OGEC doesn’t seem to have as good of a ring to it
It is very likely the countries that would be involved in this close natural gas relationship would be the countries who are already members of the Gas Exporting Countries Forum. Combined, these countries represent over 60% of the worlds natural gas exports. That’s a greater market share than OPEC’s 57% of total oil exports.
| GECF Member Countries | 2011 Natural Gas Exports (Bcfpd) |
| Russia | 21.39 |
| Qatar | 11.00 |
| Norway (observer status) | 9.41 |
| The Netherlands (observer status) | 5.40 |
| Algeria | 5.03 |
| Nigeria | 2.51 |
| Trinidad & Tobago | 1.70 |
| Bolivia | 1.29 |
| Egypt | 1.02 |
| Kazakhstan (observer status) | 0.94 |
| Iran | 0.88 |
| Equatorial Guinea | 0.51 |
| United Arab Emirates | 0.50 |
| Libya | 0.35 |
| Venezuela | 0 |
| Iraq (observer status) | 0 |
Source: U.S. Energy Information Agency
Several of these countries already have significant control over prices in certain regions of the world. For example, both Gazprom and Norway’s Statoil ASA (ADR) (NYSE:STO) are responsible for 40% of Europe’s natural gas market, all of which is sold on those lucrative oil-indexed contracts.
What makes an organization like OPEC so powerful, though, is its ability to carry spare production capacity and a willingness to shut off the pump if prices get to low. If the member countries could get on board with this kind of move, it would be a very powerful tool in determining natural gas prices around the world.
What a Fool believes
Could a move like this squeeze the profitability of natural gas exports for the U.S.? Potentially, yes, but there are other places around the world that are more likely to suffer from a move like this. Countries like Australia, which has struggled to keep costs under control and doesn’t have feedstock as cheap as in the U.S., are more likely to suffer from this. Chevron Corporation (NYSE:CVX)‘s massive Gorgon LNG project is more than $15 billion over budget, so cost overruns could make the return on investment for these kinds of projects less lucrative.
At the same time, having an OPEC-type price controller would certainly limit how much the U.S. could potentially export at an economically feasible level. Gazprom signed a 30-year deal with PetroChina Company Limited (ADR) (NYSE:PTR) that will supply the Chinese company with 3.7 billion cubic feet per day of gas starting in 2018, just about the same time when the majority of the other major LNG facilities around the world are expected to come on line. If Russia could get some of these natural gas exporting countries to sign on to this “OPEC of gas” idea, it could change the game.
The article Is Vladimir Putin Building a New OPEC? originally appeared on Fool.com.
Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter, @TylerCroweFool.The Motley Fool recommends Chevron and Statoil (ADR).
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
