Negotiating Successful Gas & LNG Contracts

Course overview Today's global gas market 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 course will provide effective training in the critical considerations and conditions for successfully concluding Gas and LNG Sales Agreements. The 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. Participants will also receive a copy of Professor Stickley’s text “A Framework for Negotiating & Managing Gas Industry Contracts” which includes a CD containing examples of the contracts discussed during the course. A 4-day intermediate training course covering: LNG and gas sales Markets, networks and pricing Upstream and transportation agreements Gas supply and purchase agreements Contract management Dispute resolution Who should attend The course is suitable for attendees who are 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. Those who will benefit are therefore likely to be: Senior and middle level commercial managers Commercial lawyers Risk managers Energy purchasing managers Strategy managers Pipeline marketing managers Operations managers Project managers Senior government officials and regulators
Day 1 LNG and gas sales development projects Development logic: the contractual chain and commercial balance that is at the heart of gas projects Development risk: a matrix approach to risk assessment and management Understanding risk in gas projects; overview of the various types of risk that can occur Risk apportionment – its fundamental role in project financing Risk should lie with the party who can best control it: rewards should be proportional to the scale of risks being taken and the likelihood of such risks occurring Identifying and allocating risk How areas of risk are handled in the contractual arrangements for the supply of gas to a project Assessment of gas project feasibility: how quantity is the key to understanding the process Techniques for economic assessment The economic model of gas contracts Commercial issues in gas development Gas markets: development in the unbundling and deregulation of gas markets Gas networks: interconnections and trading hubs Gas pricing methodologies Enterprise structures Financing options in energy project developments: balance sheet, non-recourse project, multilateral agency funding Case study: Gas project risk matrix A detailed review, in workshop simulation format, of the development of a risk matrix for a typical LNG project. Based on the contractual interfaces required by such a project, from upstream development, through gas liquefaction and shipping, to sale to end-user customers of re-gasified gas, this case study highlights the risks that need to be handled. In simulation format, the case study builds a risk matrix to identify these risks and to examine the various alternative means of addressing them. Day 2 Upstream agreements: exploration, processing and storage Production sharing and operating agreements Gas processing Gas storage Exercise: tariff methodologies Example simulation of alternative methods of calculating Gas transportation agreements Classification of pipeline systems Relationship with gas sales agreements Transportation pricing How transportation risks have to be handled and apportioned Day 3 Pipeline gas supply and purchase agreements (GSPA) & LNG agreements Duration and delayed start date provisions Indefinite pricing and indexation How to express gas quantities in pipeline gas contracts Take or pay; make-up and carry forward Force-Majeure in gas sales contracts; the differences between pipeline gas and LNG Current practice on shortfall penalties The LNG chain The history and philosophy of LNG pricing Price formulae used in the industry Recent developments in Pacific Basin LNG pricing The price of LNG shipping The future of LNG pricing Volume flexibility and options in LNG contracts – recent approaches Exercise: negotiation simulation for pipeline gas/LNG supply and sales agreement A simulated negotiation of the terms and conditions in pipeline gas/LNG supply & purchase agreements. Based upon a hypothetical gas field, this simulationhighlights all the issues addressed in such contracts, and examines the various alternative means of handling them. Results of the negotiation will be evaluated using the economic model GasPak. Day 4 Contract management and dispute resolution Operational issues: scheduling, invoicing, balancing Production accounting Gas delivery procedures and coordination between suppliers, terminal operator, transporters and users The need to address dispute resolution Potential areas requiring dispute resolution; price review mechanisms in gas supply and purchase agreements Inclusion of opportunity for expert resolution The expert process in dispute resolution Arbitration Exercise: invoicing for GSPA Course summary and close