The Return of Gasfinger

This weekend Bloomberg reported on a new energy agreement between Russia and Algeria, reviving fears among Europeans that further coordination among the continent’s two largest natural gas suppliers could eventually lead to cartel-like production quotas and price manipulation. Despite assurances to the contrary from representatives close to the deal, it seems that many in the EU are keeping a very close eye on how this cooperation agreement works out. We recently reported on the feasibility of a Russia-led gas cartel here and here. This announcement was followed just 24 hours later by the news that Russian government may reserve the rights to all newly discovered offshore oil and gas deposits for Rosneft and Gazprom. A difficult Monday for Andris Piebalgs From Bloomberg:

Russia and Algeria Sign Energy Cooperation Agreement (Update2) By Ahmed Rouaba and Maher Chmaytelli Jan. 21 (Bloomberg) — Russia and Algeria, Europe’s two biggest suppliers of natural gas, signed an energy cooperation agreement that the European Union has pledged to monitor because of concerns it may develop into a cartel-like alliance. Russia, the world’s largest gas producer, supplies a quarter of Europe’s gas and Algeria almost 10 percent. The cooperation between the two countries will be “at all levels, from exploration to marketing,” Algerian Energy Minister Chakib Khelil told Bloomberg after the signing ceremony with his Russian counterpart Viktor Khristenko in the Algerian capital Algiers. The 12-nation Organization of Petroleum Exporting Countries, of which Algeria is already a member, controls two-fifths of global oil supplies and sets production quotas in a bid to control prices. A similar alliance in natural gas would increase concern among consumers about higher prices. “Russia and Algeria both know they can squeeze the Europeans with any suggestion of creating an OPEC for gas,” Jon Marks, managing director of U.K-based political and commercial risk consultant Cross-border Information Ltd., said today. “I get the sense that some major oil companies are quietly panicking about this,” since they buy the gas from Algeria and Russia. … “A Gazprom-Sonatrach alliance would make a lot of political sense, as both Russian President Vladimir Putin and Algerian President Abdelaziz Bouteflika are asserting state control over oil wealth,” Marks said by telephone from Hastings, England. Last year, Algeria backtracked on plans to allow foreign companies to produce oil independently of Sonatrach. Bouteflika introduced an amendment that made it compulsory for the Algerian group to have at least 51 percent of any petroleum discovery. “There is concrete progress” on a plan by Russia’s OAO Rosneft and OAO Stroitransgaz to develop a natural-gas field they discovered in the North African nation a year ago, Khelil said today. The field, in the Illizi basin of eastern Algeria, will cost as much as $4 billion to develop, he said.