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G8 Energy Ministers Convene for Talks

01.01.70

MOSCOW Russia was set to host energy ministers from the world's richest countries Thursday for discussions on energy security _ the centerpiece theme of its chairmanship of the Group of Eight industrialized nations.

The meeting is the second high profile event to be held in Moscow and follows the meeting of finance ministers on Feb. 11, who warned of the effect of "high and volatile" energy prices on the world economy in their closing communique.

The energy theme dovetails with heightened international concern over tight oil supply and a backdrop of uncertainties in major producing nations.

Russia _ the world's No. 1 gas producer and the biggest oil exporter after Saudi Arabia _ is a fitting host.

Possessing vast, untapped reserves of oil and gas locked in harsh territories off the far eastern coast, East Siberia and under the arctic waters of the Barents sea, the country is under huge pressure to jack up its plateauing production by forging partnerships with foreign energy companies to rush the new reserves to market.

And the focus on security of energy supplies was heightened by Russia itself at the start of the year. A gas price fight with Ukraine saw Russia cut supplies to its neighbor, a move that temporarily disrupted deliveries across Ukrainian territory into Europe.

"It's been kind of a wake up call for European nations that have been dependent on Russia for a number of years," U.S. Energy Secretary Samuel Bodman said Wednesday before the meetings. "I think its also stimulated the thinking about the question of energy security and the impact of problems of any sort...diversifying the source of energy is very important to managing the economy of a country."

On Monday, Gazprom deputy chief executive Alexander Medvedev defended the gas monopoly's position arguing that the dispute had been blown out of proportion by journalists.

He noted that the company's share price had soared in the weeks around the dispute, which he said was proof that investors did not believe Gazprom was being used as a political tool to punish Ukraine's western leaning government, as some observers had suggested.

On Tuesday, Energy Minister Viktor Khristenko said that while Russia was under pressure to produce more oil and gas, Russia needed security of its own _ in the form of guaranteed demand for its energy products.

Last month, U.S. President George W. Bush spooked oil producers when he warned that Americans must get rid of its "addiction to oil" by developing alternative sources of energy.

Bodman said he would use the meetings to stress the need for G-8 countries to pursue a market-based approach to energy efficiency that would encourage investment and competition in the energy sector.

He also encouraged Russia to move ahead with a project to supply gas to North America from the giant Shtokman gas field in the Barents Sea, thought to hold 3.2 trillion cubic meters of natural gas.

The names of two or three foreign companies chosen as partners for Russia's Gazprom gas monopoly at Shtokman are due to be announced in mid-April.

Bodman also said he would urge his Russian counterparts to approve the expansion of a pipeline from the Caspian Sea to Turkey.

The Baku-Tbilisi-Ceyhan pipeline, which opened last May, allows the West to tap oil from the rich Caspian Sea fields, estimated to hold the world's third-largest reserves, bypassing Russia and Iran.

Russia, which has a stake in the pipeline consortium via state-owned Transneft pipeline operator along with the private No. 1 oil producer Lukoil, has called for higher tariffs on the pipeline if it is expanded, which other shareholders oppose.

Russia has also argued that the additional supplies would lead to further overcrowding in the Bosporus Strait, which would hinder its own deliveries from Russia's Black Sea port of Novorossisk.

Expert opinion

Halter Marek

02.12.06

Halter Marek
Le College de France
Olivier Giscard dEstaing

02.12.06

Olivier Giscard dEstaing
COPAM, France
Mika Ohbayashi

02.12.06

Mika Ohbayashi
Institute for Sustainable Energy Poliy
Bill Pace

02.12.06

Bill Pace
World Federalist Movement - Institute for Global Policy
Peter I. Hajnal

01.12.06

Peter I. Hajnal
Toronto University, G8 Research Group