Momentum for a Gas OPEC
For almost 2 decades, the world’s major gas producers have been trying to form an organization similar to OPEC that would offer stability to gas prices and give producers some control over security of supply and security of demand. With international spot trade of gas increasing and public pressure growing for cleaner fuels, the producers believe the time is finally right to become a major force in global energy markets.
The main obstacle to establishing such an influential producers’ group has been the lack of international spot trade that reflects current supply-demand dynamics. Unlike oil, most gas has been traded through medium- and long-term contracts for pipeline delivery, with the gas price usually linked to the price of oil. Gas producers often felt they were leaving money on the table in these deals, which hampered further gas upstream development. But that is changing with the recent growth of liquefied natural gas (LNG) trade on the spot market and the increase in gas output from North America, the Middle East, and Africa.
While all eyes were on OPEC-plus members and what they would do about oil production in the coming months, the Gas Exporting Countries Forum (GECF) met in late November in Equatorial Guinea. Members include two of the globe’s top gas exporters, Russia and Qatar, along with 10 other members (including Iran, Libya, and Algeria) and seven “observer members” (including Norway, Iraq, Oman, and Angola). Notably absent from the group are two of the largest LNG exporters responsible for the fledgling gas spot market, the US and Australia, but GECF members control 70% of world gas reserves.
One of the group’s worries is that, after years of talk about gas being a solution for cleaner energy, momentum for renewables in the wake of heightened concern over climate change could push gas to the sidelines. The oil and gas industry sees gas not only as a bridge to the future but a mainstay of future energy supply. “This idea of natural gas as a transition fuel to renewables is strange,” Total Chief Executive Patrick Pouyanne said recently at an industry gas conference in Washington. “Natural gas is a solution (to climate change). It’s been scientifically proven.” And Qatar Minister of State for Energy Affairs Saad al-Kaabi told GECF members, “We all have the same objective: to place natural gas at the heart of the energy industry as a fuel of the future, and to affirm our true belief that natural gas is a cornerstone in the energy transition.”
BP CEO Bob Dudley said recently that he was “concerned that gas is being increasing marginalized, even vilified and demonized” by environmental groups. But for the industry to sell gas as a “green” fuel, it will need to overcome two obstacles: methane leaks/emissions and flaring. Three of the world’s largest flaring culprits are associated with the GECF—Russia, Iran, and Iraq—and flaring from the Permian Basin in the US is on the rise. In response to these concerns, Qatar—which has ambitious gas growth goals—is touting its plans to adopt more carbon and sequestration projects.
Momentum for a Gas OPEC
John Donnelly, JPT Editor
01 January 2020
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