Published: December 24 2008 02:00 | Last updated: December 24 2008 02:00
Gas exporting countries’ Christmas present to the west was a long-feared “gas Opec”, as ministers meeting in Moscow yesterday transformed what had been an occasional talking shop into a formal body with a permanent secretariat. For now, Russia is probably right that “Gopec” cannot control output and prices. First, unlike oil, natural gas relies overwhelmingly on pipelines to deliver it to end-users, limiting scope for trading. It will take years for the market for liquefied natural gas – like crude, carried by tankers – to develop enough to create a big spot market.
Second, it does not make sense for Russia and other gas powers to push prices too high in the short term. Better to increase gas’s share of energy supplies, promoting it as reliable and competitive, than to scare energy importers into developing alternatives such as nuclear power.
But Gopec’s emergence is, nonetheless, significant. Russia has systematically wooed gas producers, including Iran, Nigeria, Libya, Algeria and Qatar. It clearly aims to play a co-ordinating role among producers, and has a hand in virtually all existing and prospective supply routes to Europe. Theoretically, it could co-ordinate which resources producers choose to develop and when they come on stream – increasing longer-term pricing power.
Moreover, Uralsib, a Moscow investment bank, suggests Gopec’s formation will leave control of gas development, especially LNG, in the hands of members’ national energy companies. The likes of ExxonMobil, BP and Shell may be relegated to minority stakes. Russia may also invite Gopec energy companies to help exploit its gas reserves. That way, Gulf states, especially those without their own gas, gain access to coveted reserves. Russia gets help raising the hundreds of billions of dollars needed to develop its remote gas provinces. And it gains a useful bargaining chip for times when, as now, it is under pressure to join in Opec’s oil production cuts.
Copyright The Financial Times Limited 2008