LNG contract flexibility in the 2020s [GGP]

In her presentation, given on 27 October 2020 at the S&P Global Platts LNG & Hydrogen Gas Markets Asia Conference, part of the Singapore International Energy Week 2020, Agnieszka Ason, Visiting Research Fellow at the Oxford Institute for Energy Studies, discusses the future of long-term contracts in the LNG industry and explores the impact of the ongoing COVID-19 crisis on LNG Sale and Purchase Agreements (SPAs). She identifies potential changes to (i) pricing, (ii) operational, and (iii) contract reopening, arrangements, focussing on new-generation price review clauses, delivery adjustments in the context of market disruptions, and difficulties of the parties to SPAs to reopen non-price terms. She concludes that long-term contracts will remain the key contractual mechanism for international LNG sales in the 2020s, highlights the need to keep the entire contract structure in line with the evolution of market fundamentals, and proposes a model renegotiation clause for LNG SPAs.

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