Negotiating and drafting long term LNG sales contracts which address and allocate the risks of the “well-head to burner-tip” chain in a commercially balanced manner is a challenge in today’s evolving LNG market. The last decade has seen unprecedented growth in the international LNG trade, the opening of a variety of new import markets, the development of a number of new commercial
models in the LNG trade and substantial changes to the terms upon which LNG has until recently traditionally been sold. The next decade (particularly in Asia) is likely to see even more spectacular developments, in the development of new models for the trading and sale of LNG, in the physical infrastructure needed to deliver LNG and in the sources of feed gas. The impact of the “shale gas revolution” is having a significant effect on LNG marketing in Asia. How will today’s contracts
fare in a world with enhanced levels of shale gas production in Asia? There are now a greater variety of buyers looking to acquire LNG, and a greater variety of LNG sellers in the market than we have ever seen before. How does one contract on a long term basis in a way that will withstand the pressures a
long term contract is likely to face? In the shorter term the market has seen the price of oil drop
dramatically in the last twelve months. How can oil prices be linked to LNG prices? What are the risks of agreeing LNG pricing linked to oil or US domestic prices, what are the relative merits of these pricing methodologies? Buyers and Sellers looking to enter into sales and purchase contracts need to understand the context in which the terms of these contracts have been developed and where the likely areas of stress will be for the contract in the future. In this workshop you will learn about the key issues facing LNG buyers and sellers today and explore different approaches to dealing with these issues.
Mr Ben Smith
Partner, Norton Rose Fulbright (Asia) LLP, Singapore
Ben Smith is a Partner in Norton Rose Fulbright’s Singapore office. He has focused his practice on LNG related transactions since 2003 and has practiced in London, Tokyo, Hong Kong and Singapore. Ben has also worked in the legal departments of two major LNG players. Ben advises on all aspects of the LNG chain and has spent a lot of time recently working with clients to develop new markets for LNG. Ben is qualified as a solicitor in England & Wales and Hong Kong. He obtained his degree from the University of London. Ben’s full biography is available at www.nortonrosefulbright.com/ben.smith.
Keys issues covered
- Structuring issues: A discussion of different commercial structures and business models and the issues that arise.
- LNG contracting trends: how are the issues faced in the industry being addressed in the long term contracts?
- How the financing can be structured and the impact that the financing may have on the SPA terms
- New buyers and new sellers: how the identity of the seller and buyer influence the SPA terms
- Detailed analysis of key SPA terms
- The key differences between Master Agreements for the sale and purchase of spot cargoes and long term agreements
- Quantities (flexibility, make up, take or pay)
- Take or pay or liquidated damages; pros and cons of different liability regimes
- Pricing mechanisms, regional preferences, potential future trends
- Price review clauses and SPA duration
- Seller’s liability for late/non-delivery
- Destination restrictions/flexibility, cargo diversions and profit sharing mechanisms
- Force Majeure
- Conditions Precedent
- Enhancement of Buyer’s Creditworthiness
- Issues to consider if the seller is an aggregator or buyer will source LNG from more than one project or deliver to more than one destination
- How the terms may be different if the LNG project sources feed gas from a liquid traded gas market (such as North America) rather than under a gas sales agreement from a specified source