LNG buyers turn to tenders for long-term purchases
LNG buyers are making the best of a surge in gas supply. Most of the recent sale-purchase agreements (SPAs) with a term of over two years were done through the tender route, Petronet LNG Ltd highlighted in its annual report. Traditionally, tenders are used for spot trades or for fulfilling seasonal demand. Citing a study by leading global consultancy firm Poten and Partners, Petronet points out that of all the SPAs having a term of over two years executed by buyers in 2017, approximately eight were done through the tender route. This method of LNG contracting accounted for 10% of the total volume of LNG sold under new contracts in 2017. Out of the eight SPAs, six had a term between three and five years and two were of 15 years each. All these tenders were issued by buyers only. Interestingly, India and Pakistan are said to be driving the trend. Though the average term for contracts executed via the buy tenders was slightly over six years, they were all delivered ex-ship and had oil price linkages, the report added. An analyst with a leading consulting firm said that it’s a buyer’s market at present, and therefore, they are trying to have the best price from across the sources available. “This simply means that the supply of LNG is increasing and it’s a buyer’s market overall.”
