What Is A Liquefaction Tolling Agreement

Information on planned plant maintenance and decommissioning, gas delivery expectations and other relevant planned events that will impact the development of the delivery program will be collected annually from all project participants. The annual benefit program is usually refined each month as the ninety-day schedule is developed. This schedule reflects changes to the annual delivery schedule and further defines the lifting plan. The development of the annual implementation programme is generally fluid and involves cooperation between project participants. U.S. liquefied natural gas (LNG) is booming. Several LNG liquefaction plants are currently under construction, with more expected. But what are the operational complexities and associated risks for developers of projects with a purchase agreement (SPA) or customers with a liquefaction toll agreement (LTA) who are ready to take advantage of opportunities in the U.S. LNG market? Contractual clause in a purchase contract (SPA) according to which a minimum quantity of natural gas must be paid, whether the delivery is accepted by the buyer or not. As a general rule, the fee has a component to be paid, regardless of whether the treatment service is used or made available, whether for pre-agreed quantities of gas to be delivered for treatment or for a capacity charge in the LNG facility. The toll company usually needs basic cash flow to cover the expenses incurred, whether the processing service is used or not. Often, processing fees support project financing for export facilities. Lenders push certain aspects of the fee structure to ensure that credit risk is properly placed and that cash flows are constant throughout the term of the financing.

In the context of the development of the annual implementation program and the ninety-day schedule, project participants must also agree to conditions that allow or frame changes to the annual delivery program and procedures for allocating excess lifting operations on a ratifiable and equitable basis. The cooperation and approval of all project participants is crucial to this planning process. 2) Operational downtime: Operational processes and controls are not sufficiently developed and/or implemented. Setting up a local office that can handle the operational complexity of a toll booth is essential to avoid significant financial penalties and reputational consequences of not responding appropriately to operational challenges and adverse events (which will happen!). LNG projects are structured in a variety of ways. There is no standard structure; However, the toll model has been used in several ongoing LNG export projects. With regard to the toll model, the considerations highlighted in this document relate mainly to a project toll model, as opposed to a third-party toll (which is discussed at a very high level at the end of the document). The tariff structure will interact with many other provisions of a toll agreement. Are the fees for-profit or not-for-profit? Will capital expenditures be part of the cost? Are operating costs classified into variable and fixed costs? Are all or part of the fees payable if treatment services are not available at all times? These are all crucial questions that should be decided when determining the structure of the project. .