IDEAS home Printed from https://ideas.repec.org/a/cai/reidbu/rei_127_0089.html
   My bibliography  Save this article

Changing Contract Structures in the International Liquefied Natural Gas Market : A First Empirical Analysis

Author

Listed:
  • Sophia Ruester

Abstract

This paper provides an empirical assessment of long-term liquefied natural gas (LNG) supply contracts to determine optimal contract duration. We study the trade-off between contracting costs due to repeated bilateral bargaining and the risk of being bound in an inflexible agreement in uncertain environments. Furthermore, we add to the theoretical discussion an analysis of different dimensions of transaction frequency and their impact on governance choice. Estimation results of a two-stage model show that the presence of high dedicated asset specificity results in longer contracts thus confirming the predictions of transaction cost economics, whereas the need for flexibility reduces contract duration. With increasing bilateral trading experience between the same trading partners, contract duration decreases. We additionally observe that countries heavily reliant on natural gas imports via LNG are willing to forgo some flexibility in favor of supply security. Contracts dedicated to competitive downstream markets on average are shorter than those concluded with customers in non-liberalized import markets.

Suggested Citation

  • Sophia Ruester, 2009. "Changing Contract Structures in the International Liquefied Natural Gas Market : A First Empirical Analysis," Revue d'économie industrielle, De Boeck Université, vol. 0(3), pages 89-112.
    • Handle: RePEc:cai:reidbu:rei_127_0089
    as

    Download full text from publisher

    File URL: http://www.cairn.info/load_pdf.php?ID_ARTICLE=REI_127_0089
    Download Restriction: free
    File URL: http://www.cairn.info/revue-d-economie-industrielle-2009-3-page-89.htm
    Download Restriction: free
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Omoregie, Uyiosa, 2019. "Value Creation in a 'Non-Producing' Enterprise," SocArXiv h2mv3, Center for Open Science.
    2. Sophia Rüster, 2015. "Financing LNG Projects and the Role of Long-Term Sales-and-Purchase Agreements," Discussion Papers of DIW Berlin 1441, DIW Berlin, German Institute for Economic Research.
    3. Peter R. Hartley, 2015. "The Future of Long-term LNG Contracts," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    4. Chi Kong Chyong, 2019. "European Natural Gas Markets: Taking Stock and Looking Forward," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 89-109, August.
    5. Chi-Kong Chyong, 2015. "Markets and long-term contracts: The case of Russian gas supplies to Europe," Cambridge Working Papers in Economics 1542, Faculty of Economics, University of Cambridge.
    6. Baba, Amina & Creti, Anna & Massol, Olivier, 2020. "What can be learned from the free destination option in the LNG imbroglio?," Energy Economics, Elsevier, vol. 89(C).
    7. Amina Baba & Anna Creti & Olivier Massol, 2020. "What can we Learn from the Free Destination Option in the LNG Imbroglio ?," Working Papers hal-03181028, HAL.
    8. Jean-Michel Glachant & Michelle Hallack & Miguel Vazquez, 2013. "Building Competitive Gas Markets in the EU," Books, Edward Elgar Publishing, number 15263, December.
    9. Chyong, C-K., 2019. "Challenges to the Future of European Single Market in Natural Gas," Cambridge Working Papers in Economics 1918, Faculty of Economics, University of Cambridge.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cai:reidbu:rei_127_0089. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jean-Baptiste de Vathaire (email available below). General contact details of provider: https://www.cairn.info/revue-d-economie-industrielle.htm .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.