Page 12 - NorthAmOil Week 03 2021

NorthAmOil COMMENTARY NorthAmOil

But Commonwealth appears to be betting that the future in an effort to avoid running into sim-
the combination of flexible options, reduced ilar situations further down the line.
risk and low costs will help to attract customers. “We are seeing rising interest among buy-
“Clearly flexibility in contract terms is a ers in securing long-term supply,” Feer said. “I
significant benefit of this tender structure,” think the winter price spike has shown buyers
Jason Feer, the head of business intelligence at that relying too heavily on spot supply can be
LNG advisory firm Poten & Partners, which is risky. The assumption that buyers can always
managing the tender process, told NewsBase. get a spot cargo has been tested this winter and
“Many sellers are trying to find ways to offer several buyers have been unable to get cargoes
more flexible terms. However, Commonwealth when and where they needed them,” he added.
has an advantage because its costs are lower “At the same time, the US surge is running its
than many other US projects and that enables course and we don’t expect to see much more
it to offer liquefaction fees that are lower than supply coming online for a couple of years. Buy-
many other projects,” he said. “Tenders have ers understand that and we believe that many
been used in many other segments of the LNG are beginning to engage more actively with I think the winter
business, including short-term supply, import suppliers.”
terminal capacity and pipelines, among others. Commonwealth and other would-be LNG price spike has
We believe this is a mutually beneficial model developers on the Gulf Coast are now hoping shown buyers
because it is faster in terms of project develop- to take advantage of these shifting dynamics as
ment and offers more certainty to buyers and a new race to reach FID picks up. Indeed, some that relying too
seller.” are currently targeting 2021 for taking FIDs on
their terminals, but Commonwealth is aiming heavily on spot
Demand spike for the first quarter of 2022. If this deadline is
Commonwealth’s tender comes as spot LNG met, its first cargo is anticipated in the second supply can be
demand and prices in Northeast Asia have quarter of 2025. Commonwealth said it would risky.
soared to record highs at the start of this year. be implementing a predominantly modu-
This has been attributed to a combination of lar approach, with major components being Jason Feer
factors, including colder-than-expected winter fabricated offsite. The company expects this Head of Business
weather, supply outages in other parts of the approach to help speed up the construction pro- Intelligence
world and shipping delays, among others. cess, as well as enabling the project to offer what Poten & Partners
Spot prices for cargoes to be delivered in Commonwealth describes as “one of the most
March are already down on those set to be deliv- competitive LNG sales prices from the United
ered in February on expectations of warmer States”.
weather and some of the other issues being And if construction falls behind schedule,
resolved. However, it appears that the spike is Gunvor’s ability to offer LNG prior to start-up
causing some buyers to plan more carefully for could prove useful.™

P12 www. NEWSBASE .com Week 03 21•January•2021