Pricing Arbitrations: It’s A Gas, Gas, Gas

As has been widely reported in the industry, there has been a spate of gas price arbitrations in which buyers have largely succeeded in having contract prices revised in their favour, sometimes by hundreds of millions of dollars.¹

This article looks at the theory underlying price variation clauses, and how to approach a question about the meaning of an individual clause. The approach that a tribunal may take to such clauses may be informed by going back to basics, looking at the very reasons for having such a clause, before considering some of the mechanisms that the parties might employ. Practically, though, it should be borne in mind that what ultimately matters is the specific wording of the clause (or draft clause) in front of you, rather than what was decided about a different clause in another award.