Traders and aggregators continued their dominance of global LNG markets, participating in deals totaling more than 21 MMt/y of the nearly 29 MMt/y of confirmed transactions of two years or longer done last year.
Despite a raging pandemic that disrupted project development, global demand, and trading patterns, Poten identified 26 final sales and purchase agreements covering 28.8 MMt/y. This represented an increase of 4.4 MMt/y, about 18% higher than 2019 levels.
Poten also saw another 14 pending SPAs, heads-of-agreements and 1-year term deals signed, totaling 11.5 MMt.
Average contract length was about 11 years for deals of two years or longer, compared to the 10.3-year average in 2019. The growth in contract duration was largely down to four 20-year contracts signed with Energia Costa Azul, Venture Global’s Plaquemines project and the Greater Tortue Ahmeyim (GTA) floating LNG project off Senegal and Mauritania.
Those four deals were the only long-term contracts signed with projects under development, though there were several 10-year deals signed with Nigeria LNG that will allow the development of Train 7 to advance.
The average contract length for the other 22 deals was nine years.
Contract Lengths, 2015-2020
Contract sizes grow as traders and aggregators sign bigger deals
Contract volumes reversed a trend toward smaller volume deals, with the average size of a contract signed in 2020 reaching 1.1 MMt, up from the 900,000t average seen in 2019.
Fourteen out of 26 deals were for volumes of 1 MMt/y or greater. Interestingly, just five of those deals, accounting for over 9 MMt/y, were with end-users, while the remaining nine deals over 1 MMt/y were with traders or aggregators, continuing a trend in which portfolio players take ever larger volumes onto their books.
By contrast, end users signed eight of the 10 deals for less than 1 MMt/y, for average volume of just 370,000 t/y.
Average Length of Bilateral Contracts
Pricing continues to favor Brent
Despite significant industry discussion about the value of more liquid and widely accepted LNG benchmarks, 17 of 26 contracts signed in 2020 were priced against crude, mostly Dated Brent. These contracts accounted for about 21.1 MMt of contracted volume, or an average of 1.2 MMt per deal.
End users continued to favor Brent as a pricing benchmark, signing eight contracts covering just over 9 MMt/y. Aggregators and traders accounted for 9.8 MMt/y of Brent-related deals, or an average of 1.3 MMt per deal.
The average slope for oil-related delivered deals was 11.1%, while FOB pricing for oil-linked deals was 10.3%.
Eight gas- or LNG-linked deals were signed in 2020 for total volume of 7.4 MMt, averaging about 920,000t per deal.
Pricing varied widely as US benchmarks Henry Hub and Waha were used in contracts, as were the European TTF benchmark and the Asia Pacific JKM spot index. End users accounted for four of the gas-linked deals as they sought to reduce local basis risk by ensuring that imported supplies remained in line with local gas prices. One fixed-price deal was signed as well.
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