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Natural-Gas Producers Set Charter


By Andrew E. Kramer
International Herald Tribune
December 23, 2008


With Russian support, a dozen countries that are large producers of
natural gas founded an organization Tuesday to study methods of influencing
global prices for the fuel, much as the Organization of Petroleum Exporting
Countries does for crude oil.

The development seems likely to further unnerve European Union countries,
already wary over their growing dependence on Russian energy and what critics
say are efforts by Moscow to use oil and natural gas exports as leverage to
reassert sway over former East Bloc nations.

Initially, the officials from members of the Gas Exporting Countries Forum say,
the group will focus on coordinating investment plans to dissuade nations from
flooding the market in the future.

But if its longer-term goals are realized, the group holds the potential to
apply an OPEC-like model of price modulation to another of the world's most
basic commodities, even as natural gas is projected to play a larger role in
global energy supplies in coming decades.

The group is not expected to have much influence over prices in the short term.
The forum "will represent the interests of producers and exporters on the
international market," the Russian prime minister, Vladimir Putin, told the
gathering of energy ministers. "The time of cheap energy resources and cheap gas
is surely coming to an end."

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Still, the meeting came at a bad time for Russian energy diplomacy.

Most countries in the Russian-backed forum are also members of OPEC, which has
been at odds with Russia this autumn over the country's reluctance to reduce oil
output in coordination with OPEC to support prices.

The top Libyan energy official, Shokri Ghanem, told the group that Russia should
first reduce oil output if it wanted to support natural gas prices, which are
linked to crude oil prices. "We are still waiting for a declaration from the
Russian Federation that they are cutting their production," he said.

The 16 nations in the forum have been meeting since 2001 as an ad hoc gathering.
What was new Tuesday was the group's adoption of a charter that would establish
a permanent secretariat.

The Russian government, said falling energy prices had impelled the members to
formalize their organization.

As in OPEC, the ministers in the new group espoused an ideology of defiance to
the more industrialized countries that are the primary consumers of energy
exports and stated the rights of commodity-exporting nations to coordinate
efforts to improve the terms of trade.

Russia, which also belongs to the Group of 8 industrialized nations and sees
itself generally belonging to the club of economically developed countries, has
denied the group constitutes a new cartel, like OPEC.

A deputy chairman of the Russian gas monopoly Gazprom, Aleksander Medvedev, said
flatly, "This is a gas non-OPEC."

But the energy minister of Venezuela, the country that initiated the formation
of the original OPEC in 1960 at a meeting in Baghdad, was not coy about his
hopes for the new group as liquefied natural gas is projected to become a more
important fuel in global markets in coming decades.

"We see this organization as OPEC," Rafael Ramírez said on the sidelines of the
meeting. "We are producer countries and we have to defend our interests."

"In the long-term, we see this organization as an OPEC organization, as the gas
market is developed worldwide, we will have more instruments to influence the
market and preserve the value of this natural resource," he said.

Natural gas prices are typically linked to the global price of oil, as power
plants and other big users often have the capability to switch to fuel oil as an
alternative to natural gas. A study the group commissioned said this would
likely remain the practice.

However, the study noted that the environmental benefits of natural gas,
including lower releases of greenhouse gases and greater efficiency, was not now
priced into the fuel in international trade, offering room to negotiate the
price of natural gas upward.

The study also concluded that the market for ship-borne natural gas was
transforming the fuel into a global commodity, suggesting the industry would
change from one modeled as a utility serving pipeline customers to one built
around commodity trading.

The forum members are: Algeria, Bolivia, Brunei, Venezuela, Egypt, Indonesia,
Iran, Qatar, Libya, Malaysia, Nigeria, the United Arab Emirates, Russia and
Trinidad and Tobago, and, as observers, Equatorial Guinea and Norway.

 

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