Three ways to buy or sell a cargo of LNG coexist in the same market, and knowing which one a transaction falls under tells you a great deal about who is taking what risk.
The sale and purchase agreement
For most of the industry’s history, the SPA was the market. A single seller and a single buyer negotiate directly, agreeing a volume to be delivered over a long period — historically fifteen to twenty years — a delivery mechanism, and a price formula that will govern every cargo for the life of the contract.
The length is not incidental. A liquefaction plant is a multi-billion-dollar asset with a multi-decade operating life, and lenders financing it want confidence that revenue will arrive reliably for long enough to repay the debt. A stack of long-term SPAs with creditworthy buyers is what has historically turned a proposal into something a bank would finance, which is why reaching a final investment decision and securing offtake are so closely linked.
The price formula inside an SPA is itself a negotiated instrument, not a market quote, and how those formulas are built is the subject of the next module.
Tenders
Between a bespoke bilateral SPA and a single spot cargo sits the tender: a buyer or seller states what it needs — a volume, a delivery window, sometimes a rough price structure — and invites competing offers, choosing the best one rather than negotiating with a single counterparty from the start.
Tenders suit volumes and durations that do not justify the cost and time of a full bilateral SPA negotiation, and they have become more common as buyers diversify their supply across more counterparties than the old bilateral model typically produced. A tender can result in anything from a single cargo to a multi-year supply arrangement, so it is better understood as a buying process than a contract type of its own.
The spot market
A spot cargo is sold close to when it will actually move, priced against the market conditions of that moment rather than a formula fixed years in advance. It is the smallest, fastest and most flexible unit of LNG trade, and it exists because portfolio players — companies holding both supply and demand positions across many contracts — need a way to rebalance in real time: sell a cargo they do not need, buy one to cover a shortfall, or redirect a cargo wherever the netback is best.
Spot trade has grown substantially as more supply has become available without the destination restrictions that once locked cargoes to specific buyers, but it remains a market for marginal volume layered on top of the long-term contracts that still cover most of what actually gets produced and delivered.
Why the mix matters
None of these three mechanisms is disappearing or fully displacing another. A project needing project financing still needs long-term offtake behind it. A trader running a portfolio still wants spot flexibility to optimise around it. A buyer wanting to diversify supply without a twenty-year commitment still uses tenders to do it.
What shifts, sometimes considerably, is the balance between them — how much of the market’s volume moves under each mechanism in a given period, which tracks how much new liquefaction capacity is being financed, how confident buyers feel about future supply, and how developed the spot infrastructure and shipping availability are at the time. Reading a specific market share for spot versus long-term trade as a permanent structural fact rather than a current condition is a common way to misread where the industry actually stands.
What this means for reading a project in the tracker
A terminal’s status moving from proposed toward construction is frequently the visible sign of an invisible commercial event: enough long-term SPAs, or a strong enough combination of SPAs and financing confidence, having been secured to justify a final investment decision. The tracker records the physical consequence — a status change, a capacity figure — without recording the contracts behind it, because those contracts are commercial and rarely made public in detail. Knowing that the mechanism exists is what makes a status change legible as more than an isolated fact.