europes nightmare: a world natural gas cartel

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Thursday, Jan 1,
Last update: Mar 27, 2007 - 6:29 PM



A HotNews.ro Analysis
Europe's nightmare: A world natural gas cartel


World’s natural gas exporting countries will gather in Doha on April 9 for a forum that may set the grounds for a new natural gas cartel built on the rules of OPEC. The cartel, which for a start would bring together Russia, Iran, Algeria, Qatar and Venezuela, aims at becoming the most important energy player worldwide. Not a new idea, but rather one that was extensively discussed lately.

The most important supporter for such a cartel is Iran, the world’s second largest natural gas producer, which is forced especially by political reasons to create a mechanism of control over the international resources market.

Iran and Russia can form an OPEC-like organization because these countries hold some half of the gas reserves in the world, Ayatollah Ali Khamenei was recently quoted as saying.

And he did not consider in his statement that currently Iran exports just a little share of its energy production and that it would become a significant player on the European market once the Nabucco project is completed - in the second half of the next decade the earliest.

A grand supporter of a natural gas OPEC is Venezuela, which again exports very little of its gas production as it lacks the necessary infrastructure. Its leader Hugo Chavez thus finds another opportunity to militate politically against the United States.

Paradoxically - apparently - it was Russia, which first launched the idea through the voice of President Putin - had a cautious attitude towards the project.

But while Russian official statements avoided to straightforward support the gas move, key players in Moscow did not hesitate to push for the establishment of the cartel.

Gazprom and Algerian state company Sonatrach have recently signed an accord allowing the former to join eight natural gas exploitation projects in Russia. Meanwhile, Gazprom is to expand it activities in the field of liquefied natural gas, targeting new markets in Europe and North America.

In fact, a majority of analysts consider a “natural gas OPEC” would serve the interests of Moscow only in the sense of a growing dependency of Europe on Russian supply of resources.

Moscow is interested in pressing Europe because last year’s hitches in oil and gas deliveries from Russia showed the West is starting to look for alternatives, a recent report of the Economist Intelligence Unit shows.

It argues that Gazprom has little alternatives for selling its gas besides Europe and Turkey, to which it sells about a third of its production, but from where it gets 70% of its income while planned exports to Chine would be extremely costly, the EIU analysis says.

OPEC and the EU
Europe’s energy security is a subject that has drawn the interest of NATO itself, according to statements made by the organization’s secretary general Jaap de Hoop Scheffer, who visited Bucharest late last year.

And in November 2006, a confidential NATO report warned about Russia’s plans to build a natural gas cartel involving Algeria and other major producers.

The initiative was seen as extremely dangerous for EU’s energy independence as the Union imports 25% of its natural gases from Russia and 10% from Algeria. That adds to the geopolitical balance in Eastern Europe, where Russia has been accused of imposing its points of view through economic blackmail.

Europe has already started to consider opportunities to reduce its dependence on Russian gas. But for energy analysts, the Union should first consider alternative measures to natural gas and only then fear a future “natural gas OPEC”.

“For the European Union, the issue with this hypothetical cartel is mainly about the measure in which such an organization would strengthen the negotiation stands of two major exporters - Russia and Algeria. Actions by countries such as Iran or Venezuela are of less relevance for the Union.

“But there are at least two aspects capable of alleviating the risks of using such a cartel in political purposes by the said countries.

“I said it before. Importers and exporters depend on one another. Additionally, when compared to oil, the natural gas resources are less globalized, are a goods that sells locally or regionally and that is more difficult to store”, says Romanian analyst Catalin Dimofte.

He believes natural gas exporters now depend more on the financial flows of the importers while the latter have increased their capacity to save and resist without gas supplies for short terms, while alternatives are considered for the medium and long terms.

Dimofte believes it is unlikely that the oil shock determined by OPEC repeats. “A repetition of that extreme situation, this time in the field of natural gas, would not have the same impact. Exporters know that for sure, too, so it is improbable that they would risk an open conflict with importers”.

When it comes to Romania, the risks of establishing a “natural gas OPEC” are not predictable. Dimofte believes Romania’s problem is that the country imports gas exclusively from Russia and “besides statements as warlike as pompous, and all of them futile, we did nothing to reduce our dependence”.

HotNews.ro, Mar 27, 2007

http://english.hotnews.ro/Europe%27s-nightmare-A-world-natural-gas-cartel-articol_print_44593_4_-1_4_-1.htm

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