Cartel in the Cards

“Gas OPEC” to be Created in Doha Next Month

Kommersant has learned that last week some of the world’s leading natural gas exporters reached a final agreement on the creation of a so-called “gas OPEC.” The consortium of gas-rich countries, which at the moment includes Russia, Iran, Qatar, Venezuela, and Algeria, is due to be formally organized in the Qatari capital of Doha on April 9. The appearance of such a powerful player in the energy arena will undoubtedly meet with an extremely negative reaction from the United States and the European Union.
In the West, the possibility of a consortium of natural gas producers has provoked annoyance. “All initiatives, new or old, to take control of the delivery of energy to the markets or to limit the role of the market in setting prices all contradict the long-term interests of both suppliers and consumers,” said US Secretary of Energy Samuel Bodman soon after President Putin’s meeting with the emir of Qatar.

Europe is even more concerned by the plan to create a gas OPEC. Last year, after Gazprom and the Algerian state-owned gas company Sonatrach signed a memorandum of cooperation, European Energy Commissioner Andris Piebalgs acknowledged that “the context of these talks between Russia and Algeria makes us nervous.” If all of the leading suppliers of Europe’s energy were to unite in a cartel, the EU would be put in a very vulnerable position, particularly since Brussels has recently been eyeing Algeria and Trinidad and Tobago as possible alternative suppliers that could help the EU reduce its energy dependence on Russia.

Top managers at Gazprom make no secret of the fact that one of the Russian gas giant’s top priorities is “to get into every gas heater in Germany” and the rest of the countries in Europe. From a commercial point of view, this is justified by the fact that Gazprom would receive $400-500 per thousand cubic meters of gas by selling to the final consumer, much more than the $290 that it gets from sales to a middleman. For everyday consumers, this may appear to be a fairly good deal: by dispensing with Western European traders, they could theoretically receive Russian gas for much lower prices. Local governments in several regions of Germany have even expressed readiness to sell stakes in their gas pipelines to Gazprom. If Gazprom realizes its goal, however, it will enjoy a much more privileged position than, for example, the European energy giants E.On or Gas de France, whose production of gas is much lower than their volume of sales. If gas producers in Russia and Algeria were to put their heads together to agree on a pricing system, that would effectively sideline Western European traders in the energy market.

Kommersant