Putin warns of higher prices as gas-OPEC, GECF, meets in Moscow

Russian Prime Minister Vladimir Putin warned on Tuesday that consumer countries faced higher gas prices, as a fledgling forum that has raised fears of an OPEC-style gas cartel met to coordinate policy.

The Gas Exporting Countries Forum (GECF) groups Russia, the world’s biggest gas producer, with other gas-rich states such as Iran and Qatar and 11 other gas-exporting countries.

In a keynote address at the forum’s meeting in Moscow, Putin said that higher costs of exploration, production and transport meant that the era of cheap gas prices was ending.

"The expenses necessary for developing fields are rising sharply, and this means that despite the current problems in finances the era of cheap energy resources, of cheap gas, is of course coming to an end," Putin said.

Putin’s comments come amid a weeks-long standoff between Ukraine and Russia over Kiev’s debts to Russian energy giant Gazprom and the price it should pay after the New Year.

Gazprom supplies a quarter of the European Unions gas, mostly via Ukraine.

Forum officials were at pains to emphasize that the purpose of the annual meeting was to finalize and approve a charter for the body rather than create an OPEC-style cartel to fix prices.

"The goal of the meeting is to transform it into a more organized format. We expect such a decision to be taken. This is a gas Non-OPEC," said the deputy chairman of Gazprom, Alexander Medvedev.

Referring to the indexing of gas prices to oil prices, Qatar Energy Minister Abdullah Bin Hamad Al Attiyah added: "The gas price is still related to the oil price, we are not discussing how to create a price formula."

"It’s not a cartel. We are defending the interests of our countries, that’s all," said Venezuelan Energy Minister Rafael Ramirez.

But he added: "We see in this forum an opportunity to build a solid organization, which has in its foundation the same principles that gave birth to OPEC."

Members of the Organization of Petroleum Exporting Countries (OPEC) meet regularly to agree their production quotas in order to influence the price of crude oil on global markets.

But analysts say that a cartel for natural gas makes far less sense, since gas exports generally require the construction of capital-intensive pipelines and contracts are signed over long-term periods.

Oil exports, on the other hand, are generally based on a spot market price to the barrel for delivery within relatively short timeframes.

"There is a serious difference between the oil market and the gas market, which renders the idea of the gas cartel superfluous," said Vyacheslav Bunkov, an analyst with Aton investment group.

Putin last month rejected as "baseless" claims by critics that the forum would act like OPEC and cooperate to fix prices.

The forum, whose creation dates back to 2001, groups Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates and Venezuela.

Equatorial Guinea and Norway are attending the Moscow meeting as observers.

Five of these countries between them control nearly two-thirds of the world’s gas reserves and account for 42 percent of its production -- Russia, Iran, Qatar, Venezuela and Algeria.

Putin in his speech also made an impassioned plea for his home city of Saint Petersburg to become the headquarters of the GECF, although officials said that Doha and Tehran were also being considered.

"We will be glad to host this organization in Russia and are ready to make available one of the most beautiful cities in the world and Europe -- Saint Petersburg," Putin said.

"We are ready to give this organization diplomatic status and take all maintenance expenses," he said.