Exhibit 10.4
LNG TERMINAL USE AGREEMENT
between
CHEVRON U.S.A. INC.
and
SABINE PASS LNG, L.P.
dated November 8, 2004
LNG
TERMINAL USE AGREEMENT
This LNG TERMINAL USE
AGREEMENT (“Agreement”), dated as of this 8th day of November, 2004 (“Effective Date”) is made by and between Chevron
U.S.A. Inc., a company incorporated under the laws of the state of
Pennsylvania with an office at 1111 Bagby Street, Houston, Texas 77002 (“Customer”); and Sabine Pass LNG, L.P.,
a Delaware limited partnership with a place of business at 717 Texas Avenue,
Suite 3100, Houston, Texas, 77002 (“SABINE”). Capitalized
terms defined in Article 1 of Part Two of this Agreement shall have the meaning
assigned therein for all purposes of this Agreement.
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, ChevronTexaco Corporation (“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:
PART ONE
PRINCIPAL COMMERCIAL TERMS AND CONDITIONS
The Parties hereby
incorporate the General Terms and Conditions included as Part Two of this
Agreement.
A. Term
1. General. Subject to the provisions of this Agreement,
the term of this Agreement (“Term”) shall
consist of the Initial Term and, if applicable, any Extension Term.
2. Initial
Term. The initial term of this
Agreement (“Initial Term”) shall commence on
the Effective Date and shall continue in full force and effect until the expiration
of twenty (20) years from the Commercial Start Date.
3. Extension
Term. Customer shall have the option
of up to two (2) additional ten (10) year extension terms (each an “Extension Term”).
Customer must (a) notify SABINE in writing 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) no
later than four (4) years
prior to the expiration of the then current Term send SABINE a binding
confirmation (“Binding Confirmation”) that the
Term is extended by an Extension Term.
Upon Customer’s delivery of a Binding Confirmation to SABINE, this
Agreement will then be automatically extended for the applicable Extension
Term. The Fee for an Extension Term
shall be determined in the same manner as the Fee for the Initial Term, except
that the Reservation Fee 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.
B. Services Quantity
1. The
“Maximum LNG Reception Quantity” shall
be the quantity of LNG that Customer shall have the right to deliver to SABINE
in any Contract Year which shall be 282,761,850 MMBTUs per Contract Year.
2. The
“Gas Redelivery Rate” shall be the
quantity of Gas that Customer shall have the right to nominate for redelivery
each day for its account at the Delivery Point and is equal to 759,500 MMBTUs
per day.
C. Fees
Each month during the
Initial Term, the fees to be paid under this Agreement shall consist of the
following:
1. The
“Reservation Fee” calculated as:
a. The
quotient of the Maximum LNG Reception Quantity divided by twelve (12), multiplied
by the Unit Price;
b. The
“Unit Price” of U.S. twenty eight cents
($0.28) per MMBTU for the Initial Term and adjusted pursuant to Clause A for
Extension Terms.
2. An
“Operating Fee” equal to the product of four
cents ($0.04) multiplied by the amount calculated in Clause C.1.a above. The Operating Fee shall be adjusted for
inflation on January 1 of each Contract Year based on the increase in the
United States Consumer Price Index (All Urban Consumers) from a basis set on
January 1 of the year in which the Commercial Start Date occurs.
3. “Retainage” equal to two percent (2%) of the LNG delivered at
the Receipt Point for Customer’s account.
Included in such Retainage is fuel, including fuel for self-generated
power or Gas unavoidably lost.
D. Credit Support
As an essential inducement for SABINE entering into
this Agreement, ChevronTexaco Corporation, a Delaware corporation (“Guarantor”), shall execute in favor of SABINE, the Guarantee
attached as Exhibit C (“Guarantee”).
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E. Notices
Pursuant to Article 23, the Parties have designated
the following addresses for purposes of notices:
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Sabine
Pass LNG, L.P.
717 Texas Avenue, Suite 3100
Houston, Texas 77002
Attention: President
Fax: (713) 659-5459
Telephone: (713) 659-1361
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ChevronTexaco Global Gas a
division of
Chevron U.S.A. Inc.
1111 Bagby Street
Houston, Texas 77002
Attention: President
Fax: 713-752-3184
Telephone: 713-752-6384
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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: 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:
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Charif Souki
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Title:
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Chairman
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Chevron U.S.A. Inc.
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By:
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/s/ John D. Gass
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Name:
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John D. Gass
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Title:
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President
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PART TWO
GENERAL TERMS AND CONDITIONS
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.
1.3 “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 all Other Customers for the relevant
Contract Year.
1.4 “Agreement” means this agreement (including Part One and Part
Two hereof), 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(f).
1.6 “Approvals” means all consents, authorizations, licenses,
waivers, permits, approvals and other similar documents from or by a
Governmental Authority.
1.7 “Available Unloading Date” means at any time an Unloading
Date at one of the two (2) berths that is not a Scheduled Arrival Date for
Customer or one of the Other Customers at that berth.
1.8 “Base Rate”
means: (a) the interest rate per annum equal to the rate for three (3) month
deposits in Dollars in the London Interbank Offered Rate Market, as reported in
the Wall Street Journal on the
applicable date; plus (b) one percent (1%). The Base Rate shall change as and when the
underlying components thereof change, without notice to any Person.
1.9 “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.
1.10 “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.
1.11 “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.
1.12 “Central Time” means U.S. Central Time, as adjusted for
Daylight Saving Time and Standard Time.
1.13 “Claims” shall have the meaning set forth in Section 9.2(a)
of this Agreement.
1.14 “Commercial Start Date” shall have the
meaning set forth in Section 6.1.
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 Clause A.
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 Chevron U.S.A., Inc., unless and until
substituted in whole by an assignee by novation in accordance with Section 17.3,
whereupon such assignee shall become Customer to the extent of such assignment.
1.18 “Customer’s Inventory” means, at any given time, the quantity
in MMBTUs that represents LNG and Gas held by SABINE for Customer’s
account. Customer’s Inventory shall be
determined after deduction of Retainage in accordance with Clause C.3.
1.19 “Customer’s LNG” means, for the purposes of the Services, LNG
received at the Receipt Point for Customer’s account.
1.20 “Delivery Point” means the point of interconnect between the
tailgate of the Sabine Pass Facility and a Downstream Pipeline.
1.21 “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.
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1.22 “Downstream Pipeline” means all Gas pipelines with a connection
at the Delivery Point which transport Gas from the Sabine Pass Facility.
1.23 “Effective Date” means the date set forth in the preamble of
this Agreement.
1.24 “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 Sections 5.1(b)(ii) and 5.2(a), as such notice may be
subsequently amended pursuant to Section 8.4(a).
1.25 “Extension Term” shall have the meaning set forth in Clause A.3.
1.26 “Fee” shall have the meaning set forth in Section 4.1.
1.27 “Force Majeure” shall have the meaning set forth in Section 15.1.
1.28 “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.
1.29 “Gas” means any hydrocarbon or mixture of hydrocarbons
consisting predominantly of methane which is in a gaseous state.
1.30 “Gas Redelivery Rate” shall have the meaning set forth in
Clause B.2.
1.31 “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.
1.32 “GPA” shall have the meaning set forth in Annex I.
1.33 “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.
1.34 “Guarantee” means the Guaranty Agrement to be executed by
Guarantor in favor of SABINE in
the form attached as Exhibit C.
1.35 “Guarantor” shall have the meaning set forth in Clause D.
1.36 “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
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Hub Natural Gas
futures contract for Gas to be delivered during such month, such final 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.
1.37 “Initial Term” shall have the meaning set forth in Clause A.2.
1.38 “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, construction, 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.
1.39 “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.
1.40 “Lender” means any entity providing temporary or permanent
debt financing to SABINE in connection with construction or refinancing of the
Sabine Pass Facility.
1.41 “Liabilities” means all liabilities, costs, claims, disputes,
demands, suits, arbitrations, legal or administrative proceedings, judgments,
damages, losses and expenses (including reasonable attorneys’ fees and other
reasonable costs of arbitration, litigation or defense), and any and all fines,
penalties and assessments of, or responsibilities to, Governmental Authorities.
1.42 “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.
1.43 “LNG” means Gas in a liquid state at or below its boiling
point at a pressure of approximately one (1) atmosphere.
1.44 “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
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purchase and sale
agreement to supply or sell LNG to Customer for delivery to the Sabine Pass
Facility.
1.45 “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.
1.46 “Loading Port” means the port at which a Cargo is loaded on
board an LNG Vessel.
1.47 “Maximum LNG Reception Quantity” has the meaning set forth in
Clause B.1.
1.48 “MMBTU” means 1,000,000 BTUs.
1.49 “Notice of Readiness” or “NOR”
shall have the meaning set forth in Section 8.5.
1.50 “Operating Fee” shall have the meaning set forth in Clause C.2.
1.51 “Other Customers” means, from time to time, Persons (other
than Customer) purchasing LNG terminalling services from SABINE similar to the
Services, regardless of the short-term or long-term duration of such terminal use
agreement.
1.52 “Party” and “Parties” means SABINE and Customer, and their respective
successors and assigns.
1.53 “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.
1.54 “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.
1.55 “Pilot Boarding Station” shall have the meaning set forth in
Section 8.5(a).
1.56 “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 authorized Person assisting an LNG Vessel to enter or leave the Sabine
Pass Facility. Port Charges shall
include port use fees, throughput 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.
1.57 “Proposed Arrival Date” means, for any applicable Contract
Year, an arrival date proposed by Customer pursuant to Section 5.1.
1.58 “psig” means pounds per square inch gauge.
1.59 “Reasonable and Prudent Operator” means a Person seeking in
good faith to perform
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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.
1.60 “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.
1.61 “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.
1.62 “Reservation Fee” shall have the meaning set forth in Clause C.1.
1.63 “Retainage” shall have the meaning set forth in Clause C.3.
1.64 “SABINE” means Sabine Pass LNG, L.P. and its successors and
assigns.
1.65 “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) necessary
to provide Services hereunder, as such facilities will be constructed and
modified from time to time in accordance with this Agreement.
1.66 “Sabine Pass Marine Operations Manual” shall have the meaning
set forth in Section 8.2.
1.67 “Sabine Pass Services Manual” shall
have the meaning set forth in Section 3.5.
1.68 “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.
1.69 “Scheduled Arrival Date” means, for any applicable Contract
Year, an Unloading Date that is allocated either to Customer or any Other
Customer pursuant to Section 5.1 or 5.2.
1.70 “Scheduling Representative” means the individual appointed by
Customer in accordance with Section 5.5.
1.71 “Services” shall have the meaning set forth in Sections 2.1
and 3.1(b).
1.72 “Services Unavailability” shall have the meaning set forth in
Section 4.3.
1.73 “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.
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1.74 “Storage” means the retention by SABINE of Customer’s
Inventory at the Sabine Pass Facility.
1.75 “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 and taxes based on income, revenues, gross
receipts or net worth and all state franchise, license and similar taxes
required for the maintenance of corporate existence that are assessed against a
Party.
1.76 “Term” shall have the meaning set forth in Clause A.1.
1.77 “Transporter” means any Person who owns or operates an LNG
Vessel.
1.78 “Unloading Date” means a twenty-four (24) hour window
starting at 6:00 a.m., Central Time on a specified day and ending twenty-four
(24) consecutive hours thereafter during which SABINE would commence to make
available berthing and LNG unloading services at the Sabine Pass Facility to
either Customer or one of the Other Customers.
During the Term and subject to the provisions of this
Agreement, SABINE shall make available the following services to Customer (and
any permitted assignee of Customer) (such available services being herein
referred to as the “Services”) in
the manner set forth herein:
(a) access
to a berth for 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,
including metering, custody transfer and reporting.
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From time to time during the Term, the representatives
of SABINE and Customer may supplement this Agreement in accordance with Section
25.1 to provide that SABINE will also make available services to Customer in
addition to the Services set forth in Section 2.1.
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;
(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. On its own initiative or upon
request by Customer, SABINE may investigate the construction of: (x) facilities
to extract Liquids which are an integral part of the Sabine Pass Facility; or
(y) facilities to extract Liquids which are a separate facility and project
from the Sabine Pass Facility. If SABINE
elects to construct facilities to extract Liquids, the Parties shall negotiate
a commercially reasonable arrangement to compensate SABINE for such
facilities. The arrangement shall
provide Customer with the ability to receive its proportional share of Liquids
in-kind with SABINE being paid a processing fee for the contract duration. If the Parties do not negotiate such a
commercially reasonable arrangement, SABINE shall nevertheless have 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.
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(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 as described
in Section 3.1(b).
(b) Services. The Services SABINE shall make available to
Customer during each Contract Year, and Customer shall purchase and pay for pursuant
to Section 4.1, shall consist of the following:
(i) Unloading
of LNG. SABINE shall make the Sabine
Pass Facility available during a sufficient number of Unloading Dates during
each Contract Year to permit the berthing, unloading and receipt as ratably as
practical throughout such Contract Year of a quantity of Customer’s LNG equal
to the Maximum LNG Reception Quantity; provided, however, that for purposes of
the first and last Contract Years and any Contract Year that is a leap year,
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);
(ii) Redelivery
of Gas. Each day during the Contract
Year SABINE shall make Gas from Customer’s Inventory available to Customer at
the Delivery Point in the quantities nominated by Customer pursuant to Section 5.3
up to the lesser of the Gas Redelivery Rate or Customer’s remaining Inventory.
(c) Excess
Services. Separate and apart from
the provisions of Section 3.1(b), SABINE may, in its sole discretion, allow
berthing, unloading and receipt of quantities of LNG in excess of the Maximum
LNG Reception Quantity or redelivery of Gas in excess of the Gas Redelivery
Rate in response to a request from Customer for such excess Services; provided,
however that if such Excess Services are provided, such Excess Services shall
be based on the order of receipt of a written request from Customer or Other
Customers. The fees applicable to such
excess Services shall be as negotiated by the Parties in connection with such Services.
(a) Use
Generally. Customer shall be
entitled to use the Services in whole or in part by itself, or Customer may assign
its rights and obligations as provided in Article 17.
(b) Expiration
of Services. Subject to the
provisions of Section 4.3(b), notwithstanding any other term or condition of
this Agreement, Customer’s failure or
inability: (i) in any Contract Year to deliver Customer’s Maximum LNG Reception
Quantity to SABINE; or (ii) on any day to nominate Gas for redelivery at the
Delivery Point in an amount not to exceed the Gas Redelivery Rate, including
any portion of the Services not used in connection with a Partial Assignment, shall
not serve to increase or decrease the Services to which Customer is entitled
under Section 3.1(b) in any subsequent time period.
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On any given day during a Contract Year, Customer
shall not be entitled to receive quantities of Gas in excess of Customer’s
Inventory.
If on any day Customer fails to take redelivery at the
Delivery Point of at least ninety percent (90%) of the Gas nominated by
Customer pursuant to Section 5.3 for redelivery to or for its account on such
day and such failure is for reasons other than an event of Force Majeure or the
inability of a Downstream Pipeline to take delivery of Customer’s Gas, such
inability being not reasonably within the control of Customer, then SABINE may,
at its sole discretion, take title to the quantity of Gas nominated for
redelivery on such day but not taken free and clear of any Claims, and sell or otherwise dispose of such Gas using good faith
efforts to obtain commercially reasonable 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, within fourteen (14) Business
Days subsequent to the receipt by SABINE of such sale proceeds, remit to
Customer the net proceeds from the sale or other disposition of Customer’s
Inventory to which it takes title hereunder, minus actual transportation costs,
third party charges, and an administrative fee of U.S. five cents ($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.
In the event SABINE is required to dispose of Customer’s
Gas more than three (3) times in any Contract Year, the administrative fee
shall be increased to U.S. ten cents ($0.10) for each occasion thereafter in
such Contract Year.
Acting as a Reasonable and Prudent Operator, SABINE
shall develop, maintain and revise from time to time a single services manual
(the “Sabine Pass Services Manual”)
applicable to Customer and all Other Customers which contains detailed
implementation procedures consistent with the terms and provisions of this
Agreement necessary for performance of this Agreement with regard to the
matters set forth in Exhibit A attached hereto (but excluding the matters
governed by the Sabine Pass Marine Operations Manual). In developing such manual, SABINE shall
provide Customer with a preliminary draft of the same (the “Preliminary Services Manual”). If Customer desires to provide comments to SABINE
regarding the contents of the Preliminary Services Manual Customer shall, no
later than fifteen (15) days from receipt of such manual from SABINE, notify SABINE
in writing of its desire to provide comments on the Preliminary Services
Manual. In such event, within thirty (30) days of receipt of Customer’s notice,
SABINE shall convene a meeting with Customer to discuss Customer’s comments. If
(a) Customer does not submit the foregoing notice to SABINE
10
on a timely basis or (b) Customer and SABINE meet and
are able to agree upon revisions to the Preliminary Services Manual, then such
manual, as so revised, shall constitute the Sabine Pass Services Manual. If Customer and SABINE are unable to reach
agreement upon revisions to the Preliminary Service Manual or any revisions
thereto, SABINE shall determine the content of the Sabine Pass Services Manual,
using commercially reasonable efforts to accommodate Customer’s comments. In the event SABINE intends to amend the
Sabine Pass Services Manual, SABINE shall follow the same procedure as 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.
SABINE and Customer shall comply with such Sabine Pass Services Manual in all
respects. The Sabine Pass Services
Manual shall be developed on a basis 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.
Commencing with the Commercial Start Date, in the
event the Sabine Pass Facility has reached commercial operation by that date
and, if not, on the date it reaches such commercial operation, each month Customer
shall, as full compensation for the performance by SABINE of its obligations
under this Agreement, bear the Retainage and in addition pay to SABINE the sum
of the following three (3) components (such sum collectively referred to as the
“Fee”):
(a) the
Reservation Fee paid monthly in advance;
(b) the
Operating Fee paid monthly in advance; and
(c) any
additional costs incurred under Section 4.2 herein.
4.2 SABINE Taxes and New Regulatory 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 proportionately with
Other Customers with Customer’s share being determined for the given Contract
Year based on the following ratio:
11
(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 4.2 be in excess of twenty eight percent (28%) of such
SABINE Taxes and New Regulatory Costs.
For the purposes hereof, SABINE Taxes shall include the inability to
obtain (after using commercially reasonable efforts), or the loss or expiration
(other than as a consequence of the fault or omission of SABINE) of any
abatement of Taxes on the Services or the Sabine Pass Facility. SABINE shall use commercially reasonable efforts
to minimize or eliminate the imposition or, if imposed, the impact of such
SABINE Taxes or New Regulatory Costs for which Customer would be responsible
hereunder. SABINE shall exercise
reasonable endeavors to consult with Customer toward the mitigation of any such
SABINE Taxes and/or New Regulatory Costs.
(a) If
some or all of the Services are unavailable to Customer on more than three (3)
consecutive or ten (10) cumulative days during a Contract Year 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 maintenance (which such scheduled
maintenance shall not exceed ten (10) days per Contract Year), unscheduled
maintenance or curtailment or discontinuation or Services per Article 16 (a “Services Unavailability”), SABINE shall, to the extent
operationally feasible and not disproportionately detrimental to Other
Customers, use its reasonable efforts to restore Customer’s Services in
accordance with Section 4.3(b) and allow Customer the ability to make-up any
Services that have been lost as a result of the interruption of Services to the
Sabine Pass Facility.
(b) If
as a result of Services Unavailability, 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 the Services not made
available shall constitute a “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 Services Unavailability, to schedule any of the Services necessary
to make up the Make-Up 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 4.3(b)
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
12
compensation to
SABINE, including the unloading of LNG, the storage of Customer’s LNG, and the
redelivery of Customer’s Gas.
(c) For
the avoidance of doubt, in no event shall the Fee be adjusted as a result of
any Services Unavailability.
4.4 Services Provided to Other Customers
Customer
acknowledges that: (i) the compensation paid by Customer from time to time for
Services may be less than, or more than, the price paid by Other Customers for
the same or similar LNG terminalling services; and (ii) SABINE makes no
representations or warranties to Customer in this regard.
5.1 Annual Delivery Program
Procedures for the receipt
of LNG at the Receipt Point and redelivery of Gas at the Delivery Point will be
detailed in the Sabine Pass Services Manual, as modified from time to time, in
accordance with Section 3.5 but substantially in accordance with the following:
(a) SABINE
Deliverables. Not later than one
hundred and twenty (120) 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 and the expected impact of such activities on
the availability of Services. In no
event shall the number of days for any planned maintenance to or modifications
of the Sabine Pass Facility exceed three (3) consecutive or ten (10) cumulative
days in any Contract Year.
(b) Notice
from Scheduling Representative. Not
later than one hundred and five (105) days prior to the beginning of each
Contract Year, the Scheduling Representative shall provide SABINE with the
following:
(i) 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
specify, for each Cargo to be delivered to the Receipt Point, the proposed
arrival date (the “Proposed Arrival Date”)
of the applicable LNG Vessel and which schedule must result in a delivery pattern
whereby: (a) deliveries in any given month do not materially exceed one twelfth
(1/12) of the Maximum LNG Reception Quantity; (b) deliveries in any given month
are generally ratable over the month; (c) deliveries take into consideration
the planned maintenance and modification dates furnished to Customer by SABINE
as set forth in Section 5.1(a); and (d) deliveries shall not be scheduled so as
to utilize both unloading berths simultaneously; and
13
(ii) for
each Proposed Arrival Date proposed pursuant to Section 5.1(b)(i), the name of
the LNG Vessel expected to deliver LNG to the Sabine Pass Facility (if the
identity of the LNG Vessel is known to Customer at such time), the Expected
Receipt Quantity, and the anticipated Gross Heating Value of the LNG to be
delivered.
(c) Notices
from Other Customers. Customer
acknowledges that Other Customers will submit similar notices to SABINE
regarding the matters provided for in Section 5.1(b).
(d) Customer
Preliminary Receipt Schedule. SABINE
shall incorporate to the maximum extent practicable the notices that it
receives from the Scheduling Representative and the Other Customers and, not
later than ninety (90) 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 preliminary receipt schedule for Customer for such
Contract Year (the “Customer Preliminary
Receipt Schedule”) showing a “Scheduled Arrival Date”
for the LNG Vessel carrying each of Customer’s scheduled Cargos, which schedule
must result in a delivery pattern whereby: (i) deliveries in any given month do
not materially exceed one twelfth (1/12) of the Maximum LNG Reception Quantity;
(ii) deliveries in any given month are generally ratable over the month; (iii)
deliveries take into consideration the planned maintenance and modification
dates furnished to Customer by SABINE; and (iv) deliveries are not scheduled so
as to utilize both unloading berths simultaneously. Customer may propose to SABINE to change any
such Scheduled Arrival Date, and SABINE agrees to give due consideration to,
and use reasonable efforts to accommodate, such change.
(e) Other
Customers’ Preliminary Receipt Schedules and Mutual Cooperation. Customer
acknowledges that SABINE will issue to each Other Customer via the Sabine Pass
Website (or alternative electronic means) a preliminary receipt schedule
similar to the Customer Preliminary Receipt Schedule described in Section
5.1(d), but customized for each such Other Customer (“Other
Customers’ Preliminary Receipt Schedules”). Customer also acknowledges that conflicts
will occur in the preparation of the Customer Preliminary Receipt Schedule and
Other Customers’ Preliminary Receipt Schedules because of the joint use of the
Sabine Pass Facility among Customer and Other Customers. Accordingly, Customer agrees to cooperate with
SABINE to assist SABINE in resolving any such conflict to the extent such
cooperation does not result in material additional costs to Customer or unduly
adversely impact the Services provided to Customer hereunder.
(f) Consultation;
Annual Delivery Program. If the
Scheduling Representative desires to consult with SABINE regarding the contents
of the Customer Preliminary Receipt Schedule, the Scheduling Representative
shall, no later than fifteen (15) days from the issuance of the Customer
Preliminary Receipt Schedule, request to meet with SABINE by providing notice
thereof (the “Consultation Notice”) to
14
SABINE, and SABINE
shall, no later than fifteen (15) days after receipt of the Consultation
Notice, meet with the Scheduling Representative to discuss the Customer
Preliminary Receipt Schedule. If: (i)
the Scheduling Representative does not submit a Consultation Notice to SABINE
on a timely basis; or (ii) the Scheduling Representative and SABINE meet
pursuant to a Consultation Notice and are able during such meeting to agree
upon revisions to the Customer Preliminary Receipt Schedule, then such Customer
Preliminary Receipt Schedule, as so revised (and as updated from time to time
for such Contract Year in accordance with the provisions of this Agreement by
SABINE via the Sabine Pass Website), together with the planned maintenance and
modification dates selected by SABINE, shall constitute the “Annual Delivery Program”.
If the Scheduling Representative and SABINE meet pursuant to a Consultation
Notice and are unable during such meeting to agree upon revisions to the
Customer Preliminary Receipt Schedule, then SABINE shall determine, while using
its reasonable efforts to accommodate Customer’s views, the Annual Delivery
Program. Such Annual Delivery Program
shall, to the extent practicable, result in a delivery pattern in which: (i)
deliveries in any given month do not materially exceed one twelfth (1/12) of
the Maximum LNG Reception Quantity; (ii) deliveries in any given month are
generally ratable over the month; (iii) deliveries take into consideration
planned maintenance and modification dates furnished to Customer by SABINE; and
(iv) deliveries are not scheduled so as to utilize both unloading berths
simultaneously. SABINE shall issue via
the Sabine Pass Website (or via an alternative electronic means of transmitting
written communications if the Sabine Pass Website is unavailable) the Annual
Delivery Program no later than sixty (60) days prior to the first day of the
Contract Year.
(g) Other
Customers’ Annual Delivery Program. Customer
acknowledges that SABINE shall issue to each Other Customer a final receipt
schedule similar to the Annual Delivery Program described in Section 5.1(f)
customized for each such Other Customer (such schedules referred to as “Other Customers’ Annual Delivery Program”).
(h) Adjustment
to Schedules. Upon written request
by Customer, SABINE shall use reasonable efforts to modify the time periods
expressly set forth in Sections 5.1(b) 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, 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 contractual rights of Other Customers.
(i) Available
Unloading Dates. Throughout the
Contract Year, SABINE shall maintain on the Sabine Pass Website (or via an
alternative electronic means of transmitting written communications if the
Sabine Pass Website is unavailable) a current list of Available Unloading
Dates.
15
5.2 Three Month Schedules
(a) Proposed
Schedules. Not later than the first
(1st) day of each month in a Contract Year, Customer shall deliver the
following to SABINE: a proposed three-month forward plan of delivery of LNG (“Proposed Three Month Unloading Schedule”), which follows
the Annual Delivery Program as nearly as practicable and sets forth by voyages
and the projected dates thereof the pattern of shipments forecast for each of
the next three (3) months and the Expected Receipt Quantity of each such
shipment.
(b) Three
Month Unloading Schedules. Thereafter, and not later than the twentieth
(20th) day of each month in which a Proposed Three Month Unloading Schedule is
delivered, SABINE shall deliver the following to Customer: a final three-month
forward plan of delivery of LNG (“Three Month Unloading
Schedule”), which shall supersede Customer’s Proposed Three Month
Unloading Schedule and prior Three Month Unloading Schedules as well as the
portion of the Annual Delivery Program covering the same time periods and which
shall reflect to the extent operationally practicable Customer’s Proposed Three
Month Unloading Schedule.
(c) Customer
Changes to the Three Month Unloading
Schedule. The Parties agree
as follows:
At any time
following the issuance of the Annual Delivery Program and any applicable Three
Month Unloading Schedule, Customer’s Scheduling Representative may submit to
SABINE a written request to change a Scheduled Arrival Date to any Available
Unloading Date (such request to change, a “Customer Arrival Date Change Request”). Customer understands that: (a) Other
Customers shall also have the right to submit to SABINE similar scheduling
requests (each an “Other Customer Arrival
Date Change Request”); (b) SABINE shall have no obligation to
consult with the Scheduling Representative, Customer, or Other Customers
regarding any Customer Arrival Date Change Request or Other Customer Arrival
Date Change Request (collectively, “Arrival Date Change Requests”); and (c) SABINE shall accept any Arrival
Date Change Request on a first-come, first-served basis as soon as practical
but not later than 5:00 p.m. Central Time of the day following the date of
receipt by SABINE of the applicable Arrival Date Change Request. Upon accepting a Customer Arrival Date Change
Request, SABINE shall notify Customer 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 Arrival Date
Change Requests it submits to SABINE.
(d) Other
Modifications to the Final Schedules.
If Customer is unable to berth during its Scheduled Arrival
Date due to a Force Majeure event (an “Unloading Services Unavailability”),
each affected Scheduled Arrival Date allocated to Customer during such period
shall be cancelled, to the extent affected; provided,
16
however, that in
the event of an Unloading Services Unavailability causing the cancellation of
one or more Scheduled Arrival Dates allocated to Customer and/or Other
Customers, SABINE shall make reasonable efforts to change the Three Month
Unloading Schedule and Other Customers LNG Annual Delivery Program in order to
maximize the safe, reliable and efficient usage of the Sabine Pass Facility and
to assist Customer and Other Customers to unload quantities of LNG which would
otherwise have been unloaded at the Sabine Pass Facility during such cancelled
Scheduled Arrival Dates.
5.3 Gas Delivery
(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 nonbinding nomination schedule (“Preliminary Nomination
Schedule”) that sets forth, for each day of the succeeding month,
the quantities of Gas Customer expects to nominate for redelivery for its
account at the Delivery Point.
(b) Daily
Nomination Schedule. Each day by no
later than 9:00 a.m. Central Time Customer shall have the right to notify
SABINE of its actual nomination of the quantities of Gas to be redelivered for
its account at the Delivery Point on the following day up to the lesser of the
Gas Redelivery Rate or the remaining quantity of Customer’s Inventory and
SABINE shall be obligated to redeliver such quantities to Customer in
accordance with its nomination. Any
nomination submitted by Customer’s Scheduling Representative in accordance with
the foregoing provision shall remain in effect until changed by it in
accordance with such provision. SABINE
shall cooperate with Customer in respect to the scheduling of Gas on an
intraday basis unless such nominations would adversely affect the operations of
the Sabine Pass Facility or the rights of any Other Customer to send out Gas
pursuant to previous nominations.
(c) Spare
Vaporization. SABINE shall make
available to Customer and Other Customers spare vaporization (equivalent to
approximately 180,000 MMBTUs per day) on a pro rata basis based on the Maximum
LNG Reception Quantity per day prorated of Customer and the maximum LNG
reception quantity per day prorated of each Other Customer. Terminal use agreements (in excess of three
(3) months) for sales of Services by SABINE shall in no event burden one (1)
LNG vaporizer (excluding one (1) spare vaporizer held in reserve) 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 Sabine Pass Facilities’ total LNG regasification facilities have a daily
capacity (excluding the one (1) spare vaporizer held in reserve) of 2,700,000
MMBTUs, then the total long term sales of Gas vaporization Services to Customer
and Other Customers shall not exceed 2,520,000 MMBTUs. There shall not be an additional charge to
Customer for the use of the uncontracted vaporizer, however, such use shall not
increase the Maximum LNG Reception Quantity that Customer is entitled to in any
given period.
17
(d) Excess
or Unutilized Vaporization Capacity.
(i) To
the extent SABINE has uncontracted or unutilized vaporization capacity up to
its operational capacity of 2,520,000 MMBTUs per day (“Excess
Vaporization Capacity”), SABINE may, at its sole option, post on the
Sabine Pass Website the quantity and degree of certainty of such Excess
Vaporization Capacity. Customer may
elect to make use of such Excess Vaporization Capacity and shall have the right
to purchase all or any portion of such Excess Vaporization Capacity on a daily
basis provided, that, to the extent the demand for such Excess Vaporization
Capacity exceeds the quantity available, Customer and Other Customers shall be
entitled to a pro rata share of Excess Vaporization Capacity based on the
maximum Gas Redelivery Rate of Customer and the maximum gas redelivery rate of
each Other Customer electing to utilize any such Excess Vaporization
Capacity. The fee for such Excess
Vaporization Capacity shall be a market price to be negotiated between SABINE
and Customer in good faith but in no event shall such fee exceed the Fees
calculated in accordance with Clause C on a per MMBTU of vaporization capacity
or exceed the price that is currently being paid by any Other Customer for such
Excess Vaporization Capacity.
(ii) Notwithstanding
anything to the contrary in this Section 5.3(d), nothing herein shall prevent,
preclude, or hinder SABINE in good faith from contracting with Other Customers
on a spot or long-term basis for services available at the Sabine Pass Facility
even though the contracting of such capacity may reduce or eliminate the
availability of Excess Vaporization Capacity to Customer; provided, however,
that if Excess Vaporization Capacity has been scheduled and confirmed by SABINE
to Customer, then such capacity shall be made available to Customer on a firm
basis subordinate only to capacity previously contracted to Other Customers.
(iii) For
the avoidance of doubt, the contracting of Excess Vaporization Capacity is
intended to be on a short-term basis and is not intended and may not be used as
a means for Customer to obtain additional long-term capacity at the Sabine Pass
Facility.
5.4 Standard
SABINE shall act as a Reasonable and Prudent Operator
in performing the scheduling activities required by this Article 5.
5.5 Scheduling Representative
By no later than six (6) months 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 its appointed Scheduling
Representative at any time by notice to SABINE.
Unless otherwise stated herein, Customer hereby authorizes the
Scheduling Representative to do and perform any
18
and all acts for and on behalf of Customer with regard
to scheduling matters provided for in this Article 5. SABINE acknowledges that Customer and any
Other Customer may agree to coordinate their activities so as to make the most
efficient use of the Sabine Pass Facility, and may for purposes of this
Agreement and the terminal use agreements of the Other Customers jointly
appoint a Scheduling Representative.
5.6 Scheduling Coordination Among Customer and
Other Customers
Customer shall have the right to request SABINE to
arrange a joint meeting with Other Customers with respect to any matter in
relation to the performance of this Article 5.
SABINE shall use reasonable efforts to organize such a meeting, provided
that SABINE may elect to include additional Other Customers if SABINE
determines that such matter affects such additional Other Customers. If the Other Customers invited by SABINE
agree to participate in such a joint meeting among Customer, Other Customers
and SABINE, the joint meeting shall be held as soon as practical. SABINE shall have the right to settle any
scheduling disputes that may arise among Customer and Other Customers on a
basis that does not unfairly discriminate against Customer. Unless otherwise agreed, any such joint
meeting shall be held in Houston, Texas or by telephone, as appropriate.
6.1 Commencement of Deliveries
In accordance with the procedure set forth in this
Section 6.1, Customer shall notify SABINE 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 February 1, 2009 and (b) ends on July
1, 2009 (such period being the “First Window Period”). The First Window Period shall be narrowed
pursuant to the following provisions:
(i) No
later than ninety (90) days in advance of the first day of the First Window
Period, Customer shall notify SABINE of a sixty (60) day window (“Second
Window Period”) falling within the First Window Period for
the Commercial Start Date; provided that if Customer fails to give timely
notice of same, the Second Window Period shall be the latest possible sixty (60) day window period
within the First Window Period;
(ii) No
later than thirty (30) days in advance of the first day of the Second Window
Period, Customer shall notify SABINE of a thirty (30) day window (“Third Window Period”) falling within the Second Window
Period for the Commercial Start Date; provided that if Customer fails to give
timely notice of same, the Third Window Period shall be latest possible thirty
(30) day window period within the Second Window Period;
(iii) No
later than seven (7) days in advance of the first day of the Third Window
Period, Customer shall notify SABINE of a fifteen (15) day
19
window (“Final Window Period”) falling within the Third Window Period
for the Commercial Start Date; provided that if Customer fails to give timely
notice of same, the Final Window Period shall be the latest possible fifteen
(15) day period within the Third Window Period; and
(iv) No
later than three (3) days in advance of the first day of the Final Window
Period, Customer shall notify SABINE of the Commercial Start Date falling
within the Final Window Period; provided that if Customer 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
unless Customer is unable to unload Cargoes as a result of the Sabine Pass
Facility not having become commercially operable by that date in which case,
the Commercial Start Date shall be the first date on which the Sabine Pass
Facility is commercially operable.
6.2 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 that date to a later date; provided, however that in no
event shall delays in achieving financing or initiating construction constitute
an event of Force Majeure.
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 be able to provide the Services to Customer on the basis
set forth in this Agreement and otherwise 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;
(ii) two
unloading berths, each capable of berthing an LNG Vessel having a displacement
of no more than 166,600 tons, 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
20
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 or operational 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 the 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 approximately four hundred
eighty thousand (480,000) Cubic Meters of LNG;
(viii) LNG
regasification facilities with a total daily capacity of up to two point six
(2.6) billion Standard Cubic Feet; and
(ix) piping
and flange at the Delivery Point necessary for the purpose of connecting to the
Downstream Pipeline.
(c) Facilities
Not Provided. 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 as of the date
hereof.
21
(b) LNG
Vessel Compatibility. 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. The Parties agree that, after the date
hereof, SABINE shall be entitled to modify the Sabine Pass Facility in any
manner whatsoever, provided that: (x) such modifications do not render the
Sabine Pass Facility incompatible with an LNG Vessel that is compatible with
the Sabine Pass Facility under Section 7.2(b) above; (y) such modifications,
once finalized, do not reduce the ability of SABINE to provide the Services to
Customer on the basis set forth in this Agreement; and (z) 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:
(i) such
modification is made pursuant to a change in International LNG Terminal
Standards; or
(ii) the
LNG Vessel is capable of being modified, and such modification is minor in
nature, to maintain compatibility with both the Sabine Pass Facility and other
terminals in its normal/intended trade and SABINE reimburses Customer for the
reasonable actual costs incurred by Customer in causing Transporter to modify
the LNG Vessel to maintain compatibility with the Sabine Pass Facility as so
modified; provided, further, that Customer shall use its best efforts to
minimize costs to be borne by SABINE hereunder, shall notify SABINE reasonably
in advance of the nature and expected cost of all such LNG Vessel modifications
by Transporter, and shall certify to SABINE the actual amount and detail of all
costs incurred for which such reimbursement from SABINE is requested.
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
22
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 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.
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) Tugs,
Fireboats, Escort Vessels and Port Charges.
Customer shall arrange for, or cause the appropriate Person to arrange
for, such number and types of tugs, 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) LNG
Vessel 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.
23
(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 one hundred twenty thousand (120,000)
Cubic Meters, determined at the time of loading of LNG.
(iii) Condition
of the LNG Vessel. Each LNG Vessel
shall be, in accordance with International LNG Vessel Standards, (x) fitted in
every way for the safe loading, unloading, handling and carrying of LNG 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, Lloyd’s Register for Shipping, Bureau Veritas, 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.
24
(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).
(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
Acting as a Reasonable and Prudent Operator, SABINE
shall develop and maintain and revise from time to time a single marine
operations manual (the “Sabine Pass Marine
Operations Manual”) that governs activities at the Sabine Pass
Facility, applies to all LNG Vessels and vessels used by Other Customers and
which shall be consistent with International LNG Vessel Standards (but
excluding the matters governed by the Sabine Pass Services Manual). In developing such a manual, SABINE shall
provide Customer with a preliminary draft of the same (“Preliminary
Marine Operations Manual”).
If Customer desires to provide comments to SABINE regarding the contents
of the Preliminary Marine Operations Manual Customer shall, no later than
fifteen (15) days from receipt of such manual from SABINE, notify SABINE in
writing of its desire to provide comments on the Preliminary Marine Operations
Manual. In such event, within thirty (30) days of receipt of Customer’s notice,
SABINE shall convene a meeting with Customer to discuss Customer’s comments. If
(a) Customer does not submit the foregoing notice to SABINE on a timely basis
or (b) Customer and SABINE meet and
25
are able to agree upon revisions to the Preliminary
Marine Operations Manual, then such manual, as so revised, shall constitute the
Sabine Pass Marine Operations Manual. If
Customer and SABINE are unable to reach agreement upon revisions to the
Preliminary Marine Operations Manual or any revisions thereto, SABINE shall
determine the content of the Sabine Pass Marine Operations Manual, using
commercially reasonable efforts to accommodate Customer’s comments. In the event SABINE intends to amend the
Sabine Pass Marine Operations Manual, SABINE shall follow the same procedure as
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. SABINE and Customer shall
comply with such Sabine Pass Marine Operations Manual in all respects. SABINE 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:
26
(i) neither
the exercise nor the non-exercise of such right shall reduce the responsibility
of Customer to SABINE in respect of such LNG Vessel and her operation, nor
increase SABINE’s responsibilities to Customer or third parties for the same;
and
(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 Regarding LNG Vessel and Cargoes
(a) Change
in Expected Receipt Quantity. If,
subsequent to issuing the notice required under Section 5.1(b)(ii) and Section
5.2(a), Customer anticipates a material change 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 such changed quantity but shall at all times retain
the right not to accept any increased quantity if, in its reasonable discretion, such increased quantity would
conflict with any Other Customer’s unloading schedule or entitlement to
Services or exceed Customer’s Service entitlements 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, 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 applicable
Scheduled Arrival Date.
(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
27
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) 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(a) 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, and
shall not be required to unload, those quantities of LNG on board an LNG Vessel
that exceed one hundred and five percent (105%) the Expected Receipt Quantity
for such Cargo as specified in, whichever is applicable: (i) the notice
delivered pursuant to Section 5.1(b)(ii) or Section
5.2(a) and utilized by SABINE for the purposes of determining Annual Delivery
Program or any Three Month Unloading Schedule,
28
respectively; 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 (in light of SABINE’s obligation to have the
capability to provide Services twenty-four (24) hours a day, seven (7) days a
week), 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.
(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 Scheduled Arrival Date allocated to such LNG Vessel,
an NOR shall be deemed effective at
6:00 a.m. Central Time on such Scheduled Arrival Date;
(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 Scheduled Arrival Date allocated to
such LNG Vessel and 6:00 a.m. Central Time on the day immediately following
such Scheduled Arrival Date, 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 Scheduled Arrival Date, 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 Annual Delivery Program and Three Month Unloading
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 Scheduled Arrival Date at the first
opportunity that SABINE determines such LNG Vessel will not interfere with
berthing and unloading of any other scheduled LNG vessel with a higher berthing
priority. Berthing priority for LNG
vessels arriving before or during their respective Scheduled Arrival Dates
shall be determined as follows:
29
(i) The
first berthing priority on any day shall be for LNG vessels with a Scheduled
Arrival Date on such day. Priority
within this group shall be given to the LNG vessel which has first given SABINE
its NOR;
(ii) The
second berthing priority on any day shall be for LNG vessels arriving before
their respective Scheduled Arrival Date.
Priority within this group shall be given to the LNG vessel which has
first given SABINE its NOR.
(c) Late
Arrival. SABINE
shall berth an LNG Vessel arriving after its Scheduled Arrival Date at the
first opportunity that SABINE reasonably determines such LNG Vessel will not
interfere with berthing and unloading by any scheduled vessel arriving on its
Scheduled Arrival Date.
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; provided that in the circumstances
described in Section 16.2 (a), the repairs giving rise to such curtailment or
discontinuance are reasonably necessary for the delivery of Services to
Customer and Other Customers or for reasons of safety;
(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.
30
(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:
|
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
within thirty (30) days and pursuant to Section 11.2.
(d) 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, acting as a Reasonable and
Prudent Operator, 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.
31
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.
(ii) 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.
(iii) 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.
(iv) If
an LNG Vessel fails to vacate the berth pursuant to the provisions of this
Section 8.9 and after receipt of SABINE’s notice in respect thereof, Customer
shall reimburse SABINE for any and all reasonable and actual
32
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.
(v) In
the event an LNG Vessel fails to vacate the berth pursuant to this Section 8.9 and
Customer is not taking actions to cause it to vacate the berth, SABINE may
effect such removal at the expense of the Customer.
ARTICLE 9
RECEIPT OF LNG
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, and shall 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.
33
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.
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.
LNG when delivered by
Customer to SABINE shall have, in a gaseous state, a Gross Heating Value of not
less than 950 BTUs per Standard Cubic Foot and not more than 1165 BTUs per
Standard Cubic Foot.
(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) or 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
34
LNG not conforming to the quality specifications set
forth in Section 9.4 (“Off-Spec LNG”).
(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 Arrival Dates 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 a Cargo of Off-Spec LNG which it would otherwise be entitled to
reject, 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
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 such mixing or 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.
(d) 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
35
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.
(e) 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.
ARTICLE 10
REDELIVERY OF GAS
10.1 General
(a) Delivery
Point. Subject to Section 3.3, the
quantity of Gas nominated by Customer for any day pursuant to Section 5.3 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. Customer shall however, receive the same
quantity of BTUs as the quantity tendered, less Retainage pursuant to Clause Clause
C.3, and which Gas shall satisfy the requirements set forth in Section 10.3.
(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, except to the extent
such liabilities arise from a failure to comply with the requirements of a
Governmental Authority.
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 3.4 at the rates nominated by it pursuant to Section 5.3. In this regard, 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
36
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
and the Downstream Pipelines. Such
third-party arrangements shall be timely 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) 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 BTUs
per Standard Cubic Foot and not more than 1165 BTUs 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
g. Water
(H2O), 7 pounds per one million Standard Cubic Feet.
37
(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) or other contaminants or
extraneous material.
(c) Gas
Delivery Pressure. Customer’s Inventory shall be delivered to
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. Unless SABINE has
accepted such Off-Spec LNG pursuant to Section 9.5, 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.
(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.
ARTICLE
11
PAYMENT
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
Reservation Fee for the following month;
(b) the
Operating Fee for the following month; and
(c) any
charges under Section 4.2 and/or Section 8.9 for the prior month.
38
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 therefore 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 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 Contract 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.
39
11.4 Payment Due
Dates
(a) Due
Date for Payment of 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 Payment of 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. 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.
11.5 Payment
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 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
40
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 Section 4.1; and (ii) SABINE
may offer Customer’s unutilized Services 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. Subject to Section 11.3(b), statements may be contested by Customer or SABINE
(as the case may be) only if, within a period of ninety (90) days after a
Party’s receipt thereof, Customer or SABINE (as the case may be) serves on the
other Party 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.
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.
ARTICLE 12
DUTIES, TAXES AND OTHER GOVERNMENTAL CHARGES
Notwithstanding
Section 4.2, 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 and sales and use taxes that
may be imposed on the Services or on SABINE for providing the Services to
Customer. Customer shall reimburse and hold harmless
41
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. If any Governmental Authority requires
Customer or SABINE to remit Taxes for which the other Party is responsible, the
Party responsible for such Taxes shall promptly reimburse the other Party for
such Taxes. Any Party entitled to an
exemption from any such Taxes or charges shall furnish the other Party any
necessary documentation thereof.
ARTICLE 13
INSURANCE
13.1 SABINE’s
Insurance
SABINE shall be responsible for obtaining and
maintaining insurance for the Sabine Pass Facility to the extent required by
applicable law; and 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 and shall name Customer as an
additional insured (except for Workman’s Compensation insurance) to the extent
of the liabilities assumed by SABINE under this Agreement. In the event of a casualty that destroys or
materially impairs the Sabine Pass Facility, SABINE, upon consent of Lenders,
shall be required to utilize such insurance proceeds to cause the facility to
be rebuilt or repaired as quickly as commercially practicable. 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; and
(d) Wharfingers
Liability Insurance.
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.
42
13.2 Customer’s
Insurance
(a) Loss
of Product Insurance. Customer
acknowledges that SABINE shall not at any time be responsible for securing or 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.
(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 a waiver of subrogation clause and name SABINE as an
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, each of SABINE
and Customer agree to the Port Liability Agreement set forth in Exhibit B in
relation to Liabilities for incidents involving an LNG Vessel occurring at the
Sabine Pass Facility. SABINE shall cause
each Other Customer to agree to the Port Liability Agreement or to indemnify SABINE
in relation to Liabilities for incidents involving an LNG Vessel occurring at
the Sabine Pass Facility. Customer shall
cause Transporter to execute the Port Liability Agreement substantially in the
form set forth on Exhibit B prior to Transporter’s LNG Vessel’s arrival at the Sabine
43
Pass Facility.
In the event a Transporter fails to execute such Port Liability
Agreement, Customer shall indemnify and hold SABINE harmless from any
Liabilities incurred by SABINE arising from such failure.
ARTICLE 14
LIABILITIES
In no case
shall the liability of SABINE to Customer arising out of, relating to, or
connected with an Event under this Agreement exceed three (3) times the
Reservation Fee; provided, however, that the foregoing limitation shall not apply to
Liabilities caused by the Gross Negligence/Willful Misconduct of SABINE.
For purposes
of this Section 14.1, an “Event” means
any occurrence or series of occurrences having the same origin, and “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 known, such act or failure would have on the safety or property of
another Person.
SABINE acknowledges that Customer has informed it that
Customer intends to make significant investments in upstream liquefaction
facilities and enter into long-term contracts in reliance of SABINE’s
performance of this Agreement, and SABINE acknowledges that as a result of the
application of the liability limitation set forth in the first paragraph of
this Section 14.1, the
damages available pursuant to this Agreement to compensate Customer for a
material breach of this Agreement may not provide the Customer with an adequate
remedy. Accordingly, SABINE agrees that it will not oppose the granting of
specific performance or other temporary or permanent injunctive relief in
Customer’s favor in the event of a material breach of this Agreement (including
anticipatory repudiation) by SABINE for which Customer will not be adequately
compensated by the award of damages as a result of the application of the
liability limitation set forth in the first paragraph of this Section 14.1.
Notwithstanding any other provision of this Agreement
to the contrary, no Party shall be liable to the other Party for or in respect
of:
(a) any
consequential loss or damage, including loss of profits or business
interruption; or
(b) 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
44
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. For purposes
of this Agreement, any amounts payable by Customer to its Gas purchasers or Gas
suppliers for replacement Gas or other similar Liabilities shall be deemed to
be a consequential loss or damage.
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.
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 cause not within the control
of the Party claiming suspension, and which by the exercise of due diligence, such
Party has been unable to prevent or overcome, including without limitation (to
the extent consistent with the foregoing) acts of God, the government, or a
public enemy: strikes, lockout, or other industrial disturbances; wars,
blockades or civil disturbances of any kind; epidemics, Adverse Weather
Conditions, fires, explosions, arrests and restraints of governments or people;
freezing of, breakage or accident to, or the necessity for making repairs or
alterations to tanks, machinery or lines of pipe, and unplanned outages of the
Sabine Pass Facility. 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.
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 Clauses C and D, Sections 3.4, 7.3, 8.9,
9.2, 9.5, 10.2 and Article 4, Article 11, Article 12 and Article 20.
45
A Force
Majeure event shall take effect at the moment such an event or circumstance
occurs. Upon the occurrence of a Force
Majeure event 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;
(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.
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 commercially 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 their obligations under this Agreement to
the extent not excused by such event of Force Majeure.
The Term
shall not be extended as a result of or by the duration of an event of Force
Majeure.
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.
46
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 to Customer and Other Customers in a reasonable manner based on
the ratio that the Maximum LNG Reception Quantity bears to the Aggregate
Contracted Capacity for the remainder of such Contract Year.
Customer may terminate this Agreement if 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.
To the extent that SABINE
has notified Customer under Section 5.1(a) in connection with the preparation
of the Annual Delivery Program of maintenance to or modification of the Sabine
Pass Facility, SABINE shall, in addition to the rights set forth in Section 16.2,
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. During the period of such curtailment or
temporary discontinuation of Services, SABINE shall, from time to time, use
reasonable efforts to update Customer on the expected progress towards
completing the maintenance or modification, whichever applicable. For purposes of this Section 16.1, a
curtailment of or temporary discontinuation of Services shall mean any
curtailment or temporary discontinuation lasting no more than three (3)
consecutive days. Notwithstanding the
foregoing, SABINE agrees that, for purposes of this Section 16.1, neither a
curtailment nor a temporary discontinuation of Services pursuant to this
Section 16.1 shall reduce SABINE’s obligations to provide Services for
Customer’s LNG in a quantity up to the Maximum LNG Reception Quantity.
SABINE shall have the
right to curtail or temporarily discontinue the Services, in whole or in part,
at any time in order to: (a) repair the Sabine Pass Facility; or (b) 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
47
perform activities
similar to the Services to Customer and Other Customers in a reasonable manner
based on the ratio that the Maximum LNG Reception Quantity bears to the
Aggregate Contracted Capacity for the remainder of such Contract Year. 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; provided that SABINE shall use commercially reasonable efforts to implement
such curtailment or discontinuance of Services among Customer and Other
Customers as equitably as reasonably practicable under the circumstances. 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.
(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.
(a) Affiliates
of SABINE. Notwithstanding the
provisions of Section 17.1, SABINE may freely assign all of its rights and
obligations 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, Customer may freely assign all of its rights and
obligations under this Agreement to an Affiliate upon notice to, but without
requiring the consent of, SABINE. Guarantor shall agree in writing that the
Guarantee extends to all of the obligations assigned pursuant to this Section 17.2(b).
(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
connection with SABINE’s efforts to finance the construction of the Sabine Pass
Facility, if required by the Lenders, Customer
agrees to execute in
48
favor
of such Lenders a document in the form of the Lenders Consent and Agreement
appended hereto as Exhibit D.
(d) Partial
Assignments. Customer may assign a
portion of the Services it is entitled to hereunder (a “Partial
Assignment”) for any period of time up to and including the
remainder of the Term, or all of its entitlements for a period of time that is
less than the remaining Term, upon notice but without the prior consent of SABINE,
to one or more assignees, provided that the Guarantee, extending to all
obligations assigned pursuant to the Partial Assignment continues to remain in
full force and effect such that the guarantee of Customer’s obligations under
this Agreement in favor of SABINE is not adversely affected by such assignment;
and:
(i) the
assignees deliver to SABINE the written undertaking required by Section 17.1(b);
(ii) Customer
and all assignees designate one of them, or a third party, on behalf of
Customer and all assignees to act as Scheduling Representative and for purposes
of giving and receiving all notices, statements and other communications from
or to Customer and exercising all rights of Customer under this Agreement
(including all rights under Clause A, Sections 2.3, 3.5, 8.2, 10.2, 11.3, 18.1,
20.1, and 20.2) jointly, without delay or hindrance to each Party’s performance
of this Agreement; and
(iii) no
Partial Assignment shall reduce the responsibility of Customer or SABINE in
respect of the Services or increase SABINE’s responsibilities to Customer and
the assignees under this Agreement.
Customer shall remain liable for all payments due under this Agreement
and SABINE shall continue to send all statements required under Article 11 to Customer. Customer shall indemnify and hold SABINE
harmless from any Liabilities incurred by SABINE arising from a failure by
Customer and all assignees to designate a Scheduling Representative under Section
17.2(d)(ii) above.
(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 or SABINE’s rights and obligations under this Agreement for the
remaining Term of the Agreement shall not serve as a novation of this Agreement
unless and until, but shall serve as a novation if:
(i) the
assignee delivers to the non-assigning Party its written undertaking to be
bound by and perform all obligations of the assignor (including the assumption
of all liabilities of the assignor from the Effective Date through the date of
such assignment) 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
49
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 U.S. 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 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.
(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) From
and after the Commercial Start Date, for reasons not excused by Force Majeure
or Customer’s actions:
a. SABINE
failed to deliver to the Delivery Point an amount aggregating to 141,380,925
MMBTUs or more of Customer’s total Gas nominations in a twelve (12) month
period;
b. SABINE
has failed entirely to receive for Customer’s account at least twelve (12) Cargoes,
nominated by Customer, over a period of ninety (90) consecutive days; or
c. SABINE
failed to unload at the Receipt Point, or has notified Customer that it would
be unable to unload, the aggregate of thirty seven (37) Cargoes or more
scheduled in the Customer LNG Receipt Schedule for a twelve (12) month period.
50
(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; or
(ii) the
Guarantor or Customer 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.
This Agreement is also subject to the termination
provisions provided in Section 11.6.
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.
51
(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 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
52
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.
(k) Interim
Measures. In addition to Customer’s
rights under Section 14.1, 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
53
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.
(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
54
(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.
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
55
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;
(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;
(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 to Other Customers.
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. Customer further agrees and acknowledges
that, at the time Cheniere Energy, Inc. files its quarterly report in form 10-Q
for the third quarter,
56
complete
copies of this Agreement, with attachments, and any and all related agreements
and material amendments hereto and thereto will be filed by Cheniere Energy,
Inc. with the United States Securities and Exchange Commission as material
agreements or amendments in accordance with applicable securities laws and
regulations.
(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, such approval not to
be unreasonably withheld; 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 it is necessary 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.
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
Pennsylvania and duly qualified to do business in the State of Louisiana;
(b) Upon
satisfaction of the Customer Conditions Precedent set forth in Clause 3.2 of
the Omnibus Agreement between Customer and SABINE, 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
57
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.
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.
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 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 in Clause E 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.
58
COORDINATION
(a) Establishment
of Terminal Operations Coordination Committee. Not later than ninety (90) days following the
execution of this Agreement, the Parties shall form a joint coordination
committee (“Terminal Operations Coordination
Committee”) to serve as a forum for the Parties to coordinate and
consult regarding the provisions of Sections 24.2 and 24.3.
(b) Representatives. The Terminal Operations Coordination
Committee shall be comprised of such equal number of representatives from each
of Customer and SABINE as the Parties may agree from time to time.
(c) Limitation
of Authority. Notwithstanding anything herein to the contrary in
this Section 24.1, the Terminal Operations Coordination Committee shall have no
authority to bind or make agreements on behalf of Customer or SABINE or to
issue instructions to or direct or exercise authority over Customer or SABINE
or any of their respective officers, employees, advisors or agents or to waive
or modify any provision hereof.
(d) Expenses. Each Party shall bear all costs and expenses
incurred its respective representatives to the Terminal Operations Coordination
Committee shall be borne by SABINE.
(a) Terminal
Operations Coordination Committee Meetings.
The Terminal Operations Coordination Committee shall meet: (i) within
six (6) months following the execution of this Agreement and thereafter on a
frequency of no more than a quarterly basis until the Commercial Start Date; and (ii) upon request of either Party upon
at least fifteen (15) days prior notice (or such shorter time as the Parties
may agree), which notice shall include an agenda for the proposed meeting and
any appropriate supporting documentation.
Such meetings shall be held at such place as the Parties may agree from
time to time. At such meetings, the
Terminal Operations Coordination Committee shall coordinate the Parties’
activities with respect to the performance of the Parties prior to the
Commercial Start Date, including the satisfaction of the Conditions Precedent
and the construction and commissioning of the SABINE Pass Facility.
(b) Construction
Progress Reports. At least fifteen (15) days prior to each
quarterly Terminal Operations Coordination Committee meeting, each Party shall
furnish to the other a schedule update and interim progress report 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 and the satisfaction of
the Conditions Precedent (such schedules and interim progress reports
hereinafter referred to as a “Progress Report”. Each Progress Report shall include, as
applicable: (i) the status and progress of all construction and an update of
the construction schedule; (ii) the status and an update of construction
approvals, permits and authorizations not yet received; and (iii) any other
59
information which a Party may reasonably request to evaluate the status
and progress of the above matters. If
any material change occurs with respect to any of the above matters subsequent
to the most recent Progress Report hereunder, the issuing Party shall promptly
give notice to the other Party.
(a) Terminal
Operations Coordination Committee Meetings.
After the Commercial Start Date, the Terminal Operations Coordination
Committee shall meet on a yearly basis or such other time as the Parties may
mutually agree. Such meetings shall be
held at such place as the Parties may agree from time to time. At such meetings, the Terminal Operations
Coordination Committee shall discuss the matters set forth on Exhibit A
attached hereto.
(b) Correlation
Tests. To assist in the proper
determination of the amount of LNG delivered under this Agreement, the Parties
shall perform periodically correlation tests (each a “Correlation Test”) of SABINE’s gas chromatograph at the
Sabine Pass Facility and of LNG Supplier’s gas chromatograph at the applicable
liquefaction facility. The procedure for such tests shall
be agreed upon by the Parties, subject to the following conditions:
(i) At least sixty (60) days prior to the
Commercial Start Date, the laboratory staffs of the Parties shall jointly
develop detailed testing methods based on GPA standards (as appropriate), such
standards to be modified to conform to measurement and testing standards set
forth in the Sabine Pass Services Manual.
The first Correlation Test shall take place no later than ninety (90)
days after the Commercial Start Date.
Thereafter, a Correlation Test shall be conducted on a yearly basis
unless the Parties mutually agree to a two (2) or three (3) year interval between
tests in consideration of the consistency of prior test results;
(ii) Customer shall obtain a calibrated sample for determining response
factors, with such sample being transported from SABINE’s laboratory to the
other by LNG Vessels. The results of
these tests shall be made available to both Parties; and
(iii) Each Correlation Test shall be performed with the same procedure in the
respective laboratory chromatograph with a view to achieving similar testing
results within GPA tolerance allowances.
This
Agreement may not be amended, modified, varied or supplemented except by an
instrument in writing signed by SABINE and Customer.
60
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.
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.
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.
(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.
61
(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.
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 23 and
Article 25 shall survive the termination or expiration of this Agreement.
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.
(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. In addition,
reference to a Clause means a reference to a Clause in Part One and reference
to an Article or Section means a reference to an Article or Section of Part
Two.
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(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.
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 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.
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 (a) any
expert determination or arbitration proceeding commenced or to be commenced
pursuant to this Agreement; (b) any judicial, administrative or other
proceedings to aid the expert determination or arbitration commenced pursuant
to this Agreement; and (c) 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.
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
63
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.
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.
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. In no event shall (a) any of
SABINE’s joint venture partners or Affiliates 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 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.
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
64
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.
65
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 meters expressed to the nearest thousandth (1/1000), with LNG tank
depths expressed in meters 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.
2
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 MMBTUs, 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) millimeters and the secondary liquid level
gauging devices shall be plus or minus ten (± 10) millimeters.
The liquid level in each LNG tank shall be logged or printed.
b) Temperature
Gauging Devices.
The temperature of the LNG and of the vapor 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 millimeter 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 one (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
5
tank with an accuracy equal to or better than plus or minus one percent
(± 1%) of the measuring range.
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.
6
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 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
7
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, 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 ma``y, 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 meters to the
nearest zero point zero zero one (0.001) cubic meter, 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
8
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 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 MMBTUs
contained in the LNG delivered, rounded to the nearest ten (10) MMBTU.
|
9
|
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 meters, rounded to three (3) decimal
places.
|
|
|
|
|
|
Vh
|
=
|
the volume of
the liquid cargo in an LNG Vessel immediately after unloading, in cubic
meters, rounded to three (3) decimal places.
|
|
|
|
|
|
Vb
|
=
|
the volume of
the liquid cargo in an LNG Vessel immediately before unloading, in cubic
meters, 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 meters, of each LNG cargo unloaded shall be calculated by
using the following formula:
10
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:
12.4 MMBtu
Calculation of the Quantity of LNG Unloaded
The number of MMBTUs 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 MMBTUs 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 MMBTUs = 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 MMBTUs =
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
MMBTUs 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:
11
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;
(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 meter/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 meter/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 meter/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
1
compressibility and density shall be calculated in
accordance with the latest 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
2
procedures that are in accordance with the above
mentioned standards have been 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 (6) 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:
3
(a) by
using the registration of any check meter or meters if installed and accurately
registering;
(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.
4
EXHIBIT A
SABINE PASS SERVICES MANUAL
The Sabine Pass Services
Manual referred to in Section 3.5 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 5.3 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
1
EXHIBIT B
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 Cameron Parish,
Louisiana (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.
1
“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 Cameron
Parish, Louisiana, including its anchorage, turning basin and approaches into
the Marine Terminal associated therewith.
“Vessel Interests” means (i) Vessel Owner,
(ii) all Affiliates, participating in the ownership and/or operation, of
Vessel, (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 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) 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.
(ii) Vessel
Owner shall cause to be provided to SABINE 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 SABINE prior notice of cancellation of the Vessel’s
entry in such
2
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.
5. 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
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.
6. 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.
7. 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.
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.
|
SABINE PASS LNG L.P.
|
[INSERT SIGNATURES OF
EACH OF
VESSEL OWNERS]
|
|
|
|
|
By: SABINE PASS LNG-GP,
as General Partner
|
By:
|
|
|
|
|
|
|
By:
|
|
|
By:
|
|
|
|
Title:
|
Title:
|
|
|
|
|
|
|
|
|
3
|
|
As owner of the Name of
Vessel
Registration No.
State of Registry
|
4
Exhibit C
Guarantee
Exhibit D
Consent
1
EXHIBIT
C
GUARANTY AGREEMENT
From
CHEVRONTEXACO CORPORATION
to
SABINE PASS LNG,
L.P.
Dated as of ,
GUARANTY AGREEMENT
THIS
GUARANTY AGREEMENT, is made and entered into as of ,
by CHEVRONTEXACO CORPORATION (“ChevronTexaco”),
a corporation organized and existing under the laws of the State of Delaware,
to SABINE PASS LNG L.P., a limited
partnership organized under the laws of Delaware (“Sabine Pass”);
WITNESSETH:
WHEREAS, Sabine Pass has
entered into that certain Terminal Use Agreement dated as of
with Chevron U.S.A. Inc., a corporation incorporated under the laws of the Commonwealth of Pennsylvania; and
WHEREAS, the
ChevronTexaco Subsidiary is a wholly-owned subsidiary of ChevronTexaco; and
WHEREAS, it is a
condition precedent to the effectiveness of the TUA that certain of the
ChevronTexaco Subsidiary’s obligations thereunder be guaranteed by
ChevronTexaco in accordance with and subject to the provisions of this Guaranty
Agreement;
NOW, THEREFORE, in
consideration of the premises ChevronTexaco does hereby covenant and agree with
Sabine Pass, as follows:
ARTICLE I
DEFINITIONS
Section
1.1. Definitions. Except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in this Section 1.1 shall,
for all purposes of this Guaranty Agreement, have the meanings herein
specified, the following definitions to be equally applicable to both the
singular and plural forms of any of the terms herein defined:
Banking
Day
The term “Banking Day”
shall mean any day other than a Saturday, a Sunday or any other day on which
commercial banks in New York or California are authorized or required to be
closed.
ChevronTexaco
The term “ChevronTexaco”
shall mean ChevronTexaco Corporation, a Delaware corporation, until a successor
corporation shall have become such pursuant to the applicable provisions
hereof, and thereafter ChevronTexaco shall mean such successor corporation.
ChevronTexaco
Subsidiary
The term “ChevronTexaco
Subsidiary” shall mean Chevron U.S.A. Inc., a corporation incorporated under
the Commonwealth of Pennsylvania, until a successor corporation shall have
become such pursuant to the applicable provisions of the TUA, and thereafter
the ChevronTexaco Subsidiary shall mean such successor corporation.
1
Guaranty
Agreement
The term “Guaranty
Agreement” shall mean this Guaranty Agreement dated as of ,
as originally executed or as it may from time to time be supplemented, modified
or amended as provided herein.
Guaranteed
Obligations
The term “Guaranteed
Obligations” shall have the meaning accorded such term in Section 3.1 of this
Guaranty Agreement.
Maximum
Guaranteed Amount
The term “Maximum
Guaranteed Amount” shall mean, as of any date, an amount equal to “MGA” where:
MGA = [(Q x R x T) x
80%]- F
Where:
Q = ChevronTexaco Subsidiary’s Maximum LNG
Reception Quantity under the TUA;
R = thirty-two cents ($0.32);
T = twenty (20); and
F = the cumulative amount of Fees paid by the
ChevronTexaco Subsidiary under the TUA
Sabine
Pass
The term “Sabine Pass”
shall mean Sabine Pass LNG, L.P., a limited partnership organized under the
laws of the State of Delaware, or its permitted successor or assign pursuant to
the TUA.
TUA
The term “TUA” shall mean
the Terminal Use Agreement dated as of ,
between the ChevronTexaco Subsidiary and Sabine Pass, as such TUA was
originally executed or as it may from time to time be supplemented, modified or
amended as provided therein.
Section
1.2. Other Defined Terms. Capitalized terms not otherwise defined in
this Guaranty Agreement shall have the meanings ascribed thereto in the TUA.
2
ARTICLE II
REPRESENTATIONS OF CHEVRONTEXACO
Section 2.1. Representations of ChevronTexaco.
ChevronTexaco makes the following representations to the
Guaranteed Parties:
(a) ChevronTexaco has been duly organized and is
validly existing under the laws of the State of Delaware, has full legal right,
power and authority to enter into this Guaranty Agreement and to carry out and
consummate all transactions contemplated by this Guaranty Agreement, and by
proper corporate action has duly authorized the execution and delivery of this
Guaranty Agreement.
(b) The execution and delivery of this Guaranty
Agreement and the consummation of the transactions herein contemplated will not
conflict with or constitute on the part of ChevronTexaco a breach of or default
under its Restated Certificate of Incorporation, as amended to the date hereof,
its By-Laws, as amended to the date hereof, or any indenture, or other material
agreement or instrument to which ChevronTexaco is a party or by which it or its
properties are bound or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over ChevronTexaco or any of
its activities or properties.
(c) This Guaranty Agreement has been duly
authorized, executed and delivered by ChevronTexaco and constitutes the valid
and binding obligation of ChevronTexaco.
(d)
ChevronTexaco has made available to Sabine Pass ChevronTexaco’s Annual Report
on Form 10-K for the year ended December 31, 2003 and its Quarterly Reports on
Form 10-Q for the quarters ended March 31 and June 30, 2004 and its Current
Reports on Form 8-K dated July 29, 2004, July 30, 2004 and October 29, 2004
filed with the Securities and Exchange Commission (collectively, the “ChevronTexaco
Reports”). ChevronTexaco’s
Quarterly Report on form 10-Q for the quarter ended June 30, 2004 was filed
with the Securities and Exchange Commission on August 4, 2004. The ChevronTexaco Reports at and as of their
respective dates do not include any untrue statement of a material fact nor
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Since June 30,
2004, there has been no material adverse change in the financial condition of
ChevronTexaco and its consolidated subsidiaries taken as a whole.
ARTICLE III
GUARANTY AND AGREEMENTS
Section 3.1. Guaranty. The Guarantor absolutely, unconditionally and irrevocably guarantees to Sabine Pass the full and prompt payment by the
ChevronTexaco Subsidiary of all of its payment obligations under the TUA to
Sabine Pass and its successors and permitted assigns
3
from and after the
Commercial Start Date, including payment obligations in respect of any breach
of the TUA by the ChevronTexaco Subsidiary; provided, however, (a) the
Guarantor shall be entitled to all
defenses, counterclaims and rights of set off and recoupment that the
ChevronTexaco Subsidiary may have under the TUA other than any such defenses
based on (i) failure of consideration supporting the TUA, (ii) the Company’s
lack of authority to execute or deliver the TUA or to perform its obligations
thereunder, and (iii) any defense arising out of the bankruptcy, insolvency or
similar proceeding concerning the ChevronTexaco Subsidiary; and (b) the
Guarantor’s aggregate liability in respect of the obligations guaranteed
hereunder shall be the Maximum Guaranteed Amount (the obligations guaranteed
under this Guaranty, subject to this proviso, are hereinafter referred to as
the “Guaranteed Obligations”).
Section 3.2. Unconditional Nature of
Obligations. The obligations of ChevronTexaco under this
Guaranty Agreement shall be absolute, irrevocable and unconditional and shall
remain in full force and effect until the entire Guaranteed Obligations shall
have been paid, and such obligations shall not be affected, modified or
impaired upon the happening from time to time of any event, including without
limitation any of the following, whether or not with notice to, or the consent
of, ChevronTexaco:
(a) the waiver,
surrender, compromise, settlement, release or termination of any or all of the
obligations, covenants or agreements of the ChevronTexaco Subsidiary under the
TUA;
(b) the failure
to give notice to ChevronTexaco of the occurrence of a default under the TUA;
(c) the waiver, compromise or release of
the payment, performance or observance by the ChevronTexaco Subsidiary or by
ChevronTexaco, respectively, of any or all of the obligations, covenants or
agreements of either of them contained in the TUA or this Guaranty Agreement,
as the case may be;
(d) the extension of the time for payment
of any Guaranteed Obligation under the TUA or of the time for performance of
any other obligations, covenants or agreements under or arising out of the TUA;
(e) the
modification, amendment or alteration (whether material or otherwise) of any
obligation, covenant or agreement set forth in the TUA;
(f) the taking
or the omission of any of the actions referred to in the TUA;
(g) any failure,
omission, delay or lack on the part of Sabine Pass to enforce, assert or
exercise any right, power or remedy conferred on it in the TUA;
(h) the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially all
the assets, marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other similar
proceedings affecting ChevronTexaco or the ChevronTexaco Subsidiary or any of
the respective assets of either of them, or any allegation or contest of the
validity of this Guaranty Agreement in any such proceeding;
(i) any defense
based upon any legal disability of the ChevronTexaco Subsidiary or, to the
extent permitted by law, any release, discharge, reduction or limitation of or
with
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respect to any sums owing by the ChevronTexaco
Subsidiary or any other liability of the ChevronTexaco Subsidiary to Sabine
Pass;
(j) to the extent permitted by law, the
release or discharge by operation of law of ChevronTexaco from the performance
or observance of any obligation, covenant or agreement contained in this
Guaranty Agreement;
(k) the default
or failure of ChevronTexaco fully to perform any of its obligations set forth
in this Guaranty Agreement; or
(l) the
invalidity of the TUA or any part thereof.
If any payment by the
ChevronTexaco Subsidiary to Sabine Pass is rescinded or must be returned by the Lender, the
obligations of ChevronTexaco hereunder shall be reinstated with respect to such
payment.
Subject to clause (a) of the
proviso of the first paragraph of this Section 3.1, no set-off, counterclaim,
reduction, or diminution of any obligation, or any defense of any kind or
nature which ChevronTexaco has or may have against Sabine Pass shall be
available hereunder to ChevronTexaco to reduce the payments to Sabine Pass
under Section 3.1 of this Guaranty Agreement.
Furthermore, no defense previously raised by the ChevronTexaco
Subsidiary arising out of or in connection with a Guaranteed Obligation claimed
hereunder and which has been settled in Sabine Pass’s favor by the dispute
resolution procedures of Article 20 of the TUA may be raised by the Guarantor
and no cure period previously used by the Guarantor Subsidiary may be used by
the Guarantor.
ChevronTexaco assumes
responsibility for being and remaining informed of the financial condition of
the ChevronTexaco Subsidiary and of all other circumstances bearing upon the
risk of nonpayment of the Guaranteed Obligations which diligent inquiry would
reveal and agrees that Sabine Pass shall not have a duty to advise
ChevronTexaco of information known to it regarding such condition or any such
circumstances.
Section 3.3. Proceedings Against
ChevronTexaco. In the event of a default in the payment of
the amounts guaranteed pursuant to the terms hereof when and as the same shall
become due, Sabine Pass shall have the right to proceed first and directly
against ChevronTexaco under this Guaranty Agreement without proceeding against
the ChevronTexaco Subsidiary or exhausting any other remedies which it may
have.
Section 3.4. Costs.
ChevronTexaco agrees to pay all costs, expenses and fees, including
without limitation all reasonable attorneys’ fees, which may be incurred by
Sabine Pass in enforcing or attempting to enforce this Guaranty Agreement
following any default on the part of ChevronTexaco hereunder, whether the same
shall be enforced by suit or otherwise.
Section 3.5. Corporate Existence of
ChevronTexaco; Consolidation, Merger, Sale or Transfer. ChevronTexaco covenants that so long as it
has any outstanding obligations under this Guaranty Agreement, it will maintain
its corporate existence, will not dissolve, sell or otherwise dispose of all or
substantially all of its assets and will not consolidate with or merge into
another corporation or permit one or more other corporations to consolidate with
or merge into it; provided that ChevronTexaco may, without violating the
covenants in this Section 3.5 contained, consolidate with or merge into another
corporation or permit one or more other corporations to consolidate with or
merge into it, or sell or otherwise transfer to another corporation all or
substantially all of its assets as an entirety and thereafter dissolve, if the
surviving, resulting or transferee corporation, as the
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case may be, (i) shall be
incorporated and existing under the laws of one of the States of the United
States of America, (ii) assumes, if such corporation is not ChevronTexaco, all
of the obligations of ChevronTexaco hereunder and (iii) is not, after such
transaction, otherwise in default under any provisions hereof.
ARTICLE IV
MISCELLANEOUS
Section 4.1. Governing Law. This
Guaranty Agreement shall be governed by the laws of the State of California
(excluding the choice of law principles thereof). Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Guaranty Agreement or the transactions contemplated hereby.
Section 4.2. Notices. All
notices and other communications to ChevronTexaco or Sabine Pass may be
electronically communicated or hand delivered or sent by overnight courier, to
any party hereto at the addresses as provided in this Section 4.2:
All communications intended
for ChevronTexaco shall be sent to:
ChevronTexaco
Corporation
6001 Bollinger
Canyon Road
Building E
San Ramon,
CA 94583
Attention: Treasurer
Fax Number: (925) 842-8090
All communications intended
for Sabine Pass shall be sent to:
Sabine Pass LNG, L.P.
717 Texas
Avenue, Suite 3100
Houston, Texas
77002
Attention: President
Fax Number: (713) 659-5459
or at any other address of which either of the foregoing shall have notified
the other in any manner prescribed in this Section 4.2.
For all purposes of this
Guaranty Agreement, a notice or communication will be deemed effective:
(a) if delivered by hand or sent by overnight
courier, on the day it is delivered unless (i) that day is not a day upon which
commercial banks are open for the transaction of business in the city specified
(a “Local Banking Day”) in the address for notice provided by the
recipient or (ii) if delivered after the close of business on a Local Banking
Day, then on the next succeeding Local Banking Day and
(b) if sent by facsimile
transmission, on the date transmitted, provided that oral or written
confirmation of receipt is obtained by the sender unless the date of
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transmission and confirmation is not a Local Banking Day,
in which case on the next succeeding Local Banking Day.
Section 4.3. Banking Days.
Except as otherwise provided in this Guaranty Agreement, if any date on
which a payment is to be made, notice is to be given or other action taken
hereunder is not a Banking Day, then such payment, notice or other action shall
be made, given or taken on the next succeeding Banking Day in such place, and
in the case of any payment, no interest shall accrue for the delay.
Section 4.4. Successors and Assigns. This
Guaranty Agreement shall be binding upon ChevronTexaco and its successors and
assigns and inure to the benefit of Sabine Pass and its successors and
assigns. Except as provided in Section
3.5 hereof, ChevronTexaco may not assign its obligations hereunder without the
prior written consent of Sabine Pass. Sabine Pass may assign, mortgage or
pledge all or any of its rights, interests or benefits hereunder to secure
payment of any indebtedness incurred or to be incurred in connection with the
financing of the construction and start up of the Sabine Pass facility. The Guarantor, in connection therewith, shall
execute and deliver to the lenders to whom such indebtedness is owed a consent
to such assignment in form and substance substantially similar to the consent
and agreement executed and delivered by the ChevronTexaco Subsidiary to such
lenders in connection with the TUA.
Section 4.5. Guaranty for Benefit of
Sabine Pass. This Guaranty Agreement is entered into by
ChevronTexaco for the benefit of Sabine Pass.
Nothing contained herein shall be deemed to create any right in, or to be in
whole or in part for the benefit of any person other than ChevronTexaco and
Sabine Pass and their respective permitted successors and assigns.
Section 4.6. Term. This
Guaranty Agreement shall terminate and be of no further force and effect upon
the earliest of (a) full payment by ChevronTexaco of its obligations under
Section 3.1 hereof or (b) full payment
by the ChevronTexaco Subsidiary of its obligations under the TUA.
Section 4.7. Amendments and Waivers. Any
provision of this Guaranty agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by
each of ChevronTexaco and Sabine Pass.
Section 4.8. Headings. The
article and section headings of this Guaranty Agreement are for convenience
only and shall not affect the construction hereof.
Section 4.9. Partial Invalidity. The
invalidity of any one or more phrases, sentences, clauses or sections in this
Guaranty Agreement shall not affect the validity or enforceability of the
remaining portions of this Guaranty Agreement or any part thereof.
Section 4.10. No Waiver, Remedies. No
failure or delay by Sabine Pass in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
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Section 4.11. Execution in Several
Counterparts. This Guaranty Agreement may be executed in
any number of counterparts, each of which shall for all purposes be deemed to
be an original; but such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF,
CHEVRONTEXACO CORPORATION has caused this Guaranty Agreement to be executed in
its name and on its behalf by its duly authorized officer as of the date first
above written.
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CHEVRONTEXACO
CORPORATION
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By
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8
EXHIBIT D
THIS CONSENT
AND AGREEMENT (this “Consent and Agreement”) dated as of [ ]
is made and entered into by and among Chevron U.S.A. Inc., a corporation duly
incorporated and validly existing under the laws of the Commonwealth of
Pennsylvania (the “Project Party”), and [ ],
in its capacity as collateral agent (together with its successors and assigns
in such capacity, the “Collateral Agent”) under the Security Documents.
W
I T N E S S E T H
WHEREAS,
Sabine Pass LNG, L.P., a limited partnership duly organized and validly
existing under the laws of the State of Delaware (the “Company”), the
lenders under the Credit Agreement referred to below and the Collateral Agent
are parties to a Credit Agreement dated as of [ ]
(as amended, modified and supplemented and in effect from time to time, the “Credit
Agreement”) pursuant to which the lenders will make loans and extend other
credit to the Company for the purpose of financing the cost of constructing and
operating the Sabine Pass Facility and related expenses;
WHEREAS, the
Project Party and the Company have entered into the Terminal Use Agreement,
dated as of [ ],
2004 (as amended, restated, modified or otherwise supplemented from time to
time, the “Assigned Agreement”) with respect to the LNG terminalling
services of the Sabine Pass Facility, including (i) the berthing of LNG
vessels, (ii) the unloading, receiving and storing of LNG, (iii) the
regasification of LNG and (iv) delivery of natural gas to the Delivery Point;
and
WHEREAS, as
security for the loans made by the lenders under the Credit Agreement, the
Company has assigned, pursuant to the security documents entered into between
the Company and the Collateral Agent (as amended, modified and supplemented and
in effect from time to time, the “Security Documents”), all of its
right, title and interest in, to and under, and granted a security interest in,
the Assigned Agreement to the Collateral Agent on behalf of the secured parties
identified therein (the “Secured Parties”);
NOW THEREFORE,
as an inducement to the lenders to make the loans, and in consideration of
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions. Terms defined in the Assigned Agreement are
used herein as defined therein. Unless
otherwise stated, references herein to any Person shall include its permitted
successors and assigns and, in the case of any Governmental Authority, any
Person succeeding to its functions and capacities.
2. Representations and Warranties. The Project Party hereby represents and
warrants to the Collateral Agent and each of the Secured Parties that:
(a) The Project Party has been duly organized and
is validly existing under the laws of the Commonwealth
of Pennsylvania, has full legal right, power and authority to enter into this
Consent and Agreement and to carry out and consummate all transactions
contemplated by this Consent and Agreement, and by proper
corporate action has duly authorized the execution and delivery of this Consent
and Agreement.
(b) The execution and delivery of this Consent
and Agreement and the consummation of the transactions herein contemplated will
not conflict with or constitute on the part of the Project Party a breach of or
default under its certificate of incorporation, as amended to the date hereof,
its by-laws, as amended to the date hereof, or any indenture, or other material
agreement or instrument to which the Project Party is a party or by which it or
its properties are bound or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Project Party or any
of its activities or properties.
(c) This Consent and Agreement has been duly
authorized, executed and delivered by the Project Party and constitutes the
valid and binding obligation of the Project Party.
(d) 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 Consent and Agreement have been obtained and
all conditions thereof have been duly complied with, and no other action by,
and no notice or filing with, any governmental authority or regulatory body is
required in connection with the execution, delivery or performance of this
Consent and Agreement.
3. Consent and Agreement. The Project Party hereby acknowledges and
agrees that:
(a) At any time that an event of default has
occurred and is continuing under the Credit Agreement, the Collateral Agent and
any permitted assignee thereof shall be entitled to exercise any and all rights
of the Company under the Assigned Agreement in accordance with its terms and
the Project Party shall comply in all respects with such exercise. Without limiting the generality of the foregoing,
the Collateral Agent and any permitted assignee thereof shall have the full
right and power to enforce directly against the Project Party (subject to
Project Party’s defenses, counterclaims and rights of set off under the
Assigned Agreement) all obligations of the Project Party under the Assigned
Agreement and otherwise to exercise all remedies thereunder and to make all
demands and give all notices and make all requests required or permitted to be
made by the Company under the Assigned Agreement; provided that, in any case in
this Section 3(a), where the exercise by the Collateral Agent of any rights or
remedies shall have the effect of transferring the Assigned Agreement from the
Company to the Collateral Agent, its designee or any other person or a transfer
by the Company in lieu of the exercise
of such rights and remedies, the conditions set forth in the proviso in Section
3(d) or (e), as applicable, shall have been fulfilled to the satisfaction of
the Project Party.
(b) The Project Party will not (i) without
the prior written consent of the Collateral Agent, take any action to as a
result of a Company default under the Assigned Agreement, cancel or terminate,
or suspend performance under, the Assigned Agreement
or consent to or accept any
cancellation, termination or suspension thereof except in accordance with the
terms thereof; (ii) exercise any of its rights set forth in the Assigned
Agreement to cancel or terminate, or suspend performance under, the Assigned
Agreement as a result of a Company default thereunder, unless the Project Party
shall have first delivered to the Collateral Agent written notice stating that
it intends to exercise such right, specifying the nature of the default giving
rise to such right and permitting the Collateral Agent to cure such default by
performing or causing to be performed the obligation in default, the Collateral
Agent to have the period of time the Company is allowed to cure such default if
the notice is given to the Collateral Agent at the same time as the notice of
the default is given to the Company or a period of time equivalent to the
period of time the Company is allowed to cure such default if the notice is
given to the Collateral Agent is given at a later time than the time when the
notice is given to the Company, (iii) amend, supplement or otherwise
modify the Assigned Agreement (as in effect on the date hereof) without giving
prior notice thereof to the Collateral Agent, (iv) without the prior written
consent of the Collateral Agent, sell, assign or otherwise dispose of (by
operation of law or otherwise) any part of its interest in the Assigned
Agreement (other than for assignments permitted under the Assigned Agreement)
or (v) without the prior written consent of the Collateral Agent, petition,
request or take any other legal or administrative action which seeks, to
rescind, terminate, suspend (other than as permitted under the Assignment
Agreement), amend or modify the Assigned Agreement or any part thereof. Additionally, nothing in this Section 3(b)
shall limit the Project Party’s ability to invoke the dispute resolution
provisions of the Assigned Agreement.
Neither
the Collateral Agent nor any Secured Party shall have any obligation to the
Project Party for the performance of any obligations under the Assigned
Agreement unless and until (and to the extent), in the case of the Collateral
Agent, such entity succeeds to the interest of the Company under the Assigned
Agreement as contemplated by Section 3(d) or 3(e) below; and any curing of or
attempt to cure any of the Company’s defaults under the Assigned Agreement
prior thereto shall not be construed as an assumption by the Collateral Agent
or any Secured Party of any covenants, agreements or obligations of the Company
under the Assigned Agreement.
(c) The Project Party shall deliver to the
Collateral Agent at the address set forth on the signature pages hereof, or at
such other address as the Collateral Agent may designate in writing from time
to time to the Project Party, concurrently with the delivery thereof to the
Company, a copy of each material notice, request or demand given by the Project
Party pursuant to the Assigned Agreement.
(d) The Project Party consents to the transfer of
the Company’s interest under the Assigned Agreement pursuant to the exercise of
the Secured Parties’ remedies under the Security Documents and agrees that upon
such transfer the Project Party shall recognize the Collateral Agent or its
designee as the Company under the Assigned Agreement (subject as follows), provided
that (i) the Project Party is provided written documentation that reasonably
evidences such remedy and transfer; (ii) in the event that the Collateral Agent
or its designee(s) succeeds to the Company’s interest under the Assigned
Agreement, whether by foreclosure or otherwise, the Collateral Agent or its
designee(s)
shall assume liability for
all of the Company’s obligations and liabilities under such Assigned Agreement;
(iii) the Collateral Agent shall have first obtained the prior written consent
of the Project Party to any assignment to the Collateral Agent’s designee,
provided that the “Event of Default” under the Credit Agreement with respect to
which the Company’s obligations thereunder have been accelerated has not been
substantially caused by a failure by the Project Party to comply with its
obligations under the Assigned Agreement; and (iv) the Collateral Agent or its
designee shall have agreed to cure all of the breaches and defaults by the
Company under the Assigned Agreement. Except as otherwise set forth in the
immediately preceding sentence, none of the Secured Parties shall be liable for
the performance or observance of any of the obligations or duties of the
Company under the Assigned Agreement, and the assignment of the Assigned Agreement
by the Company to the Collateral Agent pursuant to the Security Documents shall
not give rise to any duties or obligations whatsoever on the part of any of the
Secured Parties owing to the Project Party.
(e) Upon the exercise by the Collateral Agent of
any of the remedies under the Security Documents in respect of the Assigned
Agreement, the Collateral Agent may assign its rights and interests and the
rights and interests of the Company under the Assigned Agreement to any Person,
if (i) such Person shall assume all of the obligations and liabilities of the
Company under the Assigned Agreement; (ii) the Collateral Agent shall have
first obtained the prior written consent of the Project Party to any assignment
to such Person if the “Event of Default” under the Credit Agreement with
respect to which the Company’s obligations thereunder have been accelerated
shall not have been substantially caused by a failure by the Project Party to
comply with its obligations under the Assigned Agreement; and (iii) such Person
shall have agreed to cure all of the breaches and defaults by the Company under
the Assigned Agreement.
(f) In the event that (i) the Assigned
Agreement is rejected by a trustee, liquidator, debtor-in-possession or similar
Person in any bankruptcy, insolvency or similar proceeding involving the
Company or (ii) the Assigned Agreement is terminated as a result of any
bankruptcy, insolvency or similar proceeding involving the Company and, if
within 90 days after such rejection or termination, the Collateral Agent or its
designee(s) shall so request and shall certify in writing to the Project Party
that it intends to perform the obligations of the Company as and to the extent
required under such Assigned Agreement, the Project Party will execute and deliver
to the Collateral Agent or such designee(s) a new Assigned Agreement which
shall be for the balance of the remaining term under the original Assigned
Agreement before giving effect to such rejection or termination and shall
contain the same conditions, agreements, terms, provisions and limitations as
the original Assigned Agreement (except for any requirements which have been
fulfilled by the Company and the Project Party prior to such rejection or
termination). References in this Consent
and Agreement to the “Assigned Agreement” shall be deemed also to refer to the
new Assigned Agreement.
(g) In the event that the Collateral Agent or its
designee(s), or any purchaser, transferee, grantee or assignee of the interests
of the Collateral Agent or its designee(s) in the Project assumes or becomes
liable under the Assigned Agreement (as contemplated in
subsection (d), (e) or (f) above or otherwise), no
officer, director, employee, shareholder or agent thereof shall have any
liability with respect thereto.
(h) All references in this Consent and Agreement
and elsewhere in this Consent and Agreement to the “Collateral Agent” shall be
deemed to refer to the Collateral Agent and/or any designee or transferee
thereof acting on behalf of the Secured Parties (regardless of whether so
expressly provided), and all actions permitted to be taken by the Collateral
Agent under this Consent and Agreement may be taken by any such designee or
transferee.
(i) The Collateral Agent shall not exercise any
of its rights or remedies with respect to any interest it may have in the
Sabine Pass Facility or the real property rights relating to the site on which
the Sabine Facility is located so long as the “Event of Default” under the
Credit Agreement with respect to which the Company’s obligations thereunder
have been accelerated has not been substantially caused by a failure by the
Project Party to comply with its obligations under the Assigned Agreement
unless (i) in connection with such exercise of such rights or remedies, the
Collateral Agent shall also have exercised its rights and remedies in the
Assigned Agreement, with the result that the Assigned Agreement shall have been
transferred to the Person to whom the Sabine Pass Facility or such real
property rights have been transferred, and (ii) in connection therewith, the
Collateral Agent shall have satisfied all of the conditions set forth in
Section 3(d) or (e), as applicable.
4. Collateral Agent. Collateral Agent represents that it is acting
on behalf of the Secured Parties and is authorized to bind and does hereby bind
the Secured Parties to the obligations of Collateral Agent herein.
5. Arrangements Regarding Payments. Notwithstanding anything in the Assigned
Agreement to the contrary, all payments to be made by the Project Party to the
Company under the Assigned Agreement shall be made in lawful money of the
United States, directly to the Collateral Agent, for deposit into the [ACCOUNT
NAME] (Account No. [COLLATERAL AGENT’S ACCOUNT NUMBERD, at the Principal Office
of [NAME OF DEPOSITARY] at [ADDRESS] or to such other Person and/or at such
other address as the Collateral Agent may from time to time specify in writing,
and shall be accompanied by a notice from the Project Party stating that such
payments are made under the Assigned Agreement.
The Company hereby authorizes and directs the Project Party to make such
payments as aforesaid, and agrees that such payment shall satisfy the Project
Party’s obligation to pay such amounts to the Company under the Assigned Agreement.
6. Miscellaneous.
(a) No failure on the part of the Project Party
or the Collateral Agent or any of its agents to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power or
privilege hereunder shall operate as a waiver thereof (subject to any statute
of limitations), and no single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
(b) The notice provisions of Section 23 of
the Assigned Agreement shall be deemed to apply for purposes of this Consent
and Agreement; provided, however, that the parties’ addresses are
set forth on the signature pages hereto.
(c) This Consent and Agreement may be amended or
modified only by an instrument in writing signed by the Project Party, the
Company and the Collateral Agent acting in accordance with the Credit
Agreement.
(d) This Consent and Agreement shall be binding
upon and inure to the benefit of the respective successors and permitted
assigns of each of the Project Party, the Company, the Secured Parties and the
Collateral Agent (provided, however, that the Project Party shall
not assign or transfer its rights hereunder without the prior written consent
of the Collateral Agent).
(e) This Consent and Agreement may be executed in
any number of counterparts, all of which when taken together shall constitute
one and the same instrument and any of the parties hereto may execute this
Consent and Agreement by signing any such counterpart. This Consent and Agreement shall become
effective at such time as the Collateral Agent shall have received counterparts
hereof signed by all of the intended parties hereto.
(f) If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect
in such jurisdiction and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
(g) Headings appearing herein are used solely for
convenience and are not intended to affect the interpretation of any provision
of this Consent and Agreement.
(h) Each of the Project Party and the Company
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State Court
sitting in New York City for the purposes of all legal proceedings arising out
of or relating to this Consent and Agreement or the transactions contemplated
hereby. Each of the Project Party and
the Company hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
(i) The agreements of the parties hereto are
solely for the benefit of the Project Party, the Company, the Collateral Agent
and the Secured Parties, and no Person (other than the parties hereto and the
Secured Parties and their successors and assigns permitted hereunder) shall
have any rights hereunder.
(j) This Consent and Agreement shall be governed
by, and construed in accordance with, the law of the State of New York.
(k) EACH OF THE PROJECT PARTY, THE COMPANY AND
THE COLLATERAL AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS CONSENT
AND AGREEMENT OR THE ASSIGNED AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
(l) This Consent and Agreement shall terminate
upon the indefeasible payment in full of all amounts owed under the Credit
Agreement.
IN WITNESS
WHEREOF, the undersigned by its officer duly authorized has caused this Consent
and Agreement to be duly executed and delivered as of this
day of [ ].
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CHEVRON
U.S.A. INC.
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By:
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Name:
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Title:
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Address for Notices:
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Facsimile:
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Telephone:
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Attention:
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[ ],
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as Collateral Agent
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By:
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Name:
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Title:
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Address for Notices:
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Facsimile:
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Telephone:
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Acknowledged and Agreed:
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SABINE
PASS LNG, L.P.
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By:
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Name:
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Title:
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Address for Notices:
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Facsimile:
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Telephone:
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Attention:
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