The successful implementation of LNG aggregation for market development

Abstract

In the context of the global transition towards sustainability, most countries still grapple with energy security issues and a heavy reliance on fossil fuels as an energy source. Natural gas is proposed as a significant source of energy within global future efforts to diversify the energy system. The development of the natural gas market is therefore imperative to achieve the global energy transition goals as LNG has been identified as an ideal transitionary fuel (Hafeznia, Pourfayaz, & Maleki, 2017; Mohammad, Mohamad Ishak, Mustapa, & Ayodele, 2021; Safari, Das, Langhelle, Roy, & Assadi, 2019). This research report assesses the types of LNG aggregation implemented by countries and the effectiveness of the implementation of LNG aggregation as an energy policy instrument. The determinants of the identified criteria, based on the 4-As framework, were collected, and normalised via the unitization method. Multi-criteria analysis was utilized for the aggregation of the determinants, allowing for the analysis of the function which, in this research report, is the success of LNG aggregation implementation as energy policy. The analysis provides for the top performing country based on the indicators identified for each criterion of the 4As framework, from which, the success factors of LNG aggregation are unpacked. Sixty-four countries are identified as trading in LNG, of which, eleven were identified as having implemented LNG aggregation strategies. The criteria of the 4A’s framework, affordability, availability, acceptability, and applicability, are utilised to define a set of indicators which allowed the eleven countries to be ranked based on a performance score. The United States, ranking first, implements a block aggregation strategy which has been complimented by the country’s success factors. The country has a mature legal environment which has provided reassurance to the global market and resulted in the attraction of investment, transforming the country into a net exporter of energy. The United States has flexibility in its policies which allowed for the production of non- conventional Shale gas. Russia, ranking second, implements single buyer and brokerage aggregation strategies which has enabled the country to become a significant participant within the global LNG market. This successful implementation of the aggregation strategy is underpinned by the vertical integration of the state-owned gas company. The third ranked country, Trinidad and Tobago, has successfully implemented a single buyer, single seller aggregation strategy which allowed the infant market to develop over time. The country strives towards the ease of doing business for global participants, provides Created by Terri Carmichael at Wits Business School; terri.carmichael@wbs.ac.za iii government support and the ability to absorb market fluctuations. Lastly, Singapore implements a single-buyer aggregation strategy. The success factors, of which, have been the countries complimentary incentives for investment and trade, government support, policy driven incentives, a well-developed legal system and agility within policy