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Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?

Massol, O. and Tchung-Ming, S. (2010). Cooperation among liquefied natural gas suppliers: Is rationalization the sole objective?. Energy Economics, 32(4), pp. 933-947. doi: 10.1016/j.eneco.2010.02.008

Abstract

This paper examines the development of cooperative strategies between countries exporting Liquefied Natural Gas (LNG) and members of the Gas Exporting Countries Forum (GECF). This economic study focuses specifically on an often-raised scenario: the emergence of a cooperative approach designed with the sole aim of logistic rationalization, and which would not have any effect on LNG prices. We first assess the annual gains that may result from this market-power-free cooperative approach using a simple static transportation model. The numerical results obtained suggest that, in the absence of a gain redistribution policy, this cooperative strategy will probably not be adopted because cooperation would not be a rational move for some exporters. The problem of gain sharing is then formulated using cooperative game theory concepts. Several gain-sharing methods have been studied, including the Shapley value and various nucleolus-inspired concepts. Our results suggest that the choice of a redistribution policy appears relatively restricted. Out of the methods studied, only one – per capita nucleolus – satisfies two key requirements: core belonging and monotonicity (in the aggregate). Lastly, we look at how cooperation may give rise to a coordination cost and try to determine the maximum amount of this cost. In view of the low level of this amount and the relative complexity of the sharing method implemented, we consider that the credibility of a logistic cooperation scenario exempt from market power should be reappraised.

Publication Type: Article
Additional Information: © Elsevier 2010. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Liquefied natural gas, Cooperative game theory, Linear programming problem
Subjects: H Social Sciences > HD Industries. Land use. Labor
Departments: School of Arts & Social Sciences > Economics
Date Deposited: 27 Sep 2019 16:31
URI: https://openaccess.city.ac.uk/id/eprint/22905
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