Petroleum Sales Contracts

This 3-day course is designed to give attendees a comprehensive understanding of crude oil, natural gas and refined products markets and the sales contracts that are utilised for transactions through the supply chain. Sales contracts have evolved significantly over the past 40 years and reflect the major changes that include market liberalisation and globalisation. Whereas physical trades comprise a substantial market position, paper trades that are designed to mitigate price risks and take advantage of opportunities have evolved rapidly over the past two decades. Case studies and short exercises are included to consolidate learning outcomes. The course will feature: Understanding the markets Contrasting physical and paper markets The major trading centres and commodity exchanges Distinct characteristics of crude oil, natural gas and refined products Key contract features Terminology used in contracts Price behaviour and forecasting Course overview An understanding of the trading markets is complicated by the use of technical and commercial jargon and acronyms. This course is designed to clarify and demystify the technical and commercial aspects of standard sales contracts. You will gain an insight into the functions of the markets and the dynamics that shape the petroleum commodities markets in jargon-free language. Transactions and contracts covering the spectrum from crude oil, natural gas, natural gas liquids and refined products are explained and reviewed through the use of PowerPoint presentations and general discussions. The key contractual terms in both physical and paper contracts are reviewed and explained and will enable you to appreciate the key drivers that are prevalent in the markets. Case studies are reviewed and short exercises are run that serve to consolidate learning outcomes. Benefits of attending petroleum sales contracts Acquiring a greater understanding of standard sales contracts Recognising the use of contracts to mitigate risks and offer opportunities
Day 1 Evolution of the markets What drives the petroleum markets? 1970-2010; from long-term sales to spot contracts Global supply/ demand dynamics The physical markets and global reference markers The paper markets; futures, swaps, options The petroleum commodity exchanges; ICE, Nymex, DME, Simex Reducing risk and exploiting opportunity; hedging and arbitrage Price formation The forward price curves; backwardation and contango The crude oil sales contract Crude oil characteristics, variations and price differentials Key contract terms Price references and differentials Transportation and international commercial terms (incoterms) Case study: Brent spot crude sales to a Rotterdam refinery Exercise: reviewing options for crude purchases for a U.S. Gulf coast refinery. Day 2 The natural gas sales markets Distinct characteristics of natural gas Evolution of gas markets from local to global Price formation Correlation with crude oil prices Transportation; pipelines and LNG Market opening and liberalisation Market hubs The Gas Sales Contract Agreement (GSA) Key terms Distinct features of LNG sales contracts North Sea case study: NGL sales Exercise: gas purchasing options for an electricity utility. Day 3 Sales contracts of refined products The refined products markets The key refined products; gasoline, diesel and jet kerosene “White” and “Black” products Market hubs; ARA, Med, NYH etc. Market dynamics; price drivers Global tradeflows Distribution and supply logistics Wholesale product contracts - key characteristics Exercise: Wholesale contracts to dealer networks Putting it all together Contract forms and contrasts Summarising the key contract issues Group discussion with delegates Course summary and close