Services

Procurement of Industrial Gas Requirements

Industrial Gas Commercial Advisors (IGCA) offers consulting services for the purchase of new requirements of industrial gases or with assistance with an existing product supply agreement which isn’t performing as expected (see the “Expert Witness” section).

We specialize in on-site and merchant agreements and offer expertise in products such as oxygen, nitrogen, argon, hydrogen, carbon monoxide, syngas, CO2, and CDA. Our founder, John Peterson, has over thirty-five years of experience in drafting and administrating product supply agreements covering buying, selling, and product swap arrangements.

With respect to new requirements, use IGCA for assistance in defining the initial requirement and its mode of delivery, selection of the specific industrial gas supplier, and negotiation of the PSA, as discussed below.

Industrial Gas Commercial Advisors

Mode of Delivery Selection

When determining the most reliable and cost-effective method in which to purchase industrial gases, it is important to understand that several delivery options should be considered.

Industrial gases are typically categorized in this fashion, that is, by mode of delivery.

For large atmospheric gas requirements, the three major categories are pipeline or on-site, merchant (or bulk) and standard plants (such as a membrane, molecular sieve or small cryogenic air separation facility).

As an example, assume an oxygen supply is required for the production of a common petrochemical product.

To determine the best method of industrial gas supply, the potential customer should consider numerous variables such as:

  • 1 Quantify the oxygen needed in terms of the monthly need and the instantaneous flow rate
  • 2 Minimum purity requirements of the oxygen supply and the ramifications of purity fluctuations
  • 3 Reliability requirements of the supply and the consequences of a temporary loss of oxygen flow
  • 4 Pressure requirements for the oxygen supply and what pressure fluctuations are acceptable
  • 5 Value of byproducts (such as nitrogen) which may be available from the industrial gas supplier, depending upon the mode of supply selected
  • 6 Site infrastructure requirements, such as plot size and utility availability, for the on-site mode of delivery evaluation

Each one of the above factors involves a set of tradeoffs that impact the cost and reliability of the oxygen supply and ultimately determine the delivery option to seek from the industrial gas supplier. And, each variable needs to be addressed contractually.

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Specific Supplier Selection

After determining the preferred mode of supply, let IGCA assist in developing the RFP (request for proposal) to solicit input from the appropriate suppliers.  IGCA’s industrial gas consulting services may be utilized to develop and evaluate proposals, economically evaluate various proposal options, and to work with the industrial gas supplier to find integration opportunities between the supplier and customer facilities.

Product Supply Agreement Negotiation and Contracting

When the mode of supply and potential supplier(s) are identified, use IGCA as your industrial gas consultant during the negotiation of the Product Supply Agreement.

Since such agreements, particularly for large requirements, typically specify long terms, it is exceedingly important to ensure that the PSA remains balanced, and mechanisms exist to address potential issues whenever they arise during the agreement. 

Some of the key contractual clauses to focus on during PSA negotiation, such as pricing & pricing escalation, requirements, renewal and dispute resolution, are discussed in our video in the “About Us” section of the website.

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Industrial Gas Expert Witness and Dispute Resolution Service

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Expert Witness Experience

During his career, John served as an expert witness, corporate representative and/or primary fact witness for numerous dispute resolutions, mediations, and arbitrations totaling over $350MM in settlement exposure. He is also experienced in bankruptcy proceedings, including creditor’s committee participation, and has also testified in bankruptcy court as an expert witness.  

John is experienced in large scale project development and contracting, including numerous domestic and international ASU facilities, pipeline enclaves, and SMR/HyCO production plants.

He is also familiar with production economics for on-site ASU and SMR supply modes, as well as merchant economics for most atmospheric and process gases.

Dispute Resolution

The nature of large industrial gas contracts can be quite complex. In many instances, the Industrial Gas Supplier (IGS) has expended significant capital to meet the client’s needs (in some cases, constructing a plant on the client’s facility) and has required a significant contract duration to recover the investment.  It’s perfectly reasonable and results in a lower price to the client and a reasonable long-term return for the IGS.  Clearly, a win-win.  What could possibly go wrong?

Unfortunately, over time, long term agreements can get out of whack.  Additionally, despite the best efforts of both parties, many potential third-party problems are not foreseeable or out of the reasonable control of either the client or the IGS.  When such issues happen, use Industrial Gas Commercial Advisors’ (IGCA’s) expert witness services and dispute resolution services to support such negotiations with the IGS.

And, when such negotiations do not lead to a mutually acceptable outcome, use IGCA dispute resolution services and expert witness services to pursue a favorable outcome from mediation and/or arbitration.

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Business Development

Producing large volumes of industrial gas is extremely energy-intensive. A world-scale air separation facility typically demands well over 30 megawatts of electricity. A world-scale hydrogen plant routinely consumes over 40 MMSCF of natural gas per day. Although the SMR and ASU production technologies continue to become more and more efficient, cryogenic distillation and steam methane reforming will always be large energy consumers.

Given today’s focus on ESG metrics, the major Industrial Gas Suppliers have all focused on energy reduction and new technologies relating to the production of Green products.  For the most part, the new technologies simply do not compete with current production economics, particularly in geographies with well-developed utility infrastructure.  

However, that does not mean that the IGS stakeholders are not interested in supplementing their supply portfolio with some portion of Green products and further developing the technology.

For those companies developing Green production or other unique B/D applications, use IGCA to understand the methods and costs of traditional industrial gas production/distribution and to develop a potential business case justifying a commercial relationship with the IGS or their downstream customers that creates value for all parties.  IGCA has relationships with most of the major IGS B/D or management teams and can facilitate such conversations when appropriate