Lessons for Sellers in Contracting with Emerging Market Buyers: The “Three R’s” to Structuring Payment Security Provisions -

The recent rebound in the international energy industry is being driven, at least in part, by a large and growing appetite for U.S. hydrocarbon commodity products from buyers in China and other new and emerging markets. U.S. energy companies, eager to court such new opportunities, are actively contracting with a wide variety of new and emerging market buyers for the sale and export of increasing quantities of hydrocarbons, such as liquefied natural gas, propane, ethane and the like.

In the midst of these positive developments, the conduct of a particular buyer in a recently reported case out of a State Court in the energy capital of the U.S. -- Houston, Texas -- may cause U.S. energy companies to more carefully consider the nature, size and timing of payment security they are asking for as they race to sell and export hydrocarbon commodities to new and emerging market buyers.