LNG MARKETS AND PRICE VOLATILITY

摘要

This article describes the LNG markets with some insights from market theory and practice. The mechanism that enables proper price discovery is investigated, especially for gas markets in North America, the United Kingdom and Continental Europe. It is also argued that price volatility has many components, some that represent a first-order risk (like absolute price level) and others a second-order risk (like the locational basis which is the spread betweeen a regional US gas index and the Henry Hub price). rnAt some point, a global view is necessary : it acknowledges that LNG is the ultimate link between gas markets all over the world. Each market participant makes its own global analysis and then builds and pilots a porfolio of natural gas and LNG supplies vs. sales to end-users and wholesalers. As both gas wholesales markets and former gas monopolies have weakened over the past few years, we emphasise that the access to final customers is extremely important for securing LNG flows. Acquiring such gas marketing capabilities has been a strategic move made by Integrated Oil Companies (IOCs). Simultaneously, IOCs are becoming large LNG buyers from the upstream and liquefaction projects they have helped to set-up. rnMarket participants cannot always match every purchase with every sale, for example because both horizons don’t match as suppliers prefer long-term contracts but end-users prefer to buy their gas for next year only. Thus, their porfolio aggregates matching risks that must be identified and then managed. In effect, the mechanism of LNG markets are becoming closer to those previously applicable solely to natural gas markets.