Thursday, December 10, 2009

Would-Be Gas Cartel Selects First Secretary General

…And his first move is to commission a study to find ways to keep international gas contracts indexed to the price of oil. Go figure.

The Gas Exporting Countries Forum is trying to become a natural gas cartel on the same lines as OPEC. The group met yesterday in Doha, Qatar and for the first time selected a General Secretary, Leonid V. Bokhanovsky, a vice president at Russian pipeline company Stroytransgaz.

That a Russian took the helm of the organization is not a huge surprise given the importance of gas to that nation. Russia, specifically Gazprom, the government controlled gas company, has been losing gas market share for the past year. An ample (and growing) supply of natural gas has created a more fluid spot market in Europe, causing gas consumers to pressure suppliers for lower prices than those from long-term contracts pegged to the price of oil.

A legitimate natural gas market is being created by increased supply and improved transportation (LNG), thus increasing downward pressure on prices. Suddenly, Russia finds itself on the wrong side of history. A free market is growing organically and Russia and other gas producing countries want to put a halt to it. But it’s hard to stuff the genie back into the bottle.

I’ve suggested in the past that gas is a democratic fuel because it’s available throughout the world, and not just in countries with autocratic, controlling governments. The more widespread gas production, the more likely we will be to see a free market and the harder it will be to create a cartel.

Stay tuned.

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