Understanding the Key Terms and Procedures for LNG Transactions in North America

Liquefied Natural Gas (LNG) plays a crucial role in the global energy market, especially in North America, where supply and demand continue to grow. For businesses involved in LNG trading, understanding the key terms and transaction procedures is essential to ensure smooth operations and avoid costly mistakes. This post breaks down the important aspects of LNG transactions originating from North America, focusing on delivery terms, inspection protocols, insurance, payment methods, and transaction types.

Delivery Terms: FOB and CIF Explained

When purchasing LNG, delivery terms define the responsibilities and costs borne by the buyer and seller. Two common terms used in North American LNG transactions are FOB (Free on Board) and CIF (Cost, Insurance, and Freight).

• FOB (Free on Board) means the seller delivers the LNG onto the vessel at the loading port. The buyer assumes responsibility for freight costs, insurance, and risks once the cargo is on board. This term is often preferred by buyers who want control over shipping arrangements.

  
  

• CIF (Cost, Insurance, and Freight) means the seller covers the cost of freight and insurance up to the destination port. The buyer takes responsibility once the LNG arrives at the unloading port. This option suits buyers who prefer a more hands-off approach to logistics.

  
  

In North America, LNG is available at competitive FOB prices around $310 to $320 per metric ton and CIF prices ranging from $320 to $330 per metric ton. These prices reflect the current market and include commissions of $5.00 on the buyer side.

Available Loading Ports and Their Importance

The choice of loading port affects shipping time, costs, and logistics. North American LNG suppliers offer loading from several strategic ports:

• Houston (USA)

• Rotterdam (Netherlands)

• Jurong (Singapore)

• Fujairah (UAE)

  
  

Each port supports different transaction procedures and vessel types. For example, Rotterdam and Fujairah allow FOB Tank-to-Vessel (TTV) and Tank-to-Tank (TTT) procedures, which provide flexibility depending on the buyer’s storage and transportation capabilities.

Inspection and Quality Assurance

Before loading, LNG shipments undergo rigorous inspection to ensure quality and quantity compliance. North American LNG suppliers use SGS-certified inspection protocols. SGS is a globally recognized inspection company that verifies the cargo meets contractual specifications.

This certification protects both buyers and sellers by providing an independent report on the LNG’s condition before shipment. It reduces disputes and builds trust in the transaction.

Insurance Coverage for LNG Shipments

Shipping LNG involves risks such as cargo damage, delays, or accidents. To mitigate these risks, sellers provide 100% insurance coverage of the shipment value. This insurance protects the buyer’s investment during transit, especially under CIF terms where the seller manages freight and insurance.

Buyers should confirm the insurance scope and coverage limits before finalizing contracts to avoid unexpected liabilities.

Accepted Payment Methods

LNG transactions require secure and reliable payment methods. North American suppliers accept:

• T/T Wire Transfer

• MT103 (Swift payment confirmation)

• SBLC (Standby Letter of Credit)

• DLC (Documentary Letter of Credit)

  
  

These payment options offer flexibility and security for both spot purchases and long-term contracts. For example, SBLC and DLC provide guarantees from banks, reducing financial risk for sellers.

Transaction Types: Spot and Contract Basis

LNG trading can occur on a spot basis or through long-term contracts.

• Spot transactions involve immediate purchase and delivery, suitable for buyers needing quick supply or testing new suppliers.

• Contract basis involves agreements for regular deliveries over months or years, providing price stability and supply assurance.

  
  

North American LNG suppliers support both transaction types under FOB or CIF arrangements, allowing buyers to choose what fits their operational needs.

Transaction Procedures for LNG Delivery

Understanding the specific procedures for LNG delivery helps buyers plan logistics and storage.

• Tank-to-Tank (TTT) Procedure: LNG is transferred directly from the seller’s storage tank to the buyer’s storage tank at designated ports. This method minimizes handling and reduces contamination risk.

  
  

• Vessel-to-Tank (VTT) Procedure: LNG is loaded onto a vessel at the seller’s port and then offloaded into the buyer’s storage tank at the destination port.

  
  

• FOB Tank-to-Vessel (TTV) / Tank-to-Tank (TTT) Procedure: Applicable at ports like Rotterdam, Fujairah, Singapore, China, and Houston, this procedure allows flexible transfer options depending on the buyer’s infrastructure.

  
  

These procedures ensure LNG is handled safely and efficiently, meeting international standards.

Quantity and Supply Details

North American LNG suppliers offer an unlimited supply with flexible lifting quantities:

• Minimum liftable quantity: 50,000 metric tons (MT)

• Maximum monthly quantity: 100,000 MT

  
  

This flexibility allows buyers to scale purchases based on demand without worrying about supply constraints.

Requesting a Full Sales and Contract Offer (SCO)

Buyers interested in detailed terms and pricing can request a full SCO. This document outlines all conditions, prices, and procedures, providing a clear basis for negotiation and contract signing.

Final Thoughts

Navigating LNG transactions requires clear understanding of delivery terms, inspection protocols, insurance, payment methods, and transaction procedures. North American LNG suppliers offer competitive pricing, reliable inspection, and flexible transaction options to meet diverse buyer needs.

For businesses looking to secure LNG supply, focusing on these key terms and procedures will help avoid risks and ensure smooth delivery. Requesting a full SCO and confirming inspection and insurance details are practical next steps to move forward confidently.