WHAT if they leave the oil and gas in the ground? That unwelcome prospect emerged as the world’s leaders tiptoed round President Putin last weekend, like postmen negotiating their way past an irritable alsatian.

Efforts to coax the Kremlin into ratifying the Energy Charter, a commitment to free energy markets, are losing momentum. Mr Putin berated the West on Sunday for demanding access to Russian export pipelines while offering no better access to Europe’s makets in exchange. He sees no energy crisis; oil revenues are bursting the Kremlin’s coffers. Why open the door to multinationals and flood Europe with more fuel?

While Mr Putin barked, the G8 leaders failed to notice the sound of a door shutting in Algeria, the second-largest importer of gas into Europe. President Bouteflika is reversing a liberal reform of Algeria’s oil and gas laws and is giving Sonatrach, the state energy company, a commanding role in oil and gas development as Algeria’s Gazprom and Rosneft rolled into one. Adding to the pain, foreign energy investors will be subject to a windfall tax.

Another domino is falling in the wave of oil nationalism that has swept Latin America. From now on, Sonatrach must own a majority share of any oil or gas development, rather than the 20 to 30 per cent under previous rules intended to encourage investors. On the surface, it resembles the anti-gringo nationalism of Venezuela and Bolivia, but behind Algeria’s inward shift is a more sober calculation.

The Algerian Energy Minister spoke of conservation of resources “for the benefit of future generations”.

Algeria seems less keen to roll out the barrels. The official target is to raise oil output from 1.4 million barrels per day to 2 million bpd while gas output is to increase by a third from 64 billion cubic metres a year. However, with a harsher foreign investor regime, the ambition is muted.

More importantly, these nations want to keep tighter control on the pace of new investment since they see danger in today’s oil and gas boom. There is ample evidence that Europe will switch from gas famine to gas bubble over the next two to three years. Pipelines from Norway and sea convoys of liquefied natural gas from Nigeria, Algeria, Egypt and Qatar will flip the market from short to long. More gas will, for a while, end the UK’s winter shortage and the price will fall.

National Grid, owner of the UK’s network of gas pipes, reckons that by the 2007-08 winter, new infrastructure in the form of pipelines and liquefied natural gas terminals will amount to double Britain’s requirement.

It is good news for consumers, but bad for exporting nations that have grown to depend on the huge rents from gas and oil. It explains Gazprom’s reluctance to invest billions in developing new gasfields in the frozen Yamal Peninsula and its persistent clamour for access to the downstream consumer in Europe. Gazprom knows these high prices will soon fall, as do Sonatrach of Algeria and Petroleos de Venezuela. In thrall to commodity prices, these countries see one way of protecting themselves from an uncertain future: keep more gas in the ground.

US’s long arm may hurt City’s appeal

BRITAIN is less concerned than many a nation about protecting national assets, even those of the human variety, although the three men extradited to America last week might be described by some as more of a potential liability.

The City establishment’s great embrace of the cause of the NatWest Three was heartwarming, if ultimately futile, a sort of re-run of support for the ill-fated England team in the World Cup. Behind the flag-waving, though, lies the real risk to Britain in the lengthening leash allowed to the US Department of Justice to pursue white-collar crime. It is not the freedom of Britons we need to worry about, it is that of other Europeans.

The City of London is a magnet to foreign capital because of light regulation and a willingness to overlook the sometimes contested source of the funds, evidenced yesterday by the High Court’s rejection of a challenge to the listing of Rosneft shares.

If the DoJ’s bloodhounds are now to run riot down Moorgate, it will frighten more than a few investors to Frankfurt, Luxembourg or Geneva. Britain can afford to lose a few scalps, but not all those billions.

carl.mortished@thetimes.co.uk

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