An Examination of the International Natural Gas Trade

Abstract

AbstractRecent developments in the liquefied natural gas (LNG) industry, particularly the ongoing projects of liquefaction and regasification and the increasing number of LNG‐carriers to be delivered in forthcoming years, have led some specialists to argue that LNG is today at the crossroads between regionalisation and globalisation. Other specialists think that, by 2010, LNG's share of the total international trade of natural gas will be predominant, compared with that of pipelines. All these assumptions are based on an examination of the duration of existing and ongoing international gas projects.The objective of our article is to examine the historical patterns of the international trade of natural gas and discuss the conditions for the globalisation of LNG trade. Using some statistical evidence on the international trade of natural gas from 1970 to 1997,1 we show the following. A strong correlation exists between the international trade of gas by pipeline and LNG. Before LNG becomes predominant, we need a delinking of these two means of trading gas. Globalisation of the LNG trade is not only linked to an increase in the relative share of the LNG trade; it is also and primarily linked to an increase in the inter‐area trade of LNG. There is a negligible change in the pattern of inter‐area and intra‐area trade of natural gas, even during the late 1990s; this is due to the contracted nature of the LNG international trade that resulted in a stickiness of LNG routes. The emergence of a global LNG market requires the satisfaction of four conditions: natural, economic, technical and institutional conditions — therefore, it will certainly take more than ten years to make LNG a global commodity.