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Gas Cartel Looking More Attractive

Time will tell whether the Doha forum has succeeded in this, but some outlines of a coordinated policy of gas exporters can already be seen. They were laid out in documents signed at the forum. The major gas exporting countries, therefore, now have closer positions on creating a gas cartel.
by Dr. Sergei Kolchin
Moscow (RIA Novosti) Apr 16, 2007
The sixth Gas Exporting Countries' Forum, which recently ended in Doha, the capital of Qatar, attracted much more attention than previous meetings. Before it started, there had been numerous signals that a gas analog of OPEC might be set up.

Contrary to expectations, such an organization did not emerge. But the meeting has nevertheless shown that gas exporting countries are gradually realizing the need for coordinated action instead of mere declarations of cooperation.

Iran was the first to stir up trouble, announcing a proposal for "a gas OPEC" at the end of last year. As with any initiative coming from this most eccentric player on the international stage, it naturally caused a nervous response from the United States and the European Union, which saw the future cartel as an attempt to pressure and blackmail gas consuming countries.

The reaction of other leading exporters - Russia, Qatar, Algeria and Central Asian countries - was cautious at first. This is easy to understand. Until Russia completes the North European Gas Pipeline, which will pump gas directly to Germany, and establishes its own liquefied natural gas facilities, it will remain dependent on transit countries for gas exports.

At the same time, it is a transit country for Central Asian gas going to Europe. Given such circumstances, it is difficult to discuss a coordinated pricing policy following the OPEC model.

However, further developments showed that gas exporting countries, despite political and other differences in their development priorities, did not want to reject the possibility of an international gas alliance altogether, at least out of pragmatic economic considerations. So the forum in Doha was intended to resolve a complicated and controversial problem.

On the one hand, it was necessary to reassure gas consumers, so forum participants repeatedly emphasized that no analog of OPEC was yet on the table and that none of them was determined to set it up. On the other hand, they recognized the need for mechanisms to coordinate their interests, even if through bilateral and multilateral consultations instead of within a united organization.

Time will tell whether the Doha forum has succeeded in this, but some outlines of a coordinated policy of gas exporters can already be seen. They were laid out in documents signed at the forum. The major gas exporting countries, therefore, now have closer positions on creating a gas cartel.

Industry and Energy Minister Viktor Khristenko, who headed the Russian delegation at the forum, said that Russia could undertake to draw up regulations and even finance preparations for setting up the cartel. It is no coincidence that the next meeting of gas producing countries will take place in Moscow.

Qatar has also softened its position as regards the gas alliance. In Doha, Russia and Qatar decided to set up a bilateral committee to coordinate the moves of Gazprom and Qatar Petroleum on foreign markets. Prior to the Doha forum, Gazprom held negotiations on the matter in Algeria. The idea of a gas OPEC is winning supporters in Latin America as well, namely, Venezuela and Bolivia.

It is clear that gas exporters are waking up to the need for coordination, especially in their pricing policies. As a result, the forum decided to set up a group to discuss gas prices. International experts believe that the group will most probably try to determine a new way to set prices, eliminating the current gas prices' dependence on oil prices, but it will not regulate prices as toughly as OPEC does.

So the decision is not viewed as a step toward a gas cartel. Coordinating their policies, however, may help exporters unpeg gas prices from prices for crude oil and petrochemicals, which is important for their economic prospects. It will also help them cooperate as equals with the consumers' cartel represented by the International Energy Agency, which makes setting up a producers' cartel more relevant.

An important achievement of the Doha forum was to set up a coordination committee of energy ministers, led by Russia, that would "address the forum's development."

So here are the key results of the forum in Qatar:

Gas exporting countries are realizing the need for coordinated action, which earlier boiled down to nothing more than empty declarations. Moreover, it seems quite possible that energy prices will fall over the next 10-15 years, resulting in losses for gas exporters.

Political sympathies and priorities are giving way to sober economic pragmatism; hence Russia's closer relations in the gas sector with Qatar and Iran.

Russia is regaining its traditional dominant role in the global gas alliance (it controls over 25% of the world's gas reserves), especially as pressure from the West mounts. But it will be difficult to maintain that role because it depends on supplying gas along previously created routes and because of strained relations with some ex-Soviet countries.

Under these circumstances, the setup of a gas OPEC looks like a remote prospect. However, the positions of gas exporting countries are getting closer and they already have common views, especially on coordinated pricing policies.

Although a gas cartel did not emerge in Doha, preparations for one did begin. Some international experts estimate that the share of gas in the energy balance will grow, which will increase gas exporters' importance for the global economy. Russia can play a special part here, and it is interested in close contacts with other leading gas exporters. The process of moving closer together is already under way.

Dr. Sergei Kolchin is a senior research fellow at the Institute of Economics, the Russian Academy of Sciences.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

Source: RIA Novosti

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