LNG has been part of the global natural gas market for many years but was somewhat disconnected from the United States natural gas market and its benchmark pricing point Henry Hub. This is primarily because, for a very long time, the LNG market had been one where a finite number of buyers and sellers operated in a pretty tight market where contract prices were tied to an oil-index price. It really was a market where buyers were more concerned about energy security than price.
Over the last few years, this has begun to change in earnest as the LNG market has expanded. Buyers are no longer looking to lock in long-term deals tied to oil indexes. They want short-term deals tied to the prevailing natural gas price/forward curve. With more LNG suppliers, buyers are getting these type of deals done. This is making the LNG market much more of a global arbitrage market where the cost of the natural gas in a domestic market, the cost of liquefication, and the cost of transportation are the primary components of the final delivered price. This makes the Australian LNG market more conducive to Asian buyers given the geography and Europe and South America more conducive to USA LNG exports, though the USA is also a swing producer since it can now ship to Asia using the Panama Canal. UK/Europe is somewhat the swing buyer since it is connected to Russia/Asia via pipelines and the UK LNG price is much less correlated with Henry Hub.
