Price is the easy part
It is the easiest thing in the document, and almost never the thing that decides whether you make money.
The idea
He was young enough, once, to think the hard part was the price.
His first serious deals were mineral off-take agreements with Chinese state-owned enterprises. It took a few years and one genuinely bad outcome to see it the other way round.
The price is the easiest thing in the document, and almost never the thing that decides whether you make money.
A formula is a bet
Indexation that makes sense in one price environment stops making sense in another. Oil-linked pricing is reasonable until oil and gas decouple. Hub-linked pricing is reasonable until the hub stops being liquid.
He treats a pricing formula as a bet on the future shape of a market, and prefers it described as one rather than as a neutral mechanism.
What decides it instead
Whether the volumes are really committed. Whether the buyer can pay when the market turns. Whether the contract runs as long as the debt that sits over it.
Those sit in the clauses most people read last. The contract is what you actually own.
What the first question tells you
People lead with what they actually care about. If a counterparty’s first question is about price, the deal is about price.
If it is about timing, someone has a deadline they haven’t mentioned. If it is about who else is looking, they are worried about being the only one at the table.