Energy News  
Gas OPEC: Is It A Good Idea

There is no global gas market; there isn't a European gas market either. There are no "global" gas prices - they are set individually for each contract (usually a long-term). As a result, the potential gas cartel cannot influence gas prices through restrictive quotas. By restricting exports, gas-producing countries would only harm themselves by cutting their own incomes.
by Oleg Mityayev
RIA Novosti economic commentator
Moscow (RIA Novosti) Oct 28, 2008
Russia, Iran and Qatar, the three nations accounting for over 60% of global natural gas reserves, agreed to set up a "gas OPEC," on October 21 in Tehran, Iranian Oil Minister Gholam Hossein Nozari said. The three largest gas exporters want prices up, given the recent dramatic decline after the summer peak.

Unfortunately, they have no power to change that now, as gas prices are regulated by the oil and petrochemicals markets since there is no such thing as an independent gas market.

The high-profile statement by Nozari was followed by amendments. The alliance established in Iran's capital is in fact a "big gas troika." Its technical council will smooth out all unsolved issues within a week.

The OPEC-style gas cartel will be finalized on November 18 in Moscow which must mean the group's charter will be adopted, a document which has been in the works for two years, ever since Iran initiated the idea.

In fact, gas producing nations have had a discussion site since 2001, the Gas Exporting Countries Forum (GECF) comprising 16 member states. But it has no charter, its decisions are not binding on its members and it is no more than a discussion club.

Adopting a single charter has been the long-standing stumbling block for a "gas OPEC." Iran wants the gas cartel to be modeled after the original OPEC, setting quotas for gas production thus pushing prices up while further damaging the U.S. economy.

Moscow, in turn, is trying to avoid aggressive policies suggesting that the new organization should manage joint gas projects and gas transportation issues.

The latter is especially important for Russia and its gas export monopoly, Gazprom, whose CEO Alexei Miller represented Russia at the Tehran meeting. It is crucial for Russia that Central Asian gas go through Russia on the way to Europe rather than bypass it via the Caspian seabed or go through its sly ally, Iran.

Alongside these geopolitical predicaments, there are other practical issues for the proposed cartel to grapple with. Gazprom's gas supplies to Europe have been contracted for the next one to three decades. Iran's gas industry is so disorganized that, despite its huge reserves, the country has to export Turkmen gas under some of its export projects. Turkmenistan, for its part, has shown a rather cool attitude toward the gas OPEC idea.

Qatar is a new player on the global gas market. Most of its projects are still in the works and involve LNG deliveries also to Europe, and again, under long-term contracts. If it tries to limit those deliveries, its niche will be immediately seized by rivals - Libya, Algeria and others.

It follows from the above that there is no global gas market; there isn't a European gas market either. There are no "global" gas prices - they are set individually for each contract (usually a long-term).

As a result, the potential gas cartel cannot influence gas prices through restrictive quotas. By restricting exports, gas-producing countries would only harm themselves by cutting their own incomes.

By a strange irony of fate, gas prices in Europe are based on the market value of crude oil and petrochemicals, which gas producers have no power over.

The disgruntled attitude of the three countries richest in the commodity is easy to understand. Oil prices have plummeted to half of what they were during the summer peak, and natural gas followed suit. Mr Miller and his counterparts are getting desperate because they cannot influence the process.

However, the very idea of establishing some sort of gas cartel is bound to raise concerns with European consumers, further complicating Gazprom's investments in Europe, as if European partners weren't already wary of dealing with the Russian monopoly.

The Russian government must certainly realize that "gas OPEC" is a harmful idea. Energy Minister Sergei Shmatko said earlier this month that the wording was inappropriate because Russia has no intention of regulating gas prices or production levels.

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

Source: RIA Novosti

Community
Email This Article
Comment On This Article

Share This Article With Planet Earth
del.icio.usdel.icio.us DiggDigg RedditReddit
YahooMyWebYahooMyWeb GoogleGoogle FacebookFacebook



Related Links
Powering The World in the 21st Century at Energy-Daily.com



Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News


Five Chinese Oil Workers Killed Says Sudan Govt
Khartoum (AFP) Oct 27, 2008
Tribal chiefs in central Sudan set out into the bush on Monday hoping to meet the kidnappers of nine Chinese oil workers for the first time and start negotiations for their release, a tribesman said.







  • Degradation Of Arabia Costs Five Percent Of Economy
  • China starts work on oil refinery in Niger
  • Gas OPEC: Is It A Good Idea
  • Five Chinese Oil Workers Killed Says Sudan Govt

  • South Korean reactor stops due to mechanical problem
  • Jordan signs nuclear deal with South Korea
  • Uranium shipment arrives safely in Russia: Slovenia
  • India probing radioactive lift button exports

  • Measuring The Weight Of Ancient Air
  • On Rocky Mountain Beetle Kill Could Impact Regional Air Quality
  • An Explanation For Night-Shining Clouds At The Edge Of Space
  • Seabird Ammonia Emissions Contribute To Atmospheric Acidity

  • Climate Change, Acid Rain Could Be Good for Forests
  • Carbon project brings sustainable hope to remote tract of Amazon
  • SKorea announces new 14.2 bln dlr plan to develop wetlands
  • ESA Leads The Way To Map Boreal Forest

  • Beijing Promises Better Food Standards As Crisis Spreads
  • China debates tighter food safety law spurred by milk scandal
  • China farm reforms will seek to end land grabs: official
  • UN urges China to revamp food safety after milk crisis

  • RUF Automobile Introduces All-Electric Sports Car
  • Australia plans electric vehicle network
  • Analysis: Linking cars to grid cuts CO2
  • Taiwan's bicycle makers riding high amid global financial crisis

  • New EU CO2 caps anger airlines
  • Energy Department has high school contest
  • Researchers Scientists Perform High Altitude Experiments
  • Airbus expecting 'large' China order by early 2009: CEO



  • The content herein, unless otherwise known to be public domain, are Copyright 1995-2007 - SpaceDaily.AFP and UPI Wire Stories are copyright Agence France-Presse and United Press International. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by SpaceDaily on any Web page published or hosted by SpaceDaily. Privacy Statement