Gas club seeks more clout, but not yet an OPEC

DOHA Mon Apr 9, 2007 10:57am EDT

Gas pipelines are seen in the Gazprom gas pumping station near the village of Pisarevskaya, some 280 km (173.9 miles) from the central Russian city of Voronezh December 16, 2005. Leading gas powers on Monday took a step towards setting up an OPEC-style group, but sought to reassure consumer nations it was business as usual for now. REUTERS/Viktor Korotayev

Gas pipelines are seen in the Gazprom gas pumping station near the village of Pisarevskaya, some 280 km (173.9 miles) from the central Russian city of Voronezh December 16, 2005. Leading gas powers on Monday took a step towards setting up an OPEC-style group, but sought to reassure consumer nations it was business as usual for now.

Credit: Reuters/Viktor Korotayev

DOHA (Reuters) - Leading gas powers on Monday took a small step towards setting up an OPEC-style group, but sought to reassure consumer nations it was business as usual for now.

The Gas Exporting Countries Forum, at its first meeting in two years, decided to establish a group of experts to study how to strengthen the previously toothless organization.

"In the long term we are moving towards a gas OPEC," Algerian Energy and Mines Minister Chakib Khelil said. "It will take a long time."

"We are trying to strengthen the cooperation among gas producers to avoid harmful competition. Some will say it is like OPEC, some will say it is just coodination among gas producers," said Shokri Ghanem, head of Libya's energy sector.

The study group, chaired by the world's leading gas exporter Russia, will look at factors including pricing, infrastructure and the relationship between producers and consumers, ministers said.

It will report back to the gas forum's next ministerial meeting in Moscow in 2008.

The energy minister of Qatar, host to Monday's meeting and home to the world's third largest gas reserves, placed the emphasis on improved dialogue between producers and consumers.

"We should work towards greater cooperation to stabilize the market, to give confidence to our consumers. We should send a very positive statement to our customers that we are with you, not against you," Abdullah al-Attiyah said.

He took exception to the term cartel, saying he preferred club or group. "I hate the word cartel," he said.

Russia also rejected the implication producers would collaborate at consumer expense.

"We do not, and will not, set ourselves the goal of ganging up on anybody. It would be destructive and it would make no sense at all," Russian Energy Minister Viktor Khristenko said ahead of Monday's meeting.

GAINING POWER

Since its formation in 2001, the gas producers' forum, whose members are responsible for around 60 percent of world gas exports, has been viewed by analysts as a talking shop.

The prospect of converting it into a more forceful body was rekindled in January by Iran's supreme leader and more hawkish energy ministers seized on the idea.

"We think such an organization would be beneficial. There are proposals for it, but such a process would be lengthy," said Iranian Energy Minister Kazem Vaziri-Hamaneh.

Venezuela, a political ally of Iran, backed a gas version of the Organization of the Petroleum Exporting Countries (OPEC), and together with fellow South American energy producer Bolivia, is also striving to set up a regional cartel.

"I think it is a very good idea. Gas is the second source of energy in the world," said Rafael Ramirez, energy minister of Venezuela. "We need to defend our interests."

Neither Iran nor Venezuela is a gas exporter, although they hold large reserves that they are expected to develop eventually.

By contrast, Russia needs to reassure customers it is reliable, analysts say, as the leading gas supplier has twice halted energy exports to Europe in pricing disputes with transit countries.

Regardless of their stance on turning the gas forum into an OPEC, all ministers have said the idea was not yet practical because gas has yet to become a globally traded commodity.

Although gas is usually priced in long-term contracts and on a formula derived from oil, Algeria's Khelil said the market was changing as gas gains in importance and the energy mix evolves.

"The world has changed. Now we have lots of things that people did not talk about five years ago. We have wind and solar and all these things are connected to gas," he said.

Analysts view the advent of liquefied natural gas (LNG) as a move toward a more global gas market.

LNG is gas cooled to liquid form so it can be shipped to various markets and is far more flexible than pipeline gas, which is supplied to long-term customers.

Since last year, when it snatched the number one position from Indonesia, Qatar has been the world's leading LNG exporter.

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