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Putin urges gas exporters to adopt single pricing model

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(Globalpost/GlobalPost)

Russian President Vladimir Putin called Monday on gas exporting countries to come up with a single pricing mechanism and resist EU competition rules as he hosted a summit with leaders from some of the world's top energy states.

Putin received the likes of Venezuelan President Nicolas Maduro and Iran's outgoing leader Mahmoud Ahmadinejad for the Gas Exporting Countries Forum at the Kremlin's gilded halls.

The occasional series of GECF meetings are designed to group the natural gas producers into a tight-knit community of nations resembling the OPEC oil cartel.

Pressure on the bloc which represents 60 percent of known reserves is mounting, in particular because of the extra gas supplies recently made available by North America's shale revolution.

But important differences in how the two hydrocarbons are supplied to global clients and the more regional nature of gas distribution have kept the GECF countries from building particularly strong bonds.

The first gas summit was held amid much fanfare five years ago. Putin said it was time for those gathered to adopt a fresh approach because the excitement was fading due to a lack of results.

"Our priority is to provide stable deliveries to global markets in the long-term perspective," Putin told the other leaders.

He said it was imperative they defend the practice of tying gas prices to those of oil and fighting the more temperamental nature of the spot market.

In their final statement the 13 members plus four observer countries expressed their "determination to continue supporting indexing gas prices to oil and oil products in order to ensure fair prices and the stable development of natural gas resources."

Putin also defended long-term contracts that bind clients to purchase gas within a specific price range for a number of decades and which Russia has recently been forced to abandon under pressure from some European states.

EU nations in particular abhor the link between the price of oil and gas because of the expanding supplies of the latter that have come in recent years thanks to the booming liquified natural gas (LNG) market.

Shale gas production in North America has particularly redrawn the energy map. The United States is no longer a perspective market for Russia's liquified natural gas supplies from the Barents Sea.

Putin reiterated criticism of the European Union's Third Energy Package that bars companies such as Gazprom from owning both distribution pipelines and processing facilities in the same country.

"The solidarity of exporting countries (in respect to the Third Energy Package) is imperative," Putin said.

"We must jointly resist illegal pressure and more effectively defend the interests of gas producers and suppliers on international markets."

And he cautioned that members of the loose grouping should not take the emergence of even cleaner renewable energy sources for granted.

"The efficiency and reliability of ecologically clean gas is an objective fact," said Putin.

"But this does not mean that we should sit on our laurels. Otherwise, we will lose to other types of resources."

Venezuela's Maduro for his part said it was time for the forum to transform itself into something more closely resembling OPEC.

"This forum must evolve," he said. "It must become an organisation that unites the countries present here."

He also suggested the creation of a so-called "gas bank" in which members could pool their resources to invest in particularly promising but costly energy prospects.

Iran's Ahmadinejad in turn suggested that those gathered "come up with a pricing mechanism for different forms of gas."

He provided no immediate details.

No firm commitments emerged on Monday except for a statement by the nations of their support for a link between the price of oil and gas.

Putin was scheduled to hold individual meetings with some of the attendees on Tuesday.

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http://www.globalpost.com/dispatch/news/afp/130701/putin-urges-gas-exporters-adopt-single-pricing-model-2