In recent years the LNG market and tenders have escalated at a good pace. For instance: A decade ago there were only 17 markets importing LNG and now approximately 40 markets are trading it.
It is especially true when it comes to multiple cargos for a month or a year-long deadline. The emirates gas bidders announce the requirements like cargo delivery location, and more to invite the potential bidders across the world. However, the selection criteria based on the low price may also include credit rankings, performance, and other qualifications period
Usually, the LNG or Emirates gas tenders are in favour of the tenderers. As the bidders should beat the best price of the market even before entering the procurement process. Tenderers have the right not to choose any bidder till the bidder meets project expectations.
Check out the article to understand how bidders can reduce the barriers to find the potential bidder for their gas tender.
Transaction Types of Gas Market
Direct Bilateral
As per the (GIIGNL), International Group of Liquefied Natural Gas Importers, the short-term tender’s transaction has increased from 5% to 30% in the last 20 years.
However, recently the short-term trade is executed by direct bilateral negotiations. Under this, the buyer and seller communicate directly through the messages, mail, and phone calls make it challenging to maintain the transaction history.
Intermediated Brokered
Some buyers and sellers use specialized brokers to reduce the legal work associated with the direct bilateral transaction type.
However, Emirate gas dealers often face confidentiality problems to justify the free market. Indeed, direct bilateral process reduces confidentiality but does provide great control over the transaction process.
Practical Guidelines for Gas Tenderers
Here are the guidelines a client should follow and reduce the barrier for the potential vendors for successful project completion.
Define the Requirements
A tenderer should define the guidelines clearly to all the potential vendors. It will reduce the need for clarifications. You can draft paperwork with all the requirements so it will be easy for all the participants to understand your project.
The vendor should have the tender-specific details like delivery windows, delivery location, number of cargoes, etc. Profession tenders are using the tendering methodology for short-period opportunities.
Risk Exposure Management
To win the most competitive tenders, buyers should compete and stand out from the rest participants. Vendors should minimize the barriers to increase the chances of winning tender. Here are the steps to be followed to increase the chances of winning Emirates gas tenders.
Credit Risk - A successful bidder might not face a financial crisis during the tendering process or the client might cease your project activities and you have to go back to the market.
Performance Risk - Buyer should deliver the LNG tenders on the committed time. Sometimes, you might face delivery or shipping issues so be prepared with everything.
Reputational Risk - Never participate in such activities that can lead to your company's reputation. This will directly affect your tender and the client can take legal actions for it.
Reduce the Barriers
Check out how a client can deal with the barriers while tendering:
Minimize Paperwork
Some clients asked for both physical and electronic paperwork for the gas tenders, which can be time consuming.
Clients can follow one method to save the time of both parties. They can go for digital methods like electronic paperwork, encrypted communication, digital signature, and more.
However, the buyers can ask clients for more easy methods to save time and reduce the paperwork.
Avoid high bidding fees
Some tenders charge bid fees to place a secure bid or for a performance guarantee. The guarantee is issued by a third-party bank in favour of the client and on behalf of the buyer. It is a small amount from all the vendor participants, so they won’t take their application back till the winner announcement for the project.
Likewise, tenderers issue performance guarantees, so the winner will stay on its commitment till the delivery. Tenders should ignore it for the long-term Emirates gas projects, as it includes both financial and administrative costs of the bidder.
The tender should lower the bidding fees. However, they are already generating good revenue through the bidding process.
Keep the bid period short
Some tenders choose the winner in a few days after announcing the bid, while some take months to decide. For all the bidders, long bid periods can be risky. As they are compelled to reserve a few things earlier like cargo for transportation and also, they are missing other great opportunities.
Therefore, many bidders choose short-period projects to reduce the risk. No vendor wants to lose everything for one bid. Tenderers should go for short period bids to find the potential vendor.
Avoid Negotiation
Sometimes, tenderers ask the shortlisted vendors to reduce the price to win the tender. This might be a big loss for potential bidders. Tenderers should ignore such practices.
They can do this before any shortlisting or finalizing the winner. It might affect the reputation of the client.
Try pricing formula for mutual benefits
Gas tenders are quite inflexible whether it is LNG or Emirates gas. They expect that all the bids should be price indexed according to Brent crude oil. They are not ready to change the rates of the tender with time.
Tenderers can select any common ground or try a pricing formula for flexible bids and mutual benefits of both the parties.
Avoid Overlapping of Tenders
Try to not release your tender with other competitive tenders. This usually happens when other tenderers issue a long-term and multi-year project which has the same requirements. You might not find the potential vendor due to the overlapping of schedules.
Therefore, a tenderer should announce the tender for a short period and just after the project awarding date of the fellow competitor tenderers.
Conclusion
However, bidders can make a few guidelines to make the Emirates gas tendering process easy and effective for the potential vendors. Tenderers can reduce the barriers to help the vendors to win the potential bid. Check out Tenders Pedia to find out all the private and public gas tender bids.