1. Introduction

Since the latter half of the 19th century, a major industry has developed around the exploration and production of crude oil, and the marketing and transport of oil derived fuels that have promoted and substained the industrial growth of developing countries. In the process, large volumes of natural gas have been discovered: however, to a large extent the exploration for gas has been secondary to oil, particularly in the Asia pacific region.

As the demand for gas increases, there will be increasing incentives for gas focused exploration, which will result in a large increase in the current reserves of gas.

The Asia Pacific region is the traditional hub of the global liquified natural gas (LNG) business. The main reason for this is that, as well as being the home of major LNG producing countries like Indonesia, Malaysia, Brunei and Australia and major importing countries like Japan, Korea and Taiwan, the region lacks an integrated gas pipe line grid of the kind that has evolved in Europe and the U.S. over the past 50 years.

Nowdays, it is generally agreed that the global LNG business faces a supply surplus, but this is only one picture. LNG trade is unusual in that it is divided into two distinct markets:the Asia Pacific and the Atlantic Basin. Each one is driven by different dynamics and has its own characteristics, including pricing. Most people understand the Atlantic Basin to include The Americas, Europe, North Africa and the Mediterranean. In sharp contrast to the Asia Pacific, the Atlantic Basin faces a shortage of LNG supplies, and this strange supply and demand imbalance lie the seeds of change that could transform the global LNG business.

The surplus of LNG in the Asia Pacific combined with the shortage of LNG in the Atlantic Basin and the availability of uncommitted ships from mid-2002 will create the potential for increased shortterm trading between the regional markets. But, instead of trying to transport LNGfrom the Asia Pacific to markets in the Atlantic Basin, it was an opportunity for buyers and sellers to create a more efficient way of delivering LNG to market. Although such an arrangement could prove complicated, as it would increase price transparency and could lead to some convergence in pricing between the regional market.

It was predicted that over the next decade short-term LNG trade will increase, and with it the movement of LNG between regional markets. However we believe that investors in LNG projects will want the security of selling at least some proportion of their outpout under long term contract.

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Consequently, like many others in the gas industry, we don't think that short-term trading in LNG will reach a

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