HUMBLY GROVE GAS STORAGE PROJECT

WEEKS were commissioned to provide commercial and contract management services on Star’s 10bcf underground gas storage project in Hampshire.

The project involved construction of a 27 kilometre pipeline linking the oilfield to the national gas transmission system and the construction of further processing plant at Star’s Humbly Grove site. Total project value, including drilling additional wells was in excess of £60million.

WEEKS were retained to assist STAR, from inception in 2002 to completion 2006, to manage the commercial aspects of buying/contracting within the Oil & Gas/Construction Industry.

FRONT END ENGINEERIGN DESIGN (FEED)

Inviting proposals from various Engineering Contractors to undertake a FEED; to develop a FEED service contract with a top UK public quoted company (AMEC); to establish Confidentiality Agreements; to liaise with city solicitors (Norton Rose) to agree & establish contracting/commercial principles.

DETAILED DESIGN/CONSTRUCTION

Undertaking a detailed review of possible contracts for Engineering Procurement Construction (EPC) stage of the project (NEC, FIDIC, ICHEM, CRINE, MF/1), particularly in relation to a fast track approach; a review of amendments required to align a potential Contractor’s business drivers; development of a risk/reward scenario whereby Contractor puts at risk his overhead & profit in return for an above average reward based upon his success; development of benchmarking criteria – performance, cost, schedule, safety; an understanding of a funding bank’s adversity to risk; development of Ichem Green book conditions of contract (cost reimbursable) amended to suit a Risk/Reward scenario; liaison with bank external funding solicitors (Linklaters) to ratify an acceptable commercial approach.

Negotiations with Contractor to establish the EPC contract; a review of all aspects of sub-contracting and buying relating to cost reimbursable methodology i.e. brown book, yellow book sub-contracts, Contractor internal sub-contract agreements, goods purchase agreements, consultancy service contracts, pipeline sub-contracts, innovative product/service licence agreements, warranty bonds & security, parent company guarantees, step-in agreements.

All terms of sub-contracts, goods purchase, consultancy agreements, performance guarantees, parent company guarantees, warranties and similar commercial undertakings were vetted by WEEKS.

Attending meetings with external funding bank ABN AMRO/Hoare Govett and solicitors Linklaters; explaining/ratifying contractual/commercial reasoning of EPC strategy.

An understanding of due diligence process prior to Company Listing; a detailed review of guarantees and counter guarantees and apportionment of risk/liability on the fast track project.

INSURANCES

A review of insurances required for the Gas Storage Project; consideration of employer, third party liabilities together with Contractors All Risk and Delay in Start Up policies; Understanding of how Lloyds underwriters perceive and allow for risk; apportionment of liability between Client/Contractor to avoid double insuring; meeting with Insurers representatives; review of project in relation to Insurers risk; satisfying Insurers risk adequately managed.

DRILLING

A review of suitable contracts relating to drilling operations and service company supply contracts; a non integrated approach with Client providing management/co-ordination function; specific risk associated with downhole activities.

CONSTRUCTION PHASE

During the post contract stage WEEKS monitored Contractor procedures and construction activities – checking and recommending all applications for payment, dealing with contractual issues arising and administering the contract generally.

FURTHER SERVICES

Undertaking Contractor overhead audit; establishing mark-up on staff rates; overhead build ups generally.

Attending KPMG, Client auditors undertaking project audit.

Managing AS Robicon (sub supplier to MAN Turbo) entering into Chapter 11; effects on project schedule; legal recourse, practical considerations.

Attending presentation of Gas Storage Sales and how the market works; an understanding of current market conditions and the players involved; review of marker volatility and how nominations process works; Centrica’s role and balancing procedure.

Meeting with Contractor to establish Close Out Procedures on suppliers, sub-contractors; to ensure final accounts are correct and that warranties are in place for future Client protection.

The project was completed 4Q2006.

WAALWIJK UGS

WEEKS have been commissioned to provide contract management services in connection with a pre-FEED Feasibility Study to ascertain the viability of an underground gas store in southern Holland.

In addition to managing the procurement process, WEEKS are responsible to interrogate the CAPEX estimate.

This project is ongoing.