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Gas producers jittery over drop in demand

Gulf Daily News, Wednesday, July 01, 2009

DOHA: The club of major gas producers fretted over sagging demand and prices at talks yesterday.

Ministers from the Gas Exporting Countries Forum (GECF), whose members control more than three quarters of the world’s gas reserves, failed to agree on a leader, one of the modest aims the group set itself for the meeting.

Facing the first fall in global gas demand for more than half a century, US self-sufficiency, and a big surge in production over the next few years, the club agreed on the need to improve co-operation to stabilise the market some day.

“We have a challenge now. We never had a challenge before. We could sell the gas,” Algerian Energy and Mines Minister Chakib Khelil said at the meeting in Qatar.

“You have some short-term problems and some long-term problems. The forum is going to be important in how to address the long-term challenges.”

Gas exporters already reeling from a fall in demand for gas in Europe and parts of Asia because of the recession also discussed a sudden loss of appetite in the US for imported gas because of its growing ability to meet its own needs.

“It might come back in 10-15 years but that’s not part of the global market any more,” Khelil said.

Previous GECF gatherings have stoked fears among consumers the group may develop the same influence over gas markets as the Opec has over oil but analysts say it could be years before the group gets organised.

Opec was formed in 1960 and took around a decade to become a force in global oil markets. The GECF is at a similar stage of development as Opec was at inception, analysts say.

A spot market for liquefied natural gas is growing and has formed a stronger link between regions, but the current potential for any concerted action to change global gas market fundamentals is limited.

European consumers will be especially wary of the group’s apparent focus on them after comments from Russia, the European Union’s biggest external supplier, and from would-be LNG exporter Venezuela. Russian Energy Minister Sergei Shmatko said the group would try to maximise its income, while Venezuelan Energy Minister Rafael Ramirez said it could eventually co-ordinate supply cuts to support prices.