The photo is sourced from offshore-energy.biz
The highest share of long-term contracts was observed in the Asia-Pacific, reaching 68.9% last year. Asia-Pacific countries, including Japan, China and India, are among the largest importers of LNG, for which long-term contracts are crucial. For instance, Indian Oil entered into a 5-year contract for the supply of 1.2 million tons of LNG per year with ADNOC Gas (UAE); China’s Foran Energy signed a 20-year agreement for the supply of 0.9 million tons of LNG per year from the Sabine Pass project (USA); and the Bangladeshi company Petrobangla agreed on supplies of 1.8 million tons of LNG per year for 15 years with QatarEnergy (Qatar).
A high share of spot contracts in 2023 was observed in Latin American countries (65.5%), for which the United States is the biggest supplier. By supplying to this region, American producers are able to sell excess LNG that is not covered by long-term contracts. This is largely why LNG imports in Latin America are highly volatile. For instance, Chile and Argentina reduced their LNG imports in 2022 by 25% (to 3.3 billion cubic metres) and by 36% (to 2.6 billion cubic metres), respectively. These reductions were caused by high spot prices for LNG and the reorientation of American producers to the European market. In 2023, in the context of price correction and stabilising demand in the European market, Chile and Argentina increased their LNG imports by 7% (to 3.6 billion cubic metres) and by 15% (to 2.7 billion cubic metres), respectively.
Medium-term contracts in 2023 were most in demand in the Middle East (11.3%), including due to low demand for LNG. Middle-Eastern countries, Kuwait and Jordan among them, accounted for just 1.7% of global imports (excluding re-exports) last year. To satisfy such demand, contracts lasting from 4 to 48 months are sufficient, as they allow buyers to plan deliveries without imposing long-term obligations.
Overall, despite the proliferation of spot contracts, long-term agreements prevail in the LNG market, ensuring the predictability of supplies for leading LNG consumers, such as the countries of East and South Asia, which accounted for over 60% of global LNG imports in 2023.
