Gas sales agreement—key clauses
Produced in partnership with Hunton Andrews Kurth

The following Energy practice note produced in partnership with Hunton Andrews Kurth provides comprehensive and up to date legal information covering:

  • Gas sales agreement—key clauses
  • Types of gas sales agreements (GSAs)
  • Standard form contracts
  • Key commercial terms
  • Delivery
  • Quantities
  • Nominations
  • Take-or-pay/undertake
  • Shortfall/under-delivery/deliver-or-pay
  • Make-up/carry-forward
  • More...

Gas sales agreement—key clauses

Types of gas sales agreements (GSAs)

Contracts for the sale of gas may take several forms, including:

  1. term agreements—which provide for the sale and purchase of gas for a defined period and are generally classified as either short-term (one to five years) or long-term (often with a twenty-year term, but may include much longer terms);

  2. supply-based contracts—under which the seller commits to deliver specified quantities of gas to the buyer with a degree of flexibility in terms of the source of supply. The degree of flexibility is a negotiated item and a broad right may entitle the seller to source gas worldwide, limited only by compliance with international sanctions to which the buyer is subject; and

  3. depletion-based contracts—which, in contrast is based on an unspecified amount of economically recoverable reserves from a nominated gas field. A true depletion-based contract will remain in place for the life of the field, such that the scope of the agreement is limited by such reserves rather than by time.

Parties may also implement a hybrid supply contract and depletion contract under which a particular field is nominated as the single source of supply for an aggregate volume of gas or for a fixed term.

Standard form contracts

There are several standard form contracts for physical (rather than notional) sales of gas which may guide parties in their choice of

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