CME Group, Cheniere to Develop LNG Futures Contract

CME Group, which operates the benchmark NYMEX oil and gas futures market, and leading US LNG exporter Cheniere Energy, said July 10 they will partner to develop the global gas market’s first physically-deliverable LNG futures contract.

The contract will be based on physical deliveries at Cheniere’s Sabine Pass terminal in Louisiana, where four trains are operating, a fifth is under construction and a sixth is in the permitting stages. At full build-out, Sabine Pass will offer 27mn metric tons/year of liquefaction capacity.

“In recent years, the shale revolution has unlocked abundant supplies of natural gas here in the US, creating new risks and opportunities for producers, processors, consumers and traders,” said Peter Keavey, CME Group’s global head of energy. “Through its Sabine Pass liquefaction facility, Cheniere is delivering Henry Hub-indexed natural gas to the world in the form of LNG.”

The agreement with Cheniere, Keavey said, will lay the foundation for developing new risk management tools for LNG producers, consumers and traders and further cement the role of Henry Hub gas futures as the global pricing benchmark.

As US Gulf Coast LNG is increasingly exported to Asia, South America and Europe, there will be an increased need for producers, processors and end users to hedge their price risk, CME Group said. Its suite of natural gas futures and options are already helping customers manage risk in an increasingly interconnected global gas market, and the addition of a physically-deliverable LNG futures is expected to help the industry manage those risks more effectively and efficiently.