Understanding, Negotiating and Drafting Oil and Gas Industry Contracts

The accelerated pace of change in the oil and gas industry makes this one of the world’s most challenging and complex sectors in which to understand, draft and negotiate contracts.

The legal and regulatory framework of upstream oil industry contracts is constantly changing, therefore it’s critical that all lawyers, commercial and contracts managers working in this sector are up-to-speed. The current focus is a greater emphasis on standard form agreements.

Falconbury have developed this unique 3-day programme focusing on current practice and developments. It will serve as either a comprehensive introduction for newcomers or a useful update/refresher for those with experience in the industry.

• PART ONE deals with the different types of agreements that are in common use. The expert speakers will guide participants through the various contracts focusing on understanding the key issues together with drafting techniques.
• PART TWO takes a closer look at general contract terms – terms which are common to all types of agreements and have an enormous impact.
• PART THREE focuses on negotiation skills with specific reference to and case studies based on oil and gas industry contracts.

Who should attend?

In-house lawyers, procurement managers, contract managers, contract analysts, contract engineers representing international petroleum companies, contractors and sub-contractors to the petroleum industry together with host governments.

The delivery style

This highly interactive programme aims to deliver applied training through a balanced blend of practical learning. The presenters will use a mix of trainer input, practical exercises and business cases from the upstream oil and gas industry to ensure you leave the programme with new skills and knowledge that can be put to use in the workplace straight away.

What are the objectives of this seminar?

By attending this seminar, you will:

• GAIN a knowledge and understanding of the different types of agreements that are in common use in the upstream oil and gas industry
• BECOME familiar with the general contract terms that are encountered in most upstream oil and gas industry contracts
• FIND OUT more about the problems encountered when working in different jurisdictions
• UNDERSTAND the rights and obligations of the contractor
• LEARN about dealing with disputes in upstream oil and gas contracts
• RECOGNISE the importance of risk identification and allocation
• MASTER the key skills for successful negotiation of oil and gas contracts to guarantee a successful bid

PART I – Understanding and drafting different types of upstream oil and gas agreements

Introduction and overview of industry

• Overview of contractual and fiscal structures
• Confidentiality and non-disclosure agreements
• Exclusivity agreements
• Joint bridging agreements
• Areas of mutual interest agreements

Specific issues when drafting joint ventures and licensing agreements

• Typical provisions of the agreements
• Practical exercise focusing on key licensing issues
• Technology transfer
• Concessions and licenses
• PSC’s
• Termination

Joint operating agreements

• Relationship between the parties
• Scope
• Interest of the parties
• The role of the Operator
• Rights and duties of the Non-Operator

Offshore rig hire agreements

• Rights and obligations of the parties
• Assignments
• The rig market
• What the oil companies provide
• Two main commercial risks associated with rig hire
• The Rig Hire Contract
• The IADC Form

Commercial terms in licensing and concession agreements

• Fiscal arrangements, licence fees
• Royalties, the R factor
• Taxation
• Bonuses
• Penalties

PRACTICAL WORKSHOP- Drafting agreements for offshore design, engineering and construction work including EPC contracts (engineer procure construct)

• Basic features of an EPC contract
• Key oil and gas specific clauses
• Key performance clauses
• Liquidated damages
• Performance guarantees
• Key general clauses

Host government rights and obligations

• Political risks
• Sovereign immunity
• Land – licensing, leasing
• Convertibility of currency and exchange rates
• HSSE regulations
• Assistance, consents
• Local content requirements
• Applicable laws
• Disputes-forum and enforcement
• Host govermnet petroleum regimes
• HSSE risks
• Anti-corruption regulations

PART II – General contract terms and risk allocation

General obligations of the Contractor and the Company

• Performance standards
• Data collection and reporting
• Audit rights and financial reporting
• HSSE requirements
• Sub-contractors

PRACTICAL WORKSHOP- Drafting contractual guarantees and warranties

• Advance payment bonds
• Retention bonds
• Performance guarantees
• Parent company guarantees
• Example clauses

Indemnity and hold harmless clauses

• Indemnity- why the need
• Distinction between indemnity clauses and exclusion clauses and limitation of liability clauses
• Distinction between indemnity and guarantee
• Simple indemnity and mutual indemnity
• Importance of drafting- judicial suspicion
• UKCS Mutual Hold Harmless Regime

Understanding contractual liabilities

• Liabilities for personal injury or death
• Liability for late delivery, performance or similar
• How to limit the maximum aggregate damages
• Fundamental breach v breach of fundamental obligations
• Sample clauses

Exclusion clauses in the offshore industry

• Drafting clauses to withstand judicial scrutiny
• Example clauses
• The default legal position
• Indemnity clauses
• Tortuous liability
• The Contra Preferendum Rule
• Incorporation
• Construction of the contract
• UCTA – core provisions
• Recent case law

Termination of oil and gas contracts

• Right to terminate under the contract
• Right to terminate under applicable law
• Consequences of termination
• Getting it “right”
• Getting it “wrong”

Dealing with disputes in oil and gas contracts

• Choice of method
• Litigation
• Arbitration
• Mediation
• Expert determinations

Part III – Negotiation skills
Workshop leader: Rob Maguire

The rise and rise of the negotiator
Nothing exemplifies the modern oil and gas company or contractor as much as the growth of joint ventures, sub-contracting and licensing. All of these require the executive to be able to negotiate and, often, to be able to lead others through the negotiation process.

• The increase in negotiated relationships
• Technical AND commercial skills
• Recognising a negotiation
• Great role models

Practical exercise: Negotiate and succeed
Working in teams, delegates are asked to resolve a multi-variable, multi-party business problem. The output of the exercise will form the backdrop for the following sessions on structure and influencing.

Structure for control
The research tells us that negotiation success is not related to any single aspect of the complex interactions that take place in any negotiation. However, above all else the party that negotiates best gets the best result. The keys to negotiating well are controlling the negotiation and managing the process.

• Control for success: Key planning checklist to negotiate well
• Structure for success: Creating the space to agree
• Trading for success: Understanding relative values

Personal style and negotiation
This session helps us hold a mirror up so that participants can reflect on their own style. We look at why other styles irritate us – and how we negotiate with those people we find difficult to deal with.

• Our lead style (and our fall back style)
• The A to E of negotiating styles
• Personal strengths and weaknesses

Practical exercise: Moving into engagement, influencing and persuasion
It can be argued that the more we can influence someone to our position and the greater agreement we can build, the less we have to give away in our negotiations

• Persuasion psychology
• The range of levers available
• Focusing your persuasion

Working in teams, delegates will be asked to use their knowledge of their own style and those of others in their teams to agree strategies and tips for dealing with other styles and getting the most our of the negotiation.

Martin Amison is a partner in the London office of Trowers & Hamlins. He has lived and worked in the Middle East region for approximately eight years and has been involved with the provision of legal advice in the region for the last 22 years. Martin has recently been involved with large-scale projects in the energy, petrochemicals, industrial, health and transport sectors in the UK, the Gulf States, Egypt, Jordan, Eastern Europe and Scandinavia. Martin is acknowledged as a Legal Expert in the field of projects/project finance (inc. PFI) and energy in both the Legal Business: Legal Experts directory 2010 and Chambers and Partners’ Guide to the Legal Profession 2011.

Siân Fellows is a partner in the London office of international law firm, Reed Smith. Siân has wide experience of dispute resolution in shipping and international trade including arbitration before trade associations, maritime arbitration and proceedings before the Commercial Court. She is also an accredited CEDR mediator. She also advises clients in connection with non-contentious matters arising in international trade including sale and purchase contracts, general terms and conditions, insurance, letters of credit, pre-export financing, security documents and other aspects of trade finance. Recently, Siân has been involved in the firm’s cross-department team advising Shell in relation to the FSA investigation of its reporting of oil reserves. Siân has also assisted the Civil Aviation Authority with a significant case in the High Court.

Marco Kielstra is an international legal counsel with Van Oord N.V. and is permanently seconded to Van Oord’s Offshore division in Gorinchem, the Netherlands. With Van Oord Offshore, which company is a contractor in the global offshore oil and gas industry, Marco supports the offshore pipeline installation and subsea rock installation subdivisions from tender and execution stage up to completion and, if any, claim/dispute settlement.

Rob Maguire runs his own consultancy and his experience spans the full range of issues from developing an appropriate contract strategy and building a performance dashboard to negotiation and conflict resolution to deal with the inevitable management issues that arise in any long-term relationship. Through his consulting, coaching and mentoring and skills development interactions, he helps major organisations transform their thinking and approach to their commercial relationships.

Bob Palmer is a partner in the Oil and Gas Team at CMS Cameron McKenna, part of the Energy Projects & Construction Group. Bob has more than 20 years’ experience advising companies in the oil and gas and energy sectors. According to Chambers 2009: Bob Palmer is applauded for his ‘solid, completely unflappable manner and great industry-savvy brain’. He takes on work with an international flavour, for example, leading the team that advised on unwinding the joint upstream gas assets venture between Premier Oil Overseas and KUFPEC in Pakistan.

Dr. Eduardo Pereira is Chief Legal Officer and Vice-President at Petra B.V., he has spent the past 5 years specialising in Joint Operating Agreements. He has studied this topic intensively in several academic and practical occasions, especially after joining STR group in 2008 as a legal counsel. Eduardo has played a key role in assisting Petra Energia to become the leading onshore company in Brazil. In 2011 he concluded his doctoral thesis on oil and gas joint ventures at the University of Aberdeen and became the chief legal officer and vicepresident of Petra BV. Currently Eduardo is conducting researches at Oxford Institute of Energy Studies.

Shai Wade is a partner in the London office of international law firm Reed Smith. He specialises in international arbitration, with a particular emphasis on large scale complex disputes, investment arbitration and international law. He is an expert in the fields of international trade, oil and gas, energy, banking, IT and telecoms and joint venture and corporate disputes. Shai serves as arbitrator and as counsel under rules of the major arbitration institutions, including the ICC, LCIA, UNCITRAL, ICSID and the arbitration rules of various trade associations. Shai served as a Co-Chair of the Young International Arbitration Group (YIAG) of the LCIA and as a staff attorney to the Claims Resolution Tribunal for Dormant Accounts in Switzerland. He drafted the arbitration procedures for the appeals process of the International Commission on Holocaust Era Insurance Claims.

Tom Wigley is a solicitor in Trowers & Hamlins’ International Department which he joined in 2004. Tom specialises in power, water and infrastructure development projects, telecommunications, and project finance. He was part of the team which advised on the Shuaibah IWPP, the first such deal in Saudi Arabia. Tom was also part of the team which advised Nawras in the setting up of its new mobile network in the Sultanate of Oman. He has also undertaken significant amount of oil and gas work, including work involving unconventional resources. Tom is based in London but has worked in the firm’s offices in Bahrain, Dubai and the Sultanate of Oman. He has advised upon a variety of international projects and Middle East specific matters.

Richard Williams is a partner at Pinsent Masons in London. He has experience in advising on all aspects of corporate insolvency law in connection with receiverships, liquidations and administrations. Richard has acted for insolvency practitioners, banks, commercial clients, directors and creditors. His experience is primarily in dealing with contentious aspects of insolvency law including investigations and asset recovery. Richard is also experienced in handling a wide variety of commercial issues. He has particular expertise on bonds and guarantees and frequently advises on risk exposure issues in relation to major projects.

Liabilities and Damages in International Commercial Agreements

The Mini-MBA for the Oil & Gas Industry

Joint Ventures & Other Collaboration Agreements for the Oil & Gas Industry

Commercial Awareness in the Oil & Gas Industry

The Successful Management of Major Oil and Gas Projects – Avoiding Distress

This course qualifies for the following CPD programmes:

• Solicitors Regulation Authority: 17.50 hours
• General Council of the Bar: 17.50 hours
• Cert: 0.00 hours

• BJ SERVICES AS
• BNFL
• Bolivar Trading Inc
• BP Egypt
• BP Norge AS
• Branch of BG International Limited (Kazakhstan)
• Brunel
• BTO AS
• CROSCO INTERGRATED DRILLING & WELL SVS LTD
• Dolphin Energy Ltd
• Endeavour Energy UK Ltd
• Fugro Survey BV
• Gardline Marine Sciences Ltd
• Lukoil Overseas Services Ltd
• LUKOIL Uzbekistan Operating Company LLC
• Maersk Oil Qatar AS
• MOL Hungarian Oil& Gas Plc
• National Oilwell Varco
• Noble Drilling (Nederland) BV
• North Sea Petroleum Holding
• Petroci Holding
• Petrofac Ltd
• PTTEP Oman Company Ltd
• Repsol Exploration Murzuq
• Terminale GNL Adriatico Srl
• The Shell Petroleum Development Company of Nigeria Ltd
• Total E & P UK
• TOTAL SA
• Vfm Consulting CoLtd
• Wartsila Finland Oy

“Insightful and useful”

Lolade Abiola, Contracts Manager, Caverton Helicopters Ltd

“Very practical and useful course.”

Angele Ramsaransing- Karg, Officer SR. Legal Affairs, State Oil Company Suriname NV

“Very interesting discussions, helpful, a lot of things learnt.”

Arailym Kuanyshkereeva, Contracts Specialist III, TengizChevrOil LLP

“Great delivery”

Justin Uzoma Ezeala, Counsel, Exxonmobil Oil Nigeria Plc

“Practical, interactive”

Anatoly Krasnov, Chief Legal Counsel, Lukoil Overseas Service BV

“Great variety of speakers; different background and experience reflected in presentations”

Ulla Achleitner, Legal Counsel, OMV Gas & Power GmbH

“Excellent course-very useful-practical!”

Mr G P Lourantos, Managing Director, GP Lourantos & Partners E E/Petro-Energy

“Well prepared, knowledgeable speakers with real-world examples.”

Sidney Nijeboer, Contracts Manager, ROSEN Europe BV

“A good course for managers in the oil and gas sector”

BW Dwarkasing, Deputy Director, State Oil Company Suriname