The nature of the gas and oil industry makes it unattractive for most business lenders to accept funding projects initiated by small and mid-sized companies. Lending tends to be uncommon when the project is entirely exploration on import based. That’s due to the inherent risks involved in taking part in such projects. Insurance is yet another major problem, with the premiums increasing constantly.
The risks involved, the difficulties in getting loans, and the continuous stream of innovation have forced the gas and oil industry to evolve and diverse contracts tailored to mitigate risks, solve the issues of financing, and cover the stream of innovation.
In most cases in life, we are beholden to the macro aspects that govern the environment in which we live, professionally and personally. So, energy tax law companies should take into account these great movements.
What to look out for in a gas and oil contract
In most cases, when reading case law and contracts, this simple distinction might be lost, particularly in case law and contracts that utilize the terms oil & gas seemingly interchangeably. For lawyers, gas always means associated gas or natural gas. Oil, also known as black gold, is refined into many finished products, including diesel and petrol.
The difference between gas and oil is important and means a lot to customers and attorneys. That’s because lawyers advise their customers and negotiate deals on their behalf. Gas and oil are solid in various markets, each with a distinct set of cost variables.
Gas and oil are stories
Decades ago, energy contracts were sealed with just a handshake. These days, energy contracts are in writing, and these contracts aren’t different from narration as they narrate a story about the agreement that an oil company and government have arrived at. A good narration has an introduction, middle, and conclusion. A good energy tax law company will know the kind of material to look out for in all parts of the documents. The lawyer will also know how to bargain for the exclusion of some things and the inclusion of others.
Model contracts are initial negotiating powers
Model contracts are the opening negotiating power from which the international oil company and the government proceed in their path toward a mutually helpful energy contract. Besides, negotiating a gas and oil contract needs vast knowledge, acumen, foresight, and a lot of common sense.
What are the functions of an energy contact
An energy contract forces consideration by the government and the oil company of the issues entailed in a specific energy transaction.
It must clearly establish the obligation of the parties in a way that precludes future disputes. If a dispute ensues in the future, it will allow a tribunal to determine the problems involved as a result of the clarity of the drafting of the contract.
Decoupling of gas and oil prices
Historically, there has been a relationship between the price of natural gas and that of crude oil. This entails barring all unforeseen occurrences, such as natural disasters. Decoupling is temporary. Nevertheless, their aspects tend to point to a permanent decoupling of prices and a possible dip in most areas.
- Globalization of natural gasses
- Specialization in every part of the gas and oil industry by firms
- The emergency of shale gas
Need for the pre-agreed damages clauses for pollution
A basic contract review and negotiation will assist in stemming the pollution tides and environmental degradation and hash, retributive post-pollution proclamation by governments. By ensuring energy tax law, companies negotiate and incorporate clauses that enact strict but unbiased conditions for environment protection. This includes a stipulating pre-agreed fine for all barrels spilled; the deterrent can be metered out to contractor and operator alike.
