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Natural Gas Industry Terms & Definitions

Updated: 10.20.2021

Basis Price

In the simplest terms, a basis price is the difference between any two pricing points. For the North American natural gas market, a basis price is typically the difference between a physical trading location and either the cash market or prompt futures price of gas at the Henry Hub in Erath, Louisiana, although it could be between any two physical locations. For example, gas at the Florida Citygate tends to trade at a basis differential to the Florida Zone 3 index. If gas at the Chicago Citygate is trading at $5.00 per MMbtu, and gas at the Henry Hub for the same delivery period is trading at $4.25 per MMBtu, then the Chicago Citygate would have a positive basis price or differential of $0.75 per MMbtu.


A trading period that includes the last three (3) trading days of a particular month, where a trading day is defined as any day the Intercontinental Exchange (ICE) is trading physical natural gas.

Bidweek (First of Month) Index

Represents the price of gas that will flow every calendar day during the forthcoming calendar month. Forward contracts settle to bidweek/FoM indices.

Cushion Gas

Gas in storage that cannot be withdrawn for use. Cushion gas provides pressure to extract the working gas which can be used.

Daily Index

Represents the market value of natural gas in the wholesale market for a particular location, for the next calendar day, or calendar days, if the delivery period includes the weekend and/or a holiday.


A unit of energy that equals ten therms. There are 0.99933122026994 Dth per MMBtu but this figure can vary depending on the liquids content of the natural gas.

Dry Gas

Natural gas with a low concentration of natural gas liquids.

Fixed Price

Fixed price is just the opposite of basis price. It is the all-inclusive price.

Forward Curve

Forward curves represent the market’s best estimate for what the eventual spot market price will be for a particular month at a particular location, based on currently known supply and demand fundamentals. However, those supply and demand fundamentals are constantly changing, especially in a volatile market like natural gas, so the current forward price for a particular location and month will likely be different from its actual final spot market price, especially for months farther out on the curve.


An unconventional production technique, fracking is the process of injecting liquid at high pressure into subterranean rocks, boreholes, etc. so as to force open existing fissures and extract oil or gas


The process of separating mixed natural gas liquids streams into individual liquids products such as ethane, propane, normal butane, isobutane and natural gasoline.


Futures contracts are standardized financial instruments that trade on an exchange, such as the New York Mercantile Exchange or the Intercontinental Exchange (ICE). The most common U.S natural gas futures contract is the NYMEX Henry Hub contract with a physical trading point at Erath, LA. The value of futures contracts are settled and marked-to-market each day, and require the holder to place collateral commensurate with the value of their underlying futures position.

Gross Withdrawals

The EIA defines gross withdrawals as follows: “Full well stream volume from both oil and gas wells, including all natural gas plant liquids and non-hydrocarbon gases after oil, lease condensate, and water have been removed. Also includes production delivered as royalty payments and production used as fuel on the lease.”

Horizontal Drilling

An unconventional production technique, horizontal drilling solves the challenge of maximizing extracted hydrocarbons from a thin layer of hydrocarbon-rich source rock or “pay”. Conventional drilling techniques would pass the drill bit straight down through these thin layers such that very little source rock would be targeted; however, horizontal drilling allows drillers to drill down vertically to a layer of source rock and then drill horizontally for thousands of feet providing much greater exposure to the targeted resource.

Intercontinental Exchange (ICE)

In the United States, the Intercontinental Exchange (ICE) operates as both a financial futures exchange, as well as a physical exchange where the market can buy and sell gas at numerous physical delivery points. We estimate that anywhere between 70%-90% of all physical natural gas in the United States trades on the ICE Exchange during any particular day.


The process of converting natural gas into a liquid, usually for the purpose of transportation aboard ships or trucks.


1 Million British Thermal Units – A thermal unit of measurement for Natural Gas. Thermal units are distinct from pure volumetric units in that they assume a certain energy content of the gas. Gas that is more liquids-rich, may have a higher Btu content within the same volume as dry gas.


A virtual trading location for the sale and purchase and exchange of UK natural gas, and the pricing and delivery point for the ICE Futures Europe (IntercontinentalExchange) natural gas futures contract. It is similar in concept to the Henry Hub in the United States, except that it isn’t a physical location. Rig Count A commonly cited oil and gas industry statistic which refers to the number of drilling rigs operating in a specified area. The primary source of rig count data for North America is Baker Hughes.


Swaps are financial derivative positions where one party agrees to exchange one series of payments for another. Typically, this will be a swap of fixed-for-floating obligations, or vice-versa. Unlike futures contracts, which trade on an exchange, swap contracts tend to trade over the counter.

Weekly Index

Represents the market value of natural gas in the wholesale market for a particular location, as a weekly simple average of the indexes published in our Daily series covering the listed survey dates.

Wet Gas

Natural gas with a high concentration of natural gas liquids. Wet gas is often produced from wells in more liquids-rich shale plays such as the Utica Shale in Ohio.

Working Gas in Storage

Gas in storage that can be withdrawn for use. A certain amount of stored gas must remain in the storage chamber to provide enough pressure to extract the working gas.

Unconventional Production

Often used interchangeably with “shale production”, unconventional production actually refers to using non-traditional production methods to target a resource play. Unconventional production methods include horizontal drilling and fracking.

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