Market (hub)-based gas prices have been dominant in North America for the past quarter century. The UK has had a similar mechanism for nearly 20 years and, since 2008, major continental European gas markets have made a transition away from oil-linked to market prices. But in all of the major gas markets of these regions, prices were related to (domestic or imported) pipeline gas, with LNG as a marginal source of supply. The exception is Spain where - due to the influence of LNG and lack of pipeline links to the rest of Europe - oil-related gas prices remain dominant, largely due to Asian LNG prices remaining tied to the traditional JCC crude oil-related formula. Because two-thirds to three-quarters of global LNG cargos are delivered to Asian markets, in particular Japan, Korea, and Taiwan, changes in pricing in those markets will be crucial to the overall future pricing of LNG. Long-term Asian LNG contracts have traditionally been based on JCC (colloquially known as the Japan Crude Cocktail) pricing, according to which the LNG price is based on, and indexed to, an average of the prices of crude oils imported into Japan.
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