Arbitrage: The simultaneous buying and selling of a commodity in different markets to take advantage of different prices. If the window is open, the seller has the advantage with higher prices in a different location.


Backwardation: A term used to describe the structure of a forward price curve. When a market is in backwardation, the forward prices are lower than spot prices.

Ballast Bonus: Also known as repositioning fees. Refers to fees a shipowner charges a charterer to move an empty (ballast) vessel to the receiving liquefaction terminal, and are typically remitted as a lump-sum payment. What the market charges for ballast bonus depends on the available supply of LNG vessels. When vessel capacity utilization is high, owners are much more likely to receive a ballast bonus payment. When vessel capacity utilization is low, there may be no ballast bonus payment. 

Ballast Vessel: A ship with no cargo. The term is often used in vessel tracking and the monitoring of LNG movement across the globe. 

Boil-Off: The amount of LNG that evaporates during transportation or while sitting in storage. For LNG vessels, the more modern and efficient the vessel, the less boil-off tends to occur. 

Brent Crude: This light sweet oil which originates from fields in the North Sea is the commodity’s main global trading benchmark. Brent typically trades at a premium to the U.S. benchmark West Texas Intermediate (WTI) crude. 

Bunkering: The fueling of a ship. Several key bunkering ports (which act like truck stops) for the international LNG shipping industry are Fujairah, United Arab Emirates, Gibraltar and Singapore.


Charter: See Ship Contracting

Contango: A term used to describe the structure of a forward price curve. When a market is in contango, forward prices are higher than spot prices.


Demurrage: Fees charged to a vessel for remaining in port beyond its allotted time. 

Delivered Ex-Ship (DES): A pricing mechanism that values LNG delivered at its final location. Under such transactions, ownership of LNG transfers to the buyer as it is unloaded at the receiving terminal. Generally, DES is shipped to the customer and shipping costs are included. Also see free-on-board.

DFDE (Dual-Fuel Diesel Electric): See vessels


EPC: Stands for engineering, procurement and construction and is often used in reference to the various stages of building a large infrastructure project and the contracts awarded to do so. 


FEED: Stands for front-end engineering and design, and is used in reference to the early work required in determining how an infrastructure project will be built and what will be required. 

Feed Gas: Natural gas that is delivered to a liquefaction facility via pipeline to be converted into LNG. Delivered feed gas can be greater than the stated nameplate capacity of the liquefaction train(s) because some of that feed gas will be consumed in the liquefaction process. 

Final Investment Decision (FID): A common term used in reference to the last step of determining whether to move forward with the sanctioning and construction of an infrastructure project. 

Floating Liquefied Natural Gas (FLNG): Floating facilities that liquefy natural gas offshore.

Floating Storage Regasification Unit (FSRU): A special type of ship or offshore installation used in the transfer of LNG. FSRUs are used to provide flexibility in receiving and processing LNG shipments to meet gas demand in onshore markets. 

Floating Storage Unit (FSU): FSUs are similar to FSRUs, except FSU vessels do not contain regasification capabilities. Instead, the FSU will feed its LNG into an offshore regasification module.

Forward Freight Agreement: A futures contract allowing ship owners and charterers to hedge against the rates of goods transported.

Free-on-Board (FOB): A pricing mechanism that reflects the transfer of LNG cargo from the liquefaction facility to the ship. The LNG buyer arranges shipping to the ultimate destination. As such, there are no long-haul shipping costs included in the price. For example, FOB Gulf of Mexico refers to the price of LNG that is loaded into a vessel from one of the existing Lower 48 export facilities. See also delivered ex-ship.

Freight Parity: Freight parity exists when the cost to ship LNG is the same among the various types of LNG vessel propulsion systems. For example, more modern XDF-MEGI vessels typically receive higher day rates than the older steam and diesel fuel vessels, but offer lower operating costs in the form of less LNG boiloff and reduced bunker fuel. Under conditions of freight parity, the higher shipping charter costs of more modern vessels would be offset by lower operating costs, such that the total cost to ship LNG would be the same among all vessel classifications.

Freight Rate: The fee charged for a specific cargo (LNG). 

Heel: The portion of the originally loaded LNG on a vessel that is held back, or not delivered to its destination, so it can be used to keep LNG storage compartments cool and to power the vessel during its return (ballast) leg.

Heads of Agreement (HOA): A preliminary, non-binding accord outlining the main aspects of a proposed contract.

Henry Hub (HH): The physical delivery point for the Chicago Mercantile Exchange (CME) Group natural gas futures contract. Located in Erath, LA, the Henry Hub serves as the de facto national U.S. natural gas price, although prices can vary widely in the United States, especially during the winter months. More recently, the Henry Hub has been used as an alternative pricing mechanism for international LNG contracts.

International Group of Liquefied Natural Gas Importers (GIIGNL): A nonprofit organization whose objective is to promote the development of activities related to LNG. GIIGNL publishes a free annual report filled with industry statistics that is widely used by the industry. 

International Maritime Organization (IMO): An agency of the United Nations with standard-setting authority over international shipping.

Japan Customs Crude (aka Japan Crude Cocktail) (JCC): The index to which close to half of all global LNG contracts are linked. The JCC is the weighted-average price of a mix of crude oils imported by Japan, mostly composed of sour Dubai and Oman crudes. Some contracts use a rolling average of JCC prices over the previous three or six months. 

Japan Korea Marker (JKM): Heavily referenced LNG pricing point in Northeast Asia. The spot index also forms the underlying benchmark for the CME Group’s JKM futures contract. Because JKM does not have a designated physical delivery point, the futures contract is a cash-settled instrument. Expressed in U.S. dollars/MMBtu.

Jones Act: The Jones Act of 1920 is a protectionist measure that addresses maritime commerce in the United States. The Act mandates that all goods shipped between U.S. ports must be transported by U.S. flagged vessels. Such vessels must be built, owned and operated by U.S. citizens, or permanent residents. As of February 2020, there were no U.S. flagged LNG vessels, which means LNG produced in the United States cannot be transported to LNG import facilities in the country, such as shipping LNG from the U.S. Gulf Coast or Cove Point in Maryland to import facilities in Boston.

Knots: Unit of speed that equals one nautical mile per hour. 

Laden Vessel: A ship with cargo. The term is often used in reference to vessel tracking and the monitoring of LNG movement across the globe. 

Liquefaction Train: A unit used to make LNG that employs equipment to shrink gas in a series of processes. Plants often have more than one. Train size at onshore base load plants has continued increasing with a standard unit typically capable of producing about 4 million metric tons/year. 

Liquefied Natural Gas (LNG): A fuel formed by chilling natural gas to minus 260 degrees Fahrenheit, changing it to a liquid that is roughly 600 times smaller than the gaseous state. It is regasified for use after transport in specialized vessels such as ships or trucking containers. 

LNG Spot Market: Generally consists of transactions for purchases made within two years or less. However, the convention is evolving as more spot deals are being executed by an increasing number of market participants. The International Group of Liquefied Natural Gas Importers defines “true spot volumes” as those delivered within three months of the transaction date. Prices in the spot market can be fixed, or tied to oil or gas. 

LongTerm LNG Contracts: These “base load” agreements are typically signed for 20-25 years with take-or-pay provisions to limit risk. They are more often linked to oil prices and are different from short-term deals structured to reflect spot values. 


MEGI (M-Type, Electronically Controlled, Gas Injection): See vessels

Milk Run: A colloquial term that refers to an LNG vessel that regularly shuttles back and forth between a designated liquefaction facility and a specific regasification terminal or region.

National Balancing Point (NBP): A pipeline trading hub in the United Kingdom that also serves as a benchmark for European natural gas flows and LNG spot trades. Expressed in pence/therm.

Netback: The effective price earned by a producer of LNG at a particular point. It is based on the market price minus charges for delivering the natural gas from one point to another market. For example, if the price of LNG in Japan were $6.00/MMBtu, and the cost to ship LNG from Sabine Pass to Japan were $2.50/MMBtu, then the netback at Sabine Pass would be $6.00-2.50 = $3.50. NGI’s various netback price calculations that are listed in LNG Insight show the maximum netback for a particular location from both Asia and Europe.


Oil Price Parity: Defines the price of oil-linked LNG, or the equivalent to that of a barrel of crude oil. While a coefficient of 0.1724 (17.2%) results in full oil parity, many current contracts range between 11-15% of oil prices.


Portfolio Player: A company with significant stakes in global natural gas supplies, such as Royal Dutch Shell plc and Total SA. These companies hold a portfolio of LNG purchase and sale contracts, including a mixture of spot market and long-term obligations. In addition, portfolio players tend to own assets all along the physical market supply chain, such as shipping, regasification and storage infrastructure. 


Q-Flex: see vessels

Q-Max: see vessels


Regasification: The process of returning LNG to its gaseous state. This stage typically occurs at onshore import terminals, where docking facilities, LNG storage and a plant are available to facilitate the process. 

Reloads: Refers to LNG that was delivered to an LNG terminal, kept in localized storage for a period of time, then reloaded onto another LNG vessel at some point in the future. This occurs primarily in Northwest Europe. Only a portion of regasification facilities around the world have reload capability. 

Repositioning Fees: See ballast bonus.


Sales Purchase Agreement (SPA): One of two dominant commercial structures employed by U.S. LNG export facilities. Under this model, the terminal operates at full service, purchasing the feed gas, liquefying and selling it. See also tolling agreement.

Ship Contracting:

  • Voyage Charter — Shipper maintains commercial and operational control of a vessel that is used to transport LNG between two or more ports. The rate can be flat or volume-dependent.

  • Time Charter — The shipper has to concede the ship to the charterer for a specified period of time. Charterer can carry out as many journeys as desired. Shipper maintains marine control, but the charterer has commercial control.

  • Contract of Affreightment (COA) — In a COA, the ship owner agrees to carry goods for the charterer, or to give the charterer the access of the whole or part of the ship’s cargo-carrying space to transfer goods for a specific journey or for a specific period of time. The risk of delayed shipment is borne by the owner.

  • Consecutive Voyages Charter — A type of mixed charter that reflects consecutive voyages between two pre-specified ports during a specific period of time.

S-Curve: Some oil-linked LNG contracts include an “S-curve,” where the price formula changes above and below certain crude oil prices. This helps mitigate the impact of high crude prices on the buyer, and low crude prices on the seller.

Slope: Used in oil-linked LNG contracts, the slope refers to the percentage of a crude oil indicator at which the LNG is priced. For example, older oil-linked contracts typically sold at a slope of 14.5% of the Japan Customs Crude price, and included a constant to cover the cost of shipping. Today, many oil-linked contracts are priced at a slope to Brent Crude oil. Slopes tend to have an upward ceiling of 17.2%, as explained in our oil price parity definition.

Small-Scale LNG: A term loosely applied to lower capacity liquefaction or more novel methods of LNG distribution such as trucking or rail transport. For example, in today’s larger wholesale market, LNG vessels are on average capable of carrying roughly 3 Bcf, while larger liquefaction terminals can produce billions of cubic feet per day.  

Steam Turbine: see vessels.


Title Transfer Facility (TTF): A pipeline trading hub in the Netherlands, commonly used as a benchmark to trade European spot LNG cargoes. Expressed in Euro/MWh.

Tolling Agreement: The other dominant commercial structure employed by U.S. LNG export facilities. In this instance, the terminal operator simply liquefies gas for those with a stake in its production units. Most U.S. facilities not owned by Cheniere Energy Inc. operate under this model. They don’t buy gas, market or deliver it. 

Transshipment: The transfer of LNG from one ship to another. 



  • DFDE/TFDE Vessels — These ships use multiple generators to provide electricity to propulsion motors. They can burn both diesel oil and gas, improving vessel efficiency compared to the steam turbine (ST) propulsion vessels that have long dominated LNG shipping. DFDE (Dual-Fuel Diesel Electric). TFDE (Tri-Fuel Diesel Electric). 

  • MEGI and XDF Vessels — These two stroke engines deliver flexible dual-fuel propulsion and are operated on fuel oils or gases. They offer improved fuel consumption. Most new long-term charters (i.e. newbuild) today are MEGI or XDF vessels. MEGI (M-type, Electronically Controlled, Gas Injection). XDF (low pressure 2-stroke engine).  

  • Steam Turbine Vessels — The traditional propulsion systems of LNG carriers. They are those propelled by fuels that generate steam for power. Usually two boilers generate sufficient steam for the main propulsion turbines and auxiliary engines. These vessels were widely used in the 19th and 20th century, but have largely been phased out by more efficient propulsion systems.

  • Q-Flex and Q-Max Vessels — These ships are among the largest LNG carriers in the world. Among other features, the Q-Flex has a cargo-carrying capacity of 210,000 cubic meters, while the Q-Max has a capacity of 266,000 cubic meters, both well above the standard 150,000 cubic-foot vessel. The ships were developed by Qatar, one of the world’s largest LNG producers.  

Vessel Rate: The fee charged for use of a ship. 

Virtual Pipeline: A reference to the supply chain used in the process of delivering natural gas to end-users absent a physical pipeline. For example, gas could be liquefied or compressed and delivered via truck. Virtual pipelines are often used in rural areas or to bypass physical pipelines during periods of maintenance or outages. 

Measurements Section

Bcf: Billion cubic feet

Bcm: Billion cubic meters

Boe: Barrels of oil equivalent

Euro/MWh: Euro per megawatt hour

Mcf: Thousand cubic feet

MMBtu: Million british thermal units

MMcf: Million cubic feet 

mmty/mtpa: One in the same. They stand for million metric tons per year and million tonnes per annum. See Tonne.

Metric ton: A unit of weight equal to 2,205 pounds, or 1,000 kilograms. 

Pence/therm: pence per therm

Tonne: The metric equivalent of a ton. Another word for metric ton.