- The Washington Times - Wednesday, March 7, 2007

Last month, two days after Russian President Vladimir Putin discussed with the emir of Qatar the merits of forming an OPEC-style cartel for natural gas, U.S. Energy Secretary Samuel Bodman told a Houston crowd, “[E]fforts to manipulate markets, trying to organize the suppliers in such a fashion, over the long term is not going to accrue to the benefit of suppliers.” If Mr. Putin has his way, we are likely to get a definitive test of Mr. Bodman’s hypothesis. And history will almost certainly refute the energy secretary’s position if America continues its decades-old practice of acting against its own long-term interests by restricting nuclear power, by failing to adopt reasonable conservation measures and by limiting the exploitation of its own oil and gas resources in Alaska and other federal lands and along the outer continental shelf.

“We do not reject the idea of creating a gas cartel,” said the president of Russia, which, according to World Oil journal, has nearly 2,400 trillion cubic feet in natural gas reserves, more than one-third of the world’s total. “We seek to develop special relations between Qatar and Russia,” said the emir of Qatar, which has 900 trillion cubic feet and is already a member of OPEC. In January, Ayatollah Ali Khamenei, the supreme leader of Iran, which has 1,000 in reserves, suggested the formation of a gas cartel to his guest, Igor Ivanov, the head of Russia’s Security Council.

Do the math: These three extremely autocratic societies control more than 60 percent of the world’s gas reserves. And Russia has been pursuing partnerships and discussing policy coordination with several other potential cartel members, including Algeria, Saudi Arabia, the United Arab Emirates, Libya (all OPEC members) and the countries of Central Asia. Russia, which supplies a quarter of Europe’s natural gas through its pipeline network, recently signed a deal with Algeria to develop several large Russian fields. Algeria, which has about 10 percent of the European market, can provide Russia with the technology for liquefied natural gas (LNG), which would enable Russia to become a major exporter of gas to markets (the United States, for example) that it can only reach by ship.

Gas-cartel skeptics point to the fact that natural-gas contracts often run for decades, supposedly limiting the effect of production cutbacks. Also, they argue that the gas trade is mostly regional and based on pipeline networks. But LNG technology will change both factors. Indeed, Mr. Bodman’s own Energy Department recently projected that U.S. “net LNG imports [will] grow from 0.6 tcf in 2005 to 4.5 tcf in 2030,” which would represent 20 percent of current consumption.

For good reason, NATO economic experts recently reported that Russia was seeking to cartelize the natural-gas industry. America should take Mr. Putin at his word and begin to prepare for the inevitable. That means more conservation, more gas exploration and much more nuclear power.


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