On November 20-24, La Paz (Bolivia) hosts the fourth summit of the Gas Exporting Countries Forum. In an interview with valdaiclub.com, Danila Bochkarev, fellow of Brussels-based EastWest Institute, explained the objectives of this organization and the challenges it faces.
The Gas Exporting Countries Forum (GECF) is often portrayed as a “Gas OPEC,” which has never been the case. Although its member-states’ positions, initially rather competing, tend to converge today, they are objectively less likely to hope for higher natural gas prices. Indeed, excessively high gas prices might favour non-conventional production in non-GECF countries – such as the US – and promote coal and renewables at the expense of natural gas. Furthermore, new market dynamics has changed the traditional consumer-supplier relationship pattern.
Undoubtedly, natural gas has great prospects. The International Energy Agency (IEA) has recently reaffirmed the role of natural gas as the most dynamic fossil fuel. The use of natural gas will increase by 45% in the coming 25 years, with around 80% of the increase in demand coming from the developing countries in Africa, Asia and Latin America. This is good news for the gas exporting countries. However, return to the growth rate of 2.3% “seen in the previous 25 years is not in the cards” and challenges emerging from the new competitors such as the US shale, electrification of the energy sector and renewables should not be discounted. Since 2010, the cost of renewables went down by 70% for solar and 25% for wind, while battery cost declined by 40%. While renewables are not likely to replace natural gas in the foreseeable future, they might limit the use of fossil fuels in the power generation and transport and will put a cap on the global gas prices. Finally, electricity emerges as a direct competitor to natural gas, especially in the transportation sector. According to the IEA, in 2016, “spending by the world’s consumers on electricity approached parity with their spending on oil products”.
The GECF members-states are fully aware of these developments and understand that the gas market remains competitive if compared to other types of fuel. In the energy market, competitiveness is very important. “If there is low competition, then the market will not be able to function well,” the forum Secretary General, Sayed Mohammad Hossein Adeli rightfully mentioned on November 21, as quoted by Reuters.