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Marginal cost of natural gas in developing countries : concepts and applications. Energy Department Paper.



The uncertain supply and rising cost of petroleum products since 1973 has spurred the development of alternative sources of primary energy. Natural gas is a major source of energy in over 50 developing countries. In these countries natural gas has many applications with a high value in use both as a substitute for other fuels and as a feedstock. Many countries are on the verge of embarking upon gas development and face complex questions of strategy for gas development. The World Bank has addressed these questions in a series of studies on the cost and prices of gas and its optimal allocation among different uses. The results of these studies are expected to be useful to project staff, energy economists, and policy makers concerned with natural gas development in developing countries. This paper defines the concept of marginal costs and applies it to estimate the economic cost of natural gas in ten developing countries with a wide range of conditions. The marginal cost of natural gas estimated for the ten countries, using the average incremental method, is far below the border price of cometing fuels in these countries. The cost of natural gas supply is not expected to rise in these countries within the next two decades as they tap their proven gas reserves. The sample on ten countries includes a variety of natural gas characteristics and these results are representative of costs in many developing countries. These natural gas cost estimates support a strategy of has development to substitute for petroleum fuels in a large number of developing countries.. INTRODUCTION. Background. Objetives. METHODOLOGY. Technical Characteristics of Natural Gas Production and Transport. Characteristics of Natural Gas Marginal Costs. The Average Incremental Cost (AIC) Concept. Pricing of Natural Gas. APPLICATIONS OF THE AIC METHODOLOGY TO NATURAL GAS. Country Sample. Costs. Expected Demand and Production Profiles. RESULTS. Average Incremental Costs. Comparative Analysis. Conclusions.

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Ministerio de Ambiente y Energía. Secretaría de Planificación del Sub-Sector Energía - Centro de Información de Energía y Ambiente, CIENA

Grettel Ruiz Matarrita

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