All that needs to happen to unleash a stampede for Australian gas is for the Federal Government to say: “No, we’re not joining”.
It is, of course, somewhat difficult to decline membership of an organisation that is yet to be formed, but there’s enough evidence already for someone in government to take a firm stand and reject the concept of the “gas producers club” before it is created.
That official step of pulling the world’s major gas exporters into an organisation looks like occurring in June at the next meeting of semi-official Gas Exporting Countries Forum.
According to reports flowing out of the World Economic Forum in the Swiss resort town of Davos, the June meeting in Moscow will have on its agenda the creation of a structure which will have the power to coordinate gas production in the hope of achieving greater price control.
Leading the charge for GOPEC or OGEC are the usual suspects – Arab oil producers, with Russia and some other major gas producers tagging along for the ride.
What attracts supporters of a gas cartel is the principle of producing countries dictating the terms of trade, which means setting the volumes of gas produced and the price charged.
Whether it would work in the relatively early stages of globally traded gas, when supply appears to be readily available, is an interesting economic debating point.
The Organisation of Petroleum Exporting Countries, the oil producers’ cartel, did not work well in its early years because there was sufficient non-OPEC oil available to satisfy world demand. It took a few production embargoes and the achievement of “peak oil” for OPEC to snatch control of the market.
The nascent gas cartel, from what The Slug has been reading, is taking shape exactly as OPEC did after its foundation in 1960. Initially, OPEC had five members – Kuwait, Iran, Iraq, Saudi Arabia and Venezuela. Others joined – and left – as it suited them.
The gas version of the same game is being led this time by Iran, Russia and Qatar with the cartel’s advocates arguing that it would lead to “better coordination between gas exporters”.
One of the leaders of the push is the Qatar’s Energy Minister, Abdulla Bin Hamad Al Attiyah, who told reporters in Davos that it was early days for the cartel, but it would get a shuffle on in Moscow in June.
That meeting, officially of the loose-knit gas forum, was an ideal time to accelerate discussion of a gas cartel.
Al Attiyah said gas exporters would like to see gas trade “at parity” with oil.
“Gas is still not seeing a single price for the world,” he said. “I would like to see, as a gas producer, gas at full parity to oil because gas is even more expensive to produce than oil and we should have at least no discrimination in gas against other fuels.”
For oil-dependent countries such as the United States and most of Europe the possibility of gas selling at parity with oil is a disaster in the making.
Even talk of it, such as what came out at Davos, has sent a shudder through the western world.
That’s why The Slug reckons that the Australian Government has been served an opportunity to set itself apart from the next energy price-rigging trick from the Arabs.
If a clear statement of disinterest is made, the western world (and China) will rush to snatch a slice of non-cartel gas.
The win-win of such a stance for Australia is that major project developments will be accelerated, and the benefits of higher gas prices courtesy of the cartel will flow for decades to come without ever joining this latest price-rigging club.
