Gas Market Overview

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Global gas prices, including those for Russian gas, are determined based on international gas and oil product prices.

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

1. American Market (Henry Hub):

- Current price: Monday correction to $3 per million BTU (British Thermal Units).

2. European Market (TTF):

- Current price: Increase to $381 per 1,000 cubic meters.

1. Henry Hub is the American gas benchmark. It is essentially a gas distribution hub located in Louisiana. This benchmark plays a leading role in setting natural gas prices in the US, which are traded on the New York Mercantile Exchange. The unit of measurement is British Thermal Units (BTU). To convert the price into an equivalent of 1,000 cubic meters, a factor of 35.8 is used. It is important to note that this price reflects the raw material cost only, excluding liquefaction, transportation, and regasification costs. Consequently, end consumers in the US pay significantly more for gas.

2. TTF is the main European gas benchmark. The name stands for Title Transfer Facility, which is a virtual gas trading platform.

It is worth noting that gas pricing mechanisms around the world 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, which affects 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 oriented towards spot markets and competitive mechanisms, although the link to energy prices remains.

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