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Natural-Gas Producers Meet In Moscow To Finalize Forum

Russia says there is no intention of creating a cartel of natural-gas producers.

(RFE/RL) -- Ministers from gas-exporting countries are meeting in Moscow to put the final touches to their new group -- the Gas Exporting Countries Forum (GECF).

The world's largest natural-gas producer, Russia, is grouped together in the forum with Iran, Qatar, Venezuela, and Algeria. Those five countries control nearly two-thirds of the world's natural-gas reserves and account for 42 percent of global production.

Others members are Nigeria, Libya, Malaysia, Egypt, the United Arab Emirates, Bolivia, Brunei, Indonesia, and Trinidad and Tobago.

The group has been meeting annually since 2001. Their gathering in Moscow comes amid Western fears that the group could act as the natural-gas equivalent of the OPEC oil cartel. But officials from countries in the forum say their purpose is to finalize and approve a charter for the body rather than create a cartel to fix global natural-gas prices.

"OPEC mechanisms cannot be used in the natural-gas market because OPEC's main regulatory mechanism uses production quotas to maintain prices at a desired level," says Aleksandr Medvedev, the deputy chairman of Gazprom's board of directors. "That is impossible in our work because our business is and will continue to be based, hopefully, on a system of long-term contracts with clear and strict obligations."

Analysts agree that a cartel for natural-gas makes far less sense than a cartel like OPEC, which meets regularly to agree upon production quotas in order to influence the price of crude oil on global markets. That's because natural-gas exports generally require the construction of expensive pipelines, and because natural-gas contracts are signed over long-term periods.

Oil exports, on the other hand, are generally based on spot market prices for delivery within relatively short time frames.

Russian Energy Minister Sergei Shmatko says there is no intention of creating a cartel of natural-gas producers.

Shmatko says the forum aims to "guarantee an indispensable equilibrium between natural-gas suppliers" and to coordinate polices between consumer countries and producer countries.

Shmatko also says the Moscow meeting will try to establish what he calls the "rules of the game" between natural-gas importers and exporters.

Gazprom spokesman Sergei Kupriyanov has downplayed concerns in the European Union that the establishment of GECF would harm the interest of European consumers.

"We hear calls for a unified EU energy policy and coordinated actions with regard to [natural-gas] suppliers. What is that if not a similar organization [to a forum of natural-gas exporters]?" Kupriyanov says. "It is our view that, to the contrary, cooperation at the level of a forum of natural-gas exporters with structures such as the European Union and the European Commission will benefit both sides."

Russian Prime Minister Vladimir Putin also has rejected as "baseless" the claims by critics who say the forum would act like OPEC and cooperate to fix prices. Putin said no country would give up part of its sovereignty when decisions on natural-gas production are made.

The three countries with the world's largest natural-gas reserves -- Russia, Iran, and Qatar -- have also been working create a mechanism for joint projects within the forum of the GECF.

Iran sits on the world's second-largest proven natural-gas reserves after Russia. But so far, it has played only a minor role on the natural-gas export market. That's because there is huge domestic demand for natural gas in Iran, and because the country lacks foreign investment needed to build pipelines and other infrastructure for natural-gas exports.

Qatar has the world's third-largest proven natural-gas reserves and is targeting the No. 1 position in the liquefied-natural-gas (LNG) sector.

Two other natural-gas producers, Equatorial Guinea and Norway, are attending the Moscow meeting as observers.

Copyright (c) 2008 RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

... Payvand News - 12/23/08 ... --

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