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Center for Energy Studies

Global LNG Pricing Terms and Revisions: An Empirical Analysis

Mark Agerton

Global LNG Pricing Terms and Revisions: An Empirical Analysis.

While much has been made in recent years about the increasing liquidity and size of a spot market for liquefi ed natural gas, most LNG is still sold under con fidential, long-term contracts. In fact, in 2013, according to data from the International Group of Lique fied Natural Gas Importers, 73 percent of all LNG trades took place under long-term contracts, which are especially prevalent in Asian markets. Despite the fact that this constitutes an enormous trade, there is very little transparency about how prices are specifi ed, what actual transaction prices are or when pricing terms change. Using publicly available customs data on 16 di fferent trade routes of the largest importers of LNG, graduate fellow Mark Agerton applies econometric techniques to estimate and characterize the empirical relationship between LNG import prices and crude oil prices.