Long-Term Take-or-Pay Agreements in Natural Gas Industry: Past, Present and Future
Article from: OGEL 3 (2020), in Liquefied Natural Gas (LNG)
Introduction
Many large natural gas projects, including LNG projects, are financed on the basis of long-term contracts containing take-or-pay provisions. These contracts help provide the backbone of the financing structure for projects with high capital costs and long payback periods where financing is tied to project revenues because the promise of de-risked long-term revenues on the basis of such take-or-pay provisions comforts investors. The take-or-pay provisions in these long-term contracts are intended to mitigate pricing and demand volatility as well as other market risks by setting a "floor" ...