Track 5 of 7
Markets, contracts and pricing
How cargoes are actually bought and sold: long-term contracts and their price formulas, the spot benchmarks, destination clauses, and what has to be true before a project reaches a final investment decision.
LNG was for decades a business of twenty-year contracts between one seller and one buyer, priced against crude oil because there was no gas price to reference and the competing fuel was oil. Much of that structure survives, which is why a cargo delivered tomorrow may be priced off a formula written before the buyer’s current staff were hired.
Alongside it a spot market has grown that now prices a large minority of trade against gas hubs directly. The two systems coexist awkwardly, and the gap between them is where a great deal of the industry’s money is made and lost.
This track explains the contract vocabulary, the price formulas and the financing logic that decides which of the hundreds of proposed projects in the tracker will ever be built.
8 modules
0 written so far; the rest are listed in the order they will be published.
- 01How LNG is actually bought: SPAs, tenders and spotplanned
- 02Oil indexation, slopes and the S-curveplanned
- 03Hub pricing: JKM, TTF and Henry Hubplanned
- 04Destination clauses and cargo diversionplanned
- 05Tolling, offtake and how projects are financedplanned
- 06Take-or-pay and the shape of the obligationplanned
- 07Arbitrage: when a cargo changes oceanplanned
- 08Reading a final investment decisionplanned
Vocabulary for this track
18 terms, defined in full in the glossary.