PROMAT

Natural Gas Tolling Agreement

Natural gas tolling agreements are becoming increasingly popular in the energy industry. These agreements allow companies to take advantage of the growing demand for natural gas while minimizing the risks associated with production and transportation.

A natural gas tolling agreement is a contract between two parties, where the owner of a natural gas plant (the tolling party) processes natural gas supplied by another party (the customer) for a fee. Tolling agreements are a type of outsourcing arrangement where the customer provides the natural gas, and the tolling party processes it and returns it to the customer for sale.

Tolling agreements provide several benefits for both the tolling party and the customer. For the tolling party, the agreements provide a steady stream of revenue without the capital-intensive investments required for exploration, extraction, and transportation. For the customer, tolling agreements provide a reliable channel for processing natural gas without the need to invest in expensive infrastructure or hire skilled workers.

Moreover, tolling agreements also help to manage the risks involved in natural gas production. Processing natural gas requires specialized knowledge and equipment, and the tolling party assumes these risks. The customer is responsible for supplying the natural gas and buying back the processed product, reducing their exposure to market risks.

Tolling agreements are typically long-term agreements with a term ranging from 10 to 25 years. The terms of these agreements are tailored to the specific needs of the parties involved, with fees based on factors such as the volume of natural gas processed, the complexity of the process, and the level of investment required.

In conclusion, natural gas tolling agreements are an attractive option for companies looking to take advantage of the growing demand for natural gas. These agreements provide a reliable channel for processing natural gas while minimizing risks and reducing costs. With the energy industry moving towards greater reliance on natural gas, tolling agreements will likely continue to gain popularity in the coming years.