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Energy market: guarantees against unpredictability

01.01.70

(Moscow plays host to the G8 session of energy ministers)

MOSCOW, (Igor Tomberg, for RIA Novosti) -- The G8 session of energy ministers, their colleagues from China, India, Mexico, Brazil and South Africa, and spokesmen for the World Bank, OPEC and IAEA, has become a dress rehearsal for the forthcoming G8 summit in St. Petersburg in July. The world leaders are planning to adopt a program for building a global system of energy security. This is how Minister of Industry and Energy Viktor Khristenko described the recent session. He also noted that "the quality of life of the entire world community directly depends on the reliable access to energy", and this is why there is a need for a "common approach to the task of ensuring global energy security".

The ministers adopted a final statement on the results of the session, which supports Russia's main points:

* It is necessary to secure mutual and fair access to energy markets - global energy requires global partnership;

* Energy security is the same for consumers and producers: the stability of supplies and the effective protection of the environment;

* Third countries have the right to develop atomic power engineering, but their efforts should be subject to international control and should not violate the regime of nuclear weapons non-proliferation.

The ministers emphasized that the 21st century is bound to see a considerable growth in the world consumption of energy. They recognized that a future global fuel-and-energy system would require a huge investment into the production, transportation and procession of energy resources.

Another major event was the meeting of energy ministers with Russian President Vladimir Putin, who focused on the problem of stability of the global system of energy security. "One of the keys to global energy security is a fair distribution of the risks among energy producers, transporting countries and consumers," Putin emphasized. "The energy market must be ensured against unpredictability and its level of investment risk must be reduced."

President Putin believes that the world energy market will feel the benefits from Russia's major energy projects very soon. "Russian companies are already carrying out projects of strategic importance for genuinely strengthening the global energy security system. We are looking at the development of the major Shtokman gas field. Intensive work on the construction of the North European Gas Pipeline is now underway. We are working on a project to lay a pipeline from Eastern Siberia to the Pacific coast, with a branch to the People's Republic of China."

President Putin also mentioned Russia's role in increasing the production of gas: "Russian companies are planning the active expansion of their activities in the fast-growing liquefied gas market."

The president said Russia would prepare specific proposals on energy security for the July G8 summit and is prepared to support major projects financially.

An important result of the G8 meeting in Moscow is the official support for atomic power engineering as the most accessible alternative to non-renewable hydrocarbon resources. The ministers discussed the prospects of nuclear power engineering, and a number of future scenarios, using Iran as an example. They came to the conclusion (reflected in the final document) that nuclear power engineering is very promising, especially for developing economies. In preparing for their summit in St. Petersburg, G8 leaders should determine the potential risks in this field and give poor nations a chance to get access to energy carriers.

One of the most vigorous proponents of the nuclear power alternative was U.S. Energy Secretary Samuel W. Bodman. He had his own program in Moscow - to reveal the new U.S. strategy designed to enhance energy security in the U.S. and the rest of the world. The strategy is being referred to as the Global Nuclear Energy Partnership (GNEP). A U.S.- Russian rivalry is obviously emerging in the sphere of nuclear power engineering (Washington is not going to yield its leadership in nuclear power, even to G8). At the same time, such major components of the Russian and American programs as nuclear weapons non-proliferation, ecological safety and accessibility of nuclear materials to a broad range of consumers enable the two countries to bring their positions closer together and avoid excessive rivalry.

Russia made it clear that it will defend its positions on fuel markets. Viktor Khristenko said the concept of energy security includes the guaranteed demand for its oil and gas abroad. This does not fully coincide with the Western strategy. In February, President Bush called on his compatriots to give up their addiction to oil and focus on the development of alternative energy sources. The strategy of the EU is to dramatically reduce its growing dependence on the supply of energy carriers, particularly from Russia. Apparently, this is why the final statement did not include guarantees of demand, which were strongly recommended by Russian delegates.

Generally, the G8 energy meeting had a positive outcome, but the contradictions it revealed on some problems will be rather hard to remove. Russia is engaged in difficult talks on joining the Energy Charter, primarily with the EU. Russia has already signed the Charter, and is actively negotiating the transit protocol to it, according to Khristenko.

EU representatives insist on Moscow joining the Energy Charter, largely because it prohibits the signatories to reduce energy supplies even in case of a price dispute. The EU is clearly trying to protect itself against the situation that developed last January around Ukraine and Moldova. There are many difficult-to-negotiate details. Secretary General of the Energy Charter Secretariat Andre Mernier said at a news conference in Moscow that if Russia ratified the Charter, it might lose certain levers.

Russia signed the Energy Charter in 1994, but the State Duma has yet to ratify the document. The protocol on transit has become a stumbling block: the West insists on third countries' access to gas pipelines on Russian territory. Khristenko stressed that the transit protocol is the Charter's backbone. "The talks are not easy, but they are going on," said he. "If there is progress, the Charter will be ratified."

Optimistic official estimates aside, the Moscow session has shown that building a global energy system is a formidable challenge. G8 members have different interpretations on many problems related to energy security. But at the same time, a consensus is possible and will have to be reached. This is another result of the G8 energy session, probably more important than others.

Igor Tomberg is an expert from the Institute of Economics of the Russian Academy of Sciences.

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