Natural gas index

Since the introduction of natural gas in the 1980s, the price of natural gas has been linked to oil prices. Consumers traditionally used oil for heating purposes, and gas therefore had to be priced at or below the replacement value of oil in order for gas to become an attractive alternative fuel.

Steadily growing natural gas consumption throughout the 1980s and 1990s accentuated the need for a pricing mechanism independent of oil prices. As gas markets were liberalized in the UK and the rest of Europe, market places started to emerge involving traditional market pricing based on the supply and demand balance for gas.

Consequently, the Nordic gas exchange, Nord Pool Gas, was established in 2007. Trading activity has grown significantly ever since, and today more than 10 % of the domestic demand is traded at the exchange. The closing prices at the exchange reflect the market price day by day in line with the power prices established at the power exchange Nord Pool Spot.

The daily price at Nord Pool Gas is based on a weighted average of the daily trades conducted at the exchange. It is fully transparent and reflects the real market value of gas on any given day. Therefore, the Nord Pool Gas closing price is a natural price reference in any supply contract involving gas deliveries in the Nordics.

Calculate your price here.

Advantages related to Nord Pool Gas price indexation

• A natural gas index gives you a unique opportunity to follow the gas market closely without having to know all market details.
• A natural gas index enables you to compare supplier prices.
• A natural gas index outlines all payment details, even the suppliers mark-up.
• A natural gas index ensures that you are always paying market reflective prices for your gas.
• A natural gas index makes you less dependent on global market events in the e.g. USA or China.
• A natural gas index is not dependent on the US dollar exchange rate.