Working Day

23 december, 2008 14:00

Prime Minister Vladimir Putin spoke at the 7th Ministerial Meeting of the Gas Exporting Countries Forum (GECF)

Prime Minister Vladimir Putin spoke at the 7th Ministerial Meeting of the Gas Exporting Countries Forum (GECF)
"Energy security includes the following aspects. For oil and gas producers, it primarily means the guarantee of sovereignty over their national energy resources, as well as a responsibility to ensure stable supplies to their consumers."
Vladimir Putin
7th Ministerial Meeting of the Gas Exporting Countries Forum (GECF)

Vladimir Putin's presentation:

Ladies and gentlemen,

I am happy to welcome Forum participants in Moscow today. The 7th Ministerial Meeting of the Gas Exporting Countries Forum is in fact a unique venue for a meaningful and sincere discussion on important issues related to global energy, the global economy and the gas industry, of course.

I would like to add that Russia has always supported this discussion format. I believe it is exceptionally important to develop this dialogue during the current economic and financial crisis, as I hope you would all agree.

In this respect, I would like to share some of our assessments, conclusions and proposals.

The financial distress followed by a broader economic crisis is a serious trial for the global oil and gas industry. Oil prices plummeted to a quarter of the summer level August through November. This naturally affected the gas market, as gas prices are linked with oil.

However, since the gas market is more inert, it is bound to be more severely hit by the crisis than even the oil sector, and may require more time to regain pre-crisis operation levels.

Along with that, the global gas industry is going through a major structural reform. First of all, the growing trade in liquefied natural gas (LNG) leads to globalisation of the gas market. LNG exports and imports grow, and more projects are initiated to build liquefaction plants and LNG terminals. It can be concluded that LNG will increasingly influence the role of global energy, and particularly natural gas, demand and supply.

Second, there are changes in gas production geography. Many of the existing deposits are becoming depleted, while new major resources are often found in places that are far from major gas consumption centres, which increases gas exploration, production and shipment costs.

As far as Russia is concerned, I would say that the investments required to develop such gas-rich areas as the Yamal Peninsula and offshore areas in the north, and to build gas transportation infrastructure add up to tens of billions of dollars. I don't think I have surprised anyone here.

The resulting surge in the costs of the sector's further development means that the era of cheap fuels - especially cheap gas - is nearing an end, despite global financial problems, the economic slump and even plummeting fossil fuel prices.

Third. Energy resource supplies aren't evenly distributed around the world. Therefore, it is extremely important to uphold global energy security. Russia was one of the countries to raise this issue for discussion during Russia's presidency in the G8.

Let me also remind you of a special document adopted in this respect in the wake of this Forum's summit in St Petersburg. Furthermore, Russia is already acting to strengthen the energy security of many regions, primarily in Europe.

However, certain countries' vocal concerns over energy security are nothing but political manoeuvring to cover efforts to gain preferential access to others' resources, while saving their own for some or other reasons, or because they simply do not have any. Therefore, while discussing energy security, we should have a very clear idea what each of the discussion participants means by the term.

We believe that energy security includes the following aspects. For oil and gas producers, it primarily means the guarantee of sovereignty over their national energy resources, as well as a responsibility to ensure stable supplies to their consumers.

However, consumer countries also have responsibilities. They should make long-term commitments to buy specific amounts of these commodities on predictable terms.

In addition, "transit" countries play a special role in global energy security, as they are responsible for the stable operation of the transport infrastructure, and for controlling risk during natural gas shipments. These are purely economic issues which should remain unaffected by politics.

The interests of energy producers, consumers and transit countries can be balanced only if we establish transparent and long-term market relations, with principles that are clear and understandable to, and applied by, all parties. An energy security system will be viable only if it helps maintain the necessary production levels. Gas producers and consumers must be assured of their future and be able to make long-term investment plans. Energy egotism is absolutely unacceptable here. Responsibility must be mutual.

Unfortunately, this is not so today. It is a fact of life that one of the main reasons for Europe hindering the implementation of infrastructure projects is uncertainty over the rules of the game in this market mentioned above. An unstable legal regime has become a major problem. All parties concerned must join forces to stabilise regulation and determine rules that can be reliably safeguarded against change in the foreseeable future. Political manipulation must not be tolerated when dealing with economic problems; we must exclude the issues of security and energy stability when acting for self-interest alone.

This problem needs a careful balance. The fact that gas producers and exporters have recently focused on developing partnerships in the global gas market should not surprise anyone. Don't look for a hidden agenda where there is none.

The strengthening cooperation of gas producers reflects a natural desire to make the market more predictable and to lower the risk for themselves and their customers. This is a logical approach, especially in a globalising gas market and amidst growing uncertainty over the potential development of regional markets.

I firmly believe that dialogue between producers should be encouraged consistently. The key role in this process should belong to an organisation such as the Gas Exporting Countries Forum. I want to stress that such actions are fully compliant with international law. Specifically, the right of producer countries to form unions is declared in the Charter of Economic Rights and Duties of States approved by a UN resolution in 1974.

In our opinion, the Gas Exporting Countries Forum (GECF) should become a permanent organisation, with a charter and a headquarters, representing the interests of gas producers and exporters in the international market, or at least upholding their interests and encouraging civilised market relations with consumers. It must express the cohesive position of its member states on key current issues and on development prospects in the gas sector.

I know that different sites for the Forum's headquarters are being considered at the ministerial and expert levels. Colleagues, we will accept any decision, showing the utmost flexibility. We will side with the majority. However, I would like to say on behalf of the Russian Government that we would be happy to accommodate the organisation in St Petersburg, one of the most beautiful cities in Europe and the world. We are ready to grant a diplomatic status to its headquarters and to shoulder its expenses.

In conclusion I want to wish the participants in the 7th Ministerial Meeting of the GECF success in their work. I hope they will find an effective algorithm for relations with energy consumers that will help stabilise the market and attain real and not declarative energy security. We can do this if we work hard. Again, I wish you success and thank you for choosing Moscow, Russia, for this meeting.

Merry Christmas and a happy New Year.