Market advice and estimates of contemporary LNG contract prices

⁠⁠⁠ The ACCC seeks estimates of contemporary LNG prices for medium term LNG contracts on a 6-monthly basis. These estimates must be expressed as a percentage, or slope, of Brent oil prices, and must be able to be applied against Brent oil futures to derive estimates of forward LNG prices for LNG sold into the Asian LNG market. These forward LNG prices will be used to calculate LNG netback prices (by deducting LNG freight rate estimates and other relevant costs).

1. In estimating contemporary LNG prices, the supplier will be required to:

• consider and advise on the inclusion of a fixed price term (in addition to estimates of the percentage link to Brent oil prices);
• determine which LNG contracts should be referenced to inform estimates of LNG prices; and
• normalise for all relevant contract-specific parameters to develop a single estimate of the appropriate slope and fixed price term (if applicable), including for the following parameters:

1. point of delivery (i.e FOB or DES)
2. supply flexibility
3. delivery flexibility (as relevant)
4. contract volume flexibility
5. LNG freight costs.

The Supplier will be required to provide information on how it has estimated LNG contract prices, and on any market development that provide context or underpin estimated LNG prices.

In particular, the supplier will be required to provide information on:

• relevant LNG contracts, or characteristics of relevant LNG contracts, that have informed estimated LNG prices;
• key assumptions that have been made to estimate LNG prices;
• how LNG contract parameters have been normalised across; relevant LNG contracts;
• market developments that provide necessary context to the LNG price estimates provided by the supplier (including changes in price estimates over time) such as changes in LNG market demand and supply; and
• any other relevant market developments.

The supplier will be required to provide:

• reports that set out the proposed approach to estimating LNG contract prices/slopes;
• estimates of contemporary LNG contract prices/slopes, delivered every 6 months; and
• written reports that set out relevant market developments to provide context for estimates of contemporary LNG contract prices/slopes, delivered every 6 months.