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LNG CONTARCT

Conceptualization Approach
MBA Oil and Gas (2017-19 Batch) – UPES
By Dr BS Negi
1. Source: The country and the field from where the
gas would be imported.
2. LNG Regasification Terminal: ( having
facilities of regasification, unloading , tanking and
metering etc.)

3. Pipelines : Connectivity to Gas Field to LNG


liquefaction terminal

4. Gas Quality: Composition of Gas in the reserves


should be verified beforehand and contract/pricing
for C2 and C3 presence should be done
beforehand. The composition of the gas should be
done by an independent body.

5. Contract: Prerequisites for Contracts :

• Reserves / Dedicated & LNG Train: There should LNG TERMINAL


be a dedicated reserve allocated for the LNG train
which should be predefined during the contact and
reserve estimation should be done by an
independent body.
6. Quantity Required :Quantity required should be
defined in the contact. It has to be certified by
international accreditor.
7. Time Period : Contract period
8. Heads of Agreement : The HOA need to have
broad agreement on quantity, the time period of the
contract and commencement of LNG be
delivered.(Monthly/Yearly)

9. Condition Precedent : This clause states the


precondition that are decided for implementation of
the contract including delivery of the LNG, such as
(i).Company approval
(ii). Government Approval

10. Loading Point


• Firm
• Flexible
11. Destination
• Firm
• Flexible – within Country/Globally: The
Importing country can decide upon the delivery
point when it leaves the waters of the exporting
country. The Price of the contact would change.
12. Supply Schedule
• Annual Contracted Quantity ( ACQ ): How
much quantity to be delivered annually
• Monthly Contracted Quantity ( MCQ ): How
much quantity to be delivered monthly.
• Voyage Time

13. Minimum Gas Quantity ( 90-95 % of MCQ)

14. Take or Pay ( TOP) / Supply or Pay ( SOP ):


TOP states that buyer has to take LNG or else pay
the amount.

13. MGQ : Make Good Quantity ( Buyer paid


quantity but not taken under take or pay obligation
has precedence over future supplies )

14. Delivery Terms:


• FOB ( Free on Board )- Importer is liable to
pay for the transportation cost.
• CIF ( Cost Insurance Freight ) / Ex-Ship
Contract Exporter is liable to pay for the
transportation cost.
15. Payment :
• Currency of Payment : Dollar or Dinar or Rupees
• Bank
• Periodicity – Monthly , Yearly and Quarterly.
• Credit / No Credit
16. Applicable Law ( Usually a third country – UK /
US Laws are applicable )

17. Dispute Resolution


• By Mutual Discussion between the parties
• Arbitration ( International Arbitration Law )
• International Court of law

18. Price Revision Clause :


• Currency price changes
• Destination changes
• Market dynamics change

19. Extension of Contract


• Time period extension- Same or re-negotiated
terms
20. Penalty for default
• Compliance with the agreed terms of the contract
21. Force Majeure: Treatment for the situation
outside the control of parties signatory to contract
• Mines and Minerals ( Rules and Regulation ) Act 1952

• Petroleum and minerals pipelines act 1962

• Electricity Act 2003

• Civil Contingencies Act 2004


Statutory Body | Laws • PNGRB Act 2006
Rules & Regulations for
Gas Businesses • International Arbitration Act 2008

• National Disaster Management Act 2005

• Indian Explosive Act 1884

PESO – Petroleum & Explosive Safety Organization


PNGRB - Petroleum And Natural Gas Regulatory Board
International Court of Justice
Oil & Gas – Indian Scenario
• 26 sedimentary basins: 3.14 million sq. km.
On land area - 1.39 million sq. km.
Offshore area - 1.75 million sq. km.
 About 50% of area unexplored or poorly explored
 269 blocks awarded till NELP- IX

 59,282 Sq. Km offered under HELP


 55 blocks under bidding under OALP round
since Nov. 2017 due on 2-5-18

Current Oil production : 32.19 MMT

Current Oil Consumption 200 MMT

Current Gas production : 28 BCM

Current Gas consumption : 51BCM

LNG Penetration : 23 MMT (45%)


Policy & Regulatory Issues-
• Mine Act-1952
 Directorate General of Mine Safety
 Indian Govt. Regulations for Safety in Mines and Oil
Fields 2017
 Responsible for Onshore E&P

• DGH-
 As a department of MOPNG
 Responsible for Offshore E&P

• OISD- An institution for Government owned


enterprises
• PMP Act-1962
• NDMA – 2005
• Competition Commission Act 2005
• PNGRB Act-2006- Administration through notified
Regulations
• Arbitration Act 1096
Thank You !