05.07.2009

Gas field production equipment does not always work well at very low levels. It is therefore customary in a natural gas sales agreement for there to be a minimum quantity that the buyer can nominate for delivery on any day. Although most GSAs allow the buyer to nominate zero, he will not be allowed to nominate quantities between zero and the minimum nomination level.

Thus, the minimum aggregate of all nominations is often either zero or greater than 50 mmcfd. The seller however can be asked to use reasonable endeavours to deliver at rates less than this minimum of 50 mmscfd.

There is often also a delivery tolerance in the range of +/- 2% in a day and +/- 1% in a month. If a Seller fails on any day to make available the Properly Nominated Gas other than because of Force Majeure or because of scheduled maintenance, then this same quantity of natural gas will become part of an “aggregated shortfall quantity”, which the buyer can take at the beginning of the following month at the agreed upon discounted price prior to taking any other gas.

Gina Cohen
Natural Gas Expert
Phone:
972-54-4203480
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