Economic pathology of gas price position in long-term natural gas sales contracts

The main economic challenge of long-term contracts for the sale of natural gas through the pipeline is the pricing of the gas in the contract. Considering the impact of market developments on natural gas pricing in long-term contracts, the economic pathology of natural gas sales contracts and providing suggestions to reduce this damage become important. In long-term contracts, the price of gas is determined based on the price of alternative energies. This type of pricing means that the price of gas is not determined in real terms and subsequently it will require a lot of negotiations and transaction costs. This fact, which is not in any way favorable to the economic character of the parties, leads to the fact that the pricing is repeatedly subjected to price revision arbitrations. In order to avoid the above economic risks and create transparency in the gas market pricing system, it is better to conclude natural gas sales contracts in the form of spot and short-term contracts. In addition, the restructuring of the energy exchange and the launch of the gas market can help to establish transparency in the market.