Publish time: Mon Jun 26 17:28:17 CST 2017
On the afternoon of May 23 2017, the “China Natural Gas Forum: LNG Price Review Negotiation and Dispute Resolution” jointly held by the Beijing Arbitration Commission / Beijing International Arbitration Center (the “BAC”), the North Training Center of the China-Australia Natural Gas Technology Partnership Foundation of China University of Petroleum - Beijing (the “Training Center”) and the Broad & Bright was successfully held at the BAC International Conference Hall. The event aims at conducting international and cross-professional discussions, promoting Chinese oil-gas enterprises’ better use of the LNG price review mechanism and thereby promoting healthy development of the industry of natural gas in China. International renowned experts on dispute resolution and persons in charge of oil-gas enterprises were invited to act as speakers in this symposium. More than 50 professionals from governmental authorities, adjudication institutions, research institutions and oil-gas companies participated in this event.
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The Symposium |
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The symposium was moderated by Dr. Chen Shouhai, Director of the Training Center. He firstly presented a brief introduction of the speakers and the aims of the event, then pointed out that under the background of oil-gas system reform, this event is held exactly at the right moment and is of great significance.
Mr. Lin Zhiwei
Dr. Chen Shouhai
Next, Mr. Lin Zhiwei, Secretary General of the BAC delivered a welcome speech to the speakers and the audience. By referring to the history and the status quo of the BAC, Mr. Lin clarified the BAC’s determination to provide better services of dispute resolution for the oil-gas industry, and stressed that with the participation of the governmental authorities in charge of the industry, it is reasonable to expect that discussions on relevant issues in this event will receive more attention, thus the interests of Chinese enterprises will enjoy better protection.
The forum were divided into two sessions. The first one was focused on the LNG trade practice, and the second one dispute resolution.
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Ms. Li Yao |
Mr. Anthony Way |
During the first session, Ms. Li Yao, Founder and President of SIA Energy, firstly made speech on “Status quo of Domestic and Overseas LNG Trade”. She thought that the global market of the natural gas price has not yet formed, and the LNG shares a relatively small portion in the natural gas trade. The second round of LNG sharp rise has started since last year, and China takes the biggest share of the LNG demand. Based on the analysis of the LNG trade, she also emphasized that the next two years will be the “golden window phase” for purchase and contract review, and the second tier of Chinese enterprises other than CNPC, Sinopec and CNOOC will rise with the decline of international oil price and the deepened domestic reform. Thereafter, Mr. Anthony Way, Director and Executive Partner of Energy Contract Co., gave a keynote speech on “Pricing Mechanism in LNG Long-term Contract”. From analysis of the historical statistics of LNG contracts conclusion, he pointed out that: the demand of traditional Asian LNG buyers shrank and thus the instability of demand increased; price review is frequently seen in Europe because of the marketization of LNG there. With regard to the long-term LNG pricing, he believed that for contracts with “take or pay” clause, the liquidity of LNG is reduced, and the tendency of pricing thereof is still based on the ground of “excess of supply over demand”.
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Mr. Edward van Geuns |
Ms. Ana Stanič |
Mr. Edward van Geuns, Partner of De Brauw Blackstone Westbroek Singapore office, then shared a sample negotiation case of Petronet vs. RasGas to the audience, and deemed it a milestone case. On the ground of case study, he further said that the price review is never simple, but a complex mechanism, where enterprises need to rely on the experience and judgment of those professionals to deal with. Price review should be raised at an early stage, since it will be difficult to change the negotiation status during the subsequent arbitration process. Ms. Ana Stanič, Founding Partner of E&A Law Firm, addressed on “European Experience of LNG Price Review”. In her opinion, typical price review arbitrations usually consist of two (sometimes three) stages, including the trigger of price review, the modification of the price calculation formula, and the implementation of the price formula. And “trigger factors” in typical price review term means there are incidents beyond control of both parties incurred in the buyer’s market, and such incidents result in substantial changes of the buyer’s market.
Mr. Tao Jingzhou
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Ms. Sophia Feng |
Dr. Zhang Libin |
The discussion of the second session started with the experience sharing entitled “LNG Price Review: Expert Determination or Arbitration” by Mr. Tao Jingzhou, Managing Partner in Charge of Business Development in Asia of Dechert, LLP. He thought that the most effective means to resolve disputes over LNG price are expert determination and international arbitration. There are apparent differences between the two means: expert determination only deals with technical issues, with no doctrine of “competence-competence” and limited binding effect. Compared with general arbitration, in LNG arbitration, it is possible that neither of the two parties is in breach of the contract, where the arbitral tribunal has wider discretion, the expert witness plays a more substantive role, and the disputes tackled usually point to the future. Then Ms. Sophia Feng, Director of SIAC China, spoke on “SIAC Arbitration Mechanism for Oil & Gas Disputes”. Ms. Feng specifically presented the highlights of the new SIAC arbitration rules, including provisions on “Multiple Contracts”, “Early Dismissal of Claims and Defences”, “Emergency Arbitration”, “Arb-Med-Arb”. Dr. Zhang Libin, Partner of Broad & Bright shared his understanding by addressing on “Thoughts and Suggestions on LNG Price Review for Chinese Enterprises”. He was in the opinion that currently it is the precious window phase to restart negotiation that will probably last for merely 2-3 years, and thus Chinese enterprises are expected to restart the negotiation about the LNG price. He further suggested that Chinese enterprises sort through LNG long term contracts to which they are parties, specifically review those with apparently high prices and check if there are repricing or force majeure clauses.
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| Panel discussion` | |
After that, moderated by Dr. Zhang Libin, the speakers took roundtable discussion on issues such as “considerations for entering into LNG long term contracts”, “Selection of applicable law of LNG contracts”, “Overseas practice of price review”, “Practice in the absence of price review clause” and “Conception of Asian exchange center”. The speakers had conducted active discussions and frequent exchange of views.
Following the roundtable discussion, Dr. Chen Shouhai made a sum-up of this symposium. The event came to its end successfully with the warm applauses of the audience.
Group photo
The BAC as a leading arbitration institution in China has endeavored to promote the sharing of professional knowledge including that of natural gas trading disputes and the studies on dispute resolution. It also makes effort to establish exchange platform for both Chinese and foreign experts and practitioners. We sincerely welcome colleagues from various industries to continue to pay attention to and participate in events organized by the BAC. You are also welcome to check our website and WeChat platform for more information.