A summary of all the costs associated with bringing one unit of oil/gas to the marketplace, and all of the revenues from the sale of all the products generated from that same unit.

The netback is calculated by taking all of the revenues from the oil, less all costs associated with getting the oil to a market. These costs can include, but are not limited to, importing, transportation, production and refining costs, and royalty fees.

Netbacks are calculated as follows (Platts):

Value of Volume for Sale minus Transport Costs equals Netback Price.

Value of Volume for Sale = (Gas Sales Price x Volume for Sale) / Volume for Sale

The value of the volume for sale is calculated based on the gas sales price in the destination market multiplied by the gas volume that arrives in the destination market – minus the volume that was used for fuel, or lost, along the way. The result is divided by the volume for sale to obtain a value in US dollars per MMBtu for the delivered gas.

Transport Costs = [(Terminal Costs x Unloaded Volume) + (Total Transport x Loaded Volume)] / Volume for Sale – (Hedging Cost + Buyer’s Margin)

Transport costs comprise all costs incurred to transport the gas volume from port of origination to the destination port including terminal costs, shipping costs, etc.

The sum of transport costs is divided by the volume for sale to obtain a transport cost in US dollars per MMBtu.

Netback Price

The netback price is the value of the volume for sale ($/MMBtu) minus the transport cost ($/MMBtu).

Parameter Definitions:

Gas Sales Price (GSP) ($/MMBtu)

The Gas Sales Price is an estimate of the prevailing spot market price for a particular region and varies daily. For Northeast Asia, the gas sales price is based on the World Gas Intelligence weekly assessment of the spot gas price for the region, based on a survey of traders. The weekly assessment is adjusted daily via the shift in the Brent prompt contract price.

For Southwest Europe, the gas sales price is based on the World Gas Intelligence weekly assessment of the spot gas price for the region, based on a survey of traders. This weekly assessment is adjusted daily via the change in the NBP day-ahead price. For the UK, the gas sales price is the NBP day-ahead gas price converted to US dollars via the current exchange rate. For Zeebrugge, the gas sales price is the Zeebrugge assessments done every week by WGI, adjusted for changes in NBP.

US Northeast gas price is the New England delivered-to-pipeline price as calculated via the Natural Gas Week survey.

Volume for Sale (VFS) (MMBtu)

Assumptions used in estimating volumes include a standard 155,000 cubic meter ship and a boiloff rate of 0.15% per day.

Multiplying by the heat content factor unique to each port (MMBtu/M3), gives the loaded volume (LV) at the point of origin.

Multiplying by the boiloff rate, assumed to be 0.15% per day, times the number of travel days, plus the number of Canal Days, if any, times the loaded volume (LV), results in the Unloaded Volume (UV) at the port of destination.

By then subtacting certain gas requirements at the port, the volume of gas for sale is derived.

Terminal Costs (TC) (US$)

Terminal costs are incurred when LNG is delivered into the terminal’s receiving system and re gasified. The cost is charged by volume.

Total Transport Costs (TTC) (US$)

Total transport costs include ship charter, port charges, bunker fuel cost, canal charges (if any), demurrage, and working capital. The total cost is then divided by the volume per sale to get a $/MMBtu cost for transport.

The components of the total transport cost are calculated as follows.