Key difference between the natural gas markets

Topics: Natural gas, Liquefied natural gas, Asia Pages: 6 (1637 words) Published: November 25, 2013
TABLE OF CONTENTS

Summary Page 1

North America Page 1
Asia Page 2

Europe Page 4
Conclusion Page 5
References Page 6
Summary
Natural gas markets are different unlike oil, they are categorized under regions. This is due the fact that natural gas sources are found far away from the consumers and the cost of transportation of natural gas is high over long distances. However, the cost of domestic consumption is also high due to high capital required for investment. Natural gas has three main markets which are located in Europe, North America and Asia; with each region sharing similarities in reliance on energy to support their day to day living. The three regions are however different in culture, pricing, standard of living, financial policies, history, supply, imports and exports. The difference in the natural gas markets in the three main regions will be analyzed in this report.

North America

The United States imported about 229 billion cubic feet of LNG in 2002, accounting for 4 percent of world’s LNG trade (http://www.eia.doe.gov/). LNG is received by pipeline from Canada and through shipments from Trinidad, while the Canadian gas market imports gas from US to Canadian eastern market through pipeline. Trinidad has now overtaken Algeria who was US largest supplier of LNG. As one of the primary sources of LNG supply, it now servers US with 66% of the nations LNG imports.

Production of domestic gas is expected to rise slower than consumption over the forecast period, rising from 19.0 Tcf in 2002 to 20.5 Tcf in 2010 (http://www.eia.doe.gov/). The difference between consumption and production will be made up by imports, which are forecasted to increase from net imports of 3.5 Tcf in 2002 (www.pstrust.org). With the increased shale gas production in the North America; natural gas imports should be discontinued. However politically, the nations with whom US have participated with in various bilateral agreements could be affected. For example, the development of the Keystone XL pipeline has been slowed down for political reasons.

Figure 1

The importance of natural gas has grown since the mid 90’s in the US and Canada, a large number electric power generation stations are fueled by natural gas. High consumption of natural gas in North America made the natural gas market and infrastructure to develop faster than other regions in the world. United States will be integrated into growing world market for natural gas if the planned increases in U.S. imports of liquefied natural gas (LNG) would be realized.

Asia

Unlike North America, Asia has limited indigenous conventional natural gas resources. As an emerging economy with fast growing rates of industrialization, the region is highly dependent on imported LNG from Australia, Russia and the Middle East. Following the fast increase in energy demand in Asia, two thirds of the global natural gas is consumed in Asia. Even though natural gas prices are dependent on oil-indexed long term contracts; the gas prices are not binding. The competition and political pressures on Caspian region and Central Asian governments, over pipelines out of the region is intense (www.mitei.miti.edu). Competition in the market requires a number of parties with competitive market share along a non regulated value chain. The regulator needs to show market maturity by enforcing appropriate competition (EIA, Asian gas hub).

Natural gas consumed in the region has increase by more than 250% which shows an average year on year increase of about 6% for over 20 years (EIA, Asian gas hub). LNG production supply of about 66 bcm comes largely from ‘Association of South East Asian Nations’ to meet the LNG demands of boarder Asian countries. Originally, the demand for LNG was met by LNG produced from Australia as well as Indonesia, Malaysia, Singapore, Thailand and Vietnam. If LNG demand increases in the Asian...


References: The Global Liquefied Natural Gas market; Status and Outlook (http://pstrust.org/library/docs/global lng market 2003.pdf, http://www.eia.doe.gov/)
Mitchell, J. (2010). More for Asia: Rebalancing World Oil and Gas. London: Chatham House (The Royal Institute of International Affairs)
Liquefied Natural Gas market in Europe (www.rreef.com/content/media/research Liquified Natural Gas market in Europe Febraury 2011.pdf )
McRae, G. and Ruppel, C. (Jun 2011) “The Future of Natural Gas, An Interdisciplinary MIT Study” Massachusetts Institute of Technology. Available at: http://www.yorkcommunitymaine.org/energy/The Future of Gas.pdf; http://mitei.mit.edu/publications/reports-studies/future-natural-gas
Laszlo Varo, Warner Kate and Anne Sophie Corbeau. Developing a Natural Gas Trading Hub in Asia, Obstacles and Opportunities.
Charles Augustine, Bob Broxson, Steven Peterson. Understanding Natural Gas Markets. Energy Information Administration (http://www.eia.doe.gov/).
Faulkner, C. (Sep 2012) “China’s Natural Gas Potential” Business Excellence; Available from: http://www.bus-ex.com/article/china%E2%80%99s-natural-gas-potential
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