Russia pushes an 'OPEC' for natural-gas nations
The world's biggest suppliers will meet in Moscow on Nov. 18 to finalize plans for a cartel to control gas prices.
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Russian President Dmitry Medvedev hosted OPEC's Secretary-General Abdalla Salem el-Badri last week and announced that Russia will henceforth interact with the global oil cartel as a "key area of Russia's energy policy aimed at maintaining stable and predictable prices," in the petroleum market.Skip to next paragraph
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Of course, energy industry experts point out that OPEC has never been very good at controlling oil prices – except when it was used as a political weapon against the West during the 1970s – and that Moscow's newfound interest in the group may reflect the Kremlin's shifting global political strategies. "You cannot separate economics from politics. After all, this is energy, and it obviously has a national security dimension," says Artyem Konchin, an oil and gas analyst with Unicredit-Aton, a Moscow investment bank. "Russia is unlikely to join OPEC, but its interest in the organization at this moment is not coincidental. It wants to cooperate at some level."
Many experts also say that even if Moscow does succeed in creating a gas cartel, the gas market is different than the oil market. Most supplier-customer relationships are locked in by expensive pipeline infrastructure and long-term contracts. Russia now provides about 20 percent of Europe's natural gas and is making huge investments in two new pipelines: Nordstream, which will connect Russia with Germany via the Baltic Sea, and South Stream, which will run from Russia's Black Sea coast to Bulgaria and southern Europe.
But Russia and other gas producers may see a way to change the dynamic. Emerging liquefied natural gas (LNG) technology, of which Qatar is a pioneer, makes the gas a more easily traded commodity, like oil. Currently about 8 percent of natural-gas supplies are delivered in LNG form, Mr. Krutikhin says, but that will grow in the future. Russia is close to completing a big LNG facility at Gazprom's Sakhalin-2 project on Russia's Pacific coast, and Gazprom is reportedly mulling construction of another near St. Petersburg.
Still, some analysts are skeptical that a natural-gas cartel will yield the political benefits that the Kremlin anticipates. "It's understandable that the idea of a gas OPEC sets up tremors in the West, where the idea of Russia controlling gas supplies has long been a source of disquiet," says Ms. Lipman. "But these players are very diverse. Moves to consolidate Russia's position as a leading gas producer are not identical to mustering anti-American forces around it."
But that isn't preventing the Kremlin from reconsidering many of its energy positions.
Deputy Prime Minister Igor Sechin, Russia's top energy official, startled many industry observers last week by saying that the Kremlin may create a vast storage facility for oil, which would be modeled on the US Strategic Petroleum Reserve, which has a capacity of almost three-quarters of a billion barrels of oil.
The idea behind the Russian reserve would be to stabilize oil prices by holding back or releasing stocks as necessary, Mr. Sechin said. Some experts scoff that the idea is impractical for an oil- exporting country, and a possible sign of Kremlin desperation. "It would be much safer to just keep that oil in the ground. Why invest millions into a storage facility?" says Krutikhin. "It's really hard to understand what they're thinking in the Kremlin sometimes."