Commercial Contracts in Oil and Gas and Negotiation Skills

Courses Syllabus

Introduction

Business of oil & gas is contractually and technically complex, involving enormous capital along with some risks and uncertainties. It is often significantly influenced by geopolitical events.

In this training course you will study:

• The basics of oil & gas exploration, production, and the oil and gas recovery economics to fully understand the business and the essential contracting terms
• The various types of petroleum contracts and their key attributes, along with the contracting parties’ roles and responsibilities
• The rights and obligations of all parties concerned such as national oil companies, international oil companies and the host government
• The wide-ranging financial tools used in the oil and gas industry contracts are evaluated along with the fiscal strategies that impact each party’s profitability
• How these profitability considerations provide incentives for investment and re-investment throughout various stages of oil & gas exploration and production
• How the understanding of negotiations skills, avoiding conflicts, and effectively preparing for negotiations, helps in concluding successful agreements

Objectives

• Gain broad perspective of what are the essential factors in oil and gas business
• Enhance your understanding of the fundamentals of oil & gas law, and the commercial contracts
• Evaluate the technical, commercial, and financial aspects of oil & gas contracts and their impact on the profitability
• Confidently discuss the technical terms, concepts and buzzwords with your peers and clients
• Master the negotiations skills, lead and influence business agreements towards successful contracts

Course Outlines

Day 1 : Introduction to Legal, Fiscal and Contractual Basics

Crude Oil & Gas

• The Oil Industry Streams
• Demand Drivers for Crude Oil
• Drilling Contracts – Contract Alternatives

Legal Fiscal and Contractual Framework Ownership

• Oil and Gas Rights and Ownership – The Ad Coelom Doctrine
• The Rule of Capture
• A rule of “No liability”
• Limitations to Rule of Capture
• Theories of Ownership – Escaped Hydrocarbons
• Drainage by Enhanced-recovery Operations
• Doctrine of Correlative Rights
• Conservation Laws – Drilling Wells
• Conservation Laws – Fair Share Doctrine
• Function of Oil and Gas Conservation Laws
• Well-Spacing Rules

Day 2 : Introduction to Contracts

Kinds of Oil and Gas Interests

• Fee Interest
• Mineral Interest
• Leasehold Interest
• Surface Interest
• Royalty Interest
• Production Payment
• Carried Interest
• Other Interests

Key Stages of Petroleum Projects in View of Contracts

• Explore to find it in the first place;
• Develop the infrastructure to remove oil & gas from ground;
• Produce (and sell) the oil & gas you have found;
• Abandon the wells and protect the environment when it runs out and clean up (“decommission”)

What is a Petroleum Contract

• Need for Collaboration between parties
• What is a Petroleum Contract?
• Host Government Contract
• Petroleum Fiscal Regime defined
• Petroleum contracts under different regimes
• Awarding or winning contracts
• Types of Petroleum Contracts and their Key Attributes
• Upstream Project Agreement
• Host Government Take
• An example of Concessionary System’s Cash Flow
• Optimal Government Take
• PSC – Cash Flow Distribution
• PSC – CF Distribution Example – Year N+1
• Comparison of Fiscal Systems
• Flexible Fiscal Regimes
• Why Dynamic Terms are used in Contracts
• Joint Ventures and Other Combinations

Day 3 : Roles, Responsibilities and Fiscal Tools

Dissection of Petroleum Contracts

• The document follows the events of project
• Order and Disorder in the Clauses

Parties Roles and Responsibilities in Petroleum Contracts

• The General Framework of parties involved
• National Oil Company Multiple roles
• International Oil Company Role
• Grants of Rights to a party – Contractor and Host Government
• Rights and Obligations of Host Government
• Addressing important operational issues in the contract
• Contract Area or Block
• Time periods in contracts
• Minimum Work Obligations in Exploration Phase
• Relinquishment of Unused Area to Government
• Discovery, Appraisal, Declaration of Commerciality and Development
• Post Commercial Discovery –  A Field development Plan
• Annual Work Programs & Budgets – Petroleum Contracts
• Joint Management – Petroleum Contracts
• Deadlock – Petroleum Contracts

The Financial Considerations in Petroleum Contracts – Fiscal Tools

• Tools for Concessions, Production Sharing Contract and Participating Agreements
• Signature Bonus
• Production Bonus
• Rental
• Royalty – Fixed Royalty, Sliding Royalty, &  Royalty Determination Point
• Payment in Cash or In Kind
• Corporate Income Tax and Ring Fencing
• Profit Sharing
• Production Sharing – Contract’s  & Government share
• Fixed Profit Oil Shares
• Sliding Scale Profit Sharing
• Cost Oil

• State Participation  – A Fiscal Tool in PSC

Day 4 : Strategies and Solutions

Fiscal Strategies and Solutions

• Intro to Fiscal Strategies and Solutions in PSC
• Strategies for State to meet their Profitability
• The 4 Key Questions that Defines the Strategy
• The Changing Profitability –  Due to Prices, Costs, Production Rates
• Understanding the Regressive, Neutral & Progressive Fiscal Tools
• Approaches to Profitability
• Profitability And The Fiscal Tools
• Timing of Petroleum Revenues – Fiscal Tools
• Risk for The State – Fiscal Tools
• State Participation as a Co-Investor
• Encouraging Investment and Re-Investment
• The Shift to Unconventional Oil & Gas

Gas and LNG Contracts

• The Distinct Characteristics
• Liquefied Natural Gas Business
• Liquefied Natural Gas – Contracts
• Gas Sales and Transportation Contracts
• Gas Transportation Tariffs
• Gas Sales Agreements – Terms & Quantity
• LNG Sales And Purchase Agreements
• General Economics for Gas Exploration & Development

Day 5 : Negotiations Skills

Art and Science of Negotiations Skills

• What is negotiation?
• Understanding relations between conflicts and negotiations
• Identify key roles and responsibilities of negotiating team
• Preparing for negotiations
• Implement an effective negotiations process
• Understanding key success bargaining factors
• Concluding the negotiations