Overview

Natural gas development is the most complex type of project in the petroleum industry. Projects are only feasible when long-term contracts can be reached between the producer and end-user. Often the compromise nature of these contracts means that active management of the terms and conditions for performance is necessary in order to deal with events and interpretations that were not anticipated during negotiations.

Natural gas contracts are structured to contain provisions that are favorable to either the producer or the user. It is important to understand the rights and obligations created by provisions for take-or-pay, make-up, most favored nation, and alternate fuel pricing. In addition, the management of long-term contract requires further knowledge regarding trustee financing, production accounting, and pipeline access. All of these concepts are presented with examples. As a final exercise, participants will use a computer simulation that demonstrates the relationship between pipeline transportation costs and the net-back price paid at the wellhead.

Contents

The following topics are presented in the course:

Commercial Issues - The relationship of market load to reservoir characteristics, methods for conducting gas project feasibility analysis and selecting the contract format that is most suited to the market.

Gas Industry Contracts (gas sales and purchase agreements \ gas transportation agreements) - Alternative pricing systems for natural gas, take-or-pay thresholds and accounting, gas transportation agreements and tariff methodology, reserving pipeline capacity and expansion obligations.

Contract Administration - Force majeure impacts on take-or-pay, technical standards for measurement and gas quality, balancing deliveries between producers and pipelines, establishing gas delivery procedures for multiple pipeline users, preparing billing invoices and production statements.