Brentrification: Modifying the Brent Crude Oil Model to Create a Global LNG Pricing Benchmark with Standardized Contract Terms
Published 14 April 2020
Cleaner burning natural gas is gaining global energy market share and will likely become the fossil fuel bridge to a renewable energy future. To satisfy growing gas demand in regions beyond the reach of producer pipelines, increasing volumes are being transported as liquefied natural gas (LNG) aboard super-cooled tankers. Worldwide LNG processing capacity is expanding rapidly, yet the marketplace where the physical cargoes trade reflects an earlier time.
The lack of a transparent future LNG price discovery mechanism and standardized contract terms for trading cargoes is a growing problem. When facing similar challenges 30 years-ago, the oil industry responded by launching benchmark contracts for Brent crude cargo and futures trading.
This paper will explain why Brentrification is the solution to streamline LNG trade and establish highly liquid and transparent global natural gas benchmark contracts. Details of the futures, physical forward and short-dated swap instruments used to generate the benchmark will be presented, and the patented GPD process which seamlessly links the standardized contracts will be introduced. Footnotes omitted from this introduction.
This paper will be part of the OGEL Special Issue on "Changing LNG Markets and Contracts". More information here www.ogel.org/news.asp?key=617