LIQUEFIED NATURAL GAS (LNG)

LNG Procurement

Historically, LNG supply contracts were concluded on a negotiated basis between buyer and seller, providing long term security on mutually agreeable terms. However, over the last few years obtaining LNG by international tender has grown in popularity, with projects in China, India, Korea, and Taiwan having recently gone down this route to procure natural gas supplies.

As the LNG sector has evolved and new players have entered the market, contract terms such as "take" or "pay" have loosened, pricing structures have changed, contractual flexibility has increased, and the volume of LNG traded under shorter term contacts has grown. It is essential for buyers and sellers to understand the implications of the new LNG procurement environment in order to secure the best possible deal.

Nexant Services

Nexant has worked extensively on both the "sell" and "buy" sides of LNG supply transactions, enabling us to develop and recommend approaches for procurement processes that are likely to result in the most favourable terms for LNG trade, considering bidding vs. direct negotiation after due diligence of the regulatory risks, acceptability of contractual terms, scheduling, project structure, market practice etc. Drawing on our extensive LNG market experience, we can advise clients on the market implications of project timing, including "buyers" or sellers" market conditions and pricing trends.

In our experience rigorous preparation on the part of the buyer is critical to establishing a full understanding of each particular seller's needs, which can make the difference between a successful or unsuccessful conclusion to the process. There are many valuable lessons gained from earlier experience that Nexant can draw on to assist clients in establishing the necessary level of readiness to approach the market, in the expectation of gaining the most favourable deal.

Selected Project Experience

  • Gas consultant for international gas tender—India
  • Technical and market advisor, LNG terminal development—Southeast China
  • Gas market advisor for greenfield LNG export project—Middle East
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