Gas Exporting Countries Forum: GECF Members, Purpose

Gas Exporting Countries Forum: GECF Members, Purpose explained by professional Forex trading experts the “ForexSQ” FX trading team.

Gas Exporting Countries Forum: GECF Members, Purpose

The Gas Exporting Countries’ Forum, or GECF, is a cooperative organization of countries that produce natural gas. Its members produce 40% of the world’s natural gas and control 67% of its reserves. Its purpose is to agree on the issues facing natural gas producers. Members coordinate their efforts to preserve their natural resources. Their stated purpose does not include controlling the price of natural gas.

Nevertheless, it is an unstated possibility. If GECF members formed a cartel, it would rival OPEC in strategic importance. (Source: “GECF Remedy for the Energy Markets,” International Energy Forum.)

Members

GECF has twelve members. Russia is the leading member and is also the world’s largest producer of natural gas. Iran has the world’s third-largest gas reserves, while Qatar has the fourth largest reserves. Other members include Algeria, Bolivia, Egypt, Equatorial Guinea, Libya, Nigeria, Trinidad and Tobago, United Arab Emirates, and Venezuela. The seven countries that participate as observers are Azerbaijan, Iraq, Kazakhstan, Netherlands, Norway, Oman, and Peru. Turkmenistan and Uzbekistan have also expressed interest. (Source: GECF Members, GECF.)

Meetings

November 23, 2015. Tehran, Iran: Russia’s President Vladimir Putin met Iran’s Ayatollah Ali Khameni for 90 minutes to reinforce their alliance in the Syrian war.

Russia, Iran, and Lebanon’s Hezbollah are fighting the ISIS terrorist group, along with the United States and Europe. They all agree they’d like a cease-fire by the end of 2016. However, Russia and Iran disagree with the U.S. position that Syrian President Bashr-al Assad should step down. (Source: “Russia, Iran Showcase New Partnership,” WSJ, November 24, 2015.)

June 30, 2013. Moscow, Russia: The Moscow Declaration supported extended use of natural gas in transportation and feedstock. The members and observers attended, as well as the IEA, the IEF and OPEC.

November 14, 2011. Doha, Qatar: The Doha Declaration supported using long-term contracts to support natural gas use. It also encouraged participation of new members.

History

In 2001, Iran invited Algeria, Brunei, Indonesia, Malaysia, Oman, Qatar, Russia, Turkmenistan and Norway to a meeting of ministers. They agreed to continue the dialogue between them, share research, and promote a stable energy market.

In 2003, the fifteen members created an office to administer the GECF. By 2006, the structure and staffing were in place.

At that time, Algeria and Russia agreed to coordinate the first step towards a gas cartel that would rival OPEC. Algeria is the largest gas producer in OPEC. Algeria gave Russia monopoly access to its gas fields, the eighth largest in the world. In return, Russia forgave Algeria’s $4.7 billion in debt, while Algeria agreed to buy $7.5 billion in Russian jet fighters.

How It Affects You

A gas cartel would ensure higher prices in both gas and oil. Since most of these countries are also members of the Shanghai Cooperative Organization, they are likely to give preferential treatment to China rather than the United States or Europe.

But a gas cartel is unlikely. That’s because it is much more difficult to control the market for gas than for oil. That’s because natural gas is more expensive to transport. Oil can be pumped in its liquid form into container ships. Natural gas has to be turned into liquid form. As a result, gas is a regional market. It is sold to customers that are close by.

For example, Qatar would like to increase its exports of liquefied natural gas (LNG) to Europe. It’s able to sell at market prices. When prices are low, it can easily take advantage to undercut its rivals.

That puts it into direct competition with Russia’s Gazprom and Algeria’s Sonatrach. Russia already has pipelines into Europe. It also has long-term contracts with fixed prices. That stability allows it to cover large fixed costs it incurs for building and maintaining the pipelines.

At the same time, Russia and Algeria would like to expand into Asia. That’s the major market for Qatari LNG. Therefore, the first thing the GECF members must do is agree on how to price natural gas. They can’t create a cartel if they can’t control the price. (Source: “The Myth of a Natural Gas OPEC,” National Interest, February 11, 2013.)

Natural gas produced from U.S. shale has made the competition between members that much worse. The United States doesn’t need to import as much LNG, since it produces its own natural gas. The price