Course 09 of 20 · Natural Gas Desk Academy

Location Basis & Transport Economics

Stage C, Spread, storage and cash economics. Level 5 of 10.

Measuring location basis and judging whether a transport right is in or out of the money against the delivered alternative.

119 chapters · 11 modules · every chapter one 8 to 10 minute explainer · builds on: Course 03, Course 04, Course 06

Enrol or enquire See the 119 chapters
How a chapter is sized

One chapter is one idea taken to the point of use

Each chapter is a single self-contained explainer of 8 to 10 narrated minutes, covering one idea to the point where you can use it.

Chapters run in order. Each one assumes only what the chapters before it taught, and capability belonging to a later course is named and deferred rather than half-covered.

Curriculum

11 modules · 119 chapters

Open any module for its full chapter list, in teaching order.

M0 The Spread Between Two Points Ch 1-10
  1. What a Location Basis Is
  2. Reading a Basis Quote Without Getting the Sign Wrong
  3. Choosing the Reference Point
  4. Matching Tenor Before Subtracting
  5. The Point Map Behind a Basis
  6. The Delivered Alternative as the Standard of Comparison
  7. Absolute Basis, Percentage Basis and When Each Misleads
  8. Basis Versus Spread: Settling the Vocabulary
  9. Building a Clean Basis Dataset
  10. What a Basis Number Cannot Tell You
M1 Decomposing a Basis Ch 11-21
  1. The Four Components of a Basis
  2. Turning a Tariff Rate into a Spread You Can Compare
  3. Fuel Retention Priced Rather Than Counted
  4. The Local Balance at the Receiving End
  5. Constraint Value and What It Actually Prices
  6. Variable Cost and Fixed Reservation Cost Kept Apart
  7. The Variable Cost Floor on a Flowing Path
  8. A Decomposition Worked End to End, Part One
  9. A Decomposition Worked End to End, Part Two
  10. The Terms a Decomposition Fails to Explain
  11. Testing a Decomposition Against Observed Flow
M2 The Transport Ceiling and When It Breaks Ch 22-32
  1. Why the Cost of Moving Gas Caps a Differential
  2. The Arbitrage That Enforces the Ceiling
  3. The Ceiling Is Variable Cost, Not Total Cost
  4. A Differential Inside the Ceiling: The Unconstrained Path
  5. When the Path Fills and the Ceiling Stops Binding
  6. A Spread Above the Cost of Transport and What It Means
  7. Negative Differentials and Reverse-Direction Economics
  8. Two Ceilings at Once on a Bidirectional Path
  9. A Spread Wider Than Any Route You Can Reach
  10. Measuring How Close a Path Is to Full
  11. A Worked Case: A Differential Through a Filling Path
M3 Producing Points and Consuming Points Ch 33-43
  1. Why a Production Point Behaves Differently
  2. The Egress-Limited Production Differential
  3. How a Producing-Area Discount Responds to Drilling
  4. The Wellhead Netback and the Shut-In Threshold
  5. Why a Consuming-Area Differential Is Demand-Led
  6. Cold-Weather Behaviour at a Consuming Point
  7. The Citygate Premium and What Pays For It
  8. Pooling Points and Why Their Differentials Stay Narrow
  9. Producing and Consuming Points Compared Side by Side
  10. Where a Point Sits on the Path and What That Predicts
  11. Classifying Every Point in Your Book
M4 The Basis Curve Ch 44-54
  1. From a Single Number to a Forward Curve
  2. Where Forward Location Quotes Come From
  3. The Seasonal Shape at a Consuming Point
  4. The Seasonal Shape at a Producing Point
  5. Winter Peaks and Why They Are Not Symmetric
  6. Shoulder Months and the Flat Part of the Curve
  7. Deriving a Location Curve from Two Fixed-Price Curves
  8. Filling the Gaps in an Illiquid Location Curve
  9. Rolling a Location Curve Forward Each Month
  10. The Long End and Its Honest Precision
  11. Sanity-Checking a Curve Against the Cost of Moving Gas
M5 Valuing a Held Transport Right Ch 55-66
  1. The Central Calculation Stated Plainly
  2. Gathering the Inputs for a Transport Valuation
  3. Retained Fuel and the Quantity Basis of a Spread
  4. Net Spread: Taking Out the Charges Flowing Creates
  5. Intrinsic Value for a Single Month
  6. Summing Value Across the Whole Strip
  7. In the Money, Out of the Money, At the Margin
  8. Comparing the Value Against What You Already Owe
  9. Sunk Charges and the Decision They Must Not Touch
  10. Utilisation: Why a Right Is Rarely Fully Used
  11. A Worked Valuation, Part One: Inputs and Gross Margin
  12. A Worked Valuation, Part Two: Net Value and the Verdict
M6 The Capacity Release Decision Ch 67-76
  1. The Decision a Negative Valuation Forces
  2. Valuing the Option to Release Rather Than Hold
  3. Setting a Reserve Price for a Release
  4. Term Release Against Short-Term Release
  5. Why an Out-of-the-Money Route Can Still Be Worth Keeping
  6. Pricing Optionality You Cannot Yet Observe
  7. What Releasing Costs You If the Winter Turns
  8. Release Proceeds Against the Charge You Still Owe
  9. Buying Someone Else's Released Capacity
  10. A Worked Release Decision
M7 Basis as a Traded Instrument Ch 77-87
  1. A Location Spread You Can Trade Outright
  2. How a Location Spread Trade Is Quoted
  3. The Basis Swap and What It Exchanges
  4. Settling a Swap Against Published Assessments
  5. Which Side of the Spread You Are On
  6. A Swap as a Synthetic Transport Right
  7. Comparing a Swap With Physical Capacity
  8. Index-Plus Physical Deals and the Spread They Embed
  9. Liquidity Across Locations and What Thinness Costs
  10. Where a Spread Position Meets the Credit Desk
  11. A Worked Swap Against a Held Route
M8 Constraint Events Ch 88-98
  1. What a Constraint Event Is
  2. The Anatomy of a Constraint: Before, During and After
  3. Early Signals That a Route Is About to Bind
  4. Maintenance and Capacity Reductions as Price Events
  5. The First Cold Day and How the Gap Reacts
  6. The Peak of an Event and the Number It Prints
  7. Why a Widened Gap Decays Rather Than Snaps Back
  8. Measuring What One Event Delivered
  9. Repeat Events and the Expectation They Build
  10. False Alarms: Moves That Did Not Pay
  11. A Worked Event From Signal to Settlement
M9 New Capacity and Basis Decay Ch 99-108
  1. What New Capacity Does to an Established Gap
  2. Reading a Project Before It Flows
  3. The Announcement Effect on a Forward Strip
  4. In-Service Date Risk and the Timing of the Collapse
  5. Sizing the Compression a Project Will Cause
  6. Partial Relief: When an Expansion Does Not Clear the Bottleneck
  7. Why an Existing Right Loses Worth When a New Path Opens
  8. Retirements, Reversals and Gaps That Widen Again
  9. Repricing a Transport Portfolio Against a Project Pipeline
  10. A Worked Expansion Case
M10 Residual Basis and the Whole Picture Ch 109-119
  1. The Gap a Hedge Leaves Behind
  2. Measuring the Residual Between Two Points
  3. How Stable Is a Relationship Between Two Points
  4. Reporting a Residual So a Hedge Decision Can Be Taken
  5. Geography and Time: Where This Material Stops
  6. Regional Conventions and Why the Arithmetic Travels
  7. A Full Worked Case, Part One: The Map and the Curves
  8. A Full Worked Case, Part Two: Valuing the Routes Held
  9. A Full Worked Case, Part Three: The Release and the Residual
  10. What This Measurement Cannot Do
  11. The Location Book You Can Now Keep

The brochure gives each of these 119 chapters a paragraph on what it covers and what you can do once you have worked through it.

This is course 9 of twenty

It stands alone, and it is also the entry point to the Natural Gas Desk Academy pathway.

Enrol or enquire See the whole pathway