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Moscow for Gas OPEC
Russia is gearing up for a bigger internaational role by establishing an OPEC type Gase forum, though Moscow calls it a non-OPEC cartel. On 23 December Ministers from the world's major gas-exporting countries including Iran and Libya, as well as Russia - all members of the Gas Exporting Countries Forum gathered in Moscow to discuss closer co-operation. The forum, whose creation dates back to 2001, groups Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela. Russia, Iran, Qatar, Venezuela and Algeria control nearly two-thirds of the world's gas reserves and account for 42 percent of its production. Iran, Qatar and Russia have also been working create a new forum for joint projects within the forum of the GECF. Iranian Oil Minister Gholam Hossein Nozari said that the group would "prevent unnecessary harmful competition on the market, which may damage exports."
The gathering at the Kremlin has led to suggestions that they want to set up an organization similar to the oil producers' cartel, Organization of Petroleum Exporting Countries OPEC. Members of the OPEC meet regularly to agree their production quotas in order to influence the price of crude oil on global markets. Russian Prime Minister Vladimir Putin attended the forum, while President Dmitry Medvedev hosted a dinner for delegates at the Kremlin.
In his keynote address at the forum's meeting in Moscow, Putin said that higher costs of exploration, production and transport meant that the era of cheap gas prices was ending. "The expenses necessary for developing fields are rising sharply, and this means that despite the current problems in finances the era of cheap energy resources, of cheap gas, is of course coming to an end," Putin's comments come amid a weeks-long standoff between Ukraine and Russia over Kiev's debts to Russian energy giant Gazprom which supplies a quarter of the European Union's gas, mostly via Ukraine. and the price it should pay after the New Year.
The purpose of the annual meeting was to finalize and approve a charter for the body rather than create an OPEC-style cartel to fix prices. Moscow reiterates the Gas carter would be different from OPEC. There are no mechanisms which the oil OPEC uses which could be applied to the gas market. Quota arrangement is impossible in the gas market in principle, However, Venezuelan Energy Minister Rafael Ramirez said the group was drawing inspiration from OPEC. "We see in this forum an opportunity to build a solid organisation, which has in its foundation the same principles that gave birth to OPEC." Qatar Energy Minister Abdullah Bin Hamad Al Attiyah added: "The gas price is still related to the oil price, we are not discussing how to create a price formula." a cartel for natural gas makes far less sense, since gas exports generally require the construction of capital-intensive pipelines and contracts are signed over long-term periods. Oil exports, on the other hand, are generally based on a spot market price to the barrel for delivery within relatively short timeframes.
Issues including possible future cuts in gas production and the effect of lower oil prices were also on the agenda in Moscow. There are concerns among gas-importing nations that the GECF could eventually set quotas for gas in the same way as Opec does for oil. But industry analysts say technical differences between the oil and gas markets make that unlikely for now.
The meeting comes amid growing concern that a long-running row between Russia and Ukraine could disrupt supplies to Europe this winter. At the moment Russia remains locked in a dispute with Ukraine over non-payment of debts. The Russian gas company, Gazprom, says Ukraine owes it $2bn (£1.4bn) and has warned it may cut off gas supplies next month if the dispute remains unresolved.
Russia supplies about a quarter of Europe's gas needs, and about 80% of Russian gas exports to Europe flow through Ukraine. On Monday, Gazprom said it had warned European customers about possible disruption linked to the Ukraine dispute. "It is not ruled out that the current position of the Ukrainian side and some of its actions could lead to disruptions in the stability of gas supplies to Europe," Gazprom Chairman and First Deputy Prime Minister Viktor Zubkov said in a statement. A similar dispute three years ago saw Russia briefly cutting gas deliveries to its neighbour, action that also affected supplies to several western European countries.
At the weekend, Russian Deputy Prime Minister Igor Sechin said the forum was "not about any collusion and they are talking about protecting the interests of (gas) producing countries, about co-coordinating their work". Putin in his speech also made an impassioned plea for his home city of Saint Petersburg to become the headquarters of the GECF, although officials said that Doha and Tehran were also being considered. Russian officials said delegates would agree on a charter that would make the GECF a more formal organization headquartered in St Petersburg.
Europe's dependence on Russian Gas
Europe depends on Russia for its major gas needs. A gas price war between Russia and Ukraine in the winter of 2006 had disrupted gas supplies to some EU states. The European Commission has unveiled plans to diversify the EU's energy imports and reduce dependence on Russia, the main gas supplier. The EU will remain dependent on imported fossil fuels for many years to come, the Strategic Energy Review says. Some member states "are overwhelmingly dependent on one single supplier," the document says, without naming Russia. It urges the EU to develop energy infrastructure in the Baltic states and the Mediterranean region. It also wants the EU to build a North Sea offshore grid, to link up national electricity grids in north-western Europe and plug in the numerous planned offshore wind farms. "It should become, together with the Mediterranean Ring and the Baltic Interconnection project, one of the building blocks of a future European supergrid," the strategy paper says.
By 2020, the EU says, gas imports are expected to grow to 73% of consumption. Current imports account for 61% of EU gas consumption - and 42% of those imports come from Russia. Two major gas pipeline projects - Nabucco and South Stream - are being developed to deliver gas to southern Europe, from Central Asia and Russia, respectively. A Mediterranean energy ring - interconnecting electricity and gas networks says - "is essential to develop the region's vast solar and wind energy potential." The recent volatility in oil and gas prices underlines the need for more transparency in member states' data on energy stocks. Data on member states' strategic oil stocks is already published by the EU. The commission does not call for obligatory strategic gas stocks, saying they are at least five times more expensive than oil stocks.
The EU's proposals will be considered by EU governments and the European Parliament, who have to sign off specific EU projects. Presenting the package last week, EU Commission President Jose Manuel Barroso said energy prices had risen by an average of 15% in the EU in the last year alone. He also highlighted the total reliance of eight EU states on Russia for their gas as "a problem we must address". He was speaking on the eve of EU-Russia talks in Nice, France. "We must shield European citizens from the risk that external suppliers cannot honor their commitments," he said. "We must break the vicious energy cycle of increased energy consumption and increased imports. One way to do that is to stick to the EU's green energy goals, contained in the climate change package, he said. Meeting the targets on renewables and energy efficiency would cut EU energy imports by 26%. Barroso said, stronger solidarity is also essential in boosting interconnections inside the EU, so that member states can help each other out in tackling shortfalls. "And we need a more common approach with third countries. If we can't have a single voice as Europeans we must at least have a single message."
Europe, therefore, is seriously considering diversification of its import agenda. So another priority is to get firm commitments from gas suppliers in the Middle East and Central Asia, including their involvement in gas pipeline construction. "A southern gas corridor must be developed for the supply of gas from Caspian and Middle Eastern sources, which could potentially supply a significant part of the EU's future needs," the commission says.
Post-script
Russia has been struggling to enter the WTO with the support of USA and European powers thiw has beenone of the major forieng policy objectives of the Kremlin for the last two decades. Both USA and Europe have exploited the Russian weakness very effectveily. The recent georgian fiasco ahs clearly exposed the hidden animocity between the former ideological foes. Obviously, enrgy priorities of EU and individual European state would redefine the future relations between Russia and EU. The efforts to push for an Opec type Gas cartel will be closely watched by consumer nations who fear such a move could push up energy prices. Fears over energy security mean a formal organization of gas exporting countries would be deeply unpopular in Europe and the US. It is feared that such an organization could hold a monopoly on world supply and set prices to suit its own needs.
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Yours Sincerely,
DR.ABDUL RUFF Colachal
Columnist & Independent Researcher in World Affairs, The only Indian to have gone through entire India
South Asia.
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