26 December 2021 - 16:40
  • News Code: 450889
Iran and GECF

TEHRAN (Shana) -- The Gas Exporting Countries Forum (GECF) was born in Iran shortly after the initial start of the giant South Pars natural gas reservoir discovery and exploration of first phases when it was internationally recognized that Iran possessed the world’s second largest natural gas reserves. The idea of creating a gas body like OPEC was shaped up in NIOC corridors and think tank corners of the ministry. Iran’s initial objective was an OPEC style international and intergovernmental organization in order to regulate global gas market. Back then it was crystal clear in Iran’s energy strategy and vision that gas would lead the international energy markets and energy scenes for decades to come. Having said that; to put it in perspective, GECF was a product of the National Iranian Oil Company.

However, Iran’s energy policy makers were fully aware that the international community was sensitive towards an OPEC- style body that would want to starve the world with gas. As such it was decided to name the new body as the gas exporting countries forum, not even an organization which bears own meaning and concept. Iran lobbied hard to convince as many countries as possible and initially hosted the first official forum of the GECF in Tehran. For some years, GECF had no headquarters or secretariat. Iran did not get the secretariat of the Forum. It went to Qatar that was already the world’s largest LNG exporter. Power is in barrels, not just in oil but in gas, too.

GECF: Two Decades After

Phase 1

Oil and energy ministers of 11 countries attended a two-day ministerial conference in Tehran. Ministers exchanged views and agreed to meet regularly to look at various aspects of the gas market, exchange views and discuss prospects of the international energy markets in general and gas markets, in particular. In 1998, gas prices were officially quoted in New York and London Stock Exchanges and this had given a boost to further internationalization of gas markets. Although the quotes mostly referred to LNG spot prices. Ministers were keen on information sharing, research from producer’s perspectives. I call that as warm up phase.

Phase 2

GECF Statute was developed and approved in 2008. It was agreed that Doha, Qatar would be the headquarters of the Forum. Iran, Algeria and Russia also competed as candidates to host GECF headquarters but Qatar succeeded. Qatari government helped to smooth out the process of erecting a permanent secretariat and rendered generous concessions. This was considered an important milestone in that the Forum was established with a permanent secretariat and a Secretary General to look after the day to day activities of the Forum. As for OPEC, location of the headquarters was decided right from the start and Geneva, Switzerland was agreed unanimously, though it was moved to Vienna, Austria later on.

This was probably the first case of political rivalry between countries within an international and intergovernmental body.

Phase 3

On 15 November 2011, the first GECF Heads of States Summit was hosted by Qatar in Doha. In 2013, President Putin inaugurated the second GECF Heads of States Summit in Moscow. The summit was a clear indication that the Forum was here to stay and to carry on. During the summit, most heads of states signaled that gas would be the prospective energy source when oil runs short of supply. During the inauguration ceremony there were brief references to issues such as gas pricing formulas and marketing policies.

During the summit, three countries’ heads of states from Qatar, Russia and Algeria ran the show and were referred to as the three champions of global gas markets. Nevertheless, international gas market is less dynamic but still fluid. Major theme of the heads of states summit was to decouple gas pricing mechanism from crude oil.

GECF Future

Iran gave birth to GECF in 2001. Iranian energy thinking was in the direction of turning the country into one of the major players in the global gas markets. In the course of time as Iran’s gas exports ambitions began to fade due to massive domestic consumption and slowdown in production, Tehran’s interests in GECF began to marginalize. In fact, Iran’s current interest and involvement in the GECF is still quite high and powerful. Iran a leading player in all the events and activities within the forum.

GECF held71 percent of total global gas reserves in 2020. The forum was also responsible for 44 percent of international gas exports. Some 53 percent of pipeline exports and 57 percent of LNG trade is also conducted by GECF.

Most studies on gas and international gas trade, in particular is conducted by gas consuming countries. As such, several aspects of gas business remains vague when it comes to discussing GECF. There are eleven members in the Forum. There are also six observers present in the Forum. Gas has its own rules of the game that makes it different from oil. Countries may be a net gas exporter today and turn into a net gas importer in a later phase. Gas also bears a seasonal character. Countries that are exporter in the summer turn importers in cold weather.

GECF is both homogeneous, as well as heterogeneous. Market trusts Qatar, Russia and Algeria as players who are always there for them. As for others, market is often sensitive. Nevertheless, Qatar is currently the most trustworthy supplier, though in LNG only.

GECF needs to move on. As energy market changes and evolves, and important issues such Net Zero Emissions gain momentum, the Forum is required to elevate its potential to pose as a unified and reliable source of gas supply. This will help promote the international conference to the Forum as a solid and reliable supplier for a world that will need much more gas for the next couple of decades.

GECF status is currently totally irrelevant towards price and market stability. Iran opted for this notion when decided to establish GECF back in 2001. I believe that GECF still needs a fourth phase to carry out its purposeful destination.

By Fereydoun Barkeshli

President, Vienna Energy Research Group

Courtesy of Iran Petroleum

News Code 450889

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