Global Gas Market: Analysis of Current Situation

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Global gas pricing mechanisms, including those for Russian gas, are shaped by international gas and oil product prices.

World gas markets have their key pricing benchmarks. There are several reference indices, two of which are primary:

1. American Market (Henry Hub):

- Current price: Monday correction to $3.5 per million BTU (British Thermal Units).

2. European Market (TTF):

- Current price: increase to $424 per 1,000 cubic meters.

1. Henry Hub - American gas. This is the Henry Hub gas distribution hub in Louisiana. This benchmark plays a leading role in setting natural gas prices in the US, traded on the New York Mercantile Exchange. The unit of measurement is British Thermal Units (BTU). To convert the price to an equivalent of 1,000 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, consumers in the US pay significantly more for gas.

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

It is worth noting that gas pricing mechanisms worldwide are diverse: they include exchange trading (competitive pricing, as on TTF in Europe), oil-indexation (linking gas prices to oil prices), regulated prices, and direct contracts where prices are determined by the balance of supply and demand, influencing global benchmarks including gas prices and the cost of alternative fuels (gas, oil, coal).

Russian gas prices, particularly for export markets, have traditionally been heavily dependent on oil-indexation, but are now more aligned with spot markets and competitive mechanisms, although the link to energy prices remains.

This overview was presented by Alexei Grishchenko, Doctor of Economics, Professor at the Department of Operational and Sectoral Management of the Faculty of "Higher School of Management" at the Financial University under the Government of the Russian Federation.