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| Northern Natural Gas Co. Demarcation Basis Swap Futures (Platts IFERC) |
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Northern Natural Gas Co. provides transportation and storage services to approximately 70 utility customers and numerous end-use customers in the upper Midwestern U.S. and provides cross-haul/grid transportation between other interstate and intrastate pipelines in the Permian, Anadarko, Hugoton, and Midwest areas. The company's market area capacity is approximately 4.3 billion cubic feet per day; field area capacity is approximately 2.1 Bcf per day. The demarcation point in central Kansas of the dividing line between the field area where gas is collected from wellhead producers and market areas to which gas is distributed, is an important pricing point.
The volatility of natural gas prices has given rise to a basis market that is quoted as a differential to the price of the New York Mercantile Exchange, Inc., Henry Hub natural gas futures contract, which has evolved into the benchmark for forward natural gas markets industry-wide because of its liquidity and transparency.
To help market participants offset their price risk in this major market center, the Exchange provides a Northern Natural Gas Demarcation index natural gas basis swap futures contract. The final settlement is calculated as Platts Inside FERC's Gas Market Report Northern Natural Gas Co. Demarcation index minus the NYMEX Division Henry Hub natural gas futures contract final settlement price for the corresponding contract month. Platts Inside FERC calculates the index price from its monthly bid week survey.
The lot size of 2,500 million Btus represents a commonly traded market unit and is one-quarter of the size of the Henry Hub futures contract, giving market participants additional flexibility in managing price risk. The contract, which must be traded as a multiple of the number of calendar days in the month, is available for trading on the NYMEX ClearPortsm trading platform.
All positions will be aggregated and margined according to the value at risk as calculated by the SPAN® system. Cross margining of offsetting positions across markets can result in reduced margin obligations. |
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