This is the first in­stall­ment of a two-part se­ries ex­am­in­ing nat­ur­al gas prices. In this seg­ment, we fo­cus on the in­ter­na­tion­al pric­ing bench­marks for nat­ur­al gas across three key mar­kets: the Nether­lands Ti­tle Trans­fer Fa­cil­i­ty (TTF), the US Hen­ry Hub and the Japan/Ko­rea Mark­er (JKM). These mar­kets play a crit­i­cal role in de­ter­min­ing nat­ur­al gas prices glob­al­ly and are par­tic­u­lar­ly rel­e­vant to T&T.

In the past the price for LNG be­ing ex­port­ed from T&T was linked to Hen­ry Hub prices. How­ev­er the re­vised pric­ing for­mu­la for T&T LNG ex­ports is now based on one third JKM, one third TTF and one third the Brent oil price bench­mark.

The US Hen­ry Hub, lo­cat­ed in Louisiana, is the most wide­ly recog­nised nat­ur­al gas pric­ing point in North Amer­i­ca.

This is the price that of­ten gets quot­ed on news chan­nels as the “nat­ur­al gas price” though in re­al­i­ty, nat­ur­al gas prices vary sig­nif­i­cant­ly based on both ge­og­ra­phy and on the con­tract un­der which the gas is sold. The Nether­lands Ti­tle Trans­fer Fa­cil­i­ty (TTF) is a vir­tu­al trad­ing hub for nat­ur­al gas in the Nether­lands and serves as the pri­ma­ry bench­mark for gas prices in Eu­rope. Mean­while, the Japan/Ko­rea Mark­er (JKM) is a key ref­er­ence price for liq­ue­fied nat­ur­al gas (LNG) in Asia.

Giv­en that al­most half of T&T’s nat­ur­al gas is ex­port­ed as LNG, vari­a­tions in the prices of gas at the Eu­ro­pean and Asian hubs (as well as vari­a­tions in oil prices) will have a big im­pact on the price of nat­ur­al gas at the well­head in T&T. This im­pacts the rev­enue col­lect­ed by the Gov­ern­ment.

When the At­lantic fa­cil­i­ty was first con­struct­ed, the US Hen­ry Hub prices were typ­i­cal­ly among the high­est in the world. How­ev­er, the ad­vent of shale gas and the sub­se­quent surge in do­mes­tic nat­ur­al gas pro­duc­tion in the US led to a de­cline in Hen­ry Hub prices, which have since been low­er than both TTF and JKM prices.

The Russ­ian in­va­sion of Ukraine in 2022 caused sig­nif­i­cant dis­rup­tions in glob­al en­er­gy mar­kets, par­tic­u­lar­ly in Eu­rope. As Rus­sia is a ma­jor sup­pli­er of nat­ur­al gas to Eu­rope, sanc­tions and sup­ply con­straints led to sharp price in­creas­es in Eu­rope and al­so for the im­porters of LNG in­to East and South Asia, who are now com­pet­ing with Eu­rope for LNG im­ports.

The cri­sis height­ened de­mand for nat­ur­al gas and spurred a search for al­ter­na­tive sources, par­tic­u­lar­ly LNG. While the US al­so ex­pe­ri­enced price in­creas­es, the im­pact was less se­vere com­pared to Eu­rope, as the con­flict did not di­rect­ly af­fect US en­er­gy sup­plies. For­tu­nate­ly for T&T, be­cause of the rene­go­ti­a­tion of the At­lantic con­tracts, some of the LNG ex­port prices were linked to Eu­ro­pean and Asian, rather than the US bench­mark. This re­sult­ed in a sig­nif­i­cant in­crease in rev­enue.

Al­though prices be­gan to de­cline in 2023, they re­main el­e­vat­ed com­pared to pre-cri­sis lev­els. Con­se­quent­ly, T&T’s LNG ex­port gas prices have al­so re­mained high dur­ing this pe­ri­od, re­flect­ing the for­mu­la’s re­liance on the JKM and SF in­ter­na­tion­al bench­marks.

In the next in­stall­ment, we will delve deep­er in­to the do­mes­tic nat­ur­al gas pric­ing struc­ture in T&T and its im­pli­ca­tions for the lo­cal econ­o­my.