METHODOLOGY AND SPECIFICATIONS GUIDE
JKM FORWARD CURVE AND
LNG GULF COAST MARKER FORWARD CURVE
Latest update: April 2017
JKM FORWARD CURVE
ASSUMPTIONS
NBP plays a fundamental role for the LNG market and it is used as price driver for JKM. However, we are aware of the possible market
evolutions and key roles that other markets such as Henry Hub might play.
In an undersupplied market regime, the upper bound for an hypothetical JKM curve would approach the crude (Brent/JCC) forward curve
rescaled by a factor of 0.14 (which is the ratio of the crude above which an industrial plant would switch to crude).
Starting from the second half of 2014 we have been in a oversupply market regime (which is expected up to 2025). We keep monitoring
any market regime change and we would adapt the model consequently.
SEASONALITY
JKM has a seasonality similar but not identical to NBP’s. In fact, JKM’s peaks in Winter are relatively higher than NBP and their troughs in
Summer are less deep. This can be quantified by using the Platts historical daily assessments of JKM front month and the spread of this
contract relative to the equivalent of NBP.
JKMvsNBPm = median(JKMd/m − NBPd/m) where d/m represents daily editorial assessments of contract relative to month-m
MODELING
We assume that this average historical spread is also present on the months of the forward curves JKM vs NBP. Therefore, the historical
average spread is added to the NBP forward curve to derive the JKM forward curve. The latter is finally rescaled so that it remains
consistent with the Platts editorial assessments of Mo01, 02, 03 and the two quarters.
JKMt = NBPt + JKMvsNBPt (for t = 4,5,…,24)
The model includes awareness that JKM and NBP have different front moths and expiry days.
JKM EXPIRY AND FRONT MONTH
The JKM forward curve expires on 15th of each month.
Valuation date
From 1st to 15th of month M
From 16th to end of month M
Front month
Month M+2
Month M+3
JKM FORWARD CURVE AND LNG GULF COAST MARKER FORWARD CURVE: APRIL 2017
METHODOLOGY AND SPECIFICATIONS GUIDE
LNG GULF COAST MARKER FORWARD CURVE
NET-BACK MODEL
The LNG Gulf Coast Marker Quantitative Forward Curve is computed as highest Net-Back value (LNG minus freight costs) of the Gas
forward curves below versus their relative Freight fwd curves.
Freight fwd curve
JKM Sabine Jap freight swap
JKM Sabine Jap Suez freight swap
JKM Sabine Jap cape freight swap
NBP Sabine NEW freight swap
TTF Sabine NEW freight swap
Gas fwd curve
JKM Swap
JKM Swap
JKM Swap
NBP Swap
TTF Swap
Route
USGC-Jap (Pacific)
USGC-Jap (Suez)
USGC-Jap (Cape)
USGC-NWE (Atlantic)
USGC-NWE (Atlantic)
FREIGHT MODEL
Each freight forward curve is modeled assuming the following constants:
Constant
Size of spot vessel
Laden Boil off (%/day)
Ballast Boil off (%/day)
Atlantic day rate
at port days (days)
Fillable volume
value
165,000
0.0012
0.0009
45,000
3
98.5%
Explanation
Vessel capacity
Volume of LNG boil-off on laden leg of voyage
Volume of LNG boil-off on ballast leg of voyage
Hire-rate for a vessel in the Atlantic basin
Number of days vessel will spend loading and discharging at ports
The percentage the vessel will load
The following parameters depends on the route:
Traveling days
Canal costs
Sabine Japan
23
0.18
Sabine Jap via Suez
36
0.24
Sabine Jap via Cape
38
0
Sabine NWE
12
0
Finally the freight has got a dependency on the costs of the Bunker FO 380 Houston forward curve.
GAS FORWARD CURVES
Platts editorial team assesses a NBP and TTF forward curve on a daily base. Moreover, Platts also publishes a JKM Swap quantitative
forward curve. These curves are used as input to compute the highest net back forward value.
LNG GCM EXPIRY AND FRONT MONTH
The LNG GCM forward curve expiries on the last business day of the month. The published front month corresponds to the month
following the one of the valuation date.
©2017 by S&P Global Platts, a division of S&P Global Inc. All rights reserved.
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METHODOLOGY AND SPECIFICATIONS GUIDE
JKM FORWARD CURVE AND LNG GULF COAST MARKER FORWARD CURVE: APRIL 2017
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