The Association of International Energy Negotiators published its model form LNG sale and purchase agreement in October, its first edition of a long-form LNG SPA following the publication of its LNG master sale and purchase agreement in 2012.
The LNG SPA lands with a clear ambition – give LNG lawyers and commercial teams a common, international framework for long-term cargo sales that is genuinely adaptable to different project profiles, legal traditions and market philosophies. The LNG SPA is written for medium to long-term FOB transactions on a take-or-pay basis and can be used for simple LNG sale and purchase arrangements for operating projects or as the basis for agreeing anchor LNG sales to underpin the project financing of a new liquefaction development. This article seeks to explain what the model agreement is trying to do, why it includes more optionality than some may expect, and how to apply that flexibility appropriately.
Much like other AIEN model form documents, the LNG SPA contains optionality that allows negotiators and commercial teams to adapt the model form to the specifics of the relevant transaction. This optionality is deliberate. Rather than asking parties to shoehorn one “correct” LNG contract onto diverse use cases, the form accepts that it will be used for negotiating sales contracts for liquefaction facilities that are under development, already in operation, or for multi-asset portfolio sellers, with buyers ranging from utility buyers with regulated pass-throughs to trading desks with nimble books.
The contract therefore offers choices: alternative formulations and marked options that let negotiators dial the same framework towards a tighter, low-flex commitment or a more permissive, portfolio-style regime depending on the specific application. Unsurprisingly, that approach shifts responsibility to the deal team. It is not a menu to order from indiscriminately, and negotiators and lawyers will need to apply due care and attention when translating its terms to the specifics of their deal.
