https://halshs.archives-ouvertes.fr/halshs-00129618/document

Russian and European gas interdependence: Could contractual trade channel geopolitics?

A dynamic analysis on global natural gas trade network

Information transmission and market interactions across the Atlantic — an empirical study on the natural gas market

http://idei.fr/sites/default/files/medias/doc/conf/eem/massol.pdf

Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?

Following the unconventional gas revolution, the forecasting of natural gas prices has become increasingly important because the association of these prices with those of crude oil has weakened. With this as motivation, we propose some modified hybrid models in which various combinations of the wavelet approximation, detail components, autoregressive integrated moving average, generalized autoregressive conditional heteroskedasticity, and artificial neural network models are employed to predict natural gas prices. We also emphasize the boundary problem in wavelet decomposition, and compare results that consider the boundary problem case with those that do not. The empirical results show that our suggested approach can handle the boundary problem, such that it facilitates the extraction of the appropriate forecasting results. The performance of the wavelet-hybrid approach was superior in all cases, whereas the application of detail components in the forecasting was only able to yield a small improvement in forecasting performance. Therefore, forecasting with only an approximation component would be acceptable, in consideration of forecasting efficiency.

/pdf/forecasting-natural-gas-prices-using-wavelets-time-series-2j0to6qifr.pdf

Forecasting Natural Gas Prices Using Wavelets, Time Series, and Artificial Neural Networks.

One of the lessons in the history of international trade in commodities is the emergence - sooner or later - of an international price reference, most commonly known as an international marker price. In the area of oil, West Texas Intermediate (WTI) plays the role of a marker for sour crudes traded in the Atlantic basin. Brent oil fulfils this function for sweet crudes traded in Europe. Another important aspect in the area of global commodities is that the emergence of a marker price is not always necessarily related to the relative share of production or exports of the commodity, but primarily to the existence of an organized market for this commodity. Today, while international gas trade is intensifying, we still lack an international price reference for this commodity. This is due to the fact that the international trade of natural gas is still highly regionalized. It is also due to the fact that most gas markets are still regulated. Nevertheless, deregulation efforts have been implemented in both developed (the United States, the United Kingdom, continental Europe, Korea) and developing countries (Brazil, Chile) and have led to new market structures based on more competition in all segments of the gas chain, except transportation. In the meantime, price structures based on supply and demand principles are supposed to have emerged in the US and UK markets in the 1990s as a result of the implementation of deregulation measures. Today, the US gas market, which represents more than 660 billion cubic metres per year of consumption and the UK gas market, which is close to 100 bcm annually, are considered mature enough to make the principles of supply and demand operate inside these markets. In fact, the Henry Hub (HH) price, which is determined at a physical location in Louisiana, US, and the national balancing point (NBP) price, which is determined somewhere inside the national transmission system (NTS), without any precise location, are considered as potential candidates to serve as a marker price in the international trade of gas. The objective of this paper is to examine some fundamental properties of the HH and NBP prices and assess which of them has the biggest potential to become an international price reference. Our main conclusions are: 1. According to the relatively huge volume of gas traded on the US spot market, compared with the UK, and according to the experience accumulated by the New York Mercantile Exchange (NYMEX) in gas trading, the HH price has a bigger potential than the NBP to become an international price reference, particularly because the UK market is supposed to import more and more gas indexed to oil in the coming years. 2. However, on the price fluctuation side, the NBP spot price seems to fluctuate more normally than the HH price in the short term, which can give a certain advantage to NBP prices. 3. We cannot exclude the fact that in the coming years we will have two or even more reference prices in the Atlantic Basin: the NBP, the HH and also reference prices at other regional hubs.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID822488_code917445.pdf?abstractid=822488&mirid=2

Henry Hub and National Balancing Point Prices: What will be the International Gas Price Reference?

Recent developments in the liquefied natural gas (LNG) industry, particularly the ongoing projects of liquefaction and regasification and the increasing number of LNG-carriers to be delivered in forthcoming years, have led some specialists to argue that LNG is today at the crossroads between regionalisation and globalisation. Other specialists think that, by 2010, LNG's share of the total international trade of natural gas will be predominant, compared with that of pipelines. All these assumptions are based on an examination of the duration of existing and ongoing international gas projects. The objective of our article is to examine the historical patterns of the international trade of natural gas and discuss the conditions for the globalisation of LNG trade. Using some statistical evidence on the international trade of natural gas from 1970 to 1997, we show the following. 1) A strong correlation exists between the international trade of gas by pipeline and LNG. Before LNG becomes predominant, we need a delinking of these two means of trading gas. 2) Globalisation of the LNG trade is not only linked to an increase in the relative share of the LNG trade; it is also and primarily linked to an increase in the inter-area trade of LNG. 3) There is a negligible change in the pattern of inter-area and intra-area trade of natural gas, even during the late 1990s; this is due to the contracted nature of the LNG international trade that resulted in a stickiness of LNG routes. 4) The emergence of a global LNG market requires the satisfaction of four conditions: natural, economic, technical and institutional conditions - therefore, it will certainly take more than ten years to make LNG a global commodity.

An Examination of the International Natural Gas Trade

Recent developments in the liquefied natural gas (LNG) industry, particularly the ongoing projects of liquefaction and regasification and the increasing number of LNG-carriers to be delivered in forthcoming years, have led some specialists to argue that LNG is today at the crossroads between regionalisation and globalisation. Other specialists think that, by 2010, LNG's share of the total international trade of natural gas will be predominant, compared with that of pipelines. All these assumptions are based on an examination of the duration of existing and ongoing international gas projects.



The objective of our article is to examine the historical patterns of the international trade of natural gas and discuss the conditions for the globalisation of LNG trade. Using some statistical evidence on the international trade of natural gas from 1970 to 1997,1 we show the following.



1) 
A strong correlation exists between the international trade of gas by pipeline and LNG. Before LNG becomes predominant, we need a delinking of these two means of trading gas.

2) 
Globalisation of the LNG trade is not only linked to an increase in the relative share of the LNG trade; it is also and primarily linked to an increase in the inter-area trade of LNG.

3) 
There is a negligible change in the pattern of inter-area and intra-area trade of natural gas, even during the late 1990s; this is due to the contracted nature of the LNG international trade that resulted in a stickiness of LNG routes.

4) 
The emergence of a global LNG market requires the satisfaction of four conditions: natural, economic, technical and institutional conditions — therefore, it will certainly take more than ten years to make LNG a global commodity.

One of the lessons in the history of international trade in commodities is the emergence — sooner or later — of an international price reference, most commonly known as an international marker price. In the area of oil, West Texas Intermediate (WTI) plays the role of a marker for sour crudes traded in the Atlantic basin. Brent oil fulfils this function for sweet crudes traded in Europe. Another important aspect in the area of global commodities is that the emergence of a marker price is not always necessarily related to the relative share of production or exports of the commodity, but primarily to the existence of an organized market for this commodity.

Today, while international gas trade is intensifying, we still lack an international price reference for this commodity. This is due to the fact that the international trade of natural gas is still highly regionalized. It is also due to the fact that most gas markets are still regulated. Nevertheless, deregulation efforts have been implemented in both developed (the United States, the United Kingdom, continental Europe, Korea) and developing countries (Brazil, Chile) and have led to new market structures based on more competition in all segments of the gas chain, except transportation. In the meantime, price structures based on supply and demand principles are supposed to have emerged in the US and UK markets in the 1990s as a result of the implementation of deregulation measures.

Today, the US gas market, which represents more than 660 billion cubic metres per year of consumption and the UK gas market, which is close to 100 bcm annually, are considered mature enough to make the principles of supply and demand operate inside these markets. In fact, the Henry Hub (HH) price, which is determined at a physical location in Louisiana, US, and the national balancing point (NBP) price, which is determined somewhere inside the national transmission system (NTS), without any precise location, are considered as potential candidates to serve as a marker price in the international trade of gas.

The objective of this paper is to examine some fundamental properties of the HH and NBP prices and assess which of them has the biggest potential to become an international price reference. Our main conclusions are:

1According to the relatively huge volume of gas traded on the US spot market, compared with the UK, and according to the experience accumulated by the New York Mercantile Exchange (NYMEX) in gas trading, the HH price has a bigger potential than the NBP to become an international price reference, particularly because the UK market is supposed to import more and more gas indexed to oil in the coming years.
2However, on the price fluctuation side, the NBP spot price seems to fluctuate more normally than the HH price in the short term, which can give a certain advantage to NBP prices.
3We cannot exclude the fact that in the coming years we will have two or even more reference prices in the Atlantic Basin: the NBP, the HH and also reference prices at other regional hubs.

Henry Hub and national balancing point prices: what will be the international gas price reference?

Traditionally guided by long-term contracts, the international natural gas trade is experiencing new methods of operating, based on the short term and more flexibility. Today, indeed, the existence of uncommitted quantities of natural gas, combined with gas price discrepancies among different regions of the world, gives room for the expansion of the spot-trading of gas. The main objective of this paper is to discuss three fundamental risks related to the short-term trading of natural gas: volume risk, price risk and infrastructure risk. The defenders of globalisation argue that the transition from the long-term to the short-term trading of natural gas is mainly a question of access to gas reserves, decreasing costs of gas liquefaction, the building of liquefied natural gas (LNG) fleets and regasification facilities and third-party access to the infrastructure. This process needs to be as short as possible, so that the risks related to the transition process will disappear rapidly. On the other hand, the detractors of globalisation put the emphasis on the complexity of the gas value chain and on the fact that eliminating long-term contracts increases the risks inherent to the international natural gas business. In this paper, we try to untangle and assess the risks related to the short-term trading of natural gas. Our main conclusions are listed over the page: 1. the short-term trading of gas is far from riskless; 2. volume risk requires stock-building in both consuming and producing countries; 3. price risk, through the high volatility for gas, induces an increase in options prices; and 4. there is no evidence to suggest that money-lenders' appetite for financing gas infrastructure projects will continue in a short-term trading system, and this would be a threat to consumers' security of supply.

https://papers.ssrn.com/sol3/Delivery.cfm/opec_135.pdf?abstractid=591603&mirid=2

Ahmed El Hachemi Mazighi

Papers

Henry Hub and National Balancing Point Prices: What will be the International Gas Price Reference?

An Examination of the International Natural Gas Trade

An Examination of the International Natural Gas Trade

Henry Hub and national balancing point prices: what will be the international gas price reference?

Some Risks Related to the Short-Term Trading of Natural Gas