Asian version of Henry Hub would open up markets

The rise of global LNG trade could support a market hub for natural gas in Asia, according to a note released by the EIA today. As the world’s largest consumer of LNG, Asia accounts for about 75% of LNG trade and 33% of total global gas trade. However, Asia lacks an established pricing benchmark to accurately reflect supply and demand changes in local natural gas markets.

Asian Natural Gas Market Hub Needed: EIA

Source: EIA

Market hubs like Henry Hub and the UK’s National Balancing Point are important components of a fully-fledged natural gas market. These hubs are locations for gas to be traded and price to be determined. According to the EIA, fully established gas market hubs have “high liquidity, with a high volume of trades; open access to transport facilities; and transparent price and volume reporting, index pricing, and futures contracting.”

Asian Natural Gas Market Hub Needed: EIA

Source: EIA

A natural gas hub based in Asia would allow local gas markets to develop significantly and increase transparency. However, Asia’s dependence on LNG may make such a project more difficult. Pipeline-based hubs, like Henry Hub, have continuous flows of gas, standardized gas specifications, and daily scheduling of receipts and deliveries.

These are difficult to replicate with LNG, as supply arrives in large slugs which may differ in composition, and there can be significant time between contracting and delivery. Additionally, long term contracts between suppliers and buyers of LNG limit transparency, third-party access, and publically available price benchmarks.

Asia forming LNG buyers’ club

South Korea, China, and Japan are currently attempting to form a group to exchange information and “cooperate in the joint procurement of LNG.” This group would attempt to extract concessions from producers that would give them supply flexibility. For example, restrictions currently prevent importers from selling LNG to third parties. This could allow the three countries to directly trade with each other. South Korea typically buys gas supplies for winter, while China purchases for summer and Japan buys in all seasons.


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