ABSTRACT
The issues in the simulation are price per therm and the usual terms for 'send-or-pay' and 'take-or-pay' contracts, with the associated important issues of pay or performance guarantees, force majeure conditions and caps on damages for non-performances and recourse to parent companies. This chapter discusses the case study of a gas company. PowerCo is negotiating a dedicated supply agreement with FieldCo to secure an exclusive gas supply from FieldCo's reservoirs for the purpose of providing fuel for an electricity generating plant to be constructed by PowerCo. The non-binding heads of agreement between PowerCo and FieldCo anticipate that the price per therm of gas will be 20p, rising in line with the Retail Price Index (RPI) for the life of the gas sales agreement and subject to further terms to be agreed. There are a number of major sticking points to finalizing the gas sales agreement.
