'Time to Explore Gas Output Co-ordination': GECF
It may be time for gas exporters to explore the co-ordination of their output, Algeria's energy minister Abdelmadjid Attar told the annual meeting of the Gas Exporting Countries Forum at a virtual event November 11. He had talked approvingly in his opening remarks of the unprecedented cuts in oil output that Opec and Russia had achieved earlier this year, in the wake of the demand slump caused by the Covid-19 pandemic. Gas demand has also fallen, sending prices spiralling downwards as supply has remained steady, beyond offtake cuts.
There is no such quota mechanism for co-ordinating cuts – nearly all gas exports are based on long-term contracts with defined limits on annual offtake – but he said that the balance of risks between suppliers of gas and its consumers has shifted.
Early in November, Opec and GECF had a virtual meeting to share experiences, which, NGW speculated in an editorial, could extend to the adoption of quotas for gas production too. As customers demand shorter-term, spot-priced LNG purchase contracts with no limits on destination, a new approach needs to be found to restore the balance.
Attar said that the weak carbon price and the structure of European power markets were disadvantaging gas despite the role it would have to play in the energy transition. However he did not say how higher prices for gas will help it in that market.
Hydrogen could give a fillip for gas producers, who have both the resource and the infrastructure to export it, he said. The zero-carbon fuel is carrying a lot of hope for Europe's net zero carbon goal. He also pointed to methane emissions as a problem facing gas exporters.
Attar was CEO of state oil and gas producer Sonatrach between 1997 and 1999 after having held several senior positions. Algeria was the world's first LNG exporter, with the commissioning of the Arzew terminal in 1964.