03.08.2009

The closer the price of LNG is to crude oil means the higher oil parity; if the price of LNG equates the price of crude oil in Boe terms then that is the full oil parity; if the price of LNG exceeds the price of crude oil in Boe terms then the situation can be defined as broken oil parity. If parties agree on coefficient of 0.1724 for indexation then it will result to the full oil parity situation whereby the LNG in terms of Boe would have the same price of one barrel of crude oil. Many formulae include an S-curve, where the price formula is different above and below a certain oil price, to dampen the impact of high oil prices on the buyer, and low oil prices on the seller. The formula would include a floor and a cap price to safeguard developers/sellers on the low end and buyers on the high end,

Gina Cohen
Natural Gas Expert
Phone:
972-54-4203480
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