The goal of the worldwide trend towards liberalisation of natural gas markets has been to let "gas-to-gas" market competition set prices for the commodity. But international gas markets - and particularly LNG markets - still depart substantially from the competitive ideal, price determination is extremely complex. Pipeline and LNG investments pose special problems for the competitive commodity model.
In addition, long lead times between project initiation and completion complicate the price response further. For LNG, the delay between the final investment decision (FID) on plant construction and project start-up is typically four years or more. Therefore, the current pricing signals which justify a new project cannot provide the timely supply needed to balance current demand. And the resulting supply may finally come on line under very different market conditions.
This report looks into LNG supply, demand and costs in the recent volatile market as well as their impacts on LNG pricing. It describes and analyses what happened in the recent, highly volatile price environment and the changes in LNG trade patterns.