BAKU, Azerbaijan, Nov.28. Keeping their core contract components in place, GSAs and LNG SPAs have changed substantially over decades, especially in terms of their flexibility arrangements, Trend reports November 28 with reference to Oxford Institute of Energy Studies (OIES).
OIES report reveals that the recent tendency towards greater contractual flexibility is set to continue in the future, with a growing role of alternatives to oil indexation and scope for innovation in relation to various operational aspects of the contracts.
“In recent contracts, there is generally significantly more emphasis on securing volume and delivery modifications in an expedited manner in response to changing market circumstances. Newly signed GSAs and LNG SPAs also tend to offer more legal protections for buyers and sellers in response to future market disruptions. In parallel, there is a growing cross-influence across various gas and LNG contracting segments. Due to the sustained growth of spot and short-term gas and LNG trading, fundamentals of these transactions have recently become relevant considerations in long-term contract renegotiations and price reviews,” said the institute experts.
The report says that at the same time, GSAs and LNG SPAS are increasingly influenced by the terms commonly found in fast-paced gas and LNG sales.
“The relevant examples include expanding cargo diversion entitlements and new cargo cancellation rights, which have been recently secured by some long-term LNG buyers. Operating in future globalized and commoditized gas and LNG markets, parties to new-generation GSAs and LNG SPAs could become more open to contract terms already seen (or later emerging) in other contracting segments. The contract structure for the recent US LNG contracts provide an example of how various elements of the gas value chain within the contracts are increasingly becoming unbundled, breaking the link between the commodity element and the transportation (liquefaction) element, similar to the unbundling in the pipeline market in liberalized gas markets.”
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