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In-Company Training

The Fundamentals of Gas & LNG Contracts & Pricing course covers:

Fundamentals of Gas & LNG Contracts & Pricing - Course Content

This 12-week course provides a clear understanding of the legal agreements and pricing mechanisms which underpin the global gas and LNG industries. Six detailed modules explain the key commercial and legal issues, with comprehensive models, case studies and illustrations to provide guidance on critical concepts.

Download the latest Fundamentals of Gas & LNG Contracts & Pricing course brochure here for full details of the course content.

Module One: Introduction to International Gas Trade and Contract Structure in the Gas Chain
• Gas industry overview
    - Gas/LNG measurement units and conversion factors
    - Definitions and technical appraisal of gas/LNG chain
    - Comparison between alternative means of gas transportation
    - Overview of unconventional gas sources and floating LNG terminal
    - Overview of global gas/LNG markets and recent development
    - Gas/LNG market structure and regulatory issues
• Gas/LNG contracts
    - Background
    - Basic purposes of contracts
    - Gas/LNG contracting options
    - Interdependence of contracts in the gas chain
    - Ownership/contract patterns - natural gas/LNG
    - Contract aim
    - Case studies
    - Terminologies used in gas/LNG contracts and their derivations

Module Two: Gas/LNG Contracts
• Overview of Gas/LNG contract
    - Contract structure
    -
Rationale behind gas/LNG contracts – operational, commercial and legal
• Basic principles underlying the contract articles in gas sales and purchase agreement (GSPA)
• Summarised articles of GSPA
    - Sequence of negotiation and actual operation of a typical gas sales and purchase agreement (flow chart)
• Sale and purchase agreement (SPA) for LNG (Exship)
    - Structure of LNG SPA
    - LNG contract principles and variable parameters (order of magnitude checklist)
    - Flowchart showing the sequence of contract elements in an LNG SPA
• LNG contract FOB – loading and transportation
• LNG contracts – historical trends and new developments

Module Three: Gas/LNG Contracts, New Developments and Side Letters
• Model Gas Sales Agreement (GSA), and Gas Sales and Purchase Agreement (GSPA)
    - Definitions and interpretation
    - Sale and purchase
    - Duration of agreement
    - Gas reserve and certification process
    - Initial supply date and commissioning period
    - Delivery and pressure
    - Gas quality
    - Contract quantities
    - Facilities and measurements
    - Price
    - Billing and payment
    - Seller’s title to gas
    - Sole expert, conciliation and arbitration
    - Assignment and withdrawal
    - Force majeure
    - Termination of agreement
    - General provisions
    - Conditions precedent
    - Warranties and indemnities
• Model LNG Sales and Purchase Agreement (SPA)
    - Commencement of deliveries and duration of agreement
    - Source of supply
    - Facilities
    - Annual quantities including minimum take obligation
    - Flexibility during plateau period
    - Make-good, make-up and restoration
    - Allocation principle - cargoes delivered
    - Transfer of title and risk
    - Measurement and testing
    - Price, tariffs, taxes and other expenses
    - Liabilities
    - Assignment and security
    - Arbitration and sole experts
    - Change of circumstances
    - Side letters
    - Price revision clause
    - Dispute resolution
• Summary comparison between gas and LNG contracts (general,operational, commercial and legal aspects) 

Module Four: Gas Transportation, LNG Shipping, Ancillary Contracts and Risk Mitigation
• LNG shipping
    - Background
    - Shipping services - contract types
    - Alternative methods of providing shipping services
    - Shipping structure for ex-ship deliveries
    - Shipping cost allocation
• High pressure gas transportation
    - Main characteristics
    - Specific aspects to be addressed in a gas transportation agreement
    - Operational principles central to gas transportation agreement (GTA)
    - Standard GTA articles
    - Model GTA
• Ancillary contracts
    - Tolling contract
    - Depletion contract
    - Spot LNG contract
• Risk allocation matrix
    - Direct losses
    - Consequential losses
    - Rate variance
    - Volume variance
    - An example of the risk scenarios to be developed
• LNG/gas contract risk
    - Commencement of delivery
    - Conditions precedent
    - Contract quantities
    - Investment sequence by buyer and seller
    - Transfer of title and risk
    - Non completion risk
    - Reservoir risk
    - Market risk
    - Quality risk
    - Price volatility risks
    - Political/government action and change of law 

Module Five: Gas/LNG Pricing and Pipeline Transportation Tariffs
• General principles of gas/LNG pricing and pipeline transportation tariff determination
    - Global spread of prices and trends
    - Pricing principles and main drivers globally
    - Current international pricing trends
• Local Distribution Company (LDC) pricing mechanism
    - Commercially justifiable price chargeable by an aggregating LDC
• Different pricing bases
    - Gas price setting – cost plus and net back market value criteria
    - Price based on imputed value, opportunity cost
    - Price pooling criteria
    - Gas pricing based on usage load factor
• Economic evaluation and financial modelling
    - For investment justification based on IRR
    - For tariff determination given the capital investment and required project IRR
    - Distinction between cost of service and discounted cash flow methods
• Gas/LNG pricing methodologies and price indexation
    - JCC linkage
    - Linked to Henry Hub and NBP
    - Ceiling
    - Floor
    - S-Curve
• LNG pricing options and strategies
• Gas/LNG pricing strategy in a mixed market situation
• Transportation tariff
    - Tariff determination methodology – Discounted Cash Flow (DCF) and Cost of Service (COS) based
    - Revenue target and cost recovery methodologies
    - Capacity and commodity based tariff 

Module Six: Gas/LNG Pricing and Pipeline Transportation Tariffs
• General principles of gas/LNG pricing and pipeline transportation tariff determination
    - Global spread of prices and trends
    - Pricing principles and main drivers globally
    - Current international pricing trends
• Local Distribution Company (LDC) pricing mechanism
    - Commercially justifiable price chargeable by an aggregating LDC
• Different pricing bases
    - Gas price setting – cost plus and net back market value criteria
    - Price based on imputed value, opportunity cost
    - Price pooling criteria
    - Gas pricing based on usage load factor
• Economic evaluation and financial modelling
    - For investment justification based on IRR
    - For tariff determination given the capital investment and required project IRR
    - Distinction between cost of service and discounted cash flow methods
• Gas/LNG pricing methodologies and price indexation
    - JCC linkage
    - Linked to Henry Hub and NBP
    - Ceiling
    - Floor
    - S-Curve
• LNG pricing options and strategies
• Gas/LNG pricing strategy in a mixed market situation
• Transportation tariff
    - Tariff determination methodology – Discounted Cash Flow (DCF) and Cost of Service (COS) based
    - Revenue target and cost recovery methodologies
    - Capacity and commodity based tariff

Download the latest Fundamentals of Gas & LNG Contracts & Pricing course brochure here for full details of the course content.