Partner Country Series - Developing a Natural Gas Trading Hub in Asia

The trading of natural gas in the Asia Pacific region is dominated by long-term contracts in which the price of gas is indexed to that of oil. As the price of gas between Asia and other parts of the world has widened in recent years, observers have raised serious doubts about the sustainability of this pricing model. In this report, the IEA shows what it would take to create a functional, regional natural-gas trading hub in which prices reflect the local supply and demand fundamentals. The report aims to provide stakeholders with insights on the changes that are required in the Asia Pacific natural gas sector – both downstream and upstream – to allow a competitive natural gas price to emerge. Building on OECD Europe and OECD Americas experiences, this report sets out to assess perspectives for these changes in the Asia-Pacific natural gas markets. It identifies obstacles and opportunities for a competitive natural gas price in the Asian economies to emerge.