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. Last Updated: 07/27/2016

Qatar Summit Will Likely Avoid Cartel

Gas-producing countries are meeting in the Gulf nation of Qatar on Monday to boost cooperation amid fears that they could agree on price controls, but Industry and Energy Minister Viktor Khristenko rejected these concerns on the eve of the meeting.

Officials from Russia, Iran, Qatar and 12 other gas-producing countries will try to invigorate energy dialogue with each other, energy consumers and transit countries, Khristenko said Friday.

"Does it mean that we are looking to sign a cartel agreement about pricing policy on the gas market at the April 9 forum? Of course not," Khristenko said.

Khristenko and Gazprom executives will represent Russia at the Gas Exporting Countries Forum in Qatar's capital, Doha. The countries collectively control 73 percent of the world's natural gas reserves and 41 percent of production.

The European Union, which gets one-quarter of its gas from Russia, and the United States have raised concerns over Iran's proposal in January to form a "gas OPEC," which President Vladimir Putin has called an "interesting" idea. Russia and Iran hold the world's largest and second-largest gas reserves, respectively.

Khristenko said Western political leaders were depicting gas-exporting countries as a "monster" in an effort to distract attention from their own problems. Russia would never join an organization that wants to threaten other countries, he said. The nature of global gas markets makes it impossible for exporters to influence prices in the next 15 to 20 years, Khristenko said.

Increased production of liquefied natural gas, or LNG, may give exporters more flexibility over prices than the current system of pipelines and long-term contracts.

The forum is likely to entertain the idea of creating a permanent executive agency to provide interaction among members and with the International Gas Union, which brings together companies and associations in the gas industry from 67 countries, to promote technical and economic progress, Khristenko said.

The group could also agree to exchange technology and jointly invest in upstream and downstream projects in member and consumer countries, said Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies. "It's much less dramatic and exciting than everybody thinks," Stern said.

Exporters could also try to avoid competition on separate markets, he said. For example, Algeria could ask Gazprom to respect its interests in Spain while Gazprom could ask Algeria for the same in Germany, Stern said. "I don't think it's realistic, but it's something to discuss," he said.

A more active international gas producers' association could help develop cross-border cooperation in technology and investment, Alfa Bank chief strategist Chris Weafer said last week in a research note. While Iran and Venezuela are eager to promote OPEC-style price controls and have a clear political agenda, Russia would like to avoid that, Weafer said.

"An effective gas price cartel cannot work without the active involvement of Russia. Countries like Venezuela and Iran will, however, make sitting on the fence less comfortable than in the past."