April 15, 2024

Market shifting value of Brent LNG contracts

4 min

Subscribe to our blog

"Contract value is being squeezed by falling gas & rising Brent prices"

As gas prices have declined across the last 18 months, market focus on the value of flexibility in LNG contracts has increased.

We published an article in Feb 2024 setting out drivers behind this increase in LNG market focus on flex value. In that article we showed analysis of value shifts in a US LNG export contract. In today’s article we show analysis of a Brent indexed LNG Supply & Purchase Agreement (SPA).

Relative price moves impacting Brent SPA value

Brent indexed SPAs represent a substantial portion of global LNG supply contracts.  These contracts have a strike price indexed to Brent, but deliver physical cargoes which are valued against LNG price markers (e.g. JKM).

Brent SPA value has been impacted by a significant move in Brent vs gas prices since early 2023:

  • JKM prices have declined around 65%
  • Brent prices have been more range bound, but have rallied moderately from 78 to 90 $/bbl.

These market moves have caused a material decline in the intrinsic value of Brent SPAs. We illustrate this in Chart 1 which shows the move lower in Calendar 2025 JKM forward prices minus a 12% Brent slope contract strike price since Jan 2023.

Chart 1: Cal 2025 JKM minus Brent slope (Jan 2023 – Apr 2024)

Source: ICE, CME, Timera Energy

The chart shows how the large premium of JKM over Brent slope that opened up across the energy crisis has been materially eroded as gas prices have declined since the start of last year.

Case study Brent SPA illustrates value shifts

Let’s consider a case study contract from the perspective of a buyer of a Brent indexed SPA delivered into North East Asia (a very common exposure in Pacific Basin LNG portfolios). The contract owner is long DES JKTC (physical delivered cargos, price proxied by JKM) and short Brent (against the contract index).

The impact of the shift in JKM & Brent market prices on this case study contract is shown in Chart 1.

Chart 1: Case study 2025 Brent SPA value breakdown (Jan 2023 forward curves vs Apr 2024)

Source: Timera Energy LNG Bridge model

A summary of the analysis behind these charts:

  • Case study contract is a 12% Brent indexed SPA purchase delivered into NE Asian spot market (JKM marker) with 12 cargoes per year, 0.4 tbtu volume flex, 2 cargo/yr DQT flex.
  • Analysis generated from our LNG Bridge portfolio model (used by a broad range of large LNG companies for valuation of LNG deals & portfolios)
  • Left hand panel is based on market forward curves (JKM, Brent) from Jan 2023; right hand panel based on curves from Apr 2024.

Key takeaways on Brent contract value shifts

We have analysed value shifts in Brent indexed SPAs for multiple clients across (i) price reviews (ii) contract negotiations & (iii) index basket strategy as market pricing dynamics have shifted. There are several important takeaways from the analysis we show in Chart 1 from our LNG Bridge stochastic portfolio valuation model.

  • SPA intrinsic value is down ~60% since Jan 2023, primarily driven by lower JKM prices but with some contribution from Brent rally
  • In terms of individual flex option buckets:
    • Volume flex has fallen with intrinsic value e.g. lower JKM prices mean less value in maximising contract volume take
    • Cancellation flex option is still well ‘out of the money’ in 2025 on an intrinsic basis (although extrinsic value has increased as gas prices have declined)
  • There is a significant increase (116%) in extrinsic value as the contract is now less ‘in the money’ i.e. current market prices have fallen to levels closer to the contract strike price.

The Brent SPA case study shows how the extrinsic value of flexibility is increasing in importance in a post-crisis gas market. It also illustrates the importance of shifts in gas & oil market fundamentals in driving LNG contract & portfolio value.

To find out more about the current market state of play, shifting pricing dynamics & LNG portfolio value impact, join us for our webinar on Thursday (see details below).

Join our LNG webinar “Focus on flex”

Topic: “Focus on flex” – how changing market dynamics are shifting LNG contract flex value

Time & access: Thurs 18th Apr 09:00 BST (10:00 CET, 16:00 SGT)

Registration: Pre-registration required (access is free); webinar registration link – register here


  1. How global supply & demand shifts are driving the recent fall in gas & LNG prices
  2. Impact of the changing conditions on LNG contract flexibility value
  3. Drivers of contract flex value, including intrinsic vs extrinsic value
  4. Demonstrating how flex value is shifting via (i) US contract case study (ii) Brent indexed Asia DES sale

Any Qs please contact david.duncan@timera-energy.com


Timera will also be attending Flame 2024 in Amsterdam, on 23-25 April.

Market shifting value of Brent LNG contracts