Take-or-Pay Provisions Evolve in Long-Term LNG Contracts

摘要

A combination of weak demand and disparities between low spot LNG prices and some costlier term contracts has prompted questions as to whether buyers or sellers will start invoking take-or-pay (TOP) provisions in long-term deals. A common feature of sales and purchase agreements (SPA), these ensure stable revenues for sellers and financiers to support project financing. But the TOP provision is itself slowly evolving, shifting from year-end payments for missed cargoes toward more immediate payments as sellers' marketing model moves closer to that of traders. Known as the cargo-by-cargo liability regime, it is becoming a more common feature of new contracts, along with changes in price indexation, flexibility and price reviews (WGI Dec.4' 13; WGI Jan.21' 15).