What Drives Liquefied Natural Gas Imports in Europe?

Abstract: This paper studied the extensive margin (EM) and intensive margin (IM)of liquefied natural gas(LNG) imports in Europe over the period 1996-2015. Two econometric models were used, a prob it estimation for the EM and an OLS for the IM. A time-varying approach was conducted to analyse the stability of the models in the studied time frame. The models were constructed through the application of known determinants of LNG trade as well as new factors that previously was unused in the investigation of LNG trade. The results indicated an overall stable EM, but a highly varying IM over the period. The findings inform that the EM is driven by income, diversification and lower bounds technological development and we found that itis inhibited by pipeline imports, domestic production and higher bounds technological development. The IM is determined by favourable pricing opportunities, lower bounds technological development and the diversification aspect of LNG. IM is negatively affected by domestic natural gas production and the higher bounds of technological development.