The increasing availability of unconventional gas supplies from shale and deep water deposits is already influencing producer-consumer relationships. Market observers are weighing the likelihood that consuming countries will continue importing LNG from long-standing suppliers against the possibility that they may seize the opportunity of a more diverse supply base to seek out new sellers or renegotiate existing deals.
Many see in this development a game changer on at least three fronts. First, it may be the beginning of a trend towards an integrated global gas market, where price differences among North America, Europe and Asia - the three main international gas markets - will decline or disappear all together, much like it is the case in the oil market.
Second, it may lead to the establishment of a new pricing mechanism based on spot transactions rather than on long-term contracts. And third, over the long-term, it might generate incentives for fuel switching in favour of gas, should its greater abundance trump the price-competitiveness of other fuels, most notably oil.
How likely is the shift from the conventional world of three separate regional gas markets to an unconventional one of a single global gas market? How likely is it that the conventional method of pricing gas through long-term contracts in Asia and most of Europe may gives way to the less-conventional method of doing so through short-term, spot transactions?
This IEF-Gastech roundtable explored these questions with a select group of thought leaders, with the aim of promoting greater understanding of the opportunities and challenges involved in the on-going transformation of international gas markets.
An IEF Dialogue Insights report summarising the discussion and highlighting key insights for further consideration will be delivered during the month of April.