Gas OPEC looms on horizon

World’s producing giants study delinking gas and oil prices, but insist price-fixing cartel is not part of the agenda; global gas trading holds key to commodity’s future

Gary Park

For Petroleum News

It’s been talked about for years, it’s moved a step closer, but there’s some distance yet to travel before countries controlling two-thirds of the world’s global reserves move to an OPEC-style price-fixing cartel for natural gas.

Even so, an April 9 gathering of 16 members of the Gas Exporting Countries Forum in Doha, Qatar, did little to ease the fears of European consuming nations that they might someday be faced with a gas OPEC, particularly if gas becomes a globally traded commodity.

Russia, Iran, Algeria and Venezuela told the forum their ultimate goal is to establish a gas cartel similar to OPEC, but they admitted that is out of the question in the current fragmented market, which is dominated by long-term contracts and no gas-to-gas competition in regional markets, except for the United States and the United Kingdom.

Russian President Vladimir Putin signaled his support in February for consideration of a cartel, effectively endorsing a call from Iran’s spiritual leader Ayatollah Ali Khamenei.

For now, Russian Industry and Energy Minister Viktor Khristenko said his country will lead the way in creating a forum to research “the problem of price formation for gas.”

The best hope for consumers is that Russia is genuine in merely wanting to examine the way gas prices are calculated and why the price of gas is linked to oil prices.

With worldwide gas demand forecast to grow by 2.4 percent annually from 2003 to 2030, compared with crude oil growth of 1.4 percent, some gas producers think there is a case for decoupling gas and oil.

North American prices are tied to supply and demand, with Canada contributing about 16 billion cubic feet per day to U.S. consumption of 65 billion to 70 billion cubic feet per day.

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Imports of up to 5 percent would “not significantly influence North American prices,” he said.

Participants in the sixth ministerial meeting of GECF went to some lengths in trying to calm fears that they are heading for a full-fledged cartel.

In particular, the ministers from Iran and Qatar denied there are any plans to establish a gas parallel to the OPEC oil exporters’ group.

“The cartel is not an issue,” said Iran’s Petroleum Minister Seyed Hamanech, apparently ignoring the call from his spiritual leader. “We’re here to exchange views on technical issues and the market.”

However, Algerian Energy and Mines Minister Chakib Khelil said that a gas-OPEC is possible over the long term, although “it will take a long time.”

Several members stress goal of cooperation

Qatar Energy Minister Abdullah al-Attiyah said greater cooperation can stabilize the market and give confidence to consumers, telling importing countries “we are with you, not against you.”

However, he also conceded it was the first time since its inception in 2001 that GECF had moved to another level, without attempting to say what shape the change could take.

“It can take any structure,” he said, noting that Russia, the world’s gas powerhouse, attended the forum for the first time at ministerial level.

Khristenko said the forum does not intend to “set ourselves the goal of ganging up on anybody. It would be destructive and it would make no sense at all.”

Reassuring customers is of special importance to Russia, which has created unease by twice stopping energy exports to Europe in pricing disputes with transit countries.

Venezuela, which is already taking greater control of its oil resources, favors a gas version of OPEC. Along with South American ally Bolivia it is seeking to set up a regional cartel.