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Natural gas prices, LNG transport costs, and the dynamics of LNG imports

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  • Maxwell, Don
  • Zhu, Zhen

Abstract

According to the U.S. Energy Information Administration, LNG is projected to become a much larger share of U.S. natural gas consumption, rising from current levels of around 2.5% of total natural gas consumption to 12.4% by 2030. Because natural gas and LNG are substitutes, natural gas prices are expected to be an important determinant of LNG imports. Furthermore, an increasing share of LNG is traded under short-term contracts with spot shipments being diverted to markets offering the highest returns (netbacks). Relative natural gas prices as well as LNG transportation costs are important determinants of LNG netbacks. This paper examines the empirical relationship between U.S. LNG imports, the Henry Hub price of natural gas relative to U.K. and Asia gas prices, and a proxy for LNG transportation costs using monthly data from 1997 to 2007. Granger causality tests, error variance decomposition, and impulse response analyses using a VAR model are employed to establish Granger-causality as well as the dynamics of natural gas prices and LNG transportation innovations on LNG imports.

Suggested Citation

  • Maxwell, Don & Zhu, Zhen, 2011. "Natural gas prices, LNG transport costs, and the dynamics of LNG imports," Energy Economics, Elsevier, vol. 33(2), pages 217-226, March.
    • Handle: RePEc:eee:eneeco:v:33:y:2011:i:2:p:217-226
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    References listed on IDEAS

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    1. repec:gam:jeners:v:11:y:2018:i:4:p:903-:d:140723 is not listed on IDEAS
    2. Nick, Sebastian & Tischler, Benjamin, 2014. "The Law of one Price in Global Natural Gas Markets - A Threshold Cointegration Analysis," EWI Working Papers 2014-16, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    3. He, Yongxiu & Wang, Bing & Wang, Jianhui & Xiong, Wei & Xia, Tian, 2013. "Correlation between Chinese and international energy prices based on a HP filter and time difference analysis," Energy Policy, Elsevier, vol. 62(C), pages 898-909.
    4. Camargo, Tathiany R. Moreira de & Merschmann, Paulo Roberto de C. & Arroyo, Eveline Vasquez & Szklo, Alexandre, 2014. "Major challenges for developing unconventional gas in Brazil – Will water resources impede the development of the Country׳s industry?," Resources Policy, Elsevier, vol. 41(C), pages 60-71.
    5. Matt Zahynacz, 2013. "Prospects for Exporting Liquefied Natural Gas from British Columbia: An Application of Monte Carlo Cost-Benefit Analysis," Working Papers 2013-03, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    6. Nick, Sebastian & Thoenes, Stefan, 2014. "What drives natural gas prices? — A structural VAR approach," Energy Economics, Elsevier, vol. 45(C), pages 517-527.
    7. Shi, Xunpeng & Padinjare Variam, Hari Malamakkavu, 2016. "Gas and LNG trading hubs, hub indexation and destination flexibility in East Asia," Energy Policy, Elsevier, vol. 96(C), pages 587-596.
    8. Mahdi Fasihi & Dmitrii Bogdanov & Christian Breyer, 2017. "Long-Term Hydrocarbon Trade Options for the Maghreb Region and Europe—Renewable Energy Based Synthetic Fuels for a Net Zero Emissions World," Sustainability, MDPI, Open Access Journal, vol. 9(2), pages 1-24, February.
    9. Biresselioglu, Mehmet Efe & Yelkenci, Tezer, 2016. "Scrutinizing the causality relationships between prices, production and consumption of fossil fuels: A panel data approach," Energy, Elsevier, vol. 102(C), pages 44-53.
    10. Fernández, Ignacio Arias & Gómez, Manuel Romero & Gómez, Javier Romero & Insua, Álvaro Baaliña, 2017. "Review of propulsion systems on LNG carriers," Renewable and Sustainable Energy Reviews, Elsevier, vol. 67(C), pages 1395-1411.

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