CERA: Russian official says gas cartel not imminent

Russia's deputy minister of industry told the Cambridge Energy Research Associates convention in Houston that formation of an international gas cartel is not imminent.

Feb 15th, 2007

Paula Dittrick
Senior Staff Writer

HOUSTON, Feb. 15 -- Russia's deputy minister of industry told the Cambridge Energy Research Associates convention in Houston that formation of an international gas cartel is not imminent.

Andrei Reus, speaking through an interpreter, said no one has defined the format or organization for a gas cartel.

Earlier, Russian President Vladimir Putin and Qatari Emir Shaikh Hamad bin Khalifa Al Thani had said they would explore the idea of setting up a gas cartel similar to the Organization of Petroleum Exporting Countries.

"Not a single action we've undertaken, not a single association we become part of, is aimed against anybody," Reus said Feb. 14. "We aren't working against anything specifically. Everything we do is aimed at greater efficiency, greater predictability."

His comments came about a month after Russia resumed delivering crude to Europe via Belarus on Jan. 11, ending a 3-day suspension of supplies along the Friendship pipeline that affected Germany, Poland, Slovakia, and Hungary.

The disruption followed Russia's decision to impose a duty of $180/tonne on oil exports to Belarus, which responded by slapping its own $45/tonne transit tax on Russian oil. The disruption came a year after a Russian dispute with Ukraine that disrupted Europe's gas supply briefly (OGJ Online, Jan. 11, 2007).

US energy policy
US Sec. of Energy Samuel W. Bodman told reporters at CERA that he will discourage any talk about a gas cartel, saying open markets are vital to meeting future world energy demand.

"All countries can act as they see fit, but I think it's fair to say that efforts to manipulate markets by trying to organize the suppliers over the long term will not benefit the suppliers," Bodman told reporters. "I will make my views known."

In a speech to CERA, Bodman said moves by governments to restrict foreign investment and increase the reach of state-run energy industries limit access to capital and expertise.

He called for stable regulatory frameworks, open investment climates, adherence to laws, and market-based pricing of oil and gas.

"History has shown that an unfettered market is the most effective and efficient way to determine price and allocate resources based on supply and demand," Bodman said.

European policy
CERA Senior Director Simon Blakey said natural gas "appears to be a pawn in a wider strategic and political game" in which Europe seeks a balanced energy security policy.

"Although European countries and Russia have more than 40 years of practice in aligning relationships with industrial reality, the increased scale of natural gas supply needs have rearranged the pieces on the board and introduced new points of leverage into the game," Blakey said, noting that Europe has many voices about gas relations with Russia.

He said Russia's response can seem confusing in part because Russia is responding to "a mélange of mixed signals." Blakey said CERA considers any talk of a gas cartel to be simply a distraction.

"It is not an imminent political or market reality," Blakey said. "The short-term markets in international gas trade are not so well developed" for quarterly meetings of natural gas ministers, he said, referring to OPEC meetings of oil ministers.

Meanwhile, European Union leaders closely are following Russia's policy on natural gas because more than 40% of Europe's imported gas comes from Russia.

"There are European countries who have strong traditional bilateral relations with their Russian supplier, where essentially industrial alliances cement political relations and guarantee gas—particularly Germany, Italy, and France," Blakey said, calling those countries "the old Europe."

They contrast with the "new Europe" in which the Baltics and central European countries are confirming their identities and positions within the EU, he said. "In some cases, there is a level of residual discomfort with Russia."

Contact Paula Dittrick at paulad@ogjonline.com.

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