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Iran and Russia move to create a global natural gas cartel | OilPrice.com

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The $40 billion memorandum of understanding (MoU) signed last month between Gazprom and the National Iranian Oil Company (NIOC) is a springboard to allow Russia and Iran to implement their long-standing plan to be the main players. in a global cartel for gas suppliers in the same mold as the Organization of the Petroleum Exporting Countries (OPEC) for oil suppliers. Based on the current Gulf Exporting Countries Forum (GECF), this ‘Gas OPEC’ would make it possible to coordinate an extraordinary proportion of the world’s gas reserves and control gas prices in the coming years. Occupying the number one and number two positions on the world’s largest gas reserves table, respectively, Russia with just under 48 trillion cubic meters (tcm) and Iran with almost 34 tcm, the two countries are in an ideal position. to do this.

The Russia-Iran alliance, as evidenced in the most recent multifaceted memorandum of understanding between Gazprom and NIOC, wants to control most of the two key elements in the global supply matrix: gas supplied by land through pipelines and gas supplied by through ships on liquefied natural gas (LNG) – as possible. According to a statement last week by Hamid Hosseini, president of the Iranian Oil, Gas and Petrochemicals Exporters Union, in Tehran, after the Gazprom-NIOC memorandum of understanding was signed: “Now the Russians have come to the conclusion that the consumption of gas in the world will increase and the trend towards LNG consumption has increased and they alone are not capable of satisfying world demand, so there is no room left for gas competition [between Russia and Iran].” He added: “The winner of the Russia-Ukraine war is the United States, and it will capture the European market, so if Iran and Russia can reduce the influence of the United States in the oil, gas and product markets by working together, it will benefit both. countries”.

The Gazprom-NIOC MoU, as initially analyzed by OilPrice.com, contains four key elements that are geared towards building a ‘gas OPEC’. One element is that the Russian state-backed gas giant has pledged its full assistance to the NIOC in the development of the US$10 billion Kish and North Pars gas fields, with a view to the two fields produce more than 10 million cubic meters of gas per year. day. A second element is that Gazprom will also help with a $15 billion project to increase pressure at the supergiant South Pars gas field on the Iran-Qatar maritime border. A third element is that Gazprom will provide full assistance in the completion of various liquefied natural gas (LNG) projects and the construction of export pipelines. The fourth element is that Russia will examine all opportunities to encourage other major gas powers in the Middle East to join the gradual rollout of the ‘Gas OPEC’ cartel, according to a senior source working closely with the Oil Ministry. from Iran. “Gas is widely seen as the optimal product in the transition from fossil fuels to renewable energy, so controlling most of the global flow will be the key to energy-based energy for the next ten to twenty years, as has already been done. seen on a smaller scale in Russia’s control over Europe through its gas supplies,” he added.

From a top-down perspective, the Russia-Iran alliance is focused on attracting overt or covert support for OPEC’s gas build-up from other major producers in the Middle East considered hesitant to commit to the Russia-Iran-China axis. or for the United States-Europe-Japan axis. Qatar (with the world’s third largest gas reserves of just under 24 tcm, and the leading supplier of LNG) has long been seen by Russia and Iran as a prime candidate for such a gas cartel, given which shares the main source of its current gas. prosperity with Iran in the form of the 9,700 square kilometer (sq.km) reservoir containing at least a combined 51 tcm of gas and 50 billion barrels of natural condensates. Iran has exclusive rights to 3,700 km2 of this field in its notorious South Pars field (containing around 14 tcm of gas), and Qatar’s North Field comprises the remaining 6,000 km2 (and 37 tcm of gas).

A new cooperation agreement between Tehran and Doha on the shared reservoir and beyond was reached in 2017, as discussed in depth in my latest book on world oil markets. Since then, Qatar has openly tried to avoid alienating either of the two main geopolitical power blocs. Earlier this year, the emir of Qatar, Sheikh Tamim bin Hamad Al Thani, visited the White House, and in March he met with the German economy minister, Robert Habeck, the latter being a visit to discuss how Qatar could help ease bans in Russian gas in Europe. However, prior to these visits, Qatar concluded a large number of long-term LNG supply agreements with China that caused great concern in Washington (hence Al Thani’s visit to the US in January).

Beyond the need for a good relationship between Qatar and Iran to ensure the optimal functioning of their huge joint gas reserves, Russia and Iran see another area of ​​particular vulnerability in the political composition of Doha that can be exploited in the construction of an OPEC of gas. , and that is its dislike for its other neighbor, Saudi Arabia. The blockade of Qatar from 2017 to 2021 was orchestrated by Saudi Arabia and actively backed by the United Arab Emirates, Bahrain, and Egypt initially, with later support from Jordan, Libya, and other smaller states. Qatar has never forgotten this, nor has the support Iran and Russia gave Doha during the period, both independently and through Turkey.

Together, Russia, Iran and Qatar account for just under 60 percent of the world’s gas reserves, and were the three key countries in the founding of the GECF, whose 11 members control more than 71 percent of the world’s gas reserves, the 44 per cent of its commercialized production, 53 per cent of its gas pipelines and 57 per cent of its LNG exports. Their long term mission statement agreed in Moscow, is: ‘Enhance GECF’s role on the global energy scene to support the sovereign rights of Member Countries over their natural gas resources, maximize their value for the benefit of their people, and promote their coordination on global energy developments. with a view to contributing to global sustainable development and energy security.

Related: US Strategic Petroleum Reserve Falls to 35-Year Low

There have long been talk of plans to enhance the depth of cooperation between GECF members to the extent that it becomes as powerful in the gas market as OPEC once was (before the 2014-2016 oil price war was instigated against the US shale oil sector and lost to Saudi Arabia). As early as October 2008, high-level figures from Russia, Iran and Qatar met in Tehran to discuss trilateral cooperation and the possibility of forming an OPEC-like cartel of gas-exporting countries. A key part of the reason the idea has not been fully realized has been an unwillingness on the part of Qatar to firmly align itself with the Russia-Iran alliance, which means that the swinging supply part of the supply matrix gas (LNG) had remained outside the control of Moscow and Tehran. It is true that Iran has enough gas resources to eventually become an LNG superpowerand part of the Gazprom-NIOC agreement is aimed at making this happen, but it is also true that it is a medium or long-term project.

In the shorter term, however, there are signs that Qatar’s reluctance to engage with gas OPEC may be fading. The critical feature of Doha’s economic plans is that it remain the number one exporter of LNG in the world, having lost that place for a relatively recent period, and in this context, long-term agreements with China They are of great importance to her. the notable early example – which established a template for subsequent agreements – was the long-term purchase and sale agreement between China Petroleum & Chemical Corp. (Sinopec) and Qatar Petroleum for 2

million annual tons (mtpa) of LNG for a term of 10 years. After these early deals with China, Qatar signed LNG supply agreements with Iranian (and Chinese and Russian) ally Pakistan, specifically a 10-year buy-and-sell agreement for Qatar Petroleum to supply Pakistan State Oil Company until 3 mtpa of LNG to various ports in the country. This deal builds on the previous deal signed in 2016 for Qatar to supply Pakistan with 3.75 mtpa of LNG and came around the same time Pakistan’s close ally Bangladesh made a similar deal with Qatar.

By Simon Watkins for Oilprice.com

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