International Trade in Natural Gas: Golden Age of LNG?
Name
MITJPSPGC_Rpt271.pdf
Size
2.98 MB
Format
Adobe PDF
Checksum (MD5)
9e72ca32c3d7e43fb53585837dc072a2
Author(s)
Du, Y.
Paltsev, S.
Date Issued
November 2014
Publisher
MIT Joint Program on the Science and Policy of Global Change
Citation
Report 271
Series/Report no.
MIT Joint Program Report Series;271
Abstract
The introduction of liquefied natural gas (LNG) as an option for international trade has created a market for natural gas where global prices may eventually be differentiated by the transportation costs between world regions. LNG’s trade share in 2013 was only about 30 percent of the total global trade in natural gas, but use of LNG is on the rise with numerous projects in planning or construction stages. Considering LNG projects that are under construction, planned, or proposed, we provide an analysis of LNG prospects for the next decade. LNG has substantial unexploited potential in terms of reducing capital requirements (especially for liquefaction projects), expanding new technology frontiers (e.g. floating LNG), serving new markets, and establishing new pricing schemes that better reflect the fundamentals of supply and demand. Trade volumes are projected to increase from about 240 Mt LNG in 2013 to about 340–360 Mt LNG in 2021. Despite potential challenges from weaker demand in Asia, longer-term projections show that LNG trade is bound to show substantial growth, partially due to geopolitical tensions that might increase LNG flows to Europe. However, these perspectives largely depend on demand choices, the availability and evolution of alternative fuels (e.g. renewable energies), and—most importantly—political decisions framing economic behavior.
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