Published 20 December 2016
The following article has been added to OGEL 4 (2016):
"Cash-or-Gas, the quest for balancing the imbalance" is a journey through Gas Balancing Agreements (or GBAs) and the two classic in-kind or cash balancing remedies used between co-owners of a gas field. In kind balancing allows an underproduced party to take a designated percentage of the overproduced parties' gas until a balance is reached. Cash balancing requires the overproduced party to compensate the underproduced party in cash to effectuate a balance. A well-designed GBA should be sufficiently flexible to interplay the two principal balancing methods (in-kind and cash) in order to (a) maintain imbalances at a minimum and gas production at a Maximum Efficient Rate, (b) protect both underbalanced and overbalanced parties by way of preventing overproducers from exacerbating their "time value of money" benefit of taking excess gas and underproducers from gaming the market in times of low prices to maximize their revenues in detriment of their partners, and ultimately, (c) make equity work in a real-life gas field. But it is not (only) about the election or combination of two balancing methods. Other (big) issues and responsibilities are at stake. The importance of a sound GBA is generally underestimated by joint venture parties. This paper identifies the risks that such an approach may have over parties.
The article can be downloaded here https://www.ogel.org/article.asp?key=3664