Natural Gas Pricing in the Asia Pacific Regional Market: Problems and Prospects

Irina Yu. Mironova

Authors

Irina Yu. Mironova European University in St. Petersburg; Energy Research Institute of the Russian Academy of Sciences (ERI RAS), 31, k.2, Nagornaya st., Moscow, 117186, Russian Federation

Abstract

The natural gas market in Asia is going through a transformation. Both the institutional environment and price mechanisms are changing radically. The Asia Pacific region, characterised by a traditional market structure with long-term contract and oil indexation, has consistently had the highest price levels among all regional markets. As a result, new potential price setting mechanisms are now being actively discussed in the region. Th roughout these discussions, Asian gas importers have two main objectives: firstly, reaching adequate price levels, and secondly, increasing competition (ability to choose suppliers). The low oil prices in 2014–2015 brought natural gas prices in the Asia Pacific closer to the EU prices and a level of gas price in the United States plus LNG transport costs. Therefore, the appetite for new pricing and hubs is diminishing.
This paper sets out to evaluate the extent of potential changes in the regional market. The ultimate rationale is to determine the main factors, which Russia and its oil and gas companies should take into account when forming their strategy in the APR. Russia is one of the biggest players in global energy markets and has made serious steps to expand its presence in this region.
Th e paper provides an assessment of the APR gas market and analyses the main natural gas price setting mechanisms (oil indexation, indexation to the prices of competing fuels, competition-based pricing). It also reviews the implications of using these mechanisms. Th e prospects of forming a regional gas trading hub are given particular attention. Refs 54. Figs 4. Tables 2.

Keywords:

Natural gas, LNG, the Asia Pacific region, regional market, price setting, long-term gas supply contract, indexation, competition, gas trading hub

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Author Biography

Irina Yu. Mironova, European University in St. Petersburg; Energy Research Institute of the Russian Academy of Sciences (ERI RAS), 31, k.2, Nagornaya st., Moscow, 117186, Russian Federation

senior lecturer; researcher

References

Литература на русском языке

References in Latin Alphabet

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