LNG Pricing & Profitability

Jump To: | About Global LNG Price Spreads | Global Summary | JKM (East Asia) | TTF (Continental Europe) | NBP (United Kingdom)

Why Do Natural Gas Pricing Spreads Matter?

As LNG exports have played an increasing role in the US supply/demand picture, natural gas fundamentals have shifted from a nearly insular commodity with demand fluctuations dependent almost entirely on the weather, to a much more global one.

As with any traded good, LNG exports depend on the economics between the exporting and importing countries. US natural gas is generally priced at the Henry Hub, along the north coast of the Gulf of Mexico. Internationally, there are three primary price points.

1. NBP (National Balancing Point) is the price point of UK imported natural gas.

2. TTF (Title Transfer Facility), based in the Netherlands, is the continental European price point.

3. JKM (Japan Korea Marker) is the East Asian price point, generally for Japan and South Korea.

In addition to the simple spread between the Henry Hub price and prices at each of these price points, one must also consider the cost of liquifying and transporting the LNG. This cost is most expensive for exports to JKM and lower for TTF and NBP. By subtracting the Henry Hub and transport cost from the price point (i.e. JKM – Henry Hub – Transport Cost), one can approximate the profitability of LNG exports to that location. If this is a negative number, exports don’t make financial sense (besides previously sold fixed contracts) and demand is likely to drop. On the other hand, a large, positive number points towards profitability and stronger demand.

Global Natural Gas Price Points For LNG Exports

JKM-Henry Hub Price Spread History

JKM-Henry Hub Price Spread Futures Contracts

TTF-Henry Hub Price Spread History

TTF-Henry Hub Price Spread Futures Contracts

NBP-Henry Hub Price Spread History

NBP-Henry Hub Price Spread Futures Contracts