Anatomy of LNG Shipping & Operations — Commercial Aspects
Cambridge Academy of Transport is now able to offer two distinct 2-day LNG courses. The first course covers Design, Technology & Markets whilst the second course, described below, explores the Commercial Aspects of LNG shipping and trading.
The two courses can be taken separately; but as they are scheduled back-to-back, individuals can opt to take both in succession, offering an immersive learning experience of this fast growing and technologically challenging industry.
The curriculum of the course will examine transport costs or freight economics, viewed through the prism of a shipper or vessel charterer versus that of the vessel owner/operator. It will also cover how cargo heel retention and boil-off affect these economics and which party is liable for such costs.
A dedicated session will look at the building blocks and variables of LNG voyage estimation as well as the impact of capital expenditure (CAPEX). Also included are the critical importance of cost and revenue allocations, running a freight book as well as the merits of dedicated applications to keep track of this.
The topical session on LNG pricing will examine how differentials create the opportunity for arbitrage, using freight as the enabler. It will also cover the emergence of Gas Hubs, the drivers at various pricing points as well as methodologies to hedge both commodity and freight price risk.
Day two of the course will focus on LNG cargo sale and purchase agreements and associated LNG charter parties, with particular emphasis on a number of key clauses which are unique to LNG. The aim of this course finale will be to reveal the "Deal Architecture" and to discuss areas of dispute and their resolution.
A summary of the course content follows:
LNG FREIGHT and DEAL ECONOMICS
- Key concepts: TCE and Unit Cost
- Impact of Heel and Boil-Off
- OPEX indexation and new build costs (CAPEX)
- Voyage Estimator and Unit Cost Calculator — examples
- KPI and (economic) Performance Monitoring Applications
- Freight Book and Cost Allocations
- Speed, Consumption, Due Dispatch and E2E efficiency in the Supply Chain
- Voyage Orders and Communications Protocol
- Demurrage, other causes of Profit Leakage and (sub)Optimisation
LNG PRICING and TRADE FLOWS
- Freight in early LNG projects
- Evolution of US and European gas and LNG markets
- Japan, the original driver for Asian LNG project and markets
- Evolution of Gas Market Models (Europe, US and Asia)
- Pipeline vs LNG
- Pricing formulas
- Freight and commodity price arbitrage, evolving global flows
- S-curve and Gas Hub pricing, merchant terminals and FOB sellers
- Price Risk Hedging
- LNG Supply and Demand, current and forecast
- Optimisation vs Destination Clauses
- Definitions: Owner, Operator, Charterer, Shipper
- Ship owner vs Charterer: clashing objectives
- Procuring Ocean Freight — a Process Map
- Fleet statistics and trends in ownership profiles
- Relative size of owners and operators, barriers to entry
- Chartering Chains and the difference with the Cargo Contract
- The "Holy Trinity": C/P, B/L and Cargo Contract — how this applies to LNG
- Negotiating Tactics, Preparation and Execution
- Why is Time Charter the default format in LNG?
- "Life of a Charter" process map
- Main Formats of LNG T/C and Standard Clauses (ShellLNGTime 1 and 2)
- Overview of LNG specific clauses (speed, performance, BOG, etc.)
LNG SALE and PURCHASE CONTRACTS
- Deal Architecture and sample formats
- Long term contracts
- Annual Contract Quantity (ACQ) and permitted variations
- Delivery windows
- Growth of short term and spot trades and emergence of Traders
- Master Sale and Purchase Agreements (MSPA)
- FOB buying and DAP selling warranties
- Key Notices and other documents
- Contractual Disputes and Claims (C/P and Cargo): pathways to resolution
VOYAGE & DEAL ECONOMICS
- Introduction to key concepts
- Fundamental Cost & Revenue Criteria
- Core components of Voyage Economics vs. Deal Economics
- Owners vs Charterer: Key Objectives
- Key types of charter party and allocation of costs
- Voyage vs Time Charter
- Freight calculation: unit cost versus time charter equivalent
- Freight vs Hire vs Daily Value
3-4 December 2019
Park Regis Kris Kin Hotel, Dubai
The cost of the course is USD2,000 per person, which includes tuition, refreshments, and lunch each day. Accommodation is NOT included but is available at the venue hotel or one of the many hotels located nearby.
Individuals wishing to attend both this course and the companion programme "Anatomy of LNG Shipping & Operations — Design, Technology & Markets" will receive a 10% discount on the total course fee.
Further information, contact:
Cambridge Academy of Transport
48 Whitlesford Road
Cambridge CB22 5EW
Programme and Booking Form
To download a programme giving fuller details of the course, click here.
For a Booking Form, click here.