South Lamar Boulevard in Austin, Texas during 2021's cold weather
Oil and gas price divide raises threat levels, part 2
LNG projects need the certainty of long-term contracts, but Henry-Hub–linked deals put buyers at significant risk
Companies that sign long-term energy contracts tied to volatile price indexes rather than cost-based formulas have learned they could face bankruptcy under certain conditions. During the energy crisis created by Russia’s invasion of Ukraine, German gas importer Uniper had to seek protection as prices spiked. The German government took 99% ownership in 2022 to keep gas flowing. Those funds are being repaid, but the financial collapse the firm confronted highlights the threat of signing commodity-index-linked contracts. The risks have not stopped LNG buyers from gambling, however. Jason Feer, global head of business intelligence with consultancy Poten & Partners, provided a useful analysis
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