2021-08-01-IGU-Gas_Price_Survey_2021_Edition_75页_5mb

2021 IGU Wholesale Gas Price Survey Summary

Core Content

The 2021 edition of the IGU Wholesale Gas Price Survey provides a comprehensive overview of global gas price formation mechanisms and trends from 2005 to 2020. It highlights the increasing dominance of Gas-on-Gas Competition (GOG) and the decline of Oil Price Escalation (OPE), with a focus on the impact of the global gas market's evolution and the effects of the pandemic on wholesale prices.

Main Views and Key Information

1. Price Formation Mechanisms Overview

The report identifies several categories of price formation mechanisms:

• Oil Price Escalation (OPE): Prices linked to oil prices (crude oil, gas oil, fuel oil) or other competing fuels.
• Gas-on-Gas Competition (GOG): Prices determined by supply and demand dynamics, often traded at physical or notional hubs.
• Bilateral Monopoly (BIM): Prices set through bilateral agreements between a dominant buyer and seller.
• Netback from Final Product (NET): Prices based on the final product's value, such as chemical feedstocks.
• Regulation: Cost of Service (RCS): Prices set by regulatory bodies to cover costs and return.
• Regulation: Social and Political (RSP): Prices set based on political or social considerations.
• Regulation: Below Cost (RBC): Prices below production and transport costs, often with subsidies.
• No Price (NP): Gas provided free, usually as a by-product.
• Not Known (NK): No data or evidence available.

2. 2020 Survey Results

In 2020, the survey received responses from 94 out of 113 markets, covering 98% of global gas consumption. Key findings include:

• GOG increased to 49.3%, the highest since 2005, driven largely by a rise in LNG imports.
• OPE remained at 18.5%, showing a slight decline from 24.4% in 2005.
• LNG Imports accounted for 12% of total global consumption, with spot LNG making up 34.7% of total LNG imports.
• Asia was the largest spot LNG market, followed by Japan, India, Turkey, and South Korea.
• Europe saw a significant shift towards GOG, especially in Northwest Europe, Central Europe, and Italy, with OPE nearly disappearing in these regions.

3. Regional Breakdown of Price Formation Mechanisms

• Domestic Production: GOG accounted for 47%, with North America contributing 70% of this share.
• Pipeline Imports: GOG made up 65%, with Europe (282 bcm) and North America (130 bcm) being the largest contributors.
• LNG Imports: GOG was the dominant mechanism at 44%, with Asia and Asia Pacific being the largest consumers.
• Total Imports: GOG accounted for 49.3%, while OPE remained at 18.5%.
• Total Consumption: GOG increased to 49.3%, and OPE decreased to 18.5%.

4. Price Trends and Convergence

• Wholesale prices fell sharply in 2020, reaching an average of $3.24 per MMBTU, the lowest since 2005.
• Global price convergence increased from 2005 to 2015, but this trend may have stalled since then.
• Asia and Asia Pacific saw strong consumption growth, which increased the share of OPE, while Europe experienced a significant shift towards GOG.

5. Changes in Price Formation Mechanisms

• Regulated pricing decreased from 38% in 2005 to 28.5% in 2019, with a shift from RBC to RCS in Russia in 2009 and from RSP to RCS in Malaysia in 2017.
• OPE saw a slight increase in 2020, mainly due to China's increased production.
• GOG gained significant share in Latin America and Asia, with Argentina, Colombia, India, and China being key markets.

6. Impact of the Pandemic

• The pandemic caused a sharp decline in spot LNG prices, but did not slow the growth of GOG.
• Global gas markets became more price-convergent, with European prices now closer to the world average than ever before.

Key Changes from 2005 to 2020

• GOG increased from 35% to 49.3%, while OPE decreased from 24.4% to 18.5%.
• Regulated pricing decreased significantly, especially in Russia, Iran, and Malaysia.
• Asia and Asia Pacific became the main drivers of OPE growth, while Europe saw a strong GOG shift.
• LNG imports increased, with spot LNG becoming more prevalent, especially in Asia.
• Market-based pricing mechanisms became more widespread, while regulated pricing became less common.

Conclusion

The 2021 IGU Wholesale Gas Price Survey highlights a significant shift towards market-based pricing mechanisms, particularly GOG, and a decline in regulated pricing, especially RBC. The pandemic had a notable impact on wholesale prices, leading to a sharp drop, but GOG continued to grow, especially in LNG and pipeline imports in Europe. The report underscores the increasing convergence of global gas prices and the dynamic evolution of the gas market.