LNG Sale and Purchase

In light of the fact that the initial development of the LNG industry depended upon the development of a large gas reserve and the construction of a suitable liquefaction facility, the LNG industry traditionally has been a seller-driven market dominated by long-term LNG sale-and-purchase contracts that do not provide any flexibility to the consumer and require dedicated LNG tankers and a strict framework governing the shipping of LNG. However, the future projections of the international LNG industry indicate a rapid increase in liquefaction and shipping capacity that may lead to greater short-term LNG sales and could result in the shifting of the LNG industry from being seller-dominated to one that is equally controlled, if not driven by, the buyers and end consumers of LNG. In addition to discussing such trends, this article describes the LNG chain and the way it is financed, project structure and documentation for upstream and downstream LNG projects, and typical LNG purchase and sale agreements.