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A New OPEC for Gas?

Russia, Iran and Qatar held talks in Tehran yesterday about forming a cartel for natural gas that would resemble the OPEC cartel for oil. But the structure of the natural gas business makes it unlikely that a gas OPEC would get off the ground anytime soon.

The lure of a gas OPEC is great. Most of the world's richest nations -- European countries and Japan -- depend heavily on natural gas; as concern grows about greenhouse gas emissions, natural gas is a cleaner choice than coal. So the three nations that Russia's natural gas company called the world's "gas troika" could have a lot to gain if they limit supplies to pump up prices. Together, the three control more than half the world's proven natural gas reserves.

But the mechanics are complicated. Unlike oil, which can be shipped by pipeline or tanker or truck, natural gas must travel through pipelines or special tankers with expensive terminals to turn it into liquefied natural gas. Before building such terminals, companies and countries usually lock in long-term supply contracts. Qatar has been doing this for the past couple of years and has made many big commitments. Iran, by contrast, has been struggling to find pipeline routes because of its political isolation. Logistically, it would make sense to have pipelines connecting it with Iraq and Turkey, or Georgia and Europe, or Pakistan and India. But those routes are full of political obstacles. (Iran also has rapidly growing domestic consumption.) Russia already has a great deal of market power over Europe on its own, because it supplies 25 percent of Europe's gas. But exercising that power would have all sorts of political fallout.

Consuming countries aren't exactly holding their breath for a G-OPEC kind of arrangement. Though other gas producers possess smaller reserves, Europe is busy trying to build new pipeline links to diversify supplies. There are pipelines to Algeria and Libya as well as to the big reserves in the Caspian region.

Even without a new natural gas cartel, however, big consuming nations face big constraints and long-term dependence. Russian officials in the past have visited Algeria to try to coordinate policies. In the Caspian region, competition is breaking out for access to supplies. Russia has been competing with European pipeline promoters for Turkmenistan's natural gas, most of which goes into Gazprom's pipeline system.

"In the Caspian, competition is quickly growing," said Mihaly Bayer, an ambassador at large for Hungary's foreign affairs ministry who is responsible for promoting the proposed 3,300 kilometer, 7.9 billion euro Nabucco pipeline to the region. "Russia would like to buy more gas. China would like to buy the same gas." Bayer was recently in Washington.

In the early 1980s, the Reagan administration warned Europe about building gas pipelines to Russia that would make the continent vulnerable to Moscow. For a quarter century, those fears have turned out to be largely unfounded. But the mere meeting of the troika yesterday in Tehran should be enough for all natural gas consuming nations to remember one of the most crucial pieces of advice when it comes to energy supplies: Diversify, diversify, diversify.

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Comments (7)

Smartybritches Author Profile Page:

If this is what they want to do let them. That doesn't make it completely right. I really think that the Americans should go for the natural gas and oil on and under American soil.

tropicalfolk Author Profile Page:

Meanwhile in Metropolis, Superobama is already planning a summit with Wladimir Putin, Mamoud Ahmadinejad and Hugo Chavez, to discuss the way they would help him carry out his promises of de-carbonizing America's economy, reversing global warming, and creating millions of green-collar jobs for Americans.

cbmuzik Author Profile Page:

the new OPEC? Hrmmmm....the way I see it is time for the changing of the guard. Britain for YEARS kept anyone from solidifying a grab of the oil market, America joined the pursuit and thus the double-fisted bully took over the oil war. If Russia, Iran and Qatar partner, it's curtains for the British/American empire. Plain and simple. History's past will be recalled in many ways and these guys will cause havoc for both countries. Every move has been documented. The cards have been dealt, and the hands are now being played. It's nothing more than a power game. Right now, Britain/America is not winning. There hegemony has come upon them in the worst of ways if this EVER falls through! The next war won't be for oil, it'll be for everyday resources.

mcleangirl Author Profile Page:

If we get going on solar and wind machines now, we can offset any price hikes coming along for us, and best of all, we can sell our wind and solar products to third world countries before they have to bow down to Russia and Iran in order to survive. You can bet that part of their bowing down might be to deny our access to poorer parts of the world. And the poorer parts of the world is where we get our food now that we've made suburbs of practically every farm in the country.

kohsar240 Author Profile Page:

US has pursued many of its energy policies mindlessly. Isolating and preventing Iran from exporting its natural gas to Pakistan and India has missed an opportunity to reduce demand for oil. This policy is a failure from the start. More sources of energy like natural gas in the market would supplement oil, which would offset demand for oil. Considering environmental consequences, natural gas is cleaner than oil and motorists in India and China would benefit greatly by converting their cars into use of natural gas in the form of compressed natural gas or CNG. Some of US foreign policy is so illogical that one wonders of US is too big beyond human capacity to manage, like a large corporation which has acquired many business that is hardly in sync or profitable for the parent company. In energy, US has shown no leadership to solve energy problems of the world. Many poor countries spend a large sum of their income to oil consumption. And many producing nations spend large sum of oil money to buy dictatorship, like Iran, Saudi, Venezuela, Russia and the list goes on. If and when Obama becomes president, I just hope that he takes tackle the energy problem besides many others issues like health. Republican party is too corrupt to do anything good for this country.

deflag Author Profile Page:

Car Zero
"FYK is powered on NaturalHy (HCNG), a blend consisting of 8-20% hydrogen and 92-80% compressed natural gas. The car is built almost entirely in aluminium in order to reduce weight and the car is fitted with cutting edge wireless communications solutions from Norway. Not only body and chassis, but suspension, motor, wheels and the entire has been made from recyclable aluminium and exterior as well as interior is formidable display of various aluminium-shaping techniques and surface treatments."

Aluminum, wireless, fast and recyclable. This is the car of the future or a template. Alcoa stock is looking up if we ever get around to the future. 250-270 hp and light. It sounds like a lot of fun.


You write " Consuming countries aren't exactly holding their breath for a G-OPEC kind of arrangement."

What you mean actually is that the consuming countries are scared like hell that G-OPEC might actually materialise. The US has done everything to torpedo the Iran-Pakistn-India pipeline, and still India has not given up on it although pricing considerations have delayed the project.

Well, in any case, it is the West that drove Iran into the arms of Russia. And, having long shunned Libya, they are all now falling at the country's feet, even if Libya has announced its intention to withdraw all its funds from Swiss banks.

Good luck to those who still think that the divide-and-rule strategy is a surefire one to continue their grip on hegemony.

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