Gas-on-gas competition in Shanghai

In common with other major economic centres in China, Shanghai's energy consumption has been increasing rapidly to support the high growth rate of its economy. To achieve rational, efficient and clean use of energy, together with improved environmental quality within the city, the Shanghai municipal government has decided to expand the supply and utilization of natural gas. Shanghai plans to increase the share of natural gas in its primary energy mix to 7 per cent by 2010, up from 3 per cent in 2005. This increase in natural gas demand has to be matched with a corresponding increase in supply. To date, the Shanghai region has relied on offshore extracted natural gas but this supply is limited due to the size of the reserves. Since 2005, the West–East pipeline has provided an alternative for Shanghai but demands from other regions could reduce the potential for expanding supplies from that source. Since domestic production will not be sufficient to meet demand in the near future, Shanghai is building a liquefied natural gas (LNG) regasification terminal at the Yangshan deep-water port that would allow an additional supply of more than 3 billion cubic meters per year of natural gas. Malaysia has already committed to supply LNG to the Shanghai terminal at a price that is significantly higher than the wholesale “city-gate” price for natural gas transported via pipeline, but still lower than the gas price to end-use consumers. The presence of both an LNG terminal and a transmission pipeline that connects Shanghai to domestic gas-producing regions will create gas-on-gas competition. This study assesses the benefits of introducing such competition to one of China's most advanced cities under various scenarios for demand growth. In this paper, the impact of imported LNG on market concentration in Shanghai's gas market will be analysed using the Herfindahl–Hirschmann index (HHI) and the residual supply index (RSI). Our results show that Shanghai remains a supply-constrained gas market that will continue to rely upon gas supplies from the western provinces and imported LNG. After 2017, the gas market in Shanghai can be regarded as unconcentrated since its HHI fall below 1800 under a very high growth scenario. In terms of RSI, the gas market can be considered competitive at low, moderate and high growth consumption between 2012 and 2015.     

我国东南沿海液化天然气发展问题

近年来随着油价高启,液化天然气价格不断攀升,对中国液化天然气发展带来巨大的挑战,应客观冷静地规划国内液化天然气项目,按照市场承受能力有序实施进口液化天然气接收站建设,优先考虑广东、福建、浙江、上海和珠海经济发达省市。首先建成东南沿海天然气配送主干线,并在2015年左右形成中国东南沿海天然气供应网络,满足东南沿海省市经济发展对能源的需求,确保我国东南沿海地区能源安全稳定供应。     

我国天然气价格改革浅析

我国现行的以成本加成法为基础的天然气定价机制使天然气价格偏低,从而影响了天然气的进口,造成终端消费市场的过度发展,不利于天然气企业进行成本管理,天然气定价机制改革已迫在眉睫。国外天然气价格成功改革的经验为我国提供了借鉴,但俄罗斯模式和日韩模式都不适合于中国。美国、加拿大、英国等国家天然气定价机制都经历了3个阶段,即传统固定价格阶段、天然气价值定价阶段、竞争性市场形成阶段。我国正处于天然气价格改革的第一阶段末期,应参考美国、加拿大等国的经验改革现有的天然气定价机制,建立与竞争性能源价格挂钩的定价方式,按照热值当量法计算天然气与其他竞争能源的比价关系;最终目标应是建立竞争性的市场,天然气价格由市场竞争形成。建议天然气下游利用加权定价法计算天然气终端价格,中游利用"两部制"法制定管输费,上游利用净回值法制定出厂价。同时,应制定天然气产业链一体化协调发展的相关政策,建立并完善天然气监管机构,及时处理天然气上中下游利益分配问题,制定高效的天然气价格听证会制度。     

Can the Shanghai LNG Price Index indicate Chinese market? An econometric investigation using price discovery theory

China became the world’s second largest liquefied natural gas (LNG) importer in 2018 but has faced extremely high import costs due to a lack of bargaining power. Assessments of the Shanghai LNG Price Index, first released in 2015, are vital for improving the understanding of these cost dynamics. This paper, using the LNG price index data from the Shanghai Petroleum and Gas Exchange (SHPGX) coupled with domestic and international LNG prices from July 1, 2015 to December 31, 2018, estimates several econometric models to evaluate the long-term and short-term equilibriums of the Shanghai LNG Price Index, the responses to market information shocks and the leading or lagging relationships with LNG and alternative energy prices from other agencies. The results show that the LNG price index of the SHPGX has already exhibited a long-term equilibrium and short-term adjustment mechanisms to reflect the average price level and market movements, but the market information transparency and price discovery efficiency of the index are still inadequate. China’s LNG market is still relatively independent of other natural gas markets, and marketization reforms are under way in China. The influence of the SHPGX LNG price index on the trading decisions of market participants is expected to improve with further development of China’s LNG reforms, the formation of a natural gas entry-exit system, and the increasing liquidity of the hub.     

Natural gas corridors between the EU and its main suppliers: Simulation results with the dynamic GASTALE model

Growth in gas demand poses a challenge for European energy consumers and other gas-importing countries in terms of an increasing dependency on gas imports and consequently also supply security. This paper focuses on interactions among demand, supply, and investments in natural gas corridors, namely pipeline transport, LNG, and storage facilities, affecting the European natural gas market over the period 2005–2030. A number of policy scenarios, including a business-as-usual (BAU) scenario, are formulated to study the impact of demand uncertainty and delays in investment on the gas transport infrastructure required in the long run in Europe. The analyses indicate that substantial investments in gas transport corridors are needed to accommodate imports and seasonal demand variations. Analysis of scenarios of supply interruption, in the form of suddenly reduced import capacity for particular pipeline routes, indicates that portions of Europe could experience price increases of up to 100% in the case of a year-long interruption. To accommodate import needs and to mitigate possible disruptions, pipeline connections running from East to West need to be given special priority.     

The prospects for liquefied natural gas development in the US

The objective of our paper is to analyze the prospects for LNG development in the US. In particular, we discuss LNG investment projects with respect to natural gas supply and demand, existing transmission infrastructure, and competing pipeline projects. At the same time potential competition between natural gas and coal in power generation is taken into account. We conclude that in the mid-term, LNG will assume an essential role in meeting US demand because of stagnating and declining domestic production in North America accompanied by an expected increase in demand for natural gas. Additional net imports will be required in the western US (mainly southern California), the Southeast, and in the Northeast—three areas of the nation that lack adequate supply. When accounting for the current status of existing natural gas infrastructure and forthcoming investments, we conclude that there should be little concern about sufficient investment incentives and supply security in the US competitive natural gas market.     

日本地震对世界和我国液化天然气产业的影响

2011年3月,日本东北部太平洋海域发生大地震和海啸,导致日本大批发电机组受损,引发福岛核泄漏事故,对世界和我国液化天然气(LNG)产业的发展产生了深远的影响。短期来看,多家日本电力公司大量采购LNG弥补电力缺口,短期和现货LNG市场趋紧,价格上涨;长期来看,福岛核泄漏事故对世界各国的核电规划与发展造成影响,世界LNG潜在需求增加,长期LNG资源的价格博弈愈加激烈。LNG作为我国天然气供应的重要组成部分,对调整我国能源消费结构、实现我国碳减排目标、保障我国沿海地区天然气安全稳定供应意义重大。当前世界LNG市场形势复杂多变,建议继续密切跟踪国内外形势变化,及时调整资源合作与开发策略,实现我国液化天然气产业的可持续发展。     

中国发展液化天然气面临的机遇和挑战

世界天然气消费量在一次能源结构中已占到24%,预计10年后将上升到35%,成为第三大能源。北美洲、欧洲主要是买方市场,中南美洲、中东和非洲主要是卖方市场,而亚太地区既是主要的进口市场,也是LNG出口的主要来源地区之一。未来10年全球LNG供应将持续趋紧,印度和中国将成为LNG消费的新兴市场。中国发展LNG必须注意资源接替和持续供应,基础设施、设备的建设和扩建,投资主体多元化,天然气市场培育和市场监管等问题。     

Economics of U.S. natural gas exports: Should regulators limit U.S. LNG exports?

This study assesses the level and destination of U.S. LNG exports, using a global natural market model under a wide range of EMF 31 scenarios. The scenarios reflect different U.S. natural gas resource outlooks, market conditions, changing U.S. environmental regulations, and possible changes in geopolitical conditions that affect the global natural gas demand and supply. U.S. LNG exports respond to market conditions under each scenario and are free from any artificial limits. In the near-term, U.S. LNG exports are uncompetitive in the Reference case and in the long-run U.S. LNG exports are significant when U.S. natural gas resources are plentiful. However under demand shocks (increase demand in Asia) or supply shocks (reduction in Russian supplies) or persistence of oil-indexed pricing cases, U.S. LNG exports become competitive to varying degrees. U.S. exports depend not only on U.S. economics but also on how U.S. prices change relative to price changes in other regions of the world. We conclude that limiting U.S. LNG exports is inconsistent with simulated uncertainties, and it should be left to the market to determine the levels and destination of exports.     

Future evolution of the liberalised European gas market: Simulation results with a dynamic model

Strategic behaviour by gas producers is likely to affect future gas prices and investments in the European Union (EU). To analyse this issue, a computational game theoretic model is presented that is based on a recursive-dynamic formulation. This model addresses interactions among demand, supply, pipeline and liquefied natural gas (LNG) transport, storage and investments in the natural gas market over the period 2005–2030. Three market scenarios are formulated to study the impact of producer market power. In addition, tradeoffs among investments in pipelines, LNG liquefaction and regasification facilities, and storage are explored. The model runs indicate that LNG can effectively compete with pipelines in the near future. Further, significant decreases in Cournot prices between 2005 and 2010 indicate that near-term investments in EU gas transport capacity are likely to diminish market power by making markets more accessible.     

Options of natural gas pipeline reassignment for hydrogen: Cost assessment for a Germany case study

The uncertain role of the natural gas infrastructure in the decarbonized energy system and the limitations of hydrogen blending raise the question of whether natural gas pipelines can be economically utilized for the transport of hydrogen. To investigate this question, this study derives cost functions for the selected pipeline reassignment methods. By applying geospatial hydrogen supply chain modeling, the technical and economic potential of natural gas pipeline reassignment during a hydrogen market introduction is assessed.The results of this study show a technically viable potential of more than 80% of the analyzed representative German pipeline network. By comparing the derived pipeline cost functions, it could be derived that pipeline reassignment can reduce the hydrogen transmission costs by more than 60%. Finally, a countrywide analysis of pipeline availability constraints for the year 2030 shows a cost reduction of the transmission system by 30% in comparison to a newly built hydrogen pipeline system.     

LNG as a strategy to establish developing countries’ gas markets: The Brazilian case

This paper aims to evaluate, from a Brazilian case study, if the natural gas trade can be viewed as a good opportunity for developing countries located geographically close to Western Europe and North America gas markets. Initially, the paper presents an overview of the Brazilian natural gas industry and evaluates the balance between supply and demand in each main region of Brazil. Then, it analyzes the evolution of the international gas trade, which is expected to increase rapidly (LNG particularly). Finally, the paper analyses the financial viability of the Brazilian LNG project in a context of high volatility of natural gas prices in the international market. To take this uncertainty into account, North-American natural gas prices are modelled according to the ORNSTEIN-UHLENBECK process (with EIA data over the period 1985–2003). By using an approach based on Monte-Carlo simulations and under the assumption that imports are guaranteed since the North American gas price would be higher than the breakeven of the Brazilian project, the model aims to test the hypothesis that export can promote the development of the Brazilian Northeastern gas market. LNG project is here compared to the Petrobras pipelines project, which is considered as the immediate solution for the Northeastern gas shortage. As a conclusion, this study shows that the LNG export will be vulnerable to the risks associated to the natural gas prices volatility observed on the international market.     

Natural gas contracts in an emerging competitive market

The price and duration of natural gas contracts are analysed to determine that electric and gas utilities in the USA can obtain long-run reliable supplies of natural gas at prevailing market prices. Open access to gas transmission lines has created a market with a large number of buyers and sellers that provides reliable gas supplies. The transaction cost literature on contracts suggests that spot purchases and short-term contracts have become more efficient than the long-term fixed price contracts that typifield the gas industry before the 1980s. An efficient supply of gas requires increasing contracting options and reducing regulatory approval of contracts. For instance, gas marketers, with access to local distribution of pipelines, could offer customers a menu of contract choices for gas and energy services. Alternatively, distribution companies could offer their customers a diversity of contracts. Some regulatory inefficiencies are avoided by automatically setting the allowable cost of gas to current market prices.     

A scenario analysis of investment options for the Cuban power sector using the MARKAL model

The Cuban power sector faces a need for extensive investment in new generating capacity, under a large number of uncertainties regarding future conditions, including: rate of demand growth, fluctuations in fuel prices, access to imported fuel, and access to investment capital for construction of new power plants and development of fuel import infrastructure. To identify cost effective investment strategies under these uncertainties, a supply and power sector MARKAL model was assembled, following an extensive review of available data on the Cuban power system and resource potentials. Two scenarios were assessed, a business-as-usual (BAU) scenario assuming continued moderate electricity load growth and domestic fuel production growth, and a high growth (HI) scenario assuming rapid electricity demand growth, rapid increase in domestic fuel production, and a transition to market pricing of electricity. Within these two scenarios sets, sensitivity analyses were conducted on a number of variables. The implications of least-cost investment strategies for new capacity builds, investment spending requirements, electricity prices, fuel expenditures, and carbon dioxide emissions for each scenario were assessed. Natural gas was found to be the cost effective fuel for new generation across both scenarios and most sensitivity cases, suggesting that access to natural gas, through increased domestic production and LNG import, is a clear priority for further analysis in the Cuban context.     

Power generation potential of liquified natural gas regasification terminals

The share of liquified natural gas (LNG) in the international trade of natural gas (NG) is continually increasing. This presents increasing opportunities to build power plants to generate electricity at LNG regasification terminals rather than wasting the power generation potential of LNG at about −162°C by regasifying it by seawater, ambient air, or by burning NG. Typically, over 5% of the NG received at LNG plants is used to liquify the remaining incoming gaseous NG at environmental conditions. Theoretically, all the energy consumed at LNG liquefaction plants can be recovered at LNG regasification terminals. In this study, the theoretical and practical power generation potential of regasified LNG is investigated by performing energy and exergy analyses. It is shown that up to 0.191 kWh of electric power can be generated during the regasification of LNG per standard m³ of NG regasified. The potential economic gains associated with power generation at LNG regasification facilities are demonstrated by analyzing the 2018 LNG imports of Turkey as a case study and the world. It is shown that the 314 million tons of LNG imported globally in 2018 has the electric power generation potential of 88 billion kWh with a market value of over 10 billion USD. It also has the potential to offset 38 million tons of CO₂ emissions.     

Economic valuation of green hydrogen charging compared to gray hydrogen charging: The case of South Korea

The South Korean government promotes hydrogen-powered vehicles to reduce greenhouse gas (GHG) emissions but these vehicles use gray hydrogen while charging, which causes GHG emissions. Therefore, converting this fuel into green hydrogen is necessary to help reduce GHG emissions, which will incur investment costs of approximately USD 20 billion over a decade. In this study, a contingent valuation method is applied in an analysis to examine the extent to which consumers are willing to pay for green hydrogen charging compared to gray hydrogen charging. The results indicate that the monthly mean of willingness to pay per driver is 51,674 KRW (USD 45.85), equivalent to 4302 KRW per kg (USD 3.82). Additionally, consumers accept a 28.5% increase in the monthly average fuel expenses when converting to green hydrogen. These findings can be used in the development of pricing and energy use plans to finance the expansion of green hydrogen infrastructure.     

LNG (liquefied natural gas): A necessary part in China's future energy infrastructure

This paper presents an overview of the LNG industry in China, covering LNG plants, receiving terminals, transportation, and applications. Small and medium scale LNG plants with different liquefaction processes have already been built or are being built. China's first two LNG receiving terminals have been put into operation in Guangdong and Fujian, another one is being built in Shanghai, and more are being planned. China is now able to manufacture LNG road tanks and containers. The construction of the first two LNG carriers has been completed. LNG satellite stations have been built, and LNG vehicles have been manufactured. LNG related regulations and standards are being established. The prospects of LNG in China are also discussed in this paper. Interesting topics such as small-scale liquefiers, LNG cold energy utilization, coal bed methane liquefaction, LNG plant on board (FPSO – floating production, storage, and off-loading), and LNG price are introduced and analyzed. To meet the increasing demand for natural gas, China needs to build about 10 large LNG receiving terminals, and to import LNG at the level of more than 20 bcm (billion cubic metre) per year by 2020.     

天然气下游市场和终端用户定价机制亟待规范

为保障我国“十二五”的经济发展并满足节能减排的要求,需要快速拓展天然气市场.然而与世界发达国家相比,由于经济发展程度不同以及货币汇率差等原因,导致中国天然气各类下游市场用户对天然气价格的承受能力不同,上网电价和天然气价格倒挂成为天然气市场拓展的主要制约因素.掌控中国天然气上、中游的供气价格,首先要尽可能快速增加国产天然气、特别是非常规天然气的产量,以较低的价格对冲较高的进口气价;同时要掌控基于门站价的下游用户终端气价,这就需要尽可能减少从门站到终端用户的下游供气成本,而其关键在于降低交易成本.目前中国天然气下游市场存在许多亟待解决的问题,鉴于此,建议要明确各省“门站”和省天然气“门站价”的定义;“省内管网”应是省内国家主干管网与在其基础上“完善和延伸管线”的总和;省管网公司不应是一级交易平台,而是一个管理机构;规范城市燃气公司特许经营权范围,“终端大用户”和城市燃气管网终端用户适用不同的天然气价格;按照市场机制理顺天然气下游不同用户价格.如此就有可能使占下游市场份额60％的大用户市场快速开拓.     

Techno-economic and environmental assessment of LNG export for hydrogen production

A critical requirement of a widely contemplated hydrogen economy is the development of a low carbon hydrogen supply chain that is cost competitive. This comprehensive techno-economic assessment demonstrates, for the first time, the viability of a complete hydrogen supply chain based on the transport of liquefied natural gas (LNG). This is demonstrated via the established LNG trade route from Australia to Japan against three key performance indicators (KPIs): delivered hydrogen cost, CO₂ emissions intensity (EI) across the entire supply chain, and technology readiness level (TRL). The hydrogen supply chain entails LNG export to Japan where it is used for blue hydrogen production; the by-product CO₂ is then liquefied and repatriated to Australia for sequestration or utilisation. Within this supply chain, various hydrogen production technologies are assessed, including steam methane reforming (SMR), autothermal reforming (ATR) and natural gas pyrolysis (NGP). SMR with carbon capture and storage (CCS) resulted in the lowest total hydrogen supply cost of 19 USD/GJ (2.3 USD/kgH2) which comfortably meets the 2030 Japanese hydrogen cost target of 25 USD/GJ (3 USD/kgH2) and is very close to the 17 USD/GJ 2050 Japanese hydrogen cost target. This technology also obtained the lowest CO₂ emission intensity (EI) of 38 kgCO2/GJ (4.5 kgCO2/kgH2); this was surprisingly lower than ATR with CCS primarily due to the emissions associated with ATR electricity provision for air separation. Future technologies and strategies are detailed so as to further reduce cost and supply chain emissions; these were shown to be able to reduce total CO2 EI to 14 kgCO2/GJ (1.6 kgCO2/kgH2). Hence this analysis indicates that this supply chain can act to significantly reduce CO2 emissions whilst uniquely meeting targeted hydrogen supply costs up to 2050. As such it is proposed here as an eminently viable hydrogen export option deploying both existing technology and capacity, at least until other hydrogen supply chain vectors (such as liquid hydrogen and ammonia) derived from green hydrogen production become competitive across all the KPIs.