INTERVIEW: Coronavirus crisis 'opportunity' to strengthen GECF: Algerian minister

London — The economic crisis triggered by the coronavirus pandemic and subsequent fall in gas prices represent an opportunity to strengthen the role of the Gas Exporting Countries Forum, Algeria's new energy minister, Abdelmadjid Attar, said in an interview with S&P Global Platts.

Attar, who took over as energy minister in June, said the current dynamics governing the global gas market had failed to lead to any market stabilization, and he called for more cooperation among the world's gas producers.

"I believe this crisis is an opportunity to innovate and explore ways and means to further strengthen the GECF," he said.

"Of course, gas markets are different than oil markets, but cooperation among producers and market stability are similarly important," he said.

There is currently no formal mechanism among global gas producers that could see a coordinated response to low prices through supply intervention akin to the OPEC group of exporters in the oil market.

"There is no OPEC for gas," Attar, who is president of the GECF's Ministerial Meeting planned in Algiers on November 12, said.

Over the past decade there has been speculation that the GECF could morph into a "Gas OPEC" with the power to manage markets through supply intervention, but the group has so far ruled out coordinated market management.

However, GECF Secretary General Yury Sentyurin said in June that he considered OPEC a "model" for the gas exporter group's activities, saying it was "high time" it implemented the knowledge and solutions of the oil industry.

The GECF -- whose members include gas heavyweights Russia, Qatar and Iran -- came into being in 2001 and holds around 70% of the world's proven gas reserves.

Attar said global gas markets had been oversupplied since early 2019, with the coronavirus pandemic only making the imbalance worse.

Algeria is a key gas producer and exporter -- with combined pipeline supplies to Europe and LNG exports totaling 37.5 Bcm in 2019 -- but weaker demand has affected flows so far in 2020.

Attar lamented the current state of global gas markets and the lack of market stability.

"[Gas] markets were already suffering from oversupply since early 2019 and COVID-19 and the resulting demand drop have exacerbated this situation," he said.

"Gas prices have plummeted to historically low levels and current market dynamics failed to stabilize the market," he said.

Sonatrach flexibility

In the meantime, Attar said the government and state-owned producer Sonatrach were working to offset the impact of the pandemic on Algeria's gas industry.

"Sonatrach has managed and continues to manage this exceptional situation with its customers through flexibilities already provided in its gas contracts but also through solutions that adapt to market conditions," Attar said.

"Sonatrach is in continuous discussions with its customers to find consensual solutions, particularly in terms of operational flexibility in order to cope with this exceptional situation," he said.

Many of Sonatrach's long-term gas buyers already have some flexibility built into their import contracts with the ability to nominate down purchases depending on requirements.

Sonatrach may have agreed to allow even more flexibility for buyers to show its willingness to be seen as an accommodating and reliable supply partner in the face of increasing competition, including from LNG.

"Gas markets have evolved: more actors, LNG trade linking regional markets, more diversity of contracts and pricing mechanisms, and more competition with other fuels, notably in the power sector," Attar said.

"Sonatrach is an important player in the gas market and has developed a reputation of a reliable supplier. Its cooperative strategy is based on a 'win-win' spirit, especially with its European partners," he said.

Algeria has surplus pipeline and LNG export capacity, which allows it optionality, especially regarding spot sales.

Attar said the country's export capacity means Sonatrach can satisfy its contractual commitments "and have the flexibility to place additional quantities on the spot market."

He added that a project underway at the port of Skikda will allow for Very Large Gas Carriers to load cargoes, expanding the range of its LNG supply options.

Algeria has begun supplying LNG to a wider number of countries in recent years, with increasing volumes supplied to countries such as Pakistan and India.

"Sonatrach's marketing strategy is also focused on diversifying and expanding its client portfolio," Attar said.

Despite the current low prices and challenging market environment, Attar said gas would remain a key fuel in the future.

"I believe that this situation will progressively improve. Gas is a fuel of choice and its share in the global energy mix will increase," he said.