Netforward

Buyers of natural gas measure the value of a supply option on the basis of a netforward calculation. This calculation takes the price of gas in a supply basin and adds transportation costs thereby netting an equivalent price in the marketplace. Buyers with supply and transportation alternatives will calculate the netforward from various producers to determine which option offers the lowest cost of gas.

Producers of gas often make the same sort of calculation but beginning with the price of gas in the marketplace and subtracting the various transportation and processing costs. This is called a netback calculation.