In fact, Iranian Supreme Leader Ali Khamenei first raised the idea of a gas cartel last year during his talks with Russian Security Council Secretary Igor Ivanov by saying Russia and Iran could set up gas cooperation organization like OPEC since they control half of the world's gas reserves.Responding to Khamenei a few days later, Russian leader Vladimir Putin said: "A gas OPEC is an interesting idea. We will think about it. We are not going to set up a cartel. But it would be correct to coordinate our activities."
Well, as Putin said, Russia and Iran together with another gas giant, Qatar, decided to coordinate their gas policies at a meeting Tuesday in Tehran. Speaking to reporters during the meeting, Iranian Oil Minister Gholamhossein Nozari said cooperation among the three makes sense, as ''Iran, Russia and Qatar have almost 60 percent of the world's total gas reserves. The three big holders of gas reserves are persistent and seriously interested in forming an organization of gas-exporting countries,'' Nozari said.
Despite Nozari's mention of an OPEC-style gas cartel, Russia did not characterize the possible coordination effort as a "cartel" but preferred to call it a "gas troika" or "G3." That, of course, allayed some of the fears regarding the formation of a gas cartel but also raised concerns in gas consumer countries, particularly in Europe, which in turn led to new discussions about whether a gas cartel is possible.
I personally think that a natural gas cartel that resembles OPEC would be difficult and challenging to achieve. Unlike oil, which is traded on exchange that constantly updates the market price based on supply and demand, most gas is sold under long-term contracts, which fix prices for up to 25 years. As a result, a gas cartel likely would have not much influence over the prices.
The formation of gas exchange also would be difficult because most natural gas is delivered via long pipelines and is not shipped around the world like oil to different buyers. Pipeline infrastructure also requires a lot of investment that often makes long-term contracts necessary to cover the infrastructure costs.
Despite these obstacles, a gas cartel could still enhance the standing of gas-producing countries. Such a body would allow its members to potentially wield more influence on world gas prices, particularly in Europe and Asia, than they can individually.
In this context, one expert says, "To try to maneuver the supply … makes perfect sense. Just because it doesn't have the clout of oil, it's still in their best interest to deliver natural gas where it needs to go and manage supply in order to help manage the price."
In addition to these considerations, plans for a gas cartel are also considering a future in which global crude oil supplies will become scarce and expensive. In this regard, liquefied natural gas (LNG), whose supply and trade is increasing rapidly, could become a traded commodity like crude oil as LNG is also transported by special tankers. According to some experts, in view the growing share of LNG in global energy markets, Russia, Iran and Qatar appear to have this in mind as they move toward cooperation.
Of course, these ideas regarding a gas cartel will be discussed for a long time to come. Whether the effort by Iran, Russia and Qatar at future meetings will lead to cartel or remain just a 'troika,' as Russia wishes, remains to be seen.
