Russian Natural Gas Supply: Some Implications for Japan

Abstract

The paper presents a spatial and intertemporal equilibrium model of the world market for natural gas over the next three decades. Specifically, the model calculates a pattern of production, transportation routes and prices to equate demands and supplies while maximizing the present value of producer rents within a competitive framework. Data incorporated into the specifications of supplies and demands in each location were taken from a variety of sources including the United States Geological Survey, the Energy Information Administration, the OECD, the International Energy Agency and various industry sources. We illustrate how the model can be used to examine the implications for Japan of increased exploitation of Russian natural gas resources, including the economic consequences of alternative political scenarios.