Russia 100419 Basic Political Developments

Reuters: UPDATE 1-Russia calls on gas powers to protect long-term deals

http://uk.reuters.com/article/idUKN1814263520100418
Sun Apr 18, 2010 7:10pm BST

* Suppliers need to commit to defending long-term deals

* Group to express concern about gas market fundamentals

* Qatar describes gas prices as unfair (Adds quotes from Algeria's oil minister)

By Christian Lowe

ORAN, Algeria, April 18 (Reuters) - Gas producers should work together to limit the impact of spot sales on their long-term deals, top gas exporter Russia said on Sunday.

A global gas supply glut has hit prices in spot markets, so consumers have looked to reduce what they purchase on long-term contracts to instead buy as much as they can in the open market. Gas powers holding 70 percent of the world's reserves were set to meet on Monday to discuss ways to combat low prices.

Russian Energy Minister Sergei Shmatko stopped short of calling for other members of the Gas Exporting Countries Forum (GECF) to reduce spot sales, a plan that host country Algeria aims to put before the forum's 11 members on Monday.

"The spot market is also important, but it should not start to compete with long-term contracts in the form that is happening today," Russian Energy Minister Sergei Shmatko told reporters in Algeria's Mediterranean resort of Oran, where the GECF is meeting.

"We supply within the framework of long term contracts, and we believe that other suppliers should or could express their approach to that and join with us."

The GECF has never before coordinated supply policy, but analysts say the pain from low prices may force them to consider action. New supplies from unconventional sources in the United States combined with a fall in demand due to the global economic downturn have hit gas producers' export income.

The GECF's statement after the meeting would register ministers' concern about the gas market and the need to draft a consolidated approach, Shmatko said. He gave no more detail on what that approach would be.

Ministers from Russia, Algeria and Qatar met informally on Sunday as they prepared for the GECF gathering. Asked after the meeting if the three had come to any agreement, Shmatko said "Not yet."

Algeria's Energy Minister Chakib Khelil said on Sunday that he had yet to present to other ministers a study his country had commissioned into the global gas market. The study outlines the case for the GECF to cut spot supplies to the market.

Gas producers needed to do something soon about low prices, he said.

"There is, in the short term, the problem of oversupply in the market that we have to deal with and that's the discussion we're going to have tomorrow," Khelil said.

PRICE

The group needed to find an appropriate price for gas for buyers and sellers of gas, Khelil said. Consumers could face a supply crunch in the future if the price is so low it discourages producers from investing in new capacity, he said.

"If you don't have a just price for both producers and consumers, you are not going to ensure the appropriate investments in the right time so that they will meet demand in the future," Khelil said.

Qatar's energy minister Abdullah al-Attiyah on Sunday said gas prices should be more closely connected to oil prices, which hit an 18-month high earlier in April.

"Current prices aren't fair. They should be linked to oil prices," he told reporters.

Most of Europe's gas is delivered on long-term contracts through pipelines. Globally, an increasing volume is being shipped as liquefied natural gas (LNG).

LNG suppliers have more flexibility to target the best-paying spot markets for delivery of their cargoes of gas chilled to liquid form for exports on specially designed ships.

Qatar is the world's largest LNG exporter, and is also a member of the GECF. It sends cargoes to Europe, Asia and the United States.

While the three countries are fellow members of the GECF, they also compete in Europe's market. Qatar has supplied some of the spot cargoes that have put pressure on prices in Europe.

(Reporting by Christian Lowe and Hamid Ould Ahmed; Writing by Simon Webb; Editing by Elaine Hardcastle, Bernard Orr)

Russia Today: Gas producers meeting looks to even out pricing

http://rt.com/Business/2010-04-19/gas-producers-meeting-looks.html/print

19 April, 2010, 10:19

The Gas Exporting Countries Forum, also called Gas OPEC, has been held informally since 2001, and will convene for the tenth time on the 19th of April, as gas exporting countries ramp up their profiles.

Gas OPEC wants to find a way to stabilize prices in a world saddled with a glut of gas and weak demand according to Qatar’s Energy Minister, Abdullah Bin Hamad Al-Attiyah.

“I don't think that global gas prices are fair. We always demand that gas prices are at least linked to the oil price. Gas just cannot be treated this way. Earlier we had hoped that gas prices would be above those for oil.”

Aleksandr Nazarov, senior oil and gas analyst at Metropol IFC says that any attempts to rid this link could have an adverse effect on an already fluctuating and seasonal gas price.

“We all know what happened as a result of speculating the oil, not like raw material, but like an asset, which happened back in 2008 and 2009. So oil price in 12 months went from $140 to just $30 per barrel, so basically the same thing could happen to gas prices.”

Russia is Europe’s largest gas exporter. Yet, it struggles to find an agreement on what gas prices should be, with the price averaging anywhere between $170 and $297 per 1000 cubic meters. In addition, it faces constant demand from customers to renegotiate its contracts.

Meanwhile, gas producers have said prices should be closer to $11 per British thermal unit, which Aleksandr Nazarov, thinks could curtail demand drastically.

“Which assumes a gas price close to $400 per 1000 cubic meters, which actually, I think is too high for European customers.”

So those pushing for more regulation are faced with a dilemma – how much to charge without actually outpricing their customers.