Daniel ONeill

3.1 Conditions precedent

The inclusion of conditions precedent will enable the parties to commit to the terms
of the GSA while deferring the performance of substantive obligations relating to the
supply and offtake of gas and capital investment, until such time as certain matters
fundamental to the ability of the parties to be able to perform the GSA have been
adequately addressed.
While the conditions precedent will need to be tailored to the particular
circumstances of the project, conditions precedent commonly seen in GSAs include:
obtaining all necessary government approvals necessary for the performance
of the agreement;
entry by the applicable parties into, and/or coming into effect of, other key
project agreements;11 and
entry into, or first drawdown under, any third-party financing arrangements.

To avoid uncertainty as to the effectiveness of the GSA, it is important that only

those conditions precedent which are genuinely necessary for the parties to be able
to proceed with the gas commercialisation project be included.
Upon satisfaction (or waiver) of each of the conditions precedent, the GSA will
become unconditional and certain rights and obligations of the parties will come
into effect. This will usually be the time when the parties will be obliged to make
their respective capital investments in the gas commercialisation project and
commence the construction of the project facilities.

3.2 Start date

The parties will generally be obliged to have completed the construction of their
respective facilities and be ready to supply or receive gas on or before a particular date
(the start date). The start date will, therefore, usually be the date on which the seller
is first obliged to deliver gas to the buyer in accordance with the buyers proper
nominations, and it will also be the date on and from which the seller will be liable
for shortfall for a failure to deliver a properly nominated quantity of gas to the buyer,
and the buyer will be subject to take-or-pay (discussed below).
Although the parties may agree a fixed start date at the time of entering into the
GSA, more commonly they will defer the determination of the start date until a later
time during the term, when the construction of the project facilities is well advanced
and the parties are in a better position to judge and mutually agree an appropriate
state date. This is normally achieved through a window start date mechanism,
pursuant to which the parties periodically agree on window periods (usually of
several weeks or months in duration) within which the start date will occur, with
those window periods gradually narrowing as the construction phase progresses and
with the parties finally agreeing on a start date falling within the final window
period. The window mechanism removes a significant degree of the uncertainty

11 Examples may include (i) gas transportation arrangements where pipeline transportation of the gas will
be carried out by an entity other than the seller or buyer, (ii) governmental agreements supporting the
project, and (iii) EPC contracts relating to the construction of project infrastructure.

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