TEHRAN—Some of the world’s biggest natural-gas producers are trying to seize on changes in how the fuel is bought and sold to create an OPEC-style group to influence prices.
Leaders of Nigeria and Algeria, at a recent forum in Tehran, said gas producers should come together and intervene in prices. Nigeria’s President Muhammadu Buhari called for “the formulation of a sustainable pricing mechanism that will guarantee fair and reasonable prices for both producers and consumers.”
Opening and shutting the spigots at relatively short notice to influence prices has been long-standing policy for the Organization of the Petroleum Exporting Countries, where most cargoes are sold on a spot basis. But such practice is a novel idea for gas producers, where individual long-term contracts dominate and therefore supply cannot be altered easily by coordinating producers
But that’s changing with the increasing role of short-term sales in liquefied-natural-gas. Last year, almost 30% of global liquefied natural gas was traded on a short-term basis, compared with 5% a decade ago, according to the U.S. Energy Information Administration.
“Long-term contracts with fixed prices [are] going to be abandoned,” Iran’s oil minister Bijan Zanganeh said at a gathering here of the Gas Exporting Countries Forum last week. The group’s members control two-third of global gas
The calls for intervention in the natural-gas market come as prices for the fuel have tanked. Asian LNG spot prices now stand at $7 per million British thermal units, compared with a record high of $20 in February 2014.
The slump has hit investments in the gas sector, Qatar’s oil minister Mohamed bin Saleh Al Sada told the forum. In January, Royal Dutch Shell PLC abandoned plans for a petrochemical project worth $6.5 billion in Qatar, a large gas producer.
But gas producers have cited generally sunnier outlooks for the fuel than other energy products.
The International Energy Agency expects natural gas demand to grow by an annual 1.4% through in the next 25 years—two-third of which will be LNG—compared with an annual 0.5% for oil.
Gas producers are hoping that governments impose new curbs on emissions that cut down on the use of coal and encourage the use of cleaner-burning gas for electricity consumption.
But there are hurdles to creating a cartel for natural gas.
First, two of the biggest natural gas producers—Russia and the U.S.—wouldn’t be involved.