The number of long-term contracts for liquefied natural gas (LNG) has increased by 130 percent in 2021, following a drop in 2020 when short-term spot contracts were favoured, latest data by GlobalData has revealed.
The London-based data analytics company notes that 23 long-term contracts were signed by key purchasing companies in 2021, compared to 10 in 2020.
The spot market for gas refers to the trade of large physical cargoes or parcels in one-off transactions for near-term delivery while the long-term contract typically obligates the transaction to occur at an agreed price with further financing agreements for projects with high capital costs and long payback periods.
Bhargavi Gandham, Oil and Gas Analyst at GlobalData, explains “buyers are, once again, looking towards long-term contracts to hedge price volatility and ensure guaranteed supply. The trend is expected to continue in 2022 as LNG prices in key markets such as Asia and Europe continue to be very high”.
GlobalData’s latest report, ‘Long-Term LNG Contracts Review, 2021’, reveals that the biggest long-term LNG contract signed this year was between Qatar Petroleum and CNOOC Ltd in September 2021.
According to the contract, Qatar Petroleum will supply 3.5 million tonnes per annum (mtpa) of LNG from 2022 to 2036 from the country’s Ras Laffan III liquefaction terminal to CNOOC Ltd.
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The report also confirms that China-based Sinopec Corp signed the most long-term LNG contracts in 2021, gaining five million tonnes of imported LNG per annum (mtpa).
Bhargavi continues, “In terms of LNG purchase, the majority of long-term LNG contracts completed by Sinopec were signed with Venture Global LNG as part of China’s efforts to reduce the country’s carbon emissions. The country needs to substantially increase natural gas share in its energy mix in order to achieve its goal of becoming carbon neutral by the year 2060.”
After Sinoptec, Vitol Group signed the second-highest number of long-term LNG contracts, gaining 4.3 mtpa, and Royal Dutch Shell signed the third-highest, with 4.0 mtpa. Among LNG sellers, Tellurian Investments sold the largest total volume of LNG, at 9 mtpa, in three contracts with Gunvor Group Limited, Royal Dutch Shell, and Vitol Group, respectively. Tellurian Investments’ LNG will be supplied from the Driftwood terminal in Louisiana.
Following Tellurian, Qatargas Operating Company sold the second most LNG volume, at 7.3mtpa, in agreements with Pakistan State Oil Company, China Petroleum & Chemical Corporation, CPC Corporation, and Royal Dutch Shell.
Bhargavi adds, “State-owned companies in Qatar have mostly signed long-term LNG contracts in 2021 to supply key demand centres in Asia such as China and South Korea. These companies can sign more contracts in 2022 as the global economy recovers, driving further LNG demand.”
