Reuters are reporting that buyers of LNG are no longer balking at long-term contracts, but they want to spread their risk by signing smaller volume deals with multiple producers, the head of Liquefied Natural Gas Ltd (LNG Ltd) said on 14 May.
Contract talks have picked up significantly this year, and buyers of the super-cooled company that owns the Magnolia LNG project in the US state of Louisiana.
“When we got back from the holidays, the phone started ringing like crazy,” Vesey said. “I actually don’t find anybody pushing back against (20-year deals).”
Vesey said that while there may be the occasional “odd duck” buyer looking for up to 4 million tpy, most buyers he speaks to want deals for 1 to 2 million tpy.
LNG buyers have been hesitant to sign large, long-term deals in recent years, pushing instead for small, short to mid-term agreements as they waited for an anticipated glut from new projects in the US and Australia.
The glut has so far failed to materialise. Meanwhile, demand has taken off, and a lack of recent final investment decisions (FIDs) on major projects is fanning fears of an LNG shortage as early as the middle of the next decade.
This has buyers now actively seeking longer-term deals in order to get projects built, said Vesey.
“There are actually some buyers in Asia who, seeing this shortfall of FIDs, have made it a strategic objective to sign 20-year deals to get some of these facilities built,” he said, declining to name any of those buyers.
LNG Ltd wants to have 75% of Magnolia’s planned 8 million tpy output sold before it moves ahead with an investment decision. Vesey said he expected to make that call by the end of the year.
LNG Ltd also owns Bear Head LNG, on Canada’s east coast, though that project will only move ahead after Magnolia and will require pipeline connections to carry natural gas thousands of miles from Western Canada to Nova Scotia.
Read the article online at: https://www.lngindustry.com/liquefaction/15052018/lng-buyers-again-open-to-long-term-deals/