Exhibit
10.1
LNG TERMINAL USE AGREEMENT
between
TOTAL LNG USA, INC.
and
SABINE PASS LNG, L.P.
dated September 2, 2004
LNG TERMINAL USE AGREEMENT
This LNG TERMINAL USE
AGREEMENT (the “Agreement”), dated as of this 2nd
day of September, 2004 (the “Effective Date”),
is made by and between TOTAL LNG USA, INC.,
a company incorporated under the laws of Delaware with its principal office at
One Memorial City Plaza, 800 Gessner, Suite 700, Houston, Texas U.S.A. 77024 (“Customer”); and SABINE PASS LNG, L.P.,
a Delaware limited partnership with a place of business at 717 Texas Avenue,
Suite 3100, Houston, Texas, U.S.A. 77002 (“SABINE”).
RECITALS
WHEREAS, SABINE
intends to construct, own and operate an LNG terminal facility in Cameron
Parish, Louisiana capable of performing certain LNG terminalling services,
including: the berthing of LNG vessels; the unloading, receiving and storing of
LNG; the regasification of LNG; and delivery of natural gas to the Delivery
Point;
WHEREAS, Customer
desires to purchase such LNG terminalling services from SABINE;
WHEREAS, SABINE
desires to make such LNG terminalling services available to Customer and to
Other Customers in accordance with the terms hereof; and
WHEREAS, as an essential inducement for
SABINE entering into this Agreement, Total S.A., a societe anonyme (“Guarantor”), will execute in favor of SABINE the Guarantee;
NOW, THEREFORE,
for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the Parties hereto and for the mutual covenants
contained herein, SABINE and Customer hereby agree as follows:
In addition to any terms
or expressions defined elsewhere in this Agreement, the terms or expressions
set forth below shall have the following meanings in this Agreement:
1.1 “Adverse Weather Conditions” means weather and sea conditions
actually experienced at or near the Sabine Pass Facility that are sufficiently
severe either: (a) to prevent an LNG vessel from proceeding to berth, or
unloading or departing from berth, in accordance with one or more of the
following: (i) regulations published by a Governmental Authority, (ii) an Approval
or (iii) an order of a Pilot; or (b) to cause an actual determination by
the Master of an LNG Vessel that it is unsafe for such vessel to berth, unload
or depart from berth.
1.2 “Affiliate” means a Person (other than a Party) that directly
or indirectly controls, is controlled by, or is under common control with, a
Party to this Agreement, and for such purposes the terms “control”, “controlled
by” and other derivatives shall mean the direct or indirect ownership of fifty
percent (50%) or more of the voting rights in a Person.
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1.3 “Aggregate
Actual Throughput” means the sum of Customer Actual
Throughput and the aggregate of Other Customers’ Gas delivered at the Delivery
Point in the relevant month.
1.4 “Agreement” means this agreement, together with the Annexes
and Exhibits attached hereto, which are hereby incorporated into and made a
part hereof, as the same may be hereafter amended.
1.5 “Annual Delivery Program” shall have the meaning set forth in
Section 5.1(c).
1.6 “Approvals” means all consents, authorizations, licenses,
waivers, permits, approvals and other similar documents from or by a
Governmental Authority.
1.7 “Base Rate”
means: (a) the interest rate per annum equal to (i) the prime rate
(sometimes referred to as the base rate) for corporate loans as published by The Wall Street Journal in the money rates section on the
applicable date, or (ii) in the event The Wall Street Journal
ceases or fails to publish such a rate, the prime rate (or an equivalent
thereof) in the United States for corporate loans determined as the average of
the rates referred to as prime rate, base rate or the equivalent thereof,
quoted by J.P. Morgan Chase & Co., or any successor thereof, for short term
corporate loans in New York on the applicable date; plus (b) two percent
(2%). The Base Rate shall change as and
when the underlying components thereof change, without notice to any Person.
1.8 “British Thermal Unit” or “BTU”
means the amount of heat required to raise the temperature of one (1)
avoirdupois pound of pure water from 59.0 degrees Fahrenheit to 60.0 degrees
Fahrenheit at an absolute pressure of 14.696 pounds per square inch.
1.9 “Business Day” means any day that is not a Saturday, Sunday
or legal holiday in the State of Texas, or a day on which banking institutions
chartered by the State of Texas, or the United States of America, are legally
required or authorized to close.
1.10 “Cargo” means a quantity of LNG expressed in MMBTU carried by
an LNG Vessel in relation to which SABINE will render Services to Customer
hereunder.
1.11 “Central Time” means U.S. Central Time Zone, as adjusted for
Daylight Saving Time and Standard Time.
1.12 “Claims” shall have the meaning set forth in Section 9.2 of
this Agreement.
1.13 “Commercial Start Date” shall have the meaning set forth in
Section 6.2.
1.14 “Commercial Operations Completion”
means completion of the Sabine Pass Facility so that it is ready to be used for
its intended purpose to provide the Services hereunder, with the contractor
under the engineering, procurement and construction contract for the facilities
described in Section 7.1(b) having achieved all minimum acceptance requirements
under such contract sufficient to provide the Services under this Agreement and
any agreements with Other Customers.
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1.15 “Contract Year” means each annual period starting on January
1 and ending on December 31 during the Term of this Agreement; provided,
however, that (a) the first Contract Year shall commence on the Commercial
Start Date and end on the following December 31, and (b) the last Contract Year
shall commence on January 1 immediately preceding the last day of the Term and
end on the last day of the Term as set forth in Section 6.1.
1.16 “Cubic Meter” means a volume equal to the volume of a cube
each edge of which is one (1) meter.
1.17 “Customer” means Total LNG USA, Inc., unless and until
substituted by an assignee in accordance with Article 17, whereupon such
assignee shall become Customer to the extent of such assignment.
1.18 “Customer Actual Throughput” means the aggregate quantity of
Gas delivered in MMBTUs at the Delivery Point for Customer’s account in the
relevant month.
1.19 “Customer LNG Receipt Schedule” shall have the meaning set
forth in Section 5.1(b).
1.20 “Customer’s Inventory” means, at any given time, the quantity
in MMBTUs that represents LNG and Gas held for Customer’s account. For the avoidance of doubt, Customer’s
Inventory shall be determined after deduction of Retainage in accordance with
Section 4.2.
1.21 “Customer’s LNG” means, for the purposes of Services, LNG
received at the Receipt Point for Customer’s account.
1.22 “Delivery Point” means the point of interconnect between the
tailgate of the Sabine Pass Facility and a Downstream Pipeline.
1.23 “Dispute” means any dispute, controversy or claim (of any and
every kind or type, whether based on contract, tort, statute, regulation or
otherwise) arising out of, relating to or connected with this Agreement,
including any dispute as to the construction, validity, interpretation,
termination, enforceability or breach of this Agreement, as well as any dispute
over arbitrability or jurisdiction.
1.24 “Downstream Pipeline” means all Gas pipelines downstream of
the Delivery Point which transport Gas from the Sabine Pass Facility.
1.25 “Effective Date” means the date set forth in the preamble of
this Agreement.
1.26 “Excess Gas” shall have the meaning set forth in Section
5.2(f).
1.27 “Expected Receipt Quantity” means, with respect to a given
Cargo, Customer’s reasonable estimate of the quantity of LNG (in MMBTUs)
expected to be unloaded at the Receipt Point, as set forth in the notice
delivered pursuant to Section 5.1(b)(iii), as such notice may be subsequently
amended pursuant to Section 8.4(a).
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1.28 “Extension Term” shall have the meaning set forth in Section
6.1.
1.29 “Fee” shall have the meaning set forth in Section 4.1.
1.30 “FERC” means the Federal Energy Regulatory Commission or a
successor regulatory agency.
1.31 “FERC Approval Date” shall have the meaning set forth in
Section 6.2.
1.32 “Fixed Component” shall have the meaning set forth in Section
4.1(a)(i).
1.33 “FOC Component” shall have the meaning set forth in Section
4.1(a)(ii).
1.34 “Force Majeure” shall have the meaning set forth in Section
15.1.
1.35 “For Customer”, “for Customer’s account”, “on behalf of
Customer” or other phrases containing similar wording shall include
LNG delivered to the Sabine Pass Facility at Customer’s direction as well as
Customer’s Inventory derived therefrom.
1.36 “Gas” means any hydrocarbon or mixture of hydrocarbons
consisting predominantly of methane which is in a gaseous state.
1.37 “Gas Redelivery Rate” or “GRR”
shall have the meaning set forth in Section 3.3(b).
1.38 “Governmental Authority” means, in respect of any country,
any national, regional, state, or local government, any subdivision, agency,
commission or authority thereof (including any maritime authorities, port
authority or any quasi-governmental agency) having jurisdiction over a Party,
the Sabine Pass Facility, Customer’s Inventory, an LNG Vessel, a Transporter,
or a Downstream Pipeline, as the case may be, and acting within its legal
authority.
1.39 “GPA” shall have the meaning set forth in Annex I.
1.40 “Gross Heating Value” means the quantity of heat expressed in
BTUs produced by the complete combustion in air of one (1) cubic foot of
anhydrous gas, at a temperature of 60.0 degrees Fahrenheit and at an absolute
pressure of 14.696 pounds per square inch, with the air at the same temperature
and pressure as the gas, after cooling the products of the combustion to the
initial temperature of the gas and air, and after condensation of the water
formed by combustion.
1.41 “Guarantee” means the
Guarantee executed by Guarantor in favor of SABINE in the form attached as Exhibit A, or
any other successor as allowed pursuant to the Guarantee.
1.42 “Guarantor” shall have the meaning set forth in the recitals
to this Agreement.
1.43 “Henry Hub Price” shall mean,
with respect to any month, the final settlement price in dollars per MMBTU as
published by the New York Mercantile Exchange for the Henry Hub Natural Gas
futures contract for Gas to be delivered during such month, such final
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price to be based
upon the last trading day for the contract for such month; provided, however,
that if the Henry Hub Natural Gas futures contract ceases to be traded, the
Parties shall select a comparable index to be used in its place that maintains
the intent and economic effect of the original index.
1.44 “Incremental Costs” shall have the meaning set forth in
Section 4.1(b).
1.45 “Initial Term” shall have the meaning set forth in Section
6.1.
1.46 “International LNG Terminal Standards” means, to the extent
not inconsistent with the express requirements of this Agreement, the
international standards and practices applicable to the design, equipment,
operation or maintenance of LNG receiving and regasification terminals,
established by the following (such standards to apply in the following order of
priority): (i) a Governmental Authority having jurisdiction over SABINE;
(ii) the Society of International Gas Tanker and Terminal Operators (“SIGTTO”); and (iii) any other internationally recognized
non-governmental agency or organization with whose standards and practices it
is customary for Reasonable and Prudent Operators of LNG receiving and
regasification terminals to comply. In
the event of a conflict between any of the priorities noted above, the priority
with the lowest roman numeral noted above shall prevail.
1.47 “International LNG Vessel Standards” means, to the extent not
inconsistent with the expressed requirements of this Agreement, the
international standards and practices applicable to the ownership, design,
equipment, operation or maintenance of LNG vessels established by the following
(such standards to apply in the following order of priority): (i) a
Governmental Authority; (ii) the International Maritime Organization; (iii)
SIGTTO; and (iv) any other internationally recognized non-governmental agency
or organization with whose standards and practices it is customary for
Reasonable and Prudent Operators of LNG vessels to comply. In the event of a conflict between any of the
priorities noted above, the priority with the lowest roman numeral noted above
shall prevail.
1.48 “Lender” means any entity providing temporary or permanent
debt financing to SABINE in connection with construction of the Sabine Pass
Facility.
1.49 “Liabilities” means
all liabilities, costs, claims, disputes, demands, suits, legal or
administrative proceedings, judgments, damages, losses and expenses (including
reasonable attorneys’ fees and other reasonable costs of litigation or
defense), and any and all fines, penalties and assessments of, or
responsibilities to, Governmental Authorities.
1.50 “Liquids” means liquid hydrocarbons capable of being
extracted from LNG at the Sabine Pass Facility, consisting predominately of
ethane, propane, butane and longer-chain hydrocarbons.
1.51 “LNG” means Gas in a liquid state at or below its boiling
point at a pressure of approximately one (1) atmosphere.
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1.52 “LNG Suppliers” means, in relation to performance of the
obligations of SABINE and Customer under this Agreement, those Persons who
agree in writing pursuant to an LNG purchase and sale agreement to supply or
sell LNG to Customer for delivery to the Sabine Pass Facility.
1.53 “LNG Vessel” means an ocean-going vessel suitable for
transporting LNG that Customer or an LNG Supplier uses for transportation of
LNG to the Sabine Pass Facility.
1.54 “Loading Port” means the port at which a Cargo is loaded on
board an LNG Vessel.
1.55 “Major Customer” means Customer and any Other Customer whose
LNG terminal use agreement entitles such Other Customer to berth, unload and
deliver at the Sabine Pass Facility quantities of LNG not less than 182,500,000
MMBTUs per year over a contractual term of at least five (5) years.
1.56 “Major Customer Aggregate Contracted
Capacity” means the sum of (a) the Maximum LNG Reception Quantity of
Customer; and (b) the maximum LNG reception quantity (or similar maximum
contractual entitlement to receive LNG berthing, unloading and receipt
services) of each other Major Customer for the relevant Contract Year.
1.57 “Major Customer Allocation Priority” shall have the meaning
set forth in Section 15.7.
1.58 “Make-Up Quantity” shall have the meaning set forth in
Section 4.4(c).
1.59 “Maximum LNG Reception Quantity” means 390,915,000 MMBTUs per
Contract Year; provided, however, that for purposes of the first and last
Contract Years, the Maximum LNG Reception Quantity shall be prorated based upon
the ratio that the number of days during such Contract Year bears to three
hundred sixty-five (365).
1.60 “MMBTU” means 1,000,000 BTUs.
1.61 “NAESB WGQ” shall have the meaning set forth in Section
5.2(g)(iii).
1.62 “Non-Major Customer” means any Other Customer other than a
Major Customer.
1.63 “Non-Major Customer Aggregate Contracted
Capacity” means the sum of the maximum LNG reception quantity (or
similar maximum contractual entitlement to receive LNG berthing, unloading and receipt services) of each Non-Major Customer for the relevant
Contract Year.
1.64 “NOR Window” shall have the meaning set forth in Section
8.5(b)(ii).
1.65 “Notice of Readiness” or “NOR”
shall have the meaning set forth in Section 8.5.
1.66 “Other Customers” means, from time to time, Persons (other
than Customer) purchasing LNG terminalling services from SABINE similar to the
Services.
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1.67 “Party” and “Parties” means SABINE and Customer, and their respective
successors and assigns.
1.68 “Person” means any individual, sole proprietorship,
corporation, trust, company, voluntary association, partnership, joint venture,
limited liability company, unincorporated organization, institution, Governmental
Authority or any other legal entity.
1.69 “Pilot” means any Person engaged by Transporter to come on
board an LNG Vessel to assist the Master in pilotage, mooring and unmooring of
such LNG Vessel.
1.70 “Pilot Boarding Station” shall have the meaning set forth in
Section 8.5(a).
1.71 “Port Charges” means all charges of whatsoever nature
(including rates, tolls and dues of every description) in respect of an LNG
Vessel entering or leaving the Sabine Pass Facility, including charges imposed
by fire boats, tugs and escort vessels, the U.S. Coast Guard, a Pilot, and any
other Person assisting an LNG Vessel to enter or leave the Sabine Pass
Facility. For purposes of this
Agreement, the term “Port Charges” shall include port use fees, thru-put fees
and similar fees payable by users of the Sabine Pass Facility (or by SABINE on
behalf of such users) to the West Cameron, Louisiana Port Commission and
Jefferson County, Texas Waterway and Navigation District.
1.72 “Psig” means pounds per square inch gauge.
1.73 “Reasonable and Prudent Operator” means a Person seeking in
good faith to perform its contractual obligations, and in so doing, and in the
general conduct of its undertaking, exercising that degree of skill, diligence,
prudence and foresight which would reasonably and ordinarily be expected from a
skilled and experienced operator engaged in the same type of undertaking under
the same or similar circumstances and conditions.
1.74 “Receipt Point” means the point at the Sabine Pass Facility
at which the flange coupling of the Sabine Pass Facility’s receiving line joins
the flange coupling of the LNG unloading manifold on board an LNG Vessel.
1.75 “Regasified LNG” means Gas derived from the conversion of LNG
(received by SABINE at the Receipt Point) from its liquid state to a gaseous
state.
1.76 “Reservation Fee” shall have the meaning set forth in Section
4.1(a).
1.77 “Retainage” shall have the meaning set forth in Section 4.2.
1.78 “Round Up Quantity” shall have the meaning set forth in
Section 3.1(b)(i)a.
1.79 “SABINE” means Sabine Pass LNG, L.P., unless and until
substituted by an assignee by novation in accordance with Article 17, whereupon
such assignee shall become SABINE for all purposes.
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1.80 “Sabine Pass Facility” means the LNG receiving terminal
facility as further described in Section 7.1(b) (including the port, berthing
and unloading facilities, LNG storage facilities, and regasification
facilities, together with equipment and facilities related thereto) used to
provide Services hereunder, as such facilities will be constructed and modified
from time to time in accordance with this Agreement.
1.81 “Sabine Pass Marine Operations Manual” shall have the meaning
set forth in Section 8.2.
1.82 “Sabine Pass Services Manual” shall
have the meaning set forth in Section 3.6.
1.83 “Sabine Pass Website” means the internet based computer system used by SABINE to communicate
with Customer and Other Customers regarding LNG terminalling services at the Sabine Pass Facility.
1.84 “Scheduled Unloading Window” means, for any applicable
Contract Year, an Unloading Window allocated either to Customer or any Other
Customer pursuant to Article 5.
1.85 “Scheduling Representative” means the individual appointed by
Customer in accordance with Section 5.4.
1.86 “Services” shall have the meaning set forth in Section 2.1,
as expanded from time to time in accordance with Section 2.2.
1.87 “Services Quantity” shall have the meaning set forth in
Section 3.1(b).
1.88 “Standard Cubic Foot” means the
quantity of Gas, free of water vapor, occupying a volume equal to the volume of
a cube whose edge is one (1) foot, at a temperature of 60.0 degrees Fahrenheit
and at an absolute pressure of 14.696 pounds per square inch.
1.89 “Storage” means the retention by SABINE of Customer’s
Inventory for a period of time at the Sabine Pass Facility.
1.90 “Taxes” means all customs, taxes, royalties, excises, fees,
duties, levies, sales and use taxes and
value added taxes, charges and all other assessments, which may now or hereafter be enacted, levied
or imposed, directly or indirectly, by a Governmental Authority, except Port
Charges.
1.91 “Term” shall have the meaning set forth in Section 6.1.
1.92 “Total Vaporization Capacity” shall have the meaning set
forth in Section 5.2(b)(ii).
1.93 “Transporter” means any Person who owns or operates an LNG
Vessel.
1.94 “Unloading Window” means a forty-eight (48) hour window
starting at 6:00 a.m. Central Time on a specified day and ending forty-eight
(48) consecutive hours thereafter during which SABINE would make available
berthing and LNG unloading services at the
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Sabine Pass
Facility to either Customer or one of the Other Customers; provided, however,
that if an LNG Vessel berths on the second day of the Scheduled Unloading
Window, then the forty-eight (48) hour window shall be deemed extended to
complete unloading in accordance with the time restrictions in Section 8.9(b).
ARTICLE
2
SERVICES AND SCOPE
2.1 Services
to be Provided by SABINE
During the Term and
subject to the provisions of this Agreement, SABINE shall, acting as a
Reasonable and Prudent Operator, make available the following services to
Customer (such available services being herein referred to as the “Services”) in the manner set forth in Article 3:
(a) the
berthing of LNG Vessels at the Sabine Pass
Facility;
(b) the
unloading and receipt of LNG from LNG Vessels at the Receipt Point;
(c) Storage
of Customer’s Inventory;
(d) the
regasifying of LNG held in Storage;
(e) the
transportation and delivery of such Regasified LNG to the Delivery Point (it
being acknowledged that SABINE may, at its option, cause Gas to be redelivered
to Customer at the Delivery Point from sources other than Regasified LNG); and
(f) other
activities directly related to performance by SABINE of the foregoing.
2.2 Additional
Services
From time to time during the Term, the representatives
of SABINE and Customer may supplement this Agreement in accordance with Section
24.2 to provide that SABINE will also make available services to Customer in
addition to the Services set forth in Section 2.1.
2.3 Activities
Outside Scope of this Agreement
For greater certainty, the
Parties confirm that the following activities, inter alia,
are not Services provided by SABINE to Customer and, therefore, such activities
are outside of the scope of this Agreement:
(a) harbor,
mooring and escort services, including those relating to tugs, service boats,
fire boats, and other escort vessels;
(b) the
construction, operation, ownership, maintenance, repair and removal of
facilities downstream of the Delivery Point; provided, however, that SABINE
shall construct, or permit the construction of, such downstream pipeline
interconnections at the Sabine Pass Facility as Customer may reasonably
request, subject to the following conditions:
(i) receipt
by SABINE of all Approvals for such construction and operation;
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(ii) such
construction and interconnection not impairing the operation of the Sabine Pass
Facility or causing SABINE to be in breach of its contractual obligations to
Other Customers; and
(iii) Customer’s advancing to
SABINE on a timely basis funds sufficient to fund the reasonable cost of
design, permitting, construction and operation of such interconnection
facilities as may actually be incurred by SABINE;
provided, however,
that notwithstanding anything herein to the contrary, Customer shall use
reasonable efforts to keep to a minimum the number of such downstream pipeline
interconnection requests it submits to SABINE;
(c) the
transportation of Gas beyond the Delivery Point;
(d) the
marketing of Gas and all activities related thereto (except as expressly
provided in Section 3.4); and
(e) the
removal, marketing and transportation of Liquids and all activities related
thereto. For the avoidance of doubt,
SABINE reserves the right to separate and/or extract Liquids from LNG upstream
of the Delivery Point, provided that such separation does not result in Gas
failing to meet the quality specifications at the Delivery Point required under
Section 10.3 and provided, further, that SABINE delivers at the Delivery Point
a quantity of Gas that is, less Retainage and Customer’s Inventory, the thermal
equivalent of the quantity of LNG received by SABINE for Customer’s account at
the Receipt Point.
ARTICLE
3
SALE AND PURCHASE OF SERVICES
3.1 Services
Quantity
(a) Purchase
and Sale of Services. During each
Contract Year, SABINE shall make available to Customer, and Customer shall
purchase and pay for in an amount equal to the Fee, the Services Quantity.
(b) Services
Quantity. The quantity of Services
(the “Services Quantity”) SABINE shall make
available to Customer during a Contract Year, and for which Customer shall
purchase and pay for pursuant to Section 3.1(a), shall consist of the
following:
(i) Unloading
of LNG. SABINE shall make the Sabine Pass Facility available during
Unloading Windows to allow berthing, unloading
and receipt of Customer’s LNG in a
quantity up to the Maximum LNG Reception Quantity; provided, however, that SABINE
shall use reasonable efforts to allow
berthing, unloading and receipt of Customer’s LNG in quantities in excess of
the Maximum LNG Reception Quantity, under the following circumstances only:
a. to
the extent that an additional quantity of LNG in excess of the Maximum LNG
Reception Quantity (such excess being the “Round
Up Quantity”) must be delivered in order to permit the
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delivery of the Maximum LNG Reception Quantity in whole cargo lots in
any Contract Year, the Maximum LNG Reception Quantity shall be increased by
such Round-Up Quantity, subject to Customer’s payment to SABINE of additional
compensation in the amount of $0.28 per MMBTU of such Round Up Quantity; and
b. subject
to Section 5.1(b)(i), in the event that any Cargo of LNG that was originally
scheduled, pursuant to the Customer LNG Receipt Schedule, to be unloaded in
December of a Contract Year is, as a result of changes to the Customer LNG
Receipt Schedule, unloaded in the first fourteen (14) days of the subsequent
Contract Year, such Cargo shall be deemed to have been received by SABINE in
the Contract Year in which such Cargo was originally scheduled to be unloaded
and shall not be applied against the Maximum LNG Receipt Quantity in such
subsequent Contract Year.
(ii) Storage
of Customers’ Inventory. SABINE
shall cause Customer’s Inventory, net of Retainage, to be held temporarily in
Storage until redelivered in accordance with Section 3.1(b)(iii) below; and
(iii) Redelivery of Gas at
Delivery Point. Subject to the
provisions of this Agreement, including Section 3.3(a), SABINE shall, on a
daily basis, make Gas from Customer’s Inventory available to Customer at the
Delivery Point at the rate nominated by Customer pursuant to Section 5.2(g),
which nominated rate shall be at the Gas Redelivery Rate; provided, however,
that SABINE shall, on a daily basis, make Excess Gas available to Customer and
Other Customers at the Delivery Point in the quantities determined and
allocated pursuant to Section 5.2.
(c) Expiration
of Services Quantity. Except as
provided in Section 3.1(b)(i)b above and Section 4.4(c), if Customer does not
use any portion of the Services Quantity made available to Customer pursuant to
the terms of this Agreement during the relevant period, Customer shall not
accrue any right to receive any Services in excess of the Services Quantity
with respect to any subsequent period.
3.2 Customer’s
Use of Services Quantity
Customer shall be
entitled to use the Services Quantity (and Services in respect of any Make-Up
Quantity) in whole or in part by itself, or may assign its rights and
obligations as provided in Article 17.
3.3 Gas
Redelivery
(a) No
Pre-Delivery Right. On any given day
during a Contract Year, Customer shall not be entitled to receive quantities of
Gas in excess of Customer’s Inventory.
(b) Gas
Redelivery Rate. For purposes of
this Agreement, the term “Gas Redelivery Rate”
means, subject to the last sentence of this Section 3.3(b), 1,050,000 MMBTU per
day or such lesser rate nominated by Customer; provided, however that at no
time shall Customer’s Inventory exceed six (6) billion Standard Cubic
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Feet. At all times when an LNG Vessel is unloading
on behalf of Customer, Customer shall be required to nominate Gas for
redelivery at the Delivery Point at a minimum rate equivalent to the rate
required to manage boil-off generated during unloading of such LNG.
3.4 Failure
to Take Delivery of Gas at Delivery Point
If on any day
Customer materially fails to take redelivery of any Gas at the Delivery Point
at the rate nominated by Customer and confirmed by SABINE pursuant to Article 5
and such failure is for reasons other than Force Majeure affecting a Downstream
Pipeline, then SABINE may, at its sole discretion, take title to same free and
clear of any Claims, and sell or
otherwise dispose of such Customer’s Inventory using good faith efforts to
obtain the best available prices and to minimize costs. Customer shall indemnify, defend and hold
harmless SABINE, its Affiliates, and their respective directors, officers,
members and employees, for the actual and reasonable costs incurred by SABINE
as a result of such sale or other disposition of same by SABINE. SABINE shall credit to Customer’s account the
net proceeds from the sale or other disposition of Customer’s Inventory to
which it takes title hereunder, minus transportation costs, third party
charges, and an administrative fee of U.S. $0.05 per MMBTU; provided, however,
that if the amount of the credit exceeds the amount due to SABINE under the
next monthly statement, then SABINE agrees to pay any such excess amount to
Customer within five (5) Business Days after delivery of such monthly
statement.
3.5 Services
Provided to Other Customers
(a) Identity
of Other Customers. Subject to any
obligations of confidentiality, SABINE shall inform Customer of the identity of
all Other Customers who have signed terminal use agreements with SABINE.
(b) Terminal
Use Agreements with Other Customers.
In its negotiation of terminal use agreements with Other Customers,
SABINE shall use reasonable efforts to include shipping and operational
provisions that are consistent in all material respects with the provisions in
Article 7, Article 8, Article 9, and Article 10 herein.
3.6 Sabine
Pass Services Manual
SABINE and
Customer shall discuss in good faith with the objective of developing a
services manual applicable to Customer that contains detailed implementation
procedures necessary for performance of this Agreement with regard to the
matters set forth in Exhibit B (but excluding the matters governed by the
Sabine Pass Marine Operations Manual).
In developing such a manual, SABINE shall provide Customer at least
eighteen (18) months prior to the Commercial Start Date, a draft of the
Services Manual (the “Preliminary Services
Manual”) which shall be consistent, to the maximum extent possible,
with International LNG Terminal Standards and, to the extent not inconsistent
with International LNG Terminal Standards, such good and prudent practices as
are generally followed in the LNG industry by Reasonable and Prudent Operators
of LNG receiving and regasification terminals.
If Customer desires to consult with SABINE regarding the contents of the
Preliminary Services Manual, Customer shall, no later than
12
sixty (60) days
from delivery of said manual by SABINE, request to meet with SABINE by
providing notice thereof to SABINE, and SABINE shall, no later than thirty (30)
days after receipt of such notice, meet with Customer to discuss said
manual. SABINE shall not unreasonably
propose terms and conditions for the Preliminary Services Manual, and Customer
shall not unreasonably withhold or delay its agreement to the Preliminary
Services Manual. If (a) Customer does
not submit the foregoing notice to SABINE on a timely basis or (b) Customer and
SABINE meet pursuant to such a notice and are able during such meeting to agree
upon revisions to the draft, then such draft, as so revised (and as amended
from time to time), shall constitute the “Sabine
Pass Services Manual”. If
Customer and SABINE meet pursuant to the foregoing notice and are unable during
such meeting to agree upon revisions to the Preliminary Services Manual two
hundred seventy (270) days prior to the Commercial Start Date, then the subject
matter with respect to which the Parties have been unable to agree shall be
subject to arbitration in accordance with Article 20. In the event SABINE intends to amend the
Sabine Pass Services Manual, then SABINE shall follow the procedure set forth
above in relation to the Preliminary Services Manual. SABINE shall deliver to Customer and all
Other Customers a copy of the Sabine Pass Services Manual and any amendments
thereto promptly after they have been finalized or amended, as the case may be. Customer shall comply, and shall cause its
Scheduling Representative to comply, with such Sabine Pass Services Manual in
all respects. The Parties will undertake
to develop a Sabine Pass Services Manual that is consistent with this
Agreement; however, in the event of a conflict between the terms of this
Agreement and the Sabine Pass Services Manual, the terms of this Agreement
shall control.
ARTICLE
4
COMPENSATION FOR SERVICES
From the
Commercial Start Date, provided that the Sabine Pass Facility has achieved
Commercial Operations Completion, and subject to the adjustment in Section 4.5,
Customer shall, as full compensation for the performance by SABINE of its
obligations under this Agreement, bear the Retainage and pay to SABINE the sum
of the components specified in paragraphs (a) and (b) below (such amount
collectively referred to as the “Fee”):
(a) Reservation
Fee. A monthly reservation fee (the “Reservation Fee”), payable in advance, consisting of the
following two (2) components:
(i) a
monthly component (the “Fixed Component”)
that, during the Initial Term, shall be equal to nine million one hundred
twenty one thousand three hundred fifty dollars ($9,121,350). The Fixed Component with respect to any
Extension Term shall be determined in accordance with Section 4.5; and
(ii) a
monthly component in relation to certain fixed operating costs of SABINE (the “FOC Component”) that shall be equal to one million three
hundred three thousand fifty dollars ($1,303,050), such amount to be adjusted
annually for changes in the United States Consumer Price Index
13
using the United
States Consumer Price Index (All Urban Consumers) as of the Commercial Start
Date as a base.
(b) Incremental
Costs. The following incremental
costs (the “Incremental Costs”) payable
monthly in arrears:
(i) compensation
for any Round-Up Quantity under Section 3.1(b)(i);
(ii) premiums
for business interruption insurance purchased pursuant to Section 13.1(f); and
(iii) excess berth fees, if
any, under Section 8.9(b).
4.2 Retainage
For purposes of
this Agreement “Retainage” means a
quantity of LNG equal to two percent (2%) of LNG received for Customer’s
account at the Receipt Point; provided, however, that Retainage shall be
increased temporarily for any additional losses in the event Customer fails to
nominate Gas at the minimum GRR during unloading of an LNG Vessel on behalf of
Customer or at such minimum GRR required to redeliver Customer’s share of
boil-off Gas.
4.3 Governmental
Authority Taxes and Costs
If, subsequent to
the Effective Date, any Governmental Authority:
(a) imposes
any Taxes on SABINE (excluding any Taxes on the capital revenue or income
derived by SABINE) with respect to the Services, or the Sabine Pass Facility (“SABINE Taxes”); or
(b) enacts
any safety or security related regulation which materially increases the costs
of SABINE in relation to the Services or the Sabine Pass Facility (“New Regulatory Costs”);
then Customer
shall bear such SABINE Taxes and New Regulatory Costs at the rate of forty percent
(40%); provided, however, that if the total LNG regasification facilities of
the Sabine Pass Facility are expanded to exceed 3,000,000 MMBTUs, then Customer’s
share shall instead be determined for the given Contract Year based on the
following ratio:
(x) Maximum
LNG Reception Quantity; divided by
(y) the
sum of the Maximum LNG Reception Quantity plus the aggregate quantity of LNG
contracted at the Sabine Pass Facility for the account of each Other Customer
in such Contract Year,
provided, however,
in no event shall Customer’s share of SABINE Taxes and New Regulatory Costs
under this Section 4.3 be in excess of forty percent (40%). For the purposes hereof, SABINE Taxes shall
include the inability to obtain, or the loss or expiration of, any abatement of
Taxes on the Services or the Sabine Pass Facility (despite SABINE having used
reasonable efforts to obtain such abatements).
Notwithstanding the foregoing, SABINE agrees to bear and pay one-half
(1/2) of ad valorem taxes otherwise
14
payable by
Customer in accordance with the above provisions, up to a maximum annual amount
of three million nine hundred nine thousand dollars ($3,909,000).
4.4 Effect
of Services Unavailability on Payments
(a) Force
Majeure. If some or all of the
Services are unavailable to Customer on any day during the Term as a result of
an event that constitutes Force Majeure and such event of Force Majeure exceeds
thirty (30) consecutive days, the Fee shall be adjusted until the date on which
SABINE declares the Force Majeure event at an end, as follows:
(i) If
the event of Force Majeure lasts for at least thirty (30) consecutive days but
no more than one hundred eighty (180) consecutive days, the Fee shall be
reduced by an amount equal to any business interruption insurance proceeds actually received by SABINE and payable in relation
to such event of Force Majeure; and
(ii) If
the event of Force Majeure lasts for at least one hundred eighty (180)
consecutive days, from such 180th day onward until the date on which
SABINE declares the Force Majeure event at an end, the Fee shall be reduced to
an amount sufficient to compensate SABINE fully for (a) all debt service of the
debt incurred by SABINE to finance the construction of the Sabine Pass Facility
that is secured by such facility (“Project
Debt”) and (b) the FOC Component.
Such amounts payable by Customer shall be reduced by an amount equal to
any business interruption insurance proceeds received by SABINE payable in
relation to such event of Force Majeure.
(b) Services Unavailability. If some or all of the Services Quantity is
unavailable to Customer on any day (or portion of a day) as a result of an
event that does not constitute Force Majeure or scheduled maintenance which
such scheduled maintenance not to exceed ten (10) days per year (such event
being a “Services Unavailability”), the Fee
shall not be reduced until the day after the date on which the cumulative
reduction in Customer’s Gas throughput at the Delivery Point exceeds 20,000,000
MMBTUs in a twelve (12) month period (the “Adjustment Date”). During any period of Services Unavailability
after the Adjustment Date, the Fee shall be reduced to an amount sufficient to
compensate SABINE fully for: (a) Project Debt; and (b) the FOC Component.
(c) Make-Up
Services.
(i) If
some or all of the Services Quantity is unavailable to Customer on any day as a
result of an event that constitutes Force Majeure, as a result of SABINE’s
breach of this Agreement or as a result of scheduled or unscheduled
maintenance, and, as a result, the quantity of Customer’s Gas that is delivered
by SABINE hereunder at the Delivery Point (or the quantity of Customer’s LNG
that is received at the Receipt Point, as the case may be) is less than the
quantity that Customer scheduled or would have scheduled but for such
unavailability of Services, then the portion of
15
the Services
Quantity not made available shall constitute the “Make-Up Quantity”. At any time there is an outstanding balance
of Make-Up Quantity, Customer shall have the right, within twenty four (24)
months of such unavailability of Services, to schedule any of the Services
above the Services Quantity to the extent of uncommitted available capacity of
the Sabine Pass Facility. Such Make-Up
Quantity may be scheduled from time to time, except during an event that
constitutes Force Majeure. Capacity
shall be deemed to be available and uncommitted for purposes of this Section
4.4(c) if such capacity is available after SABINE has fulfilled any contractual
obligations to Other Customers under firm agreements in existence at the time
of the circumstances giving rise to the Make-Up Quantity. All Services related to the Make-Up Quantity
shall be provided without additional compensation to SABINE, including the
unloading of LNG, the storage of Customer’s LNG, and the redelivery of Customer’s
Gas. Nothing herein is intended to allow
Customer’s Inventory to exceed 6.0 billion Standard Cubic Feet.
(ii) Customer’s
rights under this Section 4.4(c) are in addition to, and not in lieu of, any or
all of Customer’s other rights and remedies under this Agreement.
4.5 Adjustment
During Extension Terms
The Fee for the
Extension Terms shall be the lesser of: (a) the Fee for the Initial Term,
except that the Fixed Component shall be adjusted for inflation based on the
increase in the United States Consumer Price Index (All Urban Consumers) from a
basis set on January 1 following the Commercial Start Date to the beginning of
such Extension Term; or (b) the prevailing market rate for regasification
terminals in the United States offering similar services.
5.1 Customer
LNG Receipt Schedule
(a) SABINE
Deliverables. Not later than one
hundred eighty (180) days prior to the beginning of each Contract Year, SABINE
shall provide to the Scheduling Representative a non-binding written assessment
of the dates of any planned maintenance to or modifications of the Sabine Pass
Facility for such Contract Year pursuant to Section 16.1 and the expected
impact of such activities on the availability of Services. SABINE shall use best efforts to limit the
number of days of any planned maintenance to or modifications of the Sabine
Pass Facility.
(b) Notice
of Customer LNG Receipt Schedule.
Not later than one hundred twenty (120) days prior to the beginning of
each Contract Year, the Scheduling Representative shall notify SABINE of a
programming schedule for the unloading of up to the Maximum LNG Reception Quantity
over the course of the next Contract Year, which schedule shall meet the
following requirements in all
16
respects (the
schedule meeting such requirements herein referred to as the “Customer LNG Receipt Schedule”):
(i) it
shall result in an LNG delivery pattern whereby deliveries in any given month
do not materially exceed one twelfth (1/12) of the Maximum LNG Reception
Quantity, provided however Customer shall not have the right to utilize both
unloading berths simultaneously;
(ii) it
shall take into consideration the planned maintenance and modification dates
for such Contract Year furnished to Customer by SABINE as set forth in
Section 5.1(a);
(iii) it shall specify for
each Unloading Window for a Cargo, the name of the LNG Vessel expected to
deliver LNG to the Sabine Pass Facility and the corresponding Expected Receipt
Quantity to be delivered. The Customer
Proposed LNG Receipt Schedule shall be based only on the usage of LNG Vessels
which Customer in good faith expects will actually deliver LNG to the Sabine
Pass Facility in relation to a particular Unloading Window for a Cargo; and
(iv) it
shall specify for each Unloading Window for a Cargo, the anticipated quality
(expressed in terms of Gross Heating Value) of the LNG to be delivered at the
Receipt Point.
SABINE
acknowledges that, although Other Customers may submit similar notices to
SABINE regarding the programming schedule for the unloading of such Other
Customer’s LNG over the course of the next Contract Year (the “Other Customer LNG Receipt Schedules”), the Customer LNG
Receipt Schedule shall have priority over all such scheduling notices of Other
Customers and shall be binding on SABINE.
(c) SABINE
Notice of Annual Delivery Program.
SABINE shall take into consideration the Customer LNG Receipt Schedule
and the notices that it receives from Other Customers regarding the matters
provided for in Section 5.1(b) and, not later than sixty (60) days prior to the
beginning of each Contract Year, SABINE shall issue to Customer via the Sabine
Pass Website (or via an alternative electronic means of transmitting written
communications if the Sabine Pass Website is unavailable) a schedule (the “Annual Delivery Program”) for such Contract Year that shall
set forth (i) the Scheduled Unloading Windows allocated by SABINE to Customer;
and (ii) all Unloading Windows not presently allocated to Customer or Other
Customers; provided, however, that SABINE shall not:
(i) allocate
any Unloading Window to any Other Customer unless such Other Customer has
agreed to pay compensation, on a commercial basis, to SABINE for LNG
terminalling services in relation to such Unloading Window; or
(ii) allocate
to any Other Customer a number of Unloading Windows greater than the number
reasonably expected for such Other Customer to unload
17
its maximum LNG
reception quantity (or similar maximum annual contractual entitlement to unload
LNG at the Sabine Pass Facility).
(d) Customer
Changes to Customer LNG Receipt Schedule.
(i) Subject
to the terms of this Section 5.1(d), at any time following the issuance of the
Annual Delivery Program, the Scheduling Representative may submit to SABINE a
written request to change a Scheduled Unloading Window to any Unloading Window
that is not presently allocated to Customer or Other Customers under the Annual
Delivery Program (such request to change, a “Customer
Open Window Request”). Customer understands that (x) Other Customers
shall also have the right to submit to SABINE similar scheduling requests (each
an “Other Customer Open Window Request”),
(y) SABINE shall have no obligation to consult with the Scheduling
Representative, Customer, and Other Customers regarding any Customer Open
Window Request or Other Customer Open Window Request (collectively, “Open Window Request”) and (z) SABINE shall accept any Open
Window Request on a first-come, first-served basis as soon as possible but not
later than 5:00 p.m. Central Time of the Business Day following the date of
receipt by SABINE of the applicable Open Window Request. Provided that no Other Customer Open Window
Request that pertains to the same window preceded the Customer Open Window
Request, SABINE shall exercise reasonable efforts to grant the Customer Open
Window Request. Upon accepting an Open
Window Request, SABINE shall notify Customer and Other Customers thereof by
issuing a revised Annual Delivery Program via the Sabine Pass Website (or via
an alternative electronic means of transmitting written communications if the
Sabine Pass Website is unavailable).
Notwithstanding anything herein to the contrary, Customer shall use its
reasonable efforts to keep to a minimum the number of Customer Open Window
Requests it submits to SABINE.
(ii) Subject
to the terms of this Section 5.1(d), at any time following the issuance of the
Annual Delivery Program, the Scheduling Representative may submit to SABINE a
written request to change a Scheduled Unloading Window to a forty-eight (48)
hour period that is unavailable to Customer under the Annual Delivery Program
(such change, a “Change Request”). Customer acknowledges that any Change Request
will (x) likely conflict with the Scheduled Unloading Windows allocated to
Other Customers in the Other Customer LNG Receipt Schedules and (y) be
conditional upon the agreement of the Other Customers. Accordingly, SABINE shall use reasonable
efforts to obtain the consent of any Other Customer that would be affected by
Customer’s proposed revised schedule, and if such consent is not obtained,
SABINE shall have the right to accept or deny, in its sole discretion, any
Change Request and shall notify Customer thereof via the Sabine Pass Website
(or via an alternative electronic means of transmitting written communications
if the Sabine Pass Website is unavailable) within three (3) Business Days of
its receipt
18
of a Change
Request. Notwithstanding anything herein
to the contrary, Customer shall use its reasonable efforts to keep to a minimum
the number of Change Requests it submits to SABINE, and SABINE shall use its
reasonable efforts to accommodate Customer’s Change Requests.
(e) Modifications
to Customer LNG Receipt Schedule Due to Force Majeure. If, for any Scheduled Unloading Window,
SABINE is unable, due to Force Majeure, to berth and unload an LNG Vessel, each
affected Scheduled Unloading Window allocated to Customer in the Customer LNG
Receipt Schedule during such period of Force Majeure shall be cancelled.
(f) Adjustment
to Schedules. Upon written request
by the Customer, SABINE shall use reasonable efforts to modify the time periods
expressly set forth in Sections 5.1(a), 5.1(b), 5.1(c), and 5.1(d) to allow
Customer to interface these periods with corresponding time periods for
scheduling agreed upon by Customer and its LNG Suppliers. For purposes of this Section 5.1(f), SABINE
shall be deemed to have used reasonable efforts if SABINE rejects Customer’s
request because it determines, acting as a Reasonable and Prudent Operator,
that any such modification would infringe on the rights of Other Customers.
5.2 Gas
Delivery Procedure
(a) Preliminary
Nomination Schedule. Not later than
the fifteenth (15th) day of each month, commencing the month
immediately prior to the Commercial Start Date, Scheduling Representative shall
provide to SABINE a nomination schedule (the “Preliminary
Nomination Schedule”) that sets forth Customer’s estimate of the Gas
Redelivery Rate for each day of the ensuing month, such estimate to be
determined based on the then existing Annual Delivery Program.
(b) Daily
Records. Commencing on the
Commercial Start Date, SABINE shall, on each Day by 7:00 a.m. Central Time post
on the Sabine Pass Website for access by Customer certain daily records (the “Daily Records”), including the following:
(i) a
projection of Customer’s Inventory as of 9:00 a.m. Central Time on the day of
the posting of the Daily Records;
(ii) the
expected total capacity of the Sabine Pass Facility to vaporize and deliver
gas, as of 9:00 a.m. Central Time on the day following the posting of the Daily
Records, determined by SABINE as a Reasonable and Prudent Operator (“Total Vaporization Capacity”), such capacity to be exclusive
of one vaporizer unit which shall be held in reserve by SABINE solely in order
to replace a vaporizer unit that is unavailable for service; and
(iii) the sum of all Other
Customers’ maximum Gas redelivery rate (or similar maximum daily contractual
entitlement to receive Gas at the Delivery Point other than Excess Gas).
19
(c) Preliminary
Gas Nomination.
(i) Commencing
on the day before the Commercial Start Date, the Scheduling Representative
shall, by 7:30 a.m. each Day, notify to SABINE a preliminary nomination (the “Preliminary Nomination Notice”) of the quantities of Gas
(including any desired share of Excess Gas) that Customer desires to be
delivered to it at the Delivery Point commencing at 9:00 a.m. on the subsequent
day.
(ii) The
quantities nominated by the Scheduling Representative in a Preliminary
Nomination Notice shall in no event be less than the Gas Redelivery Rate.
(iii) Nominations of Excess
Gas may only be requested if the Scheduling Representative has stated, in the
Preliminary Nomination Notice, a GRR of 1,050,000 MMBTUs per day.
(iv) In
the event SABINE does not receive a Preliminary Nomination Notice on a timely
basis, the Scheduling Representative shall be deemed to have nominated the Gas
Redelivery Rate as per Section 3.3(b).
(d) Other
Customer Preliminary Nomination Notices.
Customer acknowledges that Other Customers shall provide to SABINE
notices similar to the Preliminary Nomination Notice described in Section
5.2(c).
(e) Spare
Vaporization. Long-term contracts
(in excess of three (3) months) for sales of Services by SABINE shall in no
event burden one (1) LNG vaporizer (excluding the vaporizer held in reserve in
determining Total Vaporization Capacity) under such contracts. By way of example (but without in any way
limiting SABINE’s right to expand or modify the Sabine Pass Facility), if the total
LNG regasification facilities have a daily capacity (excluding the spare
vaporizer held in reserve) of 2,730,000 MMBTUs, then the total long term sales
of Gas vaporization Services to Customer and Other Customers shall not exceed
2,541,000 MMBTUs.
(f) Preliminary
Gas Scheduling. SABINE shall, by
8:00 a.m. Central Time, provisionally allocate the Total Vaporization Capacity
as follows:
(i) SABINE
shall allocate to Customer and all Other Customers an amount of vaporization
capacity equal to the lesser of each such customer’s nomination or its maximum
Gas redelivery rate (or similar maximum daily contractual entitlement to
receive Gas at the Delivery Point);
(ii) SABINE
shall allocate the excess of the Total Vaporization Capacity (“Excess Gas”) over the sum of the nominations confirmed by
SABINE pursuant to Section 5.2(f)(i) above as follows:
a. First,
to each Nominee in an amount not to exceed the lesser of (a) the quantity of
Excess Gas nominated by such Nominee, and (b) the product of (x) the quantity
of Excess Gas and (y) a fraction, the numerator of which is such Nominee’s Gas
Redelivery Rate and
20
the denominator of which is the aggregate Gas Redelivery Rates of all
Nominees;
b. Second,
if any excess quantity of Excess Gas remains available, then to each Nominee
with unfulfilled nominations for such Excess Gas in an amount not to exceed the
lesser of (a) the quantity of Excess Gas nominated by such Nominee and not
received under the prior allocation, and (b) the product of (x) the excess
quantity of Excess Gas remaining available and (y) a fraction, the numerator of
which is the Nominee’s Gas Redelivery Rate, and the denominator of which is the
aggregate Gas Redelivery Rates of all Nominees with unfulfilled nominations for
such Excess Gas; and
c. Third,
if any excess quantity of Excess Gas remains available, then by repeating the
allocation in Section 5.2(f)(ii)b above until the entire quantity of Excess Gas
has been allocated or all nominations for such Excess Gas have been filled.
“Nominees” for the purpose of this
Section 5.2(f)(ii)b shall be Customer and those Other Customers which SABINE
has elected, in its sole right and opinion, to be eligible to be entitled to
such Excess Gas capacity.
(g) Nominations
and Scheduling.
(i) Customer’s
nomination with regard to the timely nomination cycle of the quantities of Gas
(including Excess Gas) that Customer desires to be delivered to it at the
Delivery Point shall be equal to or less than the amount allocated to Customer
pursuant to Section 5.2(f).
(ii) SABINE
shall allocate the amount of Total Vaporization Capacity actually available as
provided in Section 5.2(f).
(iii) The process for final
nominations of Gas deliveries hereunder shall be set forth in the Sabine Pass
Services Manual and shall be reasonably consistent with the North American
Energy Standards Board Wholesale Gas Quadrant (“NAESB WGQ”) standards and models relating to nominations,
which as of the date hereof are contained in NAESB WGQ Version 1.7, Standards
1.3.1 through 1.3.79, as such may be amended from time to time by NAESB WGB or
any successor organization; provided that the NAESB WGQ standards and models
relating to nominations set forth in the Sabine Pass Services Manual shall be
adjusted by the Parties consistent with good and prudent practices as are
generally followed in the LNG industry by Reasonable and Prudent Operators of
LNG receiving and regasification terminals.
(iv) Upon
the receipt of a nomination for Gas delivery during any nomination cycle after
the preliminary nomination cycle, SABINE shall allocate the Total Vaporization
Capacity in the same manner as provided in Section 5.2(f) above, except that
any confirmed nomination of Excess Gas shall not be interrupted unless such
interruption is necessary to deliver any Other Customer’s daily contractual
entitlement to receive Gas at the
21
Delivery Point.
SABINE shall advise Customer of the quantities of Excess Gas that may be
subject to being interrupted.
SABINE shall act
as a Reasonable and Prudent Operator in performing the scheduling activities
required by this Article 5.
5.4 Scheduling
Representative
By no later than
one month prior to the Commercial Start Date, Customer shall appoint an
individual to act as Scheduling Representative for the purposes of this Article
5; provided, however, that Customer shall have the right to change the identity
of the Scheduling Representative at any time by notice to SABINE. Unless otherwise stated herein, Customer
hereby authorizes the Scheduling Representative to do and perform any and all
acts for and on behalf of Customer with regard to scheduling matters provided
for in this Article 5.
Subject to the
provisions of this Agreement, the term of this Agreement (the “Term”) shall consist of the Initial Term and, if applicable,
any Extension Term. The initial term of
this Agreement (the “Initial Term”)
shall commence on the Effective Date and shall continue thereafter until the
twentieth (20th) anniversary of the Commercial Start Date. Customer shall have the option of up to six
(6) additional ten (10) year extension terms (each an “Extension
Term”), the first of which shall commence at the expiration of the
Initial Term. Customer must (a) notify
SABINE of its good faith desire to elect the applicable Extension Term at least
five (5) years prior to the expiration of the then current Term and (b) send
SABINE a binding confirmation (“Binding Confirmation”)
that the Term is extended by an Extension Term no later than four (4) years
prior to the expiration of the then current Term. Upon Customer’s delivery of a
Binding Confirmation to SABINE, this Agreement will then be automatically
extended for the applicable Extension Term; provided, however, that if, with
respect to the fifth or sixth Extension Terms the Parties are unable to agree
upon the applicable Reservation Fee by a date that is three (3) years prior to
the expiration of the then current Term, the Binding Confirmation shall not be
effective.
In accordance with the procedure set forth in this
Section 6.2, SABINE shall notify Customer of the date on which Services for
Customer will commence at the Sabine Pass Facility (the final date so notified
being the “Commercial Start Date”). The Commercial Start Date shall be a date
within the period that (a) commences on the third anniversary of the date of
issuance by FERC of the order granting authorization under Section 3(a) of the
Natural Gas Act for SABINE to carry out the construction of the Sabine Pass
Facility (such approval date being the “FERC Approval Date”);
and (b)
22
ends eighteen (18) months after such anniversary date
(such period being the “First Window Period”). The First Window Period shall be narrowed
pursuant to the following provisions:
(a) No
later than sixty (60) days following the FERC Approval Date, SABINE shall
notify Customer of a two hundred seventy (270) day window (“Second Window Period”) falling within the First Window
Period for the Commercial Start Date; provided that if SABINE fails to give
timely notice of same, the Second Window Period shall be the latest possible
two hundred seventieth (270th) day window period within the First
Window Period;
(b) No
later than ninety (90) days following the FERC Approval Date, Customer may
notify SABINE of a date, which shall be the Commercial Start Date, that shall
be no earlier than the last day of the Second Window Period and no later than
the later of (x) the last day of the Second Window Period and (y) April 1,
2009; and
(c) In
the event Customer has not exercised its right, pursuant to Section 6.2(b)
above, to specify the Commercial Start Date, then:
(i) No
later than ninety (90) days in advance of the first day of the Second Window
Period, SABINE shall notify Customer of a one hundred eighty (180) day window (“Third Window Period”) falling within the Second Window
Period for the Commercial Start Date; provided that if SABINE fails to give
timely notice of same, the Third Window Period shall be the latest possible one hundred eighty (180) day window period within
the Second Window Period;
(ii) No
later than sixty (60) days in advance of the first day of the Third Window
Period, SABINE shall notify Customer of a ninety (90) day window (“Fourth Window Period”) falling within the Third Window
Period for the Commercial Start Date; provided that if SABINE fails to give
timely notice of same, the Fourth Window Period shall be latest possible ninety
(90) day window period within the Third Window Period;
(iii) No later than thirty
(30) days in advance of the first day of the Fourth Window Period, SABINE shall
notify Customer of a sixty (60) day window (“Fifth Window
Period”) falling within the Fourth Window Period for the Commercial
Start Date; provided that if SABINE fails to give timely notice of same, the
Fifth Window Period shall be the latest possible sixty (60) day period within
the Fourth Window Period;
(iv) No
later than fifteen (15) days in advance of the first day of the Fifth Window
Period, SABINE shall notify Customer of a thirty (30) day window (“Sixth Window Period”) falling within the Fifth Window Period
for the Commercial Start Date; provided that if SABINE fails to give timely
notice of same, the Sixth Window Period shall be the latest possible thirty
(30) day period within the Fifth Window Period;
(v) No
later than seven (7) days in advance of the first day of the Sixth Window
Period, SABINE shall notify Customer of a fifteen (15) day window (“Final Window Period”) falling within the Sixth Window
23
Period for the
Commercial Start Date; provided that if SABINE fails to give timely notice of
same, the Final Window Period shall be the latest possible fifteen (15) day
period within the Sixth Window Period; and
(vi) No
later than three (3) days in advance of the first day of the Final Window
Period, SABINE shall notify Customer of the Commercial Start Date falling
within the Final Window Period; provided that if SABINE fails to give timely
notice of same, the Commercial Start Date shall be the latest possible day in
the Final Window Period.
The Commercial Start Date
shall be the date so notified, regardless of whether any unloading of Customer’s
LNG at the Sabine Pass Facility actually occurs on such date.
6.3 Delay
Caused by Force Majeure
The Commercial Start Date shall be postponed
to the extent that an event of Force Majeure has the effect of delaying
Commercial Operations Completion to a date that would otherwise be after the
Commercial Start Date.
6.4 Construction
Progress Reports
Beginning on the
Effective Date and every month thereafter until the Commercial Start Date,
SABINE shall furnish to Customer an interim progress report (collectively the “Progress Reports”) specifying the progress since the last
report and the expected progress towards completing the construction, testing
and operational start-up of the Sabine Pass Facility. Each Progress Report shall include the status
and progress of all construction, an update of the construction schedule, and
any other information which Customer has reasonably requested in writing in
advance to enable Customer to evaluate the status and progress of construction,
testing and operational start-up of the Sabine Pass Facility.
ARTICLE
7
SABINE PASS FACILITY
7.1 Sabine
Pass Facility
(a) Standard
of Operation. By the Commercial
Start Date, SABINE shall cause the Sabine Pass Facility to be constructed and
commissioned so as to achieve Commercial Operations Completion. On and after the Commercial Start Date,
SABINE shall at all times provide, maintain and operate (or cause to be
provided, maintained and operated) the Sabine Pass Facility in accordance with
the following: (i) International LNG Terminal Standards; and (ii) to the extent
not inconsistent with International LNG Terminal Standards, such good and
prudent practices as are generally followed in the LNG industry by Reasonable
and Prudent Operators of LNG receiving and regasification terminals.
(b) Facilities
to be Provided. Subject to Section
7.1(a), the Sabine Pass Facility shall include the following:
(i) appropriate
systems for communications with LNG Vessels;
24
(ii) two
unloading berths, each capable of berthing an LNG Vessel having a displacement
of no more than 166,600 tonnes, an overall length of no more than 1,140 feet, a
beam of no more than 175 feet, and a draft of no more than 40 feet, which LNG
Vessels can safely reach, fully laden, and safely depart, and at which LNG
Vessels can lie safely berthed and unload safely afloat.
(iii) lighting sufficient to
permit unloading operations by day or by night, to the extent permitted by
Governmental Authorities and Pilots (it being acknowledged, however, that
SABINE shall in no event be obligated to allow nighttime berthing operations at
the Sabine Pass Facility if SABINE determines, acting as a Reasonable and
Prudent Operator, that such operations during nighttime hours could pose safety
risks to the Sabine Pass Facility, an LNG Vessel, or a third party);
(iv) unloading
facilities capable of receiving LNG at a rate of up to an average of 12,000
Cubic Meters per hour when the pressure at the Receipt Point is at least 5.6
bars (gauge), with three (3) unloading arms each having a reasonable operating
envelope to allow for ship movement and manifold strainers of sixty (60) mesh;
(v) a
vapor return line system of sufficient capacity to transfer to an LNG Vessel
quantities of Gas necessary for the safe unloading of LNG at required rates,
pressures and temperatures;
(vi) facilities
allowing ingress and egress between the Sabine Pass Facility and the LNG Vessel
by (x) representatives of Governmental Authorities for purposes of unloading
operations; and (y) an independent surveyor for purposes of conducting tests
and measurements of LNG on board the LNG Vessel in accordance with Annex I;
(vii) LNG storage facilities with a total gross
capacity of at least four hundred eighty thousand (480,000) Cubic Meters of
LNG; and
(viii) LNG regasification facilities
with a total daily capacity of up to 2,730,000
MMBTUs.
(c) Expansion. SABINE shall have the right, but not the
obligation, to from time to time expand the Sabine Pass Facility or to
construct or acquire other facilities in order to perform the Services.
(d) Facilities
Not Provided. For the avoidance of
doubt, services and facilities not provided at the Sabine Pass Facility include
the following: (i) facilities and loading lines for liquid or gaseous nitrogen
to service an LNG Vessel; (ii) facilities for providing bunkers; and (iii)
facilities for the handling and delivery to the LNG Vessel of ship’s stores,
provisions and spare parts.
7.2 Compatibility
of Sabine Pass Facility with LNG Vessels
(a) Sabine
Pass Facility General Specifications.
SABINE has provided to Customer the general specifications for the LNG
berthing and unloading facilities of the Sabine Pass Facility and in this regard
SABINE acknowledges that such
25
specifications
have taken into consideration the necessary ship-shore compatibility in
relation to typical LNG vessels existing as of the Effective Date.
(b) Compatibility
Generally. Customer shall ensure, at
no cost to SABINE, that each of the LNG Vessels is fully compatible with the
Sabine Pass Facility as set forth in such general specifications. Should an LNG Vessel fail materially either
to be compatible with the Sabine Pass Facility, or to be in compliance with the
provisions of Article 8, Customer shall not employ such LNG Vessel until it has
been modified to be so compatible or to so comply.
(c) Modifications
to Terminal Generally. The Parties
agree that, after the date hereof, SABINE shall be entitled to modify the
Sabine Pass Facility in any manner whatsoever, provided that (i) such
modifications do not render the Sabine Pass Facility incompatible with an LNG
Vessel that was previously compatible with the Sabine Pass Facility; (ii) such
modifications, once finalized, do not reduce the Services Quantity; and (iii)
such modifications do not otherwise conflict with SABINE’s obligations under
this Agreement. Notwithstanding the
foregoing, SABINE may modify the Sabine Pass Facility in a manner that would
render it incompatible with an LNG Vessel, provided that such modification is
necessary for SABINE to comply with its obligations under Section 7.1(a).
(d) Modifications
to Terminal Resulting From Changes in International LNG Vessel Standards. In the event of a change in International LNG
Vessel Standards which requires an LNG Vessel to be modified but such vessel
modification would render such LNG Vessel incompatible with the Sabine Pass
Facility, then SABINE shall use its best efforts to modify the Sabine Pass
Facility to render it compatible with such modified LNG Vessel provided that:
(i) such modifications do not render the Sabine Pass Facility incompatible with
another LNG vessel that was previously compatible with the Sabine Pass
Facility; (ii) such modifications, once finalized, do not reduce the Services
Quantity; and (iii) such modifications do not otherwise conflict with SABINE’s
obligations under this Agreement.
7.3 Customer
Inspection Rights
Upon obtaining
SABINE’s prior written consent, which consent shall not be unreasonably
withheld or delayed, a reasonable number of Customer’s designated
representatives (including LNG Suppliers) may from time to time (including
during the period of initial construction) inspect the operation of the Sabine
Pass Facility so long as such inspection occurs from 8:00 a.m. Central Time to
5:00 p.m. Central Time on a Business Day.
Any such inspection shall be at Customer’s sole risk and expense. Customer (and its designees) shall carry out
any such inspection without any interference with or hindrance to the safe and
efficient operation of the Sabine Pass Facility. Customer’s right to inspect and examine the
Sabine Pass Facility shall be limited to verifying SABINE’s compliance with
SABINE’s obligations under this Agreement and shall not entitle Customer to
make direct requests to SABINE regarding any aspect of the Sabine Pass
Facility. No inspection (or lack
thereof) of the Sabine Pass Facility by Customer hereunder, or any requests or
observations made to SABINE or its representatives by or on behalf of Customer
in connection with any such inspection, shall (a) modify or amend SABINE’s
obligations, representations, warranties and covenants
26
under this
Agreement or under any agreement or instrument contemplated by this Agreement;
or (b) constitute an acceptance or waiver by Customer of SABINE’s
obligations under this Agreement.
ARTICLE
8
TRANSPORTATION AND UNLOADING
8.1 LNG
Vessels
(a) Customer
to Cause LNG Vessels to Comply.
Customer shall be responsible for the transportation of LNG from the
Loading Port to the Receipt Point. In
this regard, Customer shall cause each LNG Vessel to comply with the
requirements of this Article 8 in all respects.
(b) Approvals
and Documentation. Each LNG Vessel
shall comply with the regulations of, and obtain all Approvals required by,
Governmental Authorities to enable such LNG Vessel to enter, leave and carry
out all required operations at the Sabine Pass Facility. Each LNG Vessel shall at all times have on
board valid documentation evidencing all such Approvals. Each LNG Vessel shall comply fully with the
International Safety Management Code for the Safe Operation of Ships and Pollution
Prevention effective July 1, 1998, and at all times be in possession of a valid
safety management certificate.
(c) Fireboats,
Escort Vessels and Port Charges.
Customer shall arrange for, or cause the appropriate Person to arrange
for, such number and types of fireboats and escort vessels as are required by
Governmental Authorities to attend the LNG Vessel so as to permit safe and
efficient movement of the LNG Vessel within the maritime safety areas located
in the approaches to and from the Sabine Pass Facility. Customer shall pay all Port Charges directly
to the appropriate Person.
(d) Requirements. Each
LNG Vessel must satisfy the following requirements:
(i) Specifications. Except as otherwise mutually agreed in
writing by the Parties, each LNG Vessel shall be compatible with the
specifications of the Sabine Pass Facility identified in Section 7.1(b). Notwithstanding the foregoing, in the event
an LNG Vessel is compatible with the specifications set forth in Section 7.1(b)
or otherwise acceptable to SABINE, but a Governmental Authority or Pilot
prohibits or otherwise hinders the utilization of such LNG Vessel, Customer’s
obligations under this Agreement shall not be excused or suspended by reason of
Customer’s inability (pursuant to the foregoing) to use such a vessel as an LNG
Vessel.
(ii) LNG
Vessel Capacity. Except as otherwise
agreed in writing by SABINE, each LNG Vessel shall have an LNG cargo
containment capacity of no less than eighty-seven thousand six hundred (87,600)
Cubic Meters, determined at the time of loading of LNG.
(iii) Condition of the LNG
Vessel. Each LNG Vessel shall be (x)
fitted in every way for the safe loading, unloading, handling and carrying of
LNG
27
in bulk at atmospheric
pressure; and (y) tight, staunch, strong and otherwise seaworthy with cargo
handling and storage systems (including instrumentation) necessary for the safe
loading, unloading, handling, carrying and measuring of LNG in good order and
condition. The location of the unloading
manifold shall allow a safe margin for movement of the arms within the
operating envelope.
(iv) Classification
Society. Each LNG Vessel shall at
all times be maintained in class with any of the following: American Bureau of
Shipping, Lloyds Register for Shipping, Bureau Veritas, Germanischer Lloyd,
NKK, Det Norske Veritas or any other classification society that is mutually
agreeable to the Parties.
(v) Construction. Each LNG Vessel shall have been constructed
to all applicable International LNG Vessel Standards (including the
International Code For the Construction and Equipment of Ships Carrying
Liquefied Gases in Bulk).
(vi) Operation
and Maintenance. Each LNG Vessel
shall comply with, and shall be fully equipped, supplied and maintained to
comply with, all applicable International LNG Vessel Standards. Unless approved by SABINE in writing, which
approval shall not be unreasonably withheld or delayed, an LNG Vessel shall be
prohibited from engaging in any maintenance, repair or in-water surveys while
berthed at the Sabine Pass Facility.
Each LNG Vessel shall comply fully with the guidelines of any
Governmental Authority of the United States, including the National
Oceanographic and Atmospheric Administration (NOAA), in relation to actions to
avoid strikes in U.S. waters with protected sea turtles and cetaceans (e.g.,
whales and other marine mammals) and with regard to the reporting of any strike
by the LNG Vessel which causes injury to such protected species.
(vii) Crew. The officers and crew of each LNG Vessel shall
have the ability, experience, licenses and training commensurate with the
performance of their duties in accordance with internationally accepted
standards as adopted on first-class LNG vessels and as required by Governmental
Authorities and any labor organization having jurisdiction over the LNG Vessel
or her crew. Without in any way limiting
the foregoing, the Master, chief engineer, all cargo engineers, and all deck officers
shall be fluent in written and oral English and shall maintain all records and
provide all reports with respect to the LNG Vessel in English.
(viii) Communications. Each
LNG Vessel shall have communication equipment complying with applicable
regulations of Governmental Authorities and permitting such LNG Vessel to be in
constant communication with the Sabine Pass Facility and with other vessels in
the area (including fireboats, escort vessels and other vessels employed in
port operations).
28
(ix) Pumping
Time. Provided that the Sabine Pass
Facility supplies a suitable vapor return line meeting the requirements of
Section 7.1(b)(v), then:
a. an
LNG Vessel with an LNG cargo containment capacity less than or equal to one
hundred forty thousand (140,000) Cubic Meters shall be capable of unloading LNG
in a maximum of fifteen (15) hours; and
b. an
LNG Vessel with an LNG cargo containment capacity greater than one hundred
forty thousand (140,000) Cubic Meters shall be capable of unloading LNG in the
number of hours derived after applying the following formula:
15 + x = maximum
LNG unloading time (in hours)
where:
x = y/12,000
Cubic Meters; and
y = the LNG cargo
containment capacity of the LNG Vessel in excess of 140,000 Cubic Meters.
Time for connecting, cooling, stripping and disconnecting, and cooling
of liquid arms, shall not be included in the computation of pumping time.
8.2 Sabine
Pass Marine Operations Manual
SABINE and
Customer shall discuss in good faith with the objective of developing a marine
operations manual that governs activities at the Sabine Pass Facility and
applies to all LNG Vessels (but excluding the matters governed by the Sabine
Pass Services Manual). In developing
such a manual, SABINE shall provide Customer at least eighteen (18) months in
advance of the Commercial Start Date with a preliminary draft of the same (the “Preliminary Marine Operations Manual”)
which shall be consistent, to the maximum extent possible, with International
LNG Vessel Standards. If Customer
desires to consult with SABINE regarding the contents of the Preliminary Marine
Operations Manual, Customer shall, no later than sixty (60) days from delivery
of said manual by SABINE, request to meet with SABINE by providing notice
thereof to SABINE, and SABINE shall, no later than thirty (30) days after
receipt of such notice, meet with Customer to discuss said manual. SABINE shall not unreasonably propose
provisions for the Preliminary Marine Operations Manual, and Customer shall not
unreasonably withhold or delay its consent to the Preliminary Marine Operations
Manual. If (a) Customer does not submit
the foregoing notice to SABINE on a timely basis or (b) Customer and SABINE
meet pursuant to such a notice and are able during such meeting to agree upon
revisions to the draft, then such draft, as so revised (and as amended from
time to time), shall constitute the “Sabine
Pass Marine Operations Manual”.
If Customer and SABINE meet pursuant to the foregoing notice and are
unable during such meeting to agree upon revisions to the Preliminary Marine
Operations Manual, then the subject matter with respect to which the Parties
have been unable to agree shall be subject to arbitration in accordance with
Article 20. The Parties shall endeavor
to have the Sabine Pass Marine Operations Manual in effect at least nine (9)
months prior to the Commercial Start Date.
In the event SABINE intends to amend the Sabine Pass Marine
29
Operations Manual,
then SABINE shall follow the procedure set forth above in relation to the
Preliminary Marine Operations Manual.
SABINE shall deliver to Customer, and all Other Customers, a copy of the
Sabine Pass Marine Operations Manual and any amendments thereto promptly after
they have been finalized or amended, as the case may be. Customer shall comply with such Sabine Pass
Marine Operations Manual in all respects.
The Parties will undertake to develop a Sabine Pass Marine Operations
Manual that is consistent with this Agreement; however, in the event of a
conflict between the terms of this Agreement and the Sabine Pass Marine
Operations Manual, the terms of this Agreement shall control.
8.3 LNG
Vessel Inspections; Right to Reject LNG Vessel
(a) Inspections. During the Term, on prior reasonable notice
to Customer, SABINE, acting as a Reasonable and Prudent Operator, may at its
sole risk send its representatives (including an
independent internationally recognized maritime consultant) to inspect during
normal working hours any LNG Vessel as SABINE may consider necessary to
ascertain whether the LNG Vessel complies with the provisions of this
Agreement. SABINE shall bear the costs
and expenses in connection with any inspection conducted hereunder. Any such inspection may include, as far as is
practicable having regard to the LNG Vessel’s operational schedule, examination
of the LNG Vessel’s hull, cargo and ballast tanks, machinery, boilers,
auxiliaries and equipment; examination of the LNG Vessel’s deck and engine
scrap/rough and fair copy/official log books; review of records of surveys by
the LNG Vessel’s classification society and relevant Governmental Authorities;
and review of the LNG Vessel’s operating procedures and performance of surveys,
both in port and at sea. Any inspection
carried out pursuant to this Section 8.3(a): (i) shall not interfere with, or
hinder, any LNG Vessel’s safe and efficient construction or operation; and (ii)
shall not entitle SABINE or any of its representatives to make any request or
recommendation directly to Transporter except through Customer. No inspection (or lack thereof) of an LNG
Vessel hereunder shall (i) modify or amend Customer’s obligations,
representations, warranties and covenants under this Agreement or under any
agreement or instrument contemplated by this Agreement; or (ii) constitute
an acceptance or waiver by SABINE of Customer’s obligations under this
Agreement.
(b) Right
to Reject LNG Vessel. SABINE shall have the right to reject any
LNG Vessel that Customer intends to use to deliver LNG to the Sabine Pass
Facility if such LNG Vessel does not comply materially with the provisions of
this Agreement, provided that:
(i) neither
the exercise nor the non-exercise of such right shall reduce the responsibility
of Customer to SABINE in respect of such vessel and her operation, nor increase
SABINE’s responsibilities to Customer or third parties for the same; and
30
(ii) Customer’s
obligations under this Agreement shall not be excused or suspended by reason of
Customer’s inability (pursuant to the foregoing) to use a vessel as an LNG
Vessel.
8.4 Advance
Notices re LNG Vessel and Cargoes
(a) Change
in Expected Receipt Quantity. If,
subsequent to issuing the notice required under Section 5.1(b)(iv) herein,
Customer anticipates a change, by way of either increase or decrease, of at
least five percent (5%) in the Expected Receipt Quantity for a particular
Cargo, Customer shall promptly provide notice thereof to SABINE and include in
such notice Customer’s new estimate of the Expected Receipt Quantity. SABINE shall use reasonable endeavors to
accept any increase in the quantity but shall at all times retain the right not
to accept such new increased estimate if, in its sole discretion, such new
estimate will result in excess inventory at the Sabine Pass Facility.
(b) LNG
Vessel Nomination. As soon as
practicable but no later than five (5) days prior to the scheduled loading date
for a Cargo (unless the Cargo is a diversion cargo, in which case the deadline
shall be as soon as practicable after such diversion), Customer shall notify
SABINE of the information specified below:
(i) name
of LNG Vessel and, in reasonable detail, the dimensions, specifications,
operator, and owner of such LNG Vessel;
(ii) name
of Loading Port;
(iii) expected departure date
of LNG Vessel from Loading Port;
(iv) estimated
arrival date at the Sabine Pass Facility; and
(v) any
changes in the Expected Receipt Quantity since Customer’s prior notice.
Moreover, if the vessel
that Customer proposes to use as an LNG Vessel has not, within the immediately
preceding Contract Year, delivered LNG to the Sabine Pass Facility, Customer
shall notify SABINE thereof at least sixty (60) days prior to the first day of
the applicable Scheduled Unloading Window.
(c) LNG
Vessel Movements. With respect to
each Cargo of LNG to be delivered hereunder, Customer shall give, or cause the
Master of the LNG Vessel to give, to SABINE the following notices:
(i) A
first notice (“First Notice”), which shall be
sent upon the departure of the LNG Vessel from the Loading Port and which shall
set forth the time and date that loading was completed, the volume (expressed
in Cubic Meters) of LNG loaded on board the LNG Vessel, the estimated time of
arrival of the LNG Vessel at the Pilot Boarding Station (“ETA”),
and any operational deficiencies in the LNG Vessel that may affect its
performance at the Sabine Pass Facility or berth;
(ii) A
second notice (“Second Notice”), which shall be
sent ninety-six (96) hours prior to the ETA set forth in the First Notice,
stating the LNG Vessel’s then ETA. If,
thereafter, such ETA changes by more than six (6)
31
hours, Customer
shall give promptly, or cause the Master of the LNG Vessel to give promptly, to
SABINE notice of the corrected ETA;
(iii) A third notice (“Third Notice”), which shall be sent twenty-four (24) hours
prior to the ETA set forth in the Second Notice (as corrected), confirming or
amending such ETA. If, thereafter, such
ETA changes by more than three (3) hours, Customer shall give promptly, or
cause the Master of the LNG Vessel to give promptly, to SABINE notice of the
corrected ETA;
(iv) A
fourth notice (“Final Notice”), which shall be
sent twelve (12) hours prior to the ETA set forth in the Third Notice (as
corrected), confirming or amending such ETA.
If, thereafter, such ETA changes by more than one (1) hour, Customer
shall give promptly, or cause the Master of the LNG Vessel to give promptly, to
SABINE notice of the corrected ETA; and
(v) An
NOR, which shall be given at the time prescribed in Section 8.5 below.
(d) Characteristics
of Cargoes. With the First Notice,
Customer shall notify SABINE, or cause SABINE to be notified, for SABINE’s information
only, of the following characteristics of the LNG comprising its Cargo as
determined at the time of loading:
(i) Gross
Heating Value per unit;
(ii) molecular
percentage of hydrocarbon components and nitrogen;
(iii) average temperature; and
(iv) density
at loading.
(e) Right
to Reject Certain Quantities. Without prejudice to any other
rights and remedies arising hereunder or by law or otherwise, SABINE shall for
any reason (including limitations in LNG Storage) have the right to reject
unloading of any quantities of LNG on board an LNG Vessel that exceed by more
than five percent (5%) the Expected Receipt Quantity for such Cargo as
specified in, whichever applicable, (i) the notice delivered pursuant to
Section 5.1(b)(iv) and utilized by SABINE for the purposes of determining
Customer LNG Receipt Schedule or (ii) any subsequent notice delivered pursuant
to Section 8.4(a) and accepted by SABINE.
8.5 Notice
of Readiness
(a) Issuance. Subject to any
applicable restrictions, including any nighttime transit restrictions imposed
by Governmental Authorities or Pilots or any other reasonable timing
restrictions imposed by SABINE under Section 7.1(b)(iii), the Master of an LNG
Vessel or its agent shall give to SABINE its notice of readiness (“NOR”) to unload (berth or no berth) upon arrival of such LNG
Vessel at the specific location off the Sabine Pass Facility at which Pilots
customarily board the LNG Vessel (such location referred to as the “Pilot Boarding Station”) and after the Pilot has boarded the LNG Vessel.
32
(b) Effectiveness. An NOR given under Section 8.5(a) shall
become effective as follows:
(i) For
an LNG Vessel arriving at the Pilot Boarding Station at any time before 6:00
a.m. Central Time on the first day of the Scheduled Unloading Window allocated
to such LNG Vessel, an NOR shall be deemed effective at the earlier of (x) 6:00 a.m. Central Time on the first day
of such Scheduled Unloading Window; or (y) the time unloading commences;
(ii) For
an LNG Vessel arriving at the Pilot Boarding Station at any time between the
period of 6:00 a.m. Central Time on the first day of the Scheduled Unloading
Window allocated to such LNG Vessel and 6:00 p.m. Central Time on the second
day of such Scheduled Unloading Window (such period referred to as the “NOR Window”), an NOR shall become effective at the time of
its issuance; or
(iii) For an LNG Vessel
arriving at the Pilot Boarding Station at any time after the expiration of the
NOR Window, an NOR shall become
effective upon SABINE’s notice to the LNG Vessel that it is ready to receive
the LNG Vessel at berth.
8.6 Berthing
Assignment
(a) General
Rule. SABINE shall determine the
berthing sequence of all LNG Vessels at the Sabine Pass Facility in order to
ensure compliance with the Customer LNG Receipt Schedule and the Other Customer
LNG Receipt Schedules. If an LNG Vessel
arrives not ready to unload for any reason, SABINE may refuse to allow it to
berth.
(b) Timely
Arrival. SABINE shall berth an LNG
Vessel arriving before or during its NOR Window at the first opportunity that
SABINE determines such LNG Vessel will not interfere with unloading by any
other scheduled vessel but in no event later than 6:00 p.m. Central Time on the
second day of the Scheduled Unloading Window allocated to such LNG Vessel
(hereinafter referred to as the “Berthing Deadline”);
provided, however, that if SABINE does not berth such LNG Vessel by the
Berthing Deadline, but berths such vessel within forty-eight (48) hours of the
Berthing Deadline, Customer’s sole recourse and remedy for SABINE’s breach
thereof is demurrage pursuant to Section 8.7(c). If, as of the forty-eighth (48th)
hour following the Berthing Deadline, SABINE has not berthed the LNG Vessel,
and such delay is not attributable to a reason that would result in an
extension of Allotted Unloading Time under Section 8.7(a), SABINE shall be
deemed to have failed to provide the Services Quantity with respect to such
Cargo of LNG.
(c) Late
Arrival. SABINE
shall berth an LNG Vessel arriving after its NOR Window at the first
opportunity that SABINE reasonably determines such LNG Vessel will not
interfere with unloading by any scheduled vessel.
33
8.7 Unloading
Time
(a) Allotted
Unloading Time. The allotted unloading time for each LNG Vessel
(“Allotted Unloading Time”) shall be
thirty-six (36) hours, subject to extensions for:
(i) reasons
attributable to Customer, a Pilot, a Governmental Authority, the LNG Vessel or
its Master, crew, owner or operator;
(ii) Force
Majeure;
(iii) unscheduled curtailment
or temporary discontinuation of operations at the Sabine Pass Facility in
accordance with Section 16.2;
(iv) occupancy
of the berth by an LNG vessel that arrived at berth at the Sabine Pass Facility
no later than 6:00 p.m. Central Time of the scheduled unloading window
allocated to such LNG vessel (such unloading window not to exceed the time
allotted to Customer), which shall result in an extension of no more than nine
(9) hours;
(v) additional
time to unload an LNG Vessel with an LNG cargo containment capacity greater
than one hundred forty thousand (140,000) Cubic Meters, such increase over
thirty-six (36) hours to be calculated in the same manner as increases over twenty-four
(24) hours under Section 8.9(b)(i)b;
(vi) failure
to send the Final Notice; and
(vii) nighttime transit
restrictions.
For the avoidance of
doubt, SABINE shall have the right to delay berthing of the LNG Vessel for any
of the reasons set forth in (i) to (vii) above.
(b) Actual
Unloading Time. The actual unloading
time for each LNG Vessel (“Actual Unloading Time”)
shall commence when the NOR is effective and shall end when the unloading and
return lines of the LNG Vessel are disconnected from the Sabine Pass Facility’s
unloading and return lines.
(c) Demurrage at the Sabine Pass Facility.
(i) In
the event Actual Unloading Time exceeds Allotted Unloading Time (including any
extension in accordance with Section 8.7(a)) (“Demurrage
Event”), SABINE shall pay to Customer as liquidated damages
demurrage in United States dollars (which shall be prorated for a portion of a
day) determined in accordance with the rate set out in the following table:
34
|
LNG
Vessel Cargo Capacity
|
|
Demurrage Rate
in $/day
|
|
|
Less
than 120,000 Cubic Meters
|
|
$
|
45,000
|
|
|
120,000
Cubic Meters or greater up to, but not including, 160,000 Cubic
Meters
|
|
$
|
55,000
|
|
|
160,000
Cubic Meters or greater up to, but not including, 200,000 Cubic Meters
|
|
$
|
65,000
|
|
|
200,000
Cubic Meters or greater
|
|
$
|
83,000
|
|
(ii) If
a Demurrage Event occurs, Customer shall invoice SABINE for such demurrage
pursuant to Section 11.2.
(d) If,
as of the forty-eighth (48th) hour following the expiration of
Allotted Unloading Time SABINE has not completed unloading of the LNG Vessel,
Customer may discontinue unloading and may vacate the berth, and SABINE shall
be deemed to have failed to provide the Services Quantity with respect to any
portion of such Cargo of LNG that has not been unloaded.
(e) Excess
Boil-Off. If an LNG Vessel is
delayed in berthing at the Sabine Pass Facility and/or commencement of
unloading due to an event occurring at the Sabine Pass Facility and for a
reason that would not result in an extension of Allotted Unloading Time under
Section 8.7(a), and if, as a result thereof, the commencement of unloading is
delayed beyond twenty-four (24) hours after the Notice of Readiness is
effective, then, for each full hour by which commencement of unloading is
delayed beyond such twenty-four (24) hour period, SABINE shall pay Customer as
liquidated damages an amount, on account of excess boil-off, equal to the Henry
Hub Price multiplied by the quantity in MMBTUs equal to 0.0052% of the Cargo. Customer shall invoice SABINE for such excess
boil-off pursuant to Section 11.2.
8.8 Unloading
at the Sabine Pass Facility
(a) Efficiency. SABINE shall cooperate with Transporters (or
their agents) and with the Master of each LNG Vessel to facilitate the
continuous and efficient delivery of LNG hereunder.
(b) Vapor
Return Line. During unloading of
each Cargo of LNG, SABINE shall return to the LNG Vessel Gas in such quantities
as are necessary for the safe unloading of the LNG at such rates, pressures and
temperatures as may be required by the design of the LNG Vessel, and such
returned Gas shall not be deemed to be volume unloaded for Customer’s account.
35
8.9 LNG
Vessel Not Ready for Unloading; Excess Berth Time
(a) Vessel
Not Ready for Unloading. If any LNG
Vessel, previously believed to be ready for unloading, is determined to be not
ready after being berthed, SABINE may direct the LNG Vessel’s Master to vacate
the berth and proceed to anchorage, whether or not other LNG vessels are
awaiting the berth, unless it appears reasonably certain to SABINE that such
LNG Vessel can be made ready without disrupting the overall unloading schedule
of the Sabine Pass Facility or operations of the Sabine Pass Facility. When an unready LNG Vessel at anchorage
becomes ready for unloading, its Master shall notify SABINE. Upon the reberthing of any LNG Vessel vacated
pursuant to this Section 8.9(a), Customer shall be responsible for any actual
costs incurred by SABINE acting as a Reasonable and Prudent Operator as a
result of such LNG Vessel not being ready for unloading.
(b) Berth
Limitations.
(i) An
LNG Vessel shall complete unloading and vacate the berth as soon as possible
but not later than the following allowed berth time:
a. twenty-four
(24) hours, in the case of an LNG Vessel with an LNG cargo containment capacity
less than or equal to one hundred forty thousand (140,000) Cubic Meters; or
b. in
accordance with the following formula, in the case of an LNG Vessel with an LNG
cargo containment capacity greater than one hundred forty thousand (140,000)
Cubic Meters:
24 + x
= allowed berth time (in hours)
where:
x = y/12,000
Cubic Meters; and
y = the LNG cargo
containment capacity of the LNG Vessel in excess of 140,000 Cubic Meters.
Notwithstanding
the foregoing, the aforementioned time restrictions shall be extended for: (a)
reasons attributable to SABINE; (b) reasons attributable to a Pilot or to a
Governmental Authority; (c) Force Majeure; and (d) nighttime transit restrictions.
(ii) If
an LNG Vessel fails to depart at the end of its allowed berth time, SABINE may
direct the LNG Vessel to vacate the berth and proceed to sea at utmost
dispatch.
(iii) If an LNG Vessel fails
to vacate the berth after receipt of SABINE’s notice to do so under this
Section 8.9, Customer shall reimburse SABINE for any and all reasonable and
actual damages its incurs as a result thereof, including amounts SABINE becomes
contractually obligated to pay as demurrage or excess boil-off to any Other
Customer.
36
(iv) Subject
to this Section 8.9, in the event an LNG Vessel fails to vacate the berth
within seventy-two (72) hours of arrival and Customer is not taking actions to
cause it to vacate the berth, SABINE may effect such removal at the expense of
the Customer.
9.1 Title,
Custody and Risk of Loss
(a) Title
to Customer’s Inventory, Risk of Loss. Subject to Section 3.4, SABINE shall not
assume title or risk of loss with respect to Customer’s Inventory
even during periods when it is in the possession and control of SABINE. For the avoidance of doubt, title
and risk of loss with respect to Retainage shall pass to SABINE at the
Receipt Point.
(b) Possession
and Control. Possession and control
of Customer’s LNG shall pass from Customer to SABINE upon delivery of same at
the Receipt Point. Possession and
control of Customer’s Inventory shall pass from SABINE to Customer upon
delivery of same at the Delivery Point.
9.2 No
Encumbrance
(a) Customer’s
Covenants. Customer agrees to fully
defend, indemnify and hold SABINE and its Affiliates harmless against all
Encumbrances and Liabilities relating to such Encumbrances (collectively, “Claims”) regarding
Customer’s Inventory, including Claims brought by Other Customers, other than
any Claims caused by SABINE’s acts or omissions. For purposes of this Section 9.2(a), the term
“Encumbrance” shall include any
mortgage, pledge, lien, charge, adverse claim, proprietary right, assignment by
way of security, security interest, title retention, preferential right or
trust arrangement or any other security agreement or arrangement having the
effect of security.
(b) SABINE’s
Covenants. SABINE covenants that it
has the right to deliver to Customer at the Delivery Point all Gas held for
Customer’s account free from all Claims relating thereto caused by SABINE’s
acts or omissions. SABINE agrees to
fully defend, indemnify and hold Customer and its Affiliates harmless from and
against all Claims regarding Customer’s Inventory caused by the acts or
omissions of SABINE and Other Customers.
9.3 Receipt
of LNG
The receipt of LNG
from an LNG Vessel at the Receipt Point shall be carried out by use of pumps
and other equipment on the LNG Vessel under such reasonable and customary
conditions as are specified in the Sabine Pass Marine Operations Manual.
37
9.4 Quality
and Measurement of Customer’s LNG
Customer’s
LNG shall be measured and tested in accordance with Annex I. Customer shall ensure that all LNG delivered
at the Receipt Point for Customer’s account shall conform to the following
specifications:
(a) Gross
Heating Value.
(i) LNG
when delivered by Customer to SABINE shall have, in a gaseous state, a Gross
Heating Value of not less than 950 BTU per Standard Cubic Foot and not more
than 1165 BTU per Standard Cubic Foot.
(ii) If
the Gross Heating Value of LNG to be delivered hereunder is higher than the
limits set forth in Section 9.4(a)(i) by reason of boil-off occurring during a
delay (other than a delay which extends Allotted Unloading Time under Section
8.7(a)) caused by SABINE in unloading an LNG Vessel of more than thirty (30)
hours after the NOR becomes effective, such LNG shall be deemed to have met the
quality specifications of this Agreement regarding Gross Heating Value.
(b) Components.
(i) The
LNG when delivered by Customer to SABINE shall, in a gaseous state, contain not
less than eighty-four molecular percentage (84.0 MOL%) of methane (C1)
and, for the components and substances listed below, such LNG shall not contain
more than the following:
a. Nitrogen
(N2), 1.5 MOL%;
b. Ethane
(C2), 11 MOL%;
c. Propane
(C3), 3.5 MOL%;
d. Butanes
(C4) and heavier, 2 MOL%;
e. Pentanes
(C5) and heavier, 0.09 MOL%;
f. Hydrogen
sulfide (H2S), 0.25 grains per 100 Standard Cubic Feet; and
g. Total
sulfur content, 1.35 grains per 100 Standard Cubic Feet.
(ii) The
LNG when delivered by Customer to SABINE shall contain no water, mercury,
active bacteria or bacterial agents (including sulfate reducing bacteria or
acid producing bacteria) and other contaminants or extraneous material.
9.5 Off-Specification
LNG
(a) Refusal
of Off-Spec LNG. Without prejudice
to any other rights and remedies of SABINE hereunder, SABINE may refuse to take
delivery of all or part of any LNG not conforming to the quality specifications
set forth in Section 9.4 (“Off-Spec LNG”).
38
(b) Notice. Customer shall provide notice to SABINE as
soon as reasonably practicable of any existing or anticipated failure of the
LNG available for delivery to SABINE hereunder to conform to the quality
specifications set forth in Section 9.4, giving details of the nature and
expected magnitude of the variance, the cause of the non-compliance and the
probable duration thereof, including the Cargoes and Scheduled Unloading
Windows to be affected thereby. If so
notified, SABINE shall as soon as possible inform Customer whether it intends
to reject any of such Off-Spec LNG. If
SABINE is notified by Customer prior to the commencement of unloading of a
Cargo at the Sabine Pass Facility that the LNG is Off-Spec LNG and the quantity
is delivered to the Sabine Pass Facility, SABINE shall use reasonable endeavors
to take delivery of any Cargoes which it would otherwise be entitled to reject;
provided, however, that SABINE shall be entitled to delay unloading of Off-Spec
LNG for the period of time reasonably required for SABINE to determine whether
it can take delivery of such Off-Spec LNG pursuant to this Section 9.5(b). Subject to SABINE first using its reasonable
endeavors to take delivery of any Cargoes containing Off-Spec LNG, SABINE
shall:
(i) notify
Customer that SABINE will take delivery of some or all of the affected Cargoes,
without prejudice to SABINE’s rights and remedies with respect to such Off-Spec
LNG other than SABINE’s right to reject said Cargo; or
(ii) reject
all or any of the affected Cargoes.
(c) Customer’s
Responsibility. If SABINE accepts
delivery of such a Cargo of Off-Spec LNG, Customer shall:
(i) bear
the financial responsibility for all reasonable and actual incremental costs
(other than capital costs) and Liabilities incurred by SABINE or any of SABINE’s
Affiliates, in each case acting as a Reasonable and Prudent Operator, in
connection with receiving and (unless otherwise agreed with Customer) treating
Off-Spec LNG by such means as are appropriate, including mixing such Off-Spec
LNG with lower calorific value Gas or injecting nitrogen if facilities to allow
for injection presently exist at the Sabine Pass Facility; and
(ii) indemnify
and hold harmless SABINE, its Affiliates and their respective directors,
officers and employees from any and all Liabilities, including any of same
attributable to claims of any Person and any Other Customers, which arise out
of, are incident to or result from the acceptance, handling, disposal or use of
Off-Spec LNG.
9.6 Effect
on Future Cargoes
(a) No
Continuing Waiver. Acceptance of
Off-Spec LNG shall not prevent SABINE from refusing future deliveries of
Off-Spec LNG. No waiver by SABINE of any
default by Customer of any of the specifications set forth in this Article 9
shall ever operate as a continuing waiver of such specification or as a waiver
of any subsequent default, whether of a like or different character.
39
(b) Extended
Delivery of Off-Spec LNG. If (i)
Customer notifies SABINE pursuant to Section 9.5(b) of an anticipated delivery
of two (2) or more Cargoes of Off-Spec LNG and (ii) the Parties agree for
SABINE to incur incremental capital costs in order to accept delivery of such
Cargoes, then Customer shall, in addition to its payment and indemnification
obligations under Section 9.5(c), bear the financial responsibility for and
directly fund, at SABINE’s election, all such incremental capital costs.
(a) Delivery
Point. Subject to Section 3.3(a),
the quantity of Gas nominated by Customer for any day pursuant to Section 5.2
shall be delivered at the Delivery Point.
(b) Commingled
Stream. Customer acknowledges and
agrees that Customer’s Inventory shall be delivered by SABINE in a commingled
stream, including that combined with LNG received by SABINE from Other
Customers. Customer furthers
acknowledges and agrees that Customer shall have no right to receive Gas of the
same quality as Customer’s LNG, provided that the specifications of the
commingled Gas stream at the Delivery Point satisfy the requirements set forth
in Section 10.3, and provided, further, that SABINE delivers at the Delivery
Point a quantity of Gas that is, less Retainage and Customer’s Inventory, the
thermal equivalent of the quantity of LNG received by SABINE for Customer’s
account at the Receipt Point.
(c) Odorization. SABINE will deliver Customer’s Inventory at
the Delivery Point in its natural state without the addition of any odorizing
agent, and SABINE shall not be obligated to add odorizing agents to any Gas unless
required to do so by a Governmental Authority.
SABINE does not assume any responsibility for Liabilities by reason of
the fact that it has not odorized Customer’s Inventory prior to its delivery to
Customer.
10.2 Customer’s Responsibility
(a) Downstream
Arrangements. Customer shall arrange
for the transportation of Gas by Downstream Pipelines in order to meet its
obligations to take redelivery of Gas in accordance with the provisions of
Section 3.3 at the rates nominated pursuant to Article 5. Customer shall be solely responsible for
making all necessary arrangements with third parties at or downstream of the
Delivery Point to enable SABINE to deliver Gas to Downstream Pipelines on a
timely basis pursuant to the terms and conditions of this Agreement. Customer shall also be solely responsible for
ensuring that all such arrangements are consistent with the terms and
conditions of this Agreement and shall require all relevant third parties to
confirm to SABINE all of Customer’s nominations and scheduling of deliveries of
Gas, such confirmation to be by telephone, electronic transmission, or other
means acceptable to SABINE. Such
third-party arrangements shall be timely
40
communicated to,
and coordinated with, SABINE, and SABINE shall have no liability whatsoever for
any failure of any such third party to provide downstream arrangements. The rules, guidelines, and policies of a
Downstream Pipeline transporting or purchasing any Gas for or from Customer at
the Delivery Point (as may be changed from time to time by the Downstream
Pipeline) shall set forth, among other things, the manner in which Customer’s
Inventory is transported from the Delivery Point. Customer and SABINE recognize that the
receipt and delivery on the Downstream Pipeline’s facilities of Gas shall be
subject to the operational procedures of such Downstream Pipeline.
(b) Imbalance
Charges. In the event a Downstream
Pipeline imposes scheduling fees, imbalance charges, cash out costs or similar
costs, fees or damages for imbalances (“Imbalance Charges”),
Customer shall be obligated to use its reasonable efforts to avoid imposition
of such Imbalance Charges. Customer
shall indemnify and hold harmless SABINE, its Affiliates and their respective
directors, officers and employees from all Liabilities arising out of, incident
to or resulting from any Imbalance Charge directly resulting from Customer’s
acts or omissions. SABINE shall
indemnify and hold harmless Customer, its Affiliates and their respective
directors, officers and employees from all Liabilities arising out of, incident
to or resulting from any Imbalance Charge directly resulting from SABINE’s acts
or omissions.
(c) Limitation. Customer shall ensure that its Gas
transportation and sales arrangements are in compliance with all applicable
laws and regulations.
10.3 Specifications
and Measurement of Gas at the Delivery Point
Gas
delivered to Customer at the Delivery Point shall be measured and tested in
accordance with Annex II. SABINE shall
ensure that all Gas delivered at the Delivery Point for Customer’s account
shall conform to the following specifications:
(a) Gross
Heating Value. Gas when delivered by
SABINE to Customer shall have a Gross Heating Value of not less than 950 BTU
per Standard Cubic Foot and not more than 1165 BTU per Standard Cubic Foot.
(b) Components.
(i) Gas
when delivered by SABINE to Customer shall contain not less than eighty-two
molecular percentage (82 MOL%) of methane (C1) and, for the
components and substances listed below, such Gas shall not contain more than
the following:
a. Nitrogen
(N2), 3 MOL%;
b. Pentanes
(C5) and heavier, 0.1 MOL%;
c. Hydrogen
sulfide (H2S), 0.25 grains per 100 Standard Cubic Feet;
d. Total
sulfur content, 5 grains per 100 Standard Cubic Feet;
e. Oxygen
(O2), 10 parts per million;
f. Carbon
dioxide (CO2), 2 MOL%; and
41
g. Water
(H2O), 7 pounds per one million Standard Cubic Feet.
(ii) Gas
when delivered by SABINE to Customer shall contain no mercury, active bacteria
or bacterial agents (including sulfate reducing bacteria or acid producing
bacteria) and other contaminants or extraneous material.
(c) Gas
Delivery Pressure. Customer’s
Inventory shall be delivered at the Delivery Point at the appropriate pipeline
pressure; provided, however, that such pressure shall be at least 1000 psig but
shall not be required to exceed a maximum pressure of 1200 psig.
10.4 Nonconforming
Gas
(a) Right
to Reject.
Customer shall have the right to reject Gas that does not
conform to the specifications set forth in Section 10.3 (“Nonconforming Gas”) if the
failure of such Nonconforming Gas to satisfy such specifications would (a) be
grounds for an operator of a Downstream Pipeline or a Person under contract
with Customer to purchase such Gas (“Downstream
Purchaser”) to reject such Nonconforming Gas or (b) otherwise
materially and adversely affect Customer, in Customer’s reasonable opinion;
provided, however, that if SABINE has accepted such Off-Spec LNG pursuant to
Section 9.5 but the Parties have agreed under Section 9.5(c) to not treat such
Off-Spec LNG, Customer shall be deemed to have waived its right to reject Gas
that does not conform to the specifications set forth in Section 10.3.
(b) SABINE
Indemnity. If Customer accepts
delivery of Non-Conforming Gas which it would otherwise be entitled to reject,
SABINE shall indemnify and hold harmless Customer, its Affiliates and their
respective directors, officers and employees from any and all Liabilities,
including any of same attributable to claims of any Person (including Other
Customers, a Downstream Pipeline and a Downstream Purchaser), which arise out
of, are incident to or result from the acceptance, handling, disposal or use of
Non-Conforming Gas. If Customer accepts
delivery of Non-Conforming Gas which it would otherwise be entitled to reject,
SABINE shall bear the financial responsibility for all reasonable and actual
incremental costs (other than capital costs) and Liabilities incurred by
Customer or any of Customer’s Affiliates, in each case acting as a Reasonable
and Prudent Operator, in connection with accepting delivery of Non-Conforming
Gas.
11.1 Monthly
Statements
Between the first
(1st) day of each month and the tenth (10th) day of each month,
commencing with the month prior to the Commercial Start Date, SABINE shall
deliver to Customer a statement setting forth the following:
(a) the
Fixed Component for the following month;
(b) the
FOC Component for the following month;
42
(c) the
Incremental Costs, if any, for the prior month; and
(d) any
charges under Section 4.3 for the prior month.
11.2 Other
Statements
If any other moneys are
due from one Party to the other hereunder and if provision for the invoicing of
that amount due is not made elsewhere in this Article 11, then the Party to
whom such moneys are due shall furnish a statement therefor to the other Party,
along with pertinent information showing the basis for the calculation thereof.
11.3 Adjustments,
Audit
(a) General. If, within ninety (90) days of the issuance
by SABINE of a statement, SABINE acquires information indicating the necessity
of an adjustment to such statement rendered hereunder, then SABINE shall
promptly serve on Customer a written notice setting forth that
information. Unless otherwise provided
herein, after obtaining that information, SABINE shall promptly prepare and
serve on Customer an adjusted statement, showing the necessary payment, the
calculation of the payment amount, and the Party from whom the payment is
owing. In the event Customer issued a
statement and subsequently acquires information indicating the necessity of an
adjustment to such statement, Customer shall follow the same procedure in
issuing an adjusted statement.
(b) Audit. Upon thirty (30) days written notice issued
within six (6) months of the conclusion of any Contract Year, Customer shall
have the right to cause an internationally recognized firm of accountants,
appointed by Customer at Customer’s sole expense, to audit the books, records
and accounts of SABINE that are directly relevant to the determination of
Incremental Costs, SABINE Taxes and New Regulatory Costs, LNG receipts and Gas
deliveries for such prior Contract Year, as provided in statements issued to
Customer pursuant to this Article 11.
Such audit shall be conducted at the head office of SABINE and shall be
completed within the Contract Year in which Customer’s notice is sent to SABINE. If Customer obtains information indicating
the necessity of an adjustment to any statement rendered hereunder, then within
ninety (90) days following completion of the audit pertaining to the affected
Contract Year, Customer shall promptly serve on SABINE a statement pursuant to
Section 11.2 and written notice setting forth the information and basis for
such statement. If Customer waives its
right to conduct an audit, statements may be contested by Customer only if,
within a period of ninety (90) days after the end of the year, Customer serves
on SABINE notice questioning their correctness.
If no such notice is served, statements shall be deemed correct and
accepted by both Parties. Promptly after
resolution of any Dispute as to a statement, the amount of any overpayment or
underpayment (plus interest as provided in Section 11.4(c)) shall be paid by
SABINE or Customer to the other, as the case may be.
(c) Records. SABINE shall keep all books and records
relevant to such audit for a period of three (3) years following the end of the
relevant Contract Year; provided that where SABINE is on notice of a Dispute,
SABINE shall keep all such books, records and other information until such
Dispute has been finally resolved.
43
11.4 Payment
Due Dates
(a) Due
Date for Monthly Statement. Each
monthly statement submitted pursuant to Section 11.1 shall become due and
payable on the later of (i) ten (10) days after delivery by SABINE of such
monthly statement or (ii) the twenty-fifth (25th) day of the month
in which such monthly statement was received; provided that if such day is not
a Business Day, it shall become due and payable on the next Business Day.
(b) Due
Date for Other Statements. Each
statement submitted pursuant to Section 11.2 shall become due and payable
on the thirtieth (30th) day after the date on which it is received;
provided that if such payment due date is not a Business Day, the due date for
such payment shall be extended to the next Business Day. For purposes of this Section 11.4(b), a
facsimile copy of an invoice shall be deemed received by a Party on the next
Business Day following the day on which it was sent.
(c) Interest. Except as provided in Section 11.4(d), if the
full amount of any statement is not paid when due, the unpaid amount thereof
shall bear interest at the Base Rate, compounded annually, from and including
the day following the due date up to and including the date when payment is
made.
(d) Recurring
Late Payments. If three (3) monthly
statements submitted pursuant to Section 11.1 in a Contract Year are not paid
when due, then, in addition to the remedies provided in Section 11.6, any late
payment thereafter shall bear a charge equal to two percent (2%) of the unpaid
amount thereof in lieu of interest at the Base Rate as provided in Section
11.4(c).
Each Party shall pay, or
cause to be paid, in United States dollars in immediately available funds, all
amounts that become due and payable by such Party pursuant to any statement
issued hereunder, to a bank account or accounts designated by and in accordance
with instructions issued by the other Party.
Each payment of any amount owing hereunder shall be in the full amount due
without reduction or offset for any reason (except as expressly allowed under
this Agreement), including Taxes, exchange charges, or bank transfer
charges. Notwithstanding the preceding
sentence, the paying Party shall not be responsible for a designated bank’s
disbursement of amounts remitted to such bank, and a deposit in immediately
available funds of the full amount of each statement with such bank shall
constitute full discharge and satisfaction of the statement.
11.6 Nonpayment
The term “Cumulative Delinquency Amount” shall mean, with respect to a
Party, the cumulative amount, expressed in United States dollars, that is owed
by that Party to the other Party under this Agreement and is past due. Without prejudice to a Party’s right of
offset, if a Party’s failure to pay when due an amount owing hereunder causes
its Cumulative Delinquency Amount to exceed three (3) times the Reservation
Fee, then the Party to which such amount is owed shall have the right, upon
giving thirty (30) days written notice (such notice hereinafter referred to as
the “Delinquency Notice”) to the
44
owing Party, to suspend
performance of its obligations under this Agreement until such amount, with
interest in accordance with Section 11.4(c), has been paid in full; provided,
however, that (a) no such suspension of a Party’s obligations under this
Section 11.6 shall excuse the owing Party from the performance of its
obligations hereunder, and (b) in the event that SABINE suspends performance
under this Section 11.6, (i) Customer shall continue to be liable for the
Fee pursuant to Article 4, and (ii) SABINE may offer Customer’s unutilized
Services Quantity to the Other Customers.
If any such Cumulative Delinquency Amount has not been paid within sixty
(60) days after the issuance of the Delinquency Notice, then the Party to whom
such amount is owed shall have the right, upon not less than thirty (30) days
notice to the other Party, to terminate this Agreement without the necessity of
any further action, unless within that thirty (30) day period, the Party to
which such amount is owed receives payments from or on behalf of the owing
Party equal to the Cumulative Delinquency Amount. Any such termination shall be without
prejudice to any other rights and remedies of the terminating Party arising
hereunder or by law or otherwise, including the right of such Party to receive
payment in respect of all obligations and claims that arose or accrued prior to
such termination or by reason of such default by the owing Party.
11.7 Disputed
Statements
In the event of
disagreement concerning any statement, Customer or SABINE (as the case may be)
shall make provisional payment of the total amount thereof and shall
immediately notify the other Party of the reasons for such disagreement, except
that in the case of an obvious error in computation, Customer or SABINE (as the
case may be) shall pay the correct amount disregarding such error.
11.8 Final
Settlement
Within sixty (60) days
after expiration of the Term, SABINE and Customer shall determine the amount of
any final reconciliation payment. After
the amount of the final settlement has been determined, SABINE shall send a
statement to Customer, or Customer shall send a statement to SABINE, as the
case may be, in United States dollars for amounts due under this Section 11.8,
and SABINE or Customer, as the case may be, shall pay such final statement no
later than twenty (20) days after the date of receipt thereof.
Notwithstanding
Section 4.3, Customer shall be responsible for and pay, or cause to be paid,
all Taxes that may be imposed or levied on Customer’s Inventory (including
receipt or redelivery thereof) and the LNG Vessels. Customer shall reimburse and hold harmless
SABINE for any such Taxes that may be required by law to be remitted by SABINE
and shall pay such additional amount (including Taxes and corresponding
interest at the Base Rate) as is necessary to ensure receipt by SABINE of the
full amounts otherwise due to it under this Agreement. Notwithstanding the foregoing, neither Party
shall be responsible for Taxes on the capital revenue or income derived by the
other Party.
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13.1 SABINE’s
Insurance
SABINE shall be
responsible for obtaining and maintaining (a) insurance for the Sabine Pass
Facility to the extent required by applicable law; and (b) additional
insurance, as is reasonably necessary and available on reasonable commercial
terms, against such other risks and at such levels as a Reasonable and Prudent
Operator of a shared use LNG receiving and regasification terminal would
obtain. SABINE shall obtain such
insurance from a reputable insurer (or insurers) reasonably believed to have
adequate financial reserves. SABINE
shall exercise its best efforts to collect any amount due to SABINE under such
insurance policies. Any insurance policy
required pursuant to this Section 13.1 shall contain a standard waiver of
subrogation endorsement. Upon request of
Customer, SABINE shall provide to Customer satisfactory evidence that the
insurance required pursuant to this Section 13.1 is in effect. In any event SABINE shall be required to
obtain the following insurance coverages:
(a) Commercial
General Liability Insurance / Marine Terminal Operator’s Liability Insurance;
(b) Workers’
Compensation / Employer’s Liability;
(c) All-Risk
Property Insurance;
(d) Wharfingers
Liability Insurance;
(e) Pollution
Liability Insurance; and
(f) Business
Interruption Insurance pursuant to Section 4.1(b) in an amount sufficient to
replace the Fee in the event of an interruption of service due to any of the
causes customarily addressed by business interruption insurance. Prior to the placement of any business
interruption insurance, SABINE shall present its proposed business interruption
insurance policy to Customer for review and approval.
In addition, during
construction of the Sabine Pass Facility, SABINE shall cause the contractor
under the engineering, procurement and construction contract to carry an
appropriate level of insurance, including Construction All-Risk Insurance.
13.2 Customer’s
Insurance
(a) Loss
of Product Insurance. Customer
acknowledges that SABINE shall not at any time be responsible for securing and
maintaining loss of product insurance covering the risk of loss of Customer’s
Inventory and that Customer shall be responsible for insuring against such
risk. If Customer elects to obtain loss
of product insurance that insures the physical damage or loss of Customer’s
Inventory, SABINE shall, upon request of Customer, provide Customer all
documents and information reasonably necessary to enable Customer to obtain
such loss of product insurance.
46
(b) LNG
Vessel Insurance. Customer shall
ensure that insurances are procured and maintained for each LNG Vessel in
accordance with the following provisions.
In all cases, such insurance shall establish insurance coverages
consistent with insurances to the standards which a ship owner operating
reputable LNG vessels, as a Reasonable and Prudent Operator, should observe in
insuring LNG vessels of similar type, size, age and trade as such LNG Vessel. In this regard:
(i) Hull
and Machinery Insurance shall be placed and maintained with reputable marine
underwriters; and
(ii) Protection
& Indemnity Insurance (“P&I Insurance”)
shall be placed and maintained as an unlimited entry, if such entry is
available, with and subject to and on the basis of the rules of any of the
reputable P&I insurance associations experienced in providing P&I
Insurance for LNG vessels.
(c) Evidence
of Insurance. Prior to the
commencement of deliveries to the Sabine Pass Facility and thereafter at least
once each Contract Year, Customer shall furnish the following evidence of
insurance to SABINE in relation to each LNG Vessel: cover notes, certificates
of entry, the latest rules of the particular provider, and detailed written
information concerning all required insurance policies. These policies shall provide SABINE with
thirty (30) days prior written notice of any cancellation, material change or
alteration in coverage. These policies
shall also contain waiver of subrogation clause and name SABINE as additional
insured. The receipt of such information
shall not impose any obligation on SABINE.
13.3 Port
Liability Agreement
Notwithstanding
any other provision of this Agreement and any rights that a Transporter may
have under applicable law in relation to Liabilities for incidents involving an
LNG Vessel occurring at the Sabine Pass Facility, Customer shall either:
(a) cause
Transporter to execute the Port Liability Agreement in the form set forth in
Exhibit C prior to Transporter’s LNG Vessel’s arrival at the Sabine Pass
Facility in which case SABINE waives any and all claims against Customer
arising out of incidents involving such Transporter and Transporter’s LNG
Vessel; or
(b) in
the event a Transporter fails to execute such Port Liability Agreement,
indemnify and hold SABINE harmless from any Liabilities incurred by SABINE
arising from such failure.
14.1 Limitation
of Liability of SABINE
The liability of
SABINE to Customer arising out of, relating to, or connected with an Event
under this Agreement shall not exceed three (3) times the Reservation Fee. For
47
purposes of this
Section 14.1, an “Event” means
any occurrence or series of occurrences having the same origin.
14.2 Cover
Gas
In the event that
SABINE fails to receive a Cargo of LNG that it is otherwise required to receive
under this Agreement, or fails to deliver Regasified LNG that it is required to
deliver under this Agreement, and such failure is not attributable to the act
or omission of Customer, is not attributable to Force Majeure, and is not
otherwise excused by this Agreement (“Sabine Breach”),
SABINE’s liability in respect of such Sabine Breach shall be limited as
provided in Section 14.1, and shall be further limited to the excess, if any,
of:
(a) Customer’s
cost of acquiring cover gas at or downstream of the Sabine Pass Facility
necessitated by the Sabine Breach over
(b) the
net proceeds of any alternate sale of LNG made by Customer as a result of the
Sabine Breach.
Customer shall use
reasonable efforts to minimize its cost of acquiring cover gas and maximize the
net proceeds of any alternate sale of LNG.
Notwithstanding Section 4.4(c)(ii), if Customer recovers from SABINE
pursuant to this Section 14.2, Customer shall not be entitled to schedule any
Make-Up Quantity pursuant to Section 4.4(c) with respect to quantities for
which Customer recovers from SABINE pursuant to this Section 14.2.
14.3 Consequential
Loss or Damage
Except as provided
in Section 14.2, no Party shall be liable to the other Party for or in respect
of:
(a) any
consequential loss or damage;
(b) loss
of profits or business interruption to the extent such amounts do not
constitute consequential loss or damage; or
(c) any
special, incidental or punitive damages,
suffered or
incurred by the other Party or any Person resulting from breach of or failure
to perform this Agreement or the breach of any representation or warranty
hereunder, whether express or implied, and whether such damages are claimed
under breach of warranty, breach of contract, tort, or other theory or cause of
action at law or in equity, except to the extent such damages have been awarded
to a third party and are subject to allocation between or among the parties to
the Dispute.
14.4 Exceptions
The limitations of
liability contained in Sections 14.1 and 14.2 shall not apply to liabilities
caused by the Gross Negligence/Willful Misconduct of SABINE. “Gross Negligence/Willful
Misconduct” means any act or failure to act (whether sole, joint or
concurrent) by SABINE which was intended to cause, or which was in reckless
disregard of or wanton indifference to, harmful consequences SABINE knew, or
should have
48
known, such act or
failure would have on the safety or property of another Person, provided
however that any act or failure to act on the part of any employee of Customer
that has been seconded to SABINE shall not be attributed to SABINE for purposes
of this Section 14.4.
14.5 Parties’
Liability
Customer’s sole recourse
and remedy under this Agreement for a breach hereof or a default hereunder shall be against SABINE and its assets. Except as otherwise provided herein and
pursuant to the terms of the Guarantee, SABINE’s sole recourse and remedy under
this Agreement shall be against Customer and its assets for a breach hereof or
a default hereunder. In the event of a
breach of this Agreement, the non-breaching Party shall exercise commercially
reasonable efforts to mitigate its damages resulting therefrom.
15.1 Events
of Force Majeure
Neither Party shall be
liable to the other for any delay or failure in performance hereunder if and to
the extent such delay or failure is a result of Force Majeure. Subject to the provisions of this Article 15,
the term “Force Majeure” shall mean any act,
event, or circumstance, including Adverse Weather Conditions, that is not
reasonably within the control of and that prevents or delays a performance by a
Party. Nothing in this Article 15 shall
be construed to require a Party to observe a higher standard of conduct than
that required of a Reasonable and Prudent Operator as a condition to claiming
the existence of Force Majeure.
15.2 Limitation
on Scope of Force Majeure for Customer
Notwithstanding Section 15.1 of this Agreement, no
Force Majeure shall relieve, suspend, or otherwise excuse Customer from
performing any obligation to indemnify, reimburse, hold harmless or otherwise
pay SABINE under this Agreement, including the obligations set forth in
Sections 3.1, 3.4, 8.9, 9.2, 9.5, 10.2, 13.3, and 17.2 and Article 4, Article
11, Article 12 and Article 20.
A Force Majeure event shall take effect at the moment
such an event or circumstance occurs.
Upon the occurrence of a Force Majeure that prevents, interferes with or
delays the performance by SABINE or Customer, in whole or in part, of any of
its obligations hereunder, the Party affected shall give notice thereof to the
other Party describing such event and stating the obligations the performance
of which are affected (either in the original or in supplemental notices) and
stating, as applicable:
(a) the
estimated period during which performance may be prevented, interfered with or
delayed, including, to the extent known or ascertainable, the estimated extent
of such reduction in performance;
49
(b) the
particulars of the program to be implemented to resume normal performance hereunder;
(c) the
anticipated portion of the Services Quantity for a Contract Year that will not
be made available or received, as the case may be, by reason of Force Majeure;
and
(d) where
Section 15.7 applies, the quantity of Services that SABINE reasonably expects
to allocate to Customer.
Such notices shall thereafter be updated at least
monthly during the period of such claimed Force Majeure specifying the actions
being taken to remedy the circumstances causing such Force Majeure.
15.4 Measures
In order to resume normal performance of this
Agreement within the shortest time practicable, the Party affected by the Force
Majeure shall take all measures to this end which are reasonable under the
circumstances, taking into account the consequences resulting from such event
of Force Majeure. Prior to resumption of
normal performance, the Parties shall continue to perform its obligations under
this Agreement to the extent not excused by such event of Force Majeure.
15.5 No
Extension of Term
The Term shall not be extended as a result of or by
the duration of an event of Force Majeure.
15.6 Settlement
of Industrial Disturbances
Settlement of strikes, lockouts, or other industrial
disturbances shall be entirely within the discretion of the Party experiencing
such situations, and nothing herein shall require such Party to settle
industrial disputes by yielding to demands made on it when it considers such
action inadvisable.
15.7 Allocation
of Services
If, as a result of an event of Force Majeure, SABINE
is unable to meet its contractual obligations to Customer and any Other
Customers under LNG terminal use agreements, SABINE shall allocate the
available capability of the Sabine Pass Facility to perform activities similar
to the Services in the following order of priority (such allocation herein
referred to as the “Major Customer Allocation
Priority”):
(a) first
among Major Customers only, based on the ratio that the Maximum LNG Reception
Quantity (in the case of an allocation for Customer) or the similar maximum
contractual entitlement of the relevant Major Customer (in the case of an
allocation for another Major Customer) bears to the Major Customer Aggregate
Contracted Capacity for the remainder of such Contract Year; and
(b) then
among Non-Major Customers only, based on the ratio that the maximum LNG
reception quantity (or similar maximum contractual entitlement to receive
50
LNG berthing, unloading
and receipt services) of each
Non-Major Customer bears to the Non-Major Customer Aggregate Contracted
Capacity for the remainder of such Contract Year.
ARTICLE
16
CURTAILMENT OF SERVICES OR
TEMPORARY DISCONTINUATION OF SERVICES
16.1 Scheduled
Curtailment or Temporary Discontinuation of Services
To the extent that
SABINE has notified Customer under Section 5.1(a) in connection with the
preparation of the Customer LNG Receipt Schedule of maintenance to or
modification of the Sabine Pass Facility, SABINE shall have the right during
any Contract Year to curtail or temporarily discontinue the Services, in whole
or in part due to such maintenance or modification for a period lasting no more
than three (3) consecutive days. During
the period of such curtailment or temporary discontinuation of Services, SABINE
shall, from time to time, use reasonable endeavors to update Customer on the
expected progress towards completing the maintenance or modification, whichever
applicable. Notwithstanding the
foregoing, neither a curtailment nor a temporary discontinuation of Services
pursuant to this Section 16.1 shall reduce SABINE’s obligations to allow
berthing, unloading and receipt of Customer’s LNG in a quantity up to the
Maximum LNG Reception Quantity.
16.2 Unscheduled
Curtailment or Temporary Discontinuation of Services
SABINE shall have
the right to curtail or temporarily discontinue the Services provided by the
Sabine Pass Facility, in whole or in part, at any time in order to protect
persons and property, including the Sabine Pass Facility, from harm or damage
due to operational or safety conditions.
SABINE shall use reasonable endeavors to provide Customer such notice of
curtailment or temporary discontinuation as is reasonable under the
circumstances, and such notice may be issued for a specific period of time or
until further notice is given. If, as a
result of any unscheduled curtailment or temporary discontinuation of Services
pursuant to this Section 16.2, SABINE is unable to meet its contractual
obligations to Customer and any Other Customers under LNG terminal use
agreements, SABINE shall allocate the available capability of the Sabine Pass
Facility to perform activities similar to the Services in accordance with the
Major Customer Allocation Priority. If a
curtailment or temporary discontinuation of Services occurs under this Section
16.2, SABINE may direct Customer to adjust receipts of LNG and deliveries of
Customer’s Inventory as the case may be.
Notwithstanding the foregoing, SABINE shall have no responsibility to
inform Transporters, LNG Vessels, Downstream Pipelines, LNG Suppliers or any
other Persons involved in the transaction as to such curtailment or temporary
discontinuation of Services.
51
17.1 Restrictions
on Assignment
(a) Consent
of Other Party Required. Except as
otherwise provided in this Article 17, neither this Agreement nor any rights or
obligations hereunder may be assigned by any Party without the prior written
consent of the other Party, which consent shall not be
unreasonably withheld.
(b) Obligation
of Assignee. If consent is granted
pursuant to Section 17.1(a) or in the case of an assignment permitted under
Section 17.2 (other than Section 17.2(c)), the assignee to such assignment
must, as a condition to such assignment, deliver to the non-assigning Party its
written undertaking to be bound by and perform all obligations of the assignor
under this Agreement.
17.2 Permitted
Assignments
(a) Affiliates
of SABINE. Notwithstanding the
provisions of Section 17.1, SABINE may freely assign all of its rights under
this Agreement to an Affiliate, upon notice to, but without requiring the
consent of, Customer.
(b) Affiliates
of Customer. Notwithstanding the
provisions of Section 17.1, provided Guarantor agrees in writing that the
Guarantee extends to all of the obligations assigned pursuant to this Section
17.2(b), Customer may freely assign all of its rights under this Agreement to
an Affiliate upon notice to, but without requiring the consent of, SABINE. An assignment to an Affiliate of Customer
under this Section 17.2(b) of all, but not less than all, of Customer’s rights
and obligations under this Agreement shall serve as a novation of this
Agreement.
(c) Financing. Notwithstanding the provisions of Section
17.1, SABINE shall be entitled to assign, mortgage, or pledge all or any of its
rights, interests, and benefits hereunder to secure payment of any indebtedness
incurred or to be incurred in connection with the construction and term
financing of the Sabine Pass Facility.
In addition to its obligations under Section 24.1, Customer shall
provide to the Lenders to whom such indebtedness is owed a consent to
assignment or similar document in form and substance customary for similar
financing transactions and agreed by such Lenders and Customer. Moreover, Customer agrees to enter into
customary direct agreements with such Lenders in form and substance customary
for similar financing transactions and agreed by such Lenders and Customer
covering matters that are customary in project financings of this type,
including Lender assignments or security rights with respect to this Agreement,
direct notices to Lenders and Lenders’ step-in/step-out rights; provided,
however, in no event shall Customer be required to agree to any amendment to
this Agreement or to provide (or cause to be provided) any guaranty or similar
commitment other than the Guarantee in favor of the Lenders, SABINE or any
other Person. No assignment under this
Section 17.2(c) shall serve as a novation of this Agreement.
52
(d) Partial
Assignments. Customer may assign a
portion of the Services Quantity (or Services in respect of any Make-Up
Quantity) for any period of time up to and including the remainder of the Term
of the Agreement, or all of its entitlements for a period of time that is less
than the remaining Term (collectively, a “Partial Assignment”),
without the prior consent of SABINE, to one or more assignees, provided that:
(i) the
assignees deliver to SABINE the written undertaking required by Section
17.1(b);
(ii) in
relation to all such partial assignments:
a. Customer
and all assignees shall designate one of them, or a third party, to act on
behalf of Customer and all assignees as Scheduling Representative for the
purposes of (a) exercising all
rights of Customer under Section 5.1 in relation to the Customer LNG Receipt
Schedule, provided that the Scheduling Representative shall identify each
Unloading Window within the Customer LNG Receipt Schedule and to each of the
assignees, and (b) exercising all rights of Customer under Section 5.2 in
relation to Gas nominations, provided that the Scheduling Representative shall
identify the portion of each daily nomination to be delivered for the account of
Customer and for the account of each of the assignees, and
b. Customer
and all assignees shall exercise all rights of Customer under this Agreement
(including all rights under Sections 2.3, 3.6, 4.5, 6.1, 8.2, 10.2, 11.3, 18.1,
20.1, 20.2, and 24.1) jointly, without delay or hindrance to each Party’s
performance of this Agreement; and
(iii) Customer’s Guarantor
agrees that the Guarantee extends to the obligations assigned pursuant to this
Section 17.2(d).
No Partial Assignment
shall (a) serve as a novation of this Agreement; or (b) reduce the
responsibility of Customer to SABINE in respect of the Services Quantity or
increase SABINE’s responsibilities to Customer and the assignees under this
Agreement. Customer shall indemnify and
hold SABINE harmless from any Liabilities incurred by SABINE arising from a
failure by Customer and assignees to designate a Scheduling Representative or
to exercise all rights of Customer jointly under (ii) above.
17.3 Assignment
as Novation
(a) Except
as provided in Section 17.2(b), an assignment under this Article 17 of all, but
not less than all, of Customer’s rights and obligations under this Agreement
shall not serve as a novation of this Agreement unless and until, but shall
serve as a novation if:
53
(i) the
assignee delivers to the non-assigning Party its written undertaking to be
bound by and perform all obligations of the assignor under this Agreement, as
if it were the assignor; and
(ii) in
the case of Customer, assignee having demonstrated to SABINE that its
creditworthiness (including credit support from an irrevocable letter of
credit, a parent guarantee or other security) at the time of the assignment is
the same or better than the creditworthiness of Guarantor or such
creditworthiness and/or assignee are otherwise reasonably acceptable to
SABINE. For the purposes of the
preceding sentence, the creditworthiness at the time of the assignment of the
proposed assignee shall be deemed acceptable to SABINE if (i) the credit rating
of such assignee is at such time equivalent to or better than no less than two
of the following three ratings: “A3” by
Moody’s Investor Service, “A-” by Standard and Poor’s and “A-” by Fitch
Ratings; and (ii) the minimum market capitalization of such assignee is three
billion five hundred million dollars ($3,500,000,000); or
(iii) in the case of SABINE,
assignee having demonstrated to Customer that:
a. its
creditworthiness at the time of the assignment is the same or better than the
creditworthiness of SABINE, and
b. it
has succeeded to substantially all of the assets comprising the Sabine Pass
Facility and is willing and able to make available the Services Quantity to
Customer.
(b) In
the event of a novation, the assignee shall be deemed to be a Party to this
Agreement for all purposes with respect to rights and obligations pertaining to
operations hereunder from and after the effective date of the assignment and
the assignor shall be relieved of all rights and obligations hereunder from and
after the effective date of the assignment.
18.1 Early
Termination Events
(a) Termination
by Customer. Customer may terminate
this Agreement pursuant to the other provisions of this Article 18, if:
(i) SABINE
has declared Force Majeure with respect to a period that is either projected by
SABINE to extend for eighteen (18) months or has in fact extended eighteen (18)
months;
(ii) for
reasons not excused by Force Majeure or Customer’s actions:
a. SABINE
failed to deliver to the Delivery Point an amount aggregating to 191,625,000
MMBTUs or more of Customer’s total Gas nominations in a twelve (12) month
period;
54
b. SABINE
has failed entirely to receive for Customer’s account at least fifteen (15)
Cargoes, nominated by Customer, over a period of ninety (90) consecutive days;
c. SABINE
failed to unload at the Receipt Point, or has notified Customer that it would
be unable to unload, the aggregate of fifty (50) Cargoes or more scheduled in
the Customer LNG Receipt Schedule for a twelve (12) month period; or
d. (x)
if SABINE has obtained a credit rating status by Moody Investor Service,
Standard and Poor’s or Fitch Ratings, the credit rating of SABINE falls below
two of the following three ratings: “B2” by Moody Investor Service, “B” by
Standard and Poor’s or “B” by Fitch Ratings for a period exceeding fifteen (15)
days and the debt to equity ratio of SABINE on such fifteenth (15th)
day exceeds 80/20; or (y) if SABINE has not obtained a credit rating status by
Moody Investor Service, Standard and Poor’s or Fitch Ratings, for a period
exceeding fifteen (15) days the debt to equity ratio of SABINE exceeds 80/20.
(b) Termination
by SABINE. SABINE may terminate this
Agreement pursuant to the other provisions of this Article 18 if:
(i) the
Guarantee ceases to be in full force and effect other than as provided in
Section 10(a) of the Guarantee;
(ii) for
a period exceeding fifteen (15) days, the credit rating of Guarantor falls
below two of the following three ratings: “Baa3” by Moody Investor Service, “BBB-”
by Standard and Poor’s or “BBB-” by Fitch Ratings; or
(iii) the Guarantor passes a
resolution, commences proceedings or has proceedings commenced against it
(which are not stayed within sixty (60) days of service thereof on Guarantor)
in the nature of bankruptcy or reorganization resulting from insolvency or for
its liquidation of for the appointment of a receiver, trustee in bankruptcy or
liquidator of its undertaking or assets.
(c) Notice. SABINE
or Customer, as the case may be, shall give notice of its exercise of any
termination right hereunder to the other Party.
(d) Cure. At
any time after the expiration of a period of thirty (30) days after the
terminating Party gives notice of termination pursuant to Section 18.1(c), such
Party may terminate this Agreement with immediate effect by giving notice of
such termination; provided, however, that the terminating Party may not
terminate this Agreement if the circumstances giving rise to such termination
right have been fully remedied or have ceased to apply.
(e) Financial
Reporting. In regard to item (y) in
Section 18.1(a)(ii)d above, until the time SABINE has obtained a credit rating
status by Moody Investor Service, Standard and Poor’s or Fitch Ratings, SABINE
shall provide (i) quarterly unaudited and yearly audited financial statements
to Customer (certified by an officer of SABINE to be fairly presented in all
material respects) to demonstrate
55
that SABINE’s debt
to equity ratio does not exceed 80/20 and (ii) subsequent to the Commercial
Start Date, a statement to Customer executed by an officer of SABINE certifying
SABINE’s debt to equity ratio, which statement shall be provided within five
(5) Business Days of SABINE incurring any additional indebtedness.
18.2 Other
Termination Provisions
This Agreement is also
subject to the termination provisions provided in Section 11.6.
18.3 Consequences
of Termination
Termination of this
Agreement under this Article 18 or any other provision of this Agreement shall
be without prejudice to any other rights and remedies of either Party arising
hereunder or by law or otherwise which arose or accrued prior to or as a result
of such termination or by reason of default of either Party; provided, however,
that in no event shall Customer be entitled to recover damages or pursue any
other remedy against SABINE in relation to Services which would have been
performed by SABINE after the date of termination by Customer.
The
substantive laws of the State of New York, United States of America, exclusive
of any conflicts of laws principles that could require the application of any
other law, shall govern this Agreement for all purposes, including the
resolution of all Disputes between or among the Parties.
20.1 Dispute
Resolution
(a) Arbitration. Any Dispute (other than a Dispute regarding
measurement under Annex I or Annex II) shall be exclusively and definitively
resolved through final and binding arbitration, it being the intention of the
Parties that this is a broad form arbitration agreement designed to encompass
all possible disputes.
(b) Rules. The arbitration shall be conducted in accordance
with the International Arbitration Rules (the “Rules”)
of the American Arbitration Association (“AAA”) (as then
in effect).
(c) Number
of Arbitrators. The arbitral
tribunal (“Tribunal”) shall consist of three (3) arbitrators, who shall endeavor to
complete the final hearing in the arbitration within six (6) months after the
appointment of the last arbitrator.
(d) Method
of Appointment of the Arbitrators.
If there are only two (2) parties to the Dispute, then each party to the
Dispute shall appoint one (1) arbitrator within thirty (30) days of the filing
of the arbitration, and the two arbitrators so appointed shall select the
presiding arbitrator within thirty (30) days after the latter of the
56
two arbitrators
has been appointed by the parties to the Dispute. If a party to the Dispute fails to appoint
its Party-appointed arbitrator or if the two Party-appointed arbitrators cannot
reach an agreement on the presiding arbitrator within the applicable time
period, then the AAA shall serve as the appointing authority and shall appoint
the remainder of the three arbitrators not yet appointed. If the arbitration is to be conducted by
three arbitrators and there are more than two parties to the Dispute, then
within thirty (30) days of the filing of the arbitration, all claimants shall
jointly appoint one arbitrator and all respondents shall jointly appoint one
arbitrator, and the two arbitrators so appointed shall select the presiding
arbitrator within thirty (30) days after the latter of the two arbitrators has
been appointed by the parties to the Dispute.
For the purposes of appointing
arbitrators under this Article 20, (a) Customer, Guarantor and all persons
whose interest in this Agreement derives from them shall be considered as one
Party; and (b) SABINE and all persons whose interest in this Agreement derives
from SABINE shall be considered as one Party.
If either all claimants or all respondents fail to make a joint
appointment of an arbitrator, or if the Party-appointed arbitrators cannot
reach an agreement on the presiding arbitrator within the applicable time
period, then the AAA as the appointing authority shall make the prescribed
appointment.
(e) Consolidation. If the Parties initiate multiple arbitration
proceedings under this Agreement and/or under the Guarantee, the subject
matters of which are related by common questions of law or fact and which could
result in conflicting awards or obligations, then either Party may request
prior to the appointment of the arbitrators for such multiple or subsequent
disputes that all such proceedings be consolidated into a single arbitral
proceeding. Such request shall be
directed to the AAA, which shall consolidate appropriate proceedings into a
single proceeding unless consolidation would result in undue delay for the
arbitration of the Disputes.
(f) Place
of Arbitration. Unless otherwise
agreed by all parties to the Dispute, the place of arbitration shall be
Houston, Texas.
(g) Language. The arbitration proceedings shall be
conducted in the English language, and the arbitrators shall be fluent in the
English language.
(h) Entry
of Judgment. The award of the
arbitral tribunal shall be final and binding.
Judgment on the award of the arbitral tribunal may be entered and
enforced by any court of competent jurisdiction. The Parties agree that service of process for
any action to enforce an award may be accomplished according to the procedures
of Article 23, as well as any other procedure authorized by law.
(i) Notice. All notices required for any arbitration
proceeding shall be deemed properly given if given in accordance with Article
23.
(j) Qualifications
and Conduct of the Arbitrators. All
arbitrators shall be and remain at all times wholly impartial, and, once
appointed, no arbitrator shall have any ex parte
communications with any of the parties to the Dispute concerning the
arbitration or the underlying Dispute other than communications directly
concerning the selection of the presiding arbitrator, where applicable.
57
(k) Interim
Measures. Any party to the Dispute
may apply to a court in Harris County, Texas for interim measures (i) prior to
the constitution of the arbitral tribunal (and thereafter as necessary to
enforce the arbitral tribunal’s rulings); or (ii) in the absence of the
jurisdiction of the arbitral tribunal to rule on interim measures in a given
jurisdiction. The Parties agree that
seeking and obtaining such interim measures shall not waive the right to
arbitration. The arbitrators (or in an
emergency the presiding arbitrator acting alone in the event one or more of the
other arbitrators is unable to be involved in a timely fashion) may grant
interim measures including injunctions, attachments and conservation orders in
appropriate circumstances, which measures may be immediately enforced by court
order. Hearings on requests for interim
measures may be held in person, by telephone, by video conference or by other
means that permit the parties to the Dispute to present evidence and arguments.
(l) Costs
and Attorneys’ Fees. The arbitral
tribunal is authorized to award costs of the arbitration in its award,
including (a) the fees and expenses of the arbitrators; (b) the costs of assistance
required by the tribunal, including its experts; (c) the fees and expenses of
the administrator; (d) the reasonable costs for legal representation of a
successful Party; and (e) any such costs incurred in connection with an
application for interim or emergency relief and to allocate those costs between
the parties to the Dispute. The costs of
the arbitration proceedings, including attorneys’ fees, shall be borne in the
manner determined by the arbitral tribunal.
(m) Interest. The award shall include pre-award and
post-award interest, as determined by the arbitral award, from the date of any
default or other breach of this Agreement until the arbitral award is paid in
full. Interest shall accrue at the Base
Rate.
(n) Currency
of Award. The arbitral award shall
be made and payable in United States dollars, free of any tax or other
deduction.
(o) Waiver
of Challenge to Decision or Award.
To the extent permitted by law, the Parties hereby waive any right to
appeal from or challenge any arbitral decision or award, or to oppose
enforcement of any such decision or award before a court or any governmental
authority, except with respect to the limited grounds for modification or
non-enforcement provided by any applicable arbitration statute or treaty.
(p) Confidentiality. Any arbitration or expert determination
relating to a Dispute (including a settlement resulting from an arbitral award,
documents exchanged or produced during an arbitration proceeding, and
memorials, briefs or other documents prepared for the arbitration) shall be
confidential and may not be disclosed by the Parties, their employees,
officers, directors, counsel, consultants, and expert witnesses, except (in
accordance with Article 21) to the extent necessary to enforce this Section 20.1
or any arbitration award, to enforce other rights of a party to the Dispute, or
as required by law; provided, however, that breach of this confidentiality
provision shall not void any settlement, expert determination or award.
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20.2 Expert
Determination
(a) General. In the event of any disagreement between the
Parties regarding a measurement under Annex I or Annex II (a “Measurement Dispute”), the Parties hereby agree that such
Measurement Dispute shall be resolved by an expert selected as provided in this
Section 20.2. The expert is not an
arbitrator of the Measurement Dispute and shall not be deemed to be acting in
an arbitral capacity. The Party desiring
an expert determination shall give the other Party to the Measurement Dispute
notice of the request for such determination.
If the Parties to the Measurement Dispute are unable to agree upon an
expert within ten (10) days after receipt of the notice of request for an
expert determination, then, upon the request of any of the Parties to the
Measurement Dispute, the International Centre for Expertise of the
International Chamber of Commerce shall appoint such expert and shall
administer such expert determination through the ICC’s Rules for Expertise. The expert shall be and remain at all times
wholly impartial, and, once appointed, the expert shall have no ex parte communications with any of the Parties to the
Measurement Dispute concerning the expert determination or the underlying
Measurement Dispute. The Parties to the
Measurement Dispute shall cooperate fully in the expeditious conduct of such
expert determination and provide the expert with access to all facilities,
books, records, documents, information and personnel necessary to make a fully
informed decision in an expeditious manner.
Before issuing a final decision, the expert shall issue a draft report
and allow the Parties to the Measurement Dispute to comment on it. The expert shall endeavor to resolve the
Measurement Dispute within thirty (30) days (but no later than sixty (60) days)
after his appointment, taking into account the circumstances requiring an
expeditious resolution of the matter in dispute.
(b) Final
and Binding. The expert’s decision shall be final and binding on the Parties
to the Measurement Dispute unless challenged in an arbitration pursuant to
Section 20.1 within thirty (30) days of the date the expert’s decision. If challenged, (i) the decision shall remain
binding and be implemented unless and until finally replaced by an award of the
arbitrators; (ii) the decision shall be entitled to a rebuttable presumption of
correctness; and (iii) the expert shall not be appointed in the arbitration as
an arbitrator or as advisor to either Party without the written consent of both
Parties.
(c) Arbitration
of Expert Determination. In the
event that a Party requests Expert Determination for a Measurement Dispute
which raises issues that require determination of other matters in addition to
correct measurement under Annex I or Annex II, then either Party may elect to
refer the entire Measurement Dispute for arbitration under Section 20.1. In such case, the arbitrators shall be
competent to make any measurement determination that is part of a Dispute. An Expert Determination not referred to
arbitration shall proceed and shall not be stayed during the pendency of an
arbitration.
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21.1 Confidentiality
Obligation
Neither this Agreement
nor information or documents that come into the possession of a Party by means
of the other Party in connection with the performance of this Agreement may be
used or communicated to Persons (other than the Parties) without the mutual
written agreement of the Parties, except that either Party shall have the right
to disclose such information or documents without obtaining the other Party’s
prior consent in any of the situations described below:
(a) accountants,
other professional consultants or underwriters, provided such disclosure is
solely to assist the purpose for which the aforesaid were so engaged and
further provided that such Persons agree to hold such information or documents
under terms of confidentiality equivalent to this Section 21.1, and for the
benefit of the Parties;
(b) Lenders
and other providers or prospective providers of finance to SABINE in relation
to the Sabine Pass Facility, provided that such Persons agree to hold such
information or documents confidential, and for the benefit of the Parties, for
a period of at least three (3) years (excepting information in connection with
the Fee, which shall be held confidential during the Term);
(c) bona
fide prospective purchasers of all or a part of a Party’s or its Affiliate’s
business and bona fide prospective assignees of all or part of a Party’s
interest in this Agreement, provided that such Persons agree to hold such
information or documents under terms of confidentiality equivalent to this
Section 21.1, and for the benefit of the Parties;
(d) to
legal counsel, provided such disclosure is solely to assist the purpose for
which the aforesaid were so engaged;
(e) if
required by any court of law or any law, rule, or regulation, or if requested
by a Governmental Authority (including the United States Securities and
Exchange Commission) having or asserting jurisdiction over a Party and having
or asserting authority to require such disclosure in accordance with that
authority, or pursuant to the rules of any recognized stock exchange or agency
established in connection therewith; in this regard, Customer acknowledges that a copy of this Agreement will be filed by
Cheniere Energy Inc. with the United States Securities and Exchange Commission in accordance with applicable
securities laws and regulations thereunder;
(f) to
prospective assignees permitted under Article 17, to prospective and actual LNG
Suppliers and to any prospective and actual purchasers under the Customer’s Gas
sales contracts from Customer’s Inventory, in each case only to the extent
required for the execution and/or administration of such contracts, and
provided that such Persons agree to hold such information or documents under
terms of confidentiality equivalent to this Section 21.1, and for the benefit
of the Parties;
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(g) to
its Affiliates, its shareholders and partners, or its shareholders’ and
partners’ Affiliates, provided that such recipient entity has a bona fide
business need for such information and agrees to hold such information or documents
under terms of confidentiality equivalent to this Section 21.1;
(h) to
any Government Authorities to the extent such disclosure assists SABINE and
Customer in obtaining Approvals;
(i) to
an expert in connection with the resolution of a Dispute pursuant to
Section 20.2 or to an arbitration tribunal in connection with the
resolution of a Dispute under Section 20.1;
(j) to
the extent any such information or document has entered the public domain other
than through the fault or negligence of the Party making the disclosure; and
(k) to
Other Customers by SABINE only in order to allow SABINE to perform its
obligations under Section 3.5 herein.
Notwithstanding the
foregoing, Customer acknowledges and agrees that certain providers of finance
to SABINE as well as SABINE’s shareholders and partners may disclose this
Agreement and information or documents disclosed pursuant to this Section 21.1
if required by any court of law or any law, rule, or regulation, or if
requested by a Governmental Authority having or asserting jurisdiction over
such Persons and having or asserting authority to require such disclosure in
accordance with that authority, or pursuant to the rules of any recognized
stock exchange or agency established in connection therewith.
21.2 Public
Announcements
(a) General. Neither Party may issue or make any public
announcement, press release or statement regarding this Agreement unless, prior
to the release of the public announcement, press release or statement, such
Party furnishes the other Party with a copy of such announcement, press release
or statement, and obtains the approval of the other Party; provided that,
notwithstanding any failure to obtain such approval, no Party shall be
prohibited from issuing or making any such public announcement, press release
or statement if in the sole discretion of the disclosing party it is deemed
appropriate to do so in order to comply with the applicable laws, rules or
regulations of any Governmental Authority, legal proceedings or stock exchange having
jurisdiction over such Party.
(b) SABINE
Promotional Materials.
Notwithstanding any provision in Section 21.2(a) to the contrary,
SABINE may, with the consent of Customer not to be unreasonably withheld, use
the following in external announcements and publications: (i) information
concerning the signing of this Agreement; (ii) the general nature of the
Services; and (iii) the general nature of Customer’s involvement in the Sabine
Pass Facility project.
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ARTICLE
22
REPRESENTATIONS AND WARRANTIES
22.1 Representations
and Warranties of Customer
As of the date hereof and
until the expiration of this Agreement, Customer represents, undertakes and
warrants that:
(a) Customer
is and shall remain duly formed and in good standing under the laws of the
State of Delaware and duly qualified to do business in the State of Louisiana;
(b) upon
receipt of board approval, Customer has the requisite power, authority and
legal right to execute and deliver, and to perform its obligations under, this
Agreement;
(c) Customer
has not incurred any liability to any financial advisor, broker or finder for
any financial advisory, brokerage, finder’s or similar fee or commission in
connection with the transactions contemplated by this Agreement for which
Customer or any of its Affiliates could be liable; and
(d) neither
the execution, delivery nor performance of this Agreement, violates or will
violate, results or will result in a breach of, or constitutes or will
constitute a default under, any provision of Customer’s organizational
documents, any law, judgment, order, decree, rule or regulation of any court,
administrative agency or other instrumentality of any Governmental Authority or
of any other material agreement or instrument to which Customer is a party.
22.2 Representations
and Warranties of SABINE
As of the date hereof and
until the expiration of this Agreement, SABINE represents, undertakes and
warrants that:
(a) SABINE
is and shall remain duly formed and in good standing under the laws of the
State of Delaware and duly qualified to do business in the State of Louisiana;
(b) SABINE
has the requisite power, authority and legal right to execute and deliver, and
to perform its obligations under this Agreement;
(c) SABINE
has not incurred any liability to any financial advisor, broker or finder for
any financial advisory, brokerage, finder’s or similar fee or commission in
connection with the transactions contemplated by this Agreement for which
Customer or any of its Affiliates could be liable; and
(d) neither
the execution, delivery nor performance of this Agreement, violates or will
violate, results or will result in a breach of, or constitutes or will
constitute a default under, any provision of SABINE’s organizational documents,
any law, judgment, order, decree, rule or regulation of any court,
administrative agency or other instrumentality of any Governmental Authority or
of any other material agreement or instrument to which SABINE is a party.
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Except as otherwise
specifically provided, all notices authorized or required between the Parties
by any of the provisions of this Agreement shall be in writing (in English) and
delivered in person or by courier service or by any electronic means of
transmitting written communications which provides written confirmation of
complete transmission, and addressed to such Party. Oral communication does not constitute notice
for purposes of this Agreement, and e-mail addresses and telephone numbers for
the Parties are listed below as a matter of convenience only. The foregoing notwithstanding, notices given
from LNG Vessels at sea may be given by radio, and notices required under
Article 5 may be given by e-mail. A
notice given under any provision of this Agreement shall be deemed delivered
only when received by the Party to whom such notice is directed, and the time
for such Party to deliver any notice in response to such originating notice
shall run from the date the originating notice is received. “Received” for
purposes of this Article 23 shall mean actual delivery of the notice, or
delivery of the notice to the address of the Party specified hereunder or, in
the event notice was given by radio from an LNG Vessel at sea, actual receipt
of the communication by radio, or to be thereafter notified in accordance with
this Article 23. Each Party shall have
the right to change its address at any time and/or designate that copies of all
such notices be directed to another Person at another address, by giving
written notice thereof to the other Party.
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SABINE PASS LNG, L.P.
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TOTAL
LNG USA, INC.
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717 Texas
Avenue, Suite 3100
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One Memorial
City Plaza
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Houston, Texas
77002
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800 Gessner,
Suite 700
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Houston, Texas
77024
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Attention:
President
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Attention: Vice
President, Legal
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Fax: (713)
659-5459
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Fax: (713)
647-4030
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Telephone: (713)
659-1361
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Telephone: (713)
647-4000
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24.1 Customer
Cooperation Regarding SABINE Financing
Customer acknowledges that SABINE intends to obtain
project financing for the cost of construction of the Sabine Pass Facility (the
“Financing”). In addition to Customer’s obligations under
Section 17.2(c), Customer shall cooperate with SABINE in SABINE’s efforts to
obtain the Financing by supplying the Lenders information concerning Customer
(that is in Customer’s possession and is not of a proprietary nature)
reasonably requested by the Lenders.
24.2 Amendments
This Agreement may not be amended, modified, varied or
supplemented except by an instrument in writing signed by SABINE and Customer.
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24.3 Approvals
Each Party shall use
reasonable endeavors to maintain in force all Approvals necessary for its performance
under this Agreement. Customer and
SABINE shall cooperate fully with each other wherever necessary for this
purpose.
24.4 Successors
and Assigns
This Agreement shall
inure to the benefit of and be binding upon the respective successors and permitted
assigns of the Parties.
No failure to exercise or
delay in exercising any right or remedy arising from this Agreement shall
operate or be construed as a waiver of such right or remedy. Performance of any condition or obligation to
be performed hereunder shall not be deemed to have been waived or postponed
except by an instrument in writing signed by the Party who is claimed to have
granted such waiver or postponement. No
waiver by either Party shall operate or be construed as a waiver in respect of
any failure or default not expressly identified by such written waiver, whether
of a similar or different character, and whether occurring before or after that
waiver.
24.6 No
Third Party Beneficiaries
The interpretation of
this Agreement shall exclude any rights under legislative provisions conferring
rights under a contract to Persons not a party to that contract. Nothing in this Agreement shall otherwise be
construed to create any duty to, or standard of care with reference to, or any
liability to, any Person other than a Party.
24.7 Rules
of Construction
(a) Drafting. Each provision of this Agreement shall be
construed as though all Parties participated equally in the drafting of the
same. Consequently, the Parties
acknowledge and agree that any rule of construction that a document is to be
construed against the drafting Party shall not be applicable to this Agreement.
(b) Priority.
(i) In
the event of a conflict between the terms of this Agreement excluding Annexes I
and II and Exhibits A, B and C (the “Base Agreement”)
and the terms of Annexes I and II and Exhibits A, B and C, then all terms of
the Base Agreement shall take precedence over Annexes I and II and
Exhibits A, B and C.
(ii) In
the event that any conflict arises between this Agreement and the Sabine Pass
Marine Operations Manual, this Agreement shall prevail. In the event that any
conflict arises between this Agreement and the Sabine Pass Services Manual,
this Agreement shall prevail.
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24.8 Survival
of Rights
Any termination or
expiration of this Agreement shall be without prejudice to any rights,
remedies, obligations and liabilities which may have accrued to a Party
pursuant to this Agreement or otherwise under applicable law. All rights or remedies which may have accrued
to the benefit of either Party (and any of this Agreement’s provisions
necessary for the exercise of such accrued rights or remedies) prior to the
termination or expiration of this Agreement shall survive such termination or
expiration. Furthermore, the provisions
of Article 11, Article 12, Article 14, Article 19, Article 20, Article 21,
Article 23, and Article 24 shall survive the termination or expiration of this
Agreement.
24.9 Rights
and Remedies
Except where this
Agreement expressly provides to the contrary, the rights and remedies contained
in this Agreement are cumulative and not exclusive of any rights and remedies
provided by law.
24.10 Interpretation
(a) Headings. The topical headings used in this Agreement
are for convenience only and shall not be construed as having any substantive
significance or as indicating that all of the provisions of this Agreement
relating to any topic are to be found in any particular Article or that an Article
relates only to the topical heading.
(b) Singular
and Plural. Reference to the
singular includes a reference to the plural and vice versa.
(c) Gender. Reference to any gender includes a reference
to all other genders.
(d) Article. Unless otherwise provided, reference to any
Article, Section, Annex or Exhibit means an Article, Section, Annex or Exhibit
of this Agreement.
(e) Include. The words “include” and “including”
shall mean include or including without limiting the generality of the description
preceding such term and are used in an illustrative sense and not a limiting
sense.
(f) Time
Periods. References to “day,” “month,” “quarter” and “year” shall, unless otherwise stated or defined, mean a day,
month, quarter and year of the Gregorian calendar, respectively. For the avoidance of doubt, a “day” shall commence at 24:00 midnight.
(g) Statutory
References. Unless the context
otherwise requires, any reference to a statutory provision is a reference to
such provision as amended or re-enacted or as modified by other statutory
provisions from time to time and includes subsequent legislation and
regulations made under the relevant statute.
(h) Currency. References to United States dollars shall be
a reference to the lawful currency from time to time of the United States of
America.
24.11 Disclaimer
of Agency
The
rights, duties, obligations and liabilities of the Parties under this Agreement
shall be individual, not joint or collective.
It is not the intention of the Parties to create, nor shall
65
this
Agreement be deemed or construed to create, nor shall the Parties report for
any purpose any transaction occurring pursuant to this Agreement as, (a) a
partnership, joint venture or other association or a trust, nor (b) a lease or
sales transaction with respect to any portion of the Sabine Pass Facility. This Agreement shall not be deemed or
construed to authorize any Party to act as an agent, servant or employee for
the other Party for any purpose whatsoever except as explicitly set forth in
this Agreement. In their relations with
each other under this Agreement, the Parties shall not be considered
fiduciaries.
24.12 No
Sovereign Immunity
Any
Party that now or hereafter has a right to claim sovereign immunity for itself
or any of its assets hereby waives any such immunity to the fullest extent
permitted by the laws of any applicable jurisdiction. This waiver includes immunity from (i) any
expert determination or arbitration proceeding commenced pursuant to this
Agreement; (ii) any judicial, administrative or other proceedings to aid
the expert determination or arbitration commenced pursuant to this Agreement;
and (iii) any effort to confirm, enforce, or execute any decision, settlement,
award, judgment, service of process, execution order or attachment (including
pre-judgment attachment) that results from an expert determination, mediation,
arbitration or any judicial or administrative proceedings commenced pursuant to
this Agreement. Each Party acknowledges
that its rights and obligations hereunder are of a commercial and not a
governmental nature.
24.13 Severance
of Invalid Provisions
If and for so long as any
provision of this Agreement shall be deemed to be judged invalid for any reason
whatsoever, such invalidity shall not affect the validity or operation of any
other provision of this Agreement except only so far as shall be necessary to
give effect to the construction of such invalidity, and any such invalid
provision shall be deemed severed from this Agreement without affecting the
validity of the balance of this Agreement.
24.14 Compliance
with Laws
In performance of their
respective obligations under this Agreement, each Party agrees to comply with
all applicable laws, statutes, rules, regulations, judgments, decrees,
injunctions, writs and orders, and all interpretations thereof, of all
Governmental Authorities having jurisdiction over such Party.
24.15 Conflicts
of Interest
SABINE shall avoid any
conflict between its own interests and the interests of Customer in relation to
obtaining LNG terminalling services from the Sabine Pass Facility. In this regard, SABINE shall not become one
of the Other Customers during the Term hereof unless Customer has first
consented in writing (such consent not to be unreasonably withheld or delayed)
to such expanded business role by SABINE.
For the avoidance of doubt, in no event shall (a) any of SABINE’s joint
venture partners or affiliated entities of any kind be restricted from becoming
one of the Other Customers during the Term hereof; or (b) any partner,
shareholder, member, or other equity owner of SABINE be
66
restricted from becoming
one of the Other Customers during the Term hereof. Except as provided above, the Parties and
their Affiliates are free to engage or invest (directly or indirectly) in an
unlimited number of activities or businesses, any one or more of which may be
related to or in competition with the business activities contemplated under
this Agreement, without having or incurring any obligation to offer any
interest in such business activities to the other Party.
Each Party shall be
responsible for and bear all of its own costs and expenses incurred in connection
with the preparation and negotiation of this Agreement.
This Agreement
constitutes the entire agreement between the Parties relating to the subject
matter hereof and supersedes and replaces any provisions on the same subject
contained in any other agreement between the Parties except as provided in the
Omnibus Agreement of even date, whether written or oral, prior to the date of
the original execution hereof.
24.18 Counterpart
Execution
This Agreement may be
executed in any number of counterparts and each such counterpart shall be
deemed an original Agreement for all purposes, provided that no Party shall be
bound to this Agreement unless and until both Parties have executed a
counterpart. For purposes of assembling
all counterparts into one document, Customer is authorized to detach the
signature page from one or more counterparts and, after signature thereof by
the respective Party, attach each signed signature page to a counterpart.
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be duly executed and signed by its duly authorized officer as of
the Effective Date.
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SABINE
PASS LNG, L.P.
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By:
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Sabine Pass LNG-GP,
Inc., its General Partner
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By:
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/s/ Charif Souki
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Name: Charif Souki
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Title: Chairman
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TOTAL
LNG USA, INC.
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By:
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/s/ Sveinung J. Stohle
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Name: Sveinung J. Stohle
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Title: President and General Manager
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67
ANNEX I
MEASUREMENTS
AND TESTS FOR LNG AT RECEIPT POINT
1. Parties
to Supply Devices
a) General. Unless otherwise agreed, Customer and SABINE
shall supply equipment and conform to procedures that are in accordance with
the latest appropriate International Organization for Standards (“ISO”) documents.
b) Customer
Devices. Customer or Customer’s
agent shall supply, operate and maintain, or cause to be supplied, operated and
maintained, suitable gauging devices for the liquid level in LNG tanks of the LNG
Vessels, pressure and temperature measuring devices, and any other measurement
or testing devices which are incorporated in the structure of LNG vessels or
customarily maintained on board ship.
c) SABINE
Devices. SABINE shall supply,
operate and maintain, or cause to be supplied, operated and maintained, devices
required for collecting samples and for determining quality and composition of
the LNG and any other measurement or testing devices which are necessary to
perform the measurement and testing required hereunder at the Sabine Pass
Facility.
d) Dispute. Any Dispute arising under this Annex I shall
be submitted to an Expert under Section 20.2.
2. Selection
of Devices
All devices provided for in this Annex I
shall be approved by SABINE, acting as a Reasonable and Prudent Operator. The required degree of accuracy (which shall
in any case be within the permissible tolerances defined herein and in the
applicable standards referenced herein) of such devices selected shall be
mutually agreed upon by Customer and SABINE.
In advance of the use of any device, the Party providing such device
shall cause tests to be carried out to verify that such device has the required
degree of accuracy.
3. Verification
of Accuracy and Correction for Error
a) Accuracy. Accuracy of devices used shall be tested and
verified at the request of either Party, including the request by a Party to
verify accuracy of its own devices. Each
Party shall have the right to inspect at any time the measurement devices
installed by the other Party, provided
that the other Party is notified in advance.
Testing shall be performed only when both Parties are represented, or
have received adequate advance notice thereof, using methods recommended by the
manufacturer or any other method agreed to by SABINE and Customer. At the request of any Party hereto, any test
shall be witnessed and verified by an independent surveyor mutually agreed upon
by Customer and SABINE. Permissible
tolerances shall be as defined herein or as defined in the applicable standards
referenced herein.
1
b) Inaccuracy. Inaccuracy of a device exceeding the
permissible tolerances shall require correction of previous recordings, and
computations made on the basis of those recordings, to zero error with respect
to any period which is definitely known or agreed upon by the Parties as well
as adjustment of the device. All invoices issued during such period shall be
amended accordingly to reflect such correction, and an adjustment in payment
shall be made between Customer and SABINE.
If the period of error is neither known nor agreed upon, and there is no
evidence as to the duration of such period of error, corrections shall be made
and invoices amended for each receipt of LNG made during the last half of the
period since the date of the most recent calibration of the inaccurate
device. However, the provisions of this
Paragraph 3 shall not be applied
to require the modification of any invoice that has become final pursuant to
Section 11.7.
c) Costs
and Expenses of Test Verification.
All costs and expenses for testing and verifying SABINE’s measurement
devices shall be borne by SABINE, and all costs and expenses for testing and
verifying Customer’s measurement devices shall be borne by Customer. The fees and charges of independent surveyors
for measurements and calculations shall be borne directly by Customer.
4. Tank
Gauge Tables of LNG Vessels
a) Initial
Calibration. Customer shall arrange or caused to be arranged, for each tank of each
LNG Vessel, a calibration of volume against tank level. Customer shall
provide SABINE or its designee, or cause SABINE or its designee to be provided,
with a certified copy of tank gauge tables for each tank of each LNG Vessel
verified by a competent impartial authority or authorities mutually agreed upon
by the Parties. Such tables shall include correction tables for list, trim,
tank contraction and any other items requiring such tables for accuracy of
gauging.
Tank gauge tables prepared
pursuant to the above shall indicate volumes in cubic metres expressed to the
nearest thousandth (1/1000), with LNG tank depths expressed in metres to the
nearest hundredth (1/100).
b) Presence
of Representatives. SABINE and
Customer shall each have the right to have representatives present at the time
each LNG tank on each LNG Vessel is volumetrically calibrated.
c) Recalibration. If the LNG tanks of any LNG Vessel suffer
distortion of such nature as to create a reasonable doubt regarding the validity
of the tank gauge tables described herein (or any subsequent calibration
provided for herein), Customer or Customer’s agent shall recalibrate the
damaged tanks, and the vessel shall not be employed as an LNG Vessel hereunder
until appropriate corrections are made.
If mutually agreed between Customer and SABINE representatives,
recalibration of damaged tanks can be deferred until the next time when such
damaged tanks are warmed for any reason, and any corrections to the prior tank
gauge tables will be made from the time the distortion occurred. If the time of the distortion cannot be
ascertained, the Parties shall mutually agree on the time period for
retrospective adjustments.
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5. Units of Measurement and Calibration
The Parties
shall co-operate in the design, selection and acquisition of devices to be used
for measurements and tests in order that all measurements and tests may be
conducted in the SI system of units, except for the quantity delivered which is
expressed in MMBtu, the Gross Heating Value (Volume Based) which is expressed
in Btu/SCF and the pressure which is expressed in millibar and temperature in
Celsius. In the event that it becomes necessary to make measurements and tests
using a new system of units of measurements, the Parties shall establish agreed
upon conversion tables.
6. Accuracy
of Measurement
All measuring equipment must be maintained,
calibrated and tested in accordance with the manufacturer’s recommendations. In
the absence of a manufacturer’s recommendation, the minimum frequency of
calibration shall be one hundred eighty (180) days, unless otherwise mutually
agreed between the Parties.
Documentation of all tests and calibrations will be made available by
the Party performing the same to the other Party. Acceptable accuracy and performance
tolerances shall be:
a) Liquid
Level Gauging Devices.
Each LNG tank of the LNG
Vessel shall be equipped with primary and secondary liquid level gauging
devices as per Paragraph 7(b) of this Annex I.
The measurement accuracy
of the primary gauging devices shall be plus or minus seven point five (± 7.5)
millimetres and the secondary liquid level gauging devices shall be plus or
minus ten (± 10) millimetres.
The liquid level in each
LNG tank shall be logged or printed.
b) Temperature
Gauging Devices.
The temperature of the
LNG and of the vapour space in each LNG tank shall be measured by means of a
number of properly located temperature measuring devices sufficient to permit
the determination of average temperature.
The measurement accuracy
of the temperature gauging devices shall be as follows:
(i) in
the temperature range of minus one hundred sixty five to minus one hundred
forty degree Celsius (-165C to -140°C), the accuracy shall be plus or minus
zero point two degree Celsius (± 0.2 °C);
(ii) in
the temperature range of minus one hundred forty to plus forty degree Celsius
(-140C to +40 °C), the accuracy shall be plus or minus one point five degree
Celsius (± 1.5 °C).
The temperature in each
LNG tank shall be logged or printed.
c) Pressure
Gauging Devices.
Each LNG tank of the LNG
Vessel shall have one (1) absolute pressure gauging device.
3
The measurement accuracy
of the pressure gauging device shall be plus or minus one percent (± 1%) of the
measuring range.
The pressure in each LNG
tank shall be logged or printed.
d) List
and Trim Gauging Devices.
A list gauging device and
a trim gauging device shall be installed.
These shall be interfaced with the custody transfer system.
The measurement accuracy
of the list and the trim gauging devices shall be better than plus or minus
zero point zero five (±0.05) degrees for list and plus or minus zero point zero
one (± 0.01) degrees for trim.
7. Gauging
and Measuring LNG Volumes Delivered
a) Gauge
Tables. Upon SABINE’s representative
and the independent surveyor, if present, arriving on board the LNG Vessel
prior to the commencement of or during unloading, Customer or Customer’s representative
shall make available to them a certified copy of tank gauge tables for each
tank of the LNG Vessel.
b) Gauges. Volumes of LNG delivered pursuant to this
Agreement shall be determined by gauging the LNG in the tanks of the LNG
Vessels before and after unloading. Each
LNG Vessel’s tank shall be equipped with a minimum of two (2) sets of level
gauges, each set utilizing a different measurement principle. Comparison of the two (2) systems, designated
as Primary and Secondary Measurement Systems, shall be performed from time to
time to ensure compliance with the acceptable performance tolerances stated
herein.
c) Gauging
Process. Gauging the liquid in the
tanks of the LNG Vessels and measuring of liquid temperature, vapor temperature
and vapor pressure in each LNG tank, trim and list of the LNG Vessels, and
atmospheric pressure shall be performed, or caused to be performed, by Customer
before and after unloading. SABINE’s
representative shall have the right to be present while all measurements are
performed and shall verify the accuracy and acceptability of all such
measurements. The first gauging and
measurements shall be made immediately before the commencement of unloading. The second gauging and measurements shall
take place immediately after the completion of unloading. The liquid level in the LNG Vessel before and
after the unloading shall be determined by at least two (2) separate tank
gaugings to be conducted at least fifteen (15) minutes apart.
d) Records. Copies of gauging and measurement records
shall be furnished to SABINE immediately upon completion of unloading.
e) Gauging
Liquid Level of LNG. The level of
the LNG in each LNG tank of the LNG Vessel shall be gauged by means of the
primary gauging device installed in the LNG Vessel for that purpose. The level
of the LNG in each tank shall be logged or printed.
4
Measurement of the liquid
level in each LNG tank of the LNG Ship shall be made to the nearest millimeter
by using the primary liquid level gauging devices. Should the primary devices
fail, the secondary device shall be used.
Five (5) readings shall
be made following manufacturer’s recommendations on reading interval. The
arithmetic average of the readings rounded to the nearest millimetre using one
(1) decimal place shall be deemed the liquid level.
f) Determination
of Temperature. The temperature of
the LNG and of the vapor space in each LNG tank shall be measured by means of a
sufficient number of properly located temperature measuring devices to permit
the determination of average temperature.
Temperatures shall be measured at the same time as the liquid level
measurements and shall be logged or printed.
In order to determine the
temperature of liquid and vapor respectively in the LNG Vessel one (1) reading
shall be taken at each temperature gauging device in each LNG tank. An
arithmetic average of such readings rounded to the nearest zero point one
degree Celsius (0.1 °C) using two (2) decimal places with respect to vapor and
liquid in all LNG tanks shall be deemed the final temperature of the vapor and
liquid respectively.
Customer shall cause each
cargo tank in the LNG Vessel to be provided with a minimum of five (5)
temperature measuring devices. One such
measuring device shall be located in the vapor space at the top of each cargo
tank, one near the bottom of each cargo tank and the remainder distributed at
appropriate intervals from the top to the bottom of the cargo tank. These devices shall be used to determine the
average temperatures of the liquid cargo and the vapor in the cargo tank.
The average temperature
of the vapor in an LNG Vessel shall be determined immediately before unloading
by means of the temperature measuring devices specified above at the same time
as when the liquid level is measured.
The temperature measuring devices shall be fully surrounded by the
vapor. This determination shall be made
by taking the temperature readings of the temperature measuring devices in
question to the nearest zero point zero one
degrees Celsius (0.01°C), and if more than one of the devices are fully
surrounded by the vapor, by averaging those readings, and rounding to 1 decimal
place.
g) Determination
of Pressure. The pressure of the
vapor in each LNG tank shall be determined by means of pressure measuring
devices installed in each LNG tank of the LNG Vessels. The atmospheric pressure shall be determined
by readings from the standard barometer installed in the LNG Vessels. Pressures shall be measured at the same time
as the liquid level measurements, and shall be logged or printed.
Customer shall
cause the LNG Vessel to be provided with pressure measuring equipment capable
of determining the absolute pressure of the vapor in each cargo tank with an
accuracy equal to or better than plus or minus one percent (± 1%) of the
measuring range.
5
The pressure of
the vapor in an LNG Vessel shall be determined immediately before unloading at
the same time as when the liquid level is measured.
Such determination
shall be made by taking the pressure readings of the pressure measuring devices
to the nearest millibar, then averaging these readings and rounding to a whole
millibar.
h) Determination
of Density. The LNG density shall be
calculated using the method described within ISO 6976-2000, Calculation of calorific values, density, relative density
and Wobbe Index from composition. This method shall be updated to conform to any
official published revision of that document. Should any improved data, method of
calculation or direct measurement device become available which is acceptable
to both Customer and SABINE,
such improved data, method or device shall then be used. If density is determined by measurements, the
results shall be measured at the same time as the liquid level measurements and
shall be logged or printed.
8. Samples
for Quality Analysis
a) General. Flow proportional representative liquid
samples shall be collected from an appropriate point located as close as
practical to the unloading line starting two (2) hours after the beginning of
transfer and ending two (2) hours before the end of transfer. Samples taken when biphasic or overheated LNG
is suspected to be in the main transfer line will be disregarded. These incremental samples will be passed
through a vaporizer, and samples of the vaporized liquid will be analyzed. The resulting analyses, which are
proportional to time, will be mathematically flow rate weighted to yield an
analysis that is representative of the unloaded Cargo. This flow rate weighted analysis shall be
used for all appropriate calculations associated with the delivered Cargo. Should the automatic sampling system fail
during the unloading, manual samples shall be collected and analyzed for
accounting purposes.
b) Manual
Samples. Prior to the end of the
unloading cycle, two (2) spot samples shall be collected from the
vaporizer. Spot samples shall be
collected in accordance with Gas Processors Association (“GPA”)
Standard 2166 - Methods for Obtaining Gas Samples for Analysis by Gas
Chromatography - or by other mutually agreeable methods. The samples shall be properly labeled and
then distributed to Customer and SABINE.
SABINE shall retain one (1) sample for a period of thirty (30) days,
unless the analysis is in dispute. If
the analysis is in dispute, the sample will be retained until the dispute is
resolved.
Sampling and analysis methods and procedures
that differ from the above may be employed with the mutual agreement of the Parties.
9. Quality
Analysis
a) Certification
and Deviation. Chromatograph
calibration gasses shall be provided and their composition certified by an
independent third party. From time to
time, deviation checks shall be performed to verify the accuracy of the gas
composition
6
mole percentages and resulting calculated physical
properties. Analyses of a sample of test
gas of known composition resulting when procedures that are in accordance with
the above mentioned standards have been applied will be considered as
acceptable if the resulting calculated gross real heating value is within plus
or minus zero point three percent (± 0. 3) of the known gross real heating
value of the test gas sample. If the
deviation exceeds the tolerance stated, the gross real heating value, relative
density and compressibility previously calculated will be corrected
immediately. Previous analyses will be
corrected to the point where the error occurred, if this can be positively
identified to the satisfaction of both Parties.
Otherwise it shall be assumed that the drift has been linear since the
last recalibration and correction shall be based on this assumption.
b) GPA
Standard 2261. All samples shall be
analyzed by SABINE to determine the molar fraction of the hydrocarbon and other
components in the sample by gas chromatography using a mutually agreed method
in accordance with GPA Standard 2261 - Method of Analysis for Gas and Similar
Gaseous Mixtures by Gas Chromatography, current as of January 1, 1990 and as
periodically updated or as otherwise mutually agreed by the Parties. If better standards for analysis are
subsequently adopted by GPA or other recognized competent impartial authority,
upon mutual agreement of Customer and SABINE, they shall be substituted for the
standard then in use, but such substitution shall not take place
retroactively. A calibration of the
chromatograph or other analytical instrument used shall be performed by SABINE
immediately prior to the analysis of the sample of LNG delivered. SABINE shall give advance notice to Customer
of the time SABINE intends to conduct a calibration thereof, and Customer shall
have the right to have a representative present at each such calibration; provided, however, SABINE will not be
obligated to defer or reschedule any calibration in order to permit the
representative of Customer to be present.
c) GPA
Standard 2377 and 2265. SABINE shall
determine the presence of Hydrogen Sulfide (H2S) by use of GPA Standard 2377 - Test of Hydrogen Sulfide
and Carbon Dioxide in Gas Using Length of Stain Tubes. If necessary, the concentration of H2S and total sulfur will be
determined using one or more of the following methods as is appropriate: gas
chromatography, Gas Processors Standard 2265 - Standard for Determination of
Hydrogen Sulfide and Mercaptan Sulfur in Gas (Cadmium Sulfate - Iodometric
Titration Method) or any other method that is mutually acceptable.
10. Operating
Procedures
a) Notice. Prior to conducting operations for
measurement, gauging, sampling and analysis provided in this Annex I, the Party
responsible for such operations shall notify the appropriate representatives of
the other Party, allowing such representatives reasonable opportunity to be
present for all operations and computations; provided that the absence of the other Party’s representative
after notification and opportunity to attend shall not prevent any operations
and computations from being performed.
7
b) Independent Surveyor. At the request of either Party any
measurement, gauging, sampling and analysis shall be witnessed and verified by
an independent surveyor mutually agreed upon by Customer and SABINE. The results of such surveyor’s verifications
shall be made available promptly to each Party.
c) Preservation
of Records. All records of
measurement and the computed results shall be preserved by the Party
responsible for taking the same, or causing the same to be taken, and made
available to the other Party for a period of not less than three (3) years
after such measurement and computation.
11. Quantities
Delivered
a) Calculation
of MMBTU Quantities. The quantity of
MMBTUs delivered shall be calculated by SABINE and verified by Customer. Either Party may, at its own expense, require
the measurements and calculations and/or their verification by an independent
surveyor, mutually agreed upon by the Parties.
Consent to an independent surveyor proposed by a Party shall not be
unreasonably withheld by the other Party.
b) Determination
of Gross Real Heating Value. All
component values shall be in accordance with the latest revision of ISO 6579
and the latest revision of the reference standards therein.
c) Determination of Volume of LNG Unloaded.
(i) The
LNG volume in the tanks of the LNG Vessel before and after unloading (valves have to be closed) shall be
determined by gauging on the basis of the tank gauge tables provided for in
Paragraph 6. The volume of LNG remaining
in the tanks after unloading of the LNG Vessel shall be subtracted from the
volume before unloading and the resulting volume shall be taken as the volume
of the LNG delivered from the LNG Vessel.
The volume of LNG stated
in cubic metres to the nearest zero point zero zero one (0.001) cubic metre,
shall be determined by using the tank gauge tables and by applying the volume
corrections set forth therein.
(ii) Gas
returned to the LNG Vessel during unloading shall not be deemed to be volume
unloaded for Customer’s account.
(iii) If
failure of the primary gauging and measuring devices of an LNG Vessel should
make it impossible to determine the LNG volume, the volume of LNG unloaded
shall be determined by gauging the liquid level using the secondary gauging and
measurement devices. If an LNG Vessel is
not so equipped, the volume of LNG delivered shall be determined by gauging the
liquid level in SABINE’s onshore LNG storage tanks immediately before and after
unloading the LNG Vessel, and such volume shall have added to it an estimated
LNG volume, agreed upon by the Parties, for boil-off from such tanks during the
unloading of such LNG Vessel and have
8
added to it the
volume of any LNG that has been pumped from the LNG Vessel’s tanks during
unloading. SABINE shall provide
Customer, or cause Customer to be provided with, a certified copy of tank gauge
tables for each onshore LNG tank which is to be used for this purpose, such
tables to be verified by a competent impartial authority.
12. Calculations
The calculation procedures contained in this Section are generally in
accordance with the Institute of Petroleum Measurement Manual, Part XII,
the Static Measurement of Refrigerated Hydrocarbon Liquids, Section 1, IP
251/76.
|
d
|
|
=
|
|
density of LNG unloaded
at the prevailing composition and temperature Tl in kg/m3, rounded to two (2)
decimal places, calculated according to the method specified in Paragraph
12.1 of this Annex I.
|
|
|
|
|
|
|
|
Hi
|
|
=
|
|
gross heating value
(mass based) of component “i” in MJ/kg, in accordance with Paragraph 12.6.1
of this Annex I.
|
|
|
|
|
|
|
|
Hm
|
|
=
|
|
gross heating value
(mass based) of the LNG unloaded in MJ/kg, calculated in accordance with the
method specified in Paragraph 12.3 of this Annex I, rounded to four (4)
decimal places.
|
|
|
|
|
|
|
|
Hv
|
|
=
|
|
gross heating value
(volume based) of the LNG unloaded in Btu/SCF, calculated in accordance with
the method specified in Paragraph12.5 of this Annex I.
|
|
|
|
|
|
|
|
K1
|
|
=
|
|
volume correction in
m3/kmol, at temperature Tl, obtained by linear interpolation from Paragraph
12.6.3 of this Annex I, rounded to six (6) decimal places.
|
|
|
|
|
|
|
|
K2
|
|
=
|
|
volume correction in
m3/kmol, at temperature Tl obtained by linear interpolation from Paragraph
12.6.4 of this Annex I, rounded to six (6) decimal places.
|
|
|
|
|
|
|
|
Mi
|
|
=
|
|
molecular mass of
component “i” in kg/kmol, in accordance with Paragraph 12.6.1 of this Annex
I.
|
|
|
|
|
|
|
|
P
|
|
=
|
|
average absolute
pressure of vapor in an LNG Vessel immediately before unloading, in
millibars, rounded to a whole millibar.
|
|
|
|
|
|
|
|
Q
|
|
=
|
|
number of MMBtu
contained in the LNG delivered, rounded to the nearest ten (10) MMBtu.
|
|
|
|
|
|
|
|
Tl
|
|
=
|
|
average temperature of
the liquid cargo in the LNG Vessel immediately after unloading, in degrees
Celsius, rounded to one (1) decimal place.
|
|
|
|
|
|
|
|
Tv
|
|
=
|
|
average temperature of
the vapor in an LNG Vessel immediately before unloading, in degrees Celsius,
rounded to one (1) decimal place.
|
|
|
|
|
|
|
|
V
|
|
=
|
|
the volume of the
liquid cargo unloaded, in cubic metres, rounded to three (3) decimal places.
|
9
|
Vh
|
|
=
|
|
the volume of the
liquid cargo in an LNG Vessel immediately after unloading, in cubic metres,
rounded to three (3) decimal places.
|
|
|
|
|
|
|
|
Vb
|
|
=
|
|
the volume of the
liquid cargo in an LNG Vessel immediately before unloading, in cubic metres,
rounded to three (3) decimal places.
|
|
|
|
|
|
|
|
Vi
|
|
=
|
|
molar volume of
component “i” at temperature Tl, in m3/kmol, obtained by linear interpolation
from Paragraph 12.6.2 of this Annex I, rounded to six (6) decimal places.
|
|
|
|
|
|
|
|
Xi
|
|
=
|
|
molar fraction of
component “i” of the LNG samples taken from the receiving line, rounded to
four (4) decimal places, determined by gas chromatographic analysis.
|
|
|
|
|
|
|
|
Xm
|
|
=
|
|
the value of Xi for
methane.
|
|
|
|
|
|
|
|
Xn
|
|
=
|
|
the value of Xi for nitrogen.
|
12.1 Density
Calculation Formula
The density of the LNG
unloaded which is used in the MMBtu calculation in 12.4 of this Annex I shall
be calculated from the following formula derived from the revised
Klosek-McKinley method:
In the application of the
above formula, no intermediate rounding shall be made if the accuracy of “d” is
thereby affected.
12.2 Calculation
of Volume Delivered
The volume, in cubic
metres, of each LNG cargo unloaded shall be calculated by using the following
formula:
12.3 Calculation
of Gross Heating Value (Mass Based)
The gross heating value
(mass based), in MJ/kg, of each LNG cargo unloaded shall be calculated by using
the following formula:
10
12.4 MMBtu
Calculation of the Quantity of LNG Unloaded
The number of
MMBtu contained in the LNG unloaded shall be calculated using the following
formula:
The derivation of
the conversion factor 1/1055.12 in the formula in this Paragraph for the
conversion of MJ into MMBtu is obtained from GPA-2145:1994 and IP-251:1976 as
follows:
(a) q(T,P) means the gross heating value (measured at
temperature T and pressure P), contained in a given quantity of gas;
(b) q(60°F, 14.696 psia) in MJ = 1/1.00006 x
q(15°C, 1013.25 millibar) in MJ;
(c) 1
MMBtu corresponds to 1055.06 MJ;
(d) q(60°F, 14.696 psia) in MMBtu = 1/1055.06
x q(60°F, 14.696 psia) in MJ; and
(e) Combining
(b) and (d) above yields:
q(60°F, 14.696 psia) in MMBtu = 1/1055.12 x q(15°C, 1013.25 millibar) in
MJ.
Hence the number of MJ
derived shall be divided by 1055.12 to obtain the number of MMBtu for invoicing
purposes.
12.5 Calculation
of Gross Heating Value (Volume Based)
The calculation of the
Gross Heating Value (Volume Based) in Btu/SCF shall be derived from the same
compositional analysis as is used for the purposes of calculating the Gross
Heating Value (Mass Based) Hm and the
following formula shall apply:
The derivation of the
conversion factor 1.13285 for the conversion of MJ/kmol into Btu/SCF is obtained
as follows:
(a) molar
gross heating value = 
(Xi x Mi x Hi) MJ/kmol;
(b) 1
kmol = 2.20462 lbmol;
11
(c) 1
lbmol = 379.482 SCF;
(d) hence
1 kmol = 836.614 SCF; and
(e) Hv = 1,000,000/ (1055.12 x 836.614) x (Xi x Mi x Hi) Btu/SCF; or
Hv = 1.13285 x (Xi x Mi x Hi) Btu/SCF,
12.6 Data
12.6.1 Values
of Hi and Mi
|
Component
|
|
Hi (in MJ/kg)
|
|
Mi (in kg/kmol)
|
|
Methane
|
|
55.575
|
|
16.043
|
|
Ethane
|
|
51.950
|
|
30.070
|
|
Propane
|
|
50.368
|
|
44.097
|
|
Iso-Butane
|
|
49.388
|
|
58.123
|
|
N-Butane
|
|
49.546
|
|
58.123
|
|
Iso-Pentane
|
|
48.949
|
|
72.150
|
|
N-Pentane
|
|
49.045
|
|
72.150
|
|
N-Hexane
|
|
48.716
|
|
86.177
|
|
Nitrogen
|
|
0
|
|
28.013
|
|
Carbon Dioxide
|
|
0
|
|
44.010
|
|
Oxygen
|
|
0
|
|
31.999
|
Source: GPA
Publication 2145 Sl-96: “Physical Constants of Paraffin Hydrocarbons and other
components of natural gas”.
12.6.2 Values
of Vi (cubic metre/kmol)
|
Temperature
|
|
-150°C
|
|
-154°C
|
|
-158°C
|
|
-160°C
|
|
-162°C
|
|
-166°C
|
|
-170°C
|
|
Methane
|
|
0.039579
|
|
0.038983
|
|
0.038419
|
|
0.038148
|
|
0.037884
|
|
0.037375
|
|
0.036890
|
|
Ethane
|
|
0.048805
|
|
0.048455
|
|
0.048111
|
|
0.047942
|
|
0.047774
|
|
0.047442
|
|
0.047116
|
|
Propane
|
|
0.063417
|
|
0.063045
|
|
0.062678
|
|
0.062497
|
|
0.062316
|
|
0.061957
|
|
0.061602
|
|
Iso-Butane
|
|
0.079374
|
|
0.078962
|
|
0.078554
|
|
0.078352
|
|
0.078151
|
|
0.077751
|
|
0.077356
|
|
N-Butane
|
|
0.077847
|
|
0.077456
|
|
0.077068
|
|
0.076876
|
|
0.076684
|
|
0.076303
|
|
0.075926
|
|
Iso-Pentane
|
|
0.092817
|
|
0.092377
|
|
0.091939
|
|
0.091721
|
|
0.091504
|
|
0.091071
|
|
0.090641
|
|
N-Pentane
|
|
0.092643
|
|
0.092217
|
|
0.091794
|
|
0.091583
|
|
0.091373
|
|
0.090953
|
|
0.090535
|
|
N-Hexane
|
|
0.106020
|
|
0.105570
|
|
0.105122
|
|
0.104899
|
|
0.104677
|
|
0.104236
|
|
0.103800
|
|
Nitrogen
|
|
0.055877
|
|
0.051921
|
|
0.048488
|
|
0.046995
|
|
0.045702
|
|
0.043543
|
|
0.041779
|
|
Carbon Diox
|
|
0.027950
|
|
0.027650
|
|
0.027300
|
|
0.027200
|
|
0.027000
|
|
0.026700
|
|
0.026400
|
|
Oxygen
|
|
0.03367
|
|
0.03275
|
|
0.03191
|
|
0.03151
|
|
0.03115
|
|
0.03045
|
|
0.02980
|
Source: National
Bureau of Standards Interagency Report 77-867, Institute of Petroleum IP251/76
for Oxygen.
Note: For
intermediate values of temperature and molecular mass a linear interpolation
shall be applied.
12
12.6.3 Values
of Volume Correction Factor, K1 (cubic
metre/kmol)
|
Molecular
Mass of
Mixture
|
|
-150°C
|
|
-154°C
|
|
-158°C
|
|
-160°C
|
|
-162°C
|
|
-166°C
|
|
-170°C
|
|
16.0
|
|
-0.000012
|
|
-0.000010
|
|
-0.000009
|
|
-0.000009
|
|
-0.000008
|
|
-0.000007
|
|
-0.000007
|
|
16.5
|
|
0.000135
|
|
0.000118
|
|
0.000106
|
|
0.000100
|
|
0.000094
|
|
0.000086
|
|
0.000078
|
|
17.0
|
|
0.000282
|
|
0.000245
|
|
0.000221
|
|
0.000209
|
|
0.000197
|
|
0.000179
|
|
0.000163
|
|
17.2
|
|
0.000337
|
|
0.000293
|
|
0.000261
|
|
0.000248
|
|
0.000235
|
|
0.000214
|
|
0.000195
|
|
17.4
|
|
0.000392
|
|
0.000342
|
|
0.000301
|
|
0.000287
|
|
0.000274
|
|
0.000250
|
|
0.000228
|
|
17.6
|
|
0.000447
|
|
0.000390
|
|
0.000342
|
|
0.000327
|
|
0.000312
|
|
0.000286
|
|
0.000260
|
|
17.8
|
|
0.000502
|
|
0.000438
|
|
0.000382
|
|
0.000366
|
|
0.000351
|
|
0.000321
|
|
0.000293
|
|
18.0
|
|
0.000557
|
|
0.000486
|
|
0.000422
|
|
0.000405
|
|
0.000389
|
|
0.000357
|
|
0.000325
|
|
18.2
|
|
0.000597
|
|
0.000526
|
|
0.000460
|
|
0.000441
|
|
0.000423
|
|
0.000385
|
|
0.000349
|
|
18.4
|
|
0.000637
|
|
0.000566
|
|
0.000499
|
|
0.000477
|
|
0.000456
|
|
0.000412
|
|
0.000373
|
|
18.6
|
|
0.000677
|
|
0.000605
|
|
0.000537
|
|
0.000513
|
|
0.000489
|
|
0.000440
|
|
0.000397
|
|
18.8
|
|
0.000717
|
|
0.000645
|
|
0.000575
|
|
0.000548
|
|
0.000523
|
|
0.000467
|
|
0.000421
|
|
19.0
|
|
0.000757
|
|
0.000685
|
|
0.000613
|
|
0.000584
|
|
0.000556
|
|
0.000494
|
|
0.000445
|
|
19.2
|
|
0.000800
|
|
0.000724
|
|
0.000649
|
|
0.000619
|
|
0.000589
|
|
0.000526
|
|
0.000474
|
|
19.4
|
|
0.000844
|
|
0.000763
|
|
0.000685
|
|
0.000653
|
|
0.000622
|
|
0.000558
|
|
0.000503
|
|
19.6
|
|
0.000888
|
|
0.000803
|
|
0.000721
|
|
0.000688
|
|
0.000655
|
|
0.000590
|
|
0.000532
|
|
19.8
|
|
0.000932
|
|
0.000842
|
|
0.000757
|
|
0.000722
|
|
0.000688
|
|
0.000622
|
|
0.000561
|
|
20.0
|
|
0.000976
|
|
0.000881
|
|
0.000793
|
|
0.000757
|
|
0.000721
|
|
0.000654
|
|
0.000590
|
|
25.0
|
|
0.001782
|
|
0.001619
|
|
0.001475
|
|
0.001407
|
|
0.001339
|
|
0.001220
|
|
0.001116
|
|
30.0
|
|
0.002238
|
|
0.002043
|
|
0.001867
|
|
0.001790
|
|
0.001714
|
|
0.001567
|
|
0.001435
|
Source: National
Bureau of Standards Interagency Report 77-867.
Note 1: Molecular
mass of mixture equals (Xi x Mi).
Note 2: For
intermediate values of temperature and molecular mass a linear interpolation
shall be applied.
12.6.4 Values
of Volume Correction Factor, K2 (cubic
metre/kmol)
|
Molecular
Mass of
Mixture
|
|
-150°C
|
|
-154°C
|
|
-158°C
|
|
-160°C
|
|
-162°C
|
|
-166°C
|
|
-170°C
|
|
16.0
|
|
-0.000039
|
|
-0.000031
|
|
-0.000024
|
|
-0.000021
|
|
-0.000017
|
|
-0.000012
|
|
-0.000009
|
|
16.5
|
|
0.000315
|
|
0.000269
|
|
0.000196
|
|
0.000178
|
|
0.000162
|
|
0.000131
|
|
0.000101
|
|
17.0
|
|
0.000669
|
|
0.000568
|
|
0.000416
|
|
0.000377
|
|
0.000341
|
|
0.000274
|
|
0.000210
|
|
17.2
|
|
0.000745
|
|
0.000630
|
|
0.000478
|
|
0.000436
|
|
0.000397
|
|
0.000318
|
|
0.000246
|
|
17.4
|
|
0.000821
|
|
0.000692
|
|
0.000540
|
|
0.000495
|
|
0.000452
|
|
0.000362
|
|
0.000282
|
|
17.6
|
|
0.000897
|
|
0.000754
|
|
0.000602
|
|
0.000554
|
|
0.000508
|
|
0.000406
|
|
0.000318
|
|
17.8
|
|
0.000973
|
|
0.000816
|
|
0.000664
|
|
0.000613
|
|
0.000564
|
|
0.000449
|
|
0.000354
|
|
18.0
|
|
0.001049
|
|
0.000878
|
|
0.000726
|
|
0.000672
|
|
0.000620
|
|
0.000493
|
|
0.000390
|
|
18.2
|
|
0.001116
|
|
0.000939
|
|
0.000772
|
|
0.000714
|
|
0.000658
|
|
0.000530
|
|
0.000425
|
|
18.4
|
|
0.001184
|
|
0.001000
|
|
0.000819
|
|
0.000756
|
|
0.000696
|
|
0.000567
|
|
0.000460
|
|
18.6
|
|
0.001252
|
|
0.001061
|
|
0.000865
|
|
0.000799
|
|
0.000735
|
|
0.000605
|
|
0.000496
|
|
18.8
|
|
0.001320
|
|
0.001121
|
|
0.000912
|
|
0.000841
|
|
0.000773
|
|
0.000642
|
|
0.000531
|
|
19.0
|
|
0.001388
|
|
0.001182
|
|
0.000958
|
|
0.000883
|
|
0.000811
|
|
0.000679
|
|
0.000566
|
|
19.2
|
|
0.001434
|
|
0.001222
|
|
0.000998
|
|
0.000920
|
|
0.000844
|
|
0.000708
|
|
0.000594
|
|
19.4
|
|
0.001480
|
|
0.001262
|
|
0.001038
|
|
0.000956
|
|
0.000876
|
|
0.000737
|
|
0.000623
|
|
19.6
|
|
0.001526
|
|
0.001302
|
|
0.001078
|
|
0.000992
|
|
0.000908
|
|
0.000765
|
|
0.000652
|
|
19.8
|
|
0.001573
|
|
0.001342
|
|
0.001118
|
|
0.001029
|
|
0.000941
|
|
0.000794
|
|
0.000681
|
|
20.0
|
|
0.001619
|
|
0.001382
|
|
0.001158
|
|
0.001065
|
|
0.000973
|
|
0.000823
|
|
0.000709
|
|
25.0
|
|
0.002734
|
|
0.002374
|
|
0.002014
|
|
0.001893
|
|
0.001777
|
|
0.001562
|
|
0.001383
|
|
30.0
|
|
0.003723
|
|
0.003230
|
|
0.002806
|
|
0.002631
|
|
0.002459
|
|
0.002172
|
|
0.001934
|
13
Source: National Bureau
of Standards Interagency Report 77-867.
Note 1: Molecular
mass of mixture equals (Xi x Mi).
Note 2: For
intermediate values of temperature and molecular mass a linear interpolation
shall be applied.
14
ANNEX II
MEASUREMENTS AND TESTS FOR GAS AT
DELIVERY POINT
1. Applicability. The measurement procedures in this Annex II
shall apply to the measurement of quantities (volume, energy) Gas delivered by
SABINE for Customer’s Account at the Delivery Point.
2. Unit
of Measurement. All Gas delivered at
the Delivery Point shall be measured in MMBTUs.
3. Metering.
(a) Metering
Equipment. SABINE shall supply,
operate and maintain (or cause to be supplied, operated and maintained at or
near the Delivery Point) the following:
i) meters
with redundancy and other equipment as is necessary to accurately measure the
volume of Gas delivered at the Delivery Point hereunder;
ii) devices
for collecting samples and for determining the quality and composition of Gas
delivered at the Delivery Point hereunder; and
iii) and
any other measurement or testing devices which are necessary to perform the
measurement and testing required hereunder at the Delivery Point.
(collectively, the “Downstream
Metering Equipment”). The
Downstream Metering Equipment shall be designed and installed in accordance
with the current recommendations of the American Gas Association, Report No. 3 and 9 for Ultrasonic Metering.
(b) Check
Measurement Equipment and Access.
Customer may, at Customer’s expense, install and operate, at or near the
Downstream Metering Equipment, independent
check measuring equipment similar to the Downstream Metering Equipment to
monitor the accuracy of the measurements made by the Downstream Metering
Equipment. Such check metering equipment
will be installed and operated by Customer so that it does not unreasonably
interfere with the operation of the Downstream Metering Equipment.
(c) General. A pressure transmitter shall be installed on
each meter tube to measure the static pressure at the plane of the upstream
differential pressure tapping. The
temperature of the flowing Gas shall be measured on each meter tube by a
platinum resistance thermometer installed in a thermowell so that the probe tip
is in the center one-third of the pipe.
Each meter run shall be provided with a dedicated microprocessor-based
flow computer system powered by an appropriate back-up power supply.
(d) Measuring
and Density Standards. Gas shall be
measured by ultrasonic meters.
Ultrasonic meters shall be constructed and operated, Gas shall be
measured, and properties shall be determined in accordance with American Gas
Association, Report No. 9 and
any subsequent modification and amendment thereof. The compressibility and density shall be
calculated in accordance with the latest
1
revision of the American Gas Association, Report No. 9.
Metering equipment shall include the use of flow conditioners,
straightening vanes, and pulsation dampening devices where necessary. Meter
tubes shall be of a design incorporating suitable access for periodic internal
inspection, including access for internal inspection of the upstream side of
the flow conditioner. Electronic gas
measurement with a continuous readout of pressure, temperature, and Gas flow
rate shall be used. All computations
shall be made as prescribed in the above cited standard.
(e) Ultrasonic
Metering Standard. All ultrasonic
metering shall comply with the American Gas Association, Report No. 9 and any subsequent modification and amendment thereof.
4. Determination
of Gross Heating Value.
(a) GPA
2261 and 2145. The heating value of
the Gas delivered by SABINE at the Delivery Point shall be determined by gas
chromatograph. The composition of the
Gas shall be continuously measured by on-line chromatographs. The Gross Heating Value of the Gas shall be
calculated using results from the on-line chromatograph. The chromatographs will analyze all
hydrocarbon components, up to and including at least the Nonanes+ group, and
inerts having a concentration of greater than 0.002 mol percent. The determination of Gas composition shall be
in accordance with the GPA Standard 2261 – Analysis for Natural Gas and Similar
Gaseous Mixtures by Gas Chromatography.
All physical properties used in quality and quantity calculations shall
be based on these compositional analyses and the component values published in
GPA 2145, or the latest revision thereof.
Water vapor content shall be included in the component analyses. The sample analysis cycle time shall be less
than six (6) minutes. The maximum
response time from sample probe to analyzer shall be four (4) minutes. In the event of failure of the on-line Gas
chromatograph, chromatograph analysis of samples collected proportional to the
flow through the meters shall be used.
Auto-calibration of the Gas chromatograph shall be conducted on a weekly
basis or as otherwise mutually agreed by the Parties.
(b) GPA
2145. Back-up composite samples of
the flowing Gas shall be obtained weekly to be used for relative density
(specific gravity), Gross Heating Value, and compressibility factors in case of
electronic failure. Composite sampling
of the flowing stream shall be by use of a mutually agreeable continuous
sampler, designed and installed to sample proportionally to the flow rate. The end point of each composite sample
chromatographic analysis shall be the Nonane+ fraction, and values for this
fraction shall be based on the C9 value in the latest revision of GPA Standard
2145 – Table of Physical Constants of Paraffin Hydrocarbons and Other
Components of Natural Gas. All component
values shall be in accordance with such standard.
(c) Quarterly
Deviation Checks. Monthly gas
chromatograph deviation checks shall be made on Gas composition mole
percentages and resulting Gross Heating Value.
Analyses of a sample of test Gas of known composition resulting when
procedures that are in accordance with the above mentioned standards have been
A-2
applied will be considered as acceptable if the
resulting calculated Gross Heating Value is within plus or minus five (5) BTU
per Standard Cubic Foot of the known Gross Heating Value. If the deviation exceeds the tolerance
stated, Gross Heating Value, relative density, and compressibility previously
calculated will be corrected immediately.
Previous analyses will be corrected to the point where the error
occurred. If the point that the error
occurred cannot be determined, previous analyses will be corrected for one-half
the period since the last verification test, not to exceed a correction period
of six months.
(d) Corrections
for Water Content. The heating value
on a dry basis for Gas containing water shall be corrected in accordance with
standards followed by the American Gas Association. Moisture content of flowing Gas shall be
determined as often as found necessary in real practice by use of a mutually
acceptable calculation or test instrument, which could include a Meco Moisture
Analyzer.
5. Operating
Procedures
(a) Notice. Prior to conducting operations for
measurement, calibration, sampling and analysis provided in Annex II, the Party
responsible for such operations shall notify the appropriate representatives of
the other Party, allowing such representatives reasonable opportunity to be
present for all operations and computations; provided that the absence of the
other Party’s representative after notification and opportunity to attend shall
not prevent any operations and computations from being performed.
(b) Independent
Surveyor. At the request of either
Party any measurement, calibration, sampling and analysis shall be witnessed
and verified by an independent surveyor mutually agreed upon by Customer and
SABINE. The results of such surveyor’s
verifications shall be made available promptly to each Party.
(c) Preservation
of Records. All records of measurement
and the computed results shall be preserved by the Party responsible for taking
the same, or causing the same to be taken, and made available to the other
Party for a period of not less than three (3) years after such measurement and
computation.
6. Verification. At least once each month, and in addition,
from time to time upon at least two (2)
weeks prior written notice by either Party to the other, SABINE shall verify or
cause to be verified the accuracy of the Downstream Metering Equipment. When as a result of such test any of the
Downstream Metering Equipment is found to be out of calibration within the
accuracy provided by the manufacturer in the specification for such equipment ,
no adjustment shall be made to the Fee.
If the testing of the Downstream Metering Equipment demonstrates that
any meter is out of calibration by more than the accuracy provided by the
manufacturer in the specifications for such equipment, the applicable
Downstream Metering Equipment reading for the actual period during which out of
calibration measurements were made shall be estimated as follows, in descending
order of priority:
(a) by
using the registration of any check meter or meters if installed and accurately
registering;
A-3
(b) by
correcting the error if the percentage of error is ascertainable by
calibration, test, or mathematical calculation; or
(c) by
estimating the quantity of delivery by measuring deliveries during prior
periods under similar conditions when any meter was registering accurately.
If the actual period that such equipment has been out
of calibration cannot be determined to the mutual satisfaction of SABINE and
Customer, the adjustment shall be for a period equal to one-half of the time
elapsed since the most recent test. The previous payments made by Customer to
SABINE for this period shall be subtracted from the amount of payments that are
calculated to have been owed under this Agreement. The difference (which may be a positive or
negative amount) shall be added to the next monthly statement pursuant to
Section 12.2.
7. Costs. The cost of the monthly testing and
calibration of the Downstream Metering Equipment shall be borne by SABINE. The cost
of any testing and calibration of the Downstream Metering Equipment beyond the
monthly test permitted above shall also be paid by SABINE, unless the request
to test any of the Downstream Metering Equipment is made by Customer and the
results of such test requested by Customer demonstrate that the Downstream
Metering Equipment is less than one
percent (1%) out of calibration or outside of the accuracy given by the
manufacturer, in which case the cost of such testing and calibration shall be
for Customer’s account. Each Party shall
comply with any reasonable request of the other Party concerning the sealing of
the Downstream Metering Equipment, the presence of a representative of Customer
when the seals are broken and tests are conducted, and other matters affecting
the accuracy, testing and calibration of the Downstream Metering Equipment.
8. Disputes. Any Dispute arising under this Annex II shall
be submitted to an Expert under Section 20.2.
A-4
EXHIBIT A
FORM OF
PARENT GUARANTEE
Guarantee, dated as of ,
2004, by TOTAL S.A., a corporation organized under the laws of France (the “Guarantor”),
in favor of SABINE PASS LNG, L.P., a
limited partnership organized under the laws of the state of Delaware, U.S.A. (“Guaranteed
Party”).
1. Guarantee. To induce the Guaranteed Party to enter into
the LNG Terminal Use Agreement dated as of September 2, 2004 (the “Agreement”)
with TOTAL LNG USA, INC. (the “Company”), the Guarantor absolutely,
unconditionally and irrevocably guarantees to the Guaranteed Party and its
successors and permitted assigns the prompt payment of all amounts that become
due and payable (subject to any applicable grace period) by the Company to the
Guaranteed Party under the Agreement from and after the “Commercial Start Date”
as such term is defined in the Agreement, including payment obligations in
respect of any breach of the Agreement by the Company after the Commercial
Start Date (collectively, the “Obligations”); provided, however,
the Guarantor’s total liability in respect of the Obligations shall be a
cumulative maximum amount of Two Billion Five Hundred Million U.S dollars
($2,500,000,000) (the “Maximum Guaranteed Amount”). All amounts paid by or on behalf of the
Company pursuant to the Agreement in respect of the Obligations shall be
included in determining whether the Maximum Guaranteed Amount has been reached
and shall count towards the satisfaction thereof for all purposes of this
Guarantee. Notwithstanding anything to
the contrary, the following are excluded from the definition of Obligations and
the Guarantor shall have no liability in respect thereof: obligations to pay the Guaranteed Party or
third parties for claims or by way of indemnity or contribution for claims
arising in tort or strict liability, or claims for damages to property of the
Guaranteed Party or any third party or personal injury to the Guaranteed Party’s
or any third party’s employees, agents or contractors under the laws of any
jurisdiction. For the avoidance of
doubt, in no event shall Guarantor have any obligation under the Guarantee
unless and until the Commercial Start Date occurs.
2. Nature of Guarantee. This Guarantee is a primary and original
obligation of Guarantor and is an absolute, unconditional, irrevocable guaranty
and, to the extent permitted by applicable law, shall remain in full force and
effect without regard to any invalidity with respect to the execution and
delivery of the Agreement by the Company or the execution and delivery by the
Company of any other agreement between the Company and the Guaranteed
Party. The Guarantor’s obligations
hereunder shall not be affected by the existence, validity, enforceability,
perfection or extent of any collateral therefor or by any other circumstance
relating to the Obligations that might otherwise constitute a legal or
equitable discharge of or defense to the Guarantor not available to the
Company. The Guarantor agrees that the
Guaranteed Party may resort to the Guarantor for payment of any of the
Obligations whether or not the Guaranteed Party shall have resorted to any
collateral therefor or shall have proceeded against the Company or any other
obligor principally or secondarily obligated with respect to any of the
Obligations. The Guaranteed Party shall
not be obligated to file any claim relating to the Obligations in the event
that the Company becomes subject to a bankruptcy, reorganization or similar
proceeding, and the failure of the Guaranteed Party to so file shall not affect
the Guarantor’s obligations hereunder.
In the event that any payment to the Guaranteed Party in respect of any
Obligations
A-1
is rescinded or must otherwise be returned for any reason whatsoever,
the Guarantor shall remain liable hereunder with respect to such Obligations as
if such payment had not been made. The
Guarantor reserves the right to (a) set-off against any payment that has become
due and payable hereunder any amount that has become due and payable by the
Guaranteed Party to the Company under the Agreement and (b) assert
defenses which the Company may have under or with respect to the Agreement to
payment of any Obligations other than defenses arising from the bankruptcy or
insolvency of the Company or the Company’s failure to have the authority to (x)
execute or deliver the Agreement or (y) perform its obligations under the
Agreement. Any arbitral decision
(whether in a contested arbitration, by default or otherwise) under the Agreement
shall conclusively determine the liability of the parties hereto with respect
to the subject matter of such arbitral decision.
3. Changes in Obligations, Collateral therefor and
Agreements Relating thereto; Waiver of Certain Notices. The Guarantor agrees that the Guaranteed
Party may at any time and from time to time, either before or after the
maturity thereof, without notice to or further consent of the Guarantor, extend
the time of payment of, or exchange or surrender any collateral for, any of the
Obligations, and may also make any agreement with the Company or with any other
party to or person liable on any of the Obligations or interested therein, for
the extension, payment, compromise, discharge or release thereof, in whole or
in part, or for any modification or any amendment of the terms of the Agreement
(other than any Restricted Amendment) or of any agreement between the
Guaranteed Party and the Company or any such other party or person without in
any way impairing or affecting this Guarantee.
“Restricted Amendment” means any modification or amendment of the
Agreement which (i) extends the term of the Agreement or (ii) increases the
amount to be paid by the Company under the Agreement. Notwithstanding the
foregoing, Guarantor agrees that (x) if a Restricted Amendment is executed
without its written consent that extends the term of the Agreement, this
Guarantee shall remain in full force and effect for the term specified in the
Agreement prior to such Restricted Amendment and (y) if a Restricted Amendment
is executed without its written consent that increases the amount to be paid by
the Company under the Agreement, the Guarantor shall remain liable for such of
the Obligations as would have been owed had such Restricted Amendment not been
executed. The Guarantor waives:
(a) notice
of the acceptance of this Guarantee;
(b) notice
of the creation, existence or acquisition of all or any part of the
Obligations;
(c) notice
or consent respecting any modification of the Obligations or the Agreement
(other than any Restricted Amendment);
(d) notice
of adverse change in the Company’s financial condition or of any other fact
which might increase the Guaranteed Party’s risk;
(e) notice
of presentment, demand for payment, notice of dishonor and protest with respect
to any instrument; and
(f) notice
of Company’s default.
A-2
4. Expenses. The Guarantor agrees to pay on demand all
fees and out of pocket expenses (including the reasonable fees and expenses of
the Guaranteed Party’s counsel) in any way relating to the enforcement or
protection of the rights of the Guaranteed Party hereunder; provided,
that the Guarantor shall not be liable for any expenses of the Guaranteed Party
if no payment under this Guarantee is otherwise due.
5. Subrogation. Upon payment of the Obligations, the
Guarantor shall be subrogated to the rights of the Guaranteed Party against the
Company with respect to such Obligations, provided that such right of
subrogation shall not be exercised until the earlier of (a) the satisfaction in
full of all indebtedness of the Guaranteed Party secured by the “Sabine Pass
Facility” (as defined in the Agreement) or (b)
the satisfaction in full of all Obligations.
6. No Waiver; Cumulative Rights. No failure on the part of the Guaranteed Party
to exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise by
the Guaranteed Party of any right, remedy or power hereunder preclude any other
or future exercise of any right, remedy or power. Each and every right, remedy and power hereby
granted to the Guaranteed Party or allowed it by law or other agreement shall
be cumulative and not exclusive of any other, and may be exercised by the
Guaranteed Party at any time or from time to time.
7. Representations and Warranties. The Guarantor hereby represents and warrants
that:
(a) the
Guarantor is duly organized, validly existing and in good standing under the
laws of France and has full corporate power to execute, deliver and perform
this Guarantee;
(b) the
execution, delivery and performance of this Guarantee have been duly authorized
by all necessary corporate action and do not contravene any provision of the
Guarantor’s certificate of incorporation or by-laws or any law, regulation,
rule, decree, order, judgment or contractual restriction binding on the
Guarantor or its assets;
(c) all
consents, licenses, clearances, authorizations and approvals of, and
registrations and declarations with, any governmental authority or regulatory
body necessary for the due execution, delivery and performance of this
Guarantee have been obtained and all conditions thereof have been duly complied
with, and no other action by, and no notice to or filing with, any governmental
authority or regulatory body is required in connection with the execution,
delivery or performance of this Guarantee; and
(d) this
Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable against the Guarantor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles.
8. Assignment. Except as otherwise expressly provided in
this Guarantee, neither the Guarantor nor the Guaranteed Party may assign its
rights, interests or obligations hereunder to any other person or entity
without the prior written consent of the Guarantor or the Guaranteed Party, as
the case may be. The Guaranteed Party
shall be entitled to assign, mortgage or pledge
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all or any of its rights,
interests, and benefits hereunder to secure payment of any indebtedness
incurred or to be incurred in connection with the financing of the development
of the “Sabine Pass Facility” (as such term is defined in the Agreement). Guarantor shall execute and deliver to the
lenders to whom such indebtedness is owed a consent to such assignment in
reasonable form and substance acceptable to the Guarantor and such lenders.
9. Notices. All notices or demands on the Guarantor shall
be deemed effective when received, shall be in writing and shall be delivered
by hand or by registered mail, or by facsimile transmission promptly confirmed
by registered mail, addressed to the Guarantor at:
TOTAL S.A.
2 place de la Coupole
92078 Paris La Défense
Cedex
France
Attention: Legal Director, Gas & Power
Facsimile: 331.4744.3807
or to such other address
or facsimile number as the Guarantor shall have notified the Guaranteed Party
in a written notice delivered to the Guaranteed Party.
10. Termination.
(a) This
Guarantee shall remain in full force and effect and shall be binding on the
Guarantor, its successors and assigns until the first to occur of any of the
following events (a “Termination Event”): (i) all obligations of
the Guarantor hereunder having been satisfied (including, without limitation,
as a result of the Guaranteed Party (and/or its designee) having received an
amount, in the aggregate, equal to the Maximum Guaranteed Amount pursuant to
the Agreement and/or this Guarantee), (ii) such time that the Company or
its assignee or successor in interest under the Agreement would have satisfied
the Credit Test if the Company or such assignee or successor in interest had
been a replacement guarantor as referred to in Section 10(b) below,
(iii) termination as provided in Section 10(b) below, (iv) termination as
provided in Section 10(c) below, or (v) the 20th anniversary of the
Commercial Start Date. For the avoidance
of doubt and without limiting the terms of this Section 10(a), this Guarantee
shall terminate in its entirety upon the termination of the Agreement and the
satisfaction of all Obligations.
(b) Guarantor
shall have the right to cause to be provided a replacement guaranty that is in
full substitution for and in lieu of this Guarantee where the proposed
replacement guarantor satisfies the Credit Test and the proposed form of
replacement guaranty is, in all material respects, no less favorable to the
Guaranteed Company than this Guarantee.
Upon the execution and delivery of such a replacement guarantee by a
replacement guarantor who satisfies the Credit Test, this Guarantee
automatically shall terminate and be null and void for all purposes. “Credit Test” means that after giving
effect to the execution and delivery of such a replacement guaranty by the
proposed replacement guarantor, it shall be established to the Guaranteed Party’s
reasonable satisfaction that the proposed replacement guarantor has a credit
rating with respect to its senior long-term unsecured debt of “A3” (or higher)
by Moody’s Investor Service
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(“Moody’s”) or “A-” (or
higher) by Standard and Poor’s (“S&P”) (provided that in the event either
such rating agency ceases to publish such ratings, an equivalent rating by a
comparable rating agency shall be used).
(c) Guarantor
shall have the right to cause to be provided to the Guaranteed Party an
Acceptable Letter of Credit in an aggregate amount equal to the then current LC
Amount that is in full substitution for and in lieu of this Guarantee. Upon the execution and delivery of such
Acceptable Letter of Credit by an Acceptable LC Issuer and the execution and
delivery of the Escrow Agreement by the Guarantor and the Guaranteed Party,
this Guarantee automatically shall terminate and be null and void for all
purposes. “Acceptable Letter of
Credit” shall mean an irrevocable standby letter of credit in form and
substance reasonably satisfactory to the Guaranteed Party issued to and for the
benefit of the Guaranteed Party on which the Guaranteed Party may: (i) draw
upon demand for any amounts that have become due and payable by the Company
under the Agreement or (ii) draw the entire remaining amount under the
Acceptable Letter of Credit if the Acceptable Letter of Credit is not renewed
or replaced to the full value of the LC Amount not later than thirty (30) days
prior to the scheduled date of its expiry.
In order to be an “Acceptable Letter of Credit”, a letter of credit must
be issued by an Acceptable LC Issuer and must by its terms have an initial
expiration date at least twelve months beyond its date of issuance and require
the issuer to provide a written notice of non-renewal at least thirty days
prior to its current expiration date.
Any amount drawn by the Guaranteed Party because the Acceptable Letter
of Credit is not renewed or replaced (the “Escrow Amount”) that has not
yet been applied to amounts then due and payable by the Company under the
Agreement shall be held in a special account (established pursuant to an escrow
agreement mutually acceptable to the Guarantor and the Guaranteed Party (the “Escrow
Agreement”), which Escrow Agreement shall provide that (x) all interest
earned on the Escrow Amount shall be released monthly to the Guarantor or its
designee and (y) for every dollar of Obligations paid by the Company pursuant
to the Agreement, one dollar of the Escrow Amount shall be released to the
Guarantor or its designee) for the Guaranteed Party’s benefit to secure the
performance of the Company of the Obligations (which account will be pledged to
the Guaranteed Party’s lenders). The
remaining balance of the Escrow Amount shall be returned promptly to the Company
should the Acceptable Letter of Credit be replaced or renewed or the Agreement
be terminated (subject to withholding for any claim that the Guaranteed Party
may have against the Company), with any interest accrued on the Escrow Amount
to be added to, and treated similarly to, the principal amount. “Acceptable LC Issuer” shall mean a
United States bank or trust company (or other bank or trust company that is
reputable) that has both a short-term and long-term Dollar deposit rating of at
least Prime-1 and A2 by Moody’s or of at least A-1 and A by S&P, provided in either case, in the event Moody’s or
S&P ceases to publish deposit ratings, an equivalent deposit rating by a
comparable rating agency shall be used.
The Acceptable Letter of Credit shall be governed by the laws of the
State of New York. “LC Amount” shall mean the Maximum Guaranteed Amount
reduced in accordance with Section 1 to reflect all amounts paid by or on
behalf of the Company pursuant to the Agreement in respect of the Obligations.
(d) This
Guarantee shall be returned by Guaranteed Party to Guarantor immediately after
the occurrence of a Termination Event.
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11. Governing Law. This Guarantee shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws.
12. Dispute Resolution.
(a) Arbitration. Any Dispute shall be exclusively and
definitively resolved through final and binding arbitration, it being the
intention of the Parties that this is a broad form arbitration agreement
designed to encompass all possible disputes.
“Dispute” means any dispute, controversy or claim (of any and
every kind or type, whether based on contract, tort, statute, regulation, or
otherwise) arising out of, relating to, or connected with this Guarantee or the
Agreement, including any dispute as to the construction, validity,
interpretation, termination, enforceability or breach of this Guarantee or the
Agreement, as well as any dispute over arbitrability or jurisdiction.
(b) Rules. The arbitration shall be conducted in
accordance with the International Arbitration Rules (the “Rules”) of the
American Arbitration Association (“AAA”) (as then in effect).
(c) Number
of Arbitrators. The arbitral
tribunal (“Tribunal”) shall consist of three (3) arbitrators, who shall
endeavor to complete the final hearing in the arbitration within six months
after the appointment of the last arbitrator.
(d) Method
of Appointment of the Arbitrators.
Guaranteed Party and Guarantor (the “Parties”) shall each appoint
one (1) arbitrator within thirty (30) days of the commencement of the
arbitration, and the two arbitrators so appointed shall select the presiding
arbitrator within thirty (30) days after the latter of the two arbitrators has
been appointed by the Parties. If a
Party fails to appoint its Party-appointed arbitrator or if the two
Party-appointed arbitrators cannot reach an agreement on the presiding
arbitrator within the applicable time period, then the AAA shall serve as the
appointing authority and shall appoint the remainder of the three arbitrators
not yet appointed. If the
party-appointed arbitrators cannot reach an agreement on the presiding
arbitrator within the applicable time period, then the AAA as the appointing
authority shall make the prescribed appointment.
(e) Consolidation. If the Parties (and/or the Company) initiate
multiple arbitration proceedings under this Guarantee and/or under the
Agreement, the subject matters of which are related by common questions of law
or fact and which could result in conflicting awards or obligations, then
either Party may request prior to the appointment of the arbitrators for such
multiple or subsequent disputes that all such proceedings be consolidated into
a single arbitral proceeding. Such
request shall be directed to the AAA, which shall consolidate appropriate
proceedings into a single proceeding unless consolidation would result in undue
delay for the arbitration of the Disputes.
(f) Place
of Arbitration. Unless otherwise
agreed by all Parties to the Dispute, the place of arbitration shall be
Houston, Texas.
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(g) Language. The arbitration proceedings shall be
conducted in the English language, and the arbitrators shall be fluent in the
English language.
(h) Entry
of Judgment. The award of the
arbitral tribunal shall be final and binding.
Judgment on the award of the arbitral tribunal may be entered and
enforced by any court of competent jurisdiction.
(i) Qualifications
and Conduct of the Arbitrators. All
arbitrators shall be and remain at all times wholly impartial, and, once
appointed, no arbitrator shall have any ex parte communications with any of the
Parties concerning the arbitration or the underlying Dispute other than
communications directly concerning the selection of the presiding arbitrator,
where applicable.
(j) Costs
and Attorneys’ Fees. The arbitral
tribunal is authorized to award costs of the arbitration in its award, including
(i) the fees and expenses of the arbitrators; (ii) the costs of assistance
required by the tribunal, including its experts; (iii) the fees and expenses of
the administrator; (iv) the reasonable costs for legal representation of a
successful party; and (v) any such costs incurred in connection with an
application for interim or emergency relief and to allocate those costs between
the parties to the Dispute. The costs of
the arbitration proceedings, including attorneys’ fees, shall be borne in the
manner determined by the arbitral tribunal.
(k) Waiver
of Challenge to Decision or Award.
To the extent permitted by law, the Parties hereby waive any right to
appeal from or challenge any arbitral decision or award, or to oppose
enforcement of any such decision or award before a court or any governmental
authority, except with respect to the limited grounds for modification or
non-enforcement provided by any applicable arbitration statute or treaty.
IN WITNESS WHEREOF, this
Guarantee has been duly executed and delivered by the Guarantor to the
Guaranteed Party as of the date first above written.
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GUARANTOR:
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TOTAL S.A.
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By:
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Name:
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Title:
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EXHIBIT B
SABINE
PASS SERVICES MANUAL
The Sabine Pass Services
Manual referred to in Section 3.6 shall address the following matters and other
matters of a similar nature:
1. Details
associated with the implementation of Section 5.1 among SABINE, Customer and
Other Customers
2. Details
associated with the Gas delivery procedures in Section 5.2 among SABINE,
Customer and Other Customers
3. Details
associated with the content and format of the Sabine Pass Website
4. Details
associated with the invoicing process under Article 11, including:
a. Format
of invoices (electronic and original)
b. Numbering
systems/codes for all invoice-related documents
B-1
EXHIBIT C
PORT LIABILITY AGREEMENT – PORT OF SABINE
PASS, LOUISIANA
THIS PORT LIABILITY AGREEMENT (this “Agreement”)
is effective as of ,
20 , and is made by and between SABINE PASS LNG L.P., a
Delaware limited partnership, represented herein by SABINE PASS LNG-GP, Inc.,
its General Partner (“SABINE “), and [INSERT NAME(S) OF VESSEL OWNER(S), a
[TYPE OF ENTITY AND JURISDICTION OF ORGANIZATION] ([collectively] “Vessel Owner”).
RECITALS
WHEREAS, Vessel Owner, using the LNG vessel
set forth below under its name and signature (“Vessel”), proposes to deliver
certain quantities of liquefied natural gas to SABINE at its marine terminal
and receiving, storage and regasification facilities located in the Sabine
Pass, Louisiana area (as more fully defined below, the “Marine Terminal”); and
WHEREAS, Vessel Owner and SABINE
(collectively, the “Parties” and individually a “Party”) have agreed to
allocate the risk of and responsibility for loss and damage resulting from an
Incident (as defined below) at the Marine Terminal in the following manner;
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1. The
following terms shall have the following meanings when used herein:
“Affiliate” means, with respect to any
Person, any other Person which, directly or indirectly, controls, is controlled
by, or is under common control with, such Person. For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or otherwise.
“Incident” means any occurrence or series of
occurrences having the same origin arising out of or relating to the Vessel’s
use of the Marine Terminal in which there is any one or more of the following:
(i) loss of or damage to the Marine Terminal or the Vessel; (ii) injury to the
employees and agents comprising Terminal Interests or Vessel Interests; (iii)
loss or damage, other than to the Marine Terminal or the Vessel, caused or
contributed to by the Vessel, including but not limited to, injury to third
parties or damage to the property of third parties; or (iv) an obstruction or
danger affecting or interfering with the normal operation of the Marine
Terminal or the Port.
“Terminal Interests” means (i) SABINE, (ii)
all Affiliates of SABINE, (iii) all Persons (other than the Vessel Interests
and Persons providing fire boats, tugs and escort vessels to Vessel at the
Port) employed or providing services at the Marine Terminal in connection with
the unloading, storage, or regasification of LNG at the Marine Terminal, and
(iv) the employees and agents of all Persons referred to in this paragraph.
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“Marine Terminal” means SABINE’s marine
terminal and LNG receiving, storage and regasification facilities located at
the Port, including all berths, buoys, gear, craft, equipment, plant,
facilities and property of any kind (whether afloat or ashore) located thereat
or adjacent thereto and in the ownership, possession or control of the Terminal
Interests.
“Person” means any individual, firm,
corporation, trust, partnership, association, joint venture (incorporated or
unincorporated), or other business entity.
“Port” means the port at or near Sabine Pass,
Louisiana, including its anchorage, turning basin and approaches into the
Marine Terminal associated therewith.
“Vessel Interests” means (i) Vessel Owner,
(ii) all Affiliates of Vessel Owner, (iii) all Persons (other than the Terminal
Interests) participating, employed, or providing services in connection with
the ownership or operation (including all operations related to navigation and
berthing/unberthing) of the Vessel, and (iv) the employees and agents of all
Persons referred to in this paragraph.
2. In all circumstances, the Master of the
Vessel shall remain solely responsible on behalf of the Vessel Interests for
the proper navigation and safety of the Vessel and her cargo.
3. Any liability arising from an Incident shall,
as between the Vessel Interests and the Terminal Interests, be borne (i) by the
Vessel Interests alone, if the Vessel Interests are wholly or partially at
fault and the Terminal Interests are not at fault, (ii) by the Terminal
Interests alone, if the Terminal Interests are wholly or partially at fault and
the Vessel Interests are not at fault, (iii) by the Vessel Interests and the
Terminal Interests, in proportion to the degree of their respective fault, if
both are at fault and the degree of such fault can be established or (iv) by
the Vessel Interests and the Terminal Interests equally if neither of them
appears to be at fault or it is not possible to establish the degree of their
respective fault. In this regard, any
acts or omissions of Persons providing fire boats, tugs and escort vessels to
Vessel at the Port shall be deemed to be the responsibility of the Vessel
Interests.
4.
(i) SABINE shall be solely responsible for claims brought by any employee
and/or member of the family or dependent of any employee of SABINE arising out
of or consequent upon the personal injury, loss or damage to property of, or
death of such employee, family member or dependent, and SABINE shall indemnify
and hold any Vessel Owner harmless in the event any such employee, or any
family member or dependent thereof, or the executor, administrator, or personal
representative of any of the foregoing, shall bring such a claim against any
Vessel Owner.
(ii) The Vessel Owners shall be solely responsible for claims brought by any
employee and/or member of the family or dependent of any employee of any Vessel
Owner arising out of or consequent upon the personal injury, loss or damage to
property of, or death of such employee, family member or dependent,
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and each Vessel Owner shall
indemnify and hold SABINE harmless in the event any such employee, or any
family member or dependent thereof, or
the executor, administrator or personal representative of any of the foregoing,
shall bring such claim against SABINE.
(iii) SABINE and the Vessel Owners shall consult together to the extent
practicable before either makes any payment which would fall due to be indemnified
by the other under the terms of Sections 4(i) or 4(ii). The indemnities
contained in Sections 4(i) and 4(ii) are separate and distinct from, and
independent of, the obligations undertaken and the responsibilities and
exceptions from and the limitations of liability provided in Sections 2, 3, 5
and 6 of this Agreement.
(iv) The cross indemnities provided in this Section 4 are intended to be
binding regardless of fault or negligence on the part of the party in whose
favor they are being given.
5.
(i) Subject to Section 5(ii) below, the total aggregate liability of the
Vessel Interests to the Terminal Interests, however arising, in respect of any
one Incident, shall not exceed one hundred fifty million dollars
(US$150,000,000). Payment of an
aggregate sum of one hundred fifty million dollars (US$150,000,000) to any one
or more of the Terminal Interests in respect of any one Incident shall be a
complete defense to any claim, suit or demand relating to such Incident made by
the Terminal Interests against the Vessel Interests. The liability of the Vessel Interests
hereunder shall be joint and several.
(ii) Vessel Interests shall provide to the Terminal Interests at all times
sufficient written evidence that the Vessel’s Protection and Indemnity
Association has agreed to (a) cover the Vessel Interests as a member of the
Association against the liabilities and responsibilities provided for in this
Agreement in accordance with its Rules; (b) give the Terminal Interests prior
notice of cancellation of the Vessel’s entry in such Protection and Indemnity
Association; and (c) waive in favor of the Terminal Interests all rights of
subrogation of claims by the Protection and Indemnity Association against the
Terminal Interests to the extent such claims have been waived in this Agreement
by the Vessel Interests.
6. As to matters subject to this Agreement and
regardless of fault or negligence on the part of any Party, with respect to an
Incident:
(i) except to the extent expressly preserved in this Agreement, Terminal
Interests hereby expressly, voluntarily and intentionally waive any right or
claims they might otherwise have against the Vessel Interests under applicable
laws or under any port liability agreement or similar port conditions of use
previously signed by the Master for the Port; and
(ii) except to the extent expressly preserved in this Agreement, Vessel
Interests hereby expressly, voluntarily and intentionally waive any rights to
limit their
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liability under the United States
Limitation of Vessel Owners Liability Act or any other similar law or
convention, as applicable. Such waiver
shall include any right to petition a court, arbitral tribunal or other entity
for limitation of liability, any right to claim limitation of liability as a
defense in an action, and any other similar right under relevant law. The
foregoing waivers shall apply to all Persons claiming through the Terminal
Interests or through the Vessel Interests.
7. The substantive law of New York, without
regard to any conflicts of law principles that could require the application of
any other law, shall govern the interpretation of this Agreement and any
dispute, controversy, or claim arising out of, relating to, or in any way
connected with this Agreement, including, without limitation, the existence,
validity, performance, or breach hereof.
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be executed by their duly authorized representatives effective as
of the date first set forth above.
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SABINE PASS LNG L.P.
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[INSERT SIGNATURES OF EACH OF VESSEL INTERESTS]
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By: SABINE PASS
LNG-GP,
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By:
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as General Partner
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By:
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By:
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Title:
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Title:
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As owner of the
Name of Vessel
Registration No.
State of Registry
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