Editor’s Note: This column is part of a regular series by industry veteran Brad Hitch for NGI’s LNG Insight dedicated to addressing the complexities of the global natural gas market.
How close is the world to adopting a global spot LNG index? That’s a question this series has aimed to answer by exploring the prospects of establishing one based on crude oil, Title Transfer Facility (TTF) and Henry Hub prices.
The answer is a complex one.
I previously pointed out that, among other issues, substituting natural gas and oil benchmarks for LNG starves the industry of a functional price signal. An LNG market where actors cannot easily hedge spot prices on a term basis would necessarily expect large upfront margins on high prices to compensate for the risk of liquefaction....