Legal Advice on Gas Transportation Agreement

LEGAL ADVICE ON GAS TRANSPORTATION AGREEMENT

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Table of Contents

Introduction…………………………………………………………………….….I

Fixed Term Contracts………………………………………………………….….II

Date and Events…………………………………………………………………..III

Purpose of Contracts……………………………………………………………...IV

Gas Transportation Agreement…………………………………………………...V

Alternative Delivery Procedures………………………………………………….VI

Minimum Bill Obligation………………………………………………………...VII

Send-or-Pay Contracts

Fixed Penalties

What Constitutes Force Majeure…………………………………………………VIII

Common Clause

Exclusion of Vis Major

Effects of Vis Major………………………………………………………………IX

Reduction of Transport Capacity…………………………………………………X

Recommendation on Capacity……………………………………………………XI

Question Two

Processing………………………………………………………………………………..XII

NGSAA Model………………………………………………………………………….XIII

Legal Requirements…………………………………………………………………….XIV

Depletion Contracts…………………………………………………………………….XV

Impact of UK Bribery Act, 2010………………………………………………………..XVI

     General Offences

     Bribery in International Transactions…………………………………………………XVII

     Prosecution

Bibliography…………………………………………………………………………….XVIII

Introduction

The UK Continental Shelf is regarded as one of the most seasoned and indeed mature belts amongst the oil producing regions. This region though has in recent times been affected by the unsteady and fluctuating prices of oil and gas, particularly affecting this region between the years 2014 and 2015.  As a new entrant into this wide berth of the UKCS^[1], making the offer^[2] to enter into contractual obligations with an existing pipeline company on Gas Transportation, some of these terms will be crucial to the smooth performance by both parties.

Fixed Term Contract

Date and Events

   This contract being entered into under the umbrella of UKCS will be termed as fixed on a number of areas and issues it will address. Any contract can thus be said to be of a fixed-term nature given that it specifies when exactly the contract will come to conclusion or comes to an end in its enforceability by the respective parties being bound^[3]by it. It can also be of a fixed-term nature if it solely depends on the occurrence of one single event. Of which upon it occurring, the contract comes to an end or commences (Byram, 2003).

Purpose of Contract

   A fixed term contract similarly has to end on a specified date when the initial intended purpose of the contract has-been accomplished by the parties. It may therefore not necessarily come to an end on just a single date before the purpose is fulfilled. A particular task has to be accomplished by one or both parties so as to have the fixed term contract concluded (Summers & Flittie, 2008).

The Gas Transportation Agreement

   This agreement for the transportation of gas has a fixed time period of 10 years, and spanning to 12 years depending on the effectiveness of the management to keep its timelines. The date, time and year has thus been fixed, and upon the conclusion of the contractual obligations between the parties after 10 years the contract will come to an end.

   The dates so fixed for the Gas Transportation will commence on the specified date, called the execution of contract^[4]date and be concluded after the ten years of operations. This date of conclusion may vary, and an extension of two years has been granted. This contract therefore is fixed on the aspect of time, and not more on the performance of a particular task as other fixed agreements may state.

    Time therefore is of the essence or crucial and is part of the terms^[5]and not warranties. The clause on considering the need of an effective management to necessitate extension will form part of the warranties^[6]considering it takes not the center focus of the Transportation Agreement in our case (Texas, 2001).

Alternative Deliveries Procedures

   This is a clause that makes a provision for the creation of the possibility to create other contracts in the future to allow the company buying and the suppliers of gas or commodities to make deliveries under terms and conditions that totally differ of vary from the previous ones or the initial agreements.

   This ADP provision lacks for this case and no provision or window has been created to chip in this clause in the course of performance of the contract. It will solely depend on the two entities to first consider the potentialities of future productions and the technicalities to be encountered so as to insert this clause into the agreement.

PART II

Minimum Bill Obligation (80%)

   This as an agreed amount specified as payment made in purchaser's nomination agreement for a specified period of time. It may be annually or after a particular period of time. These forms of payments take several forms with the most popular being: Make-Up Gas of the Take-or-Pay agreements^[7]between parties.

Send-or-Pay Contract

   This is a strict rule that dictates the form and structure taken by the negotiations between two or more companies, mostly between suppliers of commodities and a given company. It states that for any delivery of products the company so orders or had contracted to be supplied them, they make payment up to a certain amount, for example in our case, the Pipeline Company proposes to make payment to the tune of 80% of the Firm Capacity.

Fixed Penalties

   This means for the next ten years or if extended twelve years the company will be receiving 80% payments for the gas transported to the pipeline company. A penalty is usually instituted for products a company would similarly have taken, though changed their decision while the supplies were already underway.

   The advantage this system of operation will have on this Gas Transportation Co. is that it reduces any risks that may be suffered by the gas suppliers in the event the Pipeline Company refuses to make payments. This is a case which can be petitioned to have damages in the form of performance penalties.

 A landmark ruling by the Oklahoma Supreme Court^[8]highlights the authority and precedent in this field of gas and oil exploration. The Roye Realty Inc. V Arkla Inc.^[9].(1993) OK 99,P.2D,1150.The court in this authority argued that the payments made to meet the deficiencies was not part of the liquidated damages so demanded by the supplying company when a breach is occasioned by failure to make payments.

What Constitutes Force Majeure

   This agreement contains provisions on what will be considered the valid problems in the course of production of the Gas. Force Majeure^[10] or in other terms Vis Major^[11]is the natural definition of naturally occurring phenomena as a result of some superior force in nature creating chances and occurrences that bring about unforeseen accidents, thus negatively impacting exploration and production of gas. This is according to the Royal Institute of Thai (2008), on what companies would consider Force Majeure in their contractual obligations.

 Common Clause

   This clause, when amended will help in the freeing of both parties from any unforeseen and unplanned liability or detach them from any obligation in the event these natural and spontaneous forces of nature wreak havoc thus impeding the performance of their respective tasks in the agreement. The transportation company therefore should not agree to the clause that any problems arising will not be considered as Force Majeure. Such events are unforeseeable and ought to be treated as such by the parties.