The International Gas Union (IGU) on Wednesday released its Wholesale Gas Price Survey confirming “significant changes in wholesale price formation mechanisms during a period of key developments and upheaval in the global gas market.”
Average wholesale prices at the world level were $3.35 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.
Between 2015 and 2016, the gas-on-gas (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 oil price escalation (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, the survey shows.
The changes in the cross-border trade have been predominantly in pipeline imports with the GOG share rising from 23 percent to 57 percent 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 percent in 2005 to 32 percent 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 percent 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.