Nothing about a liquefaction plant’s physical design tells you how it will be paid for, and the financing structure behind it shapes commercial behaviour in ways that show up long after construction finishes.
Why offtake comes before construction
A liquefaction plant is a capital-intensive, multi-year construction project producing no revenue until it is finished, financed substantially with debt that has to be serviced regardless of how the finished plant performs commercially. Lenders extending that debt want confidence, established before they commit, that the plant’s output is already largely spoken for by buyers capable of paying for it over a period long enough to retire the loan.
That confidence comes from offtake agreements signed before or during construction, and the volume, length and creditworthiness of those agreements is what a project’s owners present to lenders as the basis for financing. A project can be technically ready to build and still wait, sometimes for years, if it has not assembled offtake that lenders find sufficient.
Two structures, two directions of commodity risk
Traditional merchant structure. The plant owner buys or produces the feed gas, owns the LNG it makes, and sells finished cargoes to buyers under sale and purchase agreements. The plant owner bears the commodity risk on the spread between feed gas cost and LNG sale price, which can be highly profitable when that spread is wide and can compress sharply when it is not.
Tolling structure. The customer supplies its own gas, delivered to the plant, and pays a fee for it to be liquefied — the customer retains ownership of the molecules throughout, and what changes hands commercially is a processing service rather than a commodity sale. The plant owner earns a largely fixed liquefaction fee regardless of what gas or LNG happens to be worth in the market that month; the customer bears the full commodity risk, in exchange for controlling the resulting cargoes completely, including where to sell them.
Tolling has been the dominant structure behind much of the liquefaction capacity built along the US Gulf Coast, in part because it separates a stable, contracted, financeable revenue stream — the fee — from the volatile commodity risk that lenders are typically reluctant to underwrite directly. It is also part of why US-origin cargoes so often move without destination restrictions: the customer that paid to have its own gas liquefied has every reason to want the freedom to send the resulting cargo wherever it is worth the most.
What “sufficient” offtake actually means
There is no fixed universal threshold — no rule that a project needs exactly some stated percentage of its capacity contracted before financing follows. What lenders and equity sponsors actually weigh is a combination of how much volume is committed, over what length of time, to buyers of what credit quality, alongside the broader financing environment and the sponsors’ own balance sheet strength, which can substitute for offtake volume to some degree if the sponsor is willing to carry more risk itself.
This is why two projects with superficially similar contracted volumes can reach final investment decision on very different timelines — the judgement is qualitative and specific to each deal, not a mechanical formula applied uniformly across the industry.
What this means for reading a proposed project
A project sitting at proposed status for an extended period is very often waiting on precisely this: not a lack of technical readiness, but a lack of sufficiently strong offtake commitments to unlock financing. The tracker records status and capacity; it does not record the commercial negotiations happening behind a proposed project, which is exactly why a status that looks static can conceal genuine, active progress toward exactly the threshold that will eventually move it.