A Review of the Literature on LNG Hubs Development, Market Integration, and Price Discovery

Abstract

This study provides a literature review of academic research related to liquefied natural gas (LNG) hubs development and market integration. Studies show that Asian markets lack a transparent pricing benchmark which exists in North American and European markets. As a result, the formation of functional LNG market hubs in the Asia Pacific region will take time. Early research evidence suggests a strongly cointegrated relationship between LNG and crude oil. Concurring with more recent findings, we confirm that LNG's statistical relationship to both WTI and Brent ceases after the break dates of August 2008 and October 2015, respectively. Multiple initiatives are underway to facilitate development and price discovery for global LNG markets. However, the conclusions found within prior literature are dependent upon the sophistication of the estimation model and sample ranges employed.

Keywords: Climate Finance, Energy Finance, Liquefied Natural Gas, Market Integration, Natural Gas, Price Discovery

JEL Classification: N70, O1, P48