Dynamics of Natural Gas Pricing: The Critical Need for a Natural Gas Hub in South Asia

This paper will examine three main pricing mechanisms for gas contracts: oil-indexation, gas-gas competition and netback from final product (e.g. prices linked to Ammonia etc.) in light of the gas contracts in this region that are oil-indexed or linked to oil prices. It will analyze the long term viability and competitiveness of this mechanism for South Asia and discuss natural gas demand in South Asia, conventional and unconventional sources of Natural Gas, as well as the effects of the geopolitics in the region on Natural Gas contracts. Remaining cognizant of these developments, this paper proposes the creation of a new natural gas trading hub in South Asia.