Published 24 May 2018
by M. Nechaeva, Gazprom Export LLC
One of the most intriguing questions of the current gas market is whether the USA are able to arrange the large-scale LNG deliveries in Asia and Europe in the short term. Almost 30 US LNG brownfield and greenfield projects are proposed and 6 of them are in the development phase at the moment, while their total contracted volumes have exceeded 100 bcm/y. However, even a fast analysis of already signed contracts gives evidence of their high risks, which mostly influences the buyer rather than the seller. The majority of these contracts were concluded on the tolling scheme basis, thus the buyer is obliged to pay for gas liquefaction regardless of his offtake policy. At the same time, the costs of LNG-terminals are covered in any market conditions. As a result, the buyers of American LNG bear the financial losses: either they sell gas to the bad or pay for unemployed capacities. The situation is mitigated now by the deliveries in Latin America, but their profitability will fall down following the commissioning of new LNG-terminals. Therefore, the USA have succeeded in transferring all the risks of LNG industry development to their trading partners.
You can download the article here: American Mistake at Someone Else's Expense