The dawn of LNG price reviews in Asia Pacific
Edward van GeunsDe Brauw Blackstone Westbroek.
The APPEA Journal 56(2) 588-588 https://doi.org/10.1071/AJ15094
Published: 2016
Abstract
LNG is often sold under long-term contracts with strong volume commitments from both sides, and a cost linked to the oil price. In volatile commodity markets, parties are under pressure to try to review the price under the agreement, either on the basis of price review clauses, hardship clauses, or by relying on general legal principles. This leads to great commercial and legal challenges for both buyers and sellers.
The experience in Europe with gas price reviews can be a source of knowledge for companies on how to deal with price reviews. Long-term gas contracts in Europe also used to be linked to oil prices. This led to a great number of price reviews when oil prices started to soar as of 2005. After that, a new wave of price reviews arose when gas prices decoupled from oil prices in 2009. European gas companies are still dealing with the resolution of those reviews.
On the basis of a number of case studies, this extended abstract sets out the key points that have been learned from a decade of price reviews in Europe with a focus on practical advice for commercial and legal decision makers. It discusses how negotiations on price reviews are best approached; whether parties should voluntarily disclose confidential information about prices (also in view of competition law), and how arbitrators deal with a gas price review.
Edward van Geuns is a partner at De Brauw Blackstone Westbroek N.V., a law firm with offices in Amsterdam, New York, London, Brussels, Shanghai and Singapore. Edward has an L.L.M. from the University of Amsterdam and advises energy companies on contracts and disputes. He has extensive experience advising on price reviews, and has been involved in arbitrations on this issue for more than a decade. The applicable laws in these price reviews arbitrations varied significantly and the arbitrations were seated in a great number of different countries. Edward is recommended by the Legal 500, who note that he is ‘outstanding in cross-examinations’. His recent work includes a US$1 billion victory in a price review arbitration, and he is presently working on a number of different gas and LNG price reviews. |
References
Hewitt, D. and Srinivasan, B., 2015a—Are the contract wheels coming off? Singapore: Credit Suisse.Hewitt, D. and Srinivasan, B., 2015b—India / Qatar re-set the deal...India won. Singapore: Credit Suisse.
