A European utility entered into an arrangement to purchase LNG cargoes on an FOB basis from a major liquefaction facility, while simultaneously entering into onward sales of those same cargoes, also on an FOB basis, at the same plant. During a period of exceptionally low global LNG prices, the buyer under the onward sales contract declared Force Majeure and failed to lift the cargoes. The client disputed the validity of this claim, asserting that the circumstances did not meet the contractual or market-recognised threshold for Force Majeure in the context of FOB LNG transactions. The dispute therefore centred on whether the buyer’s non-performance could legitimately be excused under Force Majeure provisions, and the resulting exposure faced by the client.
Gas Strategies’ independent LNG energy experts played a key role in enabling the client to substantiate its challenge by bringing deep, experience-based insight into LNG portfolio management and the practical application of contractual provisions in volatile market conditions. Drawing on first-hand expertise in managing LNG supply and trading portfolios, we enabled the client to demonstrate that the buyer’s invocation of Force Majeure was not consistent with established market practice or the commercial realities of FOB LNG arrangements.
Strengthening resolution as part of LNG expert review
Our analysis highlighted how such cargo obligations are typically managed, even in distressed price environments, reinforcing the position that adverse market conditions alone do not constitute a valid basis for non-performance. In addition, our work provided a clear and credible quantification of the financial impact arising from the non-lifted cargoes, grounded in both market pricing and realistic monetisation pathways. By integrating detailed technical understanding of portfolio dynamics with robust financial analysis, Gas Strategies helped present a coherent and compelling case to the arbitration tribunal. Our evidence was seen as instrumental in clarifying the interaction between contractual Force Majeure provisions and real-world trading behaviour, supporting a resolution aligned with both legal interpretation and accepted LNG market norms.