IGU Wholesale Gas Price Report 2017

July 4, 2017

The 2016 IGU Wholesale Gas Price survey is the ninth to be undertaken in a series which began 10 years ago. The nine surveys have confirmed the significant changes in wholesale price formation mechanisms during a period of key developments and upheaval in the global gas market. The highlights of the 2016 survey are:

• Gas-on-gas competition (GOG) had the largest share of total world consumption at 45%, predominantly in North America, Europe, the Former Soviet Union and Latin America. The oil price escalation (OPE) share stood at 20%, and is predominantly Asia Pacific, Asia and Europe. The regulated categories – regulated cost of service (RCS), regulated social and political (RSP) and regulated below cost (RBC) – account in total for some 31%. RCS is mainly the Former Soviet Union, Asia and Africa, RSP mainly the Middle East, Former Soviet Union, Latin America and Asia Pacific and RBC the Former Soviet Union, Latin America and Africa. Figure 1.1 Regional Price Formation 2016 – Total Consumption

• Cross border flows of gas account for some 28% of total world consumption. Pipeline imports are now over 57% GOG, with OPE at 35%, while OPE has 76% of LNG imports with GOG at 24%. • Between 2015 and 2016, the GOG share was broadly unchanged, with an increase in the share in Europe being offset by declines in Asia and Asia Pacific, reflecting fewer pure spot LNG cargoes. The OPE share increased by 1.5 percentage points, reflecting a small rise in Europe at the expense of BIM (in Turkey), but principally in Asia and Asia Pacific, as the share in LNG imports increased, but also reflecting a rise in domestic production in China, as the full year effect of the change in city-gate pricing came through. The RCS share declined by half a percentage point, principally reflecting the changes in China, partly offset by a rise in Iran in gas as a feedstock to petrochemicals, and faster consumption growth in some countries with RCS pricing. The RSP share was down by half a percentage point as a result of declines in the Middle East – Iran – and the FSU, principally in Russia with switching to GOG and RCS. The RBC share was unchanged.