Qatar sees difficulties in forming gas cartel


Abdullah bin Hamad Al-Attiyah said he was going to Moscow “to discuss oil and gas issues” with Victor Khristenko, Russian minister of industry and energy.
“I will see what they have done there,” Al-Attiyah told Dow Jones Newswires before leaving Qatar’s capital, Doha, yesterday for a three day trip to Russia.

Al-Attiyah said he expected “difficulties” in setting up an OPEC-style gas group, an attempt that alarmed Europe and the United States in April, when 14 natural gas producers and exporters discussed issues facing the global gas market in Doha.
Russia and Qatar hold the world’s largest gas reserves.

Europe relies heavily on gas imports, particularly from Russia, and was relieved when gas producers and exporters decided in April to form a high-level commission to study gas pricing policies, rather than a cartel. The commission’s task is to help determine the feasibility of forming an exporters’ group, but energy officials in member states have publicly backed away from statements in favor of a cartel, which for those who depend on imported natural gas for heating, cooking and generating electricity, spells a hike in prices.

Unlike oil, which is traded on an exchange  that constantly updates the market price based on supply and demand, most gas is sold under tight contracts that allow buyers to lock in prices for up to 25 years.

The formation of a gas exchange has been difficult because most natural gas is delivered via pipelines and is not as easily shipped around the world to different buyers.

Pipeline infrastructure also requires significant investment that often makes long-term contracts necessary.

The statements in favor of a gas cartel first emerged in January when Iran’s supreme leader, Ayatollah Ali Khamenei, proposed Iran and Russia create one.
In February, Russian President Vladimir Putin and Qatari Emir Sheik Hamad bin Khalifa Al Thani agreed to explore the idea.

President Abdelaziz Bouteflika of Algeria and President Hugo Chavez of Venezuela are also known to support creation of a cartel.

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