Natural-gas producers set charter

MOSCOW:
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.”

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