There was a lot of conjecture that the "Big Gas Troika" would not eventuate.Even yesterday I read an article saying nothing would come of it.Yet from the article today (below) It looks almost a done deal.Europe's domestic supply is rapidly declining and dependence on a single supplier- Russia is increasing.Some legally -binding contracts have been set up lasting decades which help pay the multi-billion dollar costs of laying the pipes from remote producing fields to the heavily populated parts of Europe. On a side note Gas prices are set to remain on all time highs until the middle of next year.
From today 24th October: Russia's gas export monopoly Gazprom said it had agreed with Iran and Qatar to form a "big gas troika" and that it should become a permanent body complete with forums. Gazprom chairman Alexei Miller did not refer to OPEC in his speech. This was done by Iran's Oil Minister Gholamhossein Nozari, who said after the meeting with his colleagues: "There is a demand to form this gas OPEC and there is a consensus to set up a gas OPEC." Gazprom, which is the world's largest natural gas exporter, has been trying to downplay the potential "danger" that the European countries in particular may perceive in this arrangement. "Surely this gathering of gas exporting countries is to give assurances over gas supply to the world," Alexei Miller said, adding: "We have a common vision of the goals of the forum and the need to transform it into a permanent organization as quickly as possible to serve the goals of stable and reliable energy supplies in the world." This did not prevent Miller from adding: "We share the opinion that oil price fluctuations don't put in question the fundamental thesis stating that the era of cheap hydrocarbons has come to an end."
There has already been some reaction to the announcement from the European Commission and the European press. Europe currently imports almost half of its gas supplies from Russia with another sizable chunk coming from Algeria, which also has special relations with Gazprom. And while European observers discount Nozari's announcement of a gas OPEC, because they don't believe in production quotas of the sort used by OPEC, they are fearful of another thing - Russia, Iran and Qatar exchanging information about prices, production schedules and investment plans. The European Commission has already announced that it will oppose the creation of any structure that will restrict competition. "The European Commission feels that energy supplies have to be sold in a free market," said its spokesman, Ferran Tarradellas Espuny.
The most interesting question, of course, is qui prodest? Who profits more from this arrangement? Iran, whose current energy infrastructure is so bad that it is forced to import natural gas from Turkmenistan? Iran has been the driving force behind the gas OPEC move, working relentlessly to convince the others. Or is it Russia that will have a chance to somehow control its eager colleagues who are looking for their share of the European market? Russia has been very cautious about putting its name on anything that may once again raise suspicions of unfair play on its part, but it has finally given in, which means the deal sounded lucrative enough to risk the western resentment. Qatar is mostly along for the ride in this case, just by virtue of its largely untapped reserves. The talk of "no more cheap gas" aside, it seems to me that Russia may have been forced to put its name on the list in the spirit of: "If you can't beat them, join them". The move to establish organization of gas producers is more about trying to preserve Russia's share of the European market than about trying to really squeeze hard on the clients. Whether or not Europe wants Russia to have such share of its market is a different issue, but it may be that it's too late to think of that now. The European politicians missed their chance to push Russia out by becoming friendly with Iran and by investing in this country's gas producing infrastructure. This could produce the desired results in the period of several years. But while the Europeans sought to avoid confrontations with the U.S., which views Iran as a part of the "axis of evil," Russia befriended Teheran, even though this friendship is at times uncomfortable. The gas troika is all about reaping the benefits of this friendship - and keeping the cash flow from gas exports alive and well. Tough for the Europeans, but it's a dog-eat-dog world out there. ■
EPG Price at posting:
25.5¢ Sentiment: LT Buy Disclosure: Held
