Natural Gas Markets in Three Distinct Regions Essay Example for Free

Natural Gas Markets in Three Distinct Regions EssayIntroductionAs with many other products and commodities participating in a globalized supply chain, the three dominant commercialiseplace places are located in north the States, europium and Asia. This is no different for essential louse up. While each region components similarly a reliance on zero to support the tenets of the modern high-standard of living, all three are extremely divergent in legal injury of demographic, culture, and record and differ widely in policies concerning finance, monetary regulation, and of course, energy. These qualities and more have shaped generations of market emergence in terms of policy and practice, and in examining the results of those developments, or todays key differences between the natural splosh markets in Asia, europium, and northeasterly America, differentiations will be made based on the following three criteria market maturity, the sources of supply, and the dependence on imports. (McRae and Ruppel, 2011)Asia Market MaturityAsia is the least developed natural drift market further shows the greatest growth potential. mainland chinaware in particular is rapidly modernizing what was once a largely agricultural country is becoming a collection of burgeoning city-centers with growing energy motivesproof can be found in any of over 100 cities with a population over one million (Perkowski, 2012). In addition, Chinese government has recently unveiled a policy whereby natural artillery is prioritized for the transportation sector in an effort to displace diesel and reign in emissions. (Aishu and Hua, 2012) This suggests china, currently the eighth largest consumer of natural gunman, may locomote that list to the top threesituating itself among Russia and the US. Despite Chinas position to increase flatulence consumption, convey(a) barriers exist to natural bluster market maturity. Structural and regulatory issues concerning natural gasincl uding determineare addressed ad hoc. (Huang, 2012 p.3058)Although industrialized Asia largely sets worldwide LNG prices (which are tied to oil-indexed long term contracts), the prices are not binding. China has pursued non-market concessions with India through bilateral agreements (McRae and Ruppel, 2011), and bypassed bidding processes with countries alike(p) Angola and Nigeria, who sign agreements without human rights or financial hydrofoil requirements normally required by Western investors. (Mitchell, 2012) Absent any semblance of sound legal modelling (let alone continuity of pricing practice), such actions show great unpredictability in Chinas trading habits which reduce confidence of potential investors aspiring to enter Chinas natural gas industry. These add up to significant barriers to natural gas market maturity.Asia Sources of SupplyAsian geography promotes apportion by sea and larger economies have logically invested heavily in LNGmore than two-thirds of global LN G is vocationd in the Asia Pacific region (Mitchell, 2012) where flexibility exists to receive gas shipments from a variety sources. Australia (LNG) and primeval Asia (pipe occupancy) have traditionally supplied gas to China, but should global market conditions shift, China is easily able to accept shipments from Canada and the United States, and high-CAPEX projects like the Kitimat LNG terminal in British Colombia are indications that North America may grow in relevancy to Chinas gas supply chain.Asia Dependence on ImportsWith limited local conventional gas, industrialized Asia is highly dependent on imported LNG from South East Asia, Australia and the Middle East. (McRae and Ruppel, 2011) However, recent assessments peg Chinas recoverable tight-gas reserves at over 1,200TCF. Due to uniquely challenging reservoir lithology, (Faulkner, 2012) China will require assistance from Independent producers as their EP technology lags by world standard. (Faulkner, 2012) Even with mystify allocating USD1B per year to Chinese shale gas exploration (Hamilton, 2012), it may take a decade until Chinese shale gas flows to market. Therefore, its reasonable to expect Asia will continue importing roughly 40% of its gas (roughly half(prenominal) is from in-region) and may become increasingly dependent on supplies from Central Asia (Kazakhstan), the Middle East and Western Africa. (Mitchell, 2012)Europe Market MaturityEurope contains a swell up-developed natural gas market which is considered open, although the lack of a kindred natural gas financial and legal framework for European Union (EU) nations is an encumbrance to efficient market operation. The complicated patchwork of cross-border pipelines must also comply with multiple and dissimilar legal and regulatory regimes which add complication to construction and operations. (McRae and Ruppel, 2011) The European market relies heavily on long term contracts with price terms based on a mix of competing fuels, and pipeline access is restricted. This policy was crafted by way of reception to the 1973 Arab Oil Embargo its inherently inapplicable to todays market and serves as a hindrance to full development of the European spot market. (McRae and Ruppel, 2011)Europe Sources of SupplyEurope is at substantial disadvantage in terms of security of natural gas supplythere is access to Russian and Central Asian natural gas, but only through Russian pipeline systems monopolized by Gazprom and Transneft, meaning shipments are highly subject to disruption resulting from infighting between Russia and transit-nation Ukraine. (Mitchell, 2012) While France has been determined to contain a unprecedented 180TCF of shale gas, Europe may never see the benefit as France has invested in nuclear to eliminate the need for hydrocarbon exploration, and holds a moratorium on same. Poland is the other European country with significant shale gas they intend to monetize their resources expeditiously. (McRae and Ruppel, 2011) Europe Dependence on ImportsWhile dependency rates between EU nations varies, the EU imported 54.1% of its arrant(a) energy consumption in 2010 (European Commission, 2012), indicating great dependence on seller nations (primarily Russia, Nigeria, Algeria, Qatar and Norway). The EU receives almost 50% of its gas by pipeline, and LNG continues to support the Iberian Peninsula. Diversification of supply is a high priority. (McRae and Ruppel, 2011) One major(ip) step to liberalizing markets would be to establish pricing mechanisms not tied to oil.While potential exists for shale gas development to reduce European imports, stringent EU environmental regulations ensure Europes dependence on imports for years ahead. Lengthy disruptions are unlikely as Russia and Algeria have failed to reinvest hydrocarbon revenues for economic growth they remain highly dependent on steady cash inflows to remain solvent. If a lengthy disruption did happen, Europe in the main has powerful North American a llies who may use diplomacy, sanctions or hostility to mitigate damage. In the event of conflict, North American surplus LNG export capacity may bolster gas shortfalls in Europe.North America Market MaturityThe United States and Canada enjoy the most developed and un-restricted natural gas market in the world. Natural gas infrastructure is highly developed and is the mechanism by which the US was able to consume 22% of the worlds natural gas in 2009. (Mitchell, 2012) Natural gas is produced by private companies with open access to the pipeline network and sold at prices set by the New York Mercantile Exchange (NYMEX) based on principles of supply and demand. Gas in North America trades at the greatest degree of independence to oil compared to other regions, indicating an exceptionally mature natural gas market.North America Sources of SupplyBy way of the North American Free Trade Agreement, the US receives natural gas supply by pipeline from Canada and Mexico, and LNG shipments fr om Trinidad. Canada receives shipments of American gas to eastern markets via pipeline. Importation of Canadian hydrocarbons may increase if authorization is granted to build the Keystone XL pipeline from Canada to the Gulf Coast.North America Dependence on ImportsNorth America possesses the reserves and technology to theoretically discontinue natural gas imports. Whether this makes political sense is debatabledoing so would financially impair many supply nations with whom North American countries participate in a variety of global affairs. Canada and the US are particularly well situated to conduct natural gas arbitrage. Environmental concerns have slowed the development of the Keystone XL pipeline. leftfield unresolved, natural gas may be reallocated for export to Asia.ConclusionsIn the West (US and EU), increased market share for NG will be an adjustment to an already well-functioning energy supply chain. In China, development of a natural gas market will be part of a paradigm shiftacknowledgement that Chinese hoi polloi are earning and spending more, and expect higher standards of living. While the West currently enjoys relatively convenient pricing on natural gas, China will boost Asias competitiveness with Europe for supplies from Russia, West Africa, Iraq and Central Asia. This will cause an eastward shift of the global gas supply chain, (Mitchell, 2012) and may shine a brighter light of scrutiny on Asias standards of conduct that might not be in line with a Western sense of decency.The results of such confrontation on natural gas markets are unfeasible to predict. One thing we can be sure of is that natural gas as a goodness is more than just a tool by which we power our machines or heat our homes. Natural gas is a gift to the world that if used correctly, can drastically improve the human experience for a great many people. Whether buyer and seller nations can be pragmatic about international trade agreements, use the proceeds to grow internal ec onomies, and establish transparency in the marketplace are the poetic rhythm by which we will know if this resource is being put to good use or merely squandered.REFERENCES1) Mitchell, J. (Nov 2010) More for Asia Rebalancing World Oil and Gas Chatham House 2) McRae, G. and Ruppel, C. (Jun 2011) The Future of Natural Gas, An Interdisciplinary MIT Study milliampere Institute of Technology. Available at http//mitei.mit.edu/publications/reports-studies/future-natural-gas 3) Perkowski, J. (May 2012) ChinasBest kept Secrets Mianyang and Other Tier 3 Cities Forbes Magazine. Online Available at http//www.forbes.com/sites/jackperkowski/2012/05/11/chinas-best-kept-secrets-mianyang-and-other-tier-3-cities/ 4) Huang, L. (May 2012) Development in Chinas Natural Gas Industry Regulation sophisticated Materials Research. Online Volume 527-527 pp 3058-3061. Available at http//www.scientific.net/AMR.524-527.3058 5) Faulkner, C. (Sep 2012) Chinas Natural Gas Potential Business virtue Online 26 Sep tember. Available from http//www.bus-ex.com/article/china%E2%80%99s-natural-gas-potential 6) Aishu, C. and Hua, J. Ed. Fernandez, C. (Oct 2012) China Prioritizes Use of Natural Gas By Vehicles, Ships Reuters Online 31 October. Available from http//www.reuters.com/article/2012/10/31/china-gas-policy-idUSL3E8LV5DN20121031 7) Hamilton, G. (Aug 2012) Shell Canada to go ahead with Kitimat LNG projects despite billion-dollar Chinese gas investment Online 21 August. Available from http//www.vancouversun.com/business/resources/Shell+Canada+ahead+with+Kitimat+projects+despite/7124608/story.html 8) Main personal credit line of Primary Energy Imports, EU-27, 2002-2010.Online European Commission Eurostat. Available from http//epp.eurostat.ec.europa.eu/statistics_explained/index.php/Energy_production_and_imports