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Global LNG Pricing Terms and Revisions: An Empirical Analysis

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  • Mark Agerton

Abstract

Asian long-term contracts for liquefied natural gas (LNG) are generally thought to index LNG prices to oil prices. This should mean that LNG and oil prices are cointegrated. However, statistical evidence for cointegration using Japanese data is not strong. To resolve this puzzle, I examine 16 Japanese, South Korean, Taiwanese, and Spanish LNG import price series and allow for multiple, unknown structural breaks in the relationship to oil prices. This resolves the puzzle, and I provide estimates for the timing of breaks and the underlying average pricing terms. I relate these to count, volume, and duration data on long-term contracts and discuss how to interpret econometric estimates in light of contract data. This paper complements existing work on global gas market integration, which largely ignores how discrete changes in oil-indexed long-term contracts will affect empirical relationships.

Suggested Citation

  • Mark Agerton, 2017. "Global LNG Pricing Terms and Revisions: An Empirical Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej38-1-agerton
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    Citations

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    Cited by:

    1. Hupka, Yuri & Popova, Ivilina & Simkins, Betty & Lee, Thomas, 2023. "A review of the literature on LNG: Hubs development, market integration, and price discovery," Journal of Commodity Markets, Elsevier, vol. 31(C).
    2. Gao, Shen & van ’t Veld, Klaas, 2021. "Pegging input prices to output prices—A special price adjustment clause in long-term CO2 sales contracts," Energy Economics, Elsevier, vol. 104(C).
    3. Hendalianpour, Ayad & Liu, Peide & Amirghodsi, Sirous & Hamzehlou, Mohammad, 2022. "Designing a System Dynamics model to simulate criteria affecting oil and gas development contracts," Resources Policy, Elsevier, vol. 78(C).
    4. Luis Aguiar-Conraria & Gilmar Conceigao & Maria Joana Soares, 2022. "How Far is Gas from becoming a Global Commodity?," The Energy Journal, , vol. 43(4), pages 179-198, May.
    5. Abdullahi Alim & Peter R. Hartley & Yihui Lan, 2018. "Asian Spot Prices for LNG and other Energy Commodities," The Energy Journal, , vol. 39(1), pages 123-142, January.
    6. Abdullahi Alim & Peter R. Hartley & Yihui Lan, 2018. "Asian Spot Prices for LNG and other Energy Commodities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    7. Jerzy Rembeza, 2020. "Coal Prices in Poland: Is the Domestic Market Separated from the International Market?," International Journal of Energy Economics and Policy, Econjournals, vol. 10(4), pages 405-410.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

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