01 Jan 2001, Energy Risk glossary , Energy Risk
A processing agreement for the conversion of an input product for a fee. In the energy sector, tolling agreements are contracts where one party – the toller – provides a company with one form of fuel to be converted into another form of fuel on their behalf. In particular, in the liquefied natural gas (LNG) industry, tolling is a common method for financing liquefaction plants or regasification terminals. In the former case the tollers are natural gas owners who wish to convert their natural gas into LNG for transportation and storage purposes, in the latter, the tollers are LNG owners who wish their LNG to be converted into gas for distribution into the relevant end-market. In the electric power market, tolling agreements are typically between a power buyer and a power generator, under which the buyer supplies the fuel and receives an amount of power generated based on an assumed heat rate at an agreed cost.