financial institutions
energy
infrastructure, Mining and commodities
Transport
TECHNOLOGY AND INNOVATION
Pharmaceuticals and life sciences
Issues in the global
LNG value chain
Norton Rose | November 6, 2012
Issues in the global LNG value chain
CONTENTS
Agenda
Tab 1
Canadian LNG - the Norton Rose advantage
Tab 2
Canadian LNG - representative engagements
Tab 3
Global gas - investing in the LNG value chain
Tab 4
Canadian LNG - Lawyer profiles
Please note: presentations can be found in separate booklet.
Issues in the global LNG value chain
AGENDA
Registration and breakfast
8:30 a.m.
Welcome
8:55 a.m.
Global issues in LNG: introductory remarks
9:00 a.m.
Global issues in LNG
9:20 a.m.
Coffee and networking break
10:00 a.m.
Canadian LNG to Asia: demand dynamics and contractual observations
10:10 a.m.
Panel discussion
10:50 a.m.
Closing remarks
11:30 a.m.
Tab 1: Canadian LNG - the Norton Rose advantage
Canadian LNG
The Norton Rose advantage
Contents
1
Norton Rose
1
2
Our global LNG experience
2
3
Our expertise in the Canadian LNG value chain
3
4
The Norton Rose advantage
6
1 Norton Rose
Norton Rose is a leading international law firm offering a full suite of business law services to
corporations, financial institutions and governments around the world. We are particularly well
known for our expertise in the areas of energy and natural resources; finance; infrastructure,
mining and commodities; transportation; technology and innovation; and pharmaceuticals and life
sciences. We are consistently ranked in the top tier of international firms in these areas. With
more than 2900 lawyers operating from over 40 offices in Canada, Europe, Asia, Australia, Africa,
the Middle East and Latin America, our legal teams are able to share industry knowledge and
sector expertise across borders to support our clients' activities and initiatives worldwide.
Norton Rose global offices
Norton Rose Canada is one of Canada's largest and most prestigious business law firms, with
over 600 lawyers in our offices in Calgary, Montréal, Ottawa, Québec and Toronto. The Canadian
roots of the firm extend back over 130 years and in 2012 the firm's Calgary office is celebrating its
th
100 year of providing legal services to the Canadian and international business communities. In
Canada, Norton Rose is a perennial recipient of accolades and awards for its expertise and quality
of service in the areas of energy and natural resources, finance, mergers and acquisitions and
corporate law, and is recognized as one of the pre-eminent Canadian law firms in these areas. Our
lawyers have represented developers of major energy projects of every kind across Canada.
Norton Rose | 1
2 Our global LNG experience
Liquefied Natural Gas (LNG) project development and transaction work is one of the cornerstones
of the global Norton Rose energy practice. From offices in Calgary, London, Perth, Sydney,
Shanghai, Hong Kong, Beijing, Singapore, Moscow, Tokyo and the Middle East, our team of
experts has been engaged in all facets of the international LNG value chain for many years,
working with clients in all of the major energy markets on some of the world's largest and most
complex LNG projects. The breadth of our experience in LNG liquefaction, storage, shipping and
regasification projects in particular is highlighted by the diagram below, showing projects in which
our lawyers have played a role.
Our involvement in numerous projects throughout the world, including the development of some of
the largest LNG facilities, enables us to staff projects and transactions with teams of lawyers who
have a comprehensive understanding of the LNG industry and who recognize and appreciate the
nuances of the correlative elements of the LNG value chain. As well, our LNG related experience
encompasses the acquisition of natural gas exploration and production rights through to the sale of
regasified LNG in consumption markets. From this base of knowledge and expertise we are able
to provide our clients with informed, balanced and practical advice on all LNG related matters.
Norton Rose | 2
3 Our expertise in the Canadian LNG value chain
The Canadian LNG industry is still in its infancy (no liquefaction/export facilities have yet been
constructed, and only one import/regasification facility has been built) and many of the early
players are indicating a desire to participate in multiple segments of future Canadian LNG value
chains. With our extensive experience in providing advice on all aspects of LNG projects
worldwide, Norton Rose is uniquely well positioned to provide high quality legal advice and support
for all of those segments within a single firm.
Upstream
Whether the natural gas resource is conventional or unconventional, and whether the initiative
involves greenfield development or the acquisition of a position in an established gas production
project, Norton Rose has the expertise and personnel to provide the legal advice and support
required for upstream initiatives of any nature or size. Our Calgary office has been involved in the
Canadian oil and gas industry since the office was established in 1912 and has played a key role in
virtually every type of transaction the industry has seen during that time.
We are able to advise on all upstream components of the LNG value chain including in relation to:

acquiring natural gas exploration and production rights

conducting natural gas exploration and production operations

acquiring interests in established projects, or in the organizations that own them

developing, constructing and operating gas gathering and processing facilities

extracting, fractionating and marketing natural gas liquids

structuring joint venture arrangements and organizations, and negotiating ownership and
operating agreements

contracting for third party gas supply

project financing, reserves based lending, project bonds and other financing solutions
Gas transportation
In Canada, natural gas production will generally be located some distance from the coastal sites
where liquefaction and export facilities are expected to be developed, requiring high capacity
natural gas pipelines to transport gas from production areas to liquefaction facilities. We regularly
represent both pipeline project developers and shippers in all aspects of major pipeline
developments and transactions. With our vast Canadian pipeline experience, we are familiar with
many of the issues that are likely to arise and are extremely well placed to advise on these
projects.
Liquefaction and regasification
Our Canadian and international LNG team has a wealth of experience in liquefaction and
regasification facility development and use. Our work spans all elements of liquefaction and
Norton Rose | 3
regasification activities, from project structuring through construction and operation. This includes
negotiation and preparation of an array of commercial agreements and ownership arrangements
relating to terminal use, buy/sell and tolling arrangements, offtake arrangements, EPC and
technical services, site preparation and construction, technology licencing, land leases,
concessions and port authority agreements, among others. We also provide advice on Canadian
and international tax structuring, the LNG regulatory process and government relations.
Shipping
Shipping has been at our core throughout our 200 year history. As one of the leading marine
practices we provide the entire range of legal services to the shipping industry and frequently
advise shipowners, charterers, financiers and other clients on all aspects of LNG shipping
transactions. We regularly advise on LNG shipping issues including export permits, TERMPOL
reviews, charter party agreements, licensing, ship building arrangements and associated matters.
We also have extensive LNG carrier finance experience.
LNG sales
Our lawyers have drafted and negotiated LNG sale and purchase agreements, from master spot
agreements to long term SPAs, for deliveries into Asia, Europe and the Americas. We have
extensive energy marketing experience, specific to the LNG industry, relating to purchase, sales,
storage, and transportation. We have represented producers, marketers, end-use consumers,
pipelines, utilities and governments in Canada and around the world. We have also negotiated and
prepared many agreements pertaining to the sale and purchase of hydrocarbons and in relation to
risk management and hedging arrangements. Members of our offices regularly provide training on
these matters to governments and other participants in the LNG industry around the world.
Canadian-specific matters
For the domestic components of the Canadian LNG value chain (gas production, supply and
transportation, liquefaction facilities development and use, and LNG export), our lawyers are able
to offer specialized legal expertise in all areas associated with Canadian LNG projects, including:

acquisition of natural gas exploration and production rights

natural gas exploration and production operations

structuring and documentation of commercial relationships, including joint ventures,
corporations and partnerships

structuring and documentation of transaction and services arrangements

mergers and acquisitions

foreign investment and competition regulation

engineering, procurement and construction

project finance
Norton Rose | 4

all aspects of energy regulation, including project development, environmental and LNG
export regulation

Aboriginal consultation and contracting

government relations

taxation
Norton Rose | 5
4 The Norton Rose advantage
With our team of leading local and international lawyers, Norton Rose is able to serve domestic and
international clients involved in Canadian LNG projects in a way that no other Canadian law firm
can match. We distinguish ourselves by our ability to provide participants in Canadian LNG
projects with high quality service and pragmatic legal advice throughout the LNG value chain,
seamlessly across borders.
With offices across six continents, our lawyers share industry knowledge and sector expertise to
support clients anywhere in the world. We provide you with exceptional local and international
capabilities while maintaining the high quality of service our clients are accustomed to receiving.
These strengths have been recognized in a number of publications and accolades including:
Energy and Natural Resources Team of the Year 2011 - Legal Business Awards
Equal second globally for Who’s Who Legal Oil and Gas Law Firm of the Year Award - Most
Highly Regarded Firms: Oil and Gas 2012
“The firm’s established strength in the LNG sector has contributed to its reputation as a
force to be reckoned with in the energy arena.” - Chambers UK
This is a top firm – the lawyers have a reputation for being hands-on, and have an
innovative and client-facing approach - Chambers Global – Projects and Energy: Africa-wide
2012
It provides good service and always delivers on time… It knows what will work and what
won't work; it understood our objectives and it could test our ideas - Chambers UK – Energy
and Natural Resources 2012
They have a strong team that looks at things commercially, is dedicated and always delivers
on time - Chambers Asia 2011
The dedicated and hard-working lawyers know the Asian and the global market well Chambers Global 2011
Oil and gas is perhaps Norton Rose’s most prominent area of activity, with the firm popping
up at every stage of the energy chain, including LNG, floating oil and gas vessel and drilling
rig financing, pipelines, petrochemicals and refineries, gas storage, and restructurings Chambers 2010
Norton Rose’s dedicated energy practice is “quite frankly a quality offering” - Chambers
Global 2009
Clients praise the breadth of the practice, which has the capacity to handle the corporate,
finance and contentious aspects of the full gamut of upstream, midstream and downstream
matters - Legal 500 UK 2009
“This is a strong, smart team of lawyers who understand all the issues,” say clients, adding:
“These guys give us all the solutions!” - Chambers Asia: Projects and Energy, Singapore, 2009
Norton Rose is now sole leader in Oil and Gas - Hemscott 2008
Norton Rose | 6
Selected representative engagements, as well as profiles of some of our lawyers in our LNG,
energy, commercial and corporate teams, are included in the following sections.
Additionally, we are including the most recent version of the Norton Rose publication "Global Gas Investing in the LNG Value Chain", which provides an overview of the contractual arrangements
and key risks associated with participating in the international LNG industry.
Contacts
For further information, please contact:
Calgary
Nick Kangles
Tel +1 403 355 3835
nick.kangles@nortonrose.com
Tom Valentine
Tel +1 403 267 8154
tom.valentine@nortonrose.com
London
Nick Prowse
Tel +44 (0)20 7444 3783
nick.prowse@nortonrose.com
Perth
Alex Cull
Tel +61 (0) 8 6212 3406
alex.cull@nortonrose.com
Norton Rose | 7
Tab 2: Global LNG - representative engagements
Global LNG
Representative engagements
Representative engagements
Our lawyers have played a key role in relation to many LNG projects around the world including the
following representative engagements.
LNG liquefaction and regasification facilities (Canada)
Kitimat LNG Project
We represented the original developers of the Kitimat LNG Project, a two train LNG export terminal on
Canada's west coast for the export of LNG into Asia. Relevant work included land acquisition/lease
arrangements, Provincial and Aboriginal consultation and negotiation, environmental review, gas supply,
transportation/pipeline issues, facility permitting, EPC, project financing, joint venture and project sale
work.
Gros Cacouna
Represented Petro-Canada Inc. in connection with the negotiation and documentation of terms for the codevelopment and firm service utilization of the Gros Cacouna greenfield LNG regasification terminal and
associated natural gas pipeline in Quebec, Canada. Commercial arrangements and documentation were
completed but the project was discontinued prior to construction.
Rabaska
Our lawyers represented Enbridge in connection with the partnership structuring for the Rabaska
greenfield LNG regasification project in Quebec, Canada. The project did not proceed due to material
changes in North American gas markets.
Bear Head
Our lawyers represented Anadarko with respect to engineering, procurement and construction matters for
the Bear Head greenfield LNG regasification project in Nova Scotia, Canada. The project did not proceed
due to material changes in North American gas markets.
LNG Terminal Project in Maine
We advised the US promoter of an LNG terminal project in Maine on the rights of Canada or a Canadian
province to prohibit navigation of LNG tankers in Canadian waters that also form a boundary with the
USA.
PETRONAS
We were legal counsel to PETRONAS on its $1.07 billion acquisition of Montney shale gas assets in
British Columbia, its upstream joint venture and LNG joint venture agreement to develop an LNG export
project in British Columbia with Progress Energy.
LNG liquefaction facilities (Global)
Abadi LNG, Indonesia
We advised a major corporation and contractor on proposals to develop the Abadi field in Indonesia as a
floating LNG (liquefaction) project.
Norton Rose | 1
Atlantic LNG Trains 1, 2, 3 and 4, Trinidad and Tobago
One of our lawyers advised BG Group over the course of several years on its Atlantic LNG interests
including the US$1.1 billion two-train expansion project (Train 2 and Train 3) and on the successful
development of Train 4.
Brass LNG, Nigeria
We have been advising Brass LNG Limited and its shareholders (ENI, ConocoPhillips, Total (previously
Chevron) and NNPC) for many years on project development activities including on the shareholders’
agreement and shareholder financing for the Brass LNG Project and on anti-bribery and anti-corruption
issues.
Darwin LNG, Australia
We advised Tokyo Electric Power Company and Tokyo Gas Co. on the acquisition of an interest in the
Bayu Undan gas field in the Timor Sea, arrangements for the creation of a pipeline joint venture for gas
transmission from the field to Darwin, and on their acquisition of an interest in the Darwin LNG project.
We have continued to advise both companies on an ongoing basis in relation to the project.
Golshan LNG, Iran
We advised the sponsors of the proposed greenfield Golshan LNG project in Iran, including on project
development, feedstock gas sales, gas processing and LNG marketing arrangements.
Gorgon LNG, Australia
We are advising Chevron on aspects of the construction, procurement and shipping arrangements for the
major 15 million tonnes per annum Gorgon LNG project.
LNG project, Nigeria
We are counsel to an upstream LNG project being developed by Moni Pulo Limited and Brass Exploration
Unlimited, both Nigerian companies. The project is for the development of a floating LNG liquefaction
plant and associated facilities in the Oron River region in Akwa Ibom State, Nigeria.
North West Shelf, Australia
Advising CNOOC on an ongoing basis in connection with its investment in the gas fields, infrastructure
rights and gas supply and offtake arrangements for the North West Shelf project.
Oman LNG, Oman
We advised in connection with the multi-sourced financing of the original two train LNG plant in Oman.
Persian LNG Project, Iran
We advised Shell, Repsol and National Iranian Oil Company as sponsors of a proposed multi-billion dollar
development and project financing of an LNG plant.
Peru LNG
While at a previous firm, Alex Cull advised a major oil and gas company on its potential acquisition of a
20% interest in the Peru LNG project and long-term offtake of not less than 4.0 mtpa of LNG. The
transaction was subsequently completed by Repsol. Tom Valentine in our Calgary office also advised the
Vice Minister of Energy and Mining of Peru in connection with the development of the project.
Norton Rose | 2
Qatargas II LNG Project, Qatar
One of our Canadian lawyers advised on the negotiation and preparation of numerous agreements for
this joint venture between Qatar Petroleum and ExxonMobil, involving the construction of two 7.8 MTPA
liquefied natural gas (LNG) facilities for the supply of LNG into the United Kingdom. Agreements included
the Development and Fiscal Agreement (pursuant to which the participants are granted rights from the
State), the Joint Venture Agreement, and the Interim Services Agreement (pursuant to which technical
services are provided to the joint venture in advance of incorporation). We also advised on offshore tax
planning, European Union (EU) competition issues, Engineering, Procurement and Construction (EPC)
agreements and an environmental liability review in relation to a proposed terminal site.
Queensland Curtis LNG, Australia
We advised Toyota Tsusho on its acquisition of interests in coal seam gas permits and on the 20-year
gas sales arrangements for the supply of gas as feedstock for the Queensland Curtis LNG project in
Australia.
RasGas II Projects, Qatar
This mandate involved two projects between Qatar Petroleum and various gas purchasers in India. One
project was, at the time, the largest single LNG sale in the history of the LNG industry. One of our
lawyers also served as project counsel on the permitting, project structuring, long term sale agreements
and related development work.
Tangguh LNG, Indonesia
One of our partners advised BPMIGAS on the Tangguh LNG Project with particular regard to the long
term LNG sale and purchase agreements with customers in China, Korea and the USA.
Wheatstone LNG, Australia
We are advising Chevron on aspects of the EPC, procurement and shipping arrangements for the major
8.9 million tonnes per annum Wheatstone LNG project including assisting with the preparation of various
internal project guides for Chevron.
LNG regasification facilities (Global)
DFTG Wilhelmshaven LNG Terminal, Germany
We advised DFTG on the proposed development of the Wilhelmshaven LNG Terminal including on the
Terminal Use Agreement.
Dragon LNG, Milford Haven, UK
We advised the lenders in relation to the construction, operation and financing of this LNG receiving,
storage and regasification terminal at Milford Haven. We also advised the lenders in relation to the
Throughput Agreement.
Dunkerque LNG, France
We advised Total on investing equity and taking LNG regasification capacity at this LNG regasification
terminal in France.
Norton Rose | 3
Eemshaven LNG terminal, The Netherlands
We advised a major European utility company on its acquisition of a company which has a stake in this
LNG regasification project in the Netherlands, including carrying out detailed due diligence on the project.
FOS LNG terminal, France
We advised a major European utility company on its acquisition of a company which has LNG
regasification capacity at this LNG regasification terminal in France, including carrying out detailed due
diligence on the documentation.
GATE LNG Terminal, The Netherlands
We advised an energy company on investing equity and taking throughput capacity at the GATE
regasification terminal. We also advised on the EPC arrangements for this regasification terminal.
LNG FSRU, India
We advised Mitsui O.S.K. Lines Ltd on the development of a potential LNG floating storage and
regasification unit to be located offshore India.
Mejillones Seaport Floating Storage and Regasification Unit (FSRU), Chile
We are advising Golar LNG on the long term Charter of an FSRU to GasAtacama in the Mejillones
Seaport, Chile and on the Floating Terminal Use Agreement for the operation of the FSRU.
Melilli LNG Project, Italy
We advised one of the sponsors in relation to the development of a proposed major LNG regasification
project in Italy and an related regasification arrangements.
Safe Harbour Energy
We are legal advisor to Safe Harbour Energy, a project being developed by the Atlantic Sea Island Group
LLC. The project relates to the construction of a man made island (of approx. 60 acres) located 13.5
miles south of the City of Long Beach, New York, and the construction of an LNG receiving, storage and
regasification facility on that island. The Terminal will be connected to an existing offshore pipeline owned
and operated by Trans Continental Gas Pipeline Corporation.
LNG marketing
LNG Sale and Purchase Agreements
Our LNG SPA experience includes negotiations with various long term and short term LNG sellers and
buyers and drafting of LNG SPAs and master trade agreements. Negotiated issues which we are typically
involved with include price and price review mechanisms, diversion rights, competition issues, delivery
and payment terms, payment security issues, choice of law and payment security (Guarantee) matters.
Angola LNG
We are advising Sonangol on its Master LNG SPA negotiations with Angola LNG and have provided LNG
contracts training to government officials.
BG Group
One of our lawyers advised BG Group on its LNG sale and purchase arrangements in relation to equity
gas sales from Atlantic LNG Trains 2, 3 and 4.
Norton Rose | 4
Brass LNG
We are advising Brass LNG on aspects of its LNG sale and purchase arrangements.
E.ON Ruhrgas
We advised E.ON Ruhrgas in connection with certain LNG sale and purchase arrangements.
Gazprom Marketing and Trading
We advised Gazprom Marketing and Trading Singapore in connection with its suite of master LNG SPAs.
JX Nippon
We advised JX Nippon Oil and Energy Corporation on its 15 year LNG offtake contract from the Gorgon
LNG project in Western Australia.
Melilli LNG Project
We advised one of the sponsors (ERG) on aspects of its proposed LNG purchase and related
regasification and gas sales arrangements.
North West Shelf, Australia
One of our partners advised Shell in buying “wedge volumes” of LNG from the North West Shelf to be
sold into the Indian and U.S. markets.
OKLNG
We advised a potential investor on its LNG sale and purchase agreement negotiations in relation to the
OKLNG project in Nigeria.
Oman LNG/KOGAS LNG sale
We advised in connection with the Oman LNG/KOGAS LNG sale and purchase agreement for the original
two train Oman LNG project.
Oman LNG
We acted as counsel to a Barbados based trading company with respect to the purchase, transportation
and sale of LNG. Under this arrangement, the LNG is purchased in Oman and sold into the distribution
hub at Zeebrugge, Belgium. Related work includes tax and the associated corporate planning on behalf of
the Canadian based principals of the trading company as well as negotiating and preparing the terms of
the Sale and Purchase Agreement with the State of Oman.
Persian LNG
We advised Persian LNG on aspects of its LNG sale and purchase arrangements.
PETRONAS
One of our lawyers advised PETRONAS in negotiating a series of long term LNG sale and purchase
agreements as well as master LNG SPAs for trading purposes. We have also advised PETRONAS on
disputes relating to confirmed trades under master LNG sales agreements.
Norton Rose | 5
PNG LNG foundation customer
We advised a foundation customer in completing its long-term LNG purchase from PNG LNG in Papua
New Guinea.
QatarGas and RasGas, Qatar
We have advised Qatar Petroleum, through its affiliates QatarGas and RasGas in relation to drafting and
negotiating various LNG sale and purchase agreements.
TEPCO
We advised TEPCO Trading in negotiating master LNG SPAs.
Tokyo Electric and Tokyo Gas
We advised Tokyo Electric and Tokyo Gas on long term LNG sales and LNG spot trades from the Darwin
LNG project in Australia.
LNG shipping
Anthony Veder Group NV
We advised Anthony Veder Group NV on the negotiation of a shipbuilding contract, inter-creditor and
related documentation in relation to an innovative LNG and ethylene carrier for construction in Poland.
We also advised the lenders on the subsequent financing of the vessel.
BGT LNG Carrier Financing
We advised the lenders in relation to a US$680 million loan facility made available to Bonny Gas
Transport Limited to refinance eleven LNG carriers. This innovative transaction, which involved security
being granted to secure both the current facility and future loan and capital market issues on a pari passu
basis and provided for a SACE S.p.A. guaranteed tranche, led to us being awarded the Jane’s Transport
Finance shipping team of the year award.
BGT LNG Vessel Financing
We advised Bonny Gas Transport Limited in relation to the project financing of two LNG vessels for
charter to Nigeria LNG Limited, to be used in connection with the NLNG expansion project (train 3),
including advising on interface issues with the liquefaction plant financing.
BP Shipping Limited
We advised the financiers in connection with the US$800 million UK leveraged lease arrangements for
four LNG carriers under construction in Korea.
Calyon and KEXIM
We advised in relation to the US$468 million financing of three LNG carriers for the Teekay Shipping
Group for use in the Rasgas II LNG Project and in relation to the US$880 million financing of four LNG
carriers for the Teekay Shipping Group for use in the Rasgas III LNG Project.
Norton Rose | 6
Credit Lyonnais
3
We advised Credit Lyonnais on a US$200 million pre and post delivery financing for a 135,000m LNG
carrier which was built at HHI for Hyundai Merchant Marine and deployed on contract of affreightment to
Kogas.
Dabhol LNG, India
We advised ANZ Investment Bank on its financing of an LNG carrier which was intended to transport LNG
from the Gulf to the Dabhol power plant in the western Indian state of Maharashtra. This ground-breaking
transaction now forms the basis of many LNG financings and was awarded the Shipping Debt Deal of the
Year by Transport Finance Yearbook. We have also advised ANZ on the restructuring of this transaction
as a consequence of the bankruptcy of Enron and the problems faced by the Dabhol power plant.
Exmar/Mitsui OSK
We advised a major bank that provided approximately US$180 million of lease financing for an LNG
carrier for Exmar/Mitsui OSK.
Lease for LNG Carrier
We advised HSBC as lead arranger and agent in connection with structuring and documenting the limited
3
recourse lease financing of a 135,000m LNG carrier for Brunei Gas Carriers SDN Bhd. The vessel is
chartered to Brunei LNG SDN Bhd (a joint venture between the government of Brunei, Shell and
Mitsubishi Corporation) and is employed in transporting LNG from Brunei Darussalam to offtakers in
Korea and Japan.
LNG Carrier
We advised a joint venture company, which included BG Group as one of its shareholders, in respect of
the $171 million limited recourse project financing of an LNG carrier for service, principally, from a
liquefaction terminal in Egypt.
LNG Carrier
We advised a syndicate of banks on the financing of the construction of an LNG carrier at a European
yard. The vessel is destined for long term charter and the structure was unusual in that it provided for the
possibility of a cross border tax lease of the vessel being introduced into the current financing and
chartering structure prior to delivery from the yard.
LNG Carrier Tenders for Rasgas III, Qatargas II, NLNG Trains 6 and 7, Brass LNG, Yemen LNG and
PNG LNG
We advised ship-owners in respect of time charter tenders for each of the Rasgas III, Qatargas II, NLNG
Trains 6 and 7, Brass LNG, Yemen LNG and PNG LNG projects as well as tenders launched by Gaz de
France and CPC.
LNG Carrier Construction
We advised E.ON on the construction of LNG carriers. We negotiated and drafted shipbuilding contracts
and the various agreements for the long term charter and operation of these vessels.
Norton Rose | 7
LNG Carriers
We advised Den Norske Bank ASA Oslo, as co-arranger and documentation agent on behalf of a
syndicate of banks in relation to the US$325 million loan to a subsidiary of Golar LNG Ltd, refinancing
and secured over a fleet of five LNG carriers; restructuring the facility to provide for the insertion of a
defeased UK tax-lease facility. We also advised the finance lessor in relation to this multi-phased lease
financing transaction. It was one of the UK’s largest shipping lease transactions in terms of asset value
and allowed the company to leverage their LNG fleet. The deal won the Jane’s Transport Finance
Shipping Leasing Deal of the Year and was also named tax leasing deal of the year by Marine Money
International.
LNG Vessel, Korea
We advised Credit Lyonnais in its role as a co-arranger with Dai-Ichi Kangyo Bank on a US$92 million
post delivery commercial funding of the construction of a 135,000m³ LNG carrier built at Samsung Heavy
Industries for SK shipping and to go on contract of affreightment to Kogas.
LNG Vessel, Spain
We advised the financiers on the first ever defeased Spanish tax lease for an LNG vessel which was
constructed in Spain for operation under time charter in Spain.
LNG Vessels
We advised an African NOC and US oil major on the building and operation of LNG vessels running
between African and US ports. We advised on and negotiated a suite of agreements including a joint
venture agreement, a shipbuilding contract, management and port usage agreements and other
agreements relating to intellectual property and other issues.
NLNG Train 6
We advised Nippon Yusen Kabushiki Kaisha on the project contracts for the construction and chartering
of two 149,600m³ LNG carriers to NLNG and on the US$253 million project financing of such carriers and,
subsequently, in relation to a US$304 million refinancing of such carriers.
NLNGplus vessel financing
We advised the lead arrangers on the US$460 million financing by Bonny Gas Transport of four new LNG
carriers to be used by Nigeria LNG under long-term charter in connection with the NLNGplus project
(trains 4 and 5), including advising on interface issues with the liquefaction plant financing. This deal won
shipping finance law award from Jane’s Transport.
Petronet LNG, Dahej, Qatar and India
3
We advised the lead arrangers on the US$283 million financing of two 138,000m LNG carriers which
transport liquefied natural gas from Rasgas II to Petronet LNG Limited’s import and regasification plant
located at the port of Dahej in the state of Gujarat, India. This included the provision of specialist advice
on the project cash flows of the terminal and the interface between the regasification terminal project and
shipping project.
Snøhvit LNG K-Line, Norway
We advised K-line on drafting and negotiating long term time charterparties and shipbuilding contracts for
two LNG vessels to be chartered to the Snøhvit group.
Norton Rose | 8
Société Générale Corporate and Investment Banking and BNP Paribas
We advised on the US$320 million limited recourse French tax lease financing of two LNG carriers. This
project was the first ever export finance deal supported by KEIC for ships in a limited recourse finance
structure and the first export finance deal covered by KEIC which is combined with a lease.
Sonangol, Angola
We advised Sonangol on tax issues and other aspects of the Angola LNG project at Soyo, Angola, and
on the acquisition of three newbuild LNG carriers to be used by Angola LNG under long-term charter. We
also advised the lenders in respect of the financing of four LNG carriers for service under long-term time
charter to the Angola LNG project.
Pipelines (Canada)
Mackenzie Gas Project
Project counsel to Imperial Oil Resources Ventures Ltd., ConocoPhillips Canada (North) Limited, Shell
Canada Limited and ExxonMobil Canada Properties for the Mackenzie Gas Project, which involved the
negotiation and drafting of all commercial agreements for the development, construction, ownership and
operation of the Mackenzie Gas Pipeline and the Mackenzie Gas Gathering Facilities.
Alliance Pipeline Project
Played various legal roles in connection with the development of the Alliance Pipeline Group's multi-billion
dollar, multi-jurisdictional high pressure natural gas pipeline and associated natural gas liquids extraction,
fractionation and distribution complex. The Alliance Pipeline transports liquids rich natural gas from the
northeastern British Columbia to the Chicago area.
Gazprom Marketing and Trading USA
Represented Gazprom Marketing and Trading USA, Inc. in connection with negotiations for natural gas
pipeline service supporting participation in a proposed greenfield Canadian LNG regasification facility.
Spectra Energy Transmission/Westcoast Energy
Counsel to Spectra Energy Transmission / Westcoast Energy Inc. in respect of an application by KM LNG
Partnership for a natural gas export licence associated with the export of LNG from a natural gas
liquefaction facility to be constructed in Kitimat, British Columbia.
EnCana
Counsel to EnCana, the project proponent with respect to the Ekwan pipeline in British Columbia.
Enbridge Pipelines
Counsel to Enbridge Pipelines Inc., the project proponent on various pipelines throughout Canada,
including the Alberta Clipper and the Southern Lights pipelines.
Kinder Morgan Canada
Represented Kinder Morgan Canada in connection with its initiative to develop a Western Canadian
carbon dioxide gathering and distribution pipeline system.
Norton Rose | 9
B.C. Hydro and Williams Gas Pipeline
Counsel to B.C. Hydro and Williams Gas Pipeline, the project proponents on the Georgia Strait Crossing
pipeline in British Columbia.
Provident Energy
Acted as Canadian legal adviser to Provident Energy Ltd. on the C$3.2 billion acquisition of the company
by Pembina Pipeline Corporation, through which Provident's natural gas liquids extraction, storage and
transportation services were added to Pembina's 7,500 kilometre (4,661 mile) pipeline network. The
combined company had a market capitalization of C$7.9 billion and total enterprise value of C$10 billion,
making it one of the largest publicly traded energy infrastructure companies in Canada.
Upstream (Canada)
PETRONAS
We were legal counsel to PETRONAS on its $1.07 billion acquisition of Montney shale gas assets in
British Columbia, its upstream joint venture and LNG joint venture agreement to develop an LNG export
project in British Columbia with Progress Energy.
Progress Energy Trust
Counsel to Progress Energy Trust as they completed the acquisition of the shares of a natural gas
producer operating in northeast British Columbia and northwest Alberta, for approximately $526 Million.
Whitecap Resources Ltd.
Advised Whitecap Resources Inc. in its $450 million acquisition of Midway Energy Ltd., publicly traded,
light oil weighted energy company with primary operations in the Garrington area of Alberta.
Crescent Point Energy Corp.
Acting as legal adviser to conventional oil and gas producer, Crescent Point Energy Corp., on its
approximately $611 million acquisition of Wild Stream Exploration Inc and in its acquisition of Reliable
Energy for approximately $99 million.
Nexen
Advised Nexen Inc. in the US$940 million sale of its heavy oil properties in Western Canada to Northern
Blizzard Resources Inc, the Canada-based oil and gas company and a portfolio company of Natural Gas
Partners, a US-based private equity firm.
Pogo Petroleum Ltd.
Advised Pogo Petroleum Ltd. in its acquisition from Unocal and subsequent disposition to TAQA of
Northrock Resources Ltd., for approximately US $2 billion.
Petro Canada
Represented Petro Canada in connection with its $55 billion merger with Suncor Energy creating one of
Canada's largest companies and its largest integrated company focused on the development of Canada's
oil sands resource.
TOTAL S.A. and TOTAL E&P Canada
Represented Total S.A. and Total E&P Canada Ltd. in connection with its $1.7 billion acquisition of Deer
Creek Energy and $550 million acquisition of Synenco, which transferred the respective ownership sof
Norton Rose | 10
an 85% interest in the Joslyn SAGD mining oil sands project, and a 60% stake in the Northern Lights oil
sands project.
OPTI Canada
Advised OPTI Canada Inc. on a variety of matters, including farm-in, acquisition and joint venture
documentation with respect to multiple oil sands projects in the Fort McMurray, Alberta area. We also
advised OPTI in connection with the sale of certain of its interests in these oil sands projects and in its
2011 restructuring and sale to CNOOC Canada.
Norton Rose | 11
Tab 3: Global gas - investing in the LNG value chain
Global gas - investing in the
LNG value chain
An overview of the contractual agreements and key risks
associated with the international LNG market
Contents
1
Introduction .......................................................................................................... 1
2
About Norton Rose .............................................................................................. 2
3
LNG ...................................................................................................................... 3
4
5
6
3.1
LNG - The basics .................................................................................... 3
3.2
The international gas and LNG market ................................................... 3
3.3
Key issues today ..................................................................................... 4
3.4
The LNG chain ........................................................................................ 4
3.5
Rates of return and net-back pricing....................................................... 8
3.6
Entry points into the value chain ............................................................. 9
Contractual structure diagrams .......................................................................... 12
4.1
Liquefaction project ............................................................................... 12
4.2
Regasification project............................................................................ 13
High level risks ................................................................................................... 14
5.1
Technical risks ...................................................................................... 14
5.2
Regulatory risks .................................................................................... 16
5.3
New country risks.................................................................................. 18
5.4
Environmental risks............................................................................... 19
5.5
Physical risks ........................................................................................ 20
Key contractual risks - by contract ..................................................................... 22
6.2
Whole chain risks .................................................................................. 22
6.3
Production sharing contract / licences .................................................. 22
6.4
Transportation agreement..................................................................... 24
6.5
Gas sale and purchase agreement....................................................... 25
6.6
LNG SPA - FOB and DAT sales ........................................................... 26
6.7
LNG tolling agreement .......................................................................... 28
6.8
Throughput agreement ......................................................................... 29
6.9
Gas sales agreement ............................................................................ 31
Appendices
Appendix I - Main terms of key contracts ........................................................................ 32
Appendix II - Contacts ..................................................................................................... 37
1 Introduction
This report sets out a high level overview of a typical contractual framework operating in
the international liquefied natural gas ("LNG") market, from upstream production to
selling regasified gas in the destination market, which a potential entrant to the market
could expect to encounter. It also highlights certain key legal risks that arise in a typical
LNG chain.
Gas increasingly represents a vital part of the world‟s energy future. Finding and
producing conventional and unconventional natural gas reserves and then transporting
gas to market is a complex business. This can involve commercialising reserves through
LNG or gas-to-liquids ("GTL") plants or transporting gas through pipelines.
Our team can offer sophisticated and forward-thinking advice across the gas chain
including in relation to upstream acquisitions, licensing, procurement, construction and
engineering, conventional and unconventional natural gas developments, processing
and sales, project and asset financing, joint venture arrangements, pipeline issues,
regulatory issues, intellectual property and technology issues and dispute resolution.
We have structured the report to cover the following:
a) an introduction to LNG and overview of typical contractual arrangements;
b) a description of the entry points to the LNG chain, to indicate where potential
LNG participants could choose to become involved;
c) a summary of various high level risks across the LNG chain (in the tables in
section 4). We have listed these risks by reference to the entry points to the
LNG chain set out in section 2.6. This should make it easier to understand the
risks which may be assumed by a new entrant seeking participation in the
various stages of the chain;
d) a summary of the key commercial and legal risks under some of the main
contracts (in the tables in section 5); and
e) a brief description of the key terms which we would typically expect to see in the
contracts addressed in this report (in Appendix 1).
While we have set out a brief summary of the key contracts and their high level risks, we
have not provided a detailed report on each contract or on particular issues. For further
information on any matter or issue referred to in this report, please contact any of the
people listed on the final page of this report or your usual Norton Rose contact.
Norton Rose | 1
2 About Norton Rose
Norton Rose Canada LLP is a member of Norton Rose Global, a leading international
law firm offering a full business law service to many of the world‟s pre-eminent
enterprises from offices in Europe, Asia, Australia, Canada, Africa, the Middle East, Latin
America and Central Asia.
The firm's lawyers share industry knowledge and sector expertise across borders to
support clients anywhere in the world. The firm is strong in financial institutions; energy;
infrastructure, mining and commodities; transport; technology and innovation; and
pharmaceuticals and life sciences.
Norton Rose is Canada's first global legal practice. Our nearly 700 lawyers based in
Calgary, Montréal, Ottawa, Toronto and Québec help clients succeed in Canada and in
key, growing markets in the world.
Norton Rose Global has more than 2900 lawyers operating from over 40 offices
worldwide.
Norton Rose | 2
3 LNG
3.1
LNG - The basics
3.1.1
LNG is the condensed form of natural gas that occurs when gas is cooled to
temperatures of approximately -161 degrees centigrade. LNG is not a useful
energy product per se; gas is liquefied because LNG occupies roughly 1/600th
of the volume of natural gas. This makes it possible to transport the gas, via
LNG tanker, to distant markets that would not be possible using a natural gas
pipeline because of costs or technical reasons. LNG makes it possible to
monetise stranded natural gas reserves and access high value natural gas
markets.
3.1.2
The gas to LNG conversion process is entirely to allow such transportation.
LNG is regasified at the unloading port in the destination market and then
transported to consumers via natural gas pipelines. LNG must be stored at
cryogenic temperatures (while in storage after liquefaction, during shipping and
while being stored at the unloading port) to maintain its liquid state.
3.1.3
LNG projects require considerable investment and are therefore generally
undertaken in circumstances where liquefaction is the only feasible means of
transporting natural gas to a desired market (i.e. where transportation by pipeline
is more expensive or too risky). Although long-distance pipelines are becoming
more viable, in many instances the only way of transporting gas to market is in
the form of LNG.
3.2
The international gas and LNG market
3.2.1
Natural gas is the fastest growing component of the world's primary energy
consumption as oil and gas companies, in line with growing demand for cleaner
fuels, seek to participate on a large scale in the fast-growing markets for natural
gas, gas liquids and low-carbon power.
3.2.2
The international LNG market has progressed rapidly since the Arzew LNG plant
was first established in Algeria in 1964. To date there are 18 countries exporting
LNG with a number of new projects in the pipeline. The number of countries
importing LNG has increased and presently regasification facilities operate in 25
countries with numerous other regasification facilities at various stages of
development. The LNG industry is expected to continue to grow into the future.
3.2.3
With the recent development of unconventional gas technologies, global natural
gas supply numbers continue to climb. While the numbers vary, the report from
the MIT Energy Initiative in 2010 estimates a remaining resource base of 16,200
tcf (being the mean projection of a range between 12,400 tcf and 20,800 tcf).
The MIT report notes that this mean projection is 150 times the annual global
Norton Rose | 3
consumption of 108 tcf in 2009. Except for Canada and the U.S., this estimate
1
does not contain any unconventional gas reserves.
3.3
Key issues today
3.3.1
Today the global LNG industry is undergoing change at an unprecedented rate.
Recent developments in unconventional gas production have the potential to
introduce a number of new players to the LNG stage. Canadian and U.S.
unconventional gas, Australian coal bed methane, and significant gas
discoveries off the coast of East Africa, all have the potential to cause significant
realignment within the LNG industry.
3.3.2
It is also clear that the path forward for these unconventional gas producers will
not be without hurdles. Public concern and regulatory uncertainty regarding
water usage, increased demands on road-usage and, most importantly,
hydraulic fracturing and the need to better understand the relationship between
hydraulic fracturing and seismic activities, will further complicate the project risk
analysis for LNG projects backstopped by unconventional gas. In addition,
recent project cost overruns and labour and materials shortages must also be
factored into the risk assessment.
3.3.3
The pressures to move traditional SPA pricing models away from oil linked
prices are also expected to continue as Buyers in both Asia and Europe seek to
re-examine the traditional pricing structures.
3.3.4
This paper examines certain key commercial and legal risks existing within the
LNG industry and provides a brief risk assessment and analysis. For further
information regarding any of the issues raised in this paper please do not
hesitate to contact your usual Norton Rose contact.
3.4
The LNG chain
3.4.1
The process of upstream production, transportation, liquefaction of natural gas,
transportation by LNG carrier, regasification and sale of natural gas in
destination markets is often described as a chain with each step in the process
interlinked with the next.
3.4.2
The LNG chain can be divided into six key stages, as described below and as
shown in Figure 1. The typical contracts associated with each stage of the LNG
chain are shown in Figure 2.
a) Upstream Production: this involves the installation and operation of upstream
facilities required to produce and deliver natural gas from the field to the surface.
1
The Future of Natural Gas; An Interdisciplinary MIT Study, (2010: Massachusetts Institute of Technology)
page 7.
Norton Rose | 4
b) Transportation: natural gas and liquids must then be transported from the
upstream production facilities to the liquefaction plant by pipeline (offshore
and/or onshore). In some cases a separate liquids pipeline may be constructed,
rather than injecting the liquids back into the gas stream for transportation to the
processing facilities.
c) Liquefaction: natural gas is treated, condensate and natural gas liquids
("NGL") (otherwise know as liquefied petroleum gases or LPG) are extracted,
and the methane stream is then refrigerated to -161 degrees centigrade in order
to produce LNG. This is achieved using an LNG „train‟. LNG is then stored on
site in LNG storage tanks. The condensate must be disposed of separately.
The NGLs may either be sold to a third party or, if the liquefaction facility has its
own fractionation facilities, NGLs may be processed and then sold. Such NGL
sales may generate a significant revenue stream for the sellers.
d) Shipping: LNG is transported from the liquefaction facility to the regasification
terminal in specially designed vessels that maintain the low temperatures. Any
NGLs which are not sold in the host country by way of domestic sales would also
be shipped by NGL carrier to international markets.
e) Regasification: LNG is converted back to natural gas in the regasification
terminal.
f)
Market: the regasified gas is generally transported via natural gas pipelines from
the outlet flange of the regasification terminal to end-users. In limited cases,
such as the Everett terminal in Boston, USA, LNG is loaded onto LNG tanker
trucks which then transport LNG locally, by road, to local small scale LNG
storage facilities.
Norton Rose | 5
Figure 1: Key stages in the LNG chain
Norton Rose | 6
Figure 2: Simplified contractual overview of LNG chain
Norton Rose | 7
3.5
Rates of return and net-back pricing
3.5.1
Potential buyers of LNG should consider whether they wish to participate in all or
only part of the LNG value chain. The risks and rates of return will vary at
different stages of the chain and in some cases; a party may not possess
sufficient financial ability to participate throughout the chain. For this reason,
different companies have adopted different strategies in relation to their
participation in the LNG value chain. The International Oil Companies
(including ExxonMobil, Shell, BP, Total and BG Group) participate in the entire
value chain, finding reserves (in order to maintain their reserve replacement
ratios), monetising their equity gas and selling it into high value markets. Others,
such as Suez / Tractebel, do not have access to upstream reserves and have
no plans to move further upstream. Suez and similar companies are LNG
buyers, with shipping and regasification capacity and access to high value
natural gas markets. More details of the various options available to potential
buyers for participation in the LNG value chain are set out in paragraph 2.6
below.
3.5.2
In order to properly evaluate the LNG chain opportunities and to formulate an
LNG strategy, we recommend that potential entrants prepare a model
(effectively acting as a “straw-man”) to examine potential full LNG chain
economics. In this context, potential entrants will need to understand various
net-back pricing assumptions, capital expenditure, operating costs and likely
rates of return for each stage of the LNG chain. Some of the points which
potential entrants may wish to analyse are set out in the table below:
Net-back deductions
Potential entrant’s LNG
chain strategy
Anticipated rates of
return for
equity/capital
employed
Market price = X
„X‟
(a) regasification fee
less
„a‟
Does the potential entrant
wish to invest in regas
infrastructure or just take
capacity?
Typically to be
structured on a tolling
basis as a relatively low
risk and low rate of
return investment
(b) shipping costs
less
„b‟
Does the potential entrant
wish to order and finance
new-build LNG carriers or
take vessels on long-term
charter?
Shipping costs
represent a small
proportion of the total
LNG chain costs. IOCs
are increasingly
arranging their own
shipping in order to
maximise control over
shipping. This gives
them the opportunity to
arbitrage markets. The
Norton Rose | 8
ability to divert cargos
to higher value markets
is often a more
important consideration
than the shipping costs
(c) liquefaction fee
less
„c‟
Does the potential entrant
wish to invest in
liquefaction plants?
Could be structured on
a tolling basis as a
relatively low risk and
low rate of return
investment
(d) upstream
transportation costs
less
„d‟
Does the potential entrant
wish to acquire upstream
interests? Exploration and
production costs typically
include signature bonus,
training costs, acreage
rentals, well and drilling
costs, seismic costs,
construction and
installation costs for
platforms and pipelines to
the liquefaction plant
If the upstream
reserves are being
developed under a
Production Sharing
Contract, the rates of
return are likely to be
highest in the upstream
Net-back price at the
wellhead = Y
„Y‟
3.6
Entry points into the value chain
3.6.1
One essential feature of the international LNG market is the linked relationship
between the processes of production, transportation, liquefaction, shipping and
regasification. If a problem arises in one part of the chain, it can have a knockon effect on other parts of the chain. For this reason it is not entirely possible to
isolate the various stages and corresponding risks in the LNG chain and certain
risks are often passed up or down the chain to other participants.
3.6.2
A potential entrant could choose to enter the LNG chain at various points. In
addition, the level of involvement that a potential entrant may wish to adopt at
relevant stages of the chain can vary as well. A potential entrant may wish to
take an equity interest in the infrastructure comprising a particular stage of the
chain, for example owning upstream facilities, pipelines, liquefaction facilities,
LNG tankers and/or regasification facilities. Alternatively, a potential entrant may
not want to own such infrastructure and may, instead, want to have access to
and use of facilities owned by others.
3.6.3
The key point is that the risks and potential returns for entrants will depend on
where entrants wish to enter the LNG chain and the level of participation they
take.
Norton Rose | 9
3.6.4
We have arranged the information contained in this report according to the
following possible scenarios under which potential entrants could access the
international LNG market:
a) Option A: LNG purchasers could purchase natural gas at the outlet flange of a
regasification terminal. In this scenario, similar issues would arise as with a
typical purchase of natural gas. Purchasers would take minimal upstream risk,
however certain upstream risks could be passed through to the purchaser in the
Gas Sales Agreement (“GSA”).
b) Option B: Purchasers could secure capacity (but not invest) in a regasification
terminal. Purchasers could also buy LNG on a DAT basis (assuming the
purchaser does not want to go any further upstream). The purchaser would then
purchase and take delivery of the LNG at the unloading jetty of the regasification
terminal. The terminal company would then convert the LNG back into a
gaseous state under a tolling agreement and deliver gas back to the purchaser.
The purchaser would then sell the natural gas into the market.
c) Option C: The purchaser could invest as a shareholder in a regasification
terminal. Again, the purchaser would buy LNG at the unloading jetty (on a DAT
basis assuming the purchaser does not want to go any further upstream). The
purchaser may still need to secure capacity rights in the terminal under a tolling
agreement. The purchaser would be a (part) owner of the underlying
infrastructure.
d) Option D: As option „B‟, but the purchaser would instead buy LNG free on
board (“FOB”). Here, the purchaser would purchase and take delivery of the
LNG at the loading jetty of the liquefaction plant and would be responsible for
shipping the LNG to the unloading jetty of the regasification terminal.
e) Option E: As option „C‟, but the purchaser would instead purchase LNG on an
FOB basis.
f)
Option F: The potential entrant could move further upstream and invest in a
liquefaction plant. Here the entrant would own equity in the liquefaction plant in
the host country but would have no further involvement upstream and would not
own equity gas.
g) Option G: The potential entrant could adopt the IOC model and participate in
the full LNG chain. Here the entrant would acquire an interest in upstream gas
reserves in the host country and be involved in the upstream facilities,
transportation, liquefaction, shipping, regasification and selling the resulting
natural gas in the UK market.
Norton Rose | 10
Figure 3: Entry points in the LNG chain
3.6.5
The contractual risks assumed by potential entrants will obviously vary
depending on the point at which the entrant enters the LNG chain. The following
sections of our report provide an overview of the contracts which potential
entrants may need to enter into under each of the above scenarios and the risks
associated with those contracts.
Norton Rose | 11
4 Contractual structure diagrams
4.1
Liquefaction project
4.1.1
The diagram below sets out the typical contractual framework for a liquefaction
project structured on a buy/sell basis (rather than a tolling basis). In this example, to
illustrate the potentially diverse interests of the joint venture partners, we have
assumed that a special purpose company (“LNG Company”) has been incorporated
with the following four shareholders. One of the shareholders is the sole gas
supplier and also an LNG offtaker (highlighted in yellow). One of the shareholders is
a government entity who is also an LNG offtaker (highlighted in pink); the other roles
of the government in relation to the project are also highlighted in pink. One of the
shareholders is only an LNG offtaker. The final shareholder is the contractor. While
this is not typical, the contractor has taken a small shareholding in a few LNG
liquefaction projects.
4.1.2
In our example, gas is sold to LNG Company by two upstream joint ventures. It is
frequently the case that the gas suppliers are affiliates of one or more of the
shareholders. LNG is sold by LNG Company to several offtakers under separate
LNG SPAs. Again, the main offtakers are likely to be related to the shareholders
and/or the upstream joint ventures.
4.1.3
LNG Company enters into the various project documents (GSAs, LNG SPAs, EPC,
Technical Services Agreements, land lease etc) directly. The project, in our
example, is financed on a limited-recourse basis, with LNG Company borrowing
Norton Rose | 12
finance from a syndicate of lenders and providing security to that syndicate. The
shareholders will normally provide some form of sponsor support to lenders and if
the government is involved the project may also benefit from government support.
4.2
Regasification project
4.2.1
The diagram below illustrates a typical contractual framework for a regasification
project, operating on a tolling basis. Again, there will be several shareholders
who take an equity interest in a special purpose company set up to engineer,
procure, construct and operate the regasification facility. The shareholders will
likely be entities operating in the downstream gas market who require access to
regasification capacity.
4.2.2
Under the Throughput Agreement shown, three different offtakers have taken
capacity in the facility, one of whom benefits from an exemption from the third
party access rights (“TPA”).
4.2.3
In the example below, the regasification facility has been financed by third party
debt on a limited-recourse basis. Regasification facilities are also commonly
financed on balance sheet, by the shareholders in the regasification company.
Norton Rose | 13
5 High level risks
Please note that the risk allocation in any project will vary depending on the outcome of negotiations. The following is intended as a general
guide only.
5.1
Technical risks
Risk
Risk level at each entry point
Full chain
participation
Invest in
liquefaction
plant
Buy LNG FOB;
capacity in terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal (Buy
LNG FOB/DAT)
Buy gas exregas terminal
Reservoir risk
High Participant (as
gas supplier)
may take full
reservoir risk.
Sometimes
possible to
mitigate/pass
this risk on to
others
Low - Participant
(as LNG plant
owner) can
protect with
tolling structure so plant only
takes „plant
operating risk‟
Low - gas supplier
should take this risk.
However, some
sellers may seek to
pass this risk to the
purchaser
Low - gas supplier
should take this risk.
However, some
sellers may seek to
pass this risk to the
purchaser
Low - gas
supplier should
take this risk.
However, some
sellers may seek
to pass this risk
to the purchaser
Low - contractual
risks set out in
GSA
Construction
delay (LNG
plant)
High Participant (as
LNG plant
owner) will take
risk of delay,
including delay
caused by force
majeure
High Participant (as
LNG plant
owner) will take
risk of delay,
including delay
caused by force
majeure
Low - protection for
LNG purchaser in
LNG SPA
High - Participant, as
holder of capacity
rights, will have to
pay for the capacity if
the terminal is
available
Low - protection for
LNG purchaser in
LNG SPA
High - Participant,
as holder of capacity
rights will have to
pay for the capacity
if the terminal is
available
Low - protection
for LNG
purchaser in
LNG SPA
Low - Participant,
as owner of
terminal,
continues to
receive
Low - contractual
risks set out in
GSA
Norton Rose | 14
Risk
Risk level at each entry point
Full chain
participation
Invest in
liquefaction
plant
Buy LNG FOB;
capacity in terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal (Buy
LNG FOB/DAT)
Buy gas exregas terminal
payments if
terminal is
available
Construction
delay (Regas
plant)
High Participant (as
LNG regas plant
owner) will take
risk of delay,
including delay
caused by force
majeure
High Participant (as
LNG regas plant
owner) will take
risk of delay,
including delay
caused by force
majeure
Low - protection in
Tolling Agreement
Low - protection in
Tolling Agreement
High - Participant
(as regas
terminal owner)
will take risk of
delay, including
delay caused by
force majeure
Low - contractual
risks set out in
GSA
Construction
delay
(shipping)
Depends on
whether FOB or
Ex-ship - see
later columns
Depends on
whether FOB or
Ex-ship - see
later columns
High - responsible for
shipping
arrangements
Low - protection in
LNG SPA
Depends on
whether FOB or
ex-ship - as
before
Low - contractual
risks set out in
GSA
Off-spec gas
provided to
LNG plant
High Participant (as
gas supplier) will
take full risk of
off-spec gas
Low - Participant
(as LNG plant
owner) can
protect under
GSA or tolling
structure
N/A
N/A
N/A
N/A
Off-spec LNG
provided to
purchaser
High Participant (as
LNG seller and
purchaser) will
take full risk of
High Participant (as
LNG seller and
purchaser) will
take full risk of
Low - protection in
LNG SPA
Low - protection in
LNG SPA
Low - protection
in Tolling
Agreement
N/A
Norton Rose | 15
Risk
Risk level at each entry point
Off-spec
regasified gas
5.2
Full chain
participation
Invest in
liquefaction
plant
off-spec LNG
off-spec LNG
High Participant (as
Regas plant
owner) will take
full risk of offspec gas
High Participant (as
Regas plant
owner) will take
full risk of offspec gas
Buy LNG FOB;
capacity in terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal (Buy
LNG FOB/DAT)
Buy gas exregas terminal
Low - protection in
Tolling Agreement
Low - protection in
Tolling Agreement
High - Participant
(as terminal
owner) will take
risk of off-spec
gas delivery
Low - contractual
risks set out in
GSA
Regulatory risks
Risk
Risk level at each entry point scenario
Full chain
participation
Invest in
liquefaction
plant
Buy LNG FOB;
capacity in
terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal
(FOB/DAT)
Buy gas exregas terminal
Upstream legal
regime
High - responsible
for compliance
with upstream
regime
Low - protection
in GSA; no
upstream
involvement
Low - protection in
LNG SPA; no
upstream
involvement
Low - protection in
LNG SPA; no
upstream
involvement
Low - protection
in LNG SPA; no
upstream
involvement
Low - no
involvement
upstream
Permits and
approvals for
High - responsible
for ensuring
High responsible for
Low - protection in
LNG SPA; no
Low - protection in
LNG SPA; no
Low - protection
in LNG SPA; no
Low - no
involvement
Norton Rose | 16
liquefaction
permits obtained
and maintained
ensuring permits
obtained and
maintained
upstream
involvement
upstream
involvement
upstream
involvement
upstream
Licence for
LNG shipping
Medium - can
arrange
transportation
under COA
Medium - can
arrange
transportation
under COA
High - responsible
for shipping and
must ensure
compliance
Low - seller
responsible for
shipping;
protection in LNG
SPA
Depends if FOB
or DAT - see
previous entries
Low - no
involvement in
shipping
Permits and
approvals for
regasification
High - responsible
for ensuring
permits obtained
and maintained
Depends if take
equity interest in
regasification
terminal
Low - no equity
interest in terminal
Low - no equity
interest in terminal
High responsible for
ensuring permits
obtained and
maintained
Low - no
involvement in
regas terminal
Third party
access
regulations
High - must
comply with TPA
requirements/gain
exemption
High - must
comply/ensure
exempt from TPA
requirements
High - must
comply/ensure
exempt from TPA
requirements
High - must
comply/ensure
exempt from TPA
requirements
High - must
comply/ensure
exempt from TPA
requirements
Low - no
involvement in
regas terminal
Norton Rose | 17
5.3
New country risks
Risk
Risk level at each entry point scenario
Full chain
participation
Invest in
liquefaction plant
Buy LNG FOB;
capacity in
terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal
(FOB/DAT)
Buy gas exregas terminal
Political
approval
High - will require
host government
approval for
PSC/licence
High - will require
licence to operate
project and export
LNG from host
government
Medium - under
PSC, host
government may
have approval
rights re
downstream
marketing
activities
Medium - under
PSC, host
government may
have approval
rights re
downstream
marketing activities
Medium - under
PSC, host
government may
have approval
rights re
downstream
activities
Medium - under
PSC, host
government may
have approval
rights re
downstream
activities
Expropriation
High - look to
bilateral
investment treaties
and stabilisation
clauses for
protection
High - look to
bilateral
investment treaties
and stabilisation
clauses for
protection
High - LNG seller‟s
supply obligation
may be excused
by Force Majeure
relief
High - LNG seller‟s
supply obligation
may be excused by
Force Majeure
relief
High - LNG
seller‟s supply
obligation may be
excused by force
majeure relief
Low - contractual
risks as set out in
GSA
Fiscal regime
High - will be
subject to host
government
petroleum and
High - will be
subject to host
government
income and other
Low - LNG buyer
only liable for port,
customs and
shipping fees/
Low - will not be
subject to host
government
As before for
FOB/DAT
Low - will not be
subject to foreign
government
Norton Rose | 18
other taxes
taxes
taxes
taxation
Reputation
High to low depends on where
participant is
investing upstream
High to low depends on where
participant is
investing
Low
Low
Low
Low
Host country
Relationship
High - poor
relationship may
affect viability of
project
High - poor
relationship may
affect viability of
project
Low
Low
Low
Low
Bankability
High to low depends on where
participant is
investing
High to low depends on where
participant is
investing
N/A
N/A
Low
N/A
5.4
taxation
Environmental risks
Risk
Compliance
with
environmental
regulations
Risk level at each entry point scenario
Full chain
participation
Invest in
liquefaction
plant
Buy LNG FOB;
capacity in
terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal
(FOB/DAT)
Buy gas exregas terminal
High - for all
elements of the
chain
High - for all
elements of the
chain other than
upstream
Medium - for
shipping only
Low
High - for regas
terminal only
Low
Norton Rose | 19
Responsibility
for
environmental
problems
5.5
High - for all
elements of the
chain
High - for all
elements of the
chain other than
upstream
Medium - for
shipping only
Low
High - for regas
terminal only
Low
Physical risks
Risk
Risk level at each entry point scenario
Full chain
participation
Invest in
liquefaction
plant
Buy LNG FOB;
capacity in
terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal
(FOB/DAT)
Buy gas exregas terminal
Force majeure
affecting:
(i) upstream
(ii) liquefaction
(iii) shipping
(iv) regas plant
Force majeure
risk (wherever it
occurs in the
chain) may be
passed through
the chain to the
destination
market
Force majeure
risk (wherever it
occurs in the
chain) may be
passed through
the chain to the
destination
market
Force majeure risk
(wherever it occurs
in the chain) may
be passed through
the chain to the
destination market
Force majeure risk
(wherever it occurs
in the chain) may
be passed through
the chain to the
destination market
Force majeure
risk (wherever it
occurs in the
chain) may be
passed through
the chain to the
destination
market
Force majeure
risk (wherever it
occurs in the
chain) may be
passed through
the chain to the
destination
market
Other problems
affecting
upstream
production and
transportation
High - Participant
bears this risk as
owner of
upstream
production and
transportation
facilities
Low
Low
Low
Low
Low
Other problems
affecting
liquefaction
plant
High - Participant
bears this risk as
owner of
liquefaction plant
High - Participant
bears this risk as
owner of
liquefaction plant
Low
Low
Low
Low
Norton Rose | 20
Risk
Risk level at each entry point scenario
Full chain
participation
Invest in
liquefaction
plant
Buy LNG FOB;
capacity in
terminal
Buy LNG DAT;
capacity in
terminal
Invest in
terminal
(FOB/DAT)
Buy gas exregas terminal
Other problems
affecting LNG
Shipping
Medium - can
arrange
transportation
under COA
Medium - can
arrange
transportation
under COA
High - Participant
bears this risk as
responsible for
shipping
Low - Participant
not responsible for
shipping
Low
Low
Other problems
affecting
Regasification
plant
Depends:
High - Participant
bears risk as
owner of regas
plant
Low - if
Participant is not
the owner of
regas plant
Depends:
High - Participant
bears risk as
owner of regas
plant
Low - if
Participant is not
the owner of
regas plant
Low
Low
High - Participant
bears this risk as
owner of regas
plant
Low
Norton Rose | 21
6 Key contractual risks - by contract
6.1.1
We have highlighted various risks below from the perspective of a potential LNG buyer, in relation
to the whole LNG chain and by reference to specific issues under the main contracts. There are
several areas of risk that are more generic, such as force majeure, which apply to all contracts
throughout the LNG chain. The nature of these generic risks, given the integration of the LNG
chain, is such that if they arise, they rarely affect just one stage in isolation. Therefore, the
various contracts in the LNG chain should ideally dovetail as much as possible, to ensure that
risks and liabilities are allocated in an appropriate manner and that appropriate insurances are
taken out on this basis.
6.1.2
Paragraph 5.2 below sets out various “whole chain” risks and suggests possible mitigants.
6.2
Whole chain risks
Issue
Potential risk
Mitigating action
Force majeure
A force majeure event affecting one
part of the LNG chain may, in turn,
cause disruption downstream (and
potentially upstream) of the event
Force majeure risk (wherever it
occurs in the chain) may be passed
through the chain to the destination
market.
Ensure that a downstream
participant is not liable for damages
for failure to perform due to a force
majeure event upstream preventing
that performance.
Change in law
A change in law (including tax law)
may affect the operation or profitability
of a particular stage in the LNG chain
Ensure that the risk of a change in
law, at the relevant stage of the LNG
chain, is allocated to the party best
able to bear such risk.
Termination
Early termination under a contract at
one stage in the LNG chain affects
performance elsewhere in the LNG
chain
When negotiating contracts, bear in
mind the effect of early termination of
upstream contracts in the LNG
chain.
Gain protection with termination
payments for termination due to
breach etc.
6.3
6.3.1
Production sharing contract / licences
A production sharing contract, a licence, or similar grant of rights, will be granted by the host
government to an entity (in some cases to an unincorporated joint venture) to allow that entity to
explore a block for, and produce, hydrocarbons. The type and terms of the contract will vary
depending on the jurisdiction. In some cases, the PSCs or other forms of E&P licence are offered
on a standard form basis, however this is not always the case. There is often negotiation as to
the terms of a PSC or licence although there may be a desire to try and limit the scope of
Norton Rose | 22
negotiations in certain instances, for example in a competitive bid round. In many cases certain
upstream risks are typically assumed by the contractors.
6.3.2
The common feature of all PSCs is that the state retains ownership in the hydrocarbon reserves.
Title only transfers at the delivery point. The contractor receives a share of production for
services performed and to reimburse it for costs incurred in the development.
6.3.3
Mitigation of contractual risks tends to be more focussed on managing E&P risks from a practical
perspective. For example, most entities wishing to acquire exploration rights will form a
consortium with other parties, in order to spread the risks. Set out in the table below are several
key contractual risks and suggestions of how these could be mitigated by a potential upstream
participant.
Issue
Potential risk
Mitigating action
Term and
commercialisation
process
The contractor bears the sole
cost of exploration activity. If no
commercial discovery is made
the block must frequently be
relinquished
Determine chances of exploration success in
advance
Fiscal terms
Increase in taxes, creeping
expropriation
Include stability and economic hardship clauses,
if possible.
Structure the project to ensure the contractor
and/or its owners are protected under bilateral
investment treaties (or other international
treaties) between the host government and the
jurisdiction of incorporation of the potential buyer
and/or its shareholders.
Government
participation
Governments frequently reserve
back-in rights, so they can
participate in the block if there is
a commercial discovery
Negotiate protection, to the extent possible, in
relation to voting rights and conflicts of interest
Cost recovery
Limit to cost recovery out of the
net revenue of the development
Ensure balance of costs not recovered can be
carried forward and recovered later
Bonuses
The contractor may be required
to pay a significant signature
bonus and sometimes a
production bonus
The contractor takes risk on expected value of
prospects
Norton Rose | 23
Transfer
Restrictions on transfer to third
parties will affect the
marketability and value of the
PSC/Licence.
If capital gains tax is payable on
assignments, this will also be a
deterrent to potential
assignments.
Decommissioning
6.4
Lack of revenue stream
available to cover costs of
decommissioning.
Ensure the contractor has the right to transfer to
affiliates.
Provide criteria for potential third party
assignees, with government approval (not to be
unreasonably withheld).
Draft the assignment clause to confirm that
assignments are exempt from taxes.
Ensure decommissioning costs are estimated
and amortised in an interest-bearing fund
through cost recovery during the production life
of the field.
Transportation agreement
6.4.1
The gas supplier to a liquefaction plant may either build a pipeline or arrange for the transportation
of its gas through a third party‟s pipeline. In mature/developed fields, it may be that a tie-in is
required to an existing pipeline that has available capacity to transport the equity gas.
6.4.2
The Transportation Agreement governs the transport of gas through a pipeline. Typically, it is
entered into between the pipeline owner or operator and the shipper or user and provides for the
transportation of a nominated volume of the user‟s gas from the delivery point (the point at which
the user brings the gas into the inlet valve of the pipeline) to a specified outlet or redelivery point.
In return for providing the transportation service, the owner or operator receives a fee, which is
subject to adjustment under certain circumstances.
6.4.3
The table below sets out certain key contractual risks faced by a user/shipper of gas through a
pipeline under a Transportation Agreement, and how these may be mitigated.
Issue
Potential risk
Mitigating action
Commissioning
Delay in construction of pipeline
Matching start-up dates
downstream of pipeline
Owner should pay liquidated damages to the
user/shipper for delay. These are unlikely to be
sufficient to cover the user/shipper‟s downstream
contractual liabilities.
Window mechanism to integrate start-up of
pipeline and liquefaction plant.
Capacity
allocation
Insufficient capacity in pipeline
reserved
Capacity to match production
profile of gas field
Other users/dedicated capacity
Reduction in capacity - priority
Increase in capacity required
due to additional gas discoveries
Capacity reservation often linked to percentage
equity ownership in pipeline.
Include a mechanism in the agreement to vary
reserved capacity as life of gas field expires.
Negotiate priority in the event of capacity
reduction - often rights are reduced pro rata to
equity interest.
Include provisions for expansion of the pipeline in
certain circumstances, to the extent technically
Norton Rose | 24
or expansions at the liquefaction
terminal
feasible.
Tariffs
Ship-or-pay liability - Tariff
payable provided pipeline is
available, regardless of whether
user provides gas
The user/shipper will want the ability to assign
capacity reservations if it cannot use the capacity,
to offset tariff payments.
Delivery of gas
Multi-user pipeline issues and
title to gas
Requirement of flexibility in
quantities of gas delivered
Users will own undivided shares in the
commingled stream, proportional to each user‟s
input stream (in terms of energy value).
If the LNG SPA has flexibility in quantities, the
user/shipper may require flexibility in the
quantities it delivers for transportation to the
liquefaction plant.
6.5
Gas sale and purchase agreement
6.5.1
It may be that the gas owner enters into a tolling arrangement with the liquefaction plant owner or
operator, under which title to the gas/LNG never changes (see section 5.5.4 below). The
upstream gas owner would then enter into LNG SPAs with purchasers. This is the case for
Atlantic LNG Train 4. Alternatively, the gas may be sold to the liquefaction project company under
a gas sale and purchase agreement and the liquefaction project company enters into LNG SPAs
directly with purchasers. This is often the case, for example all of the operating LNG projects in
Nigeria are structured with the project company purchasing gas and selling LNG.
6.5.2
A gas sale and purchase agreement is only required upstream of the liquefaction plant if a tolling
structure is not used and the liquefaction project company is to take title to the gas and sell the
LNG. In practice, in buy/sell (as opposed to tolling) projects, the liquefaction project company
purchases gas from related parties, either from its shareholders or affiliates of those shareholders.
The development of the liquefaction plant will be premised on the discovery of commercial gas
reserves. The gas sales agreement will almost always be a long term sales agreement on a
send-or-pay and take-or-pay basis.
6.5.3
The table below sets out certain key risks which a liquefaction project company (“Proj Co”) may
face under a GSA and suggests certain mitigating action that can be taken. We have assumed
for this purpose that the potential entrant is an equity owner in Proj Co. Obviously, the position
that the potential entrant would take in any GSA negotiations would depend on its involvement in
the LNG chain. If the potential entrant is a gas supplier to Proj Co, the potential entrant‟s position
on the following issues may differ.
Issue
Potential risk
Mitigating action
Term
Terminates prior to Proj Co‟s LNG
supply obligations.
Ensure terms of GSA and LNG SPA dovetail, as
do rights to extend the term.
Reserves
Failure in dedicated/committed
reserves.
Right of seller to add or withdraw
a particular source of gas.
Obtain evidence of reserves from reputable
independent petroleum reservoir engineer.
Include periodic reserves reviews in terms.
Norton Rose | 25
Other buyers from same source.
Quantity
Mismatched quantity nominations
under the GSA and the LNG
SPA.
Ensure any rights the LNG buyer has under the
LNG SPA to increase/decrease its offtake
quantity must be met under the GSA
Take or pay
Proj Co fails to take quantity of
gas which has been nominated.
Seek to agree penalties and liability for failure to
take on an ACQ basis, rather than monthly, for
example.
Off-spec gas
Seller delivers off-spec gas to
liquefaction plant.
Proj Co may have reasonable endeavours
obligation to accept off-spec gas. Otherwise
can reject gas.
Seller to indemnify Proj Co from damage
caused by its supply of off-spec gas.
Failure in supply
Seller fails to deliver gas.
Proj Co may be able to purchase from third
party, but this is unlikely to be a long-term
solution to any supply shortfall issues.
Seller may continue to be responsible for paying
the liquefaction plant its „availability fee‟ to the
extent the plant is available.
6.6
LNG SPA - FOB and DAT sales
6.6.1
The LNG SPA is a contractual arrangement for the supply of LNG. Under a long term contract,
the seller seeks a steady cash flow to pay debt service (if the plant is financed using third party
limited or non-recourse financing), operating costs and a return on equity and the buyer seeks a
committed supply of LNG from which to meet its obligations under its regasification and sales and
marketing arrangements.
6.6.2
Lenders are unlikely to finance a liquefaction facility without the certainty of long-term LNG SPAs
to cover the borrower‟s debt service obligations and fixed costs. This in turn means that the
amount of LNG available on the spot market is limited. The table below is based on a long-term
LNG SPA.
6.6.3
A buyer under an LNG SPA will have to consider the contractual terms in the context of its
downstream arrangements, including the shipping arrangements, and to what extent risks can be
passed through under the Tolling Agreement with the regasification terminal.
6.6.4
Under a DAT LNG SPA, the seller is responsible for arranging shipping and delivery of LNG
occurs at the unloading jetty of the destination regasification terminal. Under an FOB LNG SPA,
the buyer will be responsible for picking up LNG from the loading jetty of the LNG liquefaction
plant.
6.6.5
Some sellers have their own dedicated LNG shipping capacity - for example NLNG (Nigeria) uses
its shipping subsidiary, Bonny Gas Transport Limited, to deliver LNG on an ex-ship basis. Buyers
may also have their own LNG shipping subsidiaries, particularly if they have extensive
Norton Rose | 26
regasification capacity, for example BG Group has a considerable fleet of LNG tankers which
allows it flexibility in its use of its considerable worldwide regasification capacity.
6.6.6
The table below sets out certain key risks that a potential purchaser may face under an LNG SPA
and potential methods to mitigate these risks.
Issue
Potential risk
Mitigating action
Term
Ensuring sufficient regasification
capacity for length of term of LNG
SPA.
Purchaser could take an equity stake
in regas terminal; apply for TPA
exemption.
Delivery point
Where does title and risk of loss pass?
Ex-ship: Purchaser takes title and
risk of loss at regas terminal
FOB: Purchaser takes title and risk
of loss at LNG plant jetty
Destination
flexibility
Ex-ship - Purchaser requires flexibility
in where it receives LNG - in case the
regas terminal suffers force majeure or
default.
FOB - Purchaser requires flexibility in
where it is required to deliver LNG - in
case the primary destination regas
terminal suffers force majeure or
default.
Purchaser wants to receive LNG at a
different destination for operational
and/or market reasons.
LNG SPA may allow diversion of
cargoes to named alternative
locations if the primary location is
unavailable.
Shipping
arrangements
Failure in shipping arrangements either timing or specifications.
Purchaser only responsible if
purchasing on an FOB basis.
Quantity and take
or pay
Purchaser can not take LNG as
scheduled.
Purchaser requires additional LNG.
Purchaser will generally be subject
to a take or pay obligation - it will pay
for the full annual contract quantity of
LNG (subject to certain
adjustments), regardless of whether
it takes that amount. Purchaser P
may also be liable on a cargo by
cargo basis, rather than annually.
Ensure there are provisions covering
make-up LNG, so Purchaser as
buyer can recover LNG it has paid
for during the contract term but not
taken.
Quality
Seller provides off-spec LNG.
Purchaser will require rejection rights
and an indemnity for damage caused
from receiving off-spec LNG.
Provision of off-spec LNG treated as
failure to deliver. Unlikely that
liquidated damages from seller
would cover purchaser‟s
downstream contractual liabilities.
Diversions of cargoes to take
advantage of higher prices are often
subject to a profit-sharing
mechanism with the seller.
Norton Rose | 27
Issue
Potential risk
Mitigating action
Failure to deliver
Seller fails to deliver LNG on time/at
all.
If seller misses delivery window,
liquidated damages for failure to
deliver. Should cover demurrage if
FOB. Liquidated damages unlikely
to cover purchaser‟s downstream
contractual liabilities.
May be a provision allowing seller to
purchase and deliver LNG cargo
from third party. Purchaser may
have duty to mitigate and source
LNG/gas elsewhere (subject to
sufficient indemnification from seller).
6.7
LNG tolling agreement
6.7.1
It may be that the liquefaction project company acts as service provider rather than as a
purchaser of gas and seller of LNG, as is the case in Atlantic LNG (Trinidad). Under this project
structure, the gas supplier will deliver gas to the liquefaction plant to be liquefied and will take
delivery of the resulting LNG. The liquefaction project company will be isolated from upstream
and downstream risks to a certain extent and will be responsible primarily for the availability of the
liquefaction plant.
6.7.2
The table below sets out certain key risks that a liquefaction project company in a tolling structure
(“Proj Co”), in which a potential entrant may take an equity interest, may face and suggests
certain mitigating action that can be taken to combat those risks. In other respects, the risks and
mitigating actions will be similar to those described in paragraph 5.6 above.
Issue
Potential risk
Mitigating action
Tariff
User fails to use terminal.
Hell or high-water tariff - Proj Co only
takes operational risk and User pays
even if it doesn‟t use.
Look for financial support for
User/creditworthiness requirements.
If Liquefaction terminal is
unavailable, tariff will generally not
be payable.
Liquefaction terminal is unavailable.
Force majeure
Upstream, terminal or downstream
force majeure.
Proj Co will limit exposure to
upstream and downstream force
majeure - hell or high-water tariff, but
will take its own plant force majeure
risk.
Gas production, shipping, pipeline
and market failure typically User
risks.
Proj Co takes risk of liquefaction
plant force majeure and forced
outages.
Delivery of LNG
Gas not delivered by User.
Tariff is payable on a hell or highNorton Rose | 28
Issue
Potential risk
Mitigating action
water basis, so Proj Co. should not
suffer financially.
Quality
Off-spec gas delivered.
Proj Co. can reject off-spec gas.
Assignment
User reserves capacity but cannot use
it.
Allow User to assign capacity,
subject to assignees meeting certain
conditions. This may be difficult to
achieve as a commercial matter.
6.8
Throughput agreement
6.8.1
This agreement governs the regasification of LNG delivered to a regasification facility. In general,
Throughput Agreements are structured on a tolling basis: a buyer of LNG pays a fee for a certain
capacity in a regasification facility and a charge for the service provided by the operator/owner of
that facility in converting the LNG to natural gas.
6.8.2
This structure isolates the regasification facility from upstream and downstream risks, which
simplifies financing arrangements. The facility owner does not take any ownership interest in the
LNG or natural gas passing through the terminal but is paid for capacity and for services provided.
The facility owner retains the operational risk of the terminal itself (including force majeure).
6.8.3
Alternatively, there may be a buy/sell structure, whereby the regasification facility operator/owner
purchases LNG and sells the resulting natural gas.
6.8.4
The table below sets out certain key risks that a toller of LNG through a regasification facility may
face under a Throughput Agreement and certain mitigating actions that could be taken.
Issue
Potential risk
Mitigating action
Completion
Mismatch in completion of LNG
upstream facilities, regas terminal and
downstream facilities.
Window mechanism for start-up.
Regas co takes own completion risk
(pass through of liquidated damages
received from EPC contractor).
Toller (and other users) take
upstream and downstream
completion risks.
Capacity allocation
Unable to secure full capacity in
market.
Negotiate early, to ensure Toller has
sufficient LNG supply and gas
Norton Rose | 29
Issue
Potential risk
Mitigating action
Meeting TPA requirements and longterm financing commitments.
market access.
Apply for TPA exemptions early.
Tariff
Toller fails to use terminal; regas
terminal is unavailable.
Hell or high-water tariff - Regas Co
only takes operational risk and toller
pays even if it does not use.
Force majeure
Upstream, terminal or downstream
force majeure.
Regas Co will limit exposure to
upstream and downstream force
majeure - hell or high-water tariff.
LNG production, shipping, pipeline
and market failure are typically risks
that the toller would take as a user.
Regas Co takes risk of terminal force
majeure and forced outages.
Delivery of LNG
LNG not delivered by toller
Tariff is payable on a hell or highwater basis, so Regas Co. should
not suffer financially.
May include provisions allowing for
auctioning capacity if LNG is not
delivered, to ensure TPA
requirements are met.
Quality
Off-spec LNG delivered.
Regas Co. can reject off-spec LNG;
Regas Co. may be able to provide
treatment services prior to gas
entering NTS.
If Regas Co delivers off-spec gas,
may be a reduction in tariff or
liquidated damages.
Assignment
Toller reserves capacity but cannot
use it - could affect status of TPA
exemption.
Allow toller to assign capacity,
subject to assignees meeting certain
conditions. Toller may be required to
assign capacity to meet TPA
requirements.
Norton Rose | 30
Issue
Potential risk
Mitigating action
Third party access
EU restrictions on long-term
reservations of capacity may affect
bankability of terminal.
Apply for exemption from TPA
requirements for all of total capacity.
Instigate auctioning, use-it-or-lose-it
mechanisms and avoid regulation of
tariff by Ofgem/EU.
6.9
6.9.1
Gas sales agreement
The key risks associated with selling regasified gas into the market will depend upon the particular
sales and marketing arrangements involved. In addition, various other issues relating to the gas
market accessed, including standard market terms for that market and regulatory requirements
will also be relevant. These issues are beyond the scope of this report. If you require further
information in relation to Gas Sales Agreements Norton Rose has an extensive network of offices
around the world and is experienced at advising clients on these issues. Please contact any of
the people listed on the back cover or your usual Norton Rose contact.
Norton Rose | 31
Appendix I - Main terms of key contracts
Norton Rose | 32
1. Outline of main terms of a PSC / License

Purchase of data
- purchase price
- data package
- cost recoverable or not

Duration
- length of exploration phase
- length of production phase
- Extensions
- Delineation period
- Decommissioning period

Relinquishment and surrender
- at the end of exploration phase
- area reduction
- “backaway” option

Work programmes
- number of wells
- amount of seismic to shoot
- minimum expenditure
- host government approval rights

Production areas
- productive limits of field
- exempt from relinquishment

Signature and production bonuses

Rights and obligations of host government entity
- access to and use of data/equipment
- approvals of budgets, plans etc

Rights and obligations of contractor
- fulfil technical obligations
- meet funding obligations
- submission of operating reports
- local content requirements (employment and procurement)
- insurance

Valuation of petroleum
- international market price
- basket of crudes
- price monitoring

Recovery of operating costs
- from gross sale proceeds (not applicable if contract has a royalty)
Norton Rose | 33
-
carry forward costs not recovered
allocation of revenues remaining after cost recovery (“profit oil”)

Taxes
- levied on contractor‟s share of profit oil
- applicable body of tax law

Ownership transfer
- to affiliates
- conditions on transfer to third parties
- capital gains tax, charges on transfer

JOA
- condition precedent to PSC / Licence
2. Outline of mains terms of a GSA

Delivery point
- physical interface point
- alternative delivery points
- pipeline network issues

Duration
- basic term
- right to extend/ right to agree to extend

Quantities
- calorific value or volume
- annual contract quantity (“ACQ”)
- adjustments to ACQ
- excess gas

Reserves
- identification of dedicated reserves
- reserves review
- reserves modification

Nominations
- calorific value or volume
- nomination timetable
- excess gas

Delivery failure
- test for shortfall
- duty to mitigate
- liquidated damages

Price
- calorific value or volume
- market gas price
- fixed base price, index linked
Norton Rose | 34
-
triggers to price review

Take or pay
- upward adjustments
- downward adjustments
- carry forward amounts
- make-up gas period

Quality
- metering, access to metering facilities
- right to refuse
- remedies (price reduction, liquidated damages, termination)
3. Outline of main terms of an LNG SPA (FOB)

Term
- basic term
- force majeure extension
- make-up LNG extension
- extension by agreement

Destination flexibility
- restrictions on destination
- permitted diversions
- profit-splitting mechanism

Shortfall liability
- Liquidated damages (consequential loss?)
- difference in cost of alternative supplies, costs and expenses
- excusing events
- buyer‟s ability to terminate

Price
- linked to crude oil basket
- currency
- floor price
- price cap
- triggers to price review

Quantity
- base contract quantity
- round-up/down
- make-good LNG
- make-up LNG
- downward/upward flexibility
- carry forward
- priority of type of LNG
Norton Rose | 35
4. Outline of main terms of a tolling agreement

Term
- basic term
- extensions

Commissioning
- window mechanism
- start-up LNG
- completion of downstream facilities

Capacity allocation
- third party access regulations
- use it or lose it
- auction process
- capacity rights to future expansion

Tariff
- fixed fee (debt service, fixed operating costs)
- variable fee (variable operating costs)
- adjustments
- regulatory approval required?

Assignment
- transfer of capacity rights to affiliates
- transfer of capacity rights to third parties
- consents/approvals
- consent of regulators

Third party access
- exemptions
- restrictions on term
- restrictions on tariff
Norton Rose | 36
Appendix II - Contacts
Norton Rose | 37
For further information, please contact:
Europe
Asia
Australia
London
Simon Currie
Tel +44 (0)20 7444 3402
Beijing
Nigel Ward
Tel +86 (10) 8448 8881
Perth
Alex Cull
Tel +61(0)8 9426 3406
simon.currie@nortonrose.com
nigel.ward@nortonrose.com
Richard Metcalf
Tel +44 (0)20 7444 3482
Shanghai
Fei Kwok
Tel +86 (21) 6137 7001
richard.metcalf@nortonrose.com
fei.kwok@nortonrose.com
Nick Prowse
Tel +44 (0)20 7444 3783
nick.prowse@nortonrose.com
Moscow
Nick Dingemans
Tel +7 499 924 5131
nick.dingemans@nortonrose.com
Singapore
Ashley Wright
Tel +65 6309 5310
ashley.wright@nortonrose.com
Tokyo
Michael Joyce
Tel +813 5218 6800
michael.joyce@nortonrose.com
Africa
alex.cull@nortonrose.com
Sydney
Vincent Dwyer
Tel +61(0)2 9330 8238
vincent.dwyer@nortonrose.com
Canada
Calgary
Nick Kangles
Tel +1 403 355 3835
nick.kangles@nortonrose.com
Thomas E. Valentine
Tel +1 403 267 8154
tom.valentine@nortonrose.com
Johannesburg
Julian Jackson
Tel +27 11 685 8583
julian.jackson@nortonrose.com
Norton Rose | 38
Tab 4: Lawyer profiles
Lawyer profiles
Listed alphabetically by practice area
Project structuring and commercial arrangements
Alex Cull is an energy lawyer based in Perth and leads our oil and gas
team in Australia. He specialises in corporate transactions, project
development, operations and marketing and trading in the oil and gas
industry.
Alex Cull
Partner
Perth, Australia
+61 (0) 8 6212 3406
alex.cull@nortonrose.com
Alex works for a wide range of clients along the full length of the
petroleum value chain, including national oil companies, oil majors,
independents, utilities, pipeline companies, traders and financial
institutions. He primarily advises on acquisitions and divestments
(including farmouts and swaps), joint operations, and commercialising
gas through pipeline and LNG project development and offtake
arrangements. He also has extensive experience in reserves based
and project financing, pipeline transportation arrangements, and LNG
and petroleum supply and trading.
He is recognised in many directories as an expert in the oil and gas
industry and is a frequent speaker at leading industry conferences and
client workshops.
LNG expertise





Acquisitions and divestments
Project development
Liquefaction and regasification, including floating facilities
Offtake arrangements
Supply and trading
David Eeles has over 15 years of experience representing project
developers, sponsors, industrial hosts and other project participants in
connection with the acquisition, development, construction, financing,
operation, restructuring and disposition of energy, infrastructure and
industrial projects. David has acted as the lead lawyer on a number of
such projects and acts for clients on a wide range of legal matters—
from responding to and/or drafting competitive bid documentation, to
structuring and creating legal entities to own and operate projects, to
drafting and negotiating all manner of key project documents.
David A. Eeles
Partner
Calgary, Canada
+1 403.267.8232
David also represents energy industry participants with respect to a
variety of project development matters and works extensively in the
area of construction law, where he represents various participants in
public-private partnership projects and other construction-related
matters.
david.eeles@nortonrose.com
Alberta 1996
LNG expertise


Project development
Engineering, procurement and construction
Norton Rose | 1
Wayne Fedun has practised oil and gas law in Canada and
internationally since 1992. He has negotiated and prepared a
variety of energy industry agreements in such areas as
farmouts, joint ventures, project development, project finance,
facilities, EPC, transportation and marketing.
Wayne Fedun
Partner
Calgary, Canada
+1 403.267.9414
wayne.fedun@nortonrose.com
Alberta 1992
These agreements relate to projects ranging in size from
several million to several billion dollars and involve conventional
energy matters, heavy oil and oil sands projects and off-shore
drilling and production projects. Wayne also has extensive
experience as lead counsel in large oil and gas asset
acquisitions and dispositions, ranging in size from several
million dollars to $1.5 billion.
LNG expertise



Project development
Acquisitions and divestments
Commercial relationship structuring
Dave Guichon has practised Canadian and international energy
and resources law since 1981, providing services to Canadian,
US and international energy clients on a range of matters
including acquisitions and dispositions, project development
and financing, joint venture transactions, hydrocarbon
production and facilities regulation, corporate reorganizations,
and natural gas and products transportation and marketing.
Dave Guichon, QC
Senior Partner
Calgary, Canada
+1 403.267.9511
dave.guichon@nortonrose.com
Alberta 1981
From 1998 to 2004 Dave held a number of senior executive
positions in industry, serving as Vice President Law and
General Counsel of the Alliance Pipeline group of companies
and partnerships, President of Alliance Canada Marketing Ltd.,
and President of Beauvert Gas Systems Inc.
In addition to involvement in all aspects of the upstream side of
the oil and gas industry, Dave has extensive experience in the
development, purchase, sale and financing of gas, oil and
bitumen pipelines, NGL extraction facilities, LNG facilities, gas
plants, refineries and other energy industry infrastructure.
LNG expertise




Commercial relationship structuring
Project development
Gas transportation
Upstream matters
Norton Rose | 2
Michael Joyce is an M&A and projects lawyer with specialist
expertise in the oil and gas, mining and infrastructure sectors
based in Tokyo. Michael has over 22 years of experience
advising private sector and government clients, including more
than 19 years advising Japanese clients.
Michael Joyce
Partner
Tokyo, Japan
+813 5218 6824
Michael's practice in the energy industry includes providing
advice on the natural gas and oil value chains, including
acquisition of upstream assets and operational oil and gas field
businesses, negotiation of joint operating agreements, farm-in
and farmout agreements, gas and oil supply arrangements,
LNG off take agreements, LNG and oil project development and
petroleum product supplies. He also advises on negotiation of
joint venture agreements, farm-in and farmout agreements, and
operational issues, including land access, engagement of
contractors and rail and port agreements.
michael.joyce@nortonrose.com
LNG expertise



Acquisitions and divestments
Project development
Offtake arrangements
Nick Kangles’ practice focuses primarily on corporate and
commercial law, with an emphasis on counselling clients who
are developing energy projects, including pipelines, processing
facilities, LNG plants, oil sands projects, upgraders and power
plants. His work involves share and asset acquisitions and
dispositions, company and corporate governance matters and
intellectual property matters. He also has extensive experience
working with energy service companies, including drafting and
negotiating services, drilling, engineering, procurement and
construction contracts.
Nick Kangles
Senior Partner
Calgary, Canada
Nick has provided advice to major Canadian energy companies
with respect to their plans to develop LNG project.
Nick is one of the two leaders of our Canadian energy practice.
+1 403.355.3835
nick.kangles@nortonrose.com
LNG expertise
Alberta 1980 | Saskatchewan 2009



Commercial relationship structuring
Project development
Engineering, procurement and construction
Norton Rose | 3
Fei Kwok is a banking, finance and energy lawyer based in
Shanghai. She has particular experience in advising on
complex financing and project development transactions.
Fei acts for commercial corporations and financial institutions
on cross-border financing transactions, including asset
financing of transportation and energy equipment, project
financing of oil and gas projects, LNG projects, IPPs,
renewables and petrochemical facilities.
Fei Kwok
Partner
Shanghai, PR China
+86 21 6137 7001
Fei’s energy practice focuses on advising on LNG SPAs,
master agreements, spot cargo, gas and LNG swaps, gas
offtake agreements, LNG long-term and spot time charters,
LNG shipbuilding, project financing of LNG ships, petrochemical
complex, terminal tolling agreements, project financing of LNG
terminals and floating.
fei.kwok@nortonrose.com
Fei has been recognized as one of the few Mandarin-speaking
lawyers who has extensive transactional experience on crossborder energy projects and financing transactions.
LNG expertise



Acquisition and divestments
Offtake arrangements
Project financing
KayLynn Litton regularly assists clients on a broad range of
corporate and commercial matters, including acquisitions and
divestitures, joint venture projects, corporate reorganizations,
aboriginal consultation and general contractual matters.
KayLynn also advises clients on a variety of energy-related
issues relating to oil and gas leases, contested title issues,
operational matters, rights of first refusal, farmouts and
royalties. In addition, she provides assistance to clients relating
to international operations and assets.
KayLynn Litton
KayLynn leads our Calgary Energy practice group.
Partner
Calgary, Canada
LNG expertise
+1 403.267.8192
kaylynn.litton@nortonrose.com
Alberta 1997




International operations
Acquisitions and divestments
Joint venture / ownership arrangements
Aboriginal consultation and agreements
Norton Rose | 4
Chrysten Perry has over 25 years experience practising
corporate and commercial law related to oil and gas projects,
spanning a number of sectors and is involved with international
hydrocarbon projects, joint ventures, acquisitions and
divestures, and private and public mergers for the conventional
and unconventional oil and gas industry.
Chrysten Perry
Partner
Calgary, Canada
+1 403.267.8170
chrysten.perry@nortonrose.com
Alberta 1987
In addition, she has considerable expertise with gas processing
and transportation agreements, midstream agreements and has
provided legal advice with respect to Canadian LNG project
development. Clients rely on her legal and technical expertise
and practical know-how to negotiate and draft agreements for
the structuring of joint ventures and partnerships, and for the
drafting of operating agreements, royalty agreements, farm-in
and participation arrangements.
Chrysten’s extensive expertise also includes advising on often
complex asset purchase and sale, and equity purchase and
sale transactions. Chrysten is one of the two Canadian leaders
of our energy practice.
LNG expertise



Project development
Joint venture / ownership arrangement
Acquisitions and divestments
Miles Pittman's practice entails working closely with clients in
the upstream, midstream and downstream sectors, and the oil
and gas service sector, both in Canada and internationally. His
practice focuses broadly on mergers, acquisitions and
divestitures, joint venture and operating arrangements, and
transaction structuring and negotiation. Clients rely on him for
his practical and results-focused approach to transactions.
Miles Pittman
Partner
Calgary, Canada
+1 403.355.3834
miles.pittman@nortonrose.com
Alberta 1994
He has advised on gas supply and offtake arrangements with
respect to LNG projects in Canada, as well as on acquisitions,
divestitures and joint venture arrangements in support of such
projects.
LNG expertise




Commercial relationship structuring
International operations
Joint venture / ownership arrangements
Acquisitions and divestments
Norton Rose | 5
Nick Prowse is a partner in our Energy Group, specialising in
the oil, natural gas and LNG business. Nick advises
governments, national oil and gas companies, international oil
and gas companies, and lenders on major energy transactions.
Nick Prowse
Partner
Global Head of Oil and Gas
London, UK
+44 (0)20 7444 3783
nick.prowse@nortonrose.com
Nick joined Norton Rose in 1992. He spent over three years
with British Gas Group as Head of Legal in Trinidad and
Tobago, advising British Gas on a broad range of upstream and
downstream activities for the development, production,
transportation, processing (including NGL extraction and
liquefaction), marketing and sales of natural gas and on LNG
shipping and regasification arrangements.
Nick has worked on ten LNG export projects and fifteen LNG
regasification projects in Europe, Africa, Latin America, US, the
Middle East and Asia. Nick is the author of the chapter on LNG
and LPG Sales Contracts in Anthony Jennings’ book on oil and
gas production contracts. He is a frequent speaker at leading
industry conferences and, for example, has enjoyed speaking at
the last three Gastech conferences in Abu Dhabi, Amsterdam
and London.
LNG expertise






Commercial relationship structuring
Acquisitions and divestments
Project development
Liquefaction and regasification, including floating facilities
Offtake arrangements
Supply and trading
Wylie Spicer has more than 35 years of experience in the
shipping and offshore oil and gas industry. He is a recognized
authority on the relationship between the offshore and maritime
law and in respect of these issues in the Arctic. He has applied
this expertise to many offshore projects on Canada's East
Coast and in the Arctic.
Wylie Spicer, QC
Counsel
Calgary, Canada
+1 403.267.8339
wylie.spicer@nortonrose.com
Nova Scotia 1976 | Newfoundland and
Wylie's experience in these industries has been on both the
commercial side and in litigation. Throughout his career, he has
acted in connection with all of the significant marine / offshore
casualties on Canada's East Coast. This involvement included
appearances before Canadian and American shipping inquiries,
US litigation, and the handling of Canadian litigation from the
trial level to the Supreme Court of Canada.
LNG expertise



Shipping and maritime law
Offshore hydrocarbons
Arctic matters
Labrador 1991
Norton Rose | 6
Tom Valentine has over 25 years of experience in the oil and
gas industry. In 2002 and 2003, Tom lived in Doha, Qatar,
where he was Senior Counsel (Projects) with Qatar Petroleum.
While in Qatar, he was responsible for a number of international
gas and LNG projects, including projects in the United Kingdom,
India and Spain.
Thomas E. Valentine
Partner
Calgary, Canada
+1 403.267.8154
tom.valentine@nortonrose.com
Alberta 1987
Since returning to Canada in 2004, Tom's work continues to
focus on oil, gas (including LNG) and project development work,
including fiscal regime analysis and negotiations, E&P work,
joint venture structuring, joint operations issues, purchase and
sale agreements, and decommissioning obligations. He
currently provides legal advice to various gas and LNG projects
(both upstream and downstream) in Asia, Africa, Latin America,
North America and the Middle East.
Each year, Tom delivers lectures and teaches workshops on
natural gas and LNG contracts in Doha, London, Dubai,
Trinidad, Singapore and Rio.
LNG expertise



Commercial relationship structuring
Project development
Sale and purchase agreements
Norton Rose | 7
Regulatory and environmental
Don Davies practises energy law with a focus on the regulatory
and litigation fields. He is chair of our Canadian regulatory
practice group.
Don Davies
Senior Partner
Calgary, Canada
+1 403.267.8183
don.davies@nortonrose.com
Alberta 1979
Don has represented oil and gas producers, pipeline companies
and industry organizations in proceedings before the National
Energy Board for more than 30 years. He has acted for both
proponents and intervenors in respect of many applications for
the approval of pipeline facilities and for the determination of
pipeline tolls and tariffs. His cases typically involve complex
environmental,
aboriginal,
constitutional,
jurisdictional,
economic and financial issues.
Don also has extensive experience before the Alberta energy
regulators, including the Energy Resources Conservation Board
and the Alberta Utilities Commission. He has acted for
proponents of various energy projects, including oil sands
developments, pipelines, power plants, and well and field
facilities.
LNG expertise



Regulatory
Project development
Pipelines
Alan Harvie has practised energy and environmental/regulatory
law since 1989 and regularly deals with commercial,
operational, environmental and regulatory issues, especially for
the upstream oil and gas, energy, waste disposal and chemical
industries.
Alan Harvie
Partner
Calgary, Canada
Alan also has significant legal experience in acting for the oil
and gas industry in commercial transactions and regulatory
matters, including enforcement proceedings, common carrier
and processor applications, forced poolings, downspacings and
holdings, rateable take, and contested facility, and well and
pipeline applications. Alan regularly advises clients about
environmental assessments and permitting, spill response,
enforcement proceedings, contaminated site remediation, and
facility decommissioning and reclamation.
+1 403.267.9411
alan.harvie@nortonrose.com
LNG expertise
Alberta 1989



Environmental
Regulatory
Gas transportation
Norton Rose | 8
Bernie Ho has represented oil and gas and electricity clients
before the National Energy Board, Alberta Energy Resources
and Conservation Board and Alberta Utilities Commission in
relation to facility applications, rate proceedings and
proceedings examining industry-wide policy issues. She has
also appeared before several review panels conducting
environmental assessments of proposed pipeline and other
facility projects.
Bernie Ho
Partner
Calgary, Canada
Bernie also maintains a litigation and dispute resolution
practice, focusing primarily on employment-related matters. She
regularly advises clients on employment law, disability and
human rights issues, as well as having experience with a wide
variety of energy, corporate and insurance-related matters.
+1 403.267.8344
bernette.ho@nortonrose.com
LNG expertise
Alberta 1996



Regulatory
Litigation and dispute resolution
Employment
Terry Hughes practises primarily in the area of energy and
resources, but also focuses on the regulatory area. He has over
30 years of experience in the energy project development, joint
venture, marketing and regulatory fields.
Terrance Hughes
Senior Partner
Calgary, Canada
+1 403.267.8117
terry.hughes@nortonrose.com
Alberta 1982
Terry has represented both domestic and international clients in
the development and operation of many energy projects,
including NGL and natural gas pipelines and offshore natural
gas projects. His activities in this area include the negotiation,
development and interpretation of joint venture, construction
ownership and operation, transportation, processing and
product disposition agreements.
Terry also frequently appears as counsel before the National
Energy Board. His extensive energy marketing experience
relates to purchase, sales, storage, transportation and export
arrangements. He has negotiated and prepared many long-term
commodity sales arrangements.
LNG expertise



Regulatory
Project development
Marketing
Norton Rose | 9
Aboriginal
With over 40 years of litigation experience, Everett Bunnell has
been involved in a number of claims involving the oil and gas
industry, ranging from environmental liability claims,
pipeline/refinery contamination problems and drilling, production
and processing issues.
Everett Bunnell, QC
Senior Partner
Calgary, Canada
+1 403.267.9545
everett.bunnell@nortonrose.com
As the chair of the Calgary aboriginal law practice group,
Everett has been extensively involved in various environmental
issues and disputes concerning claims in respect of land and
water advanced by native groups in Alberta, British Columbia
and the Northwest Territories.
LNG expertise



Aboriginal law
Environmental litigation
Energy litigation
Alberta 1968 | British Columbia 1974 |
Nunavut 1999 | North West Territories 1975
Phil Fontaine assists clients with First Nations matters, including
aboriginal law, energy, environmental and mining and
resources. Phil is a member of the Sagkeeng First Nation in
Manitoba and the former National Chief of the Assembly of First
Nations (AFN). He is the longest-serving National Chief in AFN
history and the only one to be elected to three terms. He has
been instrumental in raising awareness of the importance of
human rights to the lives of all Canadians and First Nations
peoples in particular.
Phil Fontaine, O.M.
Senior Advisor
Calgary / Toronto, Canada
LNG expertise


First Nations matters
Aboriginal law
+1 403.355.3839 | +1 416.216.3901
phil.fontaine@nortonrose.com
Norton Rose | 10
Tax
Darren Hueppelsheuser’s practice includes all aspects of
income tax law, with an emphasis on financing and transaction
planning for corporations, trusts and partnerships in both private
and public transactions.
Darren Hueppelsheuser
Partner
Calgary, Canada
+1 403.267.8242
darren.hueppelsheuser@nortonrose.com
Darren regularly provides tax advice to Canadian and
international entities in the energy industry, particularly in
relation to the structuring of investments, acquisitions planning
and disposition strategies. He provided tax advice to Kitimat
LNG from incorporation through to their ultimate project
disposition.
Darren also advised project partners with respect to their
acquisition of shale gas assets and acquisitions of Progress
Energy Resources Corp. and LNG export facility in British
Columbia.
Alberta 1997
LNG expertise

Tax
Dion Legge's practice focuses on the income tax aspects of
corporate reorganizations, mergers and acquisitions, takeovers,
debt and equity financings, and the taxation of flow-through
vehicles.
Dion also advises on tax-planning issues related to international
structures for Canadian-based multinational corporations, on
investments by non-residents in Canada, and on structuring
cross-border mergers and acquisitions, divestitures and
financings.
Dion Legge
Partner
Calgary, Canada
Dion frequently advises Canadian and non-Canadian entities
with respect to structuring investments and acquisitions in the
energy industry, including structuring investments in gas assets
and LNG projects.
+1 403.267.9438
dion.legge@nortonrose.com
LNG expertise
Alberta 2001

Tax
Norton Rose | 11
Norton Rose is the business name for the international law firm that comprises Norton Rose LLP, Norton Rose Australia, Norton Rose Canada
LLP and Norton Rose South Africa (incorporated as Deneys Reitz Inc) and their respective affiliates (“Norton Rose entity/entities”).
The purpose of this publication is to provide information as to developments in the law. It does not contain a full analysis of the law, nor
does it constitute an opinion of Norton Rose on the points of law discussed. You must take specific legal advice on any particular matter
which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose.
No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose entity (whether or
not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this
publication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of, as
the case may be, Norton Rose LLP or Norton Rose Australia or Norton Rose Canada LLP or Norton Rose South Africa (incorporated as Deneys
Reitz Inc) or of one of their respective affiliates.
nortonrose.com
Norton Rose
Norton Rose is a leading international law firm. With more than 2900 lawyers, we offer a full business
law service to many of the world’s pre-eminent financial institutions and corporations from offices in
Europe, Asia, Australia, Canada, Africa, the Middle East, Latin America and Central Asia. We are strong
in financial institutions; energy; infrastructure, mining and commodities; transport; technology and
innovation; and pharmaceuticals and life sciences.
Norton Rose is the business name for the international law firm that comprises Norton Rose LLP,
Norton Rose Australia, Norton Rose Canada LLP and Norton Rose South Africa (incorporated as Deneys
Reitz Inc) and their respective affiliates