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Sat 13 Nov 2010 05:44 PM

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Ernst & Young says 'gas OPEC' cartel is increasingly unlikely

'Individual countries would probably be nervous about cutting back production'

Ernst & Young says 'gas OPEC' cartel is increasingly unlikely
GAS OPEC: Russia, Iran and Qatar, hold half the world’s gas reserves, are members of the Gas Exporting Countries Forum (Getty Images)

The formation of a gas exporters’ organisation modeled on OPEC is increasingly unlikely as nations seek to recoup investments in output, said Ernst & Young.

In an report emailed today, Ernst & Young said: “Individual countries would probably be nervous about cutting back production in case their actions were not matched by other exporters.”

Russia, Iran and Qatar, which together hold about half the world’s gas reserves, are members of the Gas Exporting Countries Forum, nicknamed ‘Gas OPEC’ because of a potential similarity to the Organization of Petroleum Exporting Countries in setting prices.

Ernst said, companies have invested billions of dollars in projects to produce liquefied natural gas and need to operate them at high capacity to achieve satisfactory returns. Qatar is the world’s biggest supplier of LNG, fuel cooled to a liquid for transportation by tanker.

An increase in global LNG capacity and US advances in the production of unconventional gas, including from shale formations, have contributed to oversupply, which the International Energy Agency estimates will exceed 200 billion cubic meters next year. The glut has damped spot prices in Europe as global demand fell last year.

The report said: “If shale gas does turn out to be a game changer, then this will alter the relative balance of power between governments in the energy market, which will present a further obstacle to the formation of a gas OPEC.”

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cladd 9 years ago

Shale gas has led to a change in market dynamics in the US. The next focus is no Europe.