On June 21, 2018, the European Commission (“Commission”) started a new investigation to determine whether so-called destination clauses in Qatar Petroleum’s liquefied natural gas (“LNG”) supply contracts with European buyers infringe the European Union (“EU”) antitrust rules.
Continue Reading European Commission Launches New Antitrust Investigation into LNG Destination Clauses
‘Trigger Happy’: Considering the Requirements of Your Price Review Clause
Given the fall in oil prices, many participants in the oil sector have been forced to re-evaluate their investments.[1] A drop in oil prices not only impacts the oil industry; it can also have a significant effect on gas and LNG prices around the world. Many long-term gas and LNG sales agreements continue to
Nigerian Court of Appeal Allows Third Party to Challenge Arbitration Award
In the recently published Abuja Court of Appeal case of Statoil (Nigeria) Limited & Anor v. Federal Inland Revenue Service & Anor ((2014) LPELR-23144(CA)) (“Statoil”) dated 13 June 2014, the Nigerian court held that a third party had locus standi to challenge an arbitration agreement to which it was not a party.
This
Planning Ahead to Arbitration – Important Considerations for Investors
As foreign investment into Sub-Saharan Africa continues to grow, inevitably, so does the risk of disputes arising between commercial parties. The potential benefits of arbitration in settling a commercial dispute, including procedural flexibility and neutrality, are well known (read more from the ICC here). This post provides an introduction to the relevance of
A Consequence of Falling Oil Prices
Oil prices have plunged in the last few months. For example, Brent futures traded at over $110 per barrel in June, and fell below $85 last week. This is a fall of over 20%, and the market price for crude oil is now at its lowest level since 2010.
Oil prices impact activities in
A Quick Look at the Gazprom/Naftogaz Contract Dispute
On Monday, June 16, 2014, Gazprom and Naftogaz each announced that they were commencing arbitration proceedings under the SCC Rules (seated in Stockholm, Sweden).
The arbitration arises under Contract No. KP dated January 19, 2009 (the “Contract”), a 10 year, long-term gas sales agreement between Gazprom and Naftogaz for volumes ranging from 40 to 52 billion cubic meters of gas per year. On the basis of the statements released by the parties, it appears that Gazprom will be alleging a debt claim. Naftogaz appears likely to invoke the price review provisions and seek a decrease in price. The value in dispute is in excess of US$4.5 billion.
To resolve the dispute, the tribunal will likely need to consider the price review provisions in the Contract. Pricing terms and price review provisions are confidential and rarely disclosed. However, Ukrainskaya Pravda — a Ukrainian news outlet — purported to publish the terms of the Contract when it was agreed. Assuming that the Contract published by Ukrainskaya Pravda contains the price review provisions that are relevant to the current arbitration between Naftogaz and Gazprom, the tribunal will be required to interpret some unusual terms.Continue Reading A Quick Look at the Gazprom/Naftogaz Contract Dispute
Pricing Complexity and Predictable Disputes – A primer on modern long-term gas supply contracts
On Monday, June 16, 2014, Gazprom announced that it commenced arbitration proceedings against Naftogaz under the SCC Rules (seated in Stockholm, Sweden) alleging that Naftogaz has failed to pay US$4.5 billion for gas that Gazprom has already delivered to Naftogaz. Naftogaz also announced that it had commenced a claim under the SCC Rules, seeking the establishment of a fair price for gas and alleging that it has overpaid for the gas already supplied. Some reports suggest that another claim – valued at over US$18 billion – is just around the corner.
When disputes of this value arise, it is important to understand the issues underlying the dispute and how these disputes can be avoided or mitigated. We set out below some thoughts on the structure of pricing provisions in modern long-term gas supply agreements generally.
Complex pricing provisions are a common feature of long-term commodity contracts. In long-term gas sales agreements, a fixed price for the term of the agreement is usually unrealistic due to shifts in the competitiveness of the price over time. There is no single pricing term or indices that parties can universally reference. For this reason, parties typically agree on a bespoke price formula that includes a number of variables. The variables in the formula are agreed between the parties during the negotiation of the contract. Variables can represent substitute energy sources, hub prices, coefficients to counteract the impact of inflation or mitigate currency exchange risks or any other factor that the parties consider might impact the value of gas sold under the agreement.Continue Reading Pricing Complexity and Predictable Disputes – A primer on modern long-term gas supply contracts