Introduction -

Upstream sale and purchase transactions are complex. In most instances, they are based not on simultaneous signing and completion, but rather on signing followed by a lengthy period leading to completion. This means that a seller and a buyer can agree on a transaction, enter into a sale and purchase agreement (SPA) and make a public announcement regarding such transaction, if required, but the completion of the transaction (and the transfer of benefits and liabilities) occurs weeks, months or even years afterwards.

As is the case with most other heavily regulated industries and sectors that are reliant on numerous permits and licences, sale and purchase transactions in the upstream sector are frequently subject to regulatory and ministerial approvals, which are required under either the governing laws of the host country where the upstream asset is located or the terms and conditions of the upstream project documents awarded by the energy ministry of the host country. Such regulatory and ministerial approvals (and other required third-party consents and expiry or waiver of any applicable pre-emption rights) are typically structured as conditions precedent under the SPA. Accordingly, it is not uncommon for upstream sale and purchase transactions to require an interim period between signing and completion during which it is the responsibility of the seller or the buyer to satisfy these various conditions precedent. For the purposes of this chapter, the period between signing and completion will be referred to as ‘the interim period’.

Originally published in Oil and Gas Sale and Purchase Agreements: SPAs for International Oil and Gas Acquisitions and Divestitures.