Gas OPEC gets a Russian head

Over the next two years, the world’s gas arbiter will speak Russian. Leonid Bokhanovsky, vice-president of Stroygaztrans, a Gazprom subsidiary, will be secretary-general of the Gas Exporting Countries Forum (GECF) from January 1.

Almost a year ago in Moscow energy ministers from Algeria, Bolivia, Venezuela, Egypt, Iran, Qatar, Libya, Nigeria, Russia, Trinidad and Tobago, and Equatorial Guinea signed an agreement to create the GECF. The new group, a “gas Opec”, could bring together the countries that own 73pc of the world’s gas reserves and control 42pc of gas production. The appointment of the Russian nominee was unsurprising since Russia accounts for half of the cartel’s gas production.

Nevertheless, Russia is thought to have made some concessions. For example, Russia agreed that the prestigious headquarters of the new organisation for GECF will be in Doha, Qatar, not St Petersburg.

“The appointment of a Russian secretary-general can mean a lot for Russia,” says Konstantin Simonov, director-general of the National Energy Security Fund, “but only [if] the GECF emerges as an influential arbiter for world gas players.” So far the countries do not speak with one voice, competing with one another on the world market. Predictions that the GECF would hike prices are for now groundless. Gas contracts are usually long term and gas prices are pegged to oil prices. All this suggests that the GECF will not have as much clout as Opec.

Bokhanovsky has to create an authoritative organisation from scratch. At present, the forum holds only occasional meetings, although the gas men’s problems are snowballing – growing production of liquefied natural gas has created an oversupply and pushed prices down; Europe wants to replace current long-term contracts with a short-term market, which calls into question the existence of long-term investment projects and will delay the introduction of new capacity; and clear rules of the game must be established to prevent conflicts such as that with Ukraine.

All rights reserved by Rossiyskaya Gazeta.