Russia to consolidate natural gas market

Russia has all chances to become the country in charge of the global market of gas

A session of the executive committee of the world's largest gas exporters took place in Cairo in the beginning of July. It is only known the sides discussed various schemes to sell natural gas on the world market. Iranian Oil Minister Bijen Namdar Zengene said last weekend, the organization of the world's natural gas exporters had advanced considerably, but it was still far from OPEC.

Gas Exporting Countries Forum, or GECF, counts several years in its history. The forum was established in 2001. It incorporats 15 countries exporting natural gas. The executive committee of the organization appeared at the end of June, which became a frightening event on the market. Analysts started perceiving the new organization as a new variant of OPEC, which had caused enough controversy in recent years. Members of the new international organization affirm it only goes about consultations. Indeed, the future 'gas OPEC' differs from the current oil version of it. First and foremost, it incorporates Russia. Furthermore, it looks like Russia will have to play the leading role on the natural gas market.

Analysts say Russia will be setting prices on natural gas in the future. The integrated market of natural gas does not exist for the time being. The raw material remains in the category of local goods, the prices on which are determined differently on various markets. The creation of an integrated market is only a matter of time. The cheapening of gas liquefying technologies makes its worldwide delivery become a very profitable business.

Experts believe the increase of the natural gas share in the balance of electric power producing sources will become the major factor to boost the demand on it. They forecast a 70 percent increase of the demand. Every third kilowatt of electric power in developed countries will be produced on natural gas-powered generators by 2030. Such things happen owing to the liberalization of the electric power market. Gas turbines enjoy great popularity on the free market: they allow the effective distribution of funds to purchase generators, to buy and supply fuel. Up-to-date gas turbines are extremely efficient. Their efficiency does not depend on the extent of their capacity.

Unlike conventional boiler stations, gas turbines are very demanding to fuel. If prices on natural gas go up, power specialists will not be able to use cheap kinds of oil fuel. In the event deliveries of natural gas are stopped, there will be no electricity at all.

Russian specialists are aware of that. They are preparing to take the leading position for guaranteeing the gas stability in the whole world. This will be reminiscent of the role played by Saudi Arabia in the world of oil. At first it was decided to unite the natural gas industry within the Commonwealth of Independent States (CIS). Deputy chairman of Gazprom administration Alexander Ryazanov believes the policy in the field of the natural gas industry should be coordinated: “I think that it is in our counties' interests to sell gas at the highest price possible. That is why one has to stick to correct approaches and coordinated policy,” said he. At present moment Gazprom coordinates such approaches with Kazakhstan.

The volumes of the scheduled gas extraction in Kazakhstan are striking. Gazprom is strongly determined not to let the matter out of its hands. Alexander Ryazanov believes Russia and Kazakhstan are not very wealthy countries and they will need to obtain as much money as possible from every thousand cubic meters of the sold gas. Having Kazakhstan's reserves within easy reach, Gazprom will be able to arrange a serious economic undertaking: to wait with the extraction in Russia's north until new technologies make the development more profitable. Specialists from UFG Deutsche Bank investment company think, if Gazprom implements its plans, Russia may integrate the gas industry on the entire post-Soviet space.

Phillip Vorobyov, analyst from the Moscow office of CERA consulting company believes Russia is not likely to let Kazakh gas compete with Russian gas on the world market. To all appearances, Russia will gain the support of European partners. They have done a lot in Europe lately to liberalize the market of natural gas. A special gas directive came into effect a week ago, for example. The document considerably extends the opportunity of the consumer choice for gas suppliers. European gas suppliers are prepared for the new gas order.

Western specialists believe that the world is not ready for the 'gas OPEC'. They add that the Russian authorities are not ready to head the world market of natural gas either. The government is not certain yet, which structures will be implicated in the organization. For the time being there are three players in the picture: the Ministry for Industry and Energy, the Foreign Ministry and Gazprom. Only one of them will be representing Russia. It will not be a merely bureaucratic game - the choice will be made depending on Russia’s wants in the organization.