Negotiating & Drafting Oil and Gas Industry Contracts

Course overview

*The accelerated pace of change in the oil and gas industry makes this one of the world's most challenging and complex sectors in which to understand, draft and negotiate contracts.

The legal and regulatory framework of upstream oil industry contracts is constantly changing, therefore it's critical that all lawyers, commercial and contracts managers working in this sector are up-to-speed. The current focus is a greater emphasis on standard form agreements.

Falconbury have developed this unique 3-day programme focusing on current practice and developments. It will serve as either a comprehensive introduction for newcomers or a useful update/refresher for those with experience in the industry.

• PART ONE deals with the different types of agreements that are in common use. The expert speakers will guide participants through the various contracts focusing on understanding the key issues together with drafting techniques.
• PART TWO takes a closer look at general contract terms – terms which are common to all types of agreements and have an enormous impact.
• PART THREE focuses on negotiation skills with specific reference to and case studies based on oil and gas industry contracts.

Who should attend?

In-house lawyers, procurement managers, contract managers, contract analysts, contract engineers representing international petroleum companies, contractors and sub-contractors to the petroleum industry together with host governments.

The delivery style

This highly interactive programme aims to deliver applied training through a balanced blend of practical learning. The presenters will use a mix of trainer input, practical exercises and business cases from the upstream oil and gas industry to ensure you leave the programme with new skills and knowledge that can be put to use in the workplace straight away.

What are the objectives of this seminar?

By attending this seminar, you will:

• GAIN a knowledge and understanding of the different types of agreements that are in common use in the upstream oil and gas industry
• BECOME familiar with the general contract terms that are encountered in most upstream oil and gas industry contracts
• FIND out more about the problems encountered when working in different jurisdictions
• UNDERSTAND the rights and obligations of the contractor
• LEARN about dealing with disputes in upstream oil and gas contracts
• RECOGNISE the importance of risk identification and allocation
• MASTER the key skills for successful negotiation of oil and gas contracts to guarantee a successful bid

Programme - Day 1

PART I – Understanding and drafting different types of upstream oil and gas agreements

Introduction and overview of industry

• Overview of contractual and fiscal structures
• Confidentiality and non-disclosure agreements
• Exclusivity agreements
• Joint bridging agreements
• Areas of mutual interest agreements

Specific issues when drafting joint ventures and licensing agreements

• Typical provisions of the agreements
• Practical exercise focusing on key licensing issues
• Technology transfer
• Concessions and licenses
• PSC's
• Termination

Joint operating agreements and alliances

• Relationship between the parties
• Scope
• Interest of the parties
• The role of the Operator
• Rights and duties of the Non-Operator

Offshore rig hire agreements

• Rights and obligations of the parties
• Assignments
• The rig market
• What the oil companies provide
• Two main commercial risks associated with rig hire
• The Rig Hire Contract
• The IADC Form

Commercial terms in licensing and concession agreements

• Fiscal arrangements, licence fees
• Royalties, the R factor
• Taxation
• Bonuses
• Penalties

PRACTICAL WORKSHOP- Drafting agreements for offshore design, engineering and construction work including EPC contracts (engineer procure construct)

• Basic features of an EPC contract
• Key oil and gas specific clauses
• Key performance clauses
• Liquidated damages
• Performance guarantees
• Key general clauses

Host government rights and obligations

• Political risks
• Sovereign immunity
• Land – licensing, leasing
• Convertibility of currency and exchange rates
• HSSE regulations
• Assistance, consents
• Local content requirements
• Applicable laws
• Disputes-forum and enforcement
• Host govermnet petroleum regimes
• HSSE risks
• Anti-corruption regulations

Programme - Day 2

PART II – General contract terms and risk allocation

General obligations of the Contractor and the Company

• Performance standards
• Data collection and reporting
• Audit rights and financial reporting
• HSSE requirements
• Sub-contractors

PRACTICAL WORKSHOP- Drafting contractual guarantees and warranties

• Advance payment bonds
• Retention bonds
• Performance guarantees
• Parent company guarantees
• Example clauses

Indemnity and hold harmless clauses

• Indemnity- why the need
• Distinction between indemnity clauses and exclusion clauses and limitation of liability clauses
• Distinction between indemnity and guarantee
• Simple indemnity and mutual indemnity
• Importance of drafting- judicial suspicion
• UKCS Mutual Hold Harmless Regime

Understanding contractual liabilities

• Liabilities for personal injury or death
• Liability for late delivery, performance or similar
• How to limit the maximum aggregate damages
• Fundamental breach v breach of fundamental obligations
• Sample clauses

Exclusion clauses in the offshore industry

• Drafting clauses to withstand judicial scrutiny
• Example clauses
• The default legal position
• Indemnity clauses
• Tortuous liability
• The Contra Preferendum Rule
• Incorporation
• Construction of the contract
• UCTA – core provisions
• Recent case law

Termination of oil and gas contracts

• Right to terminate under the contract
• Right to terminate under applicable law
• Consequences of termination
• Getting it "right"
• Getting it "wrong"

Dealing with disputes in oil and gas contracts

• Choice of method
• Litigation
• Arbitration
• Mediation
• Expert determinations

Programme - Day 3

Part III – Negotiation skills for upstream oil and gas contracts
Workshop leader: Rob Maguire

The rise and rise of the negotiator
Nothing exemplifies the modern oil and gas company or contractor as much as the growth of joint ventures, sub-contracting and licensing. All of these require the executive to be able to negotiate and, often, to be able to lead others through the negotiation process.

• The increase in negotiated relationships
• Technical AND commercial skills
• Recognising a negotiation
• Great role models

Practical exercise: Negotiate and succeed
Working in teams, delegates are asked to resolve a multi-variable, multi-party business problem. The output of the exercise will form the backdrop for the following sessions on structure and influencing.

Structure for control
The research tells us that negotiation success is not related to any single aspect of the complex interactions that take place in any negotiation. However, above all else the party that negotiates best gets the best result. The keys to negotiating well are controlling the negotiation and managing the process.

• Control for success: Key planning checklist to negotiate well
• Structure for success: Creating the space to agree
• Trading for success: Understanding relative values

Personal style and negotiation
This session helps us hold a mirror up so that participants can reflect on their own style. We look at why other styles irritate us – and how we negotiate with those people we find difficult to deal with.

• Our lead style (and our fall back style)
• The A to E of negotiating styles
• Personal strengths and weaknesses

Practical exercise: Moving into engagement, influencing and persuasion
It can be argued that the more we can influence someone to our position and the greater agreement we can build, the less we have to give away in our negotiations

• Persuasion psychology
• The range of levers available
• Focusing your persuasion

Working in teams, delegates will be asked to use their knowledge of their own style and those of others in their teams to agree strategies and tips for dealing with other styles and getting the most our of the negotiation.