Members of the Gas Exporting Countries Forum (GECF) have warned against “artificial” interventions in the gas market, saying such measures would worsen the current market tightness and disincentivize new investments.
Ministers and top officials from GECF members — which include gas heavyweights Russia, Qatar, and Iran — met Oct. 25 in Cairo for the forum’s latest ministerial summit.
In the concluding communique, the GECF said that gas markets were undergoing “dramatic changes” in terms of physical flows, market functioning, contractual arrangements, and investment.
The forum expressed “great concern with regard to the attempts to alter the price discovery and risk management functions of markets, and to impose politically-driven price caps.”
“Such artificial intervention in market functioning can only aggravate market tightness, discourage investment, and be detrimental to producers and consumers alike,” it said.
The warning comes as the European Commission continues to work with EU member states on potential gas market intervention measures, including gas price cap mechanisms and dynamic pricing corridors.
Price volatility
Gas prices in Europe and Asia have been extremely volatile through 2022, with new record highs reached for European gas and Asian LNG benchmark prices.
Platts, part of S&P Global Commodity Insights, assessed the Dutch TTF month-ahead price at a record high of Eur319.98/MWh on Aug. 26, while the JKM spot LNG price assessment hit an all-time high in March of $84.76/MMBtu.
The GECF, in its communique, said that while gas hubs experienced extreme volatility, long-term gas contract prices were more stable and predictable.
It also said that it was underinvestment since 2015 — on the back of very low gas prices and “misguided calls” to stop investing in gas projects — that had resulted in the current supply-demand imbalance.
That imbalance, it said, had been “exacerbated by geopolitical tensions and as Europe became the preferred destination for LNG cargoes to compensate for reduced pipeline flows.”
“Market tightness is expected to continue in the medium-term, as the majority of new projects will come on stream only after 2025,” it said.
Gas infrastructure
In the longer term, the GECF continues to see a bigger role for gas in the global energy mix.
It said gas’s share would increase from 23% today to 26% in 2050, underpinned by population growth, doubling of world GDP, improved standards of living, and policies and technology aimed at improving air quality and mitigating climate change.
Ministers also stressed the importance of “timely investment” for market stability, and the need for unhindered flow of financial resources and access to technology in a non-discriminatory manner.
They also emphasized the crucial need for security of supply and security of demand, and for collaboration to protect critical gas infrastructure.
“The meeting emphasized the importance of critical energy infrastructure for the free flow of gas and stable functioning of global gas markets and condemns any deliberate attacks to damage such infrastructure.”
The GECF has 11 full members: Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad & Tobago, and Venezuela.
Angola, Azerbaijan, Iraq, Malaysia, Mozambique, Norway, Peru, and the UAE are GECF observer countries.
Source: Platts