1 June 2019
Oil's volatility hastening decline in oil-indexed LNG pricing
The pricing of often decades-long liquefied natural gas (LNG) contracts is becoming more unpredictable as a result of oil price swings
Driven by rising supply and expansion in export capacity from Qatar, Australia and more recently the US, the diversification of LNG supplies is driving an evolution of the contractual terms through which it is sold. Buyers now have greater bargaining power when negotiating contracts, and with the recent volatility in oil prices, there is extra uncertainty about what level of oil-indexation will be required in new contracts. Ultimately, it seems certain that sellers will look for alternative ways of selling their contracted volumes. Since the LNG industry's birth in the 1960s, when natural gas started being used in Europe and North East Asia as an alternative to oil products for power genera
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