Protection in a Dynamic LNG Market

Global trade, investment and development in LNG is affected by numerous external factors, including geo-political, social, environmental and economic conditions. More recently, the LNG market has been re-shaped by the discovery of large quantities of shale gas. Buyers and sellers negotiating long-term, high value LNG sale and purchase agreements (SPAs) continue to face uncertainty as to how the LNG market will evolve and need to ensure that their SPAs provide flexibility against those uncertainties as much as possible. This article will discuss two LNG SPA provisions by which buyers and sellers can provide more flexibility around the potential of significant LNG market dislocations: diversion rights provisions and price adjustment provisions.