International Gas Contracts - Commercial Factors and Negotiations

Course Summary
The vast majority of natural gas sales, including international ones, are via pipeline. Unfortunately such familiarity may lead to a less than successful approach to the negotiation of such sales and purchase contracts - as several companies have learned to their cost. This five-day course will give you a deeper understanding of the contractual issues as well as risks and how to mitigate them. It will also help to reduce the time (and money) spent on negotiations. The main focus of the course will be on large pipeline international sales and purchase agreements but it will also include their relationship to other contracts in the pipeline gas chain. In particular, it will consider how the risks and contractual provisions change as the contracting parties change along the gas chain from gas field to end-users such as electric power generators, chemical and fertilizer plant.
Using the Bolonia© case study, participants will be able to practice their negotiation skills and knowledge gained from the course as well as test their understanding of the contractual issues involved.
The course being presented in Bahrain will contain additional detail concerning the content of LNG contracts that is not normally contained in the Oxford NG5 course. For example, it will contain details regarding LNG tanker requirements, nomination procedures etc. It will also cover LNG pricing and quality issues.
What you will learn
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The detailed structure and content of the natural gas sales and purchase agreement

How to analyse the risks involved and methods to mitigate against them for both buyer and seller

Negotiating skills and how to manage the negotiating process

Metering and gas quality specification issues and how they relate to price and invoicing
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Suitability:

• Commercial and technical personnel involved in all forms of natural gas activities, both national and international, wishing to deepen their understanding of natural gas sales and purchase agreements and their negotiation
  
• Personnel from government, regulatory and fiscal authorities who wish to widen their knowledge of contractual and commercial issues in gas agreements
  
• Relative newcomers to the natural gas sector are welcome to join the course but maximum benefit will be obtained by those participants with a good understanding of how the gas industry operates or have attended the NG3 course: The Gas Chain Concept - Industry Structure, Economics, and Pricing
  

Commercial Aspects of Contracts

• Role of the contract in financing ne- projects
  
• Establishing the relationship between buyer and seller
  
• Managing risk along the gas chain
  
• Price revision mechanisms; relating gas price to alternative fuels
  
• Quality and metering issues, particularly related to price, invoicing and pipeline transmission
  
• Some references will be made to LNG projects, LNG sales and purchase contracts and ho- they differ from the corresponding pipeline gas contracts and projects
  
• Impact of liberalisation and regulation
  

Elements of a Gas Contract

• The parties and place of incorporation
  
• Recital
  
• Contract terminology and definitions of terms used
  
• Applicable law
  
• Dedication of reserves
  
• Nomination procedures
  
• Dispute resolution, appointment of expert, arbitration, Force Majeure
  
• The major issues in contracts; price, volume, duration
  
• Volume, quantity (DCQ/ACQ), nomination procedures, take-or-pay provisions, carry forward and make-up gas
  
• Pricing structures, pricing revision/revie- and price-break
  
• Warranties and indemnities
  
• Non-performance
  
• Default provisions and Force Majeure
  
• Dispute settlement; arbitration; cancellation provisions
  

Negotiating Skills

• The process of negotiating
  
• Ho- to achieve an agreement that is acceptable to both sides
  
• Planning, target setting, tactics
  
• Verbal and non-verbal communication
  

The Negotiating Process in Practice - Simulated Gas Contract Negotiations

• Preparation for real negotiations
  
• Analysing the management's brief and setting out the negotiating strategies
  
• Seeking information and responding to the other party's demands
  
• Understanding the objectives of the parties in the negotiation
  
• Responding to changes in the negotiating brief
  
• Reconciling the differing demands of buyers and sellers
  
• Closing gaps between the parties
  
• Maintaining the win-win relationship
  
• Closing the deal