Swing suppliers and international natural gas market integration

Abstract

This study explores the international natural gas market integration using the Engle-Granger cointegration and error correction model. Previous studies have suggested that liquefied natural gas (LNG) and oil-linked pricing with a long-term contract have played key roles in gas market integration, especially between European and Asian markets. There is, however, little discussion of the role of the emergence of a swing supplier. A swing supplier, e.g., Qatar or Russia, is flexible to unexpected changes in supply and demand in both European and Asian markets and adapts the gas production/exports swiftly to meet the changes in the markets. Qatar has been a swing supplier since 2005 in the global natural gas market. In 2009, Qatar's global LNG export share reached above 30% and has remained around 25% since then. Empirical results indirectly support that the emergence of a swing supplier may tighten market integration between Europe and Asia. The swing supplier may have accelerated the degree of market integration as well, particularly after 2009. © 2020 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).