Process & Notice:
US LNG offtake contracts (especially at Cheniere’s Sabine Pass and Corpus Christi, Sempra’s Cameron, Freeport, etc.) are structured as “take-or-pay” tolling agreements.
Offtakers must notify the terminal operator of their intent to cancel a cargo typically at least 40 days before the start of the loading month (e.g., for a February cargo, notice is due by December 20).
The exact notice period can vary by terminal and contract, but 40–45 days is standard for Cheniere and similar for other US projects.
Penalties:
The primary penalty for cancellation is the loss of the fixed liquefaction fee (usually $2–$3/MMBtu), which is paid regardless of whether the cargo is lifted (“sunk cost”).
There is no additional penalty for not lifting the cargo beyond the loss of the fixed fee, unless the contract includes specific delivery obligations to third parties or vessel charters (rare for standard FOB contracts).
The offtaker avoids variable costs (feedgas, shipping, regasification) by not lifting.
Summary Table:
Step | Typical Notice Period | Penalty/Cost |
|---|---|---|
Notify cancellation | 40–45 days | Forfeit fixed liquefaction fee ($2–$3/MMBtu) |
Current Netbacks (Summer 2026, USGC to TTF, Adjusted for Sunk Costs)
Calculation:
Netback = TTF Forward Price – (Henry Hub x 115% + Variable Shipping)
Sunk liquefaction fee is excluded from netback for economic decision-making, as it is paid regardless.
Forward Price Assumptions (Summer 2026):
Henry Hub: ~$4.00/MMBtu (EIA STEO Oct 2025)
TTF: ~$8.00–$8.50/MMBtu (market forward curve, mid-2026)
Variable Shipping (USGC to NWE): $0.80–$1.20/MMBtu (IEA/NGI, given current vessel oversupply)
Liquefaction variable O&M: ~$0.30/MMBtu
Estimated Netback (Excluding Sunk Fees):
Component | Value ($/MMBtu) |
|---|---|
TTF Summer 2026 | 8.25 |
Henry Hub x 1.15 | 4.60 |
Variable Shipping | 1.00 |
Variable O&M | 0.30 |
Netback (to USGC) | ~$2.35 |
Key Points:
Netbacks remain solidly positive for Summer 2026, even after accounting for variable costs.
The fixed liquefaction fee is a sunk cost and does not factor into the marginal decision to lift or cancel a cargo.
Shipping market remains oversupplied, keeping variable costs low.
Market View
Bullish/Neutral for USGC LNG flows to Europe for Summer 2026:
Netbacks are positive, cancellation risk is minimal.
Ample vessel supply and robust European summer demand support continued US LNG exports.
Only scenario for cancellations would be a sharp collapse in TTF or spike in shipping rates—neither is currently forecast.
References:
[Argus, S&P Global, RBN Energy]
Summary Table: USGC to TTF Netback (Summer 2026, $/MMBtu)
TTF | Henry Hub | Shipping | O&M | Netback |
|---|---|---|---|---|
8.25 | 4.60 | 1.00 | 0.30 |
Bottom Line:
US LNG cargo cancellations are rare in the current environment, with positive netbacks to Europe for Summer 2026. The process is straightforward: notify ~40 days ahead, forfeit the fixed fee, no extra penalty. The economics favor continued strong exports barring a major market shock.