What can be learned from the free destination option in the LNG Imbroglio ? - Archive ouverte HAL Access content directly
Preprints, Working Papers, ... Year :

What can be learned from the free destination option in the LNG Imbroglio ?

(1, 2) , (1, 2, 3) , (4, 5, 6)
1
2
3
4
5
6

Abstract

We examine the profitability of flexible routing by LNG cargoes for a single supplier taking into account uncertainty in the medium-term dynamics of gas markets. First, we model the trajectory of natural gas prices in Asia, Northern America, and Europe using a Threshold Vector AutoRegression representation (TVAR) in which the system’s dynamics switches back and forth between high and low regimes of oil price volatility. We then use the generalized impulse response functions (GIRF) obtained from the estimated threshold model to analyze the effects of volatility shocks on the regional gas markets dynamics. Lastly, the valuation of destination flexibility in LNG supplies is conducted using a real option approach. We generate a sample of possible future regional price trajectories using Monte Carlo simulations of our empirical model and determine for each trajectory the optimal shipping decisions and their profitability. Our results portend a substantial source of profit for the industry and reveal future movements of vessels. We discuss the conditional impact of destination flexibility on the globalization of natural gas markets.
Fichier principal
Vignette du fichier
Cahier de l'Economie n132.pdf (2.91 Mo) Télécharger le fichier

Dates and versions

hal-03192881 , version 1 (08-04-2021)

Identifiers

  • HAL Id : hal-03192881 , version 1

Cite

Amina Baba, Anna Creti, Olivier Massol. What can be learned from the free destination option in the LNG Imbroglio ?: Cahiers de l'Economie, Série Recherche, n° 132. 2020. ⟨hal-03192881⟩
115 View
47 Download

Share

Gmail Facebook Twitter LinkedIn More