Special Adviser, Oil & Gas
White & Case
14:25 - 14:50
Thursday, 19 September 2019
S1.9 LNG Price Reopeners: Rest in Peace?
LNG Price Reopeners: Rest in Peace?
Over the years, many of those in the international LNG business will have been engaged in the negotiation of price reopeners and, more recently, their re-negotiation. And a good number will have had to deal with price reopener disputes, often in the context of formal arbitration proceedings. Customary approaches to price reopeners have been tested in this way in the context of both gas and LNG supply contacts and in the circumstances of gas markets and regulations in transition, particularly in Europe.
For some, these same influences and practices are now making their way towards the world’s great LNG markets in Asia. They see that a comparable re-structuring of markets, regulations and contracts will be taking place against the background of disputes and formal arbitration proceedings, as was the case in Europe. Or they see that re-structuring, but not the discord. Instead, they predict a more consensual and less adversarial transition to these new markets and contracts.
But others are now questioning why this should be the case at all and suggest that the day of the price reopener in international LNG has now passed. They point to the re-setting of what might once have been oil price-related LNG and the growth of market-priced LNG in the Americas and Europe. They also recognise the increased integration of producers, consumers and lenders across many of the world’s LNG markets and question the erstwhile dependence on the words of the LNG SPA for all answers in respect of the parties’ long relationship over time.
In these circumstances, there is a growing questioning of the business benefit in seeking to re-cast yesterday’s deals in the company of arbitrators, lawyers, accountants and economists, when tomorrow’s deals are there for the making in the context of the changing markets and bright future of international LNG.