The press is almost silent about the activities and prospects of the Gas Exporting Countries Forum (GECF), a young international organization set up to increase coordination among the world’s leading natural gas producers. The few publications that do address the GECF often contain errors. The worst of these is to describe the GECF as “the gas OPEC,” comparing it to the influential group of oil exporting countries.

The GECF is not “a gas OPEC”—it is currently merely a discussion forum, and its charter does not have any provisions that could be used to put pressure on gas prices. The GECF cannot set quotas on gas, and its major objective is to “support the sovereign rights of member countries over their natural gas resources and their abilities to independently plan and manage the sustainable, efficient and environmentally conscious development, use and conservation of natural gas resources for the benefit of their peoples” and to exchange “experience, views, [and] information” on the development of the gas-extracting industry.

Nonetheless, there are plans to transform the organization into an effective international cartel that could exert tangible influence on the price-formation mechanism in the market for natural gas. Such plans are, to a degree, promoted by some of the members of the organization, including Iran, Russia, Algeria and Venezuela. This is of no surprise since these countries' aggregate share of the world gas reserves exceeds 50 percent, and their desire to regulate the consumer price of this fuel is natural. Yet, this path is not that easy.

First, there is no single global gas market, as there is with oil. The challenge of transporting gas efficiently means that there are multiple regional markets, which vary in demand and supply. This leads to tough competition for consumers, tearing the camp of suppliers apart.

Specifically, Qatar's intentions to increase the exports of liquefied natural gas (LNG) to Europe disturbs Russia’s Gazprom and Algeria’s Sonatrach, which view the European market as their priority sales outlet. In response, Russia and Algeria are determined to conquer the Asian markets, which are viewed as the major markets for Qatari LNG.

Second, internal and external political factors compound the situation. The consequences of uprisings in some Arab countries in 2011 are a case in point. Those events engendered changes in regimes and altered the balance of power in the energy sector there.

Egypt and Libya are among the gas-exporting countries that felt the grave effects of the Arab Spring. Apart from those two countries, the Forum includes Qatar, Oman, Algeria, which might experience similar unrest in the future. And we should not forget that Iran, which is mined around with sanctions and antagonistic to the Arab states, particularly when the matter has something to do with hydrocarbons.

Third, one must account for differences in policies of the gas suppliers. For example, most of them, including Russia, tend to export pipeline gas under long-term contracts and thus are interested in sustaining year-round supplies at a preset price that is independent of subsequent changes in market conditions. The formula for gas prices used in long-term contracts is linked to oil products.

In contrast, Qatar, the world's leading exporter of LNG, is interested in fast sales at spot prices, which vary along with the current market demand and are not fixed in the long term.

Russia supports a proposal to develop a market pricing mechanism for gas, which would be used by suppliers in writing new long-term contracts. However, according to Qatari officials, the most effective way to achieve stability in the regional energy markets is by binding gas prices to oil prices. If gas-exporting countries manage to reach an agreement on an appropriate pricing mechanism, everyone will have access to the gas market: the choice among the directions of gas exports will not depend on the price offered by the importer.

Doha objects the formation of a gas cartel, largely because this idea is opposed by the United States, Canada, Australia and many EU member states. Qataris fear that they will be accused of collusion and the matter will be referred to international arbitrage.

As a result, the Qatari side avoids the real issues of developing the gas pricing mechanism. I spent a lot of time in Qatar and I have not heard a more or less definite position on this issue from the local gas specialists. Qatari responses boiled down to saying that exporters should sell their hydrocarbons at the highest possible price to all consumers, and Qatar is ostensibly doing it.

Considering the influence of geopolitics, economics, geography and other factors that do not allow the suppliers to choose a coherent position on the exports of the commodity, it is too early to speak about a qualitative evolution of the GECF and its ability to set the prices for consumers in coordination with the major gas exporters. Moreover, although the GECF has held its First Gas Summit, its formative period is not complete.

The current situation in the Middle East and North Africa affects, albeit indirectly, the activities of the GECF. Recently, there have been signs of competition among Iran, Algeria, Qatar, and Libya—and this competition is expected to escalate.

The First GECF summit held in 2011 was instrumental in bringing attention to the environmental benefits of natural gas in the global energy sector and in enhancing investment flows in the gas industry. It gave an impetus to the strategic development of the Forum and set the stage for reaching a new institutional level in the future.

The Declaration adopted at the end of the Forum stated the position of the GECF as representing the interests of the world's producers and consumers of hydrocarbons. At the same time, it stressed the fact that natural gas is the most efficient and environmentally friendly fossil fuel. Hence, gas can be the basis for the development of the countries participating in the forum, while also serving the interests of all mankind.

Certainly, the summit and the resulting Declaration were important and timely steps in turning the Forum into an efficient and specialized organization. However, the visible achievements of the GECF are marred with a number of drawbacks. Speaking with the diplomats of the GECF states in Doha, I got the impression that although many of them are optimistic about the organization, they also acknowledge the need for improvement.

Necessary reforms include established plans for the development of gas markets in order to avoid disorderly competition. It is also important to agree to develop and apply pricing models for natural gas that would be optimal for both suppliers and consumers and take into account its environmental advantages over other energy sources.

The Forum will continue to strengthen the international position of the organization while developing the dialogue with the major players on the global energy market. In addition, there are plans to expand the organization by possibly including countries such as Indonesia, Malaysia, Brunei, Australia, Canada. Iraq, Azerbaijan, Myanmar and Tanzania.

The future will show that Forum is on firmer footing. Indeed, the organization, by trial and error, has sought to address to the global challenges of gas markets, and within a relatively short period of time it has made much progress. The next summit of the GECF, to be held in Russia in 2013, may reveal the fruits of those efforts. But there is still no “gas OPEC.”

Eldar O. Kasayev is an expert on international law and investment in the energy sector of the Middle East and North Africa. His book Qatar in the 21^st Century: Today’s Tendency and Prognosis of Economic Development will be released in 2013.

Image: Wikimedia Commons/lgelball. CC BY-SA 3.0.