Sun. Jun 20th, 2021

City gas distribution

Transporting future fuel

#33 GTA – Gas Transportation Agreement

14 min read

Gas Transmission agreement is done between Gas Transporter & Gas Shipper for transporting gas from one place to other.

The Transporter is engaged in the business of transmission/processing of gas and owns &operates natural gas pipelines/processing plants. Further, the transporter may build new transmission facilities or buy capacity from any other transporter for the purpose of providing Transmission Services.

The Shipper is having existing facilities or creating facilities that require Gas as fuel/feedstock or have plans to sell gas to various consumers. The Shipper has requested the Transporter to make necessary arrangements for transportation of Gas from Delivery Point to Redelivery Point.

There are various clauses in GTA Agreement, It is being discussion below;

Clause 1Definitions
Clause 2Rights & Obligations
Clause 3Condition Precedent & Operating Code
Clause 4Capacity Tranche
Clause 5Term
Clause 6Transmission Charge
Clause 7Liquidated Damages
Clause 8Billing & Payment
Clause 9REPRESENTATIONS, WARRANTIES AND COVENANTS
Clause 10Planned works
Clause 11Force Majeure
Clause 12Change in law
Clause 13Termination
Clause 14Liabilities and Indemnities
Clause 15Miscellaneous

Clause 1: Definitions

This article mainly contains the definition of the various term used in the Gas Transportation Agreement & it also dictates the interpretation of various terms used in the Gas Transportation Agreement.

Clause 2: Rights & Obligations

The Shipper and the Transporter shall in accordance with this Clause enter into one or more transactions in relation to one or more Redelivery Points whereby the Shipper shall contract for specified capacity for a specified duration for the transportation of the Gas through the Transporters facilities and the Transporter shall provide Gas Transmission Services for such duration in respect thereof. Each transaction shall be governed by the terms of this Agreement and by other term that may be agreed in writing between Parties confirming such transaction i.e. CT.

Here, in this clause various rights & obligation of seller & buyer are mentioned.

Clause 3: Conditions Precedent & Operating Code

A condition precedent is an event or state of affairs that is required before something else will occur. In contract law, a condition precedent is an event which must occur, unless its non-occurrence is excused, before performance under a contract becomes due, i.e., before any contractual duty exists. The details of various events are mentioned in this clause.

This Operating Code is a document intended to record certain rights and responsibilities of each of the parties involved in the transportation of Gas through the Transporter Facilities. The Transporter Facilities currently conveys Gas from multiple sources of Gas to multiple consumption points from the Transporter Facilities.

This Operating Code is intended primarily to address technical and operational issues relating to transfer of Gas through the Transporter Facilities. Each person who signs a contract for transmission of Gas (“GTA”) (each such person shall be hereinafter called a “Shipper”) with (“Transporter”) and each GTA will incorporate, by reference, the provisions of the Operating Code and will, in addition, set out the specific terms and conditions regulating the contractual relationship between the Transporter and Shipper regarding the flow of Gas through the Transporter Facilities under each CT Agreements.

This Operating Code shall be binding on the parties to a GTA upon execution of the GTA by the Transporter and the Shipper.

Clause 4: Capacity Tranche

A “Capacity Tranche” or“CT” or“CT Agreement”or “Booked Capacity”shall be a quantity of transmission capacity reserved by Transporter for a particular transmission purpose of Shipper. Each CT Agreement shall be identified by a name, Delivery Point and Redelivery point and shall be documented in a separate Exhibit to this Agreement. The “Ship-or-Pay CT Agreement” shall mean an arrangement under which subject to and in accordance with such CT Agreement, the Transporter shall reserve transmission capacity so as to provide Gas Transmission Services to Shipper on a firm basis.

Clause 5: Term

In this clause, the term or period of the agreement are mentioned in detail.

Clause 6: Transmission Charges

Commencing from each CT Start Date and till CT End Date, the Shipper shall pay, with respect to each CT, Transmission Charges in accordance to each CT. The Transmission Charges shall be arrived in the form of ship-or pay CT agreement, Authorized/Unauthorized overrun charge & Imbalance charges.

Clause 7: Liquidated Damages

Liquidated damages are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g. late performance).

Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract.

The various liquidated damages & its consequences are mentioned in this clause.

Clause 8: Billing & Payment

Transporter shall deliver electronically to the Shipper, as soon as possible following the end of each Fortnight, from the Fortnight in which the Start Date falls, an invoice for such Fortnight setting forth the amount to be paid by the Shipper to the Transporter in respect of such Fortnight (a “Fortnightly Invoice”), which amount shall be the sum total of the following:

(a) An amount equal to the Transmission Charge for such Fortnight showing details of the calculation; plus

(b) an amount equal to the Authorised Overrun Charges for such Fortnight showing details of the calculation; plus

(c) an amount equal to the Unauthorised Overrun Charges for such Fortnight showing details of the calculation; plus

(d) an amount equal to Positive Imbalance Charges for such Fortnight showing details of the calculation; plus

(e) an amount equal to the Negative Imbalance Charges for such Fortnight showing details of such calculation; minus

(f) an amount equal to applicable Liquidated Damages determined in accordance with this agreement; plus

(g) an amount equal to applicable ship-or-Pay Payment determined in accordance with this agreement; plus;

(h) Taxes due and payable by the Shipper in accordance with this Agreement plus or minus (as the circumstances may require)

(i) Interest accrued and unpaid by either Party on delayed payments.

(j) any other amount due and payable by the Shipper or the Transporter in accordance with this Agreement or as a result of any correction to any prior fortnightly invoice, showing details of the calculation.

Other details mentioned in this clause include: how shipper will make payments, If any dispute between the party regarding amount – it has to be sorted according to the said agreement, consequences of failure to pay & letter of credit from shipper.

Clause 9: REPRESENTATIONS, WARRANTIES AND COVENANTS

A representation is a statement of fact that induces a party to enter into the contract.  The statement, made before or at the time of making the contract, regards a past fact or existing circumstance related to the contract which influences such party to enter the contract.

A warranty is an undertaking or stipulation that a certain fact in relation to the subject of the contract is or shall be as it is stated or promised; and refers to an agreement to protect the recipient against loss if the fact is or becomes untrue.

A covenant is a promise by a party by which it pledges that something is either done, will be done or shall not be done.

The details of all the three term listed above are mentioned in this clause.

Clause 10: Planned works

Planned Works shall mean works conducted over a period of hours or days identified in advance (i) on the Transporter Facilities by the Transporter, which may temporarily restrict the Transporter Facilities capacity and shall include modifications to, enlargement of, repairs to or maintenance of the Transporter Facilities; and (ii) upstream and/or downstream of Transporter Facilities which results in Shipper having a reduced requirement for capacity. (iii) on the Shipper Facilities by the Shipper, which may temporarily restrict the Shipper Facilities capacity and shall include modifications to, enlargement of, repairs to or maintenance of the Shipper Facilities; and (iv) upstream and/or downstream of Shipper Facilities which results in Shipper having a reduced or non -requirement for capacity.

Both Parties shall have the right, without any liability to the other Party, to temporarily reduce the CT Delivery Point MDQ and the relevant CT Redelivery Point MDQ for any CT during Planned Works.

Details regarding the planned work is mentioned in this clause.

Clause 11: Force Majeure

The term ‘force majeure’ is defined as ‘an event or effect that can be neither anticipated nor controlled. It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.

From a contractual perspective, a force majeure clause provides temporary reprieve to a party from performing its obligations under a contract upon the occurrence of a force majeure event.

A force majeure clause typically spells out specific circumstances or events, which would qualify as force majeure events, conditions which would have been fulfilled for such force majeure clause to apply to the contract and the consequences of the occurrence of such force majeure event. As such, for a force majeure clause to become applicable (should any force majeure event occur), the occurrence of such events should be beyond the control of the parties and the parties will be required to demonstrate that they have made attempts to mitigate the impact of such force majeure event. If an event or circumstance comes within the ambit of a force majeure event and fulfills the conditions for applicability of the clause then the consequence would be that parties would be relieved from performing their respective obligations to be undertaken by them under the contract during the period that such force majeure events continue.

Details about the force majeure conditions are mentioned in this clause.

Clause 12: Change in law

For purposes of this Agreement, the term “Change in Law”shall mean the occurrence of any of the following after date of this Agreement:

a. any enactment or issuance of any new Law;

b. any amendment, alteration, or modification of an existing Law;

c. the modification, repeal, or re-enactment of any existing law (other than a re-enactment which merely consolidates or codifies existing Law);

d. any cancellation, revocation, withdrawal or suspension of, or failure or refusal to issue or renew any authorization which is not due to the default of any party;

e. the commencement of any Law which had not at the date of this Agreement yet entered into effect except to the extent such law was enacted prior to the date of this Agreement with a commencement date after the date of this Agreement and which Law takes effect on that commencement date without material amendment; and

f. any act, decision, decree or the exercise of any powers after the date of this Agreement of or any government or regulatory authority with power to regulate, control or direct the activities of a Party which affects the Party in respect of the performance of its obligations or the exercise of its rights under this Agreement (other than due to default of any Party)

and which, in any case,(A) has a material adverse effect on either Party and the consequences of which prevent either Party from exercising its material rights or (B) prevents, or relieves either Party from performing its material obligations under this Agreement (any Party so effected being referred to as an “Affected Party”) provided that such material adverse effect could not have been prevented or overcome by the Transporter or the Shipper (as the case may be)In the event of any change in law including (any Change in Law) arising fromregulatory actionof the Board, the parties shall discuss the manner in which the effect of such Changein Law shall be dealt with in this Agreement. Any change in the rate of Taxes applicable to the transportation of Gas on the Shipper or the Transporter shall not be a Change in Law. Any change in the rate of Taxes applicable to the transmission of Gas shall pass through to the Shipper as part of the Transportation Charges.

Clause 13: Termination

The different cases when the buyer and seller can terminate the agreement is mentioned in this article. All the cases with the procedure will be mentioned in this article.

Clause 14: Liabilities and Indemnities

In this article, the seller & buyer both will represent some sort of Indemnities. All the detail regarding the Indemnities from both ends are mentioned in this article.

Clause 15: Miscellaneous

Other important details related to the agreement are mentioned here in this article.

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