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Gas producers fret over demand, agree on little

Reuters, Tuesday June 30 2009

* Gas exporters rue U.S. lost gas appetite

* No agreement on leader of gas group

(Adds comment from Russian energy minister, background)

By Simon Webb and Luke Pachymuthu

DOHA, June 30 (Reuters) - The club of major gas producers fretted over sagging demand and prices at talks on Tuesday, but the loose grouping is far from having the power and collective will to do anything to tighten the market.

Ministers from the Gas Exporting Countries Forum (GECF), whose members control more than three quarters of the world’s gas reserves, failed to agree on a leader, one of the modest aims the group set itself for the meeting.

Facing the first fall in global gas demand for more than half a century, U.S. self-sufficiency, and a big surge in production over the next few years, the club agreed on the need to improve cooperation to stabilise the market some day. “We have a challenge now. We never had a challenge before. We could sell the gas,” Algerian Energy and Mines Minister Chakib Khelil said at the meeting in Qatar.

“You have some short-term problems and some long-term problems. The forum is going to be important in how to address the long-term challenges.”

Gas exporters already reeling from a fall in demand for gas in Europe and parts of Asia because of the recession also discussed a sudden loss of appetite in the United States for imported gas because of its growing ability to meet its own needs.

“It might come back in 10-15 years but that’s not part of the global market any more,” Khelil said.

GAS OPEC?

Previous GECF gatherings have stoked fears among consumers the group may develop the same influence over gas markets as the Organization of the Petroleum Exporting Countries (OPEC) has over oil but analysts say it could be years before the group gets organised.

OPEC was formed in 1960 and took around a decade to become a force in global oil markets. The GECF is at a similar stage of development as OPEC was at inception, analysts say.

Because most gas is still delivered through pipelines that physically tie suppliers to their customers, influencing prices on a global scale would be trickier than with oil, which is sold globally on tankers to the highest bidder, they say.

A spot market for liquefied natural gas (LNG) is growing and has formed a stronger link between regions, but the current potential for any concerted action to change global gas market fundamentals is limited.

EUROPE FOCUS

European consumers will be especially wary of the group’s apparent focus on them after comments from Russia, the world’s largest gas exporter and the Europe’s biggest external supplier.

“I am sure our cooperation will have influence on the gas market and on the stabilisation of the gas market,” Russian Energy Minister Sergei Shmatko said, adding the group would try to maximise income for members.

Rafael Ramirez, energy minister for major oil producer and would-be LNG exporter Venezuela, said the group had no plans, yet, to coordinate supply cuts to support prices.

But Europe looked likely to be the focus for any coordinated action.

“The European market stands out as the most mature,” Ramirez said.

“It receives supply from different countries that are part of our forum. We can start putting together some answers there.”

The GECF said in a statement after their ministerial meeting increased cooperation between producers should ensure future supplies of gas and a stable market for the mutual benefit of producers and consumers.

The gas exporters, who until now have often competed with each other to supply consumers, plan to avoid overlapping investments, which would force them to compete in the same market, Algeria’s Khelil said.

With low prices and possible oversupply a pressing concern, the group agreed to meet again in Qatar on Dec. 9, 2009. It let 20 months pass between its April 2007 and December 2008 ministerial meetings.

For more stories on the GECF meeting click here:

(Writing by Daniel Fineren; editing by Barbara Lewis)