Agnieszka Ason

Senior Visiting Research Fellow

Agnieszka Ason is an independent energy lawyer and a Visiting Research Fellow at the Oxford Institute for Energy Studies.

Agnieszka has extensive experience (as counsel and expert) in international energy disputes, including major pipeline gas and LNG price review negotiations and arbitrations in European and Asian markets. She is an Honorary Lecturer at the Queen Mary University of London and frequently guest lectures on energy law and international dispute resolution, most recently at the Humboldt University of Berlin and the London School of Economics.

Agnieszka has published, conducted workshops, and provided press comments on various aspects of international energy contracts. She is the editor of the Oil, Gas and Energy Law (OGEL) Special Issue on Changing LNG Markets and Contracts (2020) and co-editor of the OGEL Special Issue on Carbon Neutral Energy (2022). Her recent speaking engagements include presentations for the International Group of Liquefied Natural Gas Importers (GIIGNL), the United States Energy Association (USEA), the Institute of Energy Economics Japan (IEEJ), Global Arbitration Review (GAR), S&P Global Platts, and the European Commission’s Scientific Advice Mechanism.

Her current research is focused on the impact of decarbonisation on long-term energy contracts and new models for LNG and hydrogen contracting.

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                    [post_content] => This paper offers an overview and explanation of international gas contracts, of which there are several types along the value chain. The key objective of this paper is to focus on two specific categories of long-term agreements for gas and liquefied natural gas (LNG) sales, namely Gas Supply Agreements for pipeline gas (GSAs) and Sale and Purchase Agreements for LNG (LNG SPAs). These two types of long-term supply contracts play a central role in the international gas industry, where natural gas is transported by cross-border pipelines or shipped over long distances in the form of LNG.

GSAs and LNG SPAs have a long history. They have underpinned early gas and LNG export projects dating back to the mid-1900s and later drove the development of international gas and LNG trade. Despite the emergence, and growing role, of spot and shorter-term alternatives, long-term GSAs and LNG SPAs have remained the key contractual instruments for international gas and LNG sales.

GSAs and LNG SPAs have evolved over time. The early contracts were inflexible arrangements concluded between buyers and sellers for periods often exceeding 20 years, delivering gas and LNG in a rigid (mainly point-to-point) trading model. These contracts offered limited options to modify the rights and obligations of the parties during the lifetime of the contract. At the time parties accepted the rigid contract structures as buyers were seeking security of gas supply and sellers security of offtake. In response to various structural changes in gas markets (including principally market liberalization in North America and Europe), and changing supply and demand fundamentals, gas supply contracts have become increasingly flexible. The general trend towards more flexibility has been reflected in changes to both price and non-price terms in GSAs and LNG SPAs.

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                    [post_content] => On 31 March 2022, President Putin signed a Decree on the Special Procedure for the Fulfilment by Foreign Buyers of Obligations to Russian Natural Gas Suppliers, which, in essence, requires buyers from ‘unfriendly’ countries to pay in roubles for gas delivered to them after 1 April 2022. The key objective of this comment is to discuss the impact of the new payment mechanism introduced by the Decree on long-term gas supply agreements (GSAs).
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                    [post_content] => In her presentation, given on 27 October 2020 at the S&P Global Platts LNG & Hydrogen Gas Markets Asia Conference, part of the Singapore International Energy Week 2020, Agnieszka Ason, Visiting Research Fellow at the Oxford Institute for Energy Studies, discusses the future of long-term contracts in the LNG industry and explores the impact of the ongoing COVID-19 crisis on LNG Sale and Purchase Agreements (SPAs). She identifies potential changes to (i) pricing, (ii) operational, and (iii) contract reopening, arrangements, focussing on new-generation price review clauses, delivery adjustments in the context of market disruptions, and difficulties of the parties to SPAs to reopen non-price terms. She concludes that long-term contracts will remain the key contractual mechanism for international LNG sales in the 2020s, highlights the need to keep the entire contract structure in line with the evolution of market fundamentals, and proposes a model renegotiation clause for LNG SPAs.
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                    [post_content] => The paper discusses scenarios for Asian long-term LNG contracts (LNG SPAs), taking into account the COVID-19 crisis, which, as this paper argues, will have a significant impact on the evolution of contractual arrangements in the industry. Recent market events have delivered multiple incentives for price reviews and exposed three key needs for changes to Asian LNG SPAs: (1) to abandon oil-linked pricing, (2) to increase operational flexibility, and (3) to re-examine contract adjustment mechanisms. Highlighting that the anticipated European-style wave of price review arbitrations is unlikely to materialize in Asia in the near term, the paper concludes that a transition driven by comprehensive contract reviews executed by the parties would be an optimal scenario for Asian LNG SPAs in the 2020s.
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                    [post_content] => In early February, as the Chinese government imposed quarantines and travel restrictions on large parts of the country to stem the spread of the coronavirus (COVID-19), China’s largest LNG importer, CNOOC invoked force majeure on cargoes. On 5 March 2020, PetroChina reportedly issued force majeure notices to some of its suppliers of piped gas and LNG. While the notices were prompted by logistical constraints (related to the quarantines and now plummeting demand), there is a growing concern in the industry that these notices are an attempt to renegotiate contracts.

This comment discusses force majeure clauses in LNG sale and purchase agreements (SPAs), the consequences of buyers’ force majeure and explores the potential outcomes as well as the impact of force majeure declarations on the LNG industry. It argues that even though Chinese buyers have a number of reasons to seek contractual changes, they are unlikely to blatantly breach contracts in a way that would put supply security at risk. Such force majeure claims may, however, start a conversation about future revisions to contractual terms, even though sellers would at best agree to add more flexibility clauses and will resist outright price revisions. Over the coming years, the pressure from the Chinese government and buyers to move to more flexible prices will undoubtedly increase, but given uncertainty around domestic price reforms, any concrete steps toward renegotiation will likely wait until China has established some form of domestic pricing reference.

 

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                    [post_content] => Until recently, Asian LNG contract issues, including price adjustments, have been resolved by negotiation, with few formal price review clauses, and certainly no price review arbitrations. These two, largely European phenomena to date, are only now spilling over into Asia. As this paper argues, the role of LNG price reviews and arbitrations in the Pacific Basin is likely to increase in the coming years. Asian LNG contracts finalized in the 2000s typically contain price review clauses. Contracts concluded in the recent years, which accepted a close link to oil prices in particular, are naturally exposed to price reviews. Arbitration, the preferred method of dispute resolution in European gas pricing disputes, is likely to become an important, novel, addition to the Asian LNG price review landscape. Offered with a robust, time-tested, and improved, dispute resolution mechanism, Asian LNG stakeholders they can tailor arbitration to their needs and use it primarily to hedge against the risks of protracted price review discussions.
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A greater diversity of pricing mechanisms (including oil-, hub-, spot-indexed and other, price formulas applied on a stand-alone or hybrid basis), volume adjustments for operational purposes, and diversions of LNG cargoes, are some examples of flexible terms that are commonly found in the newer contracts. Notably, the historical principle of risk allocation, where the seller assumes the price risk, and the buyer assumes the volume risk, has remained relevant in long-term contract negotiations.

There are no universally accepted general terms for pipeline gas and LNG supply contracts. GSAs and LNG SPAs are negotiated on a case-specific basis. They are typically strictly confidential and combine (1) the commercial choices of the parties and (2) their shared long-term outlook for market changes. In practice, long-term gas and LNG contracts commonly include price review clauses, but, they rarely provide a practicable renegotiation basis for more comprehensive changes to contract terms. The issue of contract reopener mechanisms became particularly relevant during the Covid-19 pandemic, where market circumstances significantly affected performance under gas and LNG contracts and triggered the need for various operational adjustments. More recently, the ability of the parties to renegotiate contract terms has become even more urgent amidst the global search for additional gas and LNG supplies in response to the Russian invasion of Ukraine and related disruptions (executed and anticipated) to Russian gas and LNG exports.

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Latest Publications by Agnieszka Ason