Iran And Russia Move To Create A Global Natural Gas Cartel

The Russia-Iran alliance wants as much control as possible over the two crucial components of the global supply matrix: gas supplied over land via pipelines and gas supplied via ships in liquefied natural gas (LNG), and so they are moving to create a global natural gas cartel.

Iran And Russia Move To Create A Global Natural Gas Cartel 1

The US$40 billion Memorandum of Understanding (MoU) between Gazprom and the National Iranian Oil Company (NIOC) that was signed last month is a first step toward enabling Russia and Iran to carry out their long-standing plan to be the main players in a global cartel for gas suppliers, similar to the Organization of the Petroleum Exporting Countries (OPEC) for oil suppliers. This “Gas OPEC” would enable the coordination of a remarkable amount of the world’s gas reserves and control over gas pricing in the upcoming years, building on the existing Gulf Exporting Countries Forum (GECF). The two nations are in a perfect position to do this as they hold the top two spots in the list of the largest gas reserves in the world, with Russia holding just under 48 trillion cubic metres (tcm) and Iran holding close to 34 tcm, respectively.

The Russia-Iran alliance wants as much control as possible over the two crucial components of the global supply matrix: gas supplied over land via pipelines and gas supplied via ships in liquefied natural gas (LNG). This is demonstrated by the most recent multifaceted MoU between Gazprom and the NIOC. Following the signing of the Gazprom-NIOC MoU, Hamid Hosseini, chairman of Iran’s Oil, Gas, and Petrochemical Products Exporters’ Union, issued the following statement in Tehran last week: “Now the Russians have come to the conclusion that the consumption of gas in the world will increase and the tendency towards consumption of LNG has increased and they alone are not able to meet the world’s demand, so there is no room left for gas competition [between Russia and Iran].” He added: “The winner of the Russia-Ukraine war is the United States, and it will capture the European market, so if Iran and Russia can reduce the influence of the United States in the oil, gas and product markets by working together, it will benefit both countries.”

According to OilPrice.com’s early analysis of the Gazprom-NIOC MoU, it has four main components that are intended to create a “Gas OPEC.” One aspect is that the US$10 billion development of the Kish and North Pars gas fields with the goal of the two fields generating more than 10 million cubic metres of gas per day has been pledged by the Russian state-backed gas giant to the NIOC. The supergiant South Pars gas field is located on the maritime boundary between Iran and Qatar, and a $15 billion initiative to enhance pressure there will also receive full support from Gazprom. Thirdly, Gazprom will offer complete support for the development of several liquefied natural gas (LNG) projects and the construction of gas export pipelines. According to a senior source who closely cooperates with Iran’s Petroleum Ministry, the fourth component is that Russia would look into all options to persuade other significant gas powers in the Middle East to join in the slow roll-out of the “Gas OPEC” cartel. “Controlling as much of the global flow of that will be the key to energy-based power over the next ten to twenty years, as has already been seen on a smaller scale in Russia’s hold over Europe through its gas supplies,” he continued. “Gas is widely seen as the optimal product in the transition from fossil fuels to renewable energy.

From a top-down perspective, the Russia-Iran alliance is concentrated on enticing other significant Middle Eastern producers who are viewed as being undecided in committing to the Russia-Iran-China axis or to the U.S.-Europe-Japan axis to provide overt or covert support for the Gas OPEC construct. Given that it shares the primary source of its ongoing prosperity with Iran in the form of the 9,700 square kilometre (sq.km) reservoir holding at least a combined 51 tcm of gas and 50 billion barrels of natural condensates, Qatar (which has the third-largest gas reserves in the world, at just under 24 tcm, and is the top supplier of LNG) has long been seen by Russia and Iran as a prime candidate for such a gas cartel. This reservoir of Iran’s renowned South Pars field, which has over 14 tcm of gas, has exclusive rights over 3,700 sq. km. Qatar’s North Field is responsible for the remaining 6,000 sq km (and 37 tcm of gas).

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According to an extensive analysis on the world’s oil markets, a new cooperation agreement was struck between Tehran and Doha in 2017 on the joint reservoir and beyond. Since then, Qatar has made a conscious effort to maintain good relations with both of the major geopolitical power blocs. Qatar’s Emir, Sheikh Tamim bin Hamad Al Thani, visited the White House at the beginning of this year, and in March he met with Robert Habeck, the German economy minister, to discuss how Qatar could help ease restrictions on Russian gas entering Europe. But before to these trips, Qatar signed a number of long-term LNG supply agreements with China, raising serious concerns in Washington (hence the visit of Al Thani to the U.S. in January).

Russia and Iran see another particular area of vulnerability in Doha’s political makeup that can be exploited in the formation of a Gas OPEC, and that is its dislike for its other neighbour, Saudi Arabia. This vulnerability is in addition to the requirement for good relations between Qatar and Iran to ensure the optimal functioning of their immense joint gas reservoir. The UAE, Bahrain, and Egypt first actively supported the blockade of Qatar from 2017 to 2021, which was managed by Saudi Arabia. Later, assistance came from Jordan, Libya, and other smaller states. Qatar has never forgotten it, nor has it forgotten the assistance Iran and Russia provided to Doha at the time, both directly and indirectly through Turkey.

The GECF, whose 11 members control over 71 percent of the world’s gas reserves, 44 percent of its marketed production, 53 percent of its gas pipelines, and 57 percent of its LNG exports, was established with the help of Russia, Iran, and Qatar, which together account for just under 60 percent of the world’s gas reserves. Its long-term mission (pdf below) is to “enhance the role of GECF in the global energy scene in order to support the sovereign rights of Member Countries over their natural gas resources, to maximise 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.” This mission statement was agreed upon in Moscow.

Plans to deepen collaboration between GECF members have been discussed for a while now, with the goal of making them as influential in the gas market as OPEC once was (before the 2014-2016 Oil Price War was instigated against the U.S. shale oil sector and lost by Saudi Arabia). High-ranking representatives from Russia, Iran, and Qatar met in Tehran in October 2008 to discuss trilateral cooperation and the potential formation of an OPEC-style cartel of gas exporting nations. The fact that Qatar refused to completely align itself with the Russia-Iran alliance meant that the swing supply component of the gas supply matrix, LNG, remained beyond the control of Moscow and Tehran, which was a major factor in why the idea has not been fully fulfilled. Although a portion of the Gazprom-NIOC contract is intended to help Iran become a superpower in LNG production, it is also true that this is a medium- to long-term project. Iran has ample gas reserves to do so gradually.

However, there are indications that Qatar’s hesitation to join Gas OPEC may be fading in the near future. Since Doha recently lost its position as the world’s top LNG exporter, maintaining that position is a crucial aspect of its economic ambitions. In this regard, the long-term agreements with China are crucial for Doha. The long-term purchase and sales agreement between China Petroleum & Chemical Corp. (Sinopec) and Qatar Petroleum for 2 million tonnes per annum of LNG for a duration of 10 years was an early significant example that served as a model for following transactions. Following these initial agreements with China, Qatar signed LNG supply contracts with China’s and Russia’s allies, Iran and Pakistan. The 10-year sale and purchase contract calls for Qatar Petroleum to provide the Pakistan State Oil Company with up to 3 mtpa of LNG to various ports throughout the country. This agreement expands upon the earlier one, which was inked in 2016 and came at roughly the same time as close Pakistani ally Bangladesh’s agreement with Qatar to provide Pakistan with 3.75 mtpa of LNG.

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1 COMMENT

  1. Good for them – – world is in great demand for this clean / abundant / plentiful fuel . BTW (usa , sa , et al) …let’s all jump in , the water’s fine . …. ….shalom to all

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