Cooperation among liquefied natural gas suppliers: is rationalization the sole objective?
AbstractThis paper examines the development of cooperative strategies between 12 countries exporting Liquefied Natural Gas (LNG) and belonging to the Gas Exporting Countries Forum (GECF). This economic study is more specifically focused on a scenario often raised: that of the emergence of a cooperative approach designed with the sole aim of logistic rationalization, and which would not have any effect on LNG prices. As this is a standard transportation problem, we first assess the gains that may result from this cooperative approach using a simple static model calibrated on the year 2007. The numerical results obtained suggest that, in the absence of a gain redistribution policy, this cooperative strategy will probably not be adopted because cooperation would not be a rational move for some exporters. The problem of gain sharing is then formulated using cooperative game theory concepts. Several gain sharing methods have been studied, including the Shapley value and various nucleolus-inspired concepts. Our results suggest that the choice of a redistribution policy appears relatively restricted. Out of the methods studied, only one – the per capita nucleolus - satisfies two key requirements: core belonging and monotonicity (in the aggregate). Lastly, coordination costs are considered and we determine the maximum amount that can be tolerated by such a cooperation. In view of the low level of this amount and the relative complexity of the sharing method implemented, we consider that the credibility of a logistic cooperation scenario exempt from market power should be reappraised.
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Bibliographic InfoPaper provided by CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1 in its series Cahiers du CREDEN (CREDEN Working Papers) with number 09.02.82.
Length: 39 pages
Date of creation: 2009
Date of revision:
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Postal: Université de Montpellier 1, Faculté des Sciences Economiques, CREDEN, Rue Raymond Dugrand - Espace Richter, CS 79606, 34960 Montpellier Cedex 2, France
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Web page: http://www.creden.univ-montp1.fr
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Liquefied Natural gas; Cooperative game theory; linear programming problem;
Other versions of this item:
- Massol, Olivier & Tchung-Ming, Stéphane, 2010. "Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?," Energy Economics, Elsevier, vol. 32(4), pages 933-947, July.
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
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