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

The US$40 billion memorandum of understanding signed last month between Gazprom and the National Iranian Oil Company (NIOC) is a stepping stone for Russia and Iran to implement their long-standing plan to to be the main participants 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 existing Gulf Exporting Countries Forum (GECF), this “gas OPEC” would coordinate an extraordinary proportion of the world’s gas reserves and control gas prices in the years to come. Occupying the number one and number two positions respectively in the world’s largest table of gas reserves – Russia with just under 48 trillion cubic meters (tcm) and Iran with nearly 34 tcm – the two countries are in an ideal position to achieve this.

The Russian-Iranian alliance, as evidenced by the latest multi-faceted memorandum of understanding between Gazprom and NIOC, wants to control as many of the two key elements of the global supply matrix – gas supplied overland via pipelines and gas supplied via liquefied natural gas (LNG) ships – as possible. According to a statement made last week by Hamid Hosseini, chairman of the Union of Iranian Oil, Gas and Petrochemical Exporters, in Tehran after the signing of the Gazprom-NIOC MoU: “Now the Russians are come to the conclusion that the consumption of gas in the world will increase and the trend of LNG consumption has increased and they alone are not able to meet the global demand, so there is no more room for the gas competition [between Russia and Iran].” He added: “The winner of the Russian-Ukrainian war is the United States, and they will take over the European market, so if Iran and Russia can reduce the influence of the United States on the markets oil, gas and commodities by working together, it will benefit both countries.

The Gazprom-NIOC Memorandum of Understanding, as initially analyzed by OilPrice.com, contains four key elements oriented towards the constitution of a “gas OPEC”. One of the things is that the Russian state-backed gas giant has pledged to provide full assistance to NIOC in the $10 billion development of the Kish and North Pars gas fields, the two fields producing more than 10 million cubic meters of gas per day. A second element is that Gazprom will also participate fully in a US$15 billion project to increase pressure in the supergiant gas field of South Pars, on the maritime border between Iran and Qatar. A third element is that Gazprom will provide comprehensive assistance in the completion of various liquefied natural gas (LNG) projects and the construction of gas export pipelines. The fourth element is that Russia will consider all possibilities to encourage other major gas powers in the Middle East to join the progressive deployment of the “Gas OPEC” cartel, according to a high-level source who works closely with the Iranian Ministry of Petroleum. “Gas is widely seen as the optimal commodity in the transition from fossil fuels to renewables, so controlling much of the global flow of this gas will be key to energy-based power over the next few decades. next ten to twenty years, as has already been seen on a smaller scale in Russia’s grip on Europe through its gas supplies,” he added.

From a top-down perspective, the Russia-Iran alliance is focused on securing overt or covert support for building OPEC gas from other major Middle Eastern producers seen as undecided about committing to the Russia-Iran-China axis or the USA-Europe-Japan axis. Qatar (with the world’s third largest gas reserves of just under 24 tcm and the top supplier of LNG) has long been seen by Russia and Iran as a prime candidate for such a gas cartel. , given that it shares the main source of its prosperity with Iran in the form of a 9,700 square kilometer (km²) reservoir that contains at least 51 tcm combined of gas and 50 billion barrels of natural condensate. Iran holds exclusive rights to 3,700 sq km of this reservoir in its famous South Pars field (containing around 14 tcm of gas), with Qatar’s northern field comprising the remaining 6,000 sq km (and 37 tcm of gas).

A new cooperation agreement was concluded between Tehran and Doha in 2017 on the shared reservoir and beyond, as analyzed in depth in my latest book on world oil markets. Since then, Qatar has openly attempted to avoid alienating either of the two major 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 German Economy Minister Robert Habeck, the latter visit being to discuss The way that Qatar could help ease bans on Russian gas in Europe. Prior to these visits, however, Qatar entered into a a multitude of long-term LNG supply agreements with China which has raised serious concerns in Washington (hence Al Thani’s visit to the United States in January).

Beyond the need for a good relationship between Qatar and Iran to ensure the optimal functioning of their huge common gas reservoir, Russia and Iran see another area of ​​particular vulnerability in the political composition of Doha. which can be exploited in building a gas OPEC, and that is its dislike of its other neighbour, Saudi Arabia. The blockade of Qatar from 2017 to 2021 was orchestrated by Saudi Arabia and actively endorsed by the United Arab Emirates, Bahrain and Egypt at first, with later support from Jordan, Libya and others. smaller states. It has never been forgotten by Qatar, any more than the support that was given to Doha during the period by Iran, and by Russia, independently and via Turkey.

Together, Russia, Iran and Qatar account for just under 60% of the world’s gas reserves, and they are the three countries that helped create the GECF, whose 11 members control more than 71% of the reserves. world gas markets, 44% of its marketed production, 53% of its gas pipelines and 57% of its LNG exports. His long term mission statement agreed in Moscow, is to: “Strengthen the role of the GECF on the world energy scene in order to support the sovereign rights of member countries over their natural gas resources, to maximize their value for the benefit of their people and to promote their coordination on global energy developments with a view to contributing to global sustainable development and energy security”.

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There have long been statements of plans to deepen the depth of cooperation among GECF members to the point that it becomes as powerful in the gas market as OPEC once was (before the 2014-2016 oil price war started 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 a cartel of gas-exporting countries similar to OPEC. One of the main reasons why the idea has not been fully realized is Qatar’s reluctance to align itself firmly with the Russian-Iranian alliance, which means that the oscillating supply side of the gas supply matrix – LNG – had remained outside the control of Moscow and Tehran. It is true that Iran has sufficient gas resources to eventually become an LNG superpowerand part of the Gazprom-NIOC agreement aims to achieve this, but it is also true that this is a medium to long term project.

In the shorter term, however, there are signs that Qatar’s reluctance to engage in gas OPEC may fade. The key feature of Doha’s economic plans is that it remains the world’s largest LNG exporter, having lost that position relatively recently, and in this context, long-term agreements with China are extremely important to him. The first notable example — which set a pattern for subsequent transactions — was the long-term purchase and sale agreement between China Petroleum & Chemical Corp. (Sinopec) and Qatar Petroleum for 2

million tons per year (mtpa) of LNG for a period of 10 years. Following these early agreements with China, Qatar signed LNG supply agreements with Iranian (and Chinese and Russian) ally Pakistan – specifically, a 10-year sale and purchase agreement for Qatar Petroleum to supply Pakistan State Oil Company with up to 3 mtpa of LNG to various ports in the country. This agreement builds on the earlier agreement signed in 2016 for Qatar to supply Pakistan with 3.75 mtpa of LNG and came around the same time that close Pakistani ally Bangladesh struck a similar deal with Qatar.

By Simon Watkins for Oilprice.com

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