Production Handling Agreement Template for Nigeria

A Production Handling Agreement governed by Nigerian law is a comprehensive contract that establishes the terms and conditions under which one party (the Facility Owner) processes, stores, and handles hydrocarbon production on behalf of another party (the Customer). The agreement complies with Nigerian petroleum legislation, particularly the Petroleum Industry Act 2021, and addresses technical specifications, operational procedures, commercial terms, and regulatory requirements. It includes detailed provisions for capacity allocation, measurement, tariffs, and operational standards while incorporating local content requirements and environmental compliance measures specific to the Nigerian oil and gas sector.

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What is a Production Handling Agreement?

The Production Handling Agreement is essential in the Nigerian oil and gas industry where shared infrastructure and optimization of facility usage are crucial for efficient operations. This document is typically used when one company needs to process its hydrocarbon production through facilities owned by another company, often due to economic efficiency, infrastructure limitations, or regulatory requirements. The agreement must comply with Nigerian petroleum laws, particularly the Petroleum Industry Act 2021, and includes detailed technical, operational, and commercial provisions. It addresses key aspects such as capacity allocation, processing specifications, tariffs, measurement procedures, and operational standards. The document also incorporates specific Nigerian requirements regarding local content, environmental compliance, and regulatory approvals, making it a crucial tool for facility sharing arrangements in Nigeria's oil and gas sector.

What sections should be included in a Production Handling Agreement?

1. Parties: Identification of the Facility Owner and the Customer, including their registered addresses and company details

2. Background: Context of the agreement, including reference to the relevant facilities, licenses, and regulatory approvals

3. Definitions and Interpretation: Detailed definitions of technical and legal terms used throughout the agreement

4. Scope of Services: Detailed description of production handling services to be provided, including processing, storage, and delivery

5. Term and Termination: Duration of the agreement, conditions for renewal, and circumstances for termination

6. Delivery Points and Title: Specification of intake and delivery points, transfer of title and risk

7. Capacity Allocation and Nominations: Rules for capacity booking, nomination procedures, and capacity optimization

8. Technical Requirements: Specifications for hydrocarbons, operating parameters, and technical standards

9. Operating Procedures: Day-to-day operational procedures, maintenance, and HSE requirements

10. Tariff and Payment Terms: Fee structure, invoicing, and payment procedures

11. Measurement and Testing: Procedures for measuring quantity and quality of hydrocarbons

12. Liability and Indemnification: Allocation of risks and responsibilities between parties

13. Force Majeure: Definition and consequences of force majeure events

14. Confidentiality: Protection of confidential information and trade secrets

15. Governing Law and Dispute Resolution: Choice of Nigerian law and dispute resolution mechanisms

16. Boilerplate Provisions: Standard legal provisions including notices, assignments, and amendments

What sections are optional to include in a Production Handling Agreement?

1. Third Party Access: Required when the facility may be used by multiple customers, defining priority rights and allocation principles

2. Commingling: Needed when different customers' hydrocarbons may be mixed during processing

3. Local Content Compliance: Detailed section required for large-scale operations subject to Nigerian Content Development Act requirements

4. Enhanced Security Provisions: Additional security measures for facilities in high-risk areas of Nigeria

5. Decommissioning: Required for long-term agreements where facility end-of-life considerations are relevant

6. Ship-or-Pay Obligations: Include when minimum throughput guarantees are required

7. Gas Flaring Provisions: Required when associated gas handling is part of the services

What schedules should be included in a Production Handling Agreement?

1. Technical Specifications: Detailed specifications for input and output hydrocarbons

2. Operating Procedures Manual: Detailed operational procedures and requirements

3. Tariff Schedule: Detailed breakdown of fees and charges

4. Measurement Procedures: Detailed procedures for quantity and quality measurement

5. Form of Bank Guarantee: Template for any required financial security

6. Interface Procedures: Technical specifications for connection points and interfaces

7. HSE Requirements: Detailed health, safety, and environmental requirements

8. Emergency Response Procedures: Procedures for handling operational emergencies

9. Maintenance Schedule: Planned maintenance periods and procedures

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Cost

Free to use

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