Trends in natural gas pricing and their effects on traditional contracting structures
Lisa Henneberry A , Steven Harris A and Anthony Way BA Squire Sanders (US) LLP
B The Energy Contract Company Ltd
The APPEA Journal 53(2) 499-499 https://doi.org/10.1071/AJ12110
Published: 2013
Abstract
This extended abstract analyses the combined disruptive effects of the shale gas boom, the global gas glut, and the worldwide economic crisis on international gas markets. These factors are considered in three major regions of the world:
In the competitive and liquid US gas market, increased domestic shale gas production prompted a dramatic decline in US gas prices and ultimately eliminated virtually all demand for new supplies of imported LNG.
In Europe, continuing liberalisation in the EU's natural gas end-user and wholesale markets, the growing liquidity of trading hubs across Europe, and the introduction of cheaper spot-gas have fundamentally changed the traditional oil-indexed gas and LNG contracting models.
In Asia, changes in buyer sensitivities to supply security and the development of new sources of supply have prompted discounting against traditional oil-based benchmarks and an increase in short-term or more flexible LNG purchases.
This extended abstract explores the combined effects of these developing trends in each major region together with the typical responses of buyers and sellers in each market. These effects and reactions introduce associated complexities in this changing-price environment. The authors also explore potential changes in the traditional gas and LNG contracting model and the evolution of related risk allocations, which contracting parties often rely on.
Lisa Henneberry co-chairs Squire Sanders' energy and natural resources industry group. She has extensive transactional experience in the natural gas and LNG industry, having concluded energy commodity and infrastructure transactions worldwide during the past 20 years. She has worked on developing a number of LNG facilities, as well as numerous short and long-term capacity and LNG and gas purchase and sales arrangements. She has significant experience representing suppliers, purchasers, transporters, and shippers of natural gas, coal, steam, and power in the US and Mexico, including several long-term cross-border gas sales agreements, short-term gas sales and pooling arrangements, coal purchase agreements, and the development of all kinds of energy infrastructure across the Americas. In recent years, she has worked extensively with her international dispute resolution colleagues on multiple price re-opener matters; she contributes a wealth of industry experience to the team, focusing on the commercial and industry dimensions of each case. She is fluent in English, French, and Spanish. |
Steven Harris has represented a wide range of energy clients in litigation relating to onshore and offshore oil and gas exploration, production, marketing, and transportation. In recent years, he has also had substantial involvement in a number of LNG price re-opener arbitrations. He has handled disputes centering on lease and operational issues; transportation, storage, and marketing of oil, gas, and refined products; use and ownership of seismic and geophysical data and services; design, manufacturing, and use of oilfield equipment and services; construction of energy production, transportation, and storage facilities and energy insurance disputes. He also handles negotiations and disputes relating to mineral leases, concessions, and production sharing agreements, as well as domestic and international joint operating agreements, master service agreements, supply agreements, and transportation contracts. He also frequently deals with issues arising under take-or-pay obligations, indemnity and keep-whole agreements, production calls, farmout agreements, AMI agreements, unit agreements, and preferential rights agreements under marketing and supply agreements, as well as processing and facilities contracts. |
Anthony Way is an executive director and managing partner at The Energy Contract Company. With more than 30 years of industry experience, he has worked extensively as an adviser to a variety of major oil and gas companies worldwide, leading negotiations for more than 15 gas/LNG sale and purchase agreements in Asia, Europe, and Africa. He has also advised commercial aspects of numerous large gas developments (including direct advice to governments and NOCs) and has been involved in many project financings. He is a leading source of knowledge on the deregulation and liberalisation of the European gas industry, on price reviews in European and Asian gas/LNG contracts, and frequently acts as an expert in international disputes in this arena. Prior to joining ECC, Anthony was a senior vice president of Enron International, where he was responsible for all aspects of a number of successful developments and acquisitions. He holds a master's degree (chemical engineering) from Cambridge University and a degree in business administration from Durham Business School. |
