In the East Asian gas markets, issues like gas trading hubs, hub indexed pricing, and destination flexibility are being debated. This paper examines the impact of a change in East Asia's pricing benchmark and contract flexibility on the regional and global gas markets. The paper uses the Nexant World Gas Model, a linear program with global cost minimization as the objective. To our knowledge, this study on hub competition, price benchmark change and contract flexibility improvement in East Asia will be a first in the literature and have real policy relevance. The results show that both price benchmark change and contract flexibility improvements will create an overall positive effect on the world and East Asia importers, but the impacts are different among exporters and importers. However, there is no evidence of competition among different benchmark hubs and destination restrictions cause the "Asia Premium". It implies that removal of destination clauses has higher priority than the change to hub indexation for Japan, Korea and Chinese Taipei, but both should be treated equally in China. The study also suggests that East Asian importers should cooperate among themselves and with exporters to facilitate the hub creation and contract changes in East Asia.

The Global Financial Crisis (GFC) of 2007-2009 that originated in the US has revealed the need for measuring and monitoring the transmission of extreme downside market risk. This paper investigates the risk transmission mechanism between the oil and natural gas markets. We apply the recently introduced test statistics based on cross-quantilogram function and the multivariate quantile regression model (VAR for VaR) to the US oil and natural gas prices, which are independently formed. Our results show two asymmetric patterns. First, the shocks in the oil market substantially increase the Value at Risk (VaR) in the natural gas market. However, the reverse impact does not exist. Second, we highlight the significant asymmetric response of gains and losses transmission in energy markets, cautioning about the underlying weakness of adopting volatility to measure risk in the energy market. Moreover, extreme market risk is more easily transmitted across markets than moderate risk. Our results are in general robust in application to other regional energy markets, such as Europe and Asia, but the heterogeneities in responses are underpinned by the differing role of natural gas in regions. The findings in this paper have important implications for academic researchers, policy makers in gas-dependent economies, and business practitioners in light of projected increases in the use of natural gas worldwide as well as development of independent gas-on-gas competitive prices in Asia.

This paper proposes that the gas economics in East Asia (including Southeast Asia and Northeast Asia) is different from standard economics due to its exogenous oil-indexed pricing and certain region-specific and industry-specific factors. Based on a hypothesis of distinctive economics, this paper proposes an analytical framework that studies East Asian gas markets. We demonstrate this framework through a case study of the effects of a low oil prices. The qualitative and quantitative results demonstrate that low oil prices, and subsequent gas prices, have affected gas supply and demand, and trade and pricing dynamics in ways that can be explained by the distinctive gas economics. This paper demonstrates that the distinctive economics may cause market failure and that the analytical framework based on the distinctive economics can be used to assess policy options that can address these market failures.

In order to promote ASEAN gas market integration, this paper offers four scenarios to renew momentum towards continuing with the marginalised Trans-ASEAN gas pipeline (TAGP) and further development of cross-border pipeline gas trading. The paper four subregional and regional market integration scenarios could be used as stepping-stones to achieve ASEAN gas market integration. The impact of each scenario was estimated with a least cost world gas market model and the impact is indicated by the difference between each integration scenario and the baseline scenario, respectively. The simulations suggest that integrated gas markets in ASEAN are beneficial through the reduction of total procurement costs for ASEAN and the World. The TAGP is also beneficial in terms of incentivising ASEAN production that can be transported cost effectively to demand centres within the region. The development of marginal production due to the availability of lower cost transportation is in line with ASEAN's goals for resource optimisation and energy security enhancement. The paper suggests that ASEAN should advocate the gas market integration, and that ASEAN member states could take various institutional measures to achieve higher levels of integration.

This paper examines the uncertainties in Chinese gas markets, analyze the reasons and quantify their impact on the world gas market. A literature review found significant variability among the outlooks on China's gas sector. Further assessment found that uncertainties in economic growth, structural change in markets, environmental regulations, price and institutional changes contribute to the uncertainties. The analysis of China's demand and supply uncertainties with a world gas-trading model found significant changes in global production, trade patterns and spot prices, with pipeline exporters being most affected. China's domestic production and pipeline imports from Central Asia are the major buffers that can offset much of the uncertainties. The study finds an asymmetric phenomenon. Pipeline imports are responding to China's uncertainties in both low and high demand scenarios while LNG imports are only responding to high demand scenario. The major reasons are higher TOP levels and the current practice of import only up to the minimum TOP levels for LNG, as well as a lack of liberalized gas markets. The study shows that it is necessary to create LNG markets that can respond to market dynamics, through either a reduction of TOP levels or change of pricing mechanisms to hub indexation.