Long-term natural gas contracts and antitrust law in the European Union and the United States

Abstract

Long-term natural gas contracts and their specific features are at the forefront of legal and policy discussions around the world. Issues like oil price indexation and price reviews, flexibility and take-or-pay clauses or a move to shorter term trading are being debated. This is particularly true for Europe where major changes are taking place, but also in places like Australia and Asia. This study will focus on the antitrust treatment of long-term take-or-pay natural gas contracts and their specific provisions in the European Union and the United States. It will also examine the regulatory treatment of these contracts and the regulatory environment in which these contracts operate. Issues that are covered include questions on duration and volumes, take-or-pay provisions and oil indexation, destination or use restrictions, vertical integration and monopolization. Recognitions and methodological remarks This article was written as a part of a larger study on long-term natural gas contracts and EU competition law. The results of this study have been reported in this AIPN research article and in a book titled Vertical Natural Gas Transportation Capacity, Upstream Commodity Contracts and EU Competition Law (Kluwer Law International 2011). The focus in these two studies is different. The present article focuses on the legal aspects of the application of antitrust laws to natural gas contracts. It focuses on the application of law in the European Union (EU) and compares this to the situation in the United States (US). Drawing on the regulatory history in the US natural gas markets and the application of antitrust laws to long-term contracts, the study also provides for comparative remarks. The book on the other hand, focuses on competition ‘policy’ and the interplay between law and international geopolitics in the EU natural gas sector. It portrays a picture where the boundaries to the application of EU law in the natural gas sector are set by the geopolitics. It examines the role of politics in the application of law. The book also focuses on the question of how EU competition law should be applied to long-term natural gas commodity and capacity contracts, as opposed to the focus of this article which examines the application of the law.