Gazprom, OPEC and GECF

When Alexei Borisovich Miller, Deputy Chairman of the Board of Directors and Chairman of the Management Committee (CEO) of Russian energy company Gazprom walked into a standing-room-only convention hall in Amsterdam in mid 2006 and announced to leaders of the world's foremost oil and gas companies and investors, in English, "The speech will be in Russian,"(Forbes, Energy Tsar, Michael Freedman and Heidi Brown) it marked a historical event which truly showed two things: 1. how powerful Russia really is and 2. How aware of it Russia is.

Gazprom, the biggest extractor of natural gas in the world and the largest company in Russia, accounts for about 93 percent of Russian natural gas production. With reserves of 28,800 km3, it controls 16 percent of the world's gas reserves. With 119 billion barrels of reserves, Gazprom ranks behind only Saudi Arabia, with 263 billion barrels, and Iran, with 133 billion barrels, as the world's biggest owner of oil and oil equivalent in natural gas.

It's been apparent that Russian has been preparing to create a gas equivalent of the Organization of Petroleum Exporting Countries (OPEC) since the idea of a gas OPEC was first floated by Russian President Vladimir Putin in 2002. It was revived by Gazprom board member Aleksandr Medvedev in May, 2006 when he threatened that Russia would create "an alliance of gas suppliers that will be more influential than OPEC" if Russia did not get its way in energy negotiations with Europe. A "memorandum of understanding" signed between Russia and Algeria on August 4, which significantly calls for coordinated gas prices, could perhaps be a move in this direction.

Russia and Algeria (which currently has the world's eighth largest gas reserves) are two of Europe's three main gas suppliers. If such an alliance were to come into play, Norway, Europe's third supplier, could slowly be out of the loop simply because it would limit Europe's ability to shop for cheaper gas over time and ensure its dependency on an organization controlled by Moscow. Algeria is most likely ready to embrace the idea of coordinated gas prices with Russia along with Iran, which has the world's second largest gas reserves and Qatar, which has the world's third largest gas reserves. It's also safe to say that Turkmenistan, Kazakhstan, and Uzbekistan would also be more than willing to join.

It's true that such an alliance already exists. "The Gas Exporting Countries' Forum (GECF), which first met in Tehran in May 2001, consists of 15 gas-producing nations. It collectively controls 73 percent of the world's natural-gas reserves and 41 percent of production. Algeria was one of the founding members of GECF, along with Iran and Russia."(http://publiuspundit.com/2007/12/benazir_bhutto_freedom_fighter.php) Currently GECF has no staff and no headquarters and, as of yet, hasn't made any attempt what so ever to set prices. But with the signing of the Russian-Algerian agreement, it might be only a matter of time before this organization becomes more prominent.

Although there are a couple major factors that could delay such an alliance to be put together could delay, in all probability it can't be prevented. Afterall it is in these countries best interests for such an alliance to exist.