Fundamentals of LNG Contracts – Course Outline

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

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 today’s 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.

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 today’s

LNG value chain and how they will shape its future.

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

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.

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

26th 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

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

28th of November

29th of November