Gas Market Overview

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Gas pricing mechanisms around the world are diverse: they include exchange trading (competitive pricing, such as on TTF in Europe), oil-indexation (linking gas prices to oil prices), regulated prices, and direct contracts where the price is determined by the balance of supply and demand affecting global benchmarks, including gas prices and the cost of alternative fuels (gas, oil, coal).

Natural gas pricing, including Russian gas, is formed based on current global gas and oil prices.

There are two main international gas pricing hubs: Henry Hub in the USA and the Dutch hub - TTF Gas.

1. American market (Henry Hub):

- Current price: correction on Wednesday to $3.4 per million BTU (British Thermal Units).

2. European market (TTF):

- Current price: increase on Wednesday to $371 per 1000 cubic meters.

1. Henry Hub - American gas. This is a gas distribution hub located in Louisiana, USA. This benchmark plays a leading role in forming natural gas prices in the USA, which are traded on the New York Stock Exchange. The unit of measurement is British Thermal Units (BTU). To convert the price into an equivalent of 1000 cubic meters, a conversion factor of 35.8 is used. It is important to note that this price reflects the raw material cost without accounting for liquefaction, transportation, and regasification costs. Consequently, the end consumer in the USA pays significantly more for the gas.

2. TTF - European gas. This is the main benchmark for gas prices in Europe. The name stands for Title Transfer Facility - a virtual gas trading platform.

Prices for Russian gas, especially for export markets, have traditionally been heavily dependent on oil-indexation, but now they are more oriented towards spot markets and competitive mechanisms, although the link to energy prices remains.

Reviewed by Alexey Grishchenko, Doctor of Economics, Professor at the Department of Operational and Sectoral Management of the Faculty "Higher School of Management" at the Financial University under the Government of the Russian Federation.