Contract Management

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LNG Contract Management
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Contract Management Background
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Operational Issues
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Other issues of operators concern
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Delivery Procedures
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Credit Management
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Measurement Specifications
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Contract Accounting

• Managing gas contracts involves data and
  information collection and reporting regarding
  field production, delivery and sales, compliance
  with TOP obligations or other minimum bill
  provisions, gas loss and fuel use and Force
  Majeure claims
• Provisions for accounting and auditing are either
  contained within the four-corners of a main
  contract for the sale or transportation of gas or
  a specific agreement for gas balancing

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Contract Accounting ctn
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Contract Accounting ctn
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Fuel Use
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Line-Pack

• The internal operating pressure of the pipeline
  must be maintained to allow gas to flow at a rate
  that is sufficient to meet delivery obligations.
  There are 3 options for building up adequate Line
  Pack
• The pipeline to take this responsibility.
  Considering that this will represent a major
  investment in a permanent gas inventory, the cost
  will be reflected in the Capacity Charge.
• The Shippers to contribute their proportionate
  share from the gas they purchase. 
• The pipeline takes responsibility for the
  initially filling pipeline and the Shippers
  contribute subsequent volumes in the event Line
  Pack is reduced due to imbalances in deliveries
  or acceptable gas losses.

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Force Majeure
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Force Majeure

• If either party is under Force Majeure for an
  extended period, the other party may have the
  right to terminate the contract

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Audits
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Audits
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Billing Invoicing

• Gas is delivered in instalments either as monthly
  quantities or LNG cargoes are paid for in arrears

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Billing Cycle
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Billing Invoicing ctn
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Billing Invoicing ctn

• Often data on final delivery for the period is
  not available at the time the statement is
  prepared. In this case, payment is to be made on
  an interim invoice that is issued in the course
  of the billing cycle. 
• A correction is shown in the next invoice once
  the Seller has the data on actual deliveries at
  the sales meter. Other contracting parties may
  have the right to audit the records held by the
  Operator. 
• Payments are made in the currency agreed in the
  contract. This may involve the Buyer accepting
  the foreign exchange risk. Usually, a paying
  agent is such as a bank or the Operator is
  designated to receive the payment. Late payments
  will accrue interest at a premium such as 2
  percent above the London Interbank Overdraft Rate
  (LIBOR).

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Form of Invoice
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Dispute Resolution

• Disputes involve either questions of factual
  determination or contract Interpretation

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Factual determination issues concern
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(No Transcript)
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Dispute Management
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Dispute Management

• If a matter is not submitted for dispute
  resolution within a specific period after the
  event has occurred, usually two years, It could
  be barred
• unless covered by a survival clause,claims can
  not be submitted for dispute resolution after the
  contract has expired

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Contract Adjustment
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Contract Adjustment

• In some instances, market volatility and
  regulatory intervention have been accepted as the
  basis for the termination or suspension of
  contract performance, usually by the Seller,
  under so-called Market-out, Economic-out or
  Regulatory-out clauses. 
• Other rights of termination can be exercised due
  to defaults that are not corrected in a timely
  manner such as non-payment, an extended period of
  Force Majeure or material breach of contract.

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Transfers Assignments
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Amendments Renegotiations
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End of Session

• Gas Policy and Regulation