Understanding, Negotiating and Drafting Oil and Gas Industry Contracts

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

Falconbury have developed this unique 3-day programme focusing on current practice and developments in the oil and gas industry. 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.

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.

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

Introduction and overview of industry

Introduction to the different types of upstream oil and gas agreements

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

Drafting the terms of concession agreements

• Implications for host governments
• Oil companies and arbitral tribunals
• Transaction cost analysis

Specific issues when drafting drafting licensing agreements

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

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

PRACTICAL WORKSHOP

Drafting agreements for offshore design, engineering and construction work
Including EPC Contracts (Engineer Procure Construct) and EPIC contracts

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

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

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

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

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 clauses and disputes

• Clauses you must consider in your contracts to ensure financial and reputation risks are covered
• Right to terminate under the contract
• Right to terminate under applicable law
• Consequences of termination
• Getting it ‘right’
• Getting it ‘wrong’

The UK Bribery Act and its impact on oil and gas contracts

• Understanding the new framework dealing with corruption for many operators in the oil and gas business
• The Act and its impact on non-UK companies
• Changing approaches to ‘grease’ payments
• Compliance

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.

Dr Ned Swan is International General Counsel at IX Power Ltd, and a leading international expert and advisor on energy policy, law and regulation. He has been adviser to the European Commission, Council of European Energy Regulators, national governments, energy markets, energy traders, and major energy firms. He has been a partner at three major international law firms, where he advised on all aspects of the energy business including contracts, joint ventures, concessions, production, refining, purchasing, shipping, trading, environmental issues and litigation. Ned is also a visiting professor at the Faculty of Law at University College London where he originated, and taught the LLM (Master’s degree) course in Regulation of Financial Markets. He is admitted to the New York and US Federal Courts, and is a member of the Energy Institute, and the UCL Energy Institute. The Legal 500 has praised… ‘Ned Swan’s impressive energy related work.’

Martin Amison is a partner in the London office of Trowers & Hamlins. His work experience includes construction law, company and commercial law, corporate finance, international and cross-border corporate finance law, construction, arbitration and particular experience of advising on private sector projects and project finance. 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 U.K, 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.

Nicolas Bonnefoy is a partner in the energy, transport and infrastructure department in the London office of Ashurst. He has a particular focus on the mining, and upstream oil and gas sectors in Africa. Nicolas’ experience includes acting for major Chinese, European and North American companies, governments and national oil companies in structuring, securing and implementing acquisitions and disposals of oil and gas and mining assets throughout Africa, as well as the negotiation of farm-in and farm-out agreements and SPAs, exploration and production contracts and other ancillary contracts.

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, preexport financing, security documents and other aspects of trade finance. Her recent work has involved advising clients in connection with structured preexport financing, deferred payment terms, advance payment credit arrangements, joint venture agreements, pledges over various commodities, LME warrants and other documents of title. 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 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.

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.