One day before the Gas Exporting Countries Forum (GECF) opens in Qatar’s capital, it remains uncertain whether a gas cartel equivalent to the OPEC will be created or not. Russia’s Minister of Industry and Energy Viktor Khristenko is flying to Doha so as to demonstratively refrain from signing any documents providing a legal basis for the cartel’s creation. Gazprom’s mission in Qatar is directly opposite. Gazprom is responsible for the political part of the talks with the countries which have projects for building liquefied gas factories, for even rumors about a ‘gas OPEC’ improve the positions of all national gas companies in those projects.
Qatarrh of Gas Ways
Qatar’s capital Doha will host the two-day conference of the Gas Exporting Countries Forum (GECF) on the level of ministers, beginning on Monday. Chief participants of the upcoming event from 14 GECF member states (Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Qatar, Russia, Trinidad & Tobago, the UAE, Venezuela) and 2 observer states (Equatorial Guinea, Norway) arrived to Doha on Sunday. The forum’s main events will take place in Doha on Monday, in Ritz-Carlton hotel. The second day of the conference contains almost no events. The forum’s larger part will be closed. Three speeches will be given publicly: Qatar’s emir will begin, Trinidad & Tobago’s Energy Ministry’s spokesman will follow, and Qatar’s Energy Ministry’s spokesman will be next. Monday will make it clear whether the events in Doha can be seen as the creation of a ‘gas OPEC’, a cartel of the world's largest producers of natural gas for setting prices.
The idea of a gas OPEC became one of the most politically loaded subjects at the international energy market. During his first visit to Qatar in February 2007, Russian President Vladimir Putin said: “Whether it is necessary, whether we will create it, or not, is a separate question. Yet, the producers of natural gas should co-ordinate their actions.” The idea was later supported by the leaders of all largest producers of natural gas, who own 70 percent of the world’s gas deposits. Kazakhstan’s President Nursultan Nazarbaev has recently confirmed there was discussion about creating a gas cartel: “We discuss it between gas-exporting countries, and there really is a wish like that.”
Russia, Iran, Qatar, Algeria and other 10 GECF member states control nearly 42 percent of the world’s gas production. For comparison, 12 OPEC member states control 43 percent of the world’s oil production. At the same time, the authorities of consumer countries strongly disapprove of the idea of co-coordinating price policy. U.S. Secretary of Energy Samuel Bodman said that “gas exporters will not benefit” in the long-term perspective from “the attempts to manipulate markets”. EU Trade Commissioner Peter Mandelson said that creating a price cartel might become “a wrong sign” for gas consumers. Deputy Chairperson of the U.S. House Committee on Foreign Affairs Ileana Ros-Lehtinen stated that creating a gas OPEC with Russia’s participation will become a “strong long-term threat to international energy supplies”. In her letter to U.S. Secretary of State, Ros-Lehtinen called for “energetically counteracting this global extortion and racket”.
Political discussion around the gas OPEC definitely outshines the forum’s commercial aspect. The GECF’s last politically loaded conference was its first session in May 2001 in Tehran. Back then, Iranian authorities mentioned the possibility of a ‘gas OPEC’ for the first time. However, there were no real consequences. Other sessions, -- in February 2002 in Algeria, in February 2003 in Qatar, in March 2004 in Cairo, -- were timed for discussing the influence of certain projects on the world market of liquefied natural gas.
The world hardly noticed the GECF’s last forum on April 25, 2005 in Trinidad & Tobago. Meanwhile, regardless of what really happens at the forum now, the basis for the current discussion about a gas OPEC was laid at that forum. GECF then determined that the upcoming meeting of ministers should ratify a ‘3-level’ organization system: ministers’ conference, experts’ meetings, and an ‘executive bureau’. The GECF’s Liaison Office was created as well. This Monday, 14 GECF ministers will decide whether Liaison Office (which is now, in fact, a subdivision of Qatar’s company Qatargas) should be transformed into the ‘executive bureau’. If it happens, it will be a formal start for creating a gas OPEC with a constantly working secretariat.
Theoretically, it should have happened one year ago, in Caracas in spring 2006, when the GECF’s regular session was scuttled, not without U.S. pressure. This time, no U.S. pressure on the forum’s host, Qatar, was noticed. Moreover, the key issue of the unofficial agenda will be the presence or absence of Russia’s support for creating a gas OPEC.
As of Sunday, the Russian delegation consists both of formal opponents and of formal supporters of a gas OPEC. The delegation is headed by Minister of Industry and Energy Viktor Khristenko. His report during the forum will be closed, as well as his bilateral meetings in Doha. However, Khristenko explained his stand on Friday: he said that no agreements will be signed at the forum. “Even to sign a memorandum, it has to be prepared, experts have to work. We did not, do not, and will not set the goal of participating in an organization of friendship against someone,” the minister said.
The delegation’s other part is Gazprom representatives headed by Gazprom Export head Alexander Medvedev. Gazprom’s stand on the gas OPEC issue seems to be directly opposite so far. The day before, head of Gazprom’s foreign economic activities department Stanislav Tsygankov, during the forum “Russia’s Fuel and Energy Sector in the XXI century”, confirmed that “gas companies are interested in coordinating actions at the market.” “Any instrument for protecting the interests of gas producers will be useful. We, as producers, have the chance to create a functioning body (as a gas OPEC),” he said.
Gazprom interlinks its activity at the forum with the EU’s plans to liberalize gas markets of EU countries since July 1, 2007, and to carry on the policy of diversifying gas suppliers to Europe. Medvedev has said recently: “It is impossible to diversify suppliers, because the choice between Iran, Russia, and Qatar is equal to a 3-finger combination.”
Thus, Gazprom is interested in being able to put pressure on the EU, at least political, by means of the CECF’s executive bureau. Meanwhile, the Ministry of Industry and Energy needs to distance itself from the official accusations of creating a gas cartel, because it triggers criticism from the U.S.
Technically, ‘gas OPEC’ cannot function just like oil cartel OPEC, that is it cannot coordinate prices directly: out of 2.75 trillion cubic meters of gas consumed by the world in 2005, the share of liquefied natural gas was just 6.9 percent. According to the International Energy Agency’s forecast, the world demand for liquefied gas will increase up to 476 billion by 2010, that is up to 10-12 percent on the international gas market. Besides, the larger part both of liquefied gas and of ‘pipeline’ gas is being supplied under long-term contracts, making it impossible to coordinate prices.
On the contrary, the idea to coordinate prices in new pipeline and liquid-gas projects of GECF states is quite able-bodied. It will allow Russia, Qatar, and other GECF to make investors and consumers in new projects to pay higher price for gas. Russia might thus improve its positions in the talks on the Nord Stream pipeline and on the Shtokmanovskoe deposit, while Qatar will be able to raise prices on liquid gas, which will be supplied to the U.S. from new factories of Qatargas in Qatar since 2012. Algeria will be able to improve the future of the project for widening the Green Stream pipeline, and Trinidad – the U.S.-aimed project AtlanticLNG-5. The main thing is not to make the cup run over: all participants still remember the failure of the GECF meeting in 2006.
In the struggle for gas supply prices, not only ‘gas’ arguments can be used. That is why it is unlikely that the GECF will sign any agreements that the U.S. will take as creating a gas cartel. An invalid cartel will hardly raise liquid gas prices in new projects. Yet, there is a great chance that GECF members will now be looking for real measures to put pressure on the U.S., and not necessarily gas measures. Thus, sources close to Qatargas say there are Rosneft representatives among the Russian delegation. Rosneft refrains from comments officially, and denies off-the-record that any of its representatives were sent to Doha.
Qatarrh of Gas Ways
Qatar’s capital Doha will host the two-day conference of the Gas Exporting Countries Forum (GECF) on the level of ministers, beginning on Monday. Chief participants of the upcoming event from 14 GECF member states (Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Qatar, Russia, Trinidad & Tobago, the UAE, Venezuela) and 2 observer states (Equatorial Guinea, Norway) arrived to Doha on Sunday. The forum’s main events will take place in Doha on Monday, in Ritz-Carlton hotel. The second day of the conference contains almost no events. The forum’s larger part will be closed. Three speeches will be given publicly: Qatar’s emir will begin, Trinidad & Tobago’s Energy Ministry’s spokesman will follow, and Qatar’s Energy Ministry’s spokesman will be next. Monday will make it clear whether the events in Doha can be seen as the creation of a ‘gas OPEC’, a cartel of the world's largest producers of natural gas for setting prices.
The idea of a gas OPEC became one of the most politically loaded subjects at the international energy market. During his first visit to Qatar in February 2007, Russian President Vladimir Putin said: “Whether it is necessary, whether we will create it, or not, is a separate question. Yet, the producers of natural gas should co-ordinate their actions.” The idea was later supported by the leaders of all largest producers of natural gas, who own 70 percent of the world’s gas deposits. Kazakhstan’s President Nursultan Nazarbaev has recently confirmed there was discussion about creating a gas cartel: “We discuss it between gas-exporting countries, and there really is a wish like that.”Russia, Iran, Qatar, Algeria and other 10 GECF member states control nearly 42 percent of the world’s gas production. For comparison, 12 OPEC member states control 43 percent of the world’s oil production. At the same time, the authorities of consumer countries strongly disapprove of the idea of co-coordinating price policy. U.S. Secretary of Energy Samuel Bodman said that “gas exporters will not benefit” in the long-term perspective from “the attempts to manipulate markets”. EU Trade Commissioner Peter Mandelson said that creating a price cartel might become “a wrong sign” for gas consumers. Deputy Chairperson of the U.S. House Committee on Foreign Affairs Ileana Ros-Lehtinen stated that creating a gas OPEC with Russia’s participation will become a “strong long-term threat to international energy supplies”. In her letter to U.S. Secretary of State, Ros-Lehtinen called for “energetically counteracting this global extortion and racket”.
Political discussion around the gas OPEC definitely outshines the forum’s commercial aspect. The GECF’s last politically loaded conference was its first session in May 2001 in Tehran. Back then, Iranian authorities mentioned the possibility of a ‘gas OPEC’ for the first time. However, there were no real consequences. Other sessions, -- in February 2002 in Algeria, in February 2003 in Qatar, in March 2004 in Cairo, -- were timed for discussing the influence of certain projects on the world market of liquefied natural gas.
The world hardly noticed the GECF’s last forum on April 25, 2005 in Trinidad & Tobago. Meanwhile, regardless of what really happens at the forum now, the basis for the current discussion about a gas OPEC was laid at that forum. GECF then determined that the upcoming meeting of ministers should ratify a ‘3-level’ organization system: ministers’ conference, experts’ meetings, and an ‘executive bureau’. The GECF’s Liaison Office was created as well. This Monday, 14 GECF ministers will decide whether Liaison Office (which is now, in fact, a subdivision of Qatar’s company Qatargas) should be transformed into the ‘executive bureau’. If it happens, it will be a formal start for creating a gas OPEC with a constantly working secretariat.
Theoretically, it should have happened one year ago, in Caracas in spring 2006, when the GECF’s regular session was scuttled, not without U.S. pressure. This time, no U.S. pressure on the forum’s host, Qatar, was noticed. Moreover, the key issue of the unofficial agenda will be the presence or absence of Russia’s support for creating a gas OPEC.
As of Sunday, the Russian delegation consists both of formal opponents and of formal supporters of a gas OPEC. The delegation is headed by Minister of Industry and Energy Viktor Khristenko. His report during the forum will be closed, as well as his bilateral meetings in Doha. However, Khristenko explained his stand on Friday: he said that no agreements will be signed at the forum. “Even to sign a memorandum, it has to be prepared, experts have to work. We did not, do not, and will not set the goal of participating in an organization of friendship against someone,” the minister said.
The delegation’s other part is Gazprom representatives headed by Gazprom Export head Alexander Medvedev. Gazprom’s stand on the gas OPEC issue seems to be directly opposite so far. The day before, head of Gazprom’s foreign economic activities department Stanislav Tsygankov, during the forum “Russia’s Fuel and Energy Sector in the XXI century”, confirmed that “gas companies are interested in coordinating actions at the market.” “Any instrument for protecting the interests of gas producers will be useful. We, as producers, have the chance to create a functioning body (as a gas OPEC),” he said.
Gazprom interlinks its activity at the forum with the EU’s plans to liberalize gas markets of EU countries since July 1, 2007, and to carry on the policy of diversifying gas suppliers to Europe. Medvedev has said recently: “It is impossible to diversify suppliers, because the choice between Iran, Russia, and Qatar is equal to a 3-finger combination.”
Thus, Gazprom is interested in being able to put pressure on the EU, at least political, by means of the CECF’s executive bureau. Meanwhile, the Ministry of Industry and Energy needs to distance itself from the official accusations of creating a gas cartel, because it triggers criticism from the U.S.
Technically, ‘gas OPEC’ cannot function just like oil cartel OPEC, that is it cannot coordinate prices directly: out of 2.75 trillion cubic meters of gas consumed by the world in 2005, the share of liquefied natural gas was just 6.9 percent. According to the International Energy Agency’s forecast, the world demand for liquefied gas will increase up to 476 billion by 2010, that is up to 10-12 percent on the international gas market. Besides, the larger part both of liquefied gas and of ‘pipeline’ gas is being supplied under long-term contracts, making it impossible to coordinate prices.
On the contrary, the idea to coordinate prices in new pipeline and liquid-gas projects of GECF states is quite able-bodied. It will allow Russia, Qatar, and other GECF to make investors and consumers in new projects to pay higher price for gas. Russia might thus improve its positions in the talks on the Nord Stream pipeline and on the Shtokmanovskoe deposit, while Qatar will be able to raise prices on liquid gas, which will be supplied to the U.S. from new factories of Qatargas in Qatar since 2012. Algeria will be able to improve the future of the project for widening the Green Stream pipeline, and Trinidad – the U.S.-aimed project AtlanticLNG-5. The main thing is not to make the cup run over: all participants still remember the failure of the GECF meeting in 2006.
In the struggle for gas supply prices, not only ‘gas’ arguments can be used. That is why it is unlikely that the GECF will sign any agreements that the U.S. will take as creating a gas cartel. An invalid cartel will hardly raise liquid gas prices in new projects. Yet, there is a great chance that GECF members will now be looking for real measures to put pressure on the U.S., and not necessarily gas measures. Thus, sources close to Qatargas say there are Rosneft representatives among the Russian delegation. Rosneft refrains from comments officially, and denies off-the-record that any of its representatives were sent to Doha.
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