World Gas Model Research Articles

An analysis of the U.S. - China Trade War’s impact on global natural gas markets and the U.S. Coast Guard’s LNG inspection workforce

In this paper, the development and capabilities of the 2020 World Gas Model (WGM) are presented and exemplified through the analysis of two important case studies currently facing the natural gas market, a key component of the global energy sector. The goal of the United States–China Trade War case study is to analyze the potential short- and long-term effects of a prolonged trade war under several different, possible scenarios. Results from the study indicate that while increased tariffs on LNG trade from the U.S. to China greatly reduce the amount of trade volume between the two countries; however, the overall economic effect is negligible. The U.S. Coast Guard (USCG) LNG inspection workforce planning case study utilizes the WGM to provide future workforce demand for USCG personnel based on the growth of the U.S. LNG industry. The results from the study indicate that in order to avoid restriction on the U.S. LNG industry, the USCG must increase its LNG inspection workforce at a rate between 10% to 15% per annum. The U.S. - China Trade War effects on the USCG LNG inspection workforce were found to negligible as U.S. trade levels remain heightened and ever-growing despite increasing tariffs or Chinese domestic gas production.

Gas and LNG trading hubs, hub indexation and destination flexibility in East Asia

In the East Asian gas markets, issues like gas trading hubs, hub indexed pricing, and destination flexibility are being debated. This paper examines the impact of a change in East Asia's pricing benchmark and contract flexibility on the regional and global gas markets. The paper uses the Nexant World Gas Model, a linear program with global cost minimization as the objective. To our knowledge, this study on hub competition, price benchmark change and contract flexibility improvement in East Asia will be the first in the literature and have real policy relevance. The results show that both price benchmark change and contract flexibility improvements will create an overall benefit for the world and East Asia importers, but the impacts are different among exporters and importers. However, there is no evidence of competition among different benchmark hubs and no evidence that destination restrictions cause the “Asia Premium”. It implies that removal of destination clauses has higher priority than the change to hub indexation for Japan, Korea and Chinese Taipei, but both should be treated equally in China. The study also suggests that East Asian importers should cooperate among themselves and with exporters to facilitate the hub creation and contract changes in East Asia.

Some future scenarios of Russian natural gas in Europe

This study contains a number of scenario studies to assess the share of Russian natural gas in the European natural gas mix going forward. Scenarios were calculated using the NEXANT world gas model (WGM) integrated in ERIRAS modeling information complex SCANER. The calculations in the WGM are based on demand and potential production forecast in each gas producing and/or gas consuming country of the world up to 2040. The paper continues with a discussion of the (limitations of the) most often debated alternatives to Russian gas. We conclude that remarkable little changes in the European natural gas mix in the scenarios under study, and that absent very drastic policy interventions Russian natural gas will continue to play a prominent role in the EU.

Panama Canal Expansion: Will Panama Canal Be a Game-Changer for Liquefied Natural Gas Exports to Asia?

AbstractThe expansion of the Panama Canal will be completed by 2015. The route through the Panama Canal will shorten voyages from North America to Japan by more than 7,500 nautical miles. However, the competition for use of the Canal is high because it is a major route for container ships and other vessels including crude oil, metal ores, and other materials. Therefore, several questions have been raised regarding how much the capacity of the Panama Canal will be available for liquefied natural gas (LNG) passages and how much LNG will go through the Canal. Applying the 2014 version of the World Gas Model, a large-scale, game theory-based global gas model, this paper investigates the influence of the Panama Canal capacity level for LNG tankers on global gas markets and LNG exports from the Gulf of Mexico through five scenarios. The model results show that without the Panama Canal route with its expanded capacity, it is unprofitable to export LNG from the Gulf of Mexico to Asian markets. However, there may ...

World Gas Models

The article deals with the leading-edge optimization models of the global gas market: Nexant World Gas Model, University of Maryland World Gas Model, Rice World Gas Trade Model and Deloitte Market Point World Gas Model. Their advantages, disadvantages, and key features in modeling various aspects of the industry are identified and analyzed. The prospects of further research to develop our own Russian world gas model is noted.

The influence of the Panama Canal on global gas trade

An increasing growth of unconventional gas production in the U.S. has gradually turned it into a potential gas exporter. In near future, increasing LNG exports from the U.S. coupled with the capacity of the Panama Canal will change the LNG market. The Panama Canal expansion is the key to the change because the route via this canal reduces the voyage by 7000 nautical miles to Japan from the Gulf of Mexico. Applying the World Gas Model from the University of Maryland, this paper investigates the potential effects of varying Panama Canal tolls on the LNG markets via six scenarios of possible Panama Canal tariffs. Results are compared and examined with the focus on prices, LNG flows, and supply displacement. We find a significant LNG volume tradeoff between Asian and European gas markets. The U.S. and Trinidad & Tobago are key players due to their LNG exports displacing to some extent, flows from the Middle East, Africa, and other Asian suppliers to the Japanese and South Korean markets. Japanese & South Korean prices are significantly reduced when the Panama Canal tariff is low due to more supplies from the Atlantic Basin. As the toll increases, the U.S. and Trinidad &Tobago switch their exports to Europe rather than these markets in East Asia. European prices are improved when that region gets more LNG from the Atlantic basin.

Investigating the potential effects of U.S. LNG exports on global natural gas markets

There have been increasing debates regarding whether the United States should export liquefied natural gas (LNG) to the global market. Using the World Gas Model, a large-scale game theoretic model, this paper investigates the potential effects of U.S. LNG exports on the domestic and global markets. U.S. LNG export scenarios relate to a Global 20/20/20 policy and competition with new pipeline projects (e.g., Nord Stream, South Stream, and Southern Corridor projects) are also considered. We find that the average U.S. domestic natural gas prices increase approximately 10.9% given 123 billion cubic meters of LNG exports and that natural gas prices in Europe and Asia decrease significantly. In addition, less expensive U.S. LNG is competitive in European and Asian gas markets and displaces more expensive suppliers in European and Asian gas markets. Under the European pipeline scenario, Russia is expected to reduce natural gas flows to transit countries by more than 50% when the Nord Stream and South Stream pipelines become available.

Cartelization in gas markets: Studying the potential for a “Gas OPEC”

Natural gas is increasingly important as a fuel for electric power generation as well as other uses due to its environmental advantage over other fossil fuels. Using the World Gas Model, a large-scale energy equilibrium system based on a complementarity formulation, this paper analyzes possible future gas cartels and their effects on gas markets in a number of regions across the world. In addition, scenarios related to lower transport costs and decreased unconventional gas supply in the United States are considered.

The world gas market in 2030 – development scenarios using the World Gas Model

We discuss potential developments of the world natural gas industry through 2030. We use the World Gas Model (WGM), a multi-period strategic representation of the global natural gas sector, between 2005 and 2030. We specify a 'base case' and then analyse the sensitivity of the world natural gas system with scenarios, including various supply scenarios (e.g., emergence of large volumes of unconventional shale gas, or tightly constrained reserves of conventional natural gas), the impact of CO2-constraints, and regional scenarios focusing, respectively, on Russian and Caspian exports, the Arab Gulf, China and India, and the US Pacific coast. Our results show considerable changes in production, consumption, traded volumes, prices, and investments in pipelines, LNG terminals, and storage. However, the overall world natural gas industry is resilient to local disturbances and can compensate local supply disruptions of natural gas from other sources. Long-term supply security does not seem to be at risk.

The World Gas Model

Abstract We provide the description, mathematical formulation and illustrative results of the World Gas Model, a multi-period complementarity model for the global natural gas market with explicit consideration of market power in the upstream market. Market players include producers, traders, pipeline and storage operators, LNG (liquefied natural gas) liquefiers and regasifiers as well as marketers. The model data set contains more than 80 countries and regions and covers 98% of world wide natural gas production and consumption. We also include a detailed representation of cross-border natural gas pipelines and constraints imposed by long-term contracts in the LNG market. The model is calibrated to match production and consumption projections from the PRIMES [EC. European energy and transport: trends to 2030–update 2007. Brussels: European Commission; 2008] and POLES models [EC. World energy technology outlook – 2050 (WETO-H2). Brussels: European Commission; 2006] up to 2030. The results of our numerical simulations illustrate how the supply shares of pipeline and LNG in various regions in the world develop very differently over time. LNG will continue to play a major role in the Asian market, also for new importers like China and India. Europe will expand its pipeline import capacities benefiting from its relative proximity to major gas suppliers.

The World Gas Model: A Multi-Period Mixed Complementarity Model for the Global Natural Gas Market

We provide the description and illustrative results of the World Gas Model, a multi-period complementarity model for the global natural gas market. Market players include producers, traders, pipeline and storage operators, LNG liquefiers and regasifiers as well as marketers. The model data set contains more than 80 countries and regions and covers 98% of world wide natural gas production and consumption. We also include a detailed representation of cross-border natural gas pipelines and constraints imposed by long-term contracts in the LNG market. The Base Case results of our numerical simulations show that the rush for LNG observed in the past years will not be sustained throughout 2030 and that Europe will continue to rely on pipeline gas for a large share of its imports and consumption.

The Impact of Recent Gas Market Developments on Long-Term Projections for Global Gas Supply

Production from unconventional resources, increases in upstream development costs and sluggish demand growth have significantly impacted the global natural gas market in the recent past; and will likely continue to do so during the next decade. Taking these developments into account, we provide a projection of global natural gas supply until 2030 applying the MAGELAN world gas model by the Institute of Energy Economics at the University of Cologne (EWI). Apart from presenting the results of this simulation, the focus of this paper is thereby on the effects of recent supply, midstream and demand side trends on future gas supply compared to earlier studies and projections. While lower demand growth generally leads to relatively less international gas trade, pipeline exports are affected more strongly than trade in liquefied natural gas. In terms of gas output, this volume effect is found to mainly affect high cost gas producers at the upper end of the supply curve. Exports of suppliers with lower production costs and abundant reserves actually benefit.

The World Gas Market in 2030: Development Scenarios Using the World Gas Model

In this paper, we discuss potential developments of the world natural gas industry at the horizon of 2030. We use the World Gas Model (WGM), a dynamic, strategic representation of world natural gas production, trade, and consumption between 2005 and 2030. We specify a base case which defines the business-as-usual assumptions based on forecasts of the world energy markets. We then analyze the sensitivity of the world natural gas system with scenarios: i) the emergence of large volumes of unconventional North American natural gas reserves, such as shale gas; ii) on the contrary, tightly constrained reserves of conventional natural gas reserves in the world; and iii) the impact of CO2-constraints and the emergence of a competing environmental friendly backstop technology. Regional scenarios that have a global impact are: iv) the full halt of Russian and Caspian natural gas exports to Western Europe; v) sharply constrained production and export activities in the Arab Gulf; vi) heavily increasing demand for natural gas in China and India; and finally vii) constraints on liquefied natural gas (LNG) infrastructure development on the US Pacific Coast. Our results show considerable changes in production, consumption, traded volumes, and prices between the scenarios. Investments in pipelines, LNG terminals and storage are also affected. However, overall the world natural gas industry is resilient to local disturbances and can compensate local supply disruptions with natural gas from other sources. Long-term supply security does not seem to be at risk.

Representing GASPEC with the World Gas Model

This paper presents results of simulating a more collusive behavior of a group of natural gas producing and exporting countries, sometimes called GASPEC. We use the World Gas Model, a dynamic, strategic representation of world gas production, trade, and consumption between 2005 and 2030. In particular, we simulate a closer cooperation of the GASPEC countries when exporting pipeline gas and liquefied natural gas; we also run a more drastic scenario where GASPEC countries deliberately withhold production. The results shows that compared to a Base Case, a gas cartel would reduce total supplied quantities and induce price increases in gas importing countries up to 22%. There is evidence that the natural gas markets in Europe and North America would be affected more than other parts of the world. Lastly, the vulnerability of gas importers worldwide on gas exporting countries supplies is further illustrated by the results of a sensitivity case in which price levels are up to 87% higher in Europe and North America, but non-GEC countries increase production by a mere 10%.

Representing GASPEC with the World Gas Model

This paper presents results of simulating a more collusive behavior of a group of natural gas producing and exporting countries, sometimes called GASPEC. We use the World Gas Model, a dynamic, strategic representation of world gas production, trade, and consumption between 2005 and 2030. In particular, we simulate a closer cooperation of the GASPEC countries when exporting pipeline gas and liquefied natural gas; we also run a more drastic scenario where GASPEC countries deliberately hold back production. The results show that compared to our Base Case, a gas cartel would reduce total supplied quantities and induce price increases in gas importing countries up to 22%. There is evidence that the natural gas markets in Europe and North America would be affected more than other parts of the world. Lastly, the vulnerability of gas importers worldwide is further illustrated by the results of a sensitivity case in which price levels are up to 87% higher in Europe and North America.