Use-Or-Pay Liquefaction Tolling Agreements

Unlike other provisions of a toll agreement, the royalty structure may not be consistent between projects. To achieve project success, fiscal sustainability is essential and the ability to generate sufficient cash flow to support project debt and other lenders` needs is essential. Toll systems are complex and critical elements of the structure of the LNG project. The mechanism for allocating LNG to project participants and monetizing their gas rights is incorporated into the toll and cancellation agreement. Continuity of toll agreements between different toll partners using joint or common facilities is an essential element in structuring the toll portion of an LNG project. The structuring phase is essential and decisions taken at an early stage will guide the negotiations and advance the approach to documentation. As a general rule, the levy has an element to be paid, regardless of whether the processing service is used or made available, either for previously agreed quantities of gas to be delivered for processing, or for a capacity right in the LNG facility. As a general rule, the paying unit needs a basic cash flow to cover expenses related to the use or availability of the processing service. Processing costs often support project financing for export facilities.

Lenders advance certain aspects of the royalty structure to ensure that credit risk is properly placed and that the flow of payment is constant throughout the term of the financing. The choice of legal provisions and dispute resolution rules should be uniform in the documentation of projects and in the various toll agreements. If there were to be a dispute within the framework of the toll agreements, it is very likely that several parties, if not all, using the same common or common facilities, will be affected. The dispute resolution process is streamlined and more effective when all parties to the dispute are involved in the same dispute resolution process. Experts are often used as a dispute resolution option when technical or financial disputes arise. Again, these provisions cannot be available without continuity between dispute agreements if not all parties are subject to the same dispute resolution and expert provisions. Ideally, a toll system will establish a uniform accountability system, with clearly defined remedies, applied consistently and non-discriminatoryly. The liability and recourse regime applies to toll parties, operators or operators, facility owners, lift coordinators, vessels using LNG facilities and other project participants. The toll parties under separate agreements require that all users be treated consistently in the event of a gas supply failure, non-collection of natural gas or by-products, off-spec gas or LNG, partial or total closure of facilities, force majeure and similar events that may affect all parties to the toll. Throughout the project, a concise liability regime generally applies, providing a high level of security for project participants and financiers in the event of an incident. Several parties typically use the services of an export toll agency.

Whether or not it is a fully integrated project, there are a number of provisions that should be consistent in the various toll agreements that apply to the same project. Toll parties will require continuity in toll agreements in critical areas. It is essential that the provisions relating to repeal and planning conditions (including port use agreements or conditions of use), the measurement method and the allocation of LNG and other by-products to all toll operators who share common facilities (common facilities include LNG reservoirs and by-products) are consistent. , walkways, lifting arms and associated equipment). Clear and non-discriminatory attribution procedures and