THE IMPACT OF DELETION OF DESTINATION CLAUSE ON SELLER'S PROFIT FUNCTION IN LONG-TERM GAS CONTRACTS

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MANSOUR KIAEI E.

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Paper Information

Journal: ENERGY ECONOMICS REVIEW Year:2007 | Volume:4 | Issue:14 Page(s): 120-135

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Title

THE IMPACT OF DELETION OF DESTINATION CLAUSE ON SELLER'S PROFIT FUNCTION IN LONG-TERM GAS CONTRACTS

Author(s)

MANSOUR KIAEI E. | Issue Writer Certificate

Keywords

LONG TERM GAS CONTRACTSQ3

THE DESTINATION CLAUSEQ3

PRICE DISCRIMINATIONQ2

PROFIT FUNCTIONQ3

THE EUROPEAN COMMISSIONQ3

THE ALGERIA AGREEMENTQ3

Abstract

The European Commission and Algeria, on 11th July, announced that they had reached an agreement based on the Sonatrach's concession to delete THE DESTINATION CLAUSE from all Algeria's existing LNG contracts with the European buyers so such LNG contracts would not include similar clauses in the future. THE DESTINATION CLAUSE assures sellers that the buyers could not resale the purchased cargo in elsewhere in seller's market territory and provides circumstances that sellers could benefit from market division and PRICE DISCRIMINATION. Therefore deletion of destination clause from LNG contracts could affect seller's PROFIT FUNCTION. This study shows that inclusion of destination clause in LNG contracts with Asian countries has considerable impact on the seller's PROFIT FUNCTION since these countries enjoy a different energy consumption model. But for European countries, because of deregulation and liberalization of markets leading to a more competitive, comparable and homogenous market structure, applying or deletion of THE DESTINATION CLAUSE would not affect seller's PROFIT FUNCTION. The analysis shows that the producers would profit from PRICE DISCRIMINATION if transport costs or demand elasticity in the regions are asymmetric.

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APA: Copy

MANSOUR KIAEI, E.. (2007). THE IMPACT OF DELETION OF DESTINATION CLAUSE ON SELLER'S PROFIT FUNCTION IN LONG-TERM GAS CONTRACTS. ENERGY ECONOMICS REVIEW, 4(14), 120-135. SID. https://sid.ir/paper/99640/en

Vancouver: Copy

MANSOUR KIAEI E.. THE IMPACT OF DELETION OF DESTINATION CLAUSE ON SELLER'S PROFIT FUNCTION IN LONG-TERM GAS CONTRACTS. ENERGY ECONOMICS REVIEW[Internet]. 2007;4(14):120-135. Available from: https://sid.ir/paper/99640/en

IEEE: Copy

E. MANSOUR KIAEI, “THE IMPACT OF DELETION OF DESTINATION CLAUSE ON SELLER'S PROFIT FUNCTION IN LONG-TERM GAS CONTRACTS,” ENERGY ECONOMICS REVIEW, vol. 4, no. 14, pp. 120–135, 2007, [Online]. Available: https://sid.ir/paper/99640/en

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