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Understanding Global Oil, Gas & LNG Pricing
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Understanding Global Oil, Gas & LNG Pricing

2-Day Training Course: An Introduction to Pricing & Financial Risk Management in Oil & Gas. Attend this course to gain a fundamental understanding of pricing mechanisms & their impacts for oil, natural gas & LNG in the global spot & futures markets, & the role of hedging & speculation in mitigating financial risk.

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Key Learning Objectives

  • Review the global oil, natural gas and LNG industries
  • Review the natural gas markets in North America, European and Asia, including price trends
  • Recognise the role and importance of gas storage days, the strategic petroleum reserve, and OGEC
  • Discuss the indexation of the price of natural gas to the price of oil and the role played in determining the final market price of natural gas
  • Discover the concept of Energy Equivalent Pricing of natural gas
    Analyse LNG pricing using the “S” curve formula
  • Recognise how hedging and speculation strategies are used for financial gain or to mitigate the corporate risk confronting business and government your one

About the Course

This two-day intensive course is designed to provide participants with an applied and working knowledge and understanding of the current global spot price trends in oil, natural gas and LNG. The course begins with an introduction to global oil and gas industry including production, consumption, and international trade.

Discussion will centre on existing global reserves as well as the depletion of reserves. The course then builds the discussion around the various spot markets including Henry Hub, the UK’s NBP and the JCC in the Asia Pacific region. We examine the significance of the indexation of natural gas prices with the oil price and we examine the Energy Equivalent Pricing of natural gas. We also review the current trends in the relationship between oil and gas prices. The role of the “S” curve pricing model will also be developed.

The second day of the course is devoted to discussing the role of the futures market for the purposes of financial risk management. While the spot and futures markets operate separately, we identify the price convergence theory of these markets which is helpful when seeking to forecast prices. Trading strategies and the rationale for using one strategy over the other will be discussed. This discussion is supported by numerous practical examples throughout the course to assist with understanding the material.

Who Will Benefit

  • Those in the oil and gas industry who would like to gain a working knowledge of oil and gas pricing and financial risk management
  • Professional services – lawyers, accountants, auditors, consultants with direct or indirect business in the oil and gas industry who wish to improve their understanding of, and service to, their clients
  • Public servants employed by the federal and state governments in treasury, finance, procurement, state development, infrastructure and planning with managerial and oversight responsibility in the oil, LNG and CSG industries.

Testimonials

“I enjoyed the general discussion of the factors influencing price movements and corporate decision-making. The sources of data for future use were most useful”
Manager, Sinopec Australia

Terms & Conditions

To read the training course terms and conditions read more here

Course Outline

OVERVIEW OF PRICE TRENDS

  • Introduction to recent price trends in oil, natural gas and LNG markets
  • Global trends in production, consumption and international trade
  • Spot price indices in oil and gas markets
  • Overview of the spot price trends for Henry hub, UK’s NBP and the Japanese JCC and LNG prices in China.
  • The Chinese economy and the Rule of 70 and impact of the BRICS countries on global oil and gas prices

OVERVIEW OF OIL AND GAS RESERVES

  • Overview of oil (conventional and unconventional) and natural gas reserves
  • Depletion rates and duration to depletion
  • Global status of oil and gas reserves
  • Impact of the March 2011 Japanese earthquake and tsunami on the price of Japanese LNG

PEAK OIL AND GAS THEORY

  • Peak oil theory
  • The impact of the theory: conventional, unconventional and shale oil reserves
  • A new role for the USA
  • Is there a peak gas theory? A case study of the Indonesian natural gas industry

THE CREATION OF AN OGEC?

  • Mr Putin’s tacit support for the establishment of an OGEC
  • The role of OPEC

Activity: Using provided data, identify and graph the oil and natural gas production of the US and member nations comprising the so-called BRICS group of countries

OIL AND GAS PRICE COUPLING

  • Oil – natural gas price coupling
  • Energy Equivalent Pricing (EQP) and natural gas spot pricing
  • Coupling “rules” for natural gas pricing.

Activity: Recent coupling trends and its impact on the price of natural gas

LNG PRICE DETERMINATION

  • Determining the price of LNG and CBM for LNG
  • The role and application of the EQP
  • Simple “S” curve LNG price models
  • Developing more complex LNG price formulas

STRATEGIC AND NATIONAL SECURITY

  • Importance of security of oil and gas supply and impact on price
  • Impact of Varanus Island incident in Western Australia in June 3, 2008
  • Economic necessity of strategic petroleum reserve and gas storage days

CORPORATE RISK MANAGEMENT

  • The types of risk confronting different corporates: financial, price, market, foreign exchange, reputation and so on
  • Who uses risk managed strategies?
  • What tools are used to manage corporate risk?

SPOT AND FUTURES MARKETS

  • The difference between a spot market and a futures market
  • Trading commodities in the spot market
  • NYMEX futures contracts for oil and natural gas
  • Price convergence theory and forecasting spot prices

OIL AND GAS TRADING STRATEGIES – PART 1: ENERGY COMPANY TRADERS

  • The rationale for hedging and speculation
  • Numeric examples detailing the activities of oil traders
  • Numeric examples showing the activities of natural gas traders

OIL AND GAS TRADING STRATEGIES – PART 2: INVESTMENT BANKS AND INTERNATIONAL AIRLINES

  • The rationale for hedging and speculation
  • Numeric examples detailing the activities of oil traders
  • Numeric examples showing the activities of natural gas traders

OIL AND GAS TRADING STRATEGIES – PART 3: HOW GOVERNMENTS HEDGE

  • Background to the reason for hedging the oil production
  • Detail and overview of put and call options
  • Numeric examples detailing the activities of oil traders

IMPACT OF HIGH OIL PRICES ON THE ECONOMY

  • Assessing the impact of high oil and natural gas prices on the macroeconomy
  • Reviewing the data since 1970
  • How oil price shocks impact the macroeconomy
  • Did oil traders cause the GFC?

Activity: CBS 60 Minutes 14 April 2009: Did Speculation Fuel Oil Price Swings?

  • A more plausible explanation: the role of the BRICS countries?

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