Will Natural Gas be a World Exchange Commodity?

372
DOI: 10.20542/0131-2227-2016-60-1-82-92

S. Eremin, Gubkin Russian State Oil and Gas University, 65, Leninskii Prosp., Moscow, 119991, Russian Federation (eremin.s@gubkin.ru)

Abstract. The article deals with the evolution of gas industry and the prospects of conversion of natural gas into a world exñhange traded commodity. The prerequisites and restrictions of such a conversion are scrutinized. Currently, the liquefied natural gas (LNG) is becoming a major tool for operational balancing of the short-term swings in demand for gas in different regions of the world. The opportunities for transcontinental price arbitrage are growing. Its further development will lead to the emergence of a stable (adjusted for geopolitical factors) variations in prices in America, Europe and Asia, reflecting the cost of transportation (freight) and liquefaction. Alignment of LNG netback prices in all areas of its delivery will be one of the signs of a full commoditization of the natural gas. Natural gas commoditization in a global scale is supported by the increasing “gas-to-gas competition” pricing mechanism based on short-term trading. At the moment, the Henry Hub serves as a full-fledged indicator of prices for the North American market. Similarly, NBP and TTF send increasingly strong price signals to the European market. At the same time, the role of the only visible Asian spot area – Shanghai stock exchange – is still insignificant. The spot hubs already serve as delivery outlets for execution of gas futures’ contracts and other financial instruments concluded on the key world stock exchanges – New York Mercantile (NYMEX), London Futures (ICE-Futures), Singapore Mercantile Exchange (SMX). These global trading floors are likely to form the infrastructure of future universal system of price indication. Commoditization of natural gas will provide a powerful impetus to a convergence of the markets of pipeline gas and LNG worldwide. The understanding of this perspective, besides the general theoretical interest, is important in terms of assessing the competitiveness of Russian gas in the world natural gas markets in the next decades.

Keywords: natural gas, commoditization, pricing, exchange, transportation infrastructure, spot market, world market


Registered in System SCIENCE INDEX

For citation:
Eremin S. Will Natural Gas be a World Exchange Commodity?. World Eñonomy and International Relations, 2016, vol. 60, no. 1, pp. 82-92. https://doi.org/10.20542/0131-2227-2016-60-1-82-92



Comments (0)

No comments

Add comment







Indexed

 

 

 

 

Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies

 

Current Issue
2024, vol. 68, No. 3
Topical Themes of the Issue:
  • Bretton Woods 2.0: Towards a New Global Financial Architecture
  • Transformation of the EU Political Party System on the Eve of the 2024 European Election
  • South Asia in Regional and World Politics
Submit an Article
INVITATION FOR PUBLICATION
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.