Gas Exporting Countries Forum Wants Higher Output and Higher Prices

Michael Giberson

The Gas Exporting Countries Forum is meeting in Qatar. From a few news stories I gather they want to boost output and obtain higher prices, and they don’t want to issue quotas or be a cartel. My thought is that, unless they’ve discovered an end-run around basic economic principles, they will be unsuccessful in achieving their stated goals.

From the Voice of Russia:

Russia has won the support of the world’s 12 largest natural-gas exporters over the need to cooperate in developing projects for production and sale of the fuel to raise prices and boost supply at the Gas Exporting Countries Forum (GECF) in Doha on Wednesday. Russia’s Energy Minister Sergey Shmatko has described this as an integral part of the Russian energy diplomacy.

In a declaration they issued after the one-day summit the 12-member Gas Exporting Countries Forum expressed the need to reach a fair price for natural gas based on gas to oil prices indexation.

From Bloomberg:

The world’s largest natural-gas exporters aim to cooperate in developing projects for production and sale of the fuel to raise prices and boost supply.

Officials from Qatar, Iran, Egypt and Algeria, among others, agreed today in the Qatari capital Doha that the price of the fuel used to generate electricity is too low. They disagreed on how the Gas Exporting Countries Forum, a producers’ group set up to share market information and coordinate projects, could also help maximize the income of its 11 members.

Producers need to narrow the gap between prices for gas and crude oil without trying to limit production, said Hamad Bin Khalifa Al Thani, the Emir of Qatar, the world’s largest exporter of liquefied natural gas.

From AFP:

Emir of Qatar Sheikh Hamad bin Khalifa al-Thani opened the summit by complaining about disparities between oil and gas prices despite the rise in gas consumption in recent years.

“It is illogical that discrepancies between oil prices and gas prices increase in favour of the first,” said Sheikh Hamad, who added that he does not call for controlling production to influence prices.

Egyptian Petroleum Minister Abdullah Ghorab, who represented his country, said a fair price “is the cornerstone for developing the gas industry.”

… GECF has been working for a fair gas price which its leaders say is the fastest growing energy source, but they deny it aims to control prices or become a cartel like the Organisation of Petroleum Exporting Countries (OPEC).

Gas prices are currently determined either in long-term contracts between sellers and buyers, which some exporters index to oil, or on spot markets.