These quantity determinations recognize realities. Quantity determinations are also indirectly e if related to shipping terms. For example typically sells LPG on an basis at the plant, meaning that quantity is determined at the time of loadin produg cally LNG Quantity Provisions Similarly, the quantity provisions of LNG contracts recognize the is the realities of the LNG marketplace.
The need for LNG quantity mexibility is determined by production and demand. n often S to be production levels during the early years of a contract may be uantity significantly less than those during the mid-to-late years, as the facilities mature and are capable of more efficient operation Accordingly, contract quantities vary in relation to expected production levels.
Typically, this means that the quantity in the first five years of the contract(often referred to as the”build-up period”) ny are ecify a will gradually increase to a stated level which will remain fixed Butane thereafter. This type of approach has been adopted by ADGAS to tion of accommodate its expansion A single contract level would, however, not account for the unpredictability of demand.
Most LNG term contract buyers are large utility companies and use the LNG as fuel for producing electricity. As can be expected, demand for electricity(and thus as the seller LNG) will vary greatly over the course of a long-term project. jantin Therefore, the contract must accommodate this variance to the atisfaction of both parties. This is generally achieved by providing a base quantity level which the buyer is afforded upward and from flexibility.
If the buyer does not accept delivery of the downward quantity, generally required to accept the difference at a it is mentions apply). However, the Less clear, at least in terms of standard contractual provisions what happens in the event that production levels provide quantity in excess of the maximum contract quantities. The seller ma have complete discretion with respect to such excess quantities for the duration of the contract or for a specified period of time the buyer may retain the right of first refusal Generally in such cases the parties will meet, discuss the possibilities and agree on an appropriate solution.
ADGAS’ relationship with its single buyer, TEPCO, has generally followed the features described above. The original plant start-up in 1977 involved a build-up period to reach the full contractual quantities. The expansion of the ADGAS plant and the corresponding increase in output also involved a tiered approach to contractual quantities. Quantity levels were increased during the early years of the contract and eventually reached a plateau for the remaining duration.
The contract provided significant quantity flexibility by allowing upward and downward flexibility from the stated quantity levels, although various levels of commitment including those described as”best efforts apply in relation to the exercise of such flexibility On the technical side and regardless of product category a contract must outline the procedures for determining the actual quantity delivered, regardless of the content of the quantity section in general.
As with quality specifications, these procedures are developed with operations personnel. Flexibility in also depends on availability. Most LNG and LPG will provide the seller with some leeway in terms of performance in the event of a gas feedstock supply interruption. an event might be caused either by an interruption or reduction in supply(due, for instance, to technical. reasons) or as a result of force mature.