Mega Energy Projects What s in the Contract? Bali, Indonesia, October 2013 Glen Warwick, Partner, Clyde & Co Australia

Transcription

1 Mega Energy Projects What s in the Contract? Bali, Indonesia, October 2013 Glen Warwick, Partner, Clyde & Co Australia

2 Megaprojects definition A project that costs more than US$1 billion and that attracts public attention because of substantial impacts on communities, the environment and budgets 1

3 Procurement Methods Engineering, Procurement and Construction (EPC) or Engineer, Procurement and Construction Management (EPCM) EPC: Turnkey product, Contractor is sole point of responsibility, fixed price, fixed completion date EPCM: No turnkey or sole point of responsibility Employer plays a larger role. Also, Contractor takes risk for its services, not the final product, cost plus 2

4 Forms of Contract Potential for hybrid EPC and EPCM agreements Major oil and gas projects are generally bespoke, but may take standard forms (LOGIC, AMPLA, FIDIC, ICE, ICC or NEC) Alliance agreements provide a less structured approach based on trust and open accounts 3

5 Key contract terms Contract price Completion dates Performance guarantees Security Intellection property Variations Extensions of time Force Majeure Defects liability Indemnities Limitations of liability Liquidated damages suspension termination Insurance Dispute resolution 4

6 Force Majeure Civil law concept (no real meaning at common law) Force Majeure events typically outside of the control and contemplation of the parties Critical that Force Majeure provisions are carefully considered and clearly drafted if disputes are to be avoided Ideally, weather conditions should be addressed separately from Force Majeure 5

7 Concurrent delay Option 1: Contractor is not entitled to an extension of time Option 2: the Contractor is entitled to an extension of time Option 3: causes of delay are apportioned between the parties 6

8 Interface Special consideration to be given to provisions dealing with: Commencement and completion dates Liquidated damages Caps on liability Indemnities Extensions of time Insurance Force majeure Intellectual property Commissioning and testing 7

9 Performance testing Complex performance testing common in megaprojects Performance liquidated damages payable where performance guarantees are not met Testing regimes should be comprehensive, certain and complete 8

10 Jurisdiction and governing law Knock for knock indemnities Consequential loss 9

11 Knock for knock indemnities Common in oil and gas megaprojects Provide no-fault risk allocation and limit disputes Important to consider enforceability having regard to jurisdiction and governing law of the contract 10

12 Consequential loss Consequential loss generally excluded Consequential loss provisions should clearly set out categories of losses that are covered Need to be aware of the governing law of the contract and draft accordingly 11

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