The Growth of Gas and LNG Price Review Arbitrations By Peter Morton (London) Global oil and gas markets have experienced a period of consider- able turbulence and uncertainty in recent years. Numerous contracts for the supply of gas and liquefied natural gas (LNG) have, tradition- ally, been entered into on a long term basis, commonly with a con- tract term of 10 years or more, on a “take or pay” arrangement (such that the buyer still pays for the minimum annual contracted quantity whether or not that volume of gas is taken). Those long term gas or LNG supply contracts generally included a price formula for estab- lishing the contract price over the term of the contract. Historically, the price formula was either mainly or wholly referable to the price of oil, based on a perception that it was appropriate to link the price of gas to the price of what were perceived to be competing fuels. The pricing arrangements under these long-term gas/LNG supply contracts have in recent years been placed under considerable strain. There are many reasons for this, including the global finan- cial crisis commencing in 2007/2008 and its effect on demand, the impact of shale gas, movements in oil prices (including the sustained increase to levels around $90-$100 per barrel from 2011, followed by the substantial fall in the second half of 2014 and into 2015), the liberalisation of gas markets in many countries (for example, in Europe) and the growing importance and liquidity of gas trading hubs in many markets. The pressure that buyers, in particular, have been under, with on-sale margins for the gas / LNG often substantially reduced or wiped out entirely with, in many cases, the supply contract becom- ing loss-making, has led many parties to such long term gas / LNG supply agreements to seek to renegotiate the pricing provisions. 71