Cartel countdown?

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Gas giant: With over 1.6 trillion cu ft of gas reserves, Russia is likely to be the main driver of any movement towards a gas OPEC.

Alarm bells rang out across Europe last week as talk once again surfaced over the possible creation of an OPEC-style cartel between the world's gas exporters.

Ministers from 16 gas-producing nations gathered in Doha for the Gas Exporting Countries Forum (GECF) with the agenda dominated by cartel speculation. While analysts suggest that it could be a number of years until such an organisation is born however, it appears that the gas giants are no longer merely talking hot air. And a significant proportion of the gas-rich fraternity is showing a genuine desire to get the cartel wheels in motion.

Last week, delegates from Iran and Qatar both strived to play down rumours that the conference had anything to do with the forming of a ‘gas OPEC'. "I hate the name cartel. We're just here to consider our interests," said Qatar's minister of petroleum, Abdullah Al Attiyah.

Iran's energy representative, Seyed Hamaneh, told reporters: "The cartel is not an issue. We're here to exchange views on technical issues and on the markets." But as they tried in vain to dowse the fire of speculation, other energy leaders made it clear that a gas OPEC was definitely on their agendas. "In the long run, yes, we are moving towards a gas OPEC," Chakib Khelil, Algeria's oil minister said, although he added that it would be "a long time" before gas markets were liquid enough that such a group could be formed. Meanwhile, Venezuelan oil minister Rafael Ramirez also stated the case for a global gas-producing alliance. "We believe it is a good opportunity to have some discussions about this organisation," he said. "In spite of huge developments in the gas industry and growing demand to import it by consumers, great challenges face the producing countries."

Of course Russia, which controls over a quarter of the world's gas reserves, is likely to be the driving force behind any future cartel movement. At the GECF, Viktor Khristenko, Russia's industry and energy minister, said: "Russia is ready to be the one that will carry out research into the problem of price formation for gas."

In what could be the first step towards a gas cartel, the GECF member states did agree last week to set up a committee to focus on pricing. The body will be set up in conjunction with Russian gas giant Gazprom and Qatar's state-owned oil company. Asked whether the move would eventually evolve into a gas OPEC, Algeria's Khelil said: "Maybe in 10 to 15 years we will see the possibility of an organisation that would be effective in this market." It was the words of Iran's supreme leader, Ayatollah Ali Khamenei back in January that started the latest wave of speculation over an OPEC-style cartel.

During a state visit by Igor Ivanov, Secretary of Russia's Security Council, Ali Khamenei publicly proposed the formation of a gas exporters organisation. This lead Russian President Vladimir Putin to describe a cartel as an "interesting idea".

During the GECF meeting, a number of major gas-consumers spoke out against moves towards a global gas alliance. While some European leaders warned that a gas cartel would spur consumers to move to alternative sources, Andris Piebalgs, the European Union's energy commissioner said: "I'm calling for [gas exporters] not to do this because it's definitely not a healthy development in the gas market." But opposition is not limited to the West. Japan - which imports over 81 billion cubic metres of natural gas per year - has also come forward in opposition to the idea of a cartel. "If I'm asked whether we had better create one or not, I would say it's not desirable," Japan's trade minister Akira Amari said recently. "[Gas] trades in each market under free-trade circumstances, it is different from oil," he added.

Maintaining a firm stance against the forming of a gas cartel, a spokesperson for the International Energy Agency tells Arabian Business: "We believe that a cartel is always bad news for consumers and consumer countries, but cartels are also counterproductive for producing countries. Pushing up prices by forming a cartel will encourage consumers to reduce demand or switch to other fuels. This is particularly true for gas, which can be substituted with coal and nuclear power. Cartels distort behaviour and do not strengthen the security of supply."

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