Comparison of North Sea Gas Sales Contracts With U. S. Contracts
Authors: Sullivan Robert L. 
Published: December 2007

If you think you're pretty well clued in on U. S. gas sales contracts and know your way around the "whereases" and "to wits," pour yourself a cup of tea and read on. Dealing with the U. K. Gas Council - the British Gas Corporation - is a whole new cricket match.

Introduction

British Petroleum discovered natural gas in the United Kingdom portion of the North Sea in Sept. 1965 in the West Sole field. Until this was brought to shore in 1967 the U. K. sources of gas were manufactured gas and liquefied natural gas from Algeria. Although gas from the West Sole field commenced deliveries under a short-form general agreement between British Petroleum and the Gas Council, the first definitive gas sales contracts between producers in the North Sea and the Gas Council were not executed until 1968, when they were drawn up for the Hewett Field gas. The individuals representing the producers in this field were familiar with U. S. gas producers in this field were familiar with U. S. gas contracts and with competing gas purchasers. In the U. K. there is from a practical standpoint only one gas purchaser, the British Gas Council. Of course, this results in handling gas matters in the U. K. in a different manner. This paper will examine the differences in certain articles that are common to both U. S. and U. K. gas sales contracts. To understand some of the contractual differences, we should review the compelling reasons for such differences. Some are based upon the producer's production license and the 1964 Regulations of the production license and the 1964 Regulations of the Minister of Power - in which is stated that all petroleum (including natural gas) shall be delivered on shore in the U. K. unless the Minister of Power consents to delivery elsewhere - coupled with Sec. 9 of the Continental Shelf Act 1964 as to the use of natural gas. This Sec. 9 provides that neither the license holder nor any other person can supply gas to anyone in Great Britain without the Consent of the Minister of Power; his consent shall not be given unless he is Power; his consent shall not be given unless he is satisfied that the supply is for industrial purposes and that the Area Board where the premises is situated has been given an opportunity to purchase the gas at a reasonable price, or the gas is used in a chemical process that does not include the use of gas as fuel to provide heat or energy. Each of the contracts examined contains provisions to the effect that the Gas Council and the Area Boards have agreed that the Gas Council shall negotiate for the purchase of any natural gas produced pursuant to a purchase of any natural gas produced pursuant to a license granted by the Minister of Power, and that the acts of the Gas Council satisfy Sec. 9 of the Continental Shelf Act 1964, and that an offer to the Gas Council is deemed to be an offer to the relevant Area Board. Other reasons for the differences in the contracts include the diverse philosophies of the Gas Council and the producers, such as the Gas Council's insistence upon specific quantities and qualities of gas without regard to the nature of the gas and the reservoir. When considering the penalties as to the foregoing - the resulting compromised agreements and the prices - many are of the opinion that incentives for gas exploration in the U. K. portion of the North Sea were diminished.

JPT

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