It had to happen sooner or later. Seeing how OPEC has, in certain circumstances, been able to affect world prices of petroleum, one of the natural gas producers would eventually follow suit with proposing a gas cartel. What is unusual is that Venezuela would take the lead as its natural gas production is comparatively small. In fact, nearly all of its production is domestically consumed--it'd be a stretch to even call it a gas exporter at the current time. What many commentators downplay while pointing this fact out, though, is that Venezuela has substantial natural gas reserves. The Economist estimates that Venezuela has the most natural gas reserves in the region in an article assessing the prospects for a regional gas pipeline (see chart below):
Hugo Chavez and Argentina's President Nestor Kirchner--another Latin leader who has lukewarm relations with "el Diablo" (US President Bush)--first proposed a "Great Pipeline of the South" linking gas producers to consumers in Latin America. However, this project has (literally) not gotten off the ground so far. Being Hugo Chavez, he nonetheless enlisted the support of Argentina and Bolivia, two of the three leading gas producers in the region, in forming Organización de Países Productores y Exportadores de Gas del Sur (OPEGASUR) together with Brazil. Further, he wants to recruit other countries in the Gas Exporting Countries Forum (GECF) such as Algeria, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Oman, Qatar, Russia, Trinidad & Tobago, and the United Arab Emirates. These countries have 73% of the world's gas reserves and account for 42% of production. (Argentina and Brazil are not part of GECF.) Chavez will push the issue in the upcoming meeting of GECF on April 9 in Doha, Qatar. So far, GECF has been characterized as more of a "talk shop" than a formal organization. OPEGASUR will be keen on Russia, Iran, and Qatar coming on board as they have 57% of global reserves and 26% of production.
As large producers, Russia and Iran may also have designs of their own on creating a gas cartel. Whether their interests are congruent with those of Venezuela remains an open question, though they are all are inclined to use energy as a political tool particularly against the US and would probably like nothing better than to spite it by forming a cartel. Nonetheless, several questions arise over a gas cartel's usefulness for its members. As most gas is transported via existing pipelines and not via ships (like petroleum), it is not easy to reroute supplies--buyers and sellers are largely predetermined. Contracts written up tend to be long-term as well, many lasting a decade or longer. Hence, short-term price movements are harder to influence. As a result, it is more of a case of having several regional gas markets and not a global market per se. 59% of global oil demand is met through imports, whereas only 18% of gas demand is accounted for this way. Nearly all of US gas demand is met by local production, for example, though this may change as recent searches there for gas have yielded little. Just as the Economist suggests that it may be cheaper to liquify natural gas (LNG) and ship it instead of using pipelines in Latin America, advances in shipping LNG may give a cartel more leverage by developing a spot market facilitated by maritime delivery.
Hugo Chavez and Argentina's President Nestor Kirchner--another Latin leader who has lukewarm relations with "el Diablo" (US President Bush)--first proposed a "Great Pipeline of the South" linking gas producers to consumers in Latin America. However, this project has (literally) not gotten off the ground so far. Being Hugo Chavez, he nonetheless enlisted the support of Argentina and Bolivia, two of the three leading gas producers in the region, in forming Organización de Países Productores y Exportadores de Gas del Sur (OPEGASUR) together with Brazil. Further, he wants to recruit other countries in the Gas Exporting Countries Forum (GECF) such as Algeria, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Oman, Qatar, Russia, Trinidad & Tobago, and the United Arab Emirates. These countries have 73% of the world's gas reserves and account for 42% of production. (Argentina and Brazil are not part of GECF.) Chavez will push the issue in the upcoming meeting of GECF on April 9 in Doha, Qatar. So far, GECF has been characterized as more of a "talk shop" than a formal organization. OPEGASUR will be keen on Russia, Iran, and Qatar coming on board as they have 57% of global reserves and 26% of production.
As large producers, Russia and Iran may also have designs of their own on creating a gas cartel. Whether their interests are congruent with those of Venezuela remains an open question, though they are all are inclined to use energy as a political tool particularly against the US and would probably like nothing better than to spite it by forming a cartel. Nonetheless, several questions arise over a gas cartel's usefulness for its members. As most gas is transported via existing pipelines and not via ships (like petroleum), it is not easy to reroute supplies--buyers and sellers are largely predetermined. Contracts written up tend to be long-term as well, many lasting a decade or longer. Hence, short-term price movements are harder to influence. As a result, it is more of a case of having several regional gas markets and not a global market per se. 59% of global oil demand is met through imports, whereas only 18% of gas demand is accounted for this way. Nearly all of US gas demand is met by local production, for example, though this may change as recent searches there for gas have yielded little. Just as the Economist suggests that it may be cheaper to liquify natural gas (LNG) and ship it instead of using pipelines in Latin America, advances in shipping LNG may give a cartel more leverage by developing a spot market facilitated by maritime delivery.
