Slugcatcher, when he first heard about the formation of GECF, was fascinated. He was even more interested when he looked at the membership and aims of this new organisation because it is nothing more than a liquefied gas version of OPEC.
The primary objective seems to be to slow the development of new LNG projects “to ensure that a glut does not develop” and to see if production control can deliver “consistently high prices”.
Membership consists of the usual suspects; countries like Qatar, Iran, Malaysia and Nigeria are the names which have drifted across The Slug’s desk.
According to one report carried in the illustrious Wall Street Journal newspaper last week, 15 GECF members met recently in the West Indian state of Trinidad to discuss how it would be possible to “create a cartel” which would police pricing.
The implications of the Trinidad meeting, and the formation of GECF is so profound that The Slug wonders why he has not read more about it, and why it is not a hot topic in Australia, one of the few LNG producing countries which has not signed up as a member.
The reasons behind the formation of GECF, though not detailed by the organisation itself, seem obvious enough. They have their roots in a belief that OPEC is good for petroleum exporters.
Perhaps that belief is right. But it seems to The Slug that OPEC is simply an organisation that lurches from crisis to crisis, fiddles with the market, creates shortages when they need not exist, and surpluses when they also need not exist.
LNG, according to GECF members, risks going the same way as oil in the 1950s and 1960s when a glut of new fields kept the price low, and fuelled the growth of Japan, western Europe and the US.
Qatar has already reacted to this theoretically potential LNG glut by delaying the development of new projects because it is worried that the market might be damaged by a surplus of production.
Such a fear might be well founded because all new industries take time to find a comfort level, when supply and demand achieve some sort of equilibrium.
But, the concept of trying to orchestrate development when an industry is in its infancy has a ludicrous sense. Gas, at this stage, is not in short supply and if Qatar opts to stand aside then the Russians or Australians will step in and do the job.
From the perspective of a gas-importing country, the spectre of a new form of OPEC may even be a major reason for avoiding member countries – at least until you have to deal with them, say in about 100 years time when we’re all dead anyway.
For Australia, GECF could well prove to be the club that guarantees a series of developments simply because potential LNG customers will be demanding their supplies come from a reliable non-member of this new OPEC which is already talking about turning the tap off and on to suit gas producers.
Over time, the situation may change. Like oil, gas too may one day be in short supply. But, right now it is abundant, capital is looking for investment opportunities, customers want to buy, and it is a pretty silly time to talk about fiddling with the market.
