Max Rockall, Michelle Glassman Bock and Anna Diaz-Sanchez at Squire Patton Boggs consider the changing dynamics in the global LNG market
It is famously said that “those who cannot remember the past are condemned to repeat it.” This is particularly apt for Asian and European natural gas/liquefied natural gas (LNG) market players at this time, with potential oversupply issues looming on the not-too-distant horizon.
As certain commentators have noted, after a roller coaster starting with oversupply from the mid-2010s, followed by undersupply beginning in the summer of 2022, and then again an anticipated near-term projected oversupply, it comes as no surprise that questions are now being asked in the market about the efficacy (or inefficacy) of traditional contracting models and contractual terms in confronting future fluctuations in supply and demand.
In times when the sands of the global gas market are constantly shifting, parties to long- and short-term gas supply contracts need a clear understanding of the rights, safeguards and risks inherent in their contracts, while also keeping one eye firmly fixed on potential new contractual arrangements to address areas of uncertainty that have been identified through the COVID-19 pandemic, and the recent global gas crisis sparked by the conflict in Ukraine.
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