In the Middle East emirate of Qatar, the Gas Exporting Countries Forum is talking, in hushed tones, about the possible creation of gas equivalent of the Organisation of Petroleum Exporting Countries (OPEC).
If that happens, and it is not yet a formal agenda item of the 14 countries meeting in the capital of Qatar, Doha, then the world of gas changes – but not in the interests of the countries signing up for membership of the theoretical OGEC (Organisation of Gas Exporting Countries).
The winner, by default, is Australia – living out, yet again, its nickname which has grown from Donald Horne’s classic (but ironically titled) history of The Lucky Country.
To understand the point being made by The Slug about the theoretical OGEC, it is necessary to flip the growing gas debate and look at the situation from the position of the customer, rather than the vendor – something which closet-monopolists in Arab states find impossible to do.
Europe, China and the US are the world’s major gas buyers, either in pipeline or liquefied form. They are also the major victims of the price-fixing, production-rigging and exploration-deadening antics of OPEC.
Over the past 30 years, the big gas buyers have watched OPEC play games with their economies, turning off the oil tap when political events take an unexpected turn, fiddling with output levels when it suits them, and closing their doors to modern exploration and
production techniques that could dramatically boost global oil supplies.
Now, those same oil customers are watching the gas exporters (most of whom are also OPEC members) talk about forming OGEC.
To say the customers are horrified is an understatement – even if some of the attendees at the Doha gathering are poo-poohing the possibility of a gas version of OPEC.
In fact, some of the poo-poohing has done more to fan the fears of gas buyers than outright denials. Take what the goose (sorry, energy minister) from Algeria told Reuters last week.
“It is the consumers really that deep in their sub-consciousness want to have a monster,” Chakib Khelil said when blaming talk of an OGEC on the western world – before confirming the worst fears of customers by adding: “We may end forming a group of experts in the area to think about it and to keep thinking about it.”
In other words, it is “game on” in the minds of some gas exporters.
What does this mean in the world of LNG where Australia is emerging as a major player?
Obvious really. Given that Australia will never join an OPEC-type organisation, it means that potential gas buyers have just been served a very loud reminder about the critical question of future gas-purchasing contracts.
It’s not rocket science to figure out that a gas buyer in Europe, China or the US is now thinking about future supplies in more than the simple question of who can supply future tonnes.
He is thinking about who will be a reliable supplier. Who will sign up for a long-term contract and stick to the terms of the contract? Who will agree on a pricing formula and stick to the formula? Who will not use political events to turn the tap on and off? Who will be a politically and commercially reliable partner?
The answer, despite its problems with environmental issues (such as mating turtles), and heritage issues (such as ancient scribbles on rocks), is Australia.
Despite being a country with less gas than some parts of the Middle East, there is a real advantage emerging for Australian LNG producers from this talk of creating OGEC.
And while it might not feature prominently in news reports from Doha, there is no doubt that the customers are busily dividing their world of future suppliers into two camps: “reliable” and a category known as “OGEC member”.
