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Commonwealth LNG, Gunvor aim to accelerate stalled LNG plant via fuel tenders

HOUSTON, Jan 18 (Reuters) - Commonwealth LNG on Monday launched a liquefied natural gas (LNG) tender for its proposed Louisiana liquefaction plant, hoping to accelerate an investment decision on the project by reducing its uncertainty for potential customers and investors.

The plant is among a dozen stalled last year as the drop in energy demand exacerbated a reluctance to sign on to projects without a certainty of being completed. Bankers have said they expect no new LNG projects to go ahead this year.

Commonwealth LNG proposed an 8.4 million tons per annum (mtpa) plant on the U.S. Gulf Coast. Financial approval of the project has been delayed more than a year, to the first quarter of 2022, with initial output scheduled for mid-2025.

Energy trader Gunvor Group will guarantee LNG supplies for prospective customers and provide shipping as needed, the companies said. Gunvor previously agreed to acquire 3 mtpa of the project's future supply.

The tender applies a contracting technique akin to energy pipelines that employ "open season" bidding to solicit shippers, said Jason Feer, head of business intelligence at Poten & Partners, a shipbroking and LNG advisory firm managing the tender.

Commonwealth is asking potential buyers to submit their offers for LNG pricing, volume and contract duration, subject to its approval. Bids are solicited through April 2 and, if accepted, contracts will be signed by June, Commonwealth said.

The offer is "a low-risk solution for buyers to address their long-term needs while allowing Commonwealth to advance our project expeditiously," said Chief Executive Paul Varello.

"It is too early to say whether this becomes a model for LNG project development, said Poten's Feer. "It has benefits for the LNG company and for off takers. They won’t have to wait two years to find out whether a project will get enough contract" to move ahead.

Poten & Partners, the shipbroking and LNG advisory firm, is managing the tender. (Reporting by Gary McWilliams; editing by Jonathan Oatis)