Given the #COVID19 pandemic, is the #gas and #LNG industry facing new disputes, arbitrations, and structural upheaval?

In 2008/9, the financial crisis coincided with an economic crisis, which led to massive declines for natural gas sales in Europe. Some large industrial consumers and wholesalers were unable to meet their contractual commitments. The entire structure of the gas industry in Europe collapsed, spot gas markets were established and new players entered the markets, and a large number of #arbitration proceedings between importers and producers with the aim of massive reductions in the price level and the introduction of spot gas price indexation instead of oil-indexed prices in long-term contracts were initiated and conducted.

What will be the consequence of the COVID-19 pandemic? Due to government shutdowns in key areas of the economy and the lock-ins of the population in many countries, sales of natural gas and #LNG in industry and #powerplants crashed even more and faster than 11 years ago. The structures of the gas industry and the contracts have evolved since 2008/9. But prices in gas markets are collapsing due to the surpluses.

Again, there may be breaches of contractual commitments. Some parties may claim force majeure. This has already been reported for a number of LNG cargoes to Asia. This time, it cannot be ruled out that producers who have to make available deliveries under their contracts will no longer honour their obligations in view of extremely low gas market prices, since they are loss-making and not covering marginal costs. Might they claim #hardship? The industry might face a number of new and unexpected upheavals.