LNG Delivery Disputes

1. Introduction

Since the delivery of the first LNG cargo by theMethane Pioneerin 1959, the LNG market has changed dramatically, from a structured and rigid market underpinned by long-term LNG sale and purchase agreements (SPAs) to a traded market, with a large proportion of all LNG sales being made under short-term LNG master sale and purchase agreements (MSPAs) and at spot prices, or by way of swaps of LNG cargoes. The traded LNG market allows buyers and sellers of LNG to quickly trade LNG cargoes and re-optimise deliveries to benefit from arbitrage opportunities. Nonetheless, the majority of LNG sales are under long-term SPAs, which provide sellers with the long-term sales commitments necessary to take a positive final investment decision in relation to a proposed development and a 'bankable' project for the purposes of project finance lenders, while also providing buyers with security of supply.