As most countries breathed easier after noting that Opec production cuts look unlikely to boost global oil prices in the current environment, Russia rained on their parade. Holding more than half of the world?s natural gas along with Iran and Qatar, it had already announced the formation of a gas troika or a Gas G3 back in October. This Tuesday, at a meeting in Moscow, energy ministers from 12 countries decided on formalising the Forum of Gas Exporting Countries. Claiming their aim was to stabilise the gas market, they have raised fears of a gas Opec?an Ogec, as it were?that would manipulate prices by imposing production quotas. That Russia is spearheading this drive is not surprising. With approximately 25% of its GDP generated by the oil & gas sector, and with 50% of its federal government revenue dependent on exports from the same, Russia?s economy has been one of the hardest hit by the more than 70% fall in global crude prices since July. The country?s budget had, after all, been pencilled in at an oil price of $70, which has now (simultaneously driving down the price of gas exports) fallen into the $30s. Even before the latest announcements, let?s note the number of Russian efforts to consolidate the gas market on its own. These include the MoU signed in 2006 with Sonatrach of Algeria, which, together with Russia?s Gazprom, accounts for 80% of Europe?s gas imports. Not to mention this April?s agreement between Gazprom and the National Oil Corporation of Libya, which calls on the two companies to cooperate over a trans-Mediterranean connector that was initially meant to provide Europe with supply diversity.
As for India, it is forecasted that India?s share of gas consumption will rise from 9.55% in 2007 to 10.25% in 2012. Even after factoring in the increase in domestic supply during the period, our import requirement may go up 80% by 2018, largely in the form of LNG. With Russia, Iran and Qatar setting up a financial affairs centre in Doha, a technical centre in Tehran and a centre to analyse markets in Moscow, the proposed forum bears all the hallmarks of a nascent cartel that could have a substantive impact on India?s energy future. Sceptics say that the gas cartel is unlikely to take off precisely because it?s so unlike Opec, whose interests are focused, by membership and reserves being concentrated in the Middle East. But all efforts in this direction is likely strengthen Russia?s dominance as a gas supplier, and that?s something we might as well start preparing for.
