Russia, Iran and Qatar have agreed to form a powerful OPEC-style group for exporting gas. The consortium would control over 60% of the global natural gas reserves – and spark fears in the West that it could lead to higher prices. The news comes after a meeting between Gazprom chairman Alexey Miller, Qatar Energy Minister Abdullah Ben Hamad Al-Attiya, and Iranian Oil Minister Gholam Hossein Nozari. Talk about the creation of the group will send shivers down the spines of the United States and the European Union, which rely heavily on imports. The founders of any such group would be Russia, Iran, Qatar, Venezuela and Algeria. The United States and the EU fear an OPEC-style natural gas cartel would lead to a monopoly on supplies and higher prices. It’s estimated Russia holds around a quarter of the global natural gas reserves.

The move was immediately condemned by the European Commission (EC), amid fears that the trio could use gas as a political weapon. Russia accounts for about 20% of Europe’s gas imports. Officials from Russia’s state-owned energy company Gazprom met counterparts from Iran and Qatar on Tuesday [21 Oct 2008] to discuss the creation of a “big gas troika”. Alexei Miller, Gazprom’s chairman, said: “We are united by the world’s largest gas reserves, common strategic interests and, which is of great importance, high co-operation potential in tripartite projects. We have agreed to hold regular – three to four times a year – meetings of the gas G3 to discuss the crucial issues of mutual interest.” Meanwhile, members of the OPEC cartel, which controls about 40% of the world’s crude has recently announced a 1.5 million barrels per day production cut in order to put a floor under the tumbling price oil.

They are calling it by various names, whether it’s a Gas OPEC, G-OPEC, “Big Gas Troika”, Gas G3, or whatever. But the fact remains that this group will control a larger proportion of global natural gas production, 60%, than OPEC’s 40% proportion of global crude oil production. Canada’s natural gas issues aren’t exactly helping the Western cause either, with tar sands operations gobbling up rapidly declining gas reserves there.

In addition, as world crude oil production declines, and depletion rates soar (and NYMEX crude oil prices eventually catch on), there will be an increasingly larger reliance on natural gas and LNG as part of the hydrocarbon energy mix, a fact that the members of this gas OPEC are sure to capitalize on.

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