โ Scribed by Sweeney, Kevin M.
No coin nor oath required. For personal study only.
Much has been said and written in the past few months and years about the pressure within the industry and among policymakers for a retum to long-term sales contracts. Gas producers are said to favorlonger-term contracts over (or as a supplement to) thirty-day spot contracts, because only longer-term contracts provide the necessary revenue stream to develop new reserves. Policymakers, particularly at the Department of Energy and the Federal Energy Regulatory Commission, have recently explored several policies and proposals that could lead to longer-tern contracts. In responding to these initiatives, and in considering longerterm contracts, the parties need to consider several issues.
GICs are important to longer-term gas contracting, because 0) they allow interstate pipelines to preserve at least part of their merchant function, and (2) they offer pipelines 10
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as is going more long-term. For ex-G ample, the goal of Natural Gas Clearinghouse, the author's company, is to sell 70 percent to 80 percent of its gas under long-term sales agreements. Currently at NGC, the mix between term and spot volumes is roughly fifty-fifty. By contrast, as recently as 1989 s