Volume 2-1 Abstract


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"The Duty To Negotiate In Good Faith And The Enforceability Of Short-Term Nautral Gas Clauses In Production Sharing Agreements", By R DOAK BISHOP

Many areas of the world do not have an infrastructure for the use of natural gas. As a result, in the past, if natural gas was discovered that was not associated with oil production, the wells were often plugged. In recent years, however, companies have sought to find economic ways to use gas discoveries through LNG projects, by building gas pipelines to ready markets, or by constructing a local infrastructure in the form of integrated power projects.

Numerous international oil contracts, most notably Production Sharing Agreements (PSA's), have been negotiated in past years with only a short provision stating that if non-associated natural gas is discovered, the parties will negotiate a future contract for the exploitation of the gas. With companies' increasing desire to exploit natural gas discoveries, rather than plugging such wells, has come a need to find a way to enforce these short-form gas provisions when negotiations over exploitation projects fail. These contracts present the question of whether a government party can breach a PSA by failing to negotiate in good faith (or even by refusing to agree to) an exploitation project.

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