Swiss trader Gunvor Group has claimed a first in terms of competitive bidding for LNG planned to be produced by the new Commonwealth LNG project in the US.
Gunvor and Commonwealth LNG have launched a tender to reserve offtake from the 8.4m tonnes per annum (mpta) facility in Louisiana.
The trader and shipowner said this is the first-ever tender process in which buyers can secure future term supply at "volumes, pricing and durations of their choosing" through competitive bidding.
LNG will be made available under tolling, free on board (FOB) or delivered-at-place (DAP) agreements.
Commonwealth LNG officials said a different approach was warranted following changes in the energy market resulting from the global pandemic.
Commonwealth LNG founder and chief executive Paul Varello said: "We believe this process offers a mutually advantageous, low-risk solution for buyers to address their long-term needs, while allowing Commonwealth to advance our project expeditiously to meet market demand."
In 2019, Gunvor agreed to buy 3 mtpa from the facility.
The trader is also supporting the producer in securing binding offtake and supply contracts.
In addition, Gunvor will enable the offering of DAP deals.
Risks reduced
"Furthermore, the utilisation of Gunvor’s LNG portfolio will allow the offering to provide firm LNG supply obligations, which will mitigate greenfield project supply risk and/or allow deliveries of LNG prior to the start-up of the Commonwealth LNG project to buyers who require earlier supplies," Gunvor said.
"The tender process further builds on the momentum generated between Commonwealth and Gunvor under the strategic agreement executed in 2019,” Kalpesh Patel, Gunvor co-head of LNG trading, said.
Commonwealth LNG has retained US shipbroker Poten & Partners to manage the tender process.
Confirmations of interest are due by mid-February and submission of bids by early April 2021.
Contracts by June
Contracts are due to be awarded by June of this year.
The project is due for a final investment decision by the first quarter of 2022.
Gunvor has been growing as a power in the LNG shipping market.
The company has said it manages a "sizeable" fleet of LNG ships, and the sheer volume of its gas trading creates "substantial optionality" in the spot market.
Gunvor said last year it had already stopped trading coal and had bought two biofuel plants in Spain, as it focuses on the energy transition.
About 50% of its trading now relates to energy transition commodities, including biofuels, natural gas and LNG.
