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.