Shale May Alter Balance of Power in Gas Markets

A report by Ernst & Young says that the probability of the emergence of a formation of a gas exporters’ cartel modeled on OPEC is increasingly unlikely.

Russia, Iran and Qatar, which together hold about half the world’s gas reserves, are members of the Gas Exporting Countries Forum, nicknamed ‘Gas OPEC’, because of a potential similarity to the Organization of Petroleum Exporting Countries in setting prices.

Ernst said that nations are seek to recoup investments in output, and that “Individual countries would probably be nervous about cutting back production in case their actions were not matched by other exporters.”

The report said: “If shale gas does turn out to be a game changer, then this will alter the relative balance of power between governments in the energy market, which will present a further obstacle to the formation of a gas OPEC.”

An increase in global LNG capacity and US advances in the production of unconventional gas, including from shale formations, have contributed to oversupply, which the International Energy Agency estimates will exceed 200 billion cubic meters next year. The glut has damped spot prices in Europe as global demand fell last year.

Source: Bloomberg