The strong demand for natural gas in North America, Europe, and some developing countries, and the maturation of natural gas resource utilization technologies, are pushing natural gas to become a new global energy darling. In the context of high global oil prices, natural gas prices have not reached similar levels as oil prices, but with the continuous increase in trade volume, natural gas prices will be of concern.
Transport costs are relatively expensive. Long-distance transportation of natural gas, especially seaborne, is relatively expensive. For example, the delivery of natural gas from the Middle East to the United States Gulf of Mexico is on average 7 times the cost of delivering equivalent oil. Therefore, natural gas is usually used on the spot, while oil can be used more in the export market. However, there are exceptions to this situation if the local natural gas market is too small, such as parts of the Middle East, or natural gas export prices are higher than the domestic market, such as Russia. Trade statistics show that natural gas shipping trade accounts for less than 8% of the natural gas trade volume. In 2006, inter-continental trade volume of natural gas through water transport was about half of that of oil, and 15% of coal.
In all parts of the world, the price of natural gas in this market is totally different from that of the market, and the global trade of natural gas is developing. The strong demand for natural gas in North America and Europe, and the increasing maturity of natural gas resources, are driving these areas to purchase gas from more remote locations. In addition, developing countries such as China, India and Brazil are also expanding the global natural gas market. They seek natural gas supply to promote their economic development.
The LNG market will accelerate the development of liquefied natural gas (LNG), which is a way for natural gas to be transported and used offshore. It has expanded the scope of natural gas transported through pipelines. Cooling natural gas to a low temperature can make it liquid, which is 1/600 of its original volume. Liquefied natural gas can be transported by large transport ships through the economic regions of the world's oceans. At the receiving terminal, the LNG is regasified and then piped to the user in a conventional manner.
LNG trade has been for more than 40 years. However, the current market is not too big, mainly in the market with limited resources, in Asia, Japan, South Korea and Taiwan in China are more used. Now, LNG has entered an important new stage both in terms of quantitative growth and global distribution. The global LNG supply capacity will increase from 196 million tons in 2007 to 284 million tons in 2011, and will increase by nearly 50% in only four years.
The analysis of the largest LNG importer in the United States shows that more than half of LNG growth will come from Qatar, and Qatar’s large-scale LNG construction plan is underway. In the Middle East, Yemen will also become the 17th LNG exporter in the world in 2009. Russia’s investment in the Far East, a $20 billion high-efficiency Sakhalin project, will make Russia a base for LNG exports.
At present, there are 17 LNG importing countries in the world. In the future, this quantity will increase exponentially. Some import projects are already under consideration. For example, in Argentina, Brazil, Canada, Chile, United Arab Emirates, Germany, Ireland and other countries, LNG imports are to be built. There are a few projects. However, the main growth area of ​​LNG is also the United States. Natural gas production in the United States has reached a steady state and will begin to decline slowly. However, due to the huge demand for natural gas for power generation, natural gas demand will continue to grow, and LNG will fill the gap between the domestic supply of natural gas and demand in the United States. According to CERA, the United States will overtake Japan as the world's largest LNG importer in another 10 years. By 2020, US LNG imports will reach 137 million tons, which will account for 28% of global LNG demand. The United States LNG will thus become the world's largest natural gas market and will be the largest liquid trading market, competing with Asia, Europe and Latin America.
The pricing system needs to be regulated. The LNG market will have a major impact on natural gas prices. The globalization of LNG and natural gas will change with different gas price structures in different regions of the world, as well as the differences between different pricing areas.
In North America and the United Kingdom, natural gas prices are set by the settlement price in the constant exchange rate trading spot market. In Japan and South Korea, the vast majority of natural gas is determined under long-term contractual agreements, often in 20 or 25 years, during which time the price is set in accordance with the percentage or proportion of the price of oil, and the contract price is usually kept confidential. European continental pricing is in the middle, and natural gas is mostly sold on bilateral contracts. The contract is linked to the price of petroleum products, but the reference to spot prices is increasing. In the Middle East and many rich countries, the vast majority of natural gas prices are controlled by the government and are set at levels below international prices. For this reason, natural gas prices vary by region and they can even change in the opposite direction.
When will global gas prices compare with global oil prices? When will the increased LNG affect the pricing of regional natural gas? As producing countries focus on optimizing to the highest value markets, traders have also begun to seek arbitration opportunities from all continents. Multinational corporations have started to establish global risk management strategies, while consulting industries are trying to simulate future LNG flows and gas prices, and natural gas pricing. The system has become one of the topics that need to be discussed urgently in the natural gas business.
Transport costs are relatively expensive. Long-distance transportation of natural gas, especially seaborne, is relatively expensive. For example, the delivery of natural gas from the Middle East to the United States Gulf of Mexico is on average 7 times the cost of delivering equivalent oil. Therefore, natural gas is usually used on the spot, while oil can be used more in the export market. However, there are exceptions to this situation if the local natural gas market is too small, such as parts of the Middle East, or natural gas export prices are higher than the domestic market, such as Russia. Trade statistics show that natural gas shipping trade accounts for less than 8% of the natural gas trade volume. In 2006, inter-continental trade volume of natural gas through water transport was about half of that of oil, and 15% of coal.
In all parts of the world, the price of natural gas in this market is totally different from that of the market, and the global trade of natural gas is developing. The strong demand for natural gas in North America and Europe, and the increasing maturity of natural gas resources, are driving these areas to purchase gas from more remote locations. In addition, developing countries such as China, India and Brazil are also expanding the global natural gas market. They seek natural gas supply to promote their economic development.
The LNG market will accelerate the development of liquefied natural gas (LNG), which is a way for natural gas to be transported and used offshore. It has expanded the scope of natural gas transported through pipelines. Cooling natural gas to a low temperature can make it liquid, which is 1/600 of its original volume. Liquefied natural gas can be transported by large transport ships through the economic regions of the world's oceans. At the receiving terminal, the LNG is regasified and then piped to the user in a conventional manner.
LNG trade has been for more than 40 years. However, the current market is not too big, mainly in the market with limited resources, in Asia, Japan, South Korea and Taiwan in China are more used. Now, LNG has entered an important new stage both in terms of quantitative growth and global distribution. The global LNG supply capacity will increase from 196 million tons in 2007 to 284 million tons in 2011, and will increase by nearly 50% in only four years.
The analysis of the largest LNG importer in the United States shows that more than half of LNG growth will come from Qatar, and Qatar’s large-scale LNG construction plan is underway. In the Middle East, Yemen will also become the 17th LNG exporter in the world in 2009. Russia’s investment in the Far East, a $20 billion high-efficiency Sakhalin project, will make Russia a base for LNG exports.
At present, there are 17 LNG importing countries in the world. In the future, this quantity will increase exponentially. Some import projects are already under consideration. For example, in Argentina, Brazil, Canada, Chile, United Arab Emirates, Germany, Ireland and other countries, LNG imports are to be built. There are a few projects. However, the main growth area of ​​LNG is also the United States. Natural gas production in the United States has reached a steady state and will begin to decline slowly. However, due to the huge demand for natural gas for power generation, natural gas demand will continue to grow, and LNG will fill the gap between the domestic supply of natural gas and demand in the United States. According to CERA, the United States will overtake Japan as the world's largest LNG importer in another 10 years. By 2020, US LNG imports will reach 137 million tons, which will account for 28% of global LNG demand. The United States LNG will thus become the world's largest natural gas market and will be the largest liquid trading market, competing with Asia, Europe and Latin America.
The pricing system needs to be regulated. The LNG market will have a major impact on natural gas prices. The globalization of LNG and natural gas will change with different gas price structures in different regions of the world, as well as the differences between different pricing areas.
In North America and the United Kingdom, natural gas prices are set by the settlement price in the constant exchange rate trading spot market. In Japan and South Korea, the vast majority of natural gas is determined under long-term contractual agreements, often in 20 or 25 years, during which time the price is set in accordance with the percentage or proportion of the price of oil, and the contract price is usually kept confidential. European continental pricing is in the middle, and natural gas is mostly sold on bilateral contracts. The contract is linked to the price of petroleum products, but the reference to spot prices is increasing. In the Middle East and many rich countries, the vast majority of natural gas prices are controlled by the government and are set at levels below international prices. For this reason, natural gas prices vary by region and they can even change in the opposite direction.
When will global gas prices compare with global oil prices? When will the increased LNG affect the pricing of regional natural gas? As producing countries focus on optimizing to the highest value markets, traders have also begun to seek arbitration opportunities from all continents. Multinational corporations have started to establish global risk management strategies, while consulting industries are trying to simulate future LNG flows and gas prices, and natural gas pricing. The system has become one of the topics that need to be discussed urgently in the natural gas business.
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