Wednesday, December 24, 2008

Putin says 'cheap gas era' ending

BBC News | The era of cheap gas is coming to an end, Russia's Prime Minister Vladimir Putin has told ministers from the world's major gas-exporting countries.

Mr Putin said the cost of extracting gas was rising sharply, therefore "the era of cheap energy resources, of cheap gas, is of course coming to an end".

The Gas Exporting Countries Forum (GECF) meeting in Moscow has agreed a charter and plans for a permanent base.

Some observers say the GECF may develop into an Opec-style producers' cartel.

This speculation increased with the news that the charter had been adopted and that GECF leaders had agreed to establish permanent offices in Doha, Qatar.

Mr Putin had earlier said Russia was ready to set up the headquarters in St Petersburg and give it full diplomatic status.

"A new organisation has been born today, said Russian Energy Minister Sergei Shmatko.

As the head of the government of the world's biggest gas exporter, Mr Putin's word carries weight both with producers and consumers, the BBC's James Rodgers in Moscow. Concerns over energy security mean a formal organisation of gas exporting countries would be deeply unpopular in Europe and the US.

It is feared that such an organisation could hold a monopoly on world supply and set prices to suit its own needs.

The countries attending are Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela. Equatorial Guinea and Norway are attending as observers.

It is not ruled out that the current position of the Ukrainian side... could lead to disruptions in the stability of gas supplies

As well as the possibility of formalising the organisation, issues including possible future cuts in gas production and the effect of lower oil prices are also likely to be on the agenda, our correspondent says.

Industry analysts say technical differences between the oil and gas markets - including longer-term contracts for gas exports - make it unlikely for now that gas exporters will set Opec-style quotas.

Officials at the meeting stressed they were not trying to set up a price-fixing cartel.

Venezuelan Energy Minister Rafael Ramirez said participant countries wanted to build a solid organisation, "which has in its foundation the same principles that gave birth to Opec".

But he added: "It's not a cartel. We are defending the interests of our countries, that's all."