International Petroleum Contracts Masterclass (CLASSROOM) - IPCM

International Petroleum Contracts Masterclass (CLASSROOM) - IPCM

Course Summary

The International Oil and Gas industry operates within a continuously challenging environment. It is driven by, and dependent upon people; process and technology. It is a capital intensive, high risk industry, often with lengthy payback periods. It is a truly global industry, and one that operates in ever more challenging environments such as ultra-deepwater drilling and remote, harsh locations such as the Arctic. Cross cultural dealings are the norm. National resources and the ability to change a country 's economic profile are often directly dependent upon the efficient extraction and exploitation of hydrocarbon resources. In short, it is a high stakes game, there is little room for error.

All of the commercial activities within the industry are governed by contractual agreements. A contract provides clarity and a defined scope of parties ' rights; duties and obligations. A contract often helps to define and manage stakeholder expectations. A contract provides recourse when a dispute breaks out.

This Masterclass will empower the delegate. They will learn about the importance and the roles played by the contractual function. They will understand the influence and impact of governments upon commercial contracts.   Most importantly, the delegates will learn methodologies for drafting and negotiating international agreements within a multicultural framework. The delegate will gain an insight into the overarching importance of corporate social responsibility (CSR) and will understand commonly utilised dispute resolution methodologies.

This course will arm delegates with a powerful set of tools and new knowledge that can be immediately applied and add value on completion.

Learning objectives

Upon completion of this course, delegates will:

• Understand the key structural components of an international commercial contract
• Grasp the essence of negotiation and be able to implement negotiation strategies
• Become familiar with the key components and process of Production Sharing Agreements (PSA 's)
• Discern both the advantages and disadvantages associated with Joint Operating Agreements
• Know what the ramifications are of entering into a JV
• Become familiar with the various methodologies and details of unitisation
• Have awareness of the processes involved with 'Farming out ' and 'Farming in '
• Understand why decommissioning is a significant issue with many contractual ramifications
• Grasp the importance of Corporate Social Responsibility and what this means to the International Oil and Gas Industry
• Become familiar with dispute resolution processes

Course Content

Geopolitics and commercial contracts

• Overview and examples from around the world
• The Due Diligence process for understanding geopolitical activity
• Impacting factors, technology; new environments; unconventional resources; environmental concerns; security, what do these mean to commercial contracts?
• The strategic importance of hydrocarbon reserves
• Managing geopolitical risk in commercial contracts

Overview/Introduction

• Why are commercial contracts important to the International Oil and Gas Industry?
• Key issues in negotiating a petroleum contract
• Stakeholder identification and analysis

Key components of a commercial contract

• Terms and conditions
• The creation of rights; duties and obligations
• The concept of liability
• The concept of Indemnity
• The concept of Insurance
• Force Majeure
• Assignment and Novation of contract

Negotiation

• Factors of critical impact on commercial negotiations
• Template: How to establish a 'trade off ' position
• Template, How to evaluate the critical factors
• Preparing to negotiate
• Planning to negotiate
• Template:   How to set 'mission objectives '
• Template: The 7 key steps to developing a negotiation plan
• The negotiation environment
• The gender dimension
• Understanding non-verbal communication
• Physiological and psychological aspects of the process
• Culture and negotiation
• Multi-lateral negotiations
• Negotiation as a strategic process

Government and regulatory policy

• The concept of Economic Rent
• Optimum taxation systems, key impacting factors
• Government vs. Investor objectives
• Designing a licensing or contracting system
• Key requirements for licensee applicants
• Key duties of a license holder
• The key features of a concession system

Production Sharing Agreements

• Management and control issues, establishment of a joint committee
• The key features of a PSA
• The mechanics of a PSA
• Incentives; risks and rewards
• Commercial discovery and cost recovery
• Taxation; bonuses and profit sharing
• Local content rules
• Stabilisation and equilibrium clauses
• Production penalties

Joint Operating Agreements

• Overview/rationale, why are JOA 's created
• Key Aspects of a JOA
• Advantages and disadvantages of a JOA
• The parties to a JOA, roles and responsibilities
• A potential problem, default of a party
• Actions in the event of a default
• Model forms of JOA

Joint Ventures in the International Oil and Gas Industry

• Common types of JV 's
• Legal aspects of JV 's
• The rationale and business case for creating a JV
• Challenges and problems associated with JV 's
• The '4 phases ' of a JV   - planning; formation; operations; dissolution
• JV 's with NOC 's

Unitisation

• The rule of capture
• Unitisation and 'cross-boundary ' controls
• The Unitisation and Unit Operating Agreement (UUOA), key features
• Fixed interest agreements
• Cross license agreements
• Cross border unitisation
• Re-determination
• Operatorship and control
• Voting rights

Farm in and Farm out agreements

• Overview of 'Farm in ' and 'Farm out ' agreements
• Subject matter determination in farm in agreements
• Earning obligations in farm in agreements
• Consideration for obligations fulfilled in farm in agreements
• The 'long stop date ' issue in farm out agreements
• Representations and warranties of the parties in farm out agreements

Decommissioning

• The decommissioning supply chain
• Contractual issues in decommissioning
• Relevant statutes and conventions
• Letters of Credit
• 'Idle Iron ' legislation (GOM)
• Environmental issues
• Case study, Shell Brent Spa

LNG contracts and pricing

• The LNG industry, rapidly evolving
• The traditional LNG contract, what is changing?
• Destination and diversion rights in a SPA
• The 'Annual Contract Quantity ' (ACQ), buyers and sellers obligations, Take or Pay, grounds for variation
• LNG price reviews and reopeners
• Understanding 'trigger ' events

Corporate Social Responsibility

• The increasingly important role of CSR
• What does CSR mean for commercial contracts?
• CSR and stakeholder analysis

Dispute resolution methodologies

• The rationale for dispute resolution methodologies in commercial contracts
• Negotiation, formal and informal processes
• Mediation
• Arbitration - the critical context of escalation clauses

During the course, delegates get hands on experience of many aspects through team exercises and simulations.