Compare LNG Carrier Offers Beyond the Daily Rate

Overview

The commercial desk needs a comparison that follows the service being purchased. The buyer may be evaluating a defined cargo movement while an offer is expressed through vessel employment. Connecting those views requires explicit assumptions about the programme and the agreement, rather than a single rate column beside a vessel name.

Key takeaways

• Identify the start and end basis of the employment contemplated by each offer.
• Separate quoted price from the buyer's modelled cost of using the vessel.
• Record who bears each relevant cost and which items remain unresolved.
• Use the same programme assumptions when comparing candidates.
• Reopen the recommendation when the employment boundary or cargo plan changes.

Define the service before normalising the price

Write a short description of the transport need. Identify the cargo programme, relevant timing, intended receiving arrangement and what the buyer wants to achieve with the vessel. Then compare that need with the scope of each offer.

The Baltic Exchange distinguishes LNG assessments on a time-charter basis from LPG voyage assessments. Price expressions therefore need their commercial basis preserved. Baltic indices overview.

For a live offer, read the actual wording rather than assuming that an assessment convention or familiar market expression defines the agreement. Record the price basis, currency, validity and material conditions.

If two offers describe different services, keep them as distinct alternatives until the difference is resolved. A normalised calculation can help management understand them, but it should not erase the fact that the business would be purchasing different obligations.

Identify the employment boundary

Ask when the contemplated paid period begins and ends under each proposal, and what information is needed to interpret those points. Preserve the relevant agreement references and obtain appropriate commercial or legal review where the meaning is uncertain.

Do not assume that the loaded cargo movement alone defines the full period relevant to the buyer's estimate. The applicable proposal may involve positioning, delivery or redelivery assumptions that need to be identified expressly. The analyst should use the agreed or clearly labelled planning basis rather than a generic rule.

If an end point remains optional, show that as a scenario. A daily price multiplied by an unexplained duration can make the total appear firm even when the most important timing assumption is unsettled.

The comparison should distinguish quoted terms from model inputs. The rate may come directly from the owner, while the employment duration is an internal estimate based on the current programme. Readers need to know which party supplied each element.

Map cost responsibility separately from amount

Before estimating a cost, identify whether it belongs in the buyer's view under the proposed arrangement. The same category may be treated differently in different offers, and an all-in label should not replace a review of the stated scope.

Use a responsibility matrix that points to the relevant wording or clarification. If an allocation remains disputed or unclear, show it as an open issue rather than quietly assigning it to the party that makes the comparison easier.

The matrix should be tailored to the actual offers. It is not a statement that every LNG charter uses the same allocation of costs.

Compare scenarios without overstating certainty

Once the scope is clear, test the programme cases that matter to the decision. An earlier delivery point, a later end point or an alternative receiving arrangement may affect the buyer's total differently under each offer.

Use consistent assumptions where the propositions genuinely match. Where they do not, explain the difference rather than forcing a common input that misrepresents one offer.

Keep unresolved technical or acceptance questions outside a definitive cost ranking. An attractive model result does not make a candidate usable if the relevant reviews remain open. Show readiness and price together so management can understand both the economics and the path to commitment.

The recommendation should identify what drives the preference. If the daily rate is lower but the modelled employment is longer, explain which effect dominates on the stated assumptions. If the result is sensitive to an unresolved end point, say that the choice depends on obtaining a clearer basis.

Fictional case: the narrower rate comparison

A fictional LNG trader receives offers from two candidates and initially ranks them by daily rate. The lower-rate offer appears preferable, so the desk prepares a recommendation without reconciling the employment assumptions.

A reviewer asks when the buyer's cost period begins and ends in each proposal. The first offer's planning basis includes an earlier start and a different end arrangement. The second offer is more closely aligned with the defined cargo programme, but its cost responsibilities also need clarification.

The analyst rebuilds the comparison with separate columns for quoted terms, modelled duration and cost allocation. It requests the missing clarifications and presents the relevant scenarios rather than a single unexplained total.

Management can now choose between complete propositions. The lower rate remains a real feature of one offer, but it no longer substitutes for the broader question of what the buyer would pay for the service it needs.

Preserve the path from offer to recommendation

Keep the original offers, clarifications and model assumptions linked. A reviewer should be able to trace the total back to its components and identify which changes would alter the conclusion.

When a new offer arrives, compare its scope before treating it as a pure price revision. The owner may have changed an employment condition or excluded a service that was previously included. Record that change explicitly.

The final decision note should name the current programme, preferred proposition, important dependencies and next review trigger. If management accepts a scenario assumption that remains uncertain, identify the authorised owner of that choice.

At handover, separate the active offer from earlier indications. A commercially useful history should not leave the incoming coordinator unsure which price and conditions form the current basis.

Common mistakes

Ranking candidates only by daily rate overlooks the employment period and cost boundary behind the offer.

Another mistake is to present an internal duration assumption as though the owner quoted a fixed total. Keep quoted terms and modelled inputs distinct.

Finally, avoid assuming that familiar chartering practice resolves an unclear allocation. Check the actual offer or agreement and obtain the appropriate clarification.

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