Gas & LNG Contracts Negotiation

Introduction

The oil and gas industry is global in nature and it involves trading Pipeline Gas and LNG in Africa, Europe, Middle east, Asia and North America. These markets have grown rapidly as result of demand and deregulation, bringing tremendous business opportunities for all the stakeholders including government entities, producers, sellers, transporters and buyers etc. High contract value, complicated commercial terms, volatile prices, cultural differences and many other unpredicted risks have made contract negotiating, dispute resolution and risk management more and more challenging. Effective training in these areas becomes an urgent need for relevant executives in both public and private sectors. In response to such industry dynamics, this advanced training course will provide effective training in the critical considerations and conditions for successfully concluding Gas and LNG Sales Agreements. The training course will enable participants to gain an insight into the way in which Buyers and Sellers view and negotiate Gas and LNG Sales Agreements, and will give participants a detailed understanding of the terms that are important in these transactions.

This training course will highlight:

• Dynamic of downstream, midstream, and upstream activities
• Essentials of contract principles
• Gas Sales and LNG Contracts with reference to international model contracts
• Transportation Agreements with reference to international model contracts
• Gas sales and Purchase Agreements
• Contractual risk management issues, insurance, indemnities, liabilities, and force majeure
• Negotiation arts and strategies relevant to LNG contracts

Objectives

This training course aims to provide an overview of the LNG contracts and its context within the oil and gas industry, to understand how to negotiate profitably key LNG contracts, to asses and manage pricing and overall risks, and to understand the application of ADR (Alternative Dispute Resolution) relevant to LNG contracts.

This training course aims to achieve following: 

• Understanding common contractual pitfalls in LNG contracts
• Negotiate profitably LNG contracts, with clear understanding of insurance provisions, liability and indemnity clauses
• Enhance your ability to draft and negotiate LNG force majeure clauses
• Asses and manage risks as relevant to LNG contracts
• Grasp and apply dispute resolution methods to LNG contracts

Training Methodology

This interactive training course will provide the participants an ideal opportunity to improve and sharpen their skill sets in planning, negotiating and drafting LNG Contracts through interactive session with role playing, case studies, discussion groups and scenario building and the high-point of the training course being a simulation exercise of oil and gas contracts negotiation involving interactive role play by the participants. The objective of the interactive role play is to enable participants to apply the knowledge and understanding gained at the workshop to negotiate more effective LNG contracts. This will help participants gain practical insights into managing the risks and enhancing their rewards.

Who Should Attend?

The 5-Day training course is specifically designed for professionals actively involved or likely to be involved in contract negotiations and all those who need an understanding of the principles of gas contracts, including issues such as price terms and the allocation of risk.

Therefore, the audience for this training course will be:

• Senior and Middle Level Commercial Managers
• Commercial Lawyers
• Contracts Managers
• Compliance Personnel
• Risk Managers
• Energy Purchasing Managers
• Strategy Managers
• Pipeline Marketing Managers
• Operations Managers
• Project Managers
• Senior Government Officials and Regulators

Course Outline

Day 1: Dynamic of Downstream, Midstream, Upstream & Contract Law  

• Introduction to LNG & Sales Contracts

• Training objectives

• key terms and definition

• The main international industry players

• Introduction to specific LNG and Sales agreements

• Legal System and Contract Law

  • Mandatory elements of a legally enforceable contract

  • Contract Law: Contract formation

  • Contract Law: Contract terms

  • Contract Law: Interpretation of contract terms

  • Contract Law: Remedies for breach of contract

  • Assessing available remedies for breach of contract

  • Rescission

  • Compensatory damages

  • Consequential and incidental damages

  • Liquidated damages

  • Specific performance

  • Injunctive Relief

Day 2: The Essence of the LNG Sales Contracts 

• Characteristics of LNG sales contracts

• The contractual process

• Commercial realities

• Drafts and drafting

• Enforcement

• Fundamental legal principles

• Cultural and language issues

  • Fundamental Legal Principles

  • LNG Sales Contracts

  • What is LNG?

  • The LNG Industry

  • LNG Value Chain

  • LNG Sales, and LNG sale and Purchase Agreements

  • Financing of LNG Projects

  • Current Issues in LNG

  • Transportation Agreements

  • The contractual arrangements put in place for getting petroleum from the wellhead to the market place

  • Off taking and transporting Oil & Gas (pipeline or ship)

  • Typical terms of a Gas Pipeline Transportation and Processing Agreement (TPA)

  • Transportation (or Transhipment) of crude oil and Liquefied Natural Gas (LNG) or Gas to Liquids (GTL)

  • International practices and model contracts

Day 3: Gas Sale & Purchase Agreements

• Types of Gas Sales Agreements

• Parties

• Term and Effectiveness: Duration and delayed start date provisions

• Sale, Purchase and Delivery

• Gas Reserves

• How to express gas quantities in pipeline gas contracts

• Take-or-pay, Carry Forward and Make Up

• Current practice on shortfall penalties

• Quality

• Price

• Nominations, Undertake, and Overtake

• Measurement and Testing

• Invoicing and Payment

• Force-Majeure in gas sales contracts; the differences between pipeline gas and LNG

• Termination

• Tax

Day 4: Force Majeure Clauses 

• Understand the purpose and risks this clause is intended to mitigate

• Avoiding common Force Majeure pitfalls

• Protect yourself from abuse and misuse of this clause

• Mechanics of exercising Force Majeure rights

• Practical Exercise: Case studies

• Insurance Provisions

  • Overview of coverage types

  • Understanding typical insurance exclusions

  • Assessing the quality of your insurance carrier

  • Evaluating deductibles and coverage limits

  • Insurance subordination issues

  • Effective claims management

• Contract Management

• Operational issues

• Gas delivery procedures and coordination between suppliers, terminal operator, transporters and users

• Types of dispute resolution vehicles

• Importance of the dispute resolution clause

Day 5: Contract Claims & Dispute Resolutions

• Types and Assessment of Claims

• Tiered Dispute Resolution Mechanisms

• Formal Dispute Resolution

• Preventing costly litigation through effective use of ADR option

• Types of dispute resolution vehicles

• Assessing litigation vs. arbitration options

• Mediation considerations

• Considerations for selecting effective mediators and Arbitrators

• Selecting arbitration and mediation rules of procedure

• Drafting effective dispute resolution clause

• Practical Exercise: Mock arbitration exercise

• Contract Close Out

• Contract Review, Evaluation, Lessons Learned