Page last updated at 18:24 GMT, Tuesday, 23 December 2008

Putin says 'cheap gas era' ending

Solokhiv gas-field near the Ukrainian city Poltava, some 330 km east of capital, Kiev
Gas producers want more co-operation at a time of growing uncertainty

The era of cheap gas is coming to an end, Russia's Prime Minister Vladimir Putin has told ministers from the world's major gas-exporting countries.

Mr Putin said the cost of extracting gas was rising sharply, therefore "the era of cheap energy resources, of cheap gas, is of course coming to an end".

The Gas Exporting Countries Forum (GECF) meeting in Moscow has agreed a charter and plans for a permanent base.

Some observers say the GECF may develop into an Opec-style producers' cartel.

This speculation increased with the news that the charter had been adopted and that GECF leaders had agreed to establish permanent offices in Doha, Qatar.

Mr Putin had earlier said Russia was ready to set up the headquarters in St Petersburg and give it full diplomatic status.

"A new organisation has been born today, said Russian Energy Minister Sergei Shmatko.

As the head of the government of the world's biggest gas exporter, Mr Putin's word carries weight both with producers and consumers, the BBC's James Rodgers in Moscow.

But despite Mr Putin's warning, gas prices - which tend to follow oil prices with a delay of a few months - seem likely to fall in the short term, he says.

The EU gets 42% of its gas imports from Russia, mostly via pipelines across Ukraine.

The Moscow meeting comes amid growing concern that a new contract dispute between Russia's gas giant Gazprom and Ukraine could disrupt gas supplies to Europe this winter.

'Not a cartel'

Concerns over energy security mean a formal organisation of gas exporting countries would be deeply unpopular in Europe and the US.

It is feared that such an organisation could hold a monopoly on world supply and set prices to suit its own needs.

The countries attending are Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela. Equatorial Guinea and Norway are attending as observers.

It is not ruled out that the current position of the Ukrainian side... could lead to disruptions in the stability of gas supplies
Viktor Zubkov ,
Gazprom chairman

As well as the possibility of formalising the organisation, issues including possible future cuts in gas production and the effect of lower oil prices are also likely to be on the agenda, our correspondent says.

Industry analysts say technical differences between the oil and gas markets - including longer-term contracts for gas exports - make it unlikely for now that gas exporters will set Opec-style quotas.

Officials at the meeting stressed they were not trying to set up a price-fixing cartel.

Venezuelan Energy Minister Rafael Ramirez said participant countries wanted to build a solid organisation, "which has in its foundation the same principles that gave birth to Opec".

But he added: "It's not a cartel. We are defending the interests of our countries, that's all."

Ukraine row

At the moment Russia remains locked in a dispute with Ukraine over non-payment of debts.

Russia's Gazprom says Ukraine owes it $2bn (1.4bn) and has warned it may cut off gas supplies next month if the dispute remains unresolved.

On Monday, Gazprom said it had warned European customers about possible disruption linked to the Ukraine dispute.

"It is not ruled out that the current position of the Ukrainian side and some of its actions could lead to disruptions in the stability of gas supplies to Europe," Gazprom Chairman and First Deputy Prime Minister Viktor Zubkov said in a statement.

A similar dispute three years ago saw Russia briefly cutting gas deliveries to its neighbour, action that also affected supplies to several western European countries.

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Guardian Unlimited Putin: gas price will rise - 3 hrs ago
Washington Post Moscow, Kiev Head Toward Gas Impasse: Russia Threatens to Halt Sales to Ukraine Over Debt, Jeopardizing Flow to Europe - 8 hrs ago
Xinhuanet World gas producers approve charter for Doha-based forum - 9 hrs ago
Miami Herald Putin: no more cheap gas - 11 hrs ago
Telegraph 'Era of cheap gas is ending' - 14 hrs ago

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