Ben Hollins, head of European gas and power consulting for Wood Mackenzie, said it is not unusual for the Gas Exporting Countries Forum (GECF) to form a committee to look at pricing. "As such, a study of pricing is not in itself inconsistent with the stated remit of the GECF. Nonetheless it begs the question to what extent a gas OPEC might be able to influence the future global gas market and its prices -- a question which is addressed in our report."
In its latest report "OGEC-The Route to Global Gas Market Power?" Wood Mackenzie looked at the possible membership of such a group -- dubbed "OGEC" by the press -- and compared and contrasted OGEC with the OPEC oil cartel in order to understand OGEC's prospective future role in the global gas market.
U.S. officials have voiced their opposition to a gas OPEC (see related story).
Wood Mackenzie said international gas prices have been highly volatile in recent years, raising questions for producers and consumers alike. "The future outlook for gas prices is therefore a highly pertinent question, and specifically perhaps the future prospects for the explicit linkage to oil prices, which is a feature of many gas markets around the world at present," Hollins said.
"We believe that whilst a potential OGEC would not operate in the same way as OPEC (which seeks to influence oil production levels and hence price), it could nevertheless have a material impact on future global gas market dynamics."
Wood Mackenzie said an OGEC's near-term, potential sphere of influence would be limited by existing terms and conditions in long-term, predominantly oil-indexed, gas contracts that are a feature of the current global gas market. Furthermore, oil and gas differ substantially in terms of how they are consumed in that gas is more readily substitutable by other fuels while oil demand is not, given its primary use in transport fuels.
As seen by statements of key members of the GECF, it is clearly not in their interest to destroy future gas demand by adopting policies that spur the development of alternative fuels and technologies, Hollins said. What is not clear at this point is whether any potential to influence global gas trade by OGEC would unleash a strong, political reaction from consuming countries already sensitive to OPEC's influence over oil supply and price, he added.
The report found that the possible OGEC members currently control around 60% of 2P (proved and probable) global gas reserves and 50% of current global gas exports. Wood Mackenzie's analysis highlighted that members of OGEC are likely to see their influence and bargaining power increase as the principal importing gas markets of Europe, North America and Asia require ever-growing LNG and pipeline imports to meet future energy needs.
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