Big gas troika

Big gas troika actors have too divergent interests

A new three-nation club sitting on over half the world's gas is unlikely to dictate prices and could even improve supply security, analysts and industry executives say.

Russia, Iran and Qatar's agreement on Tuesday to meet regularly to discuss how to exploit their huge reserves revived concern that the big gas powers may try to control supplies like Opec wrestles with the oil market.

But analysts say the "big gas troika" is unlikely to lead to supply controls, even as more producers sign up, as all have diverse objectives and gas is harder to commoditise than oil.

"It's very hard to see anything concrete come out of this. The actors have too divergent interests to get anywhere right now," Samuel Ciszuk, Middle East analyst at Global Insight in London said.

"Russia has put forward its vision, the Algerians have put forward a strong vision of their own and of course the Iranians have their own agenda. Qatar is seemingly not really agreeing with any one of those."

Differences between the owners of the world's three biggest gas reserves were apparent on Tuesday, with Iran's Oil Minister using the "gas Opec" term that unnerves consuming countries while Russian gas export monopoly Gaz-prom said the aim was to ensure reliable supplies for all.

Informal meeting

Major gas exporters have met informally for several years at the annual Gas Exporting Countries Forum, a grouping, including Eur-ope's number two supplier Algeria, Venezuela, Nigeria, Egypt, Indonesia and Libya.

Iran has pushed to turn it into something like the Organisation of Petroleum Exporting Countries, the 13-member group of which it is a member that controls output to try to sway oil prices.

But Russia, a major oil producer which analysts say has avoided joining the real Opec because it wants to act alone, has previously said a gas version is not feasible.

On the other hand, Qatar, a small oil producer, is the second biggest gas exporter in the world and wants to increase its market share further by breaking the link to crude.

Iran exports very little gas because of decades of underinvestment, with US sanctions over Tehran's nuclear activities further slowing development in the last few years, so its capacity for influencing prices any time soon are limited.

Iran's tiny gas exports to date are part of a wider problem of underinvestment in the gas sector globally and it is the lack of investment in new fields and export facilities that worries consuming countries most.

"We are concerned about the amount of investment that is going on in potential gas exporters... Those issues remain whether or not there is a gas producers group," said Ian Cronshaw, head of energy diversity at the International Energy Agency, adviser to 28 industrialised countries.

"If it accelerates investment then obviously we would be delighted because our major concern is that upstream and supply infrastructure in general is not developing quickly enough."

Although the details of what the three countries plan to do remain unclear, Gazprom CEO Alexei Miller said they would work on joint projects and cooperation to increase supply security.

Hard to find

Senior executives of two of Europe's biggest gas distributors, GDF Suez and E.ON Ruhrgas, said closer cooperation between producers could be useful but Global Insight's Ciszuk said it was hard to find a common driver for the three countries to work on any concrete projects.

Iran's political isolation makes it difficult for Gaz-prom to invest there and Moscow's hounding of foreign investors will likely deter Qatar.

"Qatar is not really in need of funds. They are earning a lot of money and are fully capable of pursuing projects on their own," Ciszuk said.

"Russia might be and certainly Iran is but would Qatar go in and invest in Russia or Iran?"

Unlike oil, which is traded in a long-established global market of thousands of buyers and sellers competing over cargoes of crude oil, most of Russia's gas is exported to Europe through pipelines which take years to build.

These pipelines tie it to customers thousands of miles away at the other end who sign legally-binding contracts lasting decades which help pay the multi-billion dollar costs of laying the pipes from remote producing fields to the heavily populated parts of Europe.

"The gas and oil organisations would be very different according to the nature of these two (products)," Manouchehr Takin, an analyst at the Centre for Global Energy Studies in London, said.

"With gas you have to have a more dedicated consumer-producer relationship when you build a pipeline to export it."

Takin said that although it was still unclear how the gas group would evolve, it looked likely to focus on information sharing and research for now. "As to what it will be and fear of a price cartel? I doubt it," he said.

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