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Take-or-pay contract robustness: A three step story told by the Brazil-Bolivia gas case?

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  • Glachant, Jean-Michel
  • Hallack, Michelle

Abstract

Neo-institutional economics (NEI) has long shown that take-or-pay (ToP) long-term contracts provide a robust framework for safeguarding the interests of both upstream and downstream parties in the gas industry. The case of gas trade between Brazil and Bolivia presents an opportunity to re-examine empirically and to review the robust nature of the ToP framework over time. This case reveals that the positions of the contractors actually change giving rise to a veritable lifecycle of the contractual arrangement. Such a contract can be seen to span three successive phases. The first phase of the contract cycle begins when it is signed; allowing the investments to begin. The second phase starts when investments have been completed and the actual trade in gas begins. The third phase of the contract cycle comes when the increasing flow of gas comes close to saturating capacity and the volume levels for downstream market volume have been reached. These three contract phases are thus distinguished by how robust the alignment of the parties' interests is. The added value of the paper is then both empirical and analytical: the case study provides a brand new lifecycle analysis of the performance of ToP long-term contracting into an NEI framework.

Suggested Citation

  • Glachant, Jean-Michel & Hallack, Michelle, 2009. "Take-or-pay contract robustness: A three step story told by the Brazil-Bolivia gas case?," Energy Policy, Elsevier, vol. 37(2), pages 651-657, February.
  • Handle: RePEc:eee:enepol:v:37:y:2009:i:2:p:651-657
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    References listed on IDEAS

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    1. Brousseau,Eric & Glachant,Jean-Michel (ed.), 2002. "The Economics of Contracts," Cambridge Books, Cambridge University Press, number 9780521893138, April.
    2. Hubbard, R Glenn & Weiner, Robert J, 1986. "Regulation and Long-term Contracting in U.S. Natural Gas Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 71-79, September.
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    Citations

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    Cited by:

    1. Shi, Xunpeng & Padinjare Variam, Hari Malamakkavu, 2016. "Gas and LNG trading hubs, hub indexation and destination flexibility in East Asia," Energy Policy, Elsevier, vol. 96(C), pages 587-596.
    2. Keyaerts, Nico & D'haeseleer, William, 2014. "Forum shopping for ex-post gas-balancing services," Energy Policy, Elsevier, vol. 67(C), pages 209-221.
    3. Keyaerts, Nico & Hallack, Michelle & Glachant, Jean-Michel & D'haeseleer, William, 2011. "Gas market distorting effects of imbalanced gas balancing rules: Inefficient regulation of pipeline flexibility," Energy Policy, Elsevier, vol. 39(2), pages 865-876, February.
    4. Adrien de Hauteclocque & Jean-Michel Glachant, 2011. "Long-term Contracts and Competition Policy in European Energy Markets," Chapters,in: Competition, Contracts and Electricity Markets, chapter 9 Edward Elgar Publishing.
    5. Haikel Khalfallah, 2015. "Connecting Mediterranean Countries through Electricity Corridors: New Institutional Economic and Regulatory Analysis," Post-Print hal-01111432, HAL.
    6. Yu, Yang & Song, Yuhua & Bao, Haibo, 2012. "Why did the price of solar PV Si feedstock fluctuate so wildly in 2004–2009?," Energy Policy, Elsevier, vol. 49(C), pages 572-585.
    7. Hauteclocque, Adrien de & Glachant, Jean-Michel, 2009. "Long-term energy supply contracts in European competition policy: Fuzzy not crazy," Energy Policy, Elsevier, vol. 37(12), pages 5399-5407, December.
    8. Khalfallah, Haikel, 2015. "Connecting Mediterranean countries through electricity corridors: New Institutional Economic and regulatory analysis," Utilities Policy, Elsevier, vol. 32(C), pages 45-54.
    9. Reymond, Mathias, 2012. "Measuring vulnerability to shocks in the gas market in South America," Energy Policy, Elsevier, vol. 48(C), pages 754-761.

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