Your client, a small new entrant to the UKCS, is looking to enter into a gas transportation agreement, with the owners of an existing pipeline, to export gas from their nearby new development. There are no real technical problems in ‘tie-ing in’ or connecting physically to the pipeline and the tariff arrangements are acceptable to your clients.
The field to be developed is expected to produce gas and is expected to have a life of ten to twelve years although this will probably be extended by prudent management of the reservoir.
A draft Transportation Agreement has been sent for your client’s review and in particular includes:
A ten year fixed term;
A minimum bill (or Send or Pay) obligation of eighty percent of the nominated Firm Capacity;
Problems with production will not constitute a Force Majeure event;
A provision that if there is a problem in the transportation system then the producer’s capacity may be reduced;
Required: Explain to your client the main effect and implications of the above and any recommendations you may have.
A gas producer has a field in which it is very difficult to know exactly how much gas is there and how much can be produced on a day -by -day basis. Given these difficulties what type of gas sales agreement (GSA) would be advisable and what other features might mitigate the seller’s liability under the GSA?
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