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The Global Natural Gas Market: Will Transport Cost Reductions Lead to Lower Prices?

Knut Einar Rosendahl and Eirik Lund Sagen

Year: 2009
Volume: Volume 30
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-2
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Abstract:
Reduced transportation costs are usually associated with lower import prices, increased trade and price convergence. In this paper we show that lower transport costs can actually lead to higher import prices in some regions, and price divergence between import regions. Using both a general theoretical approach and a numerical model of the global natural gas market, we demonstrate that the price effect from transport cost reductions depend on the relative distances between regional markets, the choice of transport technology, and supply and demand responsiveness in the different markets. Our numerical results suggest that European consumers would generally be better off if pipeline costs are reduced, while North American consumers would be better off if LNG costs are reduced.



Globalisation of Natural Gas Markets - Effects on Prices and Trade Patterns

Finn Roar Aune, Knut Einar Rosendahl and Eirik Lund Sagen

Year: 2009
Volume: Volume 30
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-NoSI-4
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Abstract:
The regional natural gas markets are expected to gradually become more integrated. The major driving forces are lower LNG costs, more spot trade, and increased need for imports into the US and other key markets. In this paper we examine various scenarios for a future global gas market, particularly focusing on natural gas prices and trade patterns. We use a numerical model of the international energy markets, with detailed modelling of regional gas production and international gas transport. Scenarios with different assumptions about future demand and supply conditions are simulated. Our results suggest that trade between continents will grow considerably over the next couple of decades, and that prices in the main import regions will remain around current levels. However, significant constraints on exports from the Middle East may alter this picture.





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