Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?
This paper examines the development of cooperative strategies between countries exporting Liquefied Natural Gas (LNG) and members of the Gas Exporting Countries Forum (GECF). This economic study focuses specifically on an often-raised scenario: the emergence of a cooperative approach designed with the sole aim of logistic rationalization, and which would not have any effect on LNG prices. We first assess the annual gains that may result from this market-power-free cooperative approach using a simple static transportation model. 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 - per capita nucleolus - satisfies two key requirements: core belonging and monotonicity (in the aggregate). Lastly, we look at how cooperation may give rise to a coordination cost and try to determine the maximum amount of this cost. 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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James T. Jensen, 2003. "The LNG Revolution," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-45.
- Egging, Ruud & Gabriel, Steven A. & Holz, Franziska & Zhuang, Jifang, 2008.
"A complementarity model for the European natural gas market,"
Elsevier, vol. 36(7), pages 2385-2414, July.
- Ruud Egging & Steven A. Gabriel & Franziska Holz & Jifang Zhuang, 2007. "A Complementarity Model for the European Natural Gas Market," Discussion Papers of DIW Berlin 732, DIW Berlin, German Institute for Economic Research.
- Dagobert L. Brito & Peter R. Hartley, 2007. "Expectations and the Evolving World Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-24.
- Gately, Dermot, 1974. "Sharing the Gains from Regional Cooperation: A Game Theoretic Application to Planning Investment in Electric Power," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 195-208, February.
- Faulhaber, Gerald R, 1975. "Cross-Subsidization: Pricing in Public Enterprises," American Economic Review, American Economic Association, vol. 65(5), pages 966-77, December.
- Ahmed Mazighi, 2003. "An Examination of the International Natural Gas Trade," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 27(4), pages 313-329, December.
- Wolak, Frank A. & Kolstad, Charles D., 1988. "Measuring relative market power in the Western U.S. coal market using Shapley values," Resources and Energy, Elsevier, vol. 10(4), pages 293-314, December.
- Yepes Rodriguez, Ramón, 2008. "Real option valuation of free destination in long-term liquefied natural gas supplies," Energy Economics, Elsevier, vol. 30(4), pages 1909-1932, July.
- Stephen P. A. Brown and Mine K. Yucel, 2009. "Market Arbitrage: European and North American Natural Gas Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 167-186.
- Franziska Holz & Christian von Hirschhausen & Claudia Kemfert, 2006.
"A Strategic Model of European Gas Supply (GASMOD),"
Discussion Papers of DIW Berlin
551, DIW Berlin, German Institute for Economic Research.
- Anne Neumann, 2008.
"Linking Natural Gas Markets: Is LNG Doing Its Job?,"
Discussion Papers of DIW Berlin
822, DIW Berlin, German Institute for Economic Research.
- Anne Neumann, 2009. "Linking Natural Gas Markets - Is LNG Doing its Job?," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 187-200.
- Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1995. "Effects of Liberalizing the Natural Gas Markets in Western Europe," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 85-112.
- Knut Einar Rosendahl & Eirik Lund Sagen, 2007.
"The Global Natural Gas Market. Will transport cost reductions lead to lower prices?,"
523, Statistics Norway, Research Department.
- Knut Einar Rosendahl & Eirik Lund Sagen, 2009. "The Global Natural Gas Market: Will Transport Cost Reductions Lead to Lower Prices?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 17-40.
- Moulin,Hervi, 1989.
"Axioms of Cooperative Decision Making,"
Cambridge University Press, number 9780521360555, October.
- Tijs, S.H. & Driessen, T.S.H., 1986. "Game theory and cost allocation problems," Other publications TiSEM 376c24c5-c95d-4d29-96b6-4, Tilburg University, School of Economics and Management.
- L. V. Kantorovich, 1960. "Mathematical Methods of Organizing and Planning Production," Management Science, INFORMS, vol. 6(4), pages 366-422, July.
- S. H. Tijs & T. S. H. Driessen, 1986. "Game Theory and Cost Allocation Problems," Management Science, INFORMS, vol. 32(8), pages 1015-1028, August.
- Greaker, Mads & Lund Sagen, Eirik, 2008. "Explaining experience curves for new energy technologies: A case study of liquefied natural gas," Energy Economics, Elsevier, vol. 30(6), pages 2899-2911, November.
- Pierru, Axel, 2007. "Allocating the CO2 emissions of an oil refinery with Aumann-Shapley prices," Energy Economics, Elsevier, vol. 29(3), pages 563-577, May.
- Maroeska G. Boots, Fieke A.M. Rijkers and Benjamin F. Hobbs, 2004. "Trading in the Downstream European Gas Market: A Successive Oligopoly Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-102.
- Cremer, Jacques & Weitzman, Martin L., 1976. "OPEC and the monopoly price of world oil," European Economic Review, Elsevier, vol. 8(2), pages 155-164, August.
- Wagbara, Obindah N., 2007. "How would the gas exporting countries forum influence gas trade?," Energy Policy, Elsevier, vol. 35(2), pages 1224-1237, February.
- D. Granot & F. Granot & W. R. Zhu, 1998. "Characterization sets for the nucleolus," International Journal of Game Theory, Springer;Game Theory Society, vol. 27(3), pages 359-374.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:32:y:2010:i:4:p:933-947. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.