The Future of Long-term LNG Contracts

Peter Hartley

The Energy Journal, 2015, vol. 36, issue 3, 209-234

Abstract: Long-term contracts have long dominated the international market for LNG. Since 2000, however, the proportion of LNG-traded spot or under short-term contracts has grown substantially, while long-term contracts have become more flexible. While long-term contracts increase the debt capacity of large, long-lived, capital investments by reducing cash flow variability, they also may limit the ability of the contracting parties to take advantage of profitable ephemeral trading opportunities. After developing a model that illustrates these trade-offs, we argue that increased LNG market liquidity resulting from a number of exogenous changes is likely to encourage much greater volume and destination flexibility in contracts and increased reliance on short-term and spot market trades. These changes would, in turn, reinforce the initial increase in market liquidity.

Keywords: Long-term contracts; LNG; Investment project leverage; Opportunistic trades (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.36.3.phar (text/html)

Related works:
Journal Article: The Future of Long-term LNG Contracts (2015)
Working Paper: The Future of Long-Term LNG Contracts (2014)
Working Paper: The Future of Long-Term LNG Contracts (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:36:y:2015:i:3:p:209-234

DOI: 10.5547/01956574.36.3.phar

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().