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Crude Oil Supply Agreement

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Sectors: Utilities
Governing Law: Colorado , View Colorado State Laws
Effective Date: October 15, 2002
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CRUDE OIL SUPPLY AGREEMENT THIS AGREEMENT made as of October 15, 2002.
BETWEEN:
BAYTEX ENERGY LTD. , a body corporate, having offices in the City of Calgary, in the Province of Alberta ("BEL")
and
FRONTIER OIL AND REFINING COMPANY , a subsidiary of Frontier Refining & Marketing Inc., a body corporate having offices in the City of Denver, in the State of Colorado ("Refiner")
WHEREAS Refiner desires to secure from Producer and Producer is prepared to provide to Refiner a long term, firm crude petroleum supply;
NOW THEREFORE , in consideration of the premises, payments and the mutual covenants herein contained, the Parties agree as follows:


ARTICLE 1
DEFINITIONS 1.1 Definitions

For the purpose of this Agreement, the terms set forth below shall have the meanings indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined);(a) "Affiliate" means, in respect of a Person, any Person that, directly or indirectly, controls, is controlled by or under common control with the first mentioned Person, and for the purposes of this definition, "control" means the possession, directly or indirectly, by a Person or a group of Persons acting in concert, of the power to direct or cause the direction of the management and policies of the Person, whether through the ownership of voting securities or otherwise;
(b) "Agreement" shall mean or refer to this Agreement and any agreement, deed, or instrument supplemental or ancillary hereto, and the expressions "Section", "Subsection", "Article", "Exhibit" and "Schedule" followed by a number shall mean and refer to the specified section, subsection or article of or exhibit or schedule to this Agreement;
(c) "Agreement Liquidated Damages" has the meaning ascribed thereto in Section 15.1(b) herein;
(d) "Applicable Laws" shall mean all valid laws, orders, directives, rules and regulations of any governmental body, official or court, foreign, or domestic, having jurisdiction over the Parties or any matter relevant to rights and obligations hereunder, including, without limiting the foregoing, all environmental orders and directives;
(e) "Assurance Party" has the meaning ascribed thereto in Section 13.1 herein;
(f) "Commencement Date" shall mean January 1, 2003;
(g) "Daily Quantity" shall mean the amount of Oil scheduled to be delivered each day during the Term of this Agreement, as more particularly outlined in Schedule "A" hereto;
(h) "Day" shall mean a period of twenty-four (24) consecutive hours beginning and ending at seven o'clock a.m. Mountain Time;
(i) "Defaulting Party" has the meaning ascribed thereto in Section 14.1 herein;
(j) "Delivered Product" shall mean, at that particular point in time, the aggregate STB's of Oil actually delivered by Producer to Refiner at the Delivery Point;
(k) "Delivery Point" shall mean the point on the Platte Pipeline at Guernsey, Wyoming where oil transfers into the Conoco Pipe Line Company facilities;
(l) "Dollars" (and the symbol "$") shall mean dollars in the lawful currency of the United States of America;
(m) "Express Pipeline" means the collective facilities of the Express Pipeline, as General Partner of the Express Pipeline Limited Partnership and Express Pipeline LLC extending from the crude pipeline hub at Hardisty, Alberta, and terminating at the Casper, Wyoming facilities of the Platte Pipeline;
(n) "Express Pipeline System" means the collective facilities of Express Pipeline and Platte Pipeline;
(o) "Financial Assurances" has the meaning ascribed thereto in Section 13.2 herein;
(p) "Force Majeure" shall means acts of God, strikes, lockouts, or other industrial disturbances, epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, arrests and restraints and prohibitions of government (or their respective regulatory bodies), either federal or provincial, inability to obtain necessary materials, supplies (other than Oil) or permits due to existing or future rules, orders, rulings, laws of any applicable governmental authorities, civil disturbances, explosions, sabotage, breakage or accident to machinery or lines of pipe, freezing of lines of pipe, interruption or curtailment of firm or interruptible transportation services provided by third party transporters, and any other causes whether of the kind herein enumerated or otherwise (but in all events excluding lack of funds), which are not anticipated at the time of execution hereof, which are not within the control of the Party claiming suspension and which by the exercise of due diligence such Party could not have prevented or is unable to overcome. By way of illustration, the term Force Majeure shall not include shutdowns due to routine maintenance, repairs, or workovers; restrictions caused by balancing agreements or arrangements; or depletion of reserves. It is also expressly agreed that Refiner's loss of markets shall not constitute an event of Force Majeure. Force Majeure shall also include in respect of the obligation of Producer hereunder any "Force Majeure" which renders Producer unable, wholly or in part, to carry out its obligation hereunder;
(q) "General Default" has the meaning ascribed thereto in Section 14.1 herein;
(r) "GST" shall mean the goods and services tax imposed pursuant to the Excise Tax Act (Canada), as amended from time to time, and any similar tax imposed by Canada, or a province or territory of Canada which substantially supersedes or replaces the aforesaid goods and services tax;
(s) "Guarantee" has the meaning ascribed thereto in Section 13.2 herein;
(t) "Guarantor" has the meaning ascribed thereto in Section 13.2 herein;
(u) "Interest Rate" shall mean three percent (3%) above the fluctuating per annum rate of interest set forth in the weekly statistical release designated as H.15(59) published by the Federal Reserve Board opposite the caption "Federal Funds ("Effective")";
(v) "Month" shall mean a calendar month;
(w) "Mountain Time" shall mean Mountain Standard Time or Mountain Daylight Time in effect on the date in question;
(x) "Notice" shall have the meaning ascribed in Section 17.3;
(y) "Oil" shall mean Lloydminster Blend (LLB) crude oil, whether produced by Producer from its own assets or purchased by Producer to meet its delivery obligations under this Agreement;
(z) "Parties" shall mean any party to this Agreement and any permitted successor or assignee of such parties, as the case may be;
(aa) "Performing Party" has the meaning ascribed thereto in Section 14.1 herein;
(bb) "Person" includes an individual, a partnership (including a limited partnership), a firm, an unincorporated syndicate or organization, any government or governmental authority, a corporation, a company, a trust or a legal representative;
(cc) "Platte Pipeline" means the pipeline extending from the crude pipeline hub at Casper, Wyoming to refineries and interconnecting pipelines in the Wood River, Illinois area and includes the Delivery Point;
(dd) "Producer" means with respect to obligations to Refiner under this Agreement, BEL and its Affiliates, jointly and severally;
(ee) "Psia" shall mean pounds per square inch absolute;
(ff) "Price" has the meaning described in Schedule "A";
(gg) "Requesting Party" has the meaning ascribed thereto in Section 13.1 herein;
(hh) "Scheduled Amount" shall mean subject to the Term Shippers Make Up Rights contained in Transporter's Tariff, the Daily Quantity of Oil which is to be delivered ratably during each month as more particularly set forth and described in Schedule "A" hereto;
(ii) "STB" shall mean the volume of Oil which occupies one U.S. barrel (42 US gallons) when such Oil is at a pressure of 14.73 Psia and a temperature of 60 degrees Fahrenheit measured and determined by the Transporter in accordance with the then current standard terms and conditions applicable to such Transporter's transportation contracts;
(jj) "Tariff" shall mean the sum of the Express Pipeline, as General Partner of the Express Pipeline Limited Partnership 15 year Committed Rate for Super-Heavy Petroleum, as determined in accordance with the National Energy Board tariffs filed in Canada for movements in Canada from Hardisty, Alberta through to Express Pipeline LLC at the International Boundary near Wild Horse, Alberta (NEB Tariff No. 21 dated March 28, 2002, subject to future amendments) and for movements in the United States of America, the tariff filed with the Federal Energy Regulatory Commission for Super-Heavy Petroleum movements from Wild Horse, Alberta to Guernsey, Wyoming (F.E.R.C. Tariff No. 27 dated February 28, 2002, subject to future amendments), and the then current "Rules and Regulations" of the Transporter applicable thereto;
(kk) "Taxes" shall mean all ad valorem, property, occupation, gathering, pipeline regulating, windfall profits, severance, gross production, energy, excise, GST, withholding and other taxes and governmental charges and assessments imposed on Producer or the Oil;
(ll) "Temporary Transportation Assignments" means the Temporary Transportation Service Agreement Assignments dated concurrently herewith between Refiner and Purchaser whereby Refiner agrees to temporarily assign certain volumes of its shipper's entitlement under the 1995 TSA and 1998 TSA to Producer, which volumes per day and the months are more particularly described in Schedule "B";
(mm) "Term" shall mean sixty (60) months commencing on and including the Commencement Date to and including December 31, 2007 unless extended by the mutual agreement of the Parties pursuant to Section 12.2;
(nn) "Transporter" shall mean, subject to Article 10 herein, the Express Pipeline System;
(oo) "1995 TSA" shall mean the Transportation Service Agreement made as of November 30, 1995, as amended between Refiner and Express Pipeline Partnership;
(pp) "1998 TSA" shall mean the Transportation Service Agreement made as of April 1, 1998, as amended between Refiner and Express Pipeline Partnership as described and which is the subject of the Temporary Transportation Service Agreement Assignment effective April 1, 1998 between Refiner, as Assignor and Marquest Limited Partnership, as Assignee; and
(qq) "Unit of Measurement" shall mean STB for Oil.
1.2 Schedules The following schedules are attached to and form a part of this Agreement:

Schedule "A" - Price and Scheduled Amount

Schedule "B" - Temporary Transportation Assignments Volumes and Months


If any term or terms of the schedules conflict with the terms of the body of this Agreement, the terms of the body of this Agreement shall govern.


ARTICLE 2
SALE OF OIL 2.1 Sale of Oil

During the Term of this Agreement, Producer shall sell, transfer and deliver to Refiner on a firm and not interruptible basis and Refiner shall purchase and accept from Producer, on a firm and not interruptible basis, the entire right, title and interest of Producer in and to the Scheduled Amount of Oil, to have and to hold the same, together with all benefits and advantages to be derived therefrom, absolutely.


ARTICLE 3
DELIVERY 3.1 Delivery

Subject to all of the terms, conditions and limitations hereinafter set forth, Producer shall deliver or cause to be delivered to Refiner, and Refiner shall receive, or cause to be received, from Producer, all Oil up to but not in excess of the Scheduled Amount of Oil which is delivered to Refiner pursuant to the provisions of this Agreement.


ARTICLE 4
QUANTITY OF OIL 4.1 Quantity

During the Term of this Agreement, Producer shall make available and deliver to Refiner, and Refiner shall purchase and receive from Producer, the Scheduled Amount of Oil which is delivered by Producer at the Delivery Point pursuant to the provisions of this Agreement. 4.2 Change in Timing and Quantities

If at any time, either Party anticipates that there will be a change in the Scheduled Amount of Oil available at the Delivery Point or a change in the timing of the deliveries of the Scheduled Amount of Oil, such Party shall use all reasonable efforts to provide Notice to the other Party as soon as possible after becoming aware of such anticipated change and the Parties shall use all commercially reasonable efforts to adjust deliveries and receipts of Oil accordingly. 4.3 Producer to Schedule Daily Quantities

Producer shall nominate the Scheduled Amount of Oil to the Transporter for delivery to the Transporter's facilities at Hardisty, Alberta for the next succeeding month and will make available, or cause to be made available, the Scheduled Amount of Oil in that next succeeding month.

For greater clarity, Producer's obligation is to deliver the Scheduled Amount of Oil to the Transporter at Hardisty, Alberta and to effect the transportation of those volumes on the Express Pipeline System for delivery to the Refiner at the Delivery Point. Producer and Refiner acknowledge that due to the transit time and batch scheduling system of the Transporter, the actual volumes of Oil delivered to the Refiner at the Delivery Point may not equal the Scheduled Amount. If, during any month within the Term of this Agreement, Producer fails to schedule with the Transporter or schedules less than 100% of the Daily Quantity (the "Shortfall Volume"), then Producer shall indemnify Refiner for the cost of alternate Oil actually purchased by Refiner from another seller to make up the Shortfall Volume. Refiner will use commercially reasonable efforts to obtain the lowest cost alternate Oil available. To the extent the total cost of such alternative Oil exceeds the cost of Oil that would otherwise have been supplied by Producer under the terms of this Agreement, Refiner may deduct such amounts from any amounts which are or become owing by Refiner to Producer hereunder. 4.4 Operational Tolerance

It is the intent of the Parties hereto that the Scheduled Amount of Oil delivered by Producer to the Transporter's facilities at Hardisty, Alberta equal the quantity of Oil delivered at the Delivery Point. However, Refiner and Producer recognize the inherent inaccuracies in the measurement and allocation of Oil due to the inability to maintain precise control. Such inaccuracies may at times occur through no fault of Refiner or Producer, such as in the case of allocations after actual deliveries which are the result of measurement inaccuracies, or unpreventable variations in rates of flow at the Delivery Point, and may result in failure to deliver or receive the Scheduled Amount (such inaccuracies are hereinafter called "Measurement and Allocation Inaccuracies"). To the extent the actual amount of Oil delivered may vary from the Scheduled Amount due to Measurement and Allocation Inaccuracies (which for greater certainty, does not include a failure by Producer of its covenant to schedule described in Section 4.3 above) the Parties agree that Refiner's obligation to purchase and receive and Producer's obligation to sell and deliver shall be deemed to be fulfilled to the extent that such deliveries and receipts are within the normal operational tolerances of the Transporter for the applicable period.


ARTICLE 5
DELIVERY POINT AND LIABILITY 5.1 Delivery Point

The Scheduled Amount of Oil to be delivered by Producer to Refiner hereunder shall be delivered in accordance with Article 4 at the Delivery Point. 5.2 Title Transfer

As between the Parties, prior to the time that any Oil is delivered to Refiner hereunder at the Delivery Point, Producer shall be in exclusive control and possession of such Oil and shall be responsible for any damage or injury caused thereby prior to the time same shall have been delivered to Refiner. After delivery of Oil to Refiner at the Delivery Point, Refiner shall be deemed to be in exclusive control and possession thereof and responsible for any injury or damage caused thereby. Title to the Oil delivered hereunder shall pass at the Delivery Point. 5.3 Indemnity

Producer and Refiner each assume full responsibility and liability for and shall indemnify and hold harmless the other Party from all liability and expense on account of any and all damages, claims, or actions, including injury to and death of persons, arising from any act, omission or accident occurring when title to the Oil is vested in the indemnifying Party.


ARTICLE 6
REPRESENTATIONS AND WARRANTIES 6.1 Producer's Representation

Producer represents and warrants to Refiner that it has good and valid title to, or, in the alternative, that it has the right to sell and deliver, all Oil delivered hereunder at the Delivery Point; all Oil delivered by Producer will be free and clear of all adverse c
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