No matter how high (or low) North American natural gas prices get in the coming years, their relationship to world markets for oil — and also natural gas — likely will be getting more complicated, or at least interesting.

Responding to a question on the topic during Ziff Energy Group’s North American Gas Strategies conference in Houston Monday, Cargill Energy President David Gabriel said that if/when imported gas (liquefied natural gas or LNG) gets to about 10% of North American supply it will become a price setter in the U.S. market. And the price of LNG reaching American shores will probably be more influenced by European rather than Asian markets, Gabriel said.

Going forward, Arlin Travis, Shell Trading vice president for western region gas marketing, observed that things will be getting interesting for traders and anyone else who follows the market. Internationally, LNG is priced off of oil, he said, which means Brent crude in the North Sea or a crude cocktail in the Asia-Pacific market. In the United States LNG is priced off of domestic gas prices. “What an interesting dynamic where we have three different indices that we will trade against,” he said.

Also notable, Travis said, is where the bulk of global gas reserves lie: Russia and the Middle East. Gas in the Middle East, by virtue of its location, has more destination flexibility and can go to the western or eastern United States at approximately equal transportation costs, which will make the Middle East the swing supplier.

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