by Eurolng.com Staff
Long-term LNG contracts: US, Qatar and hybrid pricing formulas
How pricing works for supplies into Europe
European companies are actively signing long-term LNG contracts to reduce exposure to the spot market and TTF volatility. The two main sources — the United States and Qatar — use fundamentally different pricing models. Hybrid formulas are growing in between. Below is an overview of key terms, formulas and the trade-offs involved.
1. US contracts: Henry Hub indexation
The classic and most common formula for US LNG is:
FOB price ≈ 115–120% × Henry Hub + liquefaction fee ($2.0–3.5 / MMBtu)
- The 115% coefficient covers liquefaction losses.
- Liquefaction fees in recent deals often sit at $2.8–3.2 / MMBtu.
- 2026 example: Venture Global – Vitol: 119% HH + $2.80–3.20 / MMBtu (FOB).
Basis is usually FOB (buyer arranges shipping), tenure 10–20 years, destination flexibility is high. Take-or-pay and volume flexibility of ±10–15% are standard.
2. Qatar contracts: oil-linked model
The traditional formula is:
Price ≈ Slope × Brent + constant
- Slope is typically 10–14% (often 11–13%).
- Basis is more often DES (delivery to a European port).
- Tenors are long — 15–27 years.
In contracts with European buyers (Shell, TotalEnergies, Eni and others) a hybrid TTF element is appearing more often, but the oil base remains dominant.
3. US vs Qatar comparison
| Parameter | United States | Qatar |
|---|---|---|
| Formula | 115–120% HH + fee | Slope × Brent (10–14%) |
| Basis | More often FOB | More often DES |
| Tenure | 10–20 years | 15–27 years |
| Destination | High flexibility | Traditionally tighter |
| Hedge vs TTF | Strong | Weak (unless hybrid) |
| Price driver | US gas (Henry Hub) | Oil (Brent) |
US contracts give the European buyer a natural hedge against TTF spikes. Qatari contracts provide long, secure volume and oil indexation, which historically offered more predictability for the seller.
4. Hybrid formulas
Hybrids emerged as a compromise: the seller protects margin, the buyer gains partial linkage to its own market.
Main types:
- Oil + gas hub: α × Brent + β × TTF + constant (typical for Qatar → Europe).
- HH + European hub: a share of volume or price on Henry Hub, the rest on TTF.
- Option / switch: right to switch the formula or use replacement cost linked to a hub.
- Volume split: part of the contract on one formula, part on another.
What to check in a hybrid contract:
- index weights and whether they can be revised;
- floor / ceiling provisions;
- averaging period;
- who holds the switching right;
- review clause (after 5–7 years).
5. Conclusion for the European buyer
An optimal portfolio today usually combines both sources:
- US HH contracts — hedge against high TTF and cargo destination flexibility;
- Qatar oil-linked (or hybrid) — long baseload volume and diversification of price risk;
- Hybrid formulas — a tool to fine-tune risk between seller and buyer.
A pure oil-linked contract without a gas component fits the European market less and less well. Henry Hub remains a powerful tool against regional price shocks, while hybrids make long-term deals acceptable to both sides over a 15–20 year horizon.