"Gas OPEC" of no use to Azerbaijan

Oil&Gas Materials 23 November 2015 00:31 (UTC +04:00)

Baku, Azerbaijan, Nov. 23

By Vagif Sharifov - Trend:

The third summit of the Gas Exporting Countries Forum (GECF), which is also called "gas OPEC", starts tomorrow in Tehran.

The difference between this summit and traditional oil one is that participants do not agree on quotas for gas production, they can not jointly influence on prices and production. But it's just temporary.

At this stage, the participating countries exchange information on a modern, efficient methods of production of gas, production forecast and volume of investments.

"Gas OPEC" which accumulates more than 70 percent of world gas reserves has repeatedly offered Azerbaijan to join and become a permanent participant, but official Baku settled for the observer status. A similar decision was taken in different times by the Netherlands, Iraq, Oman, Peru and Norway.

In order to stabilize oil prices over 50 years ago OPEC was created and it could effectively perform its function for the first 10 years. However, experts know very well what is the work of OPEC today. It went as far as OPEC asking countries outside the cartel to reduce oil production, leaving its own on the same level.

Saudi Arabia, for example, has openly stated it doesn't want to lose their market position and invites all outside the OPEC countries to reduce oil production in order to strengthen prices.

Since the beginning of the last fall in oil prices, some OPEC members have repeatedly asked their colleagues in the cartel to reduce production, as the governments have huge losses because of a sharp and long-lasting double reduction in commodity prices.

Everyone knows that such requests gone unanswered and there are plenty of predictions that at the next meeting of OPEC in the beginning of December nothing cardinal will happen in terms of oil production. A similar fate awaits "gas OPEC".

If Azerbaijan had taken a different decision and joined in the status of a permanent member there would be significant risks in terms of intervention in the decisions of the state for the production and export of gas in the future and furthermore in the decisions on pricing.

In 5 years Azerbaijan will begin active gas supply to Europe, and this period would be enough that the gas Forum was formed to influence the economic decisions of its members.

In addition, the European Union has repeatedly said that it does not like the idea of a gas cartel. The EU sees this as a threat to the gas trade transparency. The representatives of the European Commission stated at various times that the best conditions for the sale of gas is a free and transparent market.

The EU even threatened to reconsider its energy policy if the "gas OPEC" has the intention to influence prices. Western analysts see an even greater challenge - such an organization, they say, by manipulating gas prices could jeopardize international energy security.

So, a replica of OPEC is impossible for several reasons. For one, the gas market is regional and dependent on pipeline routes, and secondly because the current gas prices are linked to the oil prices.

Vagif Sharifov is an analyst, expert in oil and energy markets.

Follow him on Twitter: @VagifSharifov