This odd quip came from Gazprom Management Committee Chairman Alexey Miller. Following a recent meeting with the president of China National Petroleum Corporation, where the two discussed gas sales to CNPC.
“The price of gas to be supplied to China won’t be linked to the US spot market prices,” Miller told the press.
On surface, this seems obvious. Why would Russian gas going to China be priced to the U.S. spot market? Gas prices in Europe and Asia are double, triple or even quadruple the sub-$4/Mcf rates prevailing in America.
But Gazprom making such a comment suggests some observers were expecting Henry Hub to be used as a benchmark for the CNPC sales deal. Perhaps even that CNPC itself had been pushing for an indexing to U.S. prices.
This just shows how global imbalances in commodities prices don’t last. You can bet that all gas buyers in Asia paying $14/Mcf are thinking a lot about America’s cheap gas supplies. Maybe there isn’t a way to get U.S. gas to China now. But if groups like Gazprom don’t watch themselves, inventive buyers and sellers will eventually find a way to put themselves together.
We’re already seeing a surge in U.S. LNG plans. You can bet there’s going to be a lot more thought over how to arbitrage American gas trading at at 65% below global prices.
Here’s to pushing for a good price,