Research On International Natural Gas Market And China’s LNG Supply Security

Natural gas, as a kind of clean fossil energy, has irreplaceable strategic significance to protect national energy supply security and tackle climate change. With the increasingly activity of global natural gas trade and the new challenges that the shale gas revolution in North America has brought, the international natural gas market is becoming more complex and facing many new uncertainties, so the further in-depth research is need. Meanwhile, in order to achieve the low carbon economy, as the world’s leading natural gas consumer and importer, China’s future demand for natural gas and dependency on natural gas imports will also be growing, so how to protect China’s natural gas supply security has become a serious problem. Therefore, under this background, the in-depth and systemic analysis on the volatility characteristics of international natural gas prices, the mechanism of the impact on regional natural gas prices, the evolution of global natural gas trade and China’s natural gas supply security is conducive to understanding the complex and volatile characteristics of international natural gas market better, accurately grasping the market laws and future trends of the international natural gas market, and providing the theoretical basis and decision support for developing reasonable strategies of natural gas development and protecting China’s natural gas supply security.From four aspects:the volatility characteristics of natural gas prices for the world’s three regional markets, macroeconomic factors on regional natural gas prices, the evolution of global natural gas trade pattern and the safety strategies of China’s LNG import, this paper systematically used the theory and methods of econometrics, statistics, complex networks, graph theory, operational research and other disciplines, and proposed a series comprehensive models to study the international natural gas market and the strategies of China’s LNG supply security thoroughly. The main research and conclusions are as follows:(1) Combined Ensemble Empirical Mode Decomposition with cross-correlation analysis models, the volatility characteristics of natural gas prices in the world’s three regional markets and the main impact factors for natural gas price fluctuations at different frequencies are analyzed from the perspective of multiple time scales.The results show that the North American natural gas price was mainly influenced by the market supply and demand and the amount of fluctuation was as much as$5or higher; simultaneously it was affected by hurricanes, the shale gas revolution and other emergencies, the impact was also very large and the amount of fluctuation was more than$2.5. Natural gas prices in Europe and Japan were determined by the trends of natural gas prices, respectively. In addition, the high and low frequency fluctuations of the international crude oil prices have an impact on the high-frequency fluctuations of North American natural gas prices, but the impact that the trend term of international crude oil prices has on North American natural gas prices was limited; meanwhile, inventories of natural gas in North America was not enough to affect the changes of the supply and demand of North American natural gas markets; however, Japanese and European natural gas import prices were mainly affected by the trend term of international crude oil prices, the response time was shorter, and the time generally was1to3months and1to6months, respectively.(2) The panel cointegration model was used to analyze the impact of global economic activity and international crude oil prices on natural gas import prices in three major regional natural gas markets and further VAR, impulse response functions and variance decomposition analysis models were used to investigate the shock impacts of the volatility and the increase and decrease of crude oil prices on regional natural gas import prices.The results show that both global economic activity and international crude oil prices have significant long-term positive effects on natural gas import prices in the world’s three regional gas markets. Global economic activity has a significant impact on the natural gas import prices in the North American market, while natural gas import prices in Asia and Europe were mainly affected by international crude oil prices. This is because natural gas prices have been mainly affected by the supply and demand of natural gas in North America, while natural gas prices in Asia and Europe are almost always based on the oil-index, and especially for Japan, its natural gas import prices are absolutely based on international crude oil prices. The volatility of international crude oil prices has a negative impact on regional natural gas import prices and the impact is different for each of the regions. The shock impact is weak in North America, lags in Europe and is most significant in Asia. In addition, the response of natural gas import prices to increases and decreases in international crude oil prices shows an asymmetrical mechanism, of which the decrease impact is relatively stronger.(3) The complex networks of the global liquefied natural gas and pipeline natural gas trade were constructed, repectively; the characteristics and the dynamic evolution of the global natural gas trade patterns were analyzed; the minimum spanning tree models of the international natural gas market were constructed to analyze the relationship between the international natural gas market structure and inter-regional LNG trade.The results show that the great differences exist in the regional distribution and the natural gas trade forms. The natural gas trade is mainly by pipeline in the North American market, the LNG trade in Asian markets, and both of two trade forms in the European market. Both the LNG trade network and pipeline gas trade network have the characteristics of scale-free networks. This shows that national heterogeneity exists in the natural gas trade networks and that the impact that each country has on the overall trade network and the position that each country has in the overall trade network are different. The tightness of the LNG trade network is relatively higher than that of the pipeline gas trade network. The level of monopoly in the LNG export and import market is increasing. The natural gas markets in North America, Europe and Asia are not integrated into a unified global natural gas market. However, the degree of integration between the European and Asian markets is high. The evolution of the international gas market structure and the inter-regional LNG trade is closely related, and the improvement of the integration degree in the international natural gas market and the increase of inter-regional LNG trade have mutually reinforcing effects.(4) The marine transportation risk index of liquefied natural gas was constructed, and on this basis, the multi-objective programming model on China’s LNG imports was constructed to study China’s LNG supply security comprehensively, which mainly considered the LNG import cost, the exporting countries’political risk as well as the marine transportation risk of LNG imports.The results show that in situations that extreme events were not considered, comparing with the actual import strategy, the optimal strategy reduced the import volume from Egypt, Equatorial Guinea, Nigeria, Qatar, the United Arab Emirates and Yemen whose natural gas prices or maritime transport risks were relatively higher and increased the import volume from Trinidad and Tobago, Russia and Malaysia whose maritime transport risks or natural gas prices were relatively lower; in situations that extreme events for Indonesia’s maritime transport risk or national political risk, China’s LNG import will shift from Indonesia to UAE whose maritime transport risk or national political risk were relatively lower. The empirical analysis shows that the multi-objective programming model of China’s LNG supply security that this paper constructed was valid.