Falling oil prices could settle the debate over liquefied natural gas (LNG) pricing, as long-term contracts linked to the value of oil begin to look more attractive.
With no liquid futures contract available to provide a global LNG price benchmark, oil prices have long been used to help calculate LNG contract values, but buyers have argued this is an imperfect model.
Oil prices have plunged around 30 per cent since June to trade around $80 a barrel, however, refocusing LNG buyers on the oil link, attendees at the CWC World LNG Summit in Paris said.
"It will kill this debate over what kind of (price) reference to use. When you consider the falling oil prices, it brings traditional (oil-indexed) formula very close to what would be the price of US supply into Asia," said Laurent Vivier, vice president of strategy for Total's gas and power operations.
The shale gas boom in the United States has resulted in the country having some of the cheapest-priced gas globally, leading to discussion over whether it should be more instrumental in providing the pricing point.
"It's (lower oil prices) certainly going to test some of the beliefs that gas indexation is cheaper than traditional contracts. If you take a scenario of $70 to $80 oil, that's very competitive long-term LNG oil index price," said Iain Scott, assistant marketing director of short-term trading and optimisation at Qatargas.
Around 70 per cent of global LNG trade is destined for Asia, much of which is tied into long-term contracts, with the vast majority including a link to oil prices.
Falling oil prices are also expected to trigger debate over existing contracts.
"I strongly suspect there will be disputes. Anytime something is volatile and moves quickly like that (oil prices), it will cause disruptions," said Jason Bennett, partner at oil and gas specialist law firm Baker Botts.