Moscow - Russian Prime Minister Vladimir Putin warned Tuesaday that "the era of cheap gas" would soon be over in an address to ministers of gas exporting countries meeting in Moscow. "The expense necessary for the development of fields is rising sharply, and this means that despite the current financial crisis and the fall of prices on energy commodities, the era of cheap energy resources, of cheap gas, is coming to an end," Putin said in televised comments.
Russia and the 11 other members of The Gas-Exporting Countries Forum (GECF) planned to sign a charter in a move to strengthen their cooperation. The grouping has met since 2001, but has no formal membership.
The ministers of leading gas exporters Iran, Qatar, Algeria and Russia jostled for the honour of hosting the organization's future headquarters in opening statements on Tuesday.
But the talks have left European consumers jittery that the loose group could evolve into an OPEC-style cartel.
Russian gas export monopoly Gazprom supplies about one quarter of the European Union's gas needs.
The meeting came as Gazprom warned European consumers of possible disruptions in supplies pumped through Ukrainian territory as it increases pressure Kiev over a 2-billion-dollar debt.
Gazprom threatened to cut gas supplies by new year if the debt remains unsettled.
Energy Minister Sergei Shmatko said Tuesday Russian would honour its contracts, but it was up to Europe to ensure Ukraine would not siphon off supplies intended for Europe.
In a similar dispute in 2006, Russia blamed thieving by Kiev for fuel shortages and a price spike across Europe in the dead of winter.
"Europe has sufficient means to exert the appropriate pressure in on Ukraine in the current situation to ensure the security of gas transits," Shmatko was quoted by news agency Interfax as saying.
Russian officials also dismissed fears Tuesday that the group of gas exporting nations could establish production quotas, akin to OPEC's, in an effort to influence global gas prices.
Analysts agree that the comparison is misleading because capital- intensive gas industry contracts are long-term, making quotas difficult and unlikely.
"For at least the next decade the dream of controlling world gas prices - much as OPEC supposedly controls oil prices now - will remain out of reach owing to the market structure," Alfa Bank said in a note to investors Tuesday.
"In short, cutting gas flows to one part of the world does not affect the supply demand balance in another part of the world."
But as gas production switches increasingly to Liquified Natural Gas (LNG), producer would have more flexibility in setting prices, analysts said.
Putin added that the gas sector would likely be hit harder by the financial crisis than the oil sector, whose prices have plummeted in recent months.
"Oil prices have dropped four times, between August and November 2008. This has already affect gas market, of course, where prices are tied to oil," he said.
"But we can expect that the crisis will have a more serious effect on the gas industry and its recovery will take longer."
