Global wholesale natural gas prices declined in 2019 to reach an average of $3.88 per million British thermal units (MmBtu) – a level not seen since 2016, according to the International Gas Union (IGU).
The decline largely reflects the impact of rising global gas supply, which in turn led to sharp falls in spot prices around the world, Kallanish Energy reports.
The 2020 edition of the Wholesale Gas Price Survey showed that there has been a significant shift in LNG imports to the so-called gas-on-gas (GOG) pricing formula, at the expense of the more traditional oil price escalation (OPE) – the pricing linked to oil prices.
The highest wholesale prices were found in the main liquefied natural gas (LNG) importing countries in Asia Pacific – Chinese Taipei, South Korea, and Japan – plus Singapore, China, and Brazil in Latin America.
In Chinese Taipei, wholesale gas prices averaged nearly $12/MmBtu last year, followed by $10/MmBtu in South Korea and Japan, and roughly $8/MmBtu in Singapore and Brazil.
Prices were much lower in the U.S., where prices were only just above those in the Middle East and some Former Soviet Union (FSU) countries. Prices in Iran, Russia, Uzbekistan, Canada, Saudi Arabia, Qatar, Kazakhstan, and Algeria were below $2/MmBtu. In Venezuela and Turkmenistan, countries subject to “some form of regulation,” prices were below the cost of production and transportation, near zero.
According to Mike Fulwood, project manager for the 2020 survey, the move from oil-linked prices to gas-on-gas competition was the most important event in 2019. European buyers are renegotiating contracts and moving towards spot prices.
In 2019, 41% of the LNG imports were done on GOG basis, compared with 26% in 2016. The conversion in global gas markets and the push started by Asian buyers to more flexible and market-oriented contracts are growing.
China was the largest spot LNG market last year, closely followed by Japan, India, Spain, and South Korea. Italy, France, and Turkey also imported significant spot LNG cargoes. Together, these eight countries accounted for 83% of all spot LNG cargoes traded last year. This is a 31.3% share of all LNG traded globally.
This post appeared first on Kallanish Energy News.