Page 11 - NorthAmOil Week 03 2021

NorthAmOil COMMENTARY NorthAmOil

Commonwealth LNG tries new

approach to contracting

Commonwealth LNG is prioritising flexibility in its newly launched tender for

offtake from its planned facility in Louisiana

LOUISIANA THE LNG market is evolving as new sources of customers to secure future term supply at vol-
supply allow buyers to enjoy greater flexibility umes, pricing and durations of their own choos-
WHAT: in terms of how they obtain their volumes. Sell- ing through a competitive bidding process.
Commonwealth LNG has ers, meanwhile, are faced with growing compe- “LNG will be made available under toll-
launched a tender for tition and are trying to adapt to this. A tender ing, free on board (FOB) or delivered at place
supplies from its planned announced by Commonwealth LNG this week (DAP) offtake agreements to match customer
terminal, and is offering for offtake from its planned export terminal in preferences,” Commonwealth stated. Com-
a variety of options to Cameron, Louisiana illustrates these dynamics. pany officials added that a different approach
customers. Commonwealth is proposing to build an was warranted in response to market changes
8.4mn tonne per year (tpy) liquefaction facility. brought about by the coronavirus (COVID-19)
WHY: It is one of a number of proposals for terminals pandemic.
Flexibility has become on the US Gulf Coast on which a final invest- Under the plan, Gunvor will be able to offer
increasingly important ment decision (FID) has yet to be taken, and DAP basis to those customers that prefer this
in the LNG market, and the company is seeking to secure offtake agree- option. The companies added that using Gun-
Commonwealth hopes to ments. It launched the tender in association vor’s LNG portfolio would help mitigate the
capitalise on this. with commodity trader Gunvor Group, which supply risk traditionally associated with a
struck a marketing and gas supply agreement greenfield project, and would allow for deliver-
WHAT NEXT: with Commonwealth in 2019. Under that agree- ies of LNG prior to the start-up of the Common-
The company is targeting ment, Gunvor committed to supporting Com- wealth plant if buyers require earlier supplies.
an FID in early 2022. monwealth in securing binding LNG offtake “The flexibility Gunvor can offer both in
and gas supply agreements for the full capacity terms of early bridging volumes and firm DES/
of the liquefaction plant. It also committed to DAP contracts differentiates Commonwealth
taking up to 3mn tpy of LNG offtake from the from other developing LNG projects,” stated
facility itself. Gunvor’s co-head of LNG trading, Kalpesh
Patel.
Flexible options LNG suppliers have largely struggled to sign
Now, the partners are moving forward with offtake agreements in recent months, faced with
plans to find other offtakers. In its statement, intensifying competition in a market where
Commonwealth noted that the tender would be buyers have been increasingly able to shop
the first of its kind, allowing prospective LNG around for the best option available to them.

Week 03 21•January•2021 www. NEWSBASE .com P11