Description

Designed for you, if you are...

• Involved in contracts or legal functions
• A professional seeking familiarity with these types of contracs

How we build your confidence

• Open dialogue
• Problem solving
• Case studies
• Exercises

The benefits from attending

• Gain a holistic understanding of LNG contracts
• Understand key components and their interaction
• Become familiar with key negotiation issues
• Have increased awareness of the importance of force majeure to LNG contracts

Topics

• An evolving market
  – Making the right strategic choices
  – Maximising opportunities
  – Mitigating threats
• Capacity issues (greater demand for gas for power generation, ‘floating infrastructure’, transportation fuel substitute, etc.) and delivery capabilities
• Increasing global infrastructure (new pipelines, more LNG maritime transportation) – a greater emphasis on ‘spot’ markets?
• Security of supply – increased or decreased certainty?
• Where is the destination market? A very key variable of consideration
• Long term oil indexed prices – a thing of the past?

• Degree of regulation
• Number of buyers and sellers
• Developed/access to transportation infrastructure
• Substantial trading volume
• Transparency in price and volume reporting
• Degree of liquidity to create indexation
• Futures trading

• The traditional LNG contract – key aspects reviewed (quantity, quality, conditions of delivery, i.e. FOB, CIF, DES etc.)
• Examining portfolio SPAs – a better way forward?
• Standardisation – the best way to promote transparency in contracts?
  – Key benefits of standardisation
  – Reduction in uncertainty
  – Cost reduction in terms of time and price
• An end to destination clauses?
  – Re-selling cargos into the spot market – an efficient way to reduce import costs?
  – Renegotiation
• Why stabilisation clauses are a good idea
• Reopener clauses
• Renegotiation (oil indexed vs. gas hub prices) clauses – the problem of project investment and FID
• Renegotiation clauses – combating the impact of price divergence due to market volatility
• Stabilisation clauses
• The confirmation memorandum
• Case study: An SPA dissected

• Term
• Force majeure
• Termination protocols
• Assignment issues
• Dispute resolution mechanisms (clauses)
• Warranties and guarantees
• Relevant incoterms
• Vessel/terminal/berthing facilities and any upgrades required
• Stakeholder identification and management – local content provisions (example: Barrow Island)
• Quantum of liquidated damages – when LDCs are triggered – cap and collar valuations

• The buyer’s (inclusion) and the seller’s (limitation) perspective relative to diversion rights
• Commercial rationale – key reasons for including diversion provisions
• Storage and capacity – 2 other key reasons for the inclusion of diversion provisions
• Diversion rights and force majeure
• Ship to shore compatibility issues (seller’s perspective)
• Diversion provisions and destination clauses – a potential conflict?
• Case study – examining a diversion provision
• Class exercise – negotiating diversion rights

• Stipulation of ACQ and units to be utilised
• Annual date of commencement, annual date of cessation
• The AACQ
• Round Up and Round Down Quantities
• Impact on AACQ due to scheduled major maintenance and inspection works

• Quantity reductions due to seller’s actions (including force majeure)
• Quantity reductions due to buyer suffering force majeure event(s)
• Buyer issuing a ‘Notice of Suspension’
• The ‘Cargo Shortfall Quantity’
• Mitigation sales

• Quantity reductions due to buyer’s actions (including force majeure)
• Buyer issuing a ‘Notice of Suspension’
• The ‘Cargo DoP Quantity’ (deliver or pay)

• The traditional perspective (single project, long term) – challenged by the growing ‘spot’ (short term) or medium term (designated number of cargos) market evolution
• Key stakeholders in vessel chartering
• Contracts of Affreightment
• Cargo ‘swaps’
• Voyage charters
• Shelltime4
• Exxonmobiltime 2000

• Adverse weather conditions provisions
• Compatibility of tankers with loading facilities
• Tanker inspections
• Port liability agreements
• Loading of tankers
• Notice of Readiness
• Berthing assignments
• Berth laytime
• Excess laytime (tanker not ready to load)

• The buyers’ and sellers’ obligations to the contract (purchase and supply, liability for shortfall)
• Statements of LNG not taken; unavailable or undelivered
• Payment terms (due dates, currency, and payment methodology)
• Late payment and refunds
• Seller's rights to suspend performance
• Payment disputes

• Force majeure (FM) defined
• Scope of FM events pertinent to the contract
• Exclusions
• Resumption of normal performance
• Rights of parties in the event of force majeure