What is the "basis differential"?

LNG industry is undergoing some changes by new regulation due to Liberalization and Privatization.The most important change would be in the Pricing formation model as a aim of such restructuring. the purpose of restructuring is pricing based on Gas to Gas competition.So the new pricing model will be linked to gas indicator instead of oil as it was in LNG traditional trade. Since there is not a global LNG market then we should apply local Hubs indicators into pricing model as a reference point. In the other word many LNG import contracts in U.S. that have a geographic dispersion are linked to same market and same indicator such as Henry Hub.Therefore the transportation cost depends on their distance from the Hub would be different. In some cases the differences are significant so we should introduce a further item to pricing model to modify this differential that called "basis differential" or "place differential". This modifier measures the geographic dispersion of LNG contracts from the Hub market and of course it introduces new risk into pricing model.This risk will be transferred to seller totally because of buyer could resell his volume at the same market and price if he could not take the cargo.It is obvious that the contract that is closer to the reference point it would have also a lower risk.
In short,the pricing model has a further item that called place differential from reference point.
P LNG= C + Alfa * Hub indicator market+ Beta
In the Hub market Beta would be Zero.