Considering Their Interests

9 April 2007



Natural Gas Producers Meet to Form Not-a-Cartel

Members of the somewhat informal Gas Exporting Countries Forum, nations that are major producers and exporters of natural gas, have begun a meeting in Doha, Qatar. From all appearances, they are meeting to establish a producers’ cartel not unlike OPEC. Naturally, the attendees deny that that is their intention. They are merely meeting to “consider” their “interests.” Quite.

The GECF doesn’t have a fixed membership but attendees in Doha include such countries as Russia, Iran, Qatar, Venezuela and Algeria, and together control about 73% of global gas reserves and 42% of production. Each of these states has an interest in upsetting the current balance of economic power between producers and consumers for purely financial reasons. On the other hand, Qatar and some of the lesser GECF participants have pretty good relations with the US and would probably not want to undermine them.

The real question is whether the gas production chain resembles that of petroleum enough for the OPEC model to work. A quick review of the facts suggest that only a limited cartel is even possible. Since gas is distributed through regional networks of pipelines, there really isn’t a global market in the same way there is for oil. Saudi crude can wind up anywhere, but Russian natural gas probably won’t turn up in Chile. Moreover, gas delivery contracts run for up to 30 years at a set price. This makes it difficult for any would-be cartel to cut production to drive up the price.

Iran’s OPEC governor, Hossein Kazempour Ardebili, told the media that the purpose of the GECF meeting was “not to create a cartel but rather [to address] the security of supply, providing the market’s needs and voluntary cooperation of countries based on political tastes.” So it isn’t really a cartel but rather a conspiracy against the free market. The one is institutionalized, the other improvised.

Nevertheless, Algerian Energy Minister Chakib Khelil said, “In the long term, yes. In the long term we are moving towards a gas OPEC... It will take a long time.” Since its founding in 2001, the GECF hasn’t turned into an OPEC-style cartel, and there is not even a fully blown secretariat of bureaucrats to administer things between meetings. Egypt’s Energy Minister Sameh Fahmy summed it all up, “The world is not prepared to have a gas OPEC.” Yet.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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