Putin: Era of cheap gas nearing end

Russian PM hosts gathering of producers as he threatens to turn off supplies to Ukraine.

    Putin said the gas industry would be hit harder than the oil business by the economic crisis [AFP]

    Putin described the gas industry as more rigid than the oil market, but predicted that it would nevertheless be hit hard by the current financial crisis.


    'Gas Opec' debated in Russia

    "Between August and November 2008, oil prices have fallen four times. Of course this has already had an effect on the gas market, where prices are indexed to oil," he said.
    "We can expect that the crisis will have a more serious effect on the gas industry than the oil business and its recovery will take longer."

    Putin's comments come amid a months-long standoff between Ukraine and Russia over Kiev's debts to Russian energy giant Gazprom and the price it should pay after the New Year.

    Gazprom supplies a quarter of the European Union's gas, mostly via Ukraine.
    GECF meeting

    The GECF, created in 2001, groups Algeria, Bolivia, Brunei, Egypt, Indonesia, Libya, Malaysia, Nigeria, Trinidad and Tobago, the United Arab Emirates and Venezuela.

    Equatorial Guinea and Norway will attend the Moscow meeting as observers.

    "Our aim is to guarantee an indispensible equilibium between gas suppliers and to co-ordinate policies between consumer and producer countries."

    Sergei Shmatko,
    Russian Energy Minister

    GECF member states have dismissed Western concerns that they could act as a gas equivalent to the Organisation of the Petroleum Exporting Countries (Opec).
    But officials have emphasised that the purpose of the annual meeting is to finalise and approve a charter for the body rather than create a cartel to fix prices.

    "I emphasise that we have no intention of creating a cartel of producers," Sergei Shmatko, the Russian energy minister, said in an interview to the Rossiskaya Gazeta daily on Monday.
    "Our aim is to guarantee an indispensible equilibium between gas suppliers and to co-ordinate policies between consumer and producer countries."

    Shmatko said "we are thinking about the way to establish the 'rules of the game'". 
    Opec quotas
    Members of Opec meet regularly to agree their production quotas in order to influence the price of crude oil on global markets.
    But ministers, as well as analysts, agree that a similar group for natural gas makes far less sense.

    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.
    "There is a serious difference between the oil market and the gas market, which renders the idea of the gas cartel superfluous," said Vyacheslav Bunkov, an analyst with Aton investment group.

    SOURCE: Agencies


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