Question: Recently, Air Liquide signed a long-term contract with Yan'an Energy and Chemical Co., a subsidiary of Yanchang Petroleum Group-one of China's largest firms engaged in

Recently, Air Liquide signed a long-term contract with Yan'an Energy and Chemical Co., a subsidiary of Yanchang Petroleum Group-one of China's largest firms engaged in oil and natural gas exploration and production as well as oil refining. The new contract specifies that Air Liquide invest approximately 80 million euros in two air separation units (ASUs), which will supply air gases for Yan'an's production of plastics. Air Liquide is a French multinational firm that supplies industrial gases to a wide range of industries, including chemical manufacturers. Why is a long-term contract preferable to a spot exchange or vertical integration between Yan'an and Air Liquide?

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