Andrei Kolesnikov
‘Gas OPEC' established in Moscow
The 7th ministerial meeting of the Gas Exporting Countries Forum (GECF) was held at Moscow's President Hotel on December 23, 2008. The participants representing eleven gas producing countries signed an intergovernmental agreement and approved the GECF Charter institutionalising the forum as an international intergovernmental organisation. The choice of the new organisation's headquarters was decided by a one-vote majority: St Petersburg lost the vote to Qatar's Doha.
Andrei Kolesnikov, a Kommersant special correspondent, was surprised at the complete unanimity of the countries, with their varying political systems, in their desire to establish an organisation based on no other principle than the desire to set a "fair price" on the global gas market.
The forum began as soon as Vladimir Putin arrived at President Hotel. He delivered a speech which was, perhaps, his best speech in the last several months. It was informative, in the first place.
Besides, there was so much vigour and internal conviction in it that the heads of the delegations, primarily economics and petroleum ministers from 16 countries (including those who had come to the forum as guests and observers) were listening to him with amazement.
Vladimir Putin recalled that oil prices fell fourfold in August-September 2008, which also affected the gas market because "gas prices are tied to oil prices."
"Considering its [the gas market's] sluggishness, one could expect that the crisis would have a greater effect on the sector than on the oil business and that its post-crisis recovery would take much more time. At the same time, the world's gas industry is undergoing serious structural changes now," the prime minister said.
He also said that liquefied natural gas (LNG) exports were growing and that there appeared to be more projects to build liquefaction plants and receiving terminals. He assumed that for these reasons LNG would play a greater role in regulating the global demand for energy resources and their supplies. He also talked about a surge in gas exploration, production and transportation costs.
Vladimir Putin's conclusion, quoted by the electronic media, summed up the day's theme: "The era of cheap energy resources and cheap gas is coming to an end."
Thus in about three minutes Vladimir Putin went all the way from a plunge in gas prices to the end of the era of cheap gas.
The Prime Minister spoke with such vehemence that there seemed to be no contradiction. The first is a well-known fact and the second is easy to believe. At the same time, Vladimir Putin had to assure some people, including Belarusian President Alexander Lukashenko, that the price of Russian gas for Belarus, as agreed upon with the Russian leadership, is not too high (considering that "the era of cheap gas is coming to an end"). On the other hand, he had to follow common sense reasoning which dictated that he noticed a fall in gas prices.
In some strange way, Vladimir Putin coped with the task. At least, no questions were asked concerning that part of his speech. After that, the Prime Minister expressed his ideas about the dangers to energy security. It is clear where these dangers come from: above all, from the countries which "do not have their own hydrocarbon resources, or reserve them for the future... in order to receive special preferential access to other countries' resources."
But there are countries, primarily gas producing counties, for which energy security "means, above all, guarantees of sovereignty over their national energy resources... a guaranteed opportunity to receive the needed amounts of raw materials on predictable terms."
Then the Prime Minister proceeded to the need to create a ‘gas OPEC', and although none used this word combination at the negotiating table yesterday, there is no better name for the new organisation: it is short and clear.
According to the Prime Minister, it was necessary to set the rules of the game and guarantee that "they will not change in the foreseeable future," hence the need to transform the Gas Exporting Countries Forum into a "permanent organisation with a charter and a headquarters," which "will represent the interests of gas producing countries in the international arena."
The Prime Minister offered St Petersburg, "one of the most beautiful cities in Europe and the world," as a host city for the organisation's headquarters, and a "diplomatic status" for it. He also promised that Russia would pay the bill for the GECF headquarters in St Petersburg.
At that moment, he looked very much like the Putin in Guatemala presenting the Russian application for hosting the 2014 Olympics in Sochi.
According to a Kommersant source, it was a surprise for the negotiators and delegation members that Russia was ready to bear all the upkeep expenses for the headquarters.
Vladimir Putin decided to play his trump card (not included in other countries' applications) at the last moment. This could have worked, all things being equal.
Abdullah bin Hamad al-Attiyah, Qatar's energy & industry minister, put all the blame for the drop in oil prices on the United States and underlined that fuel consumption even increased in some countries. (During a break between the sittings, someone asked Igor Sechin, Russia's deputy prime minister, whether oil production fell sharply in Russia. He showed surprise: "Fell? No, it was reduced.")
"Recently, we celebrated a great event: our LNG tanker fleet reached the US coast in Louisiana," the Qatar minister added.
He made it sound as if the Qatar tankers crushed the enemy's resistance and easily seized the United States from the sea.
"Doha may become a good host for the forum headquarters," he said.
One detail concerning this ‘historic victory,' which, in any case, cannot be underestimated: as is known, Qatar is under strong US influence. It was not the US tacit consent that allowed Qatar tankers to enter Louisiana ports; their entry was confirmed by all the necessary documents, of which any global gas producer can only dream. In this sense, Qatar did win a victory, but primarily over its rivals sitting at the table in the President Hotel.
It seemed all the speakers were saying the same thing and they were unanimous in their desire to unite. However, Bolivia's hydrocarbons minister, Saul Avalos, proved to be more original.
"Though we are novices in this sphere, I want to say, on behalf of our President Evo Morales, that now when our country has nationalised gas production and transportation and can again run this sector, we do not want to sell gas for the sake of other countries' prosperity," he said thus entering an indirect dispute with the Qatar minister. However, most importantly, sharp political contradictions did not detract from the forum participants' desire to establish a ‘gas OPEC.'
"We do not want to sell gas to countries which think they can teach us how to live well," he continued. "Our unity alone will make them respect us! President Morales wants to instill this in every Bolivian so that he can feel himself the owner of all our resources. I want to say that we will produce gas with respect and revolutionary enthusiasm!"
Against this background, the statement made by Erik Johnsen representing Norway's minister as observer was colourless. He said that the state should not interfere with gas production and the price formation policy because gas is produced by private companies. At the same time, he spoke for the need to "institutionalise the forum."
It was extremely interesting to see how mercantile national interests unite countries with different political regimes and make irreconcilable political contradictions between them meaningless.
Sameh Fahmy, Egypt's minister of petroleum, said that the draft charter was ready for signing and that it "sets forth fair price formation principles." He also said that well-known international experts participated in drafting the charter. However, no arguments were needed by that time in order to approve the charter.
Iranian oil minister, Gholam Hossein Nozari, added that it would be more logical to have the GECF headquarters in Iran since it was the country that proposed holding the first gas-exporting countries forum back in 2001.
Shukri Mohammed Ghanem, president of Libya's National Oil Corporation, deviated from the main theme (on which everything was clear). He explained that the decisions of the last OPEC meeting on consolidated cuts in oil production did not work because not all countries complied with them.
"OPEC does not represent the whole market. We have always looked with hope at our friends, primarily those from Russia who attended our meetings. We are still waiting for Russia to agree to our decisions on substantial production cuts. We are still waiting for Russia's decision, I repeat..."
Judging by the Russian negotiators' laughing eyes, they can wait forever.
"Today we are closer than ever to becoming an official international organisation," said Sergei Shmatko, Russia's energy minister, with relief after all those speeches.
A break was announced after which the second part of the meeting was devoted to two tasks - signing the charter and choosing a home for the headquarters.
A member of the Russian delegation told me that the main thing was to sign the intergovernmental agreement supplemented with the organisation's charter. This would raise the status of the members of the new organisation and would protect it from opposition on the part of Europe and the United States whose interests run counter to its establishment.
According to the Kommersant daily, the idea to form this consortium was initiated by one of the Russian participants in the previous forum. Other countries also displayed interest and members of the Russian delegation included some provisions on the GECF into the current forum's agenda. They coordinated them with other forum participants before the meetings. The process proved somewhat difficult and took several hours.
However, the Russian delegation had no doubts that the charter would be approved and the new organisation would come to life.
It was a different matter deciding on a home for the GECF headquarters. The Russian delegation thought St Petersburg had a 50/50 chance of hosting it. However, no preliminary work had been done and some felt skeptical about this.
The delegation placed all hope on the Prime Minister (who played his trump card) and on St Petersburg Governor Valentina Matviyenko who presented Russia's northern capital after the break.
She made her presentation. However, she looked gloomy and disinclined to talk after the presentation (which was held behind closed doors like the meeting itself), so it seemed clear that St Petersburg would hardly have a chance.
Valentina Matviyenko left without waiting for the vote, as if she did not believe that her city might win (Vladimir Putin also left Guatemala without waiting for the vote, but that was one of the terms of the Russian President's participation in that exciting event).
However, the Russian delegation anticipated that a host city for the GECF headquarters might not be chosen at the meeting.
"This is of minor importance," one of them said. "The main thing is to adopt the charter, and then the organisation may start its work."
However, the forum participants wanted to settle this matter on the spot. For that reason they were even late for a meeting with the Russian President in the Kremlin. It was a two-stage vote, and Doha won by one vote. This was not surprising since the Arab countries outnumbered all others on the list of the GECF members.
Thus, Russia failed to duplicate its ‘golden victory' this time. This notwithstanding, it all proceeded according to the Russian negotiators' plans with regard to the intergovernmental agreement: it was signed and supplemented with the GECF charter. It contains provisions concerning "information exchanges on the implementation of investment programmes," and also "relations with gas-consuming countries, and joint LNG projects."
Shmatko said after the meeting, "We have decided not to restrict ourselves in any way. There will not be any forbidden topics."
This means that, as with OPEC, the talk of gas quotas (which are so unpleasant for the West) has not been ruled out.
At the same time, the meeting did not advertise the presence of foreign observers. Neither French, nor Dutch nor Greek representatives were listed among the forum participants or guests, but they were present at the meeting, according to a Kommersant source. They were given this opportunity, as there was nothing to conceal.