Gas exporters seek 'high' prices as they cooperate on supply
Source: BI-ME with Bloomberg , Author: Posted by BI-ME staff
Posted: Wed November 16, 2011 9:47 am

QATAR. The world's largest natural-gas exporters aim to cooperate in developing projects for production and sale of the fuel to raise prices and boost supply.

Officials from Qatar, Iran, Egypt and Algeria, among others, agreed yesterday in the Qatari capital Doha that the price of the fuel used to generate electricity is too low. They disagreed on how the Gas Exporting Countries Forum, a producers’ group set up to share market information and coordinate projects, could also help maximize the income of its 11 members.

Producers need to narrow the gap between prices for gas and crude oil without trying to limit production, said Hamad Bin Khalifa Al Thani, the Emir of Qatar, the world’s largest exporter of liquefied natural gas. Iran’s Oil Minister Rostam Qasemi called in contrast for the forum, or GECF, to develop “a comprehensive market management plan” that would allow them to react to demand fluctuations by adjusting supply.

“When these countries say ‘oil-linked prices’ what they really mean is ‘high prices,’” Robin Mills, head of consulting at Dubai-based Manaar Energy Consulting and Project Management, said in an e-mail today. “They wish to prevent the emergence of gas-on-gas competition and transparent market-based pricing.”

Gas prices vary between the U.S., Europe and Asia due to differences in supply. U.S. prices are lower than those in Europe, which relies on both pipeline and liquefied gas. Most LNG delivered by ship is sold under long-term contracts based on oil prices, while recent spot sales have driven some market prices lower.

Algeria’s Oil Minister Youcef Yousfi expressed a desire for higher gas prices in Europe, his country’s main export market.

A “fair” price for gas would be at par with that of oil, Qatar’s Energy Minister Mohammed Al-Sada said. GECF Secretary General Leonid Bokhanovsky said the group doesn’t set output limits for its members -- unlike the Organization of Petroleum Exporting Countries -- and doesn’t intend to “manipulate” prices.

“They always say: ‘We are not an OPEC of gas,’” Guy Broggi, senior adviser to the director of liquefied natural gas at Total SA (FP), said today at the European Autumn Gas Conference in Paris. “But if they link the price to OPEC crude oil, someone else is taking care of their interests.”

Gas company executives attending the conference in Paris and another one in Rome said the potential market clout of GECF members is a concern.

“It’s something to monitor because in Europe we have a situation in which imports come mainly from Russia, Algeria and Qatar, so it can’t be taken lightly,” Marco Arcelli, head of Italian utility Enel SpA (ENEL)’s Upstream Gas Division, said in an interview today at the World LNG Summit in Rome.

The ability of gas exporters to control prices is limited by the diverse and fragmented nature of global supply and by competition among producers, said Mills, the consultant.

“Through the unification of strategies between countries, we can determine the price,” Qasemi said in an interview at the GECF meeting. “It’s a general proposal,” he added, declining to specify whether any formal Iranian plan to raise gas prices would include production quotas. Iran holds the second-biggest proved gas reserves after Russia, according to data from BP Plc.

Cooperation among producers can give rivals access to one another’s markets. Russia and Qatar, which together hold one third of the world’s gas reserves, may join in building an LNG project in Russia’s Arctic region, Al-Sada and his Russian counterpart Sergei Shmatko said. It would be the first gas- production venture between the countries.

Qatar may also consider taking a stake in OAO Novatek, the company developing the Russian project, known as Yamal LNG, Al- Sada said.

Libya, Egypt and other GECF members backed calls for cooperation and said they sought investment to boost output both for domestic and foreign markets.

Libya will make new efforts to find crude oil and gas and plans to develop new downstream projects along its coast, National Transitional Council Chairman Mustafa Abdel Jalil said. Jalil assured Libya’s partners that their energy projects will be protected.

Egypt’s Petroleum Minister Abdalla Ghorab said gas exporters need to attract additional investment partners to help pay for rising production costs. Egypt has sought to negotiate price increases for customers of its gas, including Israel, Jordan and European buyers.

The GECF’s 12 members are Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Oman, Qatar, Russia, Trinidad & Tobago and Venezuela. Kazakhstan, the Netherlands and Norway have observer status.



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