International Oil And Gas Contracts

Course review:

The advanced nature of international oil and gas deals makes respective contracts an integral part of trading and a key link in the negotiation process chain.

Errors and omissions in documents lead to tremendous extra cost for companies and endless arbitration sessions. Nothing is a better guarantee of a successful deal but a duly made and legally valid document!

Managers and legal staff are faced with a multitude of aspects and every one of them has importance in making international oil and gas contracts. To deal with that one has to monitor all recent developments to mitigate risks and secure target margin when the contract is performed. In this regard it is not only important to understand key and commonly used terms and conditions of international agreements but also be prepared to amend and alter those as needed.

Acknowledging this and responding to the challenges International Business House (IBH) has developed and is pleased to offer an International Oil and Gas Contracts, professional excellence course

COURSE STRUCTURE:

The course is composed of 3 parts

Module I: International oil and gas contracts in upstream.

Module II: International oil and gas contracts in downstream.

PROGRAMME Module I: International oil and gas contracts in upstream.

DAY ONE – An Overview of the Upstream Petroleum Industry

• The Players - multinational oil companies, host governments, national oil companies, indigenous participants, service companies
• Types of Authorisation - the agreements that authorise a person to explore for, find and extract petroleum such as concessions/licences, service contracts, risk sharing contracts
• The Project Phases Matrix –bidding, exploration and appraisals, development after commercial discovery, exploitation, processing, marketing and abandonment
• Bidding – bidding agreements, scope, duration, non-competition, interests of parties, Operator, Management Committee, budget, procedure for identifying areas to be bid for, procedure for determining what to bid, application procedure, default
• The Production Sharing Contract – scope, term, relinquishment, work obligations, work programs and budgets, obligations, right to occupy land, monitoring and reporting, notification of discovery, assessing discoveries, declaration of commerciality and development approval, recovery of costs and sharing in production, fiscal regime, exchange and remittance, employees, bonuses, other costs and fees, determining market price, management committee , book-keeping, accounts and records, back-in rights, assignment, liability and insurance, termination, force majeure, stabilisation

DAY TWO – The Joint Operating Agreement

• Introduction to Joint Operating Agreements– joint venture relationship, rules governing the relationship, the roles under a joint operating agreement (Operator, Non-Operators, Operating Committee, Sole Risk Operator, Sole Risk Participants, Non-Sole Risk Participants) and how they interact with one and other and with third parties, scope of the joint operating agreement, the interests of Participants and the relationship between Participants
• Operator and Operations – Operator, appointment, retirement, removal and replacement of Operator, authority and obligations of Operator, contracting by Operator and Operators’ relationship with third parties, relationship between Operator and Non-Operators, standard of care, Operator and other participants, Operator and third parties, non-operators and other participants, non-operators and third parties, understanding participants’ relationships in a sole risk situation
• Non-Operators – rights of Non-Operators, duties of Non-Operators
• Work Programs and Budgets – exploration, appraisal, development and production work programs and budgets, determinants of a commercial discovery, ring fencing, relinquishment
• Commercial Discovery that extends beyond the Contract Area – unitization, unitization agreement, unitization joint operating agreement, conflicts between contract areas, legal framework, cross-border unitization and sovereignty issues
• The Operating Committee – establishment, activities and administration
• Sole Risk and Non-Consent
• Default – including penalty and forfeiture
• Disposal of Production – obligation to take in-kind, off-take arrangements
• Abandonment - abandonment before discovery, voting, abandonment after discover (exclusive operations), decommissioning of installations, cost sharing disputes over decommissioning

DAY THREE – The Contracting Process

• Types of Contracts awarded by Operator
• Selection of Contractors
• Tendering Process
• Illustrative Example – offshore drilling agreement
• Terms and conditions – commencement, term, contractor’s obligations, Operator’s obligations, contractor’s equipment, Operator’s equipment, contractor’s personnel, offshore transport, remuneration/rates, liability and indemnity, environment, health and safety, assignment, sub-contracting, termination
• Risk Allocation – indemnity, back-to-back indemnity, exclusion of liability, limitation of liability
• Guarantees
• Confidentiality
• Dispute Resolution – courts, mediation, arbitration, expert determination

PROGRAMME: Module II: International oil and gas contracts in downstream.

DAY ONE – Gas Sale Agreements

• Natural Gas Agreement Matrix - overview of the contract types, the gas chain, upstream transportation cycle, midstream transportation cycle, downstream transportation cycle
• Take-or-Pay – how it works, concepts in the take-or-pay clause, exploring the buyer’s obligation under a take-or-pay clause, limitations on take-or-pay
• Terms and Conditions – quantities, quality, nominating, delivery point, price, price indexation, force majeure, term of agreement, taxes, billing and payment, measurement, guarantees
• Transportation - pipeline, pipeline agreements, shipper’s entitlement and obligations, transporter’s rights and duties, point of delivery, delivery pressure and compression, quantity, tariff, taxes and levies, quality, measurement, force majeure, warranty and indemnity, billing and payment, dispute resolution, cross-border pipelines, cross-border legal framework, cross-border pipeline disputes

DAY TWO – Crude Oil Sale Agreements

• The Players
• Crude Oil Market Structure
• Long-Term Contracts – issues with change of circumstances
• Spot Market Contracts – characteristics of the market, areas of markets, standard terms
• FOB Crude Oil Contracts – free on board, duties of seller and buyer, passing of property
• CIF Crude Oil Contracts – cost, insurance and freight, variations, out-turn clause, terms relating to deliver on arrival, duties of seller and buyer, the goods, quantity and quality, shipment period and place, appropriation, shipping documents, tender of documents, passing of property
• Forward Market Contracts
• Futures Contracts
• Options
• Delivery Terms
• Price and Pricing Formula
• Shipping Procedure
• Payment
• Legal Aspects – telephone, telex, text and email contracts, bills of lading, letters of credit, letters of indemnity, performance bonds, nomination, laytime and demurrage, certificates of quantity, quality and originality
• Taxes, charges and expenses
• Warranties – free of encumbrances, right to transfer
• Dispute Resolution
• Lifting and Balancing Agreements – lifters’ rights, vessel nominations, loading, insurance, dispute resolution