Wholesale Gas Price Survey, 2019 Edition

May 13, 2019

The survey is the eleventh to be undertaken in a series that began in 2007. It examines dramatic changes in natural gas wholesale price formation during a period of major developments in the global gas market.

Key findings of this year's survey include:

  • The share of gas on gas competition rose by half a percentage point between the 2017 and 2018 surveys to 47%. That largely reflected the increasing share of spot LNG cargoes in LNG imports and rapidly growing US consumption, which more than offset the declining share in pipeline imports, as a result of reduced European pipeline imports and increased China pipeline imports. The oil price escalation share declined by a quarter of a percentage point to 19%, with the loss in LNG imports being partly offset by gains in pipeline imports and domestic production in China. 
  • 2018 saw the most significant change in LNG imports since the IGU began the surveys, driven by the continued rise in Henry Hub priced US LNG exports as well as a general rise in spot LNG cargoes. The share of spot LNG imports reached just over 30% of total LNG imports in 2018, amounting to some 126 BCM – an increase of 65 BCM since 2016, or 10.5 percentage points. Gas on gas competition for LNG imports in the traded markets, mainly in Northwest Europe, added another 4.5% of total LNG imports. Gas on gas competition accounted for more than 50% of LNG imports into Europe in 2018 – compared to 33% in 2017, while the gas on gas competition in China and the Indian sub-continent rose from 24% to 30.5% and for the Asia Pacific importers (mainly Japan, Korea and Taiwan) from 18% to 24%. Despite the growth in LNG imports between 2017 and 2018 of some 22 BCM or 5.5%, the actual volume of oil price escalation imports declined for the first time ever. 
  • Wholesale prices outside North America rose continuously between 2005 and 2014, declined in most regions in 2015 and 2016, before rebounding in 2017 and 2018 in almost all regions. This was mainly in Europe, the Asia Pacific LNG importers, China and India, as oil prices increased and spot markets tightened. Prices also increased in the more regulated regions such as Africa and the Middle East, as authorities continued policies to increase prices to more market or economic levels. The average world wholesale price in 2018 was $4.38 per MMBTU – the highest average price since 2014. 
  • Global gas prices have been converging continuously since 2005, indicating further globalisation of the gas markets, at least up until 2018, when some divergence occurred. It is also concluded that there is more gas price convergence amongst countries (1) with market related pricing, (2) which are connected with the global gas market through gas imports, (3) with oil-indexed gas prices, and (4) within Europe. The trend of global gas price convergence is more distinct when we exclude North America.

 

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