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Gazprom seeks gas cartel
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October 8, 1999: 9:31 a.m. ET
Russian gas monopoly chief seeks OPEC-like group to regulate prices
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LONDON (CNNfn) - Gazprom, the Russian monopoly that accounts for a quarter of the world's natural gas production, has proposed an OPEC-style cartel of producers to combat the low prices that have been an obstacle to new investment.
Gazprom chief executive Rem Vyakhirev told reporters in Paris Thursday that gas producers should "pool their ideas and come up with…an agreement about the way we should behave on the market instead of each exporter doing his own thing."
Vyakhirev also warned his company may refuse to extend contracts with Western European partners, including oil giant Royal Dutch/Shell, if gas prices remain low.
"They are a dominant force in the gas market…and this will be as much political posturing as anything," said Sam Barden, the head of institutional sales at T. Hoare & Co. in London. "What the Russian government, through Gazprom, is saying is that we do want to have some sort of price control consortium."
"Unless all the other producers say they're going to go against Gazprom, it's hard to see them not coming to the party, so to speak," Barden added.
The statement marked the latest potential setback to Western business interests in Russia amid continuing turmoil on the nation's political and financial landscape.
Last month, a consortium of Russian creditors - including Britain's BP Amoco and Germany's Dresdner Bank - ceded their voting rights in oil company Sidanko to the Russian government after failing to negotiate an amicable settlement with one of Sidanko's principal subsidiaries. While the move put the onus on the Russian government to reach a deal, a final solution has remained elusive.
And in August, U.S. oil giant Exxon Corp. (XON) suspended its oil-drilling activities in a patch in Russia's Far East after a dispute with the country's ecological watchdog agency.
Gazprom, 38-percent owned by the Russian government, is by far Russia's largest company, providing 95 percent of the country's natural gas and exporting to 25 countries in Europe and the former Soviet Union.
But the company is also saddled with a heavy debt burden stemming from chronic non-payments by many of its customers in a cash-strapped Russian economy where barter is widely employed. Gazprom has already unveiled plans to slash 35,000 workers from its massive workforce.
--from staff and wire reports
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Gazprom
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