Fundamentals of LNG Contracts Course Outline

Date: 25th 29th of November 2013 | Course Leader: Dr Ian Thomson | Venue: Four Seasons Hotel, Limassol

Course Description Each day will start at 12.00 and finish at 18.00. Lunch (13:00 14:00) and one coffee break (15:30 16:00) per day are included in the course fee. This is an introductory level course which will expose participants to the principal aspects of the LNG and gas supply chains and natural gas and LNG sales and purchase contracts. It is aimed at individuals with little or no experience of gas or LNG, in either technical or commercial aspects, but would also suit more experienced practitioners who would like a more rounded exposure to the industry. It seeks to introduce the main concepts of gas and LNG markets and practical gas/ LNG chain development from first principals. It explores the technical, political and commercial influences on todays LNG value chain and how they will shape its future. It seeks to introduce the main concepts of gas and LNG markets and practical gas/ LNG chain development from first principals. It explores the technical, political and commercial influences on todays LNG value chain and how they will shape its future. Each facet of the industry is considered, from the challenges of exploration and extraction, to complexities of transportation and shipping, market dynamics, regulation, sales and purchase contracts for gas and LNG and financing of LNG. Topical issues, such as the role and importance of shorter term Liquefied Natural Gas (LNG) contracts and market deregulation, are introduced and examined in a thought provoking way. There are practical exercises in the negotiation of a complex gas contract and in the structural issues associated with the development of an LNG regasification terminal.

25th of November
Introductory Session safety and security during the course Introduction to course content and timing. Gas glossary. Gas and LNG Quiz Introduction to Gas/LNG Chain and Gas Concepts Discussion of characteristics of various gas market sectors Gas products Overview of gas reserves and gas trades, including LNG Gas/ LNG field development Gas and LNG markets and market structure issues Position of LNG in development of Stranded Gas Shale gas a game changer and impact on LNG? Gas quality and gas/ LNG processing overview Gas balancing issues how gas storage is implemented. Use of LNG to smooth out fluctuations in supply

26th of November
LNG Market Overview Upstream Issues (overview only) Liquefaction of LNG Transportation of LNG: LNG shipping types and comparison. Typical costs. Regasification of LNG practicalities of choice and design of a receiving terminal Logistics and costs of LNG: cost of supply along LNG value chain Typical Project Timescales Pricing of LNG Short-term trading of LNG Pricing arbitrage Other reasons for shorter term trading and constraints The Energy Bridge concept and Excelerate Energy Gala Dinner followed by speech How to break in and succeed in Oil&Gas Industry by Carol Bailey former chairman of Shell Indonesia

27th of November
Summary of Gas and LNG commercial issues. Co-ordination of different segments of LNG/ gas chain Host Government Agreements and Intergovernmental agreements Comparison of LNG and cross-border gas pipelines (illustrated by TANAP pipeline) Summary of gas and LNG pricing issues and latest trends Henry Hub, European practice (N and S Europe), Asia Upstream regulation of gas/ LNG How and why do states exercise control of hydrocarbon development? Concession/ tax agreements Production Sharing contracts Mid and Downstream regulation of gas/ LNG including EC Gas Directives Design Objectives Institutional Solutions and Issues to setting up a Regulator Regulating access to infrastructure how this is done; particular issues to do with Third Party Access to LNG terminals Regulation of markets (structural/ conduct and approaches to economic regulation) Analogies between gas and electricity Overview of European Gas Market including place of LNG.

28th of November
Gas sales and purchase contracts and associated agreements Detailed discussion of contract terms Duration, Pricing formulae, Take or Pay (including Make Up and Carry Forward) Quality and off-specification gas Shortfalls in supply Delivery nominations Force Majeure/ liabilities/ assignment/ law/ disputes/ notices LNG sales and purchase contracts Definitions Commencement and duration Quantities and flexibility/ annual delivery programme Take or Pay and Make Up/ Make Good Title and risk Delivery conditions/ vapour return Transportation/ who is responsible for providing the ships Quality/ metering and sampling Price/ taxes Facilities Force Majeure/ liabilities/ assignment/ law/ disputes/ notices Programming of deliveries Calculations including conversion to MMBtu, quality etc Detailed discussion of contract terms and comparison with gas contracts Typical time charter party agreement Definitions Responsibilities for maintenance/ dry docking time/ cooling time Period and trading limits/ laydays What owners and charterers must provide Rates and payment Bills of Lading/ International Conventions War risk/ loss of ship Who provides LNG for cool down Responsibilities (speed/ fuel usage/ boil off) Master Sales Agreements Shipping DES agreements and trends in shipping contracting responsibility

Practical session: Contract negotiation exercise for a gas to power project

29th of November
Further commercial and structural considerations for international gas/ LNG development Commercial and structural issues for LNG terminal development

Practical session participants will investigate the pros and cons of TEPCO/ KOGAS approaches to the commercial development of LNG receiving terminals and tolling structures
Close out session: summary of main issues and examples of how different countries implement their gas/ LNG industry Final Q&A session