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Tuesday, March 29, 2011

Shortfall in D-6 gas-: Agreement says RIL should pay ship-or-pay charges, invoking Force Majeure conditions only option out for company

Gas users have furnished agreements signed with RIL and RGTIL to argue that the ship-or-pay payments to be made under the Gas Transport Agreement for shortfall in the supply of KG D-6 gas should be made by the seller, in this case RIL, than by the buyer.
  Users quote the following clause under the head "Sellers` Supply Agreement":
  • Sellers shall reimburse Buyer for Monthly Ship-or-Pay Payments (as defined in the RGTIL GTA) paid by Buyer under the RGTIL GTA that would have been avoided had Seller made available the quantity of Gas nominated by Buyer on each Day in such Month up to the DCQ on any Day but excluding quantities that Sellers failed to make available due to Force Majeure or for which Sellers have reduced the scheduled quantity as permitted for Planned Maintenance Days"
  •   Then again, the seller is required by contract to make up for the shortfall in gas under the following clause:
  • In any Contract Year, Buyer shall pay for all Shortfall Gas at the Sales Price applicable to the Contract Month in which the Shortfall Gas is taken, and shall pay all other amounts payable under this Agreement in respect of Gas deliveries."
  • The option left for RIL to escape these clauses is the evoke the Force Majeure clause. RIL can argue that for circumstances beyond their control, like encountering reservoir conditions not foreseen earlier, it is not in a position to supply the contract quantity of gas.

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