Published 31 March 2020
In order to discuss portfolio SPAs, it is necessary first to clarify the terminology used; a portfolio SPA is a type of an LNG SPA and a form of portfolio sale, the other being a multi-cargo sale under a master LNG SPA. Portfolio sales are conducted as part of portfolio marketing by a portfolio operator, or for LNG portfolio optimization by a party with an LNG portfolio.
Historically, the LNG industry has evolved from a small club of producers and importers, to a complex industry with different layers of parties involved. As spot and short-term markets grew, portfolio sales became more sophisticated, up to the point where portfolio marketing has become the key tool for of some of the major LNG sellers.
Because of its characteristics, the portfolio SPA is not a variation of the project SPA. Key differences appear in particular in language relating to the source of LNG, force majeure, certain operational clauses, failures to deliver and to take, specifications, contract duration and termination for prolonged force majeure.
This paper discusses the portfolio sale and purchase agreement (portfolio SPA) in the context of LNG portfolio optimization and LNG marketing. After providing an overview of terminology and some historical background, the growing importance of portfolio SPAs will be examined with a focus on typical clauses.