OIL AND GAS PRICE ALIGNMENT AND THE NEW HEAD OF

C O N F I D E N T I A L DOHA 000028 SIPDIS E.O. 12958: DECL: 12/13/2019 TAGS: EPET ENRG ECON QA IR RS SUBJECT: OIL AND GAS PRICE ALIGNMENT AND THE NEW HEAD OF THE GAS EXPORTING COUNTRIES FORUM REF: 2009 DOHA 620 -------------- (C) KEY POINTS -------------- -- At the December 9 opening of the 9th Ministerial meeting of the Gas Exporting Countries Forum (GECF) in Doha, Qatar's Amir Shaykh Hamad bin Khalifa Al Thani called for the alignment of gas and oil prices. -- Qatar,s Deputy Prime Minister (and Minister of Energy), Abdullah Al-Attiyah, clarified for Deputy Energy Secretary Poneman the following day that Qatar merely seeks pricing for natural gas that is comparable to oil in the energy yielded per BTU unit. -- Prior to the selection of the Russian candidate as GECF head, Al-Attiyah,s office director opined to Embassy officers that it would be a disaster if Iran won the election. He hinted that Qatar would support the Russian candidate in the voting. -------------- (C) COMMENTS -------------- -- The Government of Qatar does not appear, for now, to advocate price fixing or manipulation of natural gas prices, but does want to see natural gas prices rise relative to those of oil. -- Given Qatar,s working relationship with Iran and recent high-level visits between the neighboring countries, it was surprising how forcefully Al-Malki came out against having an Iranian head of the GECF. -- Al-Malki, most certainly reflecting Al-Attiyah,s thinking, appears to understand that having the Iranians in the GECF leadership would doom the forum. In light of his comments, we draw the conclusion that Qatar wants the GECF to succeed as a mechanism for touting the benefits of natural gas and boosting the demand (and prices) for the product. END KEY POINTS AND COMMENTS ¶1. (U) During the opening of the 9th Ministerial Meeting of the Gas Exporting Countries Forum (GECF),the Amir of Qatar Shaykh Hamad bin Khalifa Al Thani called for the alignment of gas prices with oil prices. In his remarks, the Amir urged GECF members to explore the reasons for the disparity between oil and gas prices; however, he emphasized the importance of dialogue between the exporting and importing countries to ensure that gas products are delivered to their markets at fair prices. ¶2. (C) In a December 10 meeting with Deputy Prime Minister (and Minister of Energy) Abdullah Al-Attiyah, Deputy Energy Secretary Daniel Poneman asked Al-Attiyah for his perspective on the GECF meeting and the Amir,s comments. Stepping back to offer a broader context, Al-Attiyah responded by taking pride in the fact that Qatar months earlier had defeated Russia and Iran (reftel) in an election of GECF members to host the permanent secretariat. ¶3. (C) Al-Attiyah did not remark directly on the December 9 election of the Russian candidate Leonid V. Bokhanovsky, vice president of Russia's Stroitransgas, as the GECF's secretary general, but he told Deputy Secretary Poneman and Ambassador that producers and consumers of natural gas need to have ongoing discussions on pricing. The Deputy Secretary of Energy responded by saying he hoped that Qatar supports transparency in natural gas pricing and opposes price-fixing. ¶4. (C) The Deputy Prime Minister, noting that natural gas is a cleaner fuel than oil with less harmful environmental effects, asserted that Qatar only seeks pricing for natural gas that is comparable to oil in the energy yielded per BTU unit. Al-Attiyah said Qatar just wants gas to be competitively priced based on the merits and is not asking for fixed prices or other interference with market mechanisms. Al-Attiyah stressed that the market sets the price for oil, and Qatar wants the market to set the price for natural gas. That said, it is clear that natural gas, given its benefits vis--vis oil, is under priced by the market. This is something Qatar would like to change. ¶5. (C) In a separate December 8 meeting with P/E Chief Rice and EconOff Wahlstrom before the GECF election, Abdulaziz Al-Malki, the Office Manager for the Deputy Prime Minister, observed that Qatar, having months earlier prevailed in electing Al-Attiyah as the titular head of the gas forum and winning a separate election to host the GECF, would not win the December 9 election. However, that did not mean Qatar was uninterested in the outcome. Al-Malki said it would be a disaster for the GECF if Iran won the election. Also, because the Algerian candidate was heavily vested in OPEC, Qatar did not want him either. Asked who Qatar would support in the December 9 vote, Al-Malki said anyone but Algeria and Iran, the election of Iran being the worst possible outcome. Al-Malki hinted strongly that Qatar would support Russia. He noted that Russia, a major natural gas producer and founding member of the Forum, had the best chance of defeating Algeria and Iran (and the December 9 results proved him correct). ¶6. (U) Deputy Secretary Poneman did not clear this message. LeBaron