Environmental Engineering Reference
In-Depth Information
But some companies, such as Britain's British Gas (which has no oil to
distract it), have become big enough in LNG that they can offer security of
supply to customers out of their portfolio of LNG contracts. In this case, a
customer does not have to know where their LNG is coming from - they
just need to know they have a firm contract with BG and that BG always
has enough LNG cargoes afloat to fulfill demand.
In parallel with this, a sort of spot market (a market in which com-
modities are traded and delivered immediately, rather than at a point in
the future) has developed for uncontracted LNG gas, with cargoes being
drawn to whichever region - North America, Europe or Asia - will pay
the highest price at any one time for spot cargoes.
It gives rise to the question whether LNG trade will one day equalize
prices between regions to produce a global gas price, as exists with oil. It's
possible. Certainly LNG trade tends to equalize LNG prices across the
various regions of the world, but whether it can have the same effect on
general gas prices is doubtful. LNG amounts to only about ten percent of
the overall gas market, which is dominated by pipelines and marked by
regional price differences; it will probably stay too small relative to the
whole market to influence it. The tail would have to grow a lot bigger
before it could wag the dog.
