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Markets & Forecasts

Diversification is key for LNG pricing

Liquidity in the LNG market is low compared with that in the oil market, but there are signs that pricing structures for LNG are becoming increasingly diverse Liquidity in the LNG market is low compared with that in the oil market, but there are signs that pricing structures for LNG are becoming increasingly diverse.
By Peter Stewart 20 June 2019 World / LNG 0 34327
The diversification of pricing bases should allow LNG producers to attract buyers more flexibly and increase the liquidity of the LNG market. (RWE)

LNG price indexation has long been a vexed issue. Since Henry Hub-linked pricing broke down the decades-old dominance of oil indexation in long-term contracts for gas and LNG, pricing structures have become more diverse and contracts have typically been shorter in term.

In early June, Cheniere Energy – the company that arguably triggered the latest wave of diversification through what became known as the Sabine Pass formula its sales – said it will use a formula indexed to LNG rather than the Henry Hub for some...