The Future of Long-Term LNG Contracts

Peter Hartley

No 13-22, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: Long-term contracts between exporters and importers of LNG increase the debt capacity of large, long-lived, capital investments by reducing cash flow variability. However, long-term contracts 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 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.

Pages: 36 pages
Date: 2013
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The Future of Long-term LNG Contracts (2015)
Journal Article: The Future of Long-term LNG Contracts (2015)
Working Paper: The Future of Long-Term LNG Contracts (2014)
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