The much debated ‘gas OPEC’ is not expected to be formed during the Qatar-host Gas Exporting Countries Forum (GECF) starting from Monday. However, discussions of such a cartel seem to be on top agenda of the meeting. The Doha meeting, the sixth meeting of the GECF since it was founded in 2001, has recently generated speculation the group could become a cartel along the lines of the Organization of the Petroleum Exporting Countries (OPEC). Though, the suggestions have been repeatedly knocked down by officials. Topmost officials in Europe and America are watching anxiously to see whether Russia succeeds in forging an OPEC-style ‘gas cartel’, at gathering of the world’s leading gas exporters in Qatar today.
Gas producing nations is definitely expected to discuss the idea of an OPEC-style cartel that has shocked consumer nations when they meet on Monday, but it is unlikely to become reality soon, energy ministers have categorically said. Energy ministers of member nations have admitted that the proposal is not practical for now, but they repeated support for the proposed cartel ahead of the first ministerial meeting of the Gas Exporting Countries Forum for two years.
However, the concept of forming an OPEC like organization for gas cartel is heavily backed by gas producing nations including Venezuela Iran and Russia. They have said that they strongly backed the formation of an OPEC-like cartel for the natural gas exporting countries, saying this would defend their interests. The Gas Exporting Countries Forum (GECF) gas producers, including Russia, Iran, Qatar, Venezuela and Algeria, control 73 percent of the world’s total gas reserves and 42 percent of gas production. The idea of a gas OPEC, favored by Iran and Russia in particular, gained momentum in August last year when Europe’s two main natural gas suppliers, Gazprom of Russia and Algeria’s Sonatrach, signed a partnership agreement.
However, as of now, formation of a gas cartel seems to be tough to achieve. The formation of a gas exchange has been challenging since most natural gas is delivered through pipelines and is not as easily shipped around the world to different buyers like oil. In addition to it, pipeline infrastructure also requires significant investment that often makes long term contracts essential.
In case of gas trading, contrasting oil, which is traded on an exchange that constantly affects the market price based on supply and demand, most gas is sold under firm contracts that allows buyers to lock in prices for up to 25 years.
On the other hand, experts also argue that a natural gas cartel can be expected as more gas is super-cooled into liquid and shipped on the ship tankers whose cargos can be resold on spot markets as the ship is on the move. At present, Liquefied Natural Gas currently constitutes around one fourth of the energy market and experts believe that it will account for almost half of the total energy demand by 2030.
