commercial development of an LNG value chain-Chengdu Tianyi Energy Equipment Manufacturing Co.,Ltd.

commercial development of an LNG value chain

admin 2015-02-05 06:19:24

In the commercial development of an LNG value chain, LNG suppliers first confirm sales to the downstream buyers and then sign long-term contracts (typically 20–25 years) with strict terms and structures for gas pricing. Only when the customers are confirmed and the development of a greenfield project deemed economically feasible, could the sponsors of an LNG station project invest in their development and operation. Thus, the LNG liquefaction business has been limited to players with strong financial and political resources. Major international oil companies (IOCs) such as

ExxonMobil, Royal Dutch Shell, BP, BG Group, Chevron, and national oil companies (NOCs) such as Pertamina and Petronas are active players.

LNG is shipped around the world in specially constructed seagoing vessels. The trade of LNG is completed by signing an SPA (sale and purchase agreement) between a supplier and receiving terminal, and by signing a GSA (gas sale agreement) between a receiving terminal and end-users. Most of the contract terms used to be DES or ex ship, holding the seller responsible for the transport of the gas. With low shipbuilding costs, and the buyers preferring to ensure reliable and stable supply, however, contract with the term of FOB increased. Under such term, the buyer, who often owns a vessel or signs a long-term charter agreement with independent carriers, is responsible for the transport.

LNG purchasing agreements used to be for a long term with relatively little flexibility both in price and volume. If the annual contract quantity is confirmed, the buyer is obliged to take and pay for the product, or pay for it even if not taken, in what is referred to as the obligation of take-or-pay contract.

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commercial development of an LNG value chain