Professional Documents
Culture Documents
Involved (, in Seulng Gas, - .' - ,. - .: Sponsored, " . - ,' S&Es
Involved (, in Seulng Gas, - .' - ,. - .: Sponsored, " . - ,' S&Es
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S&es Contracts
and AlliedProblems
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#~H@;
JohnG, ih,Orp
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soMinutes
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coqtraotsM
about
natural
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g~,
shies
stand
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pressure
(over1,000pourid)
gas wellgas to tiinte~state
market, Delive~ywill be
.
to a transmission
linefor transportation
andresale
out.side
of the state.Such
.1
.
)
saleserenow tiderthe jurisdiction
of the FederalPower Coamissiont
,,
,.
1
.,
MY wesen~ati:ri,.~%
jhop~ be sli@&d~fere,+t fromthe
be~ome
,. tm.th~t~
showing
customxy,
of +ateYOsrsa I donltintqnd.
.to lE&downa barrageof statistics
,,,1.
howinterstate,naturalg&
saleshave~ncreased
fromone Iirillidncubio
feetin 194,4
:.
tO 6;5trillion
iti1959,ar
how 16billiondollsrshavebeenspsntdur@g this 15
r
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*.
.,
--QOWmeasurimg
nesrly.9OO,OO0
miles--you
are(* ,asfamiliar
,~ars to buildpip61ines
withthesefiguresas 1..
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,
There is, hqwQver$one statistic
whioh,
is of tremetious
irnportanae
to:us all in the
.,
,.. indust~y,
as wellasto the 32kU1.ion
consumers
of naturalgas &the UnitedStates.
,,
...
,.
Thisis thatdtiingthisperiodthe a~rage fieldpriceof gas has inqieased
fro,m
,.
SrOUd
~fao$,,a+%u~tiyneg
oti+ti~
..
. 60$@@ ~#/MGF:. &oducersare,p.,a~atte~,o
.,
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salesn6w at~ound
2.4@?MC~$
.imludihg tax reimb~seukmt$in
SouthLouisiana,While
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italsoc
auses
this,
incxeaspcausesconcern
on the partofIk@ributof.s
,.._
,,&d Consumers,
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,
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rae,m a $3sOOO~O0,0
difference
in -isco~t?d ine~~ overthe ~?e.of the reserves~
or a
.,
!
)
,.,
-$300d~ffersnoe
in d,ailyincome,ase~~ alfoz? 10 takebasis.
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f
Ican,think
of,o~,inet@ce%nwMhadiffeknce
Lnoontract Provisiom,on W t~pe
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/
of separation
@lowed re&iltedin an un&oes&tiyduplication
of fac~~,ti~s
at & in.. .
.
., . .
vestmentpostof $40s000ov two gas wells~..-aad
thisis but.one of m~ requirements
.
thatmsyvary withdifferentpiroiieers.
My methodof pr~s:nting
this subjectwill ~ to followa gas salethroughfromthe
,tbrou~h
Manegem?n#* ne~otiationsj
discussions-execution
+d: certificationw
iththe FPC, usingprocedures
commonly
followedby the Industry.
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PRESENTATION ~
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1.
WorkDoneBy RegionalOffioe
.,
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welland.,.offs@s
(if any)completed
a@ tested.
Gas analyzed.
a) Discovery
withLa&dDe&bne@
c) Leaaing
,. p$,,oturtiohecked
(t~s,~probably
doneprior
,,
.,.
,.
any special
situation
madeto deter~ne whether
d) Analysis~tproduction
on gas production,(For
p?oblemsexist,
whichwouldimpose
anyrestrictions
,
,,
thatnoneexistandthatthisis notgas=
discussion}
,, we willassume
.!
-,
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oap gas.)
,.
this
,
..
by Nat~al .GaeSales.
0) The gas reserveis releasedfor sale,
~e?~%ly
bymeans~
of a requestfor marketmemo.
givingdate of completion
of well,daterele~~ed
.,
,.
Regionmight
for saletlocationplat,.-,test
data,as well as anyir$ormation
,, ,~.---haveas to available
markets.
)
,
..
2. WorkDonePy Natuial
Gas Sales,Section
,
(Mv beginpri$rto releasefor saleafgas resks)
,.,
.-
.,
rnerlie,t
situation
in &6a of gas r~ser~e:
. Locationof -~
a) l%eliminar~istudyof
,
transmission
linesof ~ospectivepurchasers,
priceszanyrequirements
~ to
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.
,.
Liaison
who may be workingin,. withotherProducers
t
,,
teqestownersto determinewhet~r th~y
havqany priordedications..
- c
quality,
pressures
e~c.
from Production,
Department
all avxlable
b) Determins
,
information
on,field:
la t two are-not
ordinerilyreleased
to &s&ible purchasers
or othercompanies.
) :
P
,--P c) Contactall potential
g~, p~chag@s (~ woce8sois,
where,
applicable),
within .;,
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a..
ys*gg@@s ..&@,@y+..
gf..~*@e&l@,,.
T@-.m@@@=Y.. e~d.u~tion~.
;@.ch-Is
-m@e.~1
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allpg&ib~tZes
&&tljr,
willprobablyruls out someof thesbpros>ats,but
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to Wevent pobsiblerepercussions ,,
&e eX@or6d~ for severalreasons. We tlothis,
.
fromroy<yowners,to insurethatal bargaining
o
nth?
saleisat
arms$etigth
-,
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end to ineurethatin the eventof a breakdownin negotiations
withone comps+y ,
,.
.
.,
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wewill haveen ideaof the alternatives
avatlable--other
etringsto our bow,
Itmaybe mentioned,
at thispointthatxoysltty
owner?
havebecome
~
1
muchmoresophisticated
of recentyears,
as~t
were.,
L~d Dep&tmentto
d) (Coz,murrently
withb)tiand
c]. Discusssitjuatiohwith
.,\
determine,
whetheror not any speoialproblemswiththeroyaltyownersexist
t
or can be expected,
De&rtmentto determine
whetherwe will have*O mike
e) CheckwithProduetiion
..
ans-
etcc)
(separators,
de&drators,lines,meterstations~
specialinstallations
and, if
so,
purchasers
comein? a preevaluation.As offersfromprospective
f) Preliminary
;.
liminaryevaluation
is madeof each.
offer$so t+t the number of offersto be
. . .
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>
consideredmay
be but downto two VY three. ... \
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ev~uation$th?ivariousProspective
.pw-,.
g) on the stpe&th of thispreliiinsry.
.
7
~.
ohasers-whose
o;fers aie to be seriously
@s&dered are askedto sendproposed ,.
,.
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,
theirProposalsindetail.
.,
~.c&tractsoutlining
*
.
and LandDe,psrtments
continues.
Earlyin
the
negoti~
h) LiaisonwithProduction
*,
1.
..s
. .
who
Afterfirm offerstie received
fromall ~ksible purchasers
Negotiation:
...
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1,.
shouldbe seri+ously
ionsidered~meetingsare &ranged withthern
(individually,.$.~
.
.1
-..-=-2
.~f.
&owse)...~n@gotiateadst~~st~~
-og--tk..cGnir
a~ts*,..,.Que..to
,.the-.doupZexity-of-..--..,..
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-5-=
the gasdeliveries(different
conditions
of,pressures
quality,BTU r.eqtdre=
nents,deliverypoint,dist~o~.toaiain
line,etc.)a flatpricecouldnot
.,
,~beset to coverall gas prod,uoed
and soldfroma certainareaor evenfrom .
,.
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Analysis
of,GasSalesGontrmt
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.
.
.
a) When,contract
is Workedupintosemifinal
written.form$
it is checkedwith
l%oductions
Legal$TaxandLand~epsrtments
for theirwmaents. On occasi.dnt
.
epartinente
woheck withEn&eering and Con&tiruction
andVal.uations
t At thistime,
.,
/Dep*tment
we alsocheck~thAccounting
to advisethemOf& spmialarrangements
that
,
r, may be necessary..
.(Sometimes
theyadviseus;)
,
,~,
.,
.s,
,Purchaser
and trade
for morechanges.in
the terrns$~.conditions
hnd formof
the ccntract.Throughout
all theseoperations
-w{~rnust
keep in WLri&
what oqr
Mariagementls
pali.cy
is in regardto p&ttnentde~~ls, and we tuu~t,know
how
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...
far we can go in makingconcessions,
!.
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u) Economic St!~dyeConsidertotalannualincomef%om gas?condensate
andgwhere
.
applicable,
plantproductbover the termof the coqtract.Priceescalation
.,
.,.
,,
,.
?is t,aken
intqconsiderationqs
wellas favored~pation~imd
priceredetermine-
.
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tion. (Thismkn&.that$tc gmke a really cornpl&estudy,we &s$ run all 6onw,
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traotsof all Purohasers
in the pricingAreakhrps~ri~
giving.
consideration~to
i
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thei~escalati@2price redetermination
and favorpd.nations
,olauses,
.pince/..
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one,oontrhct
will
aot
Qallsfor a reallyoornplete
and
upQnthe other.,
,This
upto+ate
daige in
firaat
analysis.
is the changingGOR of,the gas and any predictid
; , , ,,
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recoverable
G*? s,. Na&a@@lylin keepingwithpractices
ih the Industry~
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the .,
inaomeflgure~foryearstocomeare discou@edby somewrcenhge factor.
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westudy
theFPC,
d) FFC Situaiion~
~ Afteranaly@ngthe offerseconomically,
.~
sale+ Thisinvolvesexte~ive
sit-iation
as it appliestO thisparticular
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reseerchin the Foster,Lockwoodor similarreports;
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As an exahpl~,we fou@ in one
Thisqay differ@th differpntpurchastirs.
. .
:1
fieldthat
of our ~cwpsotivepurchasers
one W8S buyinggas in the samefield 1
wider sope 12 or !13interstate
eontractej
nopeof whichwe?econtested--and
., :,
. .
thispurchaser
was payingthe Wghest p?icefor gas, All or partofthe
,,
pripespaidby each of the otherthree.
was beingcollected
undercorpo~ate,
,.
.,
.
undertaking,
~ The reasonfor
the phenomenon-was
thatthis
..
,.supjectto refund.
(.,
Pg.rchase~
wassellinggas in ar-areawherethereM beenAo iiltervention.
.{
,
.
.1
a non-jurisdictional~ ~
There h a .theopy
whichhasgro,yii in redentyearsthat,
,.
or intrastate
-s~e at ..&
lowerpriceis moreto bedesired
thana@risdi6-.
.
doubt$
tionalsaleat something
moree-Thatmsy be true,but I veryqeriously
.+
.. whenal otherfaotors&e eqtials
that
maw l?rpd
uc&s makesuchcontracts
,.
.,
-.]
.withoutcarefulstudy. Usuallythe lowerpricedcontraothas someother
.!
..-,<--- .. . .. -.
advsntsgea
suchas lowdrdeliverypressureOr highertakeprovisions.
. .
. .
factiorss
suchas,drainage
by-:,
otherProduc&s2obligations
.In viewofcert~tin.
;
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k@nobk9
I don~,,t
imag~nethattnany%oduaers
, toleaseowkrs &3~$@~pla@
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Ieiye+mwohgas
shut-in
f~orn
sell~~ to j&isdiction&m&rkets~
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probablybi
enoughto,ssythatgas,was#old
underthe oldpolicy-a@ will.
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soldunder
th6 new.
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Mostcoppanies
=-andpineian~kxaeption--rely
uwntheirbgal
Dsp=tm?nts
.
onstantly
ch~ging
.
to interpret
thJ leg@.a@eots of th?FFC situatio~ ~
~
.,
\,
..
,*
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..
pointout anotherfad,
L-
I am not
an exp&t onoperations
underFFC contro~~and I am notpreparkdto answer
Q &l-lI igtef itosdy.
any questiti?s
regardingit. .WhatI-havesaidso far
,-
Afterianalysib,
we then!mustpresentthecontract~tseU
for execu-. to llanag~mefit
.
1.
I &ve heard,handle.
thi~
procedure
by meansof an informal
tion. Some Cornpenies,
. .
,..
oftheoo.ntra&and salepresentedorfilyiIn ot~ersj
interview,
-&thdetails
.
however;thisis handledby
~morandum&i formal,
&ndas uaref
ullypreparedas ~
,.
age.
Thismethodhas,Xthink,a very greatadvent
an internatio,fiai
tradeagrOernenta
re~ into,
a uontraetwhattheywantit td
\
ssy~whenthe terms&d, conditio~s
of the agreement&e summarized
in a memo,it
.
,
is quit~easy
to detectany discre~iese
..
,
4,
,
&ometimes
two,or ewnt~ee,
Certification
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.+
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m~ople m~
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.After
the coatrac~is,exequ~edwe.~~efaced with
anotherchore--we_
must accumulate ~
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and
assemblethe d:$ta
neaeps~yfor;:ur Le@l.Departrneit
tO M* application
for
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CerW?ioate
,ofPubj$ic @nveniencek?~ Neoessit
y withthe FP@ Th& application ..>
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muqt
frequently
befsuppafted.
by testimony
in-aformalhcw+ring
be~ore.
.. the.Commissionc
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As a rul?,
te$timoqy. is k
this
,1
P partiientsometimes
,.
~a@ presented
by Nat&1
Gas. Othys
invol,yed =e acc&mtants and ec6n&ists frouk withi~ the company and, on Oocasioug
..
..
.,
.
exp6rts in various f.$dds from outsid~ the
Q~~PW*
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fJoriolu8i9n
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In, suimary; X wouldj~ke
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the kaot that thiswooedurehasbeen
.t
,
to ro-emphadze
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briefly.,1id~ine that someProducers ,msb & even inore $e-
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