Calls for OPEC-style gas cartel become louder

It is a politically sensitive move that comes at a time of concern in both Western and Eastern Europe over the reliability of Russian gas supplies. The idea gained currency last November following a NATO assessment that Middle East and Asian producers were considering a pricing cartel.

Since 2005, Russian energy supplies to parts of central and Western Europe have been subject to cut-offs because of disputes ostensibly over pricing. Europe's relations with Russia are based on a Partnership and Co-operation Agreement signed by the EU and Russia in 1997.

The agreement is due for renewal in 2007 but Moscow's growing opposition to the EU's Energy Charter is a thorny issue. Formation of a gas cartel would be a big worry for European consumers which purchase about 70 per cent of their gas supplies from Russia and 20 per cent from the Middle East, mainly Algeria.

New grouping

Iranian energy officials believe that even without the participation of Russia a grouping of Algeria, Morocco and Venezuela would be sufficient to make a gas export group viable.

Analysts believe that Europe in future will increasingly turn to supplies from Qatar and Algeria and also seek investment by Arab states in distribution networks. Observers note however, how fluid the situation is and there is growing speculation over new alliances

Global demand for LNG is estimated to be growing 12 per cent a year. As well as its growing relationship with Algeria, Russia also has significant contacts with Egypt and Libya which are increasingly important LNG suppliers to Europe.

An informal group of gas producers that account 70 per cent of world gas reserves already exists in the form of the Gas Exporting Country Forum (GECF). This was founded in 2001 by Algeria, Iran and Russia also includes Libya, Qatar, Oman the UAE, Egypt, Bolivia, Indonesia, Malaysia, Trinidad and Tobago, Venezuela as well as Norway as an observer.

Loose group

So far, the GECF has remained a loose group and has made no attempt to control gas prices. However during his recent visit to Qatar, President Vladimir Putin said that the idea of a gas cartel had not been rejected

Abdullah bin Hamad al-Attiyah, Qatar's energy minister is more cautious though over the idea of a gas cartel saying the issue is complex. For the GEFC to mirror the OPEC cartel a spot market would probably need to develop for gas.

Compared to spot oil sales, natural gas is sold in huge contracts over typically 25 year terms. Gazprom, Russia's principal gas exporter, says that for a cartel to take shape the entire pricing system would need to change, a process which could take many years. Nonetheless no one is ruling it out.