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Feature: Stage set for GECF summit amid new gas backlash

Highlights

Fifth heads-of-state level meeting of gas exporters

GECF still plays role of market monitor, not manager

Gas increasingly target of environmentalist protests

London — Natural gas is considered the cleanest of the fossil fuels and the only one whose demand is expected to continue to grow over the coming decades as it helps bridge the gap to a low-carbon energy future.

But gas is now facing increasing opposition from environmentalist groups and some political factions that see it as part of the problem, not the solution.

Against that background, the Gas Exporting Countries Forum (GECF) -- whose origins can be traced back to the first meeting of ministers in Iran in 2001 -- is holding its fifth heads-of-state summit next week in Equatorial Guinea.

The GECF -- whose members include big hitters Russia, Qatar and Iran -- holds around 70% of the world's proven gas reserves and is tasked with keeping track of global gas market developments and promoting the use of gas across the world.

There has been speculation over the past decade that the GECF could morph into a "Gas OPEC" with the power to manage markets through supply intervention, but the group has so far continued to insist its role is to encourage gas use and cooperation among its members.

Whether there could be a shift from a talking-shop to something more meaningful remains to be seen, but with the presidents of countries like Russia and Iran expected in the same room in Malabo, it is not impossible that strategic thinking might be shared.

MARKET CONDITIONS

Gas prices have been very low over the past year across most of the world -- even in northeast Asia, which is traditionally the world's premium gas market.

And the outlook remains bearish due mostly to the expected rise in LNG exports from the US over the coming 12 months.

Supply growth continues to outpace demand growth in the global LNG market, meaning there is a big surplus of gas on the water.

Without any agreement on coordinated management of the gas market there is little that the GECF can do to boost prices.

Its members exported around 515 Bcm of gas in 2018, according to data compiled by S&P Global Platts from the latest BP Statistical Review of World Energy.

That is around 42% of total gas exports last year, which were estimated by BP at 1.24 Tcm.

The GECF observer countries -- which include the world's third-biggest exporter Norway -- added a further 173 Bcm last year.

Some gas exporters do optimize their supplies with Norway being a good example.

State-controlled Equinor this summer cut production quite sharply due to very low prices and said it would produce the gas at a later date when prices were higher.

Qatar -- the world's second-biggest gas exporter after Russia -- tends to schedule its mega-train maintenance during the lower-demand shoulder months, but it has only limited exposure to spot market evolutions anyway, with much of its LNG supplied under long-term, bilateral contracts.

According to S&P Global Platts Analytics, it is LNG exporters with the largest exposure to spot markets that would be the first to exhibit signs of commercial optimization.

"Eyes should be on players like Egypt, Malaysia and Indonesia, all of which have already shown signs of commercial management in 2019, and are likely to do so again in 2020," Platts Analytics' LNG analyst Samer Mosis said.

But as a whole, it would seem unlikely that the GECF countries would look to coordinate market management in the same way that OPEC does.

OPEC COOPERATION

While there seems to be little chance of the GECF becoming a true "Gas OPEC", the two groups are becoming closer, agreeing in October a memorandum of understanding designed to enhance cooperation, mainly in the area of sharing market data and knowledge.

Areas of cooperation identified in the MOU with OPEC include:

• market monitoring, analysis, modeling and forecasting;

• market research studies covering the short, medium and long term;

• market data and statistics, data and statistical operational topics;

• initiatives and developments aimed at sustainability, along with environmental and social responsibility.

Algeria, Equatorial Guinea, Iran, Libya, Nigeria, the UAE and Venezuela are members of both organizations, while OPEC member states Angola and Iraq are also GECF observer countries.

Qatar was a member of OPEC, but left the group at the start of 2019.

Other than those also in OPEC, the other GECF member countries are Bolivia, Egypt, Russia, and Trinidad and Tobago. Azerbaijan, Kazakhstan, Norway, Oman and Peru are also GECF observer countries.

The summit next week will give some of these countries the chance to voice their views on the global gas market, but barring any surprise declarations, the gas market is unlikely to be influenced by the meeting's conclusions.

-- Stuart Elliott, stuart.elliott@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com