Russia hosts gas group, faces OPEC ire over oil

http://uk.reuters.com/article/oilRpt/idUKLN53110020081223?pageNumber=3&virtualBrandChannel=0&sp=true

UPDATE 2-
Tue Dec 23, 2008 4:45pm GMT


By Katya Golubkova and Amie Ferris-Rotman

MOSCOW, Dec 23 (Reuters) - Russia, the world's top gas exporter, hosted a meeting formalising cooperation between major gas producers on Tuesday but faced criticism from OPEC for refusing to join in cutting oil output to support energy prices.

With Prime Minister Vladimir Putin presiding, energy ministers from 12 gas exporting countries, many of them OPEC members, agreed to transform an existing gas forum that they said could benefit consumers and would not control output or prices.

The event, partly meant to increase Russia's clout in global energy diplomacy, did not go smoothly for Moscow.

Concern about falling prices and flagging demand quickly surfaced as country representatives said Russia should have sacrificed some of its own output to back up President Dmitry Medvedev's promise to support OPEC oil production cuts.

The Kremlin's critics said an important way to help gas prices is to bolster the oil price, which they reflect.

"We needed to redress the situation to the market of oil so as to redress the situation in the gas market," Libya's top oil official, Shokri Ghanem, told the ministers.

"We are still waiting for a declaration from the Russian Federation that they are cutting their (oil) production not only to support the (oil) market, but also to support the gas market," Ghanem said.

Russia, the world's No.2 oil exporter, has said it is considering all options, including joining the Organization of the Petroleum Exporting Countries, to defend its national interests.

However it did not make any firm pledges when OPEC ministers, meeting at Oran in Algeria last week, agreed their deepest production cuts of 2.2 million barrels per day.

OPEC's President Chekib Khelil told Reuters on the sidelines of the meeting that Russia had enjoyed the benefit of OPEC's cuts without sharing the pain.

"If there was no OPEC reductions in September and October, I think we would have seen prices today at maybe $20 (per barrel). So it was because of OPEC that revenues for Russia were at $40 now, not at $20," Khelil said. [ID:nLN490268]


PRICE LATER

The gas group was created out of an existing informal club called the Gas Exporting Countries Forum (GECF), which includes 16 states such as Algeria, Iran, Qatar, Venezuela, Indonesia, Nigeria and others.

Western consumers are watching the meeting closely, worried that the group will try to set gas prices and manipulate supply.

European consumers, in particular, are edgy about their main supplier gaining more clout at a time when Moscow is threatening to yet again cut supplies to Ukraine as it did in 2006, exposing the continent to gas shortages in the middle of winter.

The forum members deny they are going to control prices and said the gas market is structurally unsuited to such influence.

Nigerian Petroleum minister Odein Ajumogobia told Reuters: "The state of gas development is very different from oil. With oil you have one international oil price, with gas you have domestic, international export price, etc."

They say the main goal of the new group will be to monitor the gas market and conduct joint research.

"The difference between OPEC and the forum is very simple - OPEC looks at today, what happens on the market and makes the decision," Khelil told Reuters.

"The forum...it's more forward looking. It cannot control the volumes and price for the next 10 years because it's locked into long-term contracts and also the price of gas is locked into oil."

Russia's Energy Minister Sergei Shmatko told a closing news conference the ministers had agreed on a charter that made GECF a more formal organisation and chose Doha as the headquarters.

Russia had earlier proposed its second largest city of St Petersburg as the headquarters and Shmatko did not say why delegates endorsed the last-minute proposal of Qatar.

"It is unnecessary to make direct links between the new organisation and OPEC. We have a broader vision," Shmatko said adding that no decision had been taken on Tuesday and no discussions took place about gas production quotas.

Russia's Gazprom (GAZP.MM), the world's largest gas producer, which supplies Europe with a quarter of its gas, earlier this year signed a deal with Iran and Qatar, setting what it called a "big gas troika" to coordinate market policies. (Additional reporting by Vladimir Soldatkin and Melissa Akin, writing by Tanya Mosolova and Melissa Akin, Editing by Anthony Barker)