Russia: Organizing the passing of gas?

On paper at least, the budding “Gopec” appears nearly as formidable as the 48-year-old oil cartel. The troika control 57 per cent of known natural gas reserves – about the same proportion of crude reserves held by the three leading Opec members. North America and non-Russian Europe have only 5.3 per cent and are increasingly reliant on gas for heating and power generation.

That is where the similarities end. Unlike petroleum, natural gas is still for the most part split into regional markets served by pipelines. It is supplemented by a growing market for liquefied natural gas that, like crude, can be shipped to the continent where it fetches the highest price. Notwithstanding Gazprom’s sway over the European Union and success in bullying former vassal states, the economics of the two markets are different enough that a successful gas cartel is a pipe dream for now.

Controlling Gas,” FT, 27 October, 2008.

The idea of a natural gas cartel is an interesting one for many reasons. While it is true that the three countries mentioned in this post, Russia, Iran, and Qatar, control over 50% of the world’s natural gas reserves, it is less true that these countries would form such a cartel for political and economic reasons. I have written before on why Algeria — which holds the world’s 4th largest gas reserves and is a major LNG producer — has not hopped onto the bandwagon. Libya’s reasons are similar. Such countries already control their energy markets to a great extent through their state energy firms. They rather enjoy having countries compete for their gas because of Russia’s bad attitude. Russia’s motivation in proposing the organization is so that it can use the body as a weapon against countries with which Qatar, Algeria and Libya have little interest in quarreling with, even if it does bring great financial gain. They have and will continue to speak in amiable terms of the idea, but none of these countries are willing to cede the necessary amounts of sovereignty over their energy resources to make Russia content with such an organization. It would be a vehicle for Russian bullying, of non-gas exporters and the member states. It is indeed a pipe dream, like other Russian grabs at great power influence. The politics of a “gas OPEC,” at the very least in the short and medium term, are not favorable.

2 thoughts on “Russia: Organizing the passing of gas?

  1. Thanks. Most people are not aware of the “GOPEC” game.

    Recall info about the gas pipeline from Nigeria through Niger to gas terminals in Algeria (4,300 km, $13 billion investement to be shared between Nigeria, Algeria and poor Niger – an initiative from NEPAD). If gas is discovered between Nigeria and Algeria, there is no other option but to hook up to this key pipeline. Algeria ended at once buying arms from Russia and even return all planes and helicopters to Russia on the ground that they are of less quality than american weapons. A month later, Putin in Libya said with Gadafi that they were interested in being involved with the Nigeria-Niger-Algeria pipeline. All of sudden, Algeria declared her intention of buying again weapons from Russia. The following week, they bought fight extinction planes, then resumed purchase of weapons and allowed Gazprom to open an office in Algiers. Does this has to do with this famous GOPEC? Also Lybia allowing last week Russia opening a naval base in Libya is making Algerian very worried (an article this week in Algerian newspapers very critical of this decision).Does this too has any linkage to this GOPEC business?

    I am a Mauritanian and want to know the implication for Mauritania Tand Mali) if gas is discovered around the Taoudeni Basin, which seems to be an extension of Illzi basin. The f
    French and the American are around in the area and I see some fierce competition for the months and years ro come. Already the coup in Mauritania is not helping. Thanks for sharing some thought on this issue. Hardly anything official. We rely on sources like Jeremy Keenan, Geze and Mellah and their assessment is different from the countries that aresilent, but we know some deals are being done behind the curtains. Thanks for your thought on this. Regards. TIdinit.

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