International Natural Gas Market (Report by the Working Consulting Group of the President of the Soviet Academy of Sciences on Long-Term Energy Forecasting)

Styrikovich, M. (1987). International Natural Gas Market (Report by the Working Consulting Group of the President of the Soviet Academy of Sciences on Long-Term Energy Forecasting). IIASA Working Paper. IIASA, Laxenburg, Austria: WP-87-102

Preview

Text WP-87-102.pdf Download (4MB) | Preview

Abstract

For the past two years the International Institute for Applied Systems Analysis (IIASA), together with some other national organizations, has conducted research on the future prospects of the international natural gas trade. Soviet research institutes have also taken an active part in this program. Moreover, the Working Consulting Group of the President of the Soviet Academy of Sciences on Long-Term Energy Forecasting (the leading Soviet organization participating in the research) has prepared a "shadow project" that addresses the problem on the international natural gas market over the next 30-40 years.

Natural gas has long been viewed as a source of energy capable of reducing the dependence of industrialized nations on oil imports. In the early 1980s, global energy studies confirmed the versatility and economic viability of this resource, and economic assessments showed that only natural gas can compete with oil, when long-distance interregional gas transportation as LNG or by pipeline becomes practicable.

The worsening ecological situation called into question the prospects for wide-scale coal applications, and the continuing opposition toward nuclear energy enhanced interest in natural gas as an ecologically clean fuel.

At the same time, it became clear that the high cost of natural gas transportation and distribution substantially weakens its competitiveness, even at a high price. Under these conditions only a limited number of suppliers possessing large gas resources at low production costs can enter the world natural gas market. These suppliers include countries in the Middle East (Iran, Qatar, etc.); some countries in North Africa (Algeria, Nigeria); Southeast Asia (Indonesia, Brunei, Thailand, etc.); the US neighbors -- Mexico and Canada; and two European countries -- Norway and the USSR.

The international natural gas trade was originally expected to expand on a larger scale in the near future. Today, however. the prevailing expectation is that of moderate growth for the next decade. This can be ascribed to virtually stable energy demand in industrialized capitalist countries, which reduces the scope for the development of natural gas, nuclear energy, and the coal industry. Developing countries, in which further growth in energy consumption is expected, do not have the necessary infrastructure for natural gas utilization. On the other hand, the recent twofold drop in oil prices will have a strong influence on natural gas prices and will impede the expansion of gas utilization, despite its obvious advantages from an ecological point of view. Here one should also mention security of supplies from individual regions, which is an issue of particular concern for Western countries. This factor plays an increasing role in planning interregional pipeline gas transportation. That is why region% with an unstable political climate may have limited access to the markets of industrialized capitalist countries. All these issues should be taken into account in modeling the international natural gas market.

The world gas market in this Working Paper is divided into three large regions (local markets) and several large gas suppliers, some of which have a possibility of entering all three markets with large volumes of gas supplies. Thus, the problem acquires global significance. We focus on evaluating the dependence of marginal natural gas prices on gas consumption volumes on the basis of detailed energy forecasts for the regions and large energy consumers. Three scenarios of the world natural gas market with respect to various hypotheses of price growth in competitive energy sources (notably oil) have been considered. With the help of the dynamic model for the international natural gas market, levels of industrial development within the regions and volumes of gas imports, as well as expected natural gas prices in the case of balance between supply and demand in local markets, have been determined. An assessment has been made of the overall effect derived from the world natural gas trade for gas consumers and suppliers.

Throughout the research the Working Consulting Group has constantly maintained contacts with IIASA to coordinate and verify initial data and scenarios for computing. As for the rest, both studies are quite independent research efforts made on a similar data base. Specific features of each of the studies allow us to regard the latter as mutually complementary.

Actions (login required)

View Item