Unlike oil and coal, natural gas, due to its physical properties, is quite difficult to transport over long distances. Therefore, gas markets have historically formed separately from each other.. Thanks to natural gas liquefaction technologies (SPG) these markets are increasingly being integrated into a single system, but the process is still incomplete and each region has its own characteristics.
There are different metric systems:
• In Russia, accounting is carried out in $ per thousand cubic meters of gas ($/Tcm)
• In Europe, accounting is carried out in euros per megawatt per hour (€/MWh)
• In the USA and Asia, prices are in $ for millions of British thermal units ($/MMBtu)
European benchmark
The key benchmark for gas prices in Europe is the supply contracts at the Dutch TTF hub. Futures are traded on the ICE and CME exchanges and quoted in Euros per megawatt per hour. To convert this value to $ per cubic meter, you must multiply it by the coefficient 10,5 and on the current EUR / USD rate.
For example, 29 September 2021 G. gas price at the Dutch TTF hub was 87,22 EUR / MWh. In dollars per thousand cubic meters, it will be equal to: 87,22*10,5*1,16 = $1 062 per thousand cubic meters of natural gas.
American benchmark
In the US, the main benchmark for gas prices is contracts for delivery at the Henry Hub.. NG reference futures are listed on the NYMEX and quoted in millions of British thermal units (MMBtu).
To transfer to $ per thousand. cubic meters, the value in MMBtu must be multiplied by the coefficient 35,8. For example, as of 29 September 2021 G., November futures NGX1 closed trading at 5,477 MMBtu. This quote is equivalent to 5,477 * 35,8 = $196 per thousand cubic meters.
Important to remember, that gas prices in the USA do not take into account the final cost to the consumer, including transportation, liquefaction costs (regasification), insurance, seller profitability. Therefore, the difference in several times from European and Asian prices should not be misleading..
Asian benchmark
Gas prices in Asia are measured in the same units, as in the USA, that is, in $ / MMBtu. The benchmark is the Platts JKM indicator, which is calculated at spot prices. The corresponding futures with the ticker JKM can be found on the CME.
Meters and Feet
When it comes to production volume, reserves or exports in Russia and Europe use billions or millions of cubic meters, while the US and UK keep track of billions of cubic feet (Bcf). One cubic foot 0,0283 cubic meters. To convert Bcf to billion cubic meters, you need to multiply them by this value.
For example, American company X produced 1000 Bcf. This value will correspond 1000 * 0,0283 = 28,3 billion cubic meters.
If the gas price is given in $ for Bcf, then translate it into $ per thousand cubic meters can be by multiplying by the coefficient 1/0,0283 = 35,3.
Lost in translation
The above ratios are indicative.. They allow you to assess the big picture and compare prices, reflected in different metric systems. For more accurate calculations, it is necessary to take into account the chemical composition of gas from a particular field and use an individual conversion factor. But this level of accuracy may only be required by narrow industry experts., while for the tasks of a private investor, the above coefficients will be quite sufficient.
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