Speech at the Second Summit of Gas Exporting Countries Forum 2013-07-01 16:00:00 The Kremlin, Moscow President of Russia Vladimir Putin: Heads of state and government, delegation members, ladies and gentlemen, It is with genuine pleasure that I welcome you to this Second Summit of the Gas Exporting Countries Forum. It was five years ago now in Moscow that the representatives of 11 countries signed the Charter and Agreement establishing the Forum. At its first summit, the Forum adopted the Doha Declaration, which formulated and fixed the basic priorities for developing international gas markets. I think that this laid solid foundations for our long-term partnership. Over these last years, the Forum has undergone quite rapid transformation from an informal discussion platform to a full-fledged international organisation bringing together the world’s main gas producers and exporters. At the same time, I believe that we need to go even further, cooperate even more closely and consolidate our efforts to effectively protect gas exporting countries’ interests in order to strengthen the competitiveness of gas as a promising and clean fuel. I think that one of the Forum’s key tasks should be to reach a commonly agreed position on price formation, put in place the conditions for reducing excessive price fluctuation, and improve transparency throughout the sector. Overall, this will help to develop gas transport infrastructure and make supply more reliable. There is no question that we also need to develop cooperation on collecting and analysing data on the sector and supporting research into the global gas market. Global demand for natural gas today is growing faster than demand for oil and outstrips overall energy consumption. The International Energy Agency forecasts that demand will increase by more than 16 percent a year through to 2018 and will reach a figure of 4 trillion cubic metres. This offers big opportunities for gas producers and also places big responsibilities on us all, especially now with the global economy going through a difficult juncture. Our countries account for two thirds (65 percent) of proven global gas reserves. We account for almost half of the world’s gas exports. Our priority goal is thus to ensure stable supply for the global market over the long term. Recent years have seen rapid technological development in the gas sector. Gas production and transporting methods have improved and have made gas cheaper and more accessible for consumers. Industrial development of new resource types such as shale gas, difficult-to-access reserves and deep offshore reserves, coalbed methane and gas hydrates is expanding. This is strengthening gas’ position on the global market. At the same time though, pressure is growing on the exporting countries. This is a serious challenge for all of us. We are seeing this challenge above all in attempts to impose on producers economically unacceptable conditions for supply via pipeline systems, abolish the principle of supplies based on long-term contracts, peg contract prices to oil and petroleum product prices as a market price indicator, and lower the level of compulsory gas purchase volumes. Unfortunately, the advocates of these policies often do not realise that abandoning the basic principles of long-term contracts would not only deal a blow to the gas producers but would ultimately create big losses for the customer countries and undermine their energy security. We should not forget that gas use responds to another of the global challenges we face. By increasing the share of gas in overall energy consumption we can substantially improve the environmental situation. Of course, we all need to pay for energy and environmental security. This is only fair and is fully in keeping with the spirit of market relations free of politicised considerations. New hydrocarbon production and transport technology are certainly making supply on the gas market more elastic. New price references are emerging, including spot market prices. But this is not a reason to abandon effective instruments that have been tried and tested in practice, including long-term contracts and the ‘take or pay’ principle. Together, these two parts of the energy security equation guarantee that the capital-intensive gas sector with its long investment cycle remains profitable, ensuring sustainable and proactive development of the global economy’s energy base in the future. I believe that we need to preserve a fair distribution of risks between the exporters and the importers. I must mention here too the discriminatory restrictions a number of consumer countries have introduced in recent years against natural gas suppliers. I am referring above all to the changes to the European Union’s energy regulation laws, the so-called ‘third energy package’. The adoption of the relevant gas directive seriously restricts traditional gas suppliers, who have invested in the European gas sector’s development over several decades, in their activity on the EU market. This situation makes solidarity between the gas exporting countries all the more important. We need to work together to resist unfair pressure and defend producers’ and suppliers’ interests on external markets. We want fair consideration of our interests. Reaching common positions among the Forum’s participating countries on relations with the buyer countries is also important in the context of increasing competition between energy resources on the global market. Gas is objectively an effective, reliable and clean energy source, but if we grow complacent and rest on our laurels we will lose out in the competition with other resource types. I think that cooperation on developing new uses for natural gas and supporting research on its potential uses and applications are another important area for our work together. Making more active use of gas as an engine fuel, for example, would enable us to substantially cut harmful emissions into the atmosphere. Colleagues, despite the current economic difficulties, I think the Gas Exporting Countries Forum has a good future ahead. I am sure that we have what it takes to develop effectively functioning mechanisms for protecting gas producing countries’ lawful interests. Russia is ready for this partnership and hopes that we will work effectively and reliably together, supporting each other and supporting the global economy and its development. Thank you for your attention. I want to thank you for coming to this summit here in Moscow. I hope that you will have the chance not just to speak together and discuss bilateral ties and the gas sector’s development, but also to see something of our capital city. Thank you for your attention.