Total Sales Exceeding 180 BCM of Gas and 100 MT of Crude
Our lawyers have, structured, negotiated, drafted and advised on the implementation and amendment of a range of marketing agreements, including:
Gas Sales Agreements, aggregate volumes exceeding 180 BCM
Several long-term gas sales agreements in the CIS, both cross-border and domestic. One of the complexities was managing very different maintenance regimes as between the seller and buyer, which led to lengthy volume nomination, shortfall and undertake procedures. Another notable complexity arose from establishing a pricing and price review mechanism that could be realistically invoked and enforced, with the inclusion of a specialist technical fast-track tribunal. Unusually, although the sales and deliveries took place entirely in the CIS, we used English law for one of the larger contracts in order to ensure that its indemnity provisions would be enforceable. We also included specific provisions to redress potential state intervention on behalf of one of the parties that was indirectly controlled by a sovereign state. With domestic agreements, care has to be taken to ensure the gas sales agreement does not result in the application of restrictive anti-monopoly processes.
Marketing Agreements for crude oil from cross-border pipelines
Agreements for the marketing of crude oil through trunk pipelines in the CIS. For crude from the same field, this involved a transparent joint marketing structure that eliminated consortium members achieving different netbacks - which would result in distortions to cost recovery - while allowing the individual marketing of crude after lifting. This afforded each consortium member the maximum flexibility in its trading activities. Such agreements tend to be closely linked to pipeline transportation agreements and managed by a joint marketing company as agent for the owners of the crude.
Backup Gas Supply Contract
An agreement for the reverse flow of gas back to a field in the event the field processing facilities' gas sweetening plant was down for planned or unplanned maintenance. The agreement required robust provisions to ensure that operations in the field were not interrupted, and processes were in place to secure gas supplies for both the field and the wholesale market.
Mutual assurances agreements and performance guarantees. Due to the long-term nature of gas sales agreements and the infrastructure investments that depend on the gas offtake, where gas sales agreements are executed by special purpose vehicles or joint ventures, it is essential to put in place performance guarantees. These should be from one or more parent companies that control the SPV or JV, and that have sufficient financial substance.
Fair Billing Policy
During the first six months of 2018 we carried out a survey of senior lawyers and general counsels in the oil industry and other industries. As none of these were clients, they were able to be frank.
The level of annoyance with services provided by the law firms was shocking. Most of the grievances boiled down to billing practices - in particular being billed for time that it was felt was unfair to bill for - such as internal law firm briefings, the client educating the firm and the client improving contracts drafted by the firm.
To address these concerns we have implemented a 7-point fair billing policy, under which we do not bill for time spent on these activities. This has been very well received and makes for a much better relationship.