How to design LNG contracts? Andrius Šimkus │Gas Expert │ Energy Community Secretariat 4 th Vienna Forum on European Energy Law │ Energy Community Secretariat Vilnius, 15 April 2016
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How to design LNG contracts?
Andrius Šimkus │Gas Expert │ Energy Community Secretariat
4th Vienna Forum on European Energy Law │ Energy Community Secretariat
Vilnius, 15 April 2016
Communication from the Commission
on an EU strategy for LNG and gas storage
(16.2.2016, COM(2016)49)
“further diversification of the EU’s natural gas supply remains a key
objective, particularly as domestic production in the EU will continue to
decline in coming decades”
“the prospect of a dramatic (50%) expansion [of LNG] in global supply
over the next few years and consequently of lower prices presents a
major opportunity for the EU”
Security and
resilience Sustainability
Competitiveness
Sale and
purchase
agreement
Tolling
agreement
Liquefaction
facility
Tolling
agreement
Customer
Loading point of the
customer’s vessel at
the liquefaction
terminal
-
EXW / FCA / FAS
Regasification (LNGT Op.)
Transportation (TSO/DSO)
Market realisation
Feed gas
Shipping
Seller
Sale and
purchase
agreement
Customer
Liquefaction facility
(FOB)
-
LNG terminal
(CPT/CFR/CIF)
Liquefaction
facility
Feed
gas LNG
[Shipping]
Regasification (LNGT Op.)
Transportation (TSO/DSO)
Market realisation
[Shipping]
#1 Services and obligations
Tolling agreement Sale and purchase
agreement
Liquefaction facility
- treating of the feed gas
- rendering the liquefaction service
- storage of feed gas / LNG*
Consumer
- fixed charge for the right to receive
the service
- variable charge for actual services
Seller
- delivering the LNG
- shipping*
Consumer
- payment for LNG received (+)
quantity
adjustment
-
operational
tolerance
Destination
clauses
#2 Conditions precedent
Tolling agreement Sale and purchase
agreement
Long-/medium- term commitments
conditions precedent securing
long-term commitments
- infrastructure developments
- commercial operations
#3 Damages
Tolling agreement Sale and purchase
agreement
Take-or-pay
Damage compensation*
(market price indexation)
End use requirements*
#4 Termination
Tolling agreement Sale and purchase
agreement
Early termination right
- contractual party's fault
- Force Majeure
- authorisations (regulatory effects)
Volumes /
destination
flexibility in LTCs
Short-term
contracts
-
Spot trading
Swap agreements
-
Re-export
Sourcing supply
from multiple
locations
www.energy-community.org
Thank you
for your attention!
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