Physical prices vs. Financial Settlements for natural gas.
In Lesson 6, you looked-up some cash prices at various hubs in the US using the link for Natural Gas Intelligence. Using those same cash hubs, compare the most recent prices to the NYMEX Settlement price for natural gas for June, 2014.
Use the CME website to find the most recent Settlement price. Calculate the difference as follows: Cash price minus NYMEX.
These results represent what is known as the "actual Basis" relationship between the NYMEX Henry Hub contract delivery point for natural gas in south Louisiana and other physical delivery points in the US.
The natural gas is processed due to it contains many impurities and water. There are some specifications natural gas delivered by or on behalf of Shipper to Natural at any Receipt Point, and natural gas delivered by Natural to or for the account of Shipper at any Delivery Point, shall be of pipeline quality such as below.
- % of O2: The parties should make various efforts to reduce the oxygen level in the gas. The oxygen level should not exceed to ten parts per million (10 ppm) by volume of uncombined oxygen.
- Water Vapor:The gas shall be free of water and hydrocarbons in liquid form at the temperature and pressure at which the gas is delivered. In addition, the gas shallnot contain any hydrocarbons which might condense to free liquids in the pipeline under normal pipeline conditions and shall in no event contain water vapor in excess of seven (7) pounds per one million (1,000,000) cubic feet.
- H2S:The total sulfur content, including mercaptans and hydrogen sulfide, shall not exceed one-half (1/2) grain per one hundred (100) cubic feet of gas.
- % of Nitrogen: The gas shall have a combined composition of total inert gases (principally nitrogen and carbon dioxide) of not more than four (4) mole percent.
Hydrocarbon dew point: Natural will include in such posting the anticipated duration of the limitation. Points with an actual flow of 100 Dth/d or less will be exempt from the limitation in any such posting. Natural will provide as much prior notice of any such limitation as reasonably practicable and will attempt to provide this prior notice in the posting at least ten (10) Days before the beginning of the month in which the limitation is to be effective. If prior notice by posting at least ten (10) Days before the beginning of the month is not practicable, Natural will explain the reason in the posting why it was unable to give such prior notice.
Calculation of daily natural gas pipeline transportation rates per MMBtu
From Midcontinent to Market
| Monthly reservation Fees |
9.18 |
|
13.72 |
|
|
|
|
| Days |
30.4 |
|
|
|
|
|
|
| Daily rate |
|
|
|
| per MMBtu |
0.302 |
|
|
|
|
|
|
| Commodity |
0.0146 |
|
|
|
|
|
|
| Total rate |
$ 0.317 |
|
|
