The International Gas Union (IGU) has released its 2017 Wholesale Gas Price Survey. The survey is the ninth to be undertaken in a series that began 10 years ago. The nine surveys have confirmed the significant changes in wholesale price formation mechanisms during a period of key developments and upheaval in the global gas market.
Highlights of this year’s survey include:
- Average wholesale prices at the world level were $3.35 USD per MMBTU in 2016, which was the lowest level recorded in all the nine surveys. In 2016, prices were also more converged than in previous years, as “market” prices continued to decline, while “regulated” prices predominantly rose, outside the Former Soviet Union (FSU) where the currency weakness reduced the prices in dollar terms.
- In 2016 gas-on-gas competition (GOG) had the largest share of total world consumption at 45%, predominantly in North America, Europe, the Former Soviet Union and Latin America. The oil price escalation (OPE) share stood at 20%, and predominantly in Asia Pacific, Asia and Europe. The other regulated categories account in total for 31%.
- Between 2015 and 2016, the GOG share was broadly unchanged, with an increase in the share in Europe being offset by declines in Asia and Asia Pacific, reflecting fewer pure spot LNG cargoes. The OPE share increased by 1.5 percentage points, reflecting a small rise in Europe, but principally in Asia and Asia Pacific, as the share in LNG imports increased, but also reflecting a rise in domestic production in China.
- Overall, the regulated sectors share had fallen from 38% in 2005 to 31% in 2016, principally to GOG and, to a lesser extent, OPE. This has been one of the most significant changes recently, especially in China and India, with “market-based” pricing gaining at the expense of “regulated” pricing.
- The changes in cross-border trade have been predominantly in pipeline imports with the GOG share rising from 23% to 57% between 2005 and 2016, all in Europe, at the expense of OPE. The shares in LNG imports have been more stable in recent years, although GOG rose from 13% in 2005 to 32% in 2015, but over half this increase came between 2005 and 2007 as the spot LNG market grew, and then as trading markets such as the UK began importing LNG. The GOG share of LNG imports fell back again in 2016 to 24% as the rise in LNG trade was all in contracted volumes, linked to oil prices, and the growth was also outside the traded markets in Europe.
The Wholesale Gas Price Report is a vital reference for the natural gas industry around the world. In the most recent survey, responses were received for countries that cover 90% of total world consumption. To download the full report, please click here.