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What is LNG Arbitrage?
LNG arbitrage occurs when the cost of shipping LNG between points A and B is less than the price spread between those two points. For example, if the price of LNG at Sabine Pass is $5 per MMbtu, the price of LNG in Europe is $10 per MMbtu, and the shipping costs from Sabine Pass to Europe is $2 per MMbtu, then a $3 arbitrage opportunity exists. The spread will also depend on what costs are assumed to be fixed and which are variable. For example, in the Sabine Pass to Europe and Sabine Pass to Asia arbitrage tables we publish each day in our LNG Insight service, we show arbitrage curves on both a fixed and variable shipping cost basis. Our variable cost calculation only includes fuel, boil-off, port & canal feels, while our fixed curves include these variable costs along with the cost of chartering a vessel.
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