Are We Seeing The Emergence Of A Russia-Saudi Natural Gas Cartel?

OilPrice.com: Are Russia And The Saudis Planning A Natural Gas Cartel?

The fledgling production cut strategy of OPEC (Saudi Arabia) and non-OPEC (Russia and the FSU) shows that a new strategy is needed to counter the ongoing doubts in the markets.

At the same time, Russia and Saudi continue to give indications of a possible OPEC 2.0 scenario, in which a possible Russian membership is on the table. This would confront the market with a renewed and stronger oil cartel, although the overall strategies need to be adjusted. At the same time, Saudi Arabia, via its oil giant Aramco has openly stated to be interested in global gas investment opportunities, starting in Russia’s Siberian region. While the media still looks at the current discussions as a pure crude oil cooperation strategy, some see another development on the horizon. The real power of OPEC, non-OPEC cooperation would increase if they would not only include a crude oil production cut, but also integrate the other (hidden) cartel, the Gas Exporting Countries Forum (GECF). An OPEC 2.1, including gas exporters, would really block any negative developments in the market, even shale oil and gas.

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WNU Editor: I am not optimistic on the success of such a cartel. The same market forces that are now driving the price of oil are the same market forces driving the price of oil.

Is Russia's Monopoly Over Gas About To Be Broken In Europe?

Insight: Poland's Shale Gas Play Takes On Russian Power -- Reuters

(Reuters) - When Wieslaw Radzieciak took office as the mayor of Lesniowice in the gently-rolling farmland of southeastern Poland 26 years ago, the Soviet garrisons that dotted the county were a stark reminder of which superpower was in control.

The signs of Russian occupation have vanished but over the past year a new superpower has moved in, its presence spelled out on the distinctive logos plastered on the trucks used by U.S.-based oil services company Halliburton.

It's all part of Poland's ambitious goal to exploit Europe's biggest estimated deposits of shale gas. Beginning in 2014, Warsaw wants to tap an estimated 5.3 trillion cubic meters of recoverable reserves of gas - enough, according to the U.S. Energy Information Administration, to supply Poland with more than 300 years of its domestic energy needs.

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My Comment: If this becomes successful .... and it is a big if .... it will have a profound impact on Russian influence in Europe as well as a big drop in income earned from gas sales. Are the Russians concerned ... you betcha. Are the Poles and others hopeful that this will succeed .... you betcha on that also.

Russia Look To Control World's Gas Prices

From The Telegraph:

Plan for 'gas Opec' could tighten Prime Minister Vladimir Putin's grip on Europe's gas supplies.

The Russian national anthem blared over the loudspeakers as dozens of oilmen and officials braved the freezing cold to watch the tanker come in, celebrating the launch of year-round oil production from Sakhalin-2, the largest oil and gas project in the world.

They congratulated themselves and stared out to the sea with pride.

Yet this month's event will be dwarfed by one to come early next year, when the sprawling plant on the tip of Russia's Far Eastern island of Sakhalin begins producing liquefied natural gas, or LNG, a relatively new form of energy.

The advent of LNG may one day allow gas exporting countries, who gathered in Moscow last week to create a new organisation, to act as a cartel along the lines of Opec, holding sway over prices and supply, and thus consumers around the world.

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My Comment: Such a plan will never work in the long term. As OPEC's failure becomes obvious to all to see, once prices increase .... alternative or additional energy sources will be quickly found. For old line communists like Putin, free market economics is a concept that is hard to understand or define, but its impact is felt on a daily basis.

Gazprom Warns Europe On Gas Deliveries

Photo: The logo of Russia's state-controlled gas giant Gazprom in front of Russia's Government building in Moscow. Russian giant Gazprom has warned European clients that its gas conflict with Ukraine, conduit for European-bound gas from Russia, could affect deliveries to Europe. (AFP/File/Alexander Nemenov)

From Yahoo News/AFP:

MOSCOW (AFP) – Russian energy giant Gazprom warned European clients Friday that its gas conflict with Ukraine, conduit for European-bound gas from Russia, could affect deliveries to Europe.

The warning came in a letter from Gazprom chief Alexei Miller to the company's European clients.

"Gazprom is doing everything possible to avoid any disruption of gas deliveries to Europe," said Miller in the letter cited by Interfax news agency.

"However, if events develop along an unfavourable scenario, the problem of Ukrainian transit will be a common problem for Russia and Europe," Miller said.

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The Establishment Of A Natural Gas Cartel

Natural gas production by country (countries in brown and then red have the largest production). Image is from the Natural Gas Bank.

Gas OPEC? Not Quite -- Forbes Magazine

Russia unites a dozen countries under the banner of energy cooperation, but it's not yet a sinister prospect.

The outlines of a "gas OPEC" seemed to take shape on Tuesday, though its teeth might not be as sharp as feared.

On Tuesday, energy ministers from 12 gas-exporting countries flew to Moscow to formally unite as one group, fueling suspicions that this would essentially extend an original "troika" of Iran, Russia and Qatar announced back in October. But it will be a long while before any such "gas OPEC" achieves the control and the influence of its oil-exporting counterpart, as the natural gas market has not yet moved out of the shadow of crude oil.

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More News On The Establishment Of A Natural Gas Cartel

Russia hosts gas group, faces OPEC ire over oil -- Reuters
Exporters meet to create ‘gas Opec’ -- Financial Times
Natural-gas producers set charter -- International Herald Tribune
Russian PM: Era of Cheap Natural Gas is Ending -- Voice Of America
Gas Producers Meet in Moscow Amid Russian Dispute With Ukraine -- Bloomberg
Gas exporting states form new forum -- Deutsche Welle

The Emergence Of A Gas Cartel

(Image from Natural Gas Bank)
Natural gas production by country (countries in brown and then red have the largest production)

Russia, Iran, Qatar Discuss OPEC-Style Gas Cartel
-- Yahoo News/AP

TEHRAN, Iran – Iran, Russia and Qatar discussed the formation of an OPEC-style cartel among some of the largest natural gas producing nations on Tuesday, a prospect that has unnerved energy-importing nations in Europe and the United States.

The meeting appeared to be the first serious talks about the creation of such a cartel since Iran's supreme leader, Ayatollah Ali Khamenei, first raised the idea in January 2007.

The prospect has raised concern in the United States and around the 27-nation European Union, which depends on Russia for nearly half of its natural gas imports. Moscow, which controls many of the European pipelines delivering gas from Russia and Central Asia, already has a tight hold on supplies.

Russia has been accused of using energy as a weapon, in particular in its disputes with neighboring Ukraine. European Union leaders have said they would stand against any Russian effort to create a gas cartel, fearing energy prices — and Russia's political clout — could rise further as a result.

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My Comment: There is enormous money in natural gas. My surprise is that it took so long to organize such a cartel.