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Bureau of Energy, Ministry of Economic Affairs, R.O.C.

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What are the pricing mechanisms of the pipeline natural gas and liquefied natural gas?

1. Pipeline Natural Gas:
    Generally, New York Mercantile Exchange (NYMEX) natural gas trading prices reported by media are referring to the pipeline gas posted prices at Henry Hub in Charles Lake, Louisiana of the United States, Henry Hub has become a natural gas trading center since it is connected to nine major natural gas pipelines in United States. The price of pipeline natural gas in United States is mainly affected by supply and demand situations of natural gas market and by weather impacts within a region, It is a regional trade indicator rather than an international natural gas price. For example, ever since 2010, due to the advanced hydraulic fracturing technology of shale gas production has led to pipeline natural gas prices declined in in the U.S. In general speaking, the transmission and distribution of natural gas via pipeline is easier and of low-cost, the pipeline natural gas is less expensive than LNG.
 
2. Liquefied Natural Gas:
    For the sake of long distance transportation, natural gas should be processed (i.e. Liquefaction) into a liquefied status with -162℃.LNG is shipped by dedicated carrier to the destination receiving terminal, stored in cryogenic tanks, and regasified into gaseous status for pipeline transmission in the destination country, The much higher price of liquefied natural gas comes from the above process costs, handling costs, storage costs, and its expensive infrastructure investment. Japan is the biggest importer and consumer of LNG around the world, the import volume in 2018 was about 82.46 million tons annually, occupied 26% of global trading volume.
    Traditionally, LNG pricing is tightly linking with crude oil price, for example, in the Far East, including Japan, Taiwan, South Korea, even China. LNG contracted prices widely adapt JCC system. JCC, which stands for Japan Crude Cocktail or Japan Crude Clearance, is a moving average of Japan’s crude oil importing price that public announced monthly by Japan’s Custom Authority. CPC Corporation, Taiwan currently has 4 long-term LNG import contracts with Qatar, Malaysia, Australia and Papua New Guinea, all of the contracts are linking with JCC. Therefore, Taiwan's imported liquefied natural gas prices are affected by the crude oil price fluctuations, and much different with the U.S. natural gas prices (Henry Hub system) as the market pricing basis.

Update: 2019-04-23
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