Screen-print style poster of a regas terminal with an option contract seal

CASE STUDIES / OPTIONALITY · OCT 2​025

Valuing cancellation rights and regasification slots.

The study compares a utility portfolio with and without supply cancellation rights across the same simulated price paths.

$0.24/MMBtu

MEAN OPTION VALUE · REGULAR VOLATILITY

View as slides (PDF) →

Compare two versions of the portfolio.

01 · PORTFOLIO

Both versions supply Italy and northwest Europe and have access to the same spot markets. The flexible version can cancel firm supply for a fee and buy replacement cargoes.

BASE SLOT COST $0.50/MMBTU · CANCELLATION FEE $2M PER CARGO · JAN 2​027 TO DEC 2​029 · EUROPEAN POWER UTILITY PERSPECTIVE

THE BOOK · SUPPLY, DEMAND AND SPOT

DES purchases · Livorno120% HH + $4 · CANCELLABLE
FOB purchases · USA120% HH + $2 · CANCELLABLE
DES purchases · NWE Flex120% HH + $3.80 · CANCELLABLE
DES sales · LivornoPSV + $0.25 · CANCELLABLE
DES sales · NWE / SpainTTF - $0.10 / - $0.05 · FIRM
SpotUSA (TTF) · CHINA (JKM) · INDIA (BRENT)

Separate forward and simulated value.

02 · COMPARISON

At forward prices, the option is worth $0.04/MMBtu. Mean simulated value is $0.14 at low volatility, $0.24 at regular volatility and $0.45 at high volatility. The regular-volatility value above forwards is therefore $0.20/MMBtu.

$0.00$0.50$1.00$1.50$2.00MEAN · LOW $0.14MEAN · BASE $0.24MEAN · HIGH VOL $0.45AT FORWARD: JUST $0.04OPTION VALUE PER PATH · $/MMBTU · FLEXIBLE MINUS BASE · 1,000 MC PATHS PER REGIMEHIGH-VOL TAIL TO $1.80 · NEVER NEGATIVE
Option value across simulated prices. Curve shapes are illustrative; the stated mean and median values come from the study.

Use the same price paths.

03 · PROFIT CHANGE

Each comparison uses 1,000 simulated paths per volatility setting. X-LNG recalculates both portfolios on each path and measures the profit difference.

$0M$100M$200M159.69174.70+$15MLOW VOL171.55196.89+$25MBASE VOL200.84249.36+$49MHIGH VOLBASE · NON-CANCELLABLEFLEXIBLE · WITH CALL OPTION · MEAN $MMEAN MC PROFIT PER REGIME · 1,000 IDENTICAL PATHS FOR BASE AND FLEXIBLE
Mean portfolio profit with and without cancellation rights, at three volatility levels.

Why replacement supply creates value.

04 · REPLACEMENT SUPPLY

When spot supply becomes cheaper than firm supply plus the cancellation fee, the model can replace the firm cargo. The existing sales and regas requirements remain part of the comparison.

0%10%20%30%40%50%47.2%32.7%SPOT USA17.7%25.8%SPOT INDIA17.7%25.8%SPOT CHINATHE OPTION BUYS US SPOTFLEXIBLE · WITH OPTIONBASE · SHARE OF CARGO DECISIONS, BASE VOLATILITYAT HIGH VOL THE US SHIFT PEAKS: 49.0% VS 32.3% · +16.7 POINTS · INDIA -8.9 · CHINA -6.4
Share of cargo decisions using each replacement market across 1,000 simulated price paths, at regular volatility.

Compare fees and slot costs.

05 · FEES AND COSTS

In the sensitivity test, each $0.25/MMBtu increase in slot cost reduces portfolio profit by about $0.11/MMBtu. The reported average effect of a $1M cancellation-fee increase is about $0.04/MMBtu.

$0.00$0.50$1.00CANCELLATION FEE SWEPT · SLOT COST FIXED $0.501.062$0M0.989$1M0.922$2M0.901$3M0.885$4MCANCELLATION FEESLOT COST SWEPT · FEE FIXED $2M1.154$0.001.038$0.250.922$0.500.807$0.750.692$1.00SLOT COST $/MMBTUPORTFOLIO PROFIT $/MMBTU AT FORWARDS · GREEN = BASE CASE $0.50 SLOT / $2M FEE = $0.922
Option value under different cancellation fees and regasification costs. The full study tests 25 combinations.

06 · RESULT

$0.24/MMBtu mean option value at regular volatility, including $0.04 at forward prices.

The fees and access to replacement supply are model assumptions. Mean total value, median value and value above forwards are different measures.

What this comparison shows.

07 · TAKEAWAYS

✓

Separate forward and simulated value

At forward prices, the option is worth $0.04/MMBtu. Mean simulated value is $0.14 at low volatility, $0.24 at regular volatility and $0.45 at high volatility. The regular-volatility value above forwards is therefore $0.20/MMBtu.

✓

Compare fees and slot costs

In the sensitivity test, each $0.25/MMBtu increase in slot cost reduces portfolio profit by about $0.11/MMBtu. The reported average effect of a $1M cancellation-fee increase is about $0.04/MMBtu.

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Scope of the result

The fees and access to replacement supply are model assumptions. Mean total value, median value and value above forwards are different measures.

How the study was calculated.

08 · CALCULATION

1

Set up the comparison

Both versions supply Italy and northwest Europe and have access to the same spot markets. The flexible version can cancel firm supply for a fee and buy replacement cargoes.

2

Calculate the alternatives

Each comparison uses 1,000 simulated paths per volatility setting. X-LNG recalculates both portfolios on each path and measures the profit difference.

3

Review the result

$0.24/MMBtu mean option value at regular volatility, including $0.04 at forward prices.

Modelled results depend on the contracts, prices and operating assumptions used.