An Asian LNG buyer entered into a long-term agreement for the supply of LNG cargoes on a DES basis. During a period of exceptionally high global LNG prices, the seller failed to deliver a series of contracted cargoes. Rather than perform, the seller sought to rely on a contractual price cap associated with non-delivery, effectively using it as a mechanism to limit its financial exposure despite the significantly higher market value of the cargoes at the time. The buyer contested this approach, arguing that the seller’s failure to deliver was not justified and that the price cap did not reflect the true economic loss incurred, particularly given the buyer’s need to secure alternative supply to meet downstream customer demand.
Gas Strategies’ experts played a critical role in enabling the client to challenge the seller’s position by bringing deep, independent insight into LNG shipping logistics and trading behaviour. Drawing on extensive experience in operating LNG fleets and managing cargo movements, we enabled the client to demonstrate that the seller’s actions were not consistent with a genuine intent to deliver. Our analysis of vessel availability, shipping routes, and transit times showed that, despite formal cargo nominations, the logistical realities made delivery implausible, reinforcing the conclusion that the seller had not taken the necessary steps to fulfil its contractual obligations.
In parallel, our quantitative assessment provided a robust and market-grounded valuation of the buyer’s losses, capturing both the prevailing price environment and the practical cost of securing replacement volumes. By combining detailed technical analysis with a clear articulation of the commercial impact, Gas Strategies equipped the client with compelling evidence that the seller’s reliance on the price cap did not reflect the true scale of the loss. This integrated approach was seen as instrumental in strengthening the client’s negotiating position, enabling a settlement significantly closer to the full market value of the undelivered cargoes while avoiding the uncertainty and cost of arbitration.