Russian to head ‘Gas OPEC’ amid glut in global supplies
International Herald Tribune, 10.12.2009
An organization of natural gas exporting countries informally known as the Gas OPEC has elected a Russian as its first secretary general, underscoring the oversize role the country is likely to have in the group that it helped found a year ago.
Leonid V. Bokhanovsky, a vice president at Stroytransgaz, a well-connected pipeline construction company, was elected at a meeting of energy ministers from the 11 member countries in Doha, Qatar, where the group, the Gas Exporting Countries Forum, has its headquarters.
They used their inaugural meeting to address the current global natural gas glut and said it would focus on coordinating investment policies to dissuade countries from further flooding the market. The overabundance of natural gas is pushing down heating and electricity bills around the world.
The glut is partly the result of the invention in the United States of new drilling techniques that allow natural gas to be produced from geological formations considered unusable before. This so-called shale-bed gas is shaking up the market and poses a threat to the export revenue of Russia, the world’s largest natural gas exporting country, as prices for gas tumble worldwide.
For now, the main utility company customers in Europe of Gazprom, the state-run Russian natural gas company, are still paying relatively high prices that are linked to oil prices under long-term contracts used in the Continental natural gas trade.
But for a year, these rates have run about double the spot market price of natural gas in Europe, a cost passed along to consumers in countries that use a lot of Russian gas, like Germany.
Companies are thus understandably trying to limit their Russian purchases. So Russia, which had expected to gain market share in Europe, has in fact been losing it for about a year, making efforts to have a say in global trade all the more pressing for Moscow.
As a first order of business, Mr. Bokhanovsky commissioned a study on how to maintain the link between natural gas and oil prices in contracts, an idea opposed by the International Energy Agency, the organization that advises energy consuming countries.
If the group evolves into a cartel, much like the Organization of the Petroleum Exporting Countries is for crude oil, it could put the brakes on market forces making relatively clean-burning gas less expensive than oil today, Ian Cronshaw, an authority on natural gas at the I.E.A., said by telephone. ‘‘Our position is that markets should set prices,’’ he said.
Before his appointment, Mr. Bokhanovsky was a vice president at Stroytransgaz, a construction company indirectly controlled by Gennady Timchenko, an oil trader and ally of Prime Minister Vladimir V. Putin of Russia.
The members include Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Qatar, Nigeria, Russia, Trinidad and Tobago and Venezuela, and as observers, Kazakhstan and Norway.
Andrew E. Kramer
