Falling Crude Price Could Make Oil-Linked LNG Contracts More Attractive

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PARIS, NOV 21:  Falling oil prices could settle the debate over liquefied natural gas (LNG) pricing, as long-term contracts linked to the value of oil begin to look more attractive.

With no liquid futures contract available to provide a global LNG price benchmark, oil prices have long been used to help calculate LNG contract values, but buyers have argued this is an imperfect model.

Oil prices have plunged around 30 per cent since June to trade around $80 a barrel, however, refocusing LNG buyers on the oil link, attendees at the CWC World LNG Summit in Paris said.

“It will kill this debate over what kind of (price) reference to use. When you consider the falling oil prices, it brings traditional (oil-indexed) formula very close to what would be the price of US supply into Asia,” said Laurent Vivier, vice president of strategy for Total’s gas and power operations.

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