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Algeria-Russia gas deal does not herald a new cartel: analysts
By Amelie Herenstein
AFP
PARIS
Petroleumworld.com 08 09 06
European Union members may be wary of an alliance between their two main natural gas suppliers, Gazprom of Russia and Algeria's Sonatrach, but experts say the risk of a gas cartel is slim.
The two energy groups unveiled on Friday a memorandum of understanding that covers cooperation in "exploration, production, transmission, gas transmission and distribution network development, asset swaps, natural gas and oil processing and marketing in Algeria, Russia and third countries".
Italy, which is heavily dependent on both countries for natural gas, reacted quickly to the announcement, with the president of oil major Eni, Paolo Scaroni, terming it a "juncture of concern".
Italy's economic development minister, Pierluigi Bersani, said he "hoped the accord would set off alarms in Rome, Brussels and all other European capitals".
But the EU Comission replied by saying it was "following" the project, a low-key response that contrasted sharply with shock in January when a dispute between Russian and Ukraine disrupted gas deliveries to western Europe.
Gazprom's power is nonetheless increasingly seen as a threat in Europe, which is increasingly dependent on foreign sources of energy, with 24 percent provided by Russia and 11 percent by Algeria.
The EU has spent considerable time since the winter crisis trying to come up with a strategy to deal with its situation.
At the trade magazine Arab Oil and Gas, editor-in-chief Francis Perrin said: "What attracted the most attention (in the memorandum) was the the word 'marketing', that is to say the risk of a cartel.
"Until now, Gazprom and Sonatrach have competed in the European market."
But few details have emerged concerning the agreement and nothing at the moment indicated that the two energy groups had decided to create a "gas OPEC", Perrin added in reference to the Organisation of Petroleum Exporting Countries.
One thing that was certain, in his opinion, was that a large part of their cooperation would involve liquified natural gas (LNG) that is transported by ship.
Algeria has a long track record in the strategic field and Gazprom intends to become a major player as well.
"As for the rest, they are talking about possible cooperation in gas, including exploration, development, production, sales, etc," Perrin said.
"Which means they are talking about everything, or maybe about nothing."
Algeria has signed several such memoranda in the past but they have not always resulted in concrete industrial projects, he noted.
Moreover, both Algeria and Russia have little interest in frightening their main client if they want to avoid provoking competition authorities in Brussels into "getting out the battle axe".
At the International Energy Agency, natural gas analyst Daniel Simmons said that managing a gas cartel would be "incredibly difficult" because there are "so many different qualities of gas and so many delivery systems".
If such a threat did occur, Europeans could develop nuclear power sources, a field in which they have considerable expertise, he pointed out.
"It helps very much with the public relations to build new nuclear if the public is up in arms about being held ransom by someone, some sort of cartel," Simmons said.
"So we shouldn't see it in the same light as an oil cartel."
AFP 09 0155 GMT 08 06
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