IGU Sees More Price Convergence

The International Gas Union (IGU), which represents national gas industry associations from most of the world's nations, released its 2017 Wholesale Gas Price Survey June 5, its ninth such survey to be undertaken in a series that began ten years ago.

IGU's latest survey highlighted that the average wholesale price globally was $3.35/mn Btu in 2016, the lowest level recorded in all of its nine surveys, although prices across different regions were more converged in 2016 than in previous years. It also saw more volumes overall priced against oil.

The IGU Survey also reported that in 2016 wholesale prices derived from gas hubs, in other words gas-on-gas competition, accounted for 45% of global consumption focused on North America, Europe, the former Soviet Union, and Latin America. Oil price indexation provided wholesale pricing for 20% of global gas consumption, chiefly in the Asia Pacific, Asia and eastern Europe regions. Other regulated pricing categories accounted for 31%.

The survey found that gas-on-gas competition was little changed between 2015 and 2016, with a slight increase in the share in Europe being offset by declines in Asia and Asia Pacific reflecting fewer pure spot LNG cargoes there. Oil price indexation, however, increased by 1.5 percentage points, reflecting a small rise in Europe – probably due to Gazprom's increased volume sales to eastern Europe last year – but principally in Asia and Asia Pacific as the share in LNG imports grew, but as also domestic production in China increased.

Mark Smedley