LNG pricing is complex and varies dramatically by region, governed by three major global benchmarks: Henry Hub (North America), TTF (Europe), and JKM (Asia-Pacific). As of January 2026, spot prices range from $3.50/MMBtu in the US to $12.00-14.00/MMBtu in Asia, creating significant arbitrage opportunities.
The Three Major Pricing Benchmarks
| Benchmark | Region | Current Price | Unit | Market Type |
|---|---|---|---|---|
| Henry Hub | North America (USA) | $3.50 | $/MMBtu | Pipeline gas futures |
| TTF (Title Transfer Facility) | Europe (Netherlands) | €28.00 ($11.20) | €/MWh | Hub-based, liquid spot market |
| JKM (Japan/Korea Marker) | Asia-Pacific | $13.50 | $/MMBtu | Spot LNG assessment |
Henry Hub (HH) - USA Natural Gas Benchmark
- Location: Erath, Louisiana (pipeline hub)
- Traded on: NYMEX (New York Mercantile Exchange)
- Liquidity: Extremely high (most liquid gas contract globally)
- LNG Relevance: Base cost for US LNG exports; liquefaction adds ~$3-4/MMBtu
- Historical Range (2020-2026): $1.80-$9.20/MMBtu
TTF (Title Transfer Facility) - European Gas Benchmark
- Location: Virtual trading point in the Netherlands
- Traded on: ICE Endex
- Unit Conversion: €/MWh → $/MMBtu (1 MWh ≈ 3.412 MMBtu)
- 2022-2023 Crisis: Spiked to €200+/MWh ($70/MMBtu) post-Ukraine invasion
- 2026 Status: Normalized to pre-crisis levels with diversified LNG supply
JKM (Japan/Korea Marker) - Asia-Pacific LNG Spot Price
- Assessment: Platts (S&P Global) front-month spot DES price
- Delivery: Northeast Asia (Japan, South Korea, Taiwan, China)
- Premium Driver: Asian buyers historically pay premium for energy security
- 2026 Context: China's slowdown has reduced the "Asia premium"
LNG Contract Pricing Mechanisms
1. Oil-Indexed Pricing (Legacy Model)
Traditional long-term contracts in Asia link LNG prices to crude oil benchmarks (JCC - Japan Crude Cocktail):
Formula: LNG Price = (α × JCC) + β
- α (slope) typically 10-15% of crude oil price
- β (constant) represents fixed costs
- Example: If JCC = $80/barrel, LNG ≈ $10-12/MMBtu
Rationale: Historically, oil and gas competed for the same industrial/power markets. As gas markets matured, this linkage weakened.
2026 Status: Still used in ~30% of Asian long-term contracts, down from 70% in 2015.
2. Hub-Based Pricing (Market Model)
Prices determined by supply-demand at regional trading hubs:
- North America: Henry Hub + liquefaction fee + shipping (~$3.50 + $3 + $1.50 = $8.00 FOB)
- Europe: TTF prices reflect pipeline gas competition
- Transparency: Real-time market pricing, no oil linkage
3. Hybrid Indexation
Modern contracts blend oil-indexation with hub prices:
Example: LNG Price = 50% × JCC + 30% × JKM + 20% × Henry Hub
Reduces volatility while maintaining market responsiveness.
Spot vs. Long-Term Contracts
| Contract Type | Duration | Volume Flexibility | Price Basis | Market Share (2026) |
|---|---|---|---|---|
| Long-Term (LT) | 10-25 years | Take-or-Pay (80-95%) | Oil-indexed or hybrid | ~60% |
| Medium-Term (MT) | 2-5 years | Annual Contract Quantity | Hub-based or hybrid | ~15% |
| Spot/Short-Term | Single cargo or <1 year | Fully flexible | JKM, TTF, or bilateral | ~25% |
Take-or-Pay Obligations
Most long-term contracts include Take-or-Pay (TOP) clauses:
- Buyer must pay for minimum annual volume (e.g., 90%) even if not taken
- Provides revenue certainty for liquefaction project financing
- Typical TOP: 85-95% of Annual Contract Quantity (ACQ)
- Unused volumes may be "banked" for future use (makeup provisions)
Destination Flexibility
Modern contracts increasingly allow destination flexibility:
- Restricted (Legacy): Cargo must be delivered to specific country
- Free Destination: Buyer can redirect cargo to highest bidder
- 2026 Trend: ~70% of new contracts have destination flexibility (vs. 40% in 2020)
LNG Delivered Cost Breakdown
Total delivered cost to Asia from US Gulf Coast (example for 2026):
| Component | Cost ($/MMBtu) | Notes |
|---|---|---|
| Henry Hub Gas Price | $3.50 | Feedstock cost |
| Liquefaction Fee | $3.00 | Tolling fee (e.g., Cheniere, Freeport) |
| Shipping (US → Asia) | $1.80 | ~20-day voyage, Q-Max charter ~$100k/day |
| Regasification | $0.50 | Terminal fees in Asia |
| Total Delivered Cost | $8.80 | Competitive vs. JKM @ $13.50 |
Arbitrage Opportunity: With JKM at $13.50, traders can earn $4.70/MMBtu gross margin ($13.50 - $8.80) before financing and risk costs.
Regional Price Dynamics (2026)
North America: Shale Gas Abundance
- Henry Hub: $3.50/MMBtu (range: $2.80-$5.20 in 2025)
- Driver: Permian Basin associated gas production exceeds pipeline capacity
- Export Economics: US LNG highly competitive globally; netback pricing allows export at HH + $3-4
- Constraint: Liquefaction capacity, not feedstock
Europe: Post-Ukraine Transition
- TTF: €28/MWh (~$11.20/MMBtu)
- 2022-2023 Crisis: Russian pipeline cuts sent TTF to €200+/MWh
- 2026 Reality: Normalized via LNG imports (120 MTPA in 2025 vs. 80 pre-crisis)
- Sources: US (40%), Qatar (25%), Algeria/Nigeria/Norway (35%)
- Storage: Underground gas storage at 75% capacity entering winter 2026
Asia-Pacific: Demand Moderation
- JKM: $13.50/MMBtu (down from $18-20 in 2023-2024)
- China Slowdown: Economic growth 4.5% (2025) vs. 8% pre-pandemic; reduced LNG imports
- Japan/Korea: Stable demand; nuclear restarts in Japan reduce LNG dependence
- Southeast Asia: Growing demand (Thailand, Vietnam, Philippines) offsets Northeast decline
Price Volatility & Risk Management
Historical Volatility
TTF 2022 Crisis Example:
- January 2022: €70/MWh
- August 2022: €220/MWh (peak)
- December 2022: €120/MWh
- January 2026: €28/MWh
This 3x swing within a year demonstrates extreme market stress during supply disruptions.
Hedging Strategies
Market participants use various tools to manage price risk:
- Financial Swaps: Fix price via OTC derivatives (e.g., JKM swaps cleared via CME)
- Futures Contracts: TTF futures on ICE Endex, Henry Hub on NYMEX
- Portfolio Diversification: Blend oil-indexed and hub-based contracts
- Storage Arbitrage: Buy in summer (low demand), sell in winter (high demand)
Pricing Outlook: 2026-2030
Supply Glut Scenario (Base Case)
- New Capacity: 150 MTPA coming online 2026-2028 (Qatar North Field, US projects)
- Expected Impact: JKM falls to $10-12/MMBtu; TTF to $9-10/MMBtu
- Winner: Buyers (lower costs); Asian industrials benefit most
- Loser: High-cost producers (e.g., floating LNG projects with breakeven >$12)
Upside Risks (Tight Market)
- Triggers: Cold winter in Asia/Europe, supply outages, geopolitical disruption
- Potential Spike: JKM to $20-25/MMBtu (2024 levels)
- Probability (2026): ~25% for sustained spike >$18
Long-Term Trajectory (2030+)
- Decarbonization Pressure: Carbon pricing ($50-100/tonne CO₂) adds $1-2/MMBtu
- Competition: Renewables + batteries challenge gas in power generation
- Stabilization: Prices likely converge globally at $10-14/MMBtu as markets mature
Key Takeaways
- Three global benchmarks: Henry Hub ($3.50), TTF (€28/$11.20), JKM ($13.50)
- US LNG is cost-competitive globally due to cheap shale gas
- Long-term contracts shifting from oil-indexation to hub-based pricing
- Spot market share growing: 25% in 2026 vs. 15% in 2020
- Delivered US LNG to Asia costs ~$8.80/MMBtu, creating arbitrage vs. JKM
- 2026-2028: Supply glut expected to pressure prices downward
- Destination flexibility now in 70% of new contracts, enabling price arbitrage