LNG Freight Methodology

Submitted rates should be provided on a round trip basis and should incorporate any positioning/repositioning assumptions. Forward rates should reflect a forward view of where the spot market will price for the relevant month/period.

4 Spot Contracts and 2 Forward Assessments:

4 Spot Contracts (SparkS):

• Spark30S
• Spark25S
• Spark30S-174-premium
• Spark25S-174-premium

2 Forward Assessments (SparkFo):

• Spark30Fo
• Spark25Fo

Contract and Submission Assumptions:

Prices can only be submitted when the assessment windows are open, which is from 0800-1000 (GMT) during assessment days. This is to allow linkage between European and Asian markets. The window can be extended for late submissions for a maximum of 3 periods of 30 minutes.

LNG Freight Rates Assumptions and Specifications

The Spark $/day LNG freight rates are round trip hire based on the following assumptions and specifications:

• Routes:
  • Spark25: NWS to Tianjin
  • Spark30: Sabine Pass to Gate
• Duration:
  • Spark25: 25 days (19 days sailing, 1 day load, 1 day discharge and 4 Flex Days)
  • Spark30: 30 days (25 days sailing, 1 day load, 1 day discharge and 3 Flex Days)
• Unit: US dollars per day ($/day)
• Vessel Type: 174,000 m3 2 Stroke with no usage of any onboard liquefaction capabilities
• Delivery Location: Cold delivery at load port
• Vessel Age: Max 20 years old
• Speed: 17 knots
• Ballast Bonus: At prevailing market rate
• Positioning Fee: At prevailing market rate
• Ballast Fuel: LNG at Boil Off Rate
• Boil Off Rate: 0.085% of cargo tanks at 98.5% capacity for 174,000 m3 2 Strokes
• LNG Conversion Factor: 23
• LNG Fuel Reference Prices:
  • Spark25: last available end of day settlement price of the JKM LNG (Platts) futures front month contract (PCC:JKM) as published by ICE Futures Europe
  • Spark30: last available day’s daily settlement price of the Dutch TTF Gas 1st Line Financial Futures (USD/MMBTU) front month contract (PCC:TFU) as published by ICE Futures Europe
• Charterer Payment: Hire Cost + Ballast Bonus + Positioning Fee
• Spark Rate: (Charterer Payment - Ballast Fuel Costs) / Duration
• Rounding: All assessments are rounded to the nearest $250 and submissions are accepted in $250 increments.

LNG Freight Rates Assessment Process

Spark may engage with submitters to ensure submissions align to Spark specifications. Following engagement with a submitter, if Spark believes a submission does not align to the specifications, Spark may remove this submission from the calculation given internal approval from at least two Spark Senior Assessors.

After the submissions from eligible shipbrokers have been checked by a Spark Senior Assessor and all the required justifications have been provided, the final assessment will be the simple average of eligible broker assessments computed at the end of the submission window, rounded to the nearest $250.

Spark25/30S-174-premium assessment:

Assessed via direct submissions from leading shipbrokers, the Spark25/30S-174-premium reflects a weekly assessed 174 2 Stroke spot premium to 160 TFDEs assessments for Spark30 and Spark25.

• Spark25S-174-premium = Spark25S - Spark25S-160
• Spark30S-174-premium = Spark30S - Spark30S-160

where:

Spark25S-160 and Spark30S-160 are spot LNG freight rates aligned to the methodology for the existing Spark25S and Spark30S 174 2 Stroke rates, except for the following specifications:

• Vessel Type: 160,000 m3 TFDE
• Boil Off Rate: 0.1% of cargo tanks at 98.5% capacity

Assessment Frequency and Settlement Mechanisms:

• Inputs and Settlement Mechanism:
  • Spark25S and Spark30S Prompt Assessment:
    • Spot Period: vessel delivery 15-45 days forward from the date of assessment.
    • Publication Frequency: Daily (between 0800-1000 GMT)
    • Settlement: average of assessments between 1st day and last day of calendar month (inclusive).
  • Spark25/30 Forward Contracts:
    • Forward Curve: 12 months (M+1 to M+12)
    • Forward Curve Frequency: 1 time per week (Tuesday 0800-1000 GMT)
    • Rolling: M+1 to M+12 roll on the first business day of the month.
  • Spark25/30-174-premium Prompt Assessment:
    • Spot Period: vessel delivery 15-45 days forward from the date of assessment.
    • Publication Frequency: 1 time per week (Tuesday 0800-1000 GMT)

Holiday Days:

Spark follows the UK Public Holiday calendar. There will be no submissions on a UK public holiday unless clearly communicated by Spark.

Eligibility Criteria and Benchmarking:

Only recognised, Eligible Brokers form part of the Spark Price Assessment. All new Eligible Brokers must be nominated by at least 5 market participants in order to contribute to the Spark Price assessment. Brokers must be actively involved in the spot market and must demonstrate this.

A survey will be sent out to all Spark users every 12 months (starting in September 2021) allowing the market to challenge the involvement of any Eligible Broker or suggesting the addition of new brokers.

Market Data is also received from a variety of other market participants who are active in the LNG freight market. This adds further transparency to the market.

Some examples of Spark methodology applied to physical fixtures.

For full details behind these calculations please see the Spark Calculator and associated methodology.

Contract Type: Spark30S:

• A vessel fixed at 50k/day with 100% fuel and 100% hire ballast bonus to load port (Sabine) and no positioning fee.
  • Spark30 rate: $50,000/day
• A vessel fixed at $50k/day with a $1m ballast bonus lump sum and no positioning fee.
  • Spark30 rate: $52,000/day
• A vessel fixed at 50k/day with 100% fuel and 100% hire ballast bonus to load port (Sabine) and 100% fuel and 100% positioning from Singapore via Panama including Canal cost.
  • Spark30 rate: $141,000/day

Please note that the assumed LNG price for the calculations is $6.87/MMBtu.

Examples of how to apply the SparkS Settlement Mechanism:

• Calendar Month: June 2022
• Settlement period opens: 1st June 2022
• Settlement period closes: 30th June 2022

Settlement Mechanism: average of assessments (daily) between 1st June 2022 and 30th June 2022 (inclusive).

Raising challenges of Spark assessments:

Spark assessments can be challenged from within the platform via the challenge button.

Governance and Compliance

Spark believes that commodity pricing should be based on direct and independent submissions from approved, active market players. Spark delivers this via an intuitive, easily accessible platform, with Spark price assessments (the “Spark Prices”) based on a clear and fit-for-purpose methodology.

Spark advocates for data-driven assessments that are not susceptible to individual judgement or bias. The Spark approach, which sets us apart from traditional PRAs, is designed to produce high quality, robust price assessments in both liquid and illiquid markets. Further information on Spark governance and compliance can be found in the Spark Governance Policies and Procedures document here.

Spark endeavours to standardise our approach to data collection and price formation wherever possible, whilst allowing for market-specific methodologies when required. This allows Spark to:

• Produce reliable, fair, data-driven and representative price assessments;
• Provide mechanisms aimed at preventing market manipulation;
• Provide greater levels of transparency in illiquid markets by providing a growing amount of anonymised, relevant data; and
• Avoid selective reporting where possible whilst recognising industry dynamics and lack of liquidity.

Spark Prices are automatically calculated based on the methodology outlined in this document. Market participants can directly enter price information on the platform, removing the need for journalists and assessors to gather data. This allows Spark’s senior assessors to focus on identifying anomalous data, and ensuring the platform operates as expected. Data submissions that breach defined tolerance thresholds must be justified by the submitter. All justifications are recorded in the Spark administration system and are accessible by Spark senior assessors.

By following a data-centric method that relies predominantly on technology, Spark removes human error and judgement as much as possible from the Spark Prices.

In order to ensure Spark provides reliable, fair and representative price assessments, at least 50% of the approved and permissioned eligible submitters are required in order to calculate a Spark Price. In the event that threshold is not, Spark will roll forward the prior published price. Spark customers will be informed if such action is necessary.

Revision History