Gas/LNG Contracts : Risk, Pricing and Negotiation Course

Gas and LNG value chains are complex. Related legal and commercial agreements must take account of the technical, market, commercial, regulatory and geopolitical factors that are at play.

This Four-Day Course provides a solid grounding in the technical and market fundamentals, prevailing gas and LNG supply and associated agreements, principles and available techniques for pricing and agreement negotiation techniques.

Delegates will acquire the fundamentals of international gas and LNG agreements, an understanding of gas and LNG supply and related agreements, and negotiation techniques and strategies relevant to international gas and LNG agreements.

Course Highlights

  • Gas/LNG Contracts, Aims, Risk and Value Considerations
  • Gas/LNG Market Overview and Gas/LNG Pricing
  • Gas/LNG Contract Principles and Gas/LNG Trading
  • Gas/LNG Contract Negotiation – Principles and Techniques
  • Developing Key Gas/LNG Contract Articles and Model GSPA
  • Gas/LNG Contract Principles and Model SPA
  • High Pressure Gas Transmission and Shipping and Risk Mitigation
  • Flexibility Mechanisms for Gas and Related Contracts
  • Gas/LNG chain Contracting, Pricing and key terms
  • Project Finance

Day One

Introductions

Session 1: Gas /LNG Industry Overview

  • Gas / LNG chain and definitions
  • Gas transmission technologies:
    • Comparative summary of pipeline, LNG, CNG and GTL
  • Technology innovation developments:
    • Shale gas, FLNG, FRSU, small scale LNG
  • Measurement units applicable to gas /LNG units
  • Worked numerical examples

Session 2: Gas /LNG Market Overview

  • Overview of natural gas sector
  • International pipeline trade
  • LNG trade
  • Regional markets:
    • Profile of gas trade of Africa, Atlantic, Middle East, Asia Pacific, Europe and USA
  • Geopolitical issues
  • Gas/LNG market structure and gas industry regulatory issues

Session 3: Gas/LNG Contracts, Aims, Risk and Value Considerations

  • Basic questions
  • Contracts objectives
  • Gas/LNG chain contracts
  • Operational, commercial and legal basis for long term contracts
  • Contract perspectives of Buyer and Seller: obligations, risk mitigation and value

DISCUSSION: What needs to be in place for serious commercial engagement to commence:

  • Buyer’s view
  • Seller’s view

Session 4: Gas/LNG Contract Principles

  • Introduction to terminology and contract terms
  • Background to Long Term Gas Contracts
  • Key aspects of Gas / LNG contracts
  • Worked examples for annual contracts and payments for natural gas and for LNG

Day Two

Session 5: Overview of Gas/LNG Contract Elements

  • Types of Gas/LNG Contract
    • Supply, depletion
  • Elements of Gas/LNG Contracts
    • Title transfer, technical or commercial elements?
    • Supply commencement
    • Supply quantity, minimum quantity, quality, compensation
    • Supply obligations, flexibility, minimum payment obligation
    • Exceptions to obligations, suspension
    • Quality
    • Pricing, indexation, reopeners
    • Information rights

Session 6: Key Contract Articles

  • What is agreed?
  • Quality, specification, title and risk, testing & measurement
  • Contract quantities (with calculation examples):
  • DCQ, ACQ, MDQ, Take Or Pay, Make Good, Make up, Carry Forward, Shortfall and Annual Reconciliation
  • Contract quantities (with calculation examples):
  • Force Majeure, Dispute Resolution, Assignment, Termination, Liabilities, Governing Law.

GROUP DISCUSSION: Expertise required and how to organise

Session 7: Developing Key Gas/LNG Contract Articles and Model GSPA

  • Review of contract flow sheet
  • Development of articles to level needed for drafting of GSPA
    • Value of clarity and precision
  • Appendix: Model Gas Sales and Purchase Agreement

DISCUSSION: Managing team with required expertise

Session 8: LNG Contract Principles and Model SPA

  • Review of LNG SPA contract flow sheet
  • Structure of contracts for Sale and Purchase of:
    • LNG Ex Ship
    • LNG FOB
  • Appendix: Model LNG Sales and Purchase Agreement

EXERCISE: practical aspects of LNG payments

Day Three

Session 9: High Pressure Gas Transmission

  • Background: purpose, natural monopoly, development and construction
  • Issues arising from multiple shippers, new customers, system integrity
  • Standard contract articles checklist
  • Gas balancing, over/under run, physical flow
  • Appendix: Model gas transportation agreement (GTA)

DISCUSSION: Public policy influence on allocation of risk

Session 10: Flexibility and Other Relevant Gas Contracts

  • Flexibility available from:
    • Supply, Demand, Infrastructure
    • Gas markets
  • Other relevant contracts
    • Spot contract
    • Tolling contract
    • Regasification contract

Session 11: Shipping and Risk Mitigation

  • Ship types, current fleet, operations, design and condition
  • LNG SPA responsibility for shipping
  • Shipping contracts: Time Charter and rates, Bareboat and Contract of Affreightment, short term charter
  • Allocation of major risks and mitigation
  • Structured approach to LNG/ gas contract risk identification, allocation and mitigation

Session 12: Gas/LNG Contract Negotiation

  • Typical steps in progress of negotiation
  • Applicable contract law
  • Review of important concepts and negotiating styles.
  • Structured preparation process and planning tool
  • Stages in negotiation of a gas contract and principles – preparation, fact finding, proposal, bargaining,tradable variables, offer of concession and non-negotiable item concept
  • Case Study application and discussion

Day Four

Session 13: Gas/LNG Pricing

  • Basic principles and main drivers
  • Gas pricing methodologies: cost plus, cost of service, net back / market value
  • Regional price formation
  • Current international gas/LNG pricing trends
  • Global LNG pricing methodologies:
    • Oil price indexation, (JCC crude parity, Brent etc.), Henry Hub (USA), NBP (UK) & TTF (NL), Negotiated base price (P0)) indexed by crude derivatives (weighted)
  • Pricing indexation methods: Absolute value on price of reference fuel/basket of fuels, P0 indexed to reference fuel, Mixed indexation based on ceiling, floor, s-curve, linkage to product prices
  • DISCUSSION: selling HH priced gas into Asia or Europe

Session 14: Gas/LNG Trading

  • Why trading is necessary
  • Gas trading: spot, financial markets, European hubs,
  • Fuel price risk example
  • Regional gas pricing variation
  • LNG trading
  • LNG arbitrage: illustrative example
  • Discussion: Trading function within a natural gas company

Session 15: Exercise: Gas/LNG chain contracting, pricing and key terms

GROUP EXERCISE AND DISCUSSION

  • Simulation, for formation of new LNG to power supply chain, of initial negotiation of contract positions on pricing, projects’ scheduling, conditions precedent, default liabilities, force majeure and initial pricing for each of five contract parties to LNG SPA, gas pipeline GSPA, GTA and GSA.

Session 16: Project Finance

  • Background
  • Lenders’ approach
  • Additional requirements
  • Impact on gas sales agreement
  • Discussion
  • Legal Counsels/Advisors
  • Commercial Managers
  • Negotiators
  • Project Managers
  • Project Directors
  • Project Engineers
  • Planning Managers / Engineers
  • Operation Managers
  • Risk Managers
  • Business Development Managers
  • Contract Managers
  • Contract Specialists
  • Sourcing / Purchasing Managers
  • Pipeline Marketing Managers
  • Financial Controllers / Managers
  • Corporate Strategy Managers
  • Senior Government Officials
  • Regulators & Investor Relations

kodukula
Mr. J. Nyhan

Mr. Nyhan is a Senior Associate with the Energy Contract Company. He has strong strategy, management, development, commercial and negotiation experience gained in managerial, transactional and advisory roles. With more than 20 years experience in worldwide markets, he brings the knowledge of oil and gas, power and related energy businesses that can deliver robust solutions to client’s business challenges.

As well as managing and developing commercial teams, James has participated directly in negotiations, transactions, joint ventures and complex regulatory issues. He has worked with most parts of the oil and gas value chain, power and infrastructure developments.

His career includes engineering design, project management and economic and business planning with Ove Arup & Partners, independent power project development with Edison Mission Energy and development of a marketing and trading of gas, LNG and power business with Shell.

His strategy, management, development and commercial experience spans across oil and gas, power, and infrastructure ventures in Europe, Middle East, Africa and North America.

He holds a civil engineering degree from University College Cork, Ireland and an MBA from IMD, Switzerland.

Note:  His full professional Biography is available on request.

Venue:

Holiday Inn Hotel, Sandton – Johannesburg

Dates: 6th – 9th June 2017

Course Prices and Discounts can be viewed after registration.

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