The impact of competition law on destination restrictions in Asia-Pacific LNG contracts
Mark Grime A B , Dave Poddar A and Nadia Kalic AA Clifford Chance, Level 16, 1 O’Connell Street, Sydney, NSW 2000, Australia.
B Corresponding author. Email: mark.grime@cliffordchance.com
The APPEA Journal 57(2) 465-468 https://doi.org/10.1071/AJ16242
Accepted: 27 March 2017 Published: 29 May 2017
Abstract
The continual decline in prices for liquefied natural gas (LNG) in the Asia-Pacific is changing the commercial dynamics between LNG suppliers and buyers, particularly in the context of renegotiating LNG sale and purchase agreements (LNG SPAs) across the Asia-Pacific region.
Although prevailing market dynamics across Asia-Pacific LNG markets has created opportunities for buyers to renegotiate supply agreements, many remain subject to long-term agreements with destination restrictions that limit buyers from reselling cargoes or taking delivery outside their home jurisdiction, and which impact arbitrage and trading opportunities in spot markets.
The investigation by the Japan Fair Trade Commission into whether destination restrictions in LNG SPAs contravene Japanese competition laws, highlights the importance of competition law as a key issue and commercial consideration for both LNG suppliers and buyers in the Asia-Pacific.
This paper will examine what role competition law may play in the future renegotiation of LNG SPAs, and the extent to which this may provide a basis to impact the efficacy of destination restrictions in LNG SPAs under the competition laws of several key Asian jurisdictions.
Keywords: Asia, China, commercial risks, competition law risks, deregulation, destination restrictions, European Union, Japan, LNG supply contracts, profit-sharing mechanisms, structural reform, territorial restrictions.
Mark Grime holds a Bachelor of Economic and Social Sciences and a Bachelor of Laws (Hons) from the University of Sydney and is a Senior Associate in the competition/antitrust group in the Sydney office of Clifford Chance. He has advised on a wide range of competition law and antitrust matters including complex domestic and multi-jurisdictional merger clearances, market regulation and infrastructure access, and high-profile agency investigations and litigation regarding anticompetitive conduct. Prior to joining Clifford Chance, Mark worked in the Enforcement Group at the Australian Competition and Consumer Commission, where he was involved in a range of competition and consumer law investigations and litigation. |
Dave Poddar holds a Bachelor of Economics and a Bachelor of Laws (Hons) from the University of Adelaide and is a Partner at Clifford Chance in Sydney. He has over 25 years of experience in competition/antitrust law and heads the Asia-Pacific antitrust practice firms. He has worked on significant clearances for Australian M&A and international joint ventures and alliances. Dave has also worked on infrastructure access and regulatory matters and has advised on competition agency investigations and cartel matters across a variety of sectors. |
Nadia Kalic holds a Bachelor of International Business and a Bachelor of Laws (Hons) from the Queensland University of Technology and is a Counsel at Clifford Chance in Sydney. She specialises in energy and infrastructure projects, joint ventures and the acquisition and disposal of energy and infrastructure assets. She has extensive experience in Australia, Asia, Middle East and Northern Africa advising on all aspects of the LNG supply chain including gas sale and purchase agreements (spot and long-term), gas transportation agreements, gas tolling agreements and LNG SPAs (spot and long-term). |
