With US LNG out of the money in both Asian and European gas markets, cargo cancellations at US liquefaction plants have accelerated dramatically, with between 70 and 100 export shipments already reported canceled for the summer ahead. When the tolling contracts for first-wave US export projects were put in place early last decade, nobody could have anticipated the arrival of Covid-19 - yet as it turns out those contracts are well suited to the current environment. That is because they were written with destination as well as cancellation flexibility that now provide a relief valve to a badly glutted market. Under a typical US tolling contract, the buyer pays 115% times the Henry Hub Nymex price per million Btu, plus a fixed fee ranging from $2.49/MMBtu-$3.50/MMBtu depending on the contract. If a buyer decides to forgo a cargo, the buyer still pays the fee.
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