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 liquefied natural gas, most LNG is still sold under confidential, long-term contracts. In fact, in 2013, according to data from the International Group of Liquefied 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 specified, what actual transaction prices are or when pricing terms change. Using publicly available customs data on 16 different 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.