The occasional meetings of the Gas Exporting Countries Forum (GECF) are designed to group the natural gas producers into a tight-knit community of nations resembling the Opec oil cartel. Hosting a summit with leaders from some of the world's top energy states in Moscow on 1st July, 2013, Russian President Vladimir Putin called upon the gas exporting countries to come up with a single price mechanism and resist EU competition rules. He asserted that it was imperative to defend the practice of tying gas prices to those of oil and fight the more temperamental nature of the spot market. It was also essential to have long-term contracts that bind clients to purchase gas within a specific price range for a number of decades and which Russia was recently forced to abandon under pressure from some European states.
The European Union's Third Energy Package that bars companies such as Gazprom from owning both distribution pipelines and processing facilities in the same country was also criticised. "We must jointly resist illegal pressure and more effectively defend the interests of gas producers and suppliers on the international market," Putin reiterated. Venezuela's Maduro said it was time for the Forum to transform itself into something more closely resembling Opec and it must become an organisation that unites the countries present here. Iran's Ahmadinejad suggested to "come up with a pricing mechanism for different forms of gas."
These are, of course, forceful words showing the determination of major gas exporting countries to dictate their own terms to the rest of the world and follow the example of Opec which has largely succeeded in controlling the supplies and manipulating the prices of oil products in the international market over the last few decades. However, gas exporting countries fail to appreciate their constraints when making comparison between the two products and analysing their supply and demand conditions in the global market. They now seem desperate because pressure on the bloc which represents 60 percent of known reserves is mounting, particularly because of the extra gas supplies recently made available by North America's shale revolution. Also, important differences in how the two hydrocarbons are supplied to the global clients and the more regional nature of gas distribution have not allowed the GECF countries to build strong bonds. That is why the excitement of first gas summit which was held amid much fanfare five years ago has faded due to lack of results. On the other hand, the attitude of major gas importing countries has completely changed. Once desperate to get regular gas supplies from various sources on longer-term basis, they are now looking at alternative sources to meet their needs at cheaper rates. Shale gas production, in particular, has redrawn the energy map and the US is no longer a perspective market for Russia's liquefied natural gas supplies from the Barents Sea. EU nations do not like the link between the price of oil and gas because of the expanding supplies of the latter in the recent years, thanks also to the booming liquefied natural gas (LNG) market. That is why they have now upper hand in bargaining with companies such as Gazprom and do not see any reason to accept their conditions in totality. GECF needs to accept the fact that times have changed, and sources of gas supplies are now more abundant and diversified. As such, gas importers are not captive buyers any more and terms and conditions in the international gas market cannot be dictated unilaterally. The cartel of oil exporting countries could also meet the same fate if faced with similar circumstances. In a situation like this, the insistence of GECF to have a link between the price of oil and gas and move towards a single pricing model appears no more than wishful thinking. The forum of gas exporting countries, in our view, needs to redefine its role and approach if it wants to be relevant and influential in a rapidly changing world.
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