Decarbonisation imperils long-term LNG contracts

Failing to incorporate greater flexibility into LNG purchase agreements could spell trouble as nations get tough on carbon emissions

LNG producers are failing to include sufficient protections against unforeseen events in their contracts with buyers—an oversight that could lead to expensive litigation should deals turn sour, a top industry lawyer told the 2020 Gastech Virtual Summit last week. The annual contract volume of 20-year LNG sales-and-purchase agreements (SPAs) has slumped over the past decade, from a peak of around 25mn t to about 12mnt last year and less than 2mn t so far in 2020. But they remain an industry staple despite doubts over LNG’s long-term profitability. “Shorter duration contracts are still very long term... [there are] requirements for flexibility at all levels and pretty much in all ways,” says P