FACTORS AFFECTING LNG PRICES

Facing the trend of green energy conversion, LNG is predicted to be a pioneering fuel source in this "revolution" with the ability to provide efficient and environmentally friendly energy. In Vietnam, leading companies in the industry are trying to speed up progress to bring LNG into service for gas power and industrial production. However, in recent years, LNG gas prices have continuously fluctuated due to many different factors, this is also a challenge in bringing liquefied natural gas into use. So what are the factors that affect LNG gas prices? What factors will LNG prices in Vietnam be affected by? How have world LNG prices changed in recent years? Please refer to the article below.

Factors affecting LNG prices:

Global factors.

LNG prices in the world have continuously fluctuated in recent years due to influences from political situations, wars, epidemics, gas inventories, and related policies.

In the end of 2023, LNG prices continued to decrease despite previous predictions that gas prices would increase in winter due to high demand. In early 2024, LNG prices tend to start to increase again. In general, being able to predict future LNG prices depends on market fluctuations. It can be said that LNG prices are a clear reflection of the market situation in the world.

Weather:

In winter, when temperatures are low, the need to use heat for heating increases. In particular, if the weather becomes unusually cold due to the impact of climate change in recent years, it will create pressure on LNG prices, which may increase because supply often cannot react quickly. in response to short-term increases in demand.

Oil price fluctuations:

In some areas, LNG price calculation depends on Brent oil price. If Brent oil prices increase, gas prices also increase and vice versa.

*Brent oil is a type of crude oil exploited in fields in the North Sea region. Brent crude oil is often considered the benchmark for measuring global oil prices, and its price is often used as a reference for the prices of other crude oils in international markets.

Supply and demand factors:

Like all commodity markets, LNG prices reflect the balance between supply and demand. The rapid growth of the LNG industry as well as fluctuations in natural gas production and consumption can impact supply and demand, affecting prices.

In Vietnam, a country that uses 100% LNG from imports, in addition to the above factors, natural gas prices in Vietnam are also subject to many other impacts such as:

Imported LNG price:

Vietnam is an LNG importing country, and LNG prices are often paid in USD. When the exchange rate between Vietnamese Dong (VND) and US Dollar (USD) fluctuates, when calculating the domestic price, it must be based on the USD/VND exchange rate in domestic Vietnam at that time. If the VND depreciates compared to the US dollar, the price of imported LNG will increase and vice versa.

Transportation costs:

The cost of transporting LNG from export ports to Vietnam can play a large part in the final price of the product. Factors such as shipping distance, port fees, insurance fees and related factors can directly affect this cost. If transportation costs increase due to factors such as fuel price increases or fluctuations in the transportation market, LNG prices in Vietnam may also increase.

* Shipping costs vary between regions depending on the distance from the factory/warehouse. In addition, storage costs are also a significant impact on LNG prices.

Related taxes and fees:

In Vietnam, the tax and fee policies set by the Government also contribute to affecting LNG prices. When used in Vietnam, LNG will be subject to taxes such as: Import tax, value added tax (VAT), and other related taxes and fees. In addition to taxes and fees that affect the LNG pricing structure, the Government is also making efforts to implement policies to support the energy industry.

* Investment costs, installation of storage and storage systems, regasification systems, gas receiving wharves, etc. are also significant factors affecting the LNG pricing mechanism in Vietnam.

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