Australia’s Gladstone LNG issues tender for five cargoes

The Gladstone LNG (GLNG) project in Queensland, Australia has issued a tender requesting bids for five commissioning cargoes between October and December, according to traders invited to participate.

GLNG issued the tender on 24 August and will close it on 14 September, with the validity period covering one week. Two cargoes are available for October and November each, with one cargo for December.

Bids can be submitted on either an FOB (free on board) or DES (delivered ex-ship) basis, the traders told ICIS.

According to the tender document, GLNG will sell the cargoes to the highest bidder, but there is optionality not to deliver the cargo if the project does not meet its production volume threshold, traders said.

“What that means is the performance of the project will determine whether the cargoes will be delivered or loaded. They will cancel [the deal], if they do not produce sufficient volumes,” one trader in Europe said.

However, the optionality only gives GLNG the operational right to cancel a delivery or loading during the project’s commissioning phase, not the commercial right, a trader in Asia said.

While the GLNG tender will receive wide interest from market participants, traders are expecting bids to be placed at a discount to current spot prices, because of the flexibility required.

“Unless the buyer has structural flexibility, it can be risky to buy a cargo that may not arrive, because of the production uncertainty during a new project’s commissioning phase,” the first trader said.

“You cannot rely on these cargoes, unless you have portfolio flexibility like the majors,” the trader added.

However, the tender invitation from GLNG is a strong indication that the export plant is likely to start up by end-September.

“The most likely scenario is that GLNG will produce the cargoes as required,” the second trader said. xieli.lee@icis.com