oil ad gas( Energy economics)

oil ad gas( Energy economics) Project description Will LNG become a similar global commodity to oil? Background The international oil industry can claim its history back to the mid- to late-1800s, and has developed into the energy life blood of all global economies, whether they be oil producing nations or insatiable consumers. Natural gas a close relative of crude oil was long considered an afterthought of crude production, and has always been constrained by an inability to store and transport the product, unless the gas wells were situated very close to the consumer. Liquefied Natural Gas (LNG) overcomes those two problems, and whilst the technology was proved commercially viable in the 1940s, only for the past 40 years has the shipping technology evolved to enable the deep-sea movement from producing gas fields to the major markets. The major disadvantage of LNG is the requirement to build expensive infrastructure to liquefy the gas at the production site and further re-gasification facilities within the consuming territories. Traditionally, the market for LNG and Natural Gas was separated into distinct regions North America, Europe and the Asia Pacific region. Natural Gas was moved by pipeline to consumers and pricing based on linkage to the crude oil price on the argument that this was the benchmarked competitive alternative fuel. Many supply contracts were very long term, and access to distribution systems controlled by nationalised gas companies, contributing towards a severe limitation of spotmarket sales. These markets were long-term orientated and inflexible. LNG shipments have started to change these characteristics, although the costs of building liquefaction trains and committing to shipping contracts, has led to the LNG industry being typified by producers reaching 20- and 25-year contractual positions with major utility companies. The Shale Gas explosion in the USA could be a potential game-changer and catalyst for further changes in market structure, but can this really lever LNG away from oil price-linked contracts and establish a spot market, with liquidity and transparency to build a global commodity market in LNG, in similar fashion to New York Mercantile Exchange (NYMEX), Intercontinental Exchange (ICE0 in London and the Brent and West Texas Intermediate (WTI) benchmark crudes? Assignment Task Your task is to discuss, after reading and research, the prospects of LNG becoming a global commodity in the next 40 years of its evolution? In particular, your Report should discuss and analyse, amongst other issues, the following: What are the prospects for LNG in the USA, and can the Shale Gas explosion both satisfy domestic demand and create a healthy potential for exports? What drivers are forcing buyers and sellers of LNG to move away from the traditional longterm contracts and long-term contract pricing? Can a more transparent market in LNG trades be established with the old linkage to oil prices being supplanted by some other pricing mechanism? What is required in your 3,000-word Report, and forming the basis of assessment and marking, is your own analysis and conclusions reached by interpreting the content of the Module, together with a wide range of commentary on this topic derived from your own research. Describe current oil and gas market trends and relate current conditions to historical market performance. Explain basic oil and gas market dynamics, with especial reference to consumer and producer reactions to price movements. Illustrate how the trading environment, including market conditions and competitive forces can influence corporate strategy within the oil and gas industries. Evaluate the significance of supply and demand factors to decisions relating to pricing and output policies. Constructive critical analysis, introduction and conclusions. Demonstration of a clear understanding of the issues. Use of academic models. Full articulation of ideas developed. Offering well-argued solutions and/or alternatives. Format, referencing, bibliography. Rigorous use of the Harvard Methodology for citation and referencing; page numbering; correct format for direct quotations. Content, style, relevance, and originality. Clear demonstration of rigorous research from recognised authoritative sources. Audience focus. Meeting the deliverables.