CME Group and Cheniere to jointly develop LNG futures contract

CME Group has signed a deal with Cheniere Energy to develop an LNG futures contract with physical delivery to the Sabine Pass terminal on the US Gulf Coast.

The agreement is expected to enable the creation of a new LNG risk management tool for producers, consumers and traders.

To be developed by CME Group, the proposed physically deliverable LNG futures contract is aimed at helping the industry in managing price risk more effectively and efficiently.

CME Group Energy global head Peter Keavey said: “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.

“This agreement with Cheniere is significant because it will be the foundation for developing a new LNG risk management tool for producers, consumers and traders around the globe, while further cementing the role of Henry Hub Natural Gas futures as the global gas pricing benchmark.”

The company highlighted that rise in exports of US Gulf Coast LNG to Asia, South America and Europe requires producers, processors and end users to limit their price risk.

Cheniere is currently delivering Henry Hub-indexed natural gas to the global markets through the Sabine Pass liquefaction facility.

Exports from the terminal began in February 2016.

Cheniere operates four trains with a production capacity of 18 million metric tonnes per year (MMTA) of LNG.

The capacity will be scaled up to 27MMTA through the addition of two trains, the first of which is under construction.

The company is also constructing a separate LNG export facility outside of Corpus Christi, Texas.

The liquefaction project will involve five trains with an expected LNG aggregate production capacity of up to 22.5MMTA.