Tolling Agreement Example: How Tolling Agreements Work and How to Draft One

A tolling agreement is an arrangement between two parties in which one party (the toller) agrees to process or “toll” a raw material or product for the other party (the tolling party). This can include refining, processing, or manufacturing a product to the tolling party’s specifications.

Tolling agreements are common in the energy industry, where refineries or processing plants may toll crude oil or natural gas for oil and gas producers. They are also used in the manufacturing industry, where one company may toll a product for another company.

This article will provide an example of a tolling agreement and discuss the key elements that should be included in a tolling agreement.

Tolling Agreement Example

ABC Refinery agrees to toll 100,000 barrels of crude oil for XYZ Oil and Gas. The crude oil will be delivered to the ABC Refinery, and ABC Refinery will process the crude oil into refined products, such as gasoline and diesel fuel, according to XYZ Oil and Gas’ specifications.

The tolling agreement will be effective for one year from the date of signing and may be extended by mutual agreement of the parties.

XYZ Oil and Gas will be responsible for providing the crude oil and paying all shipping and transportation costs to deliver the crude oil to ABC Refinery. ABC Refinery will be responsible for processing the crude oil into refined products and paying for all processing costs, including labor and materials.

XYZ Oil and Gas will have the right to inspect the processing facilities and the final products to ensure that they meet the agreed-upon specifications. ABC Refinery will provide regular reports to XYZ Oil and Gas regarding the progress of the tolling process, including any delays or issues that arise.

Upon completion of the tolling process, ABC Refinery will deliver the refined products to XYZ Oil and Gas and transfer ownership of the products to XYZ Oil and Gas.

Key Elements of a Tolling Agreement

When drafting a tolling agreement, it is important to include the following key elements:

1. Description of the raw material or product to be tolled

2. Specifications for the processed product

3. Timeframe for the tolling process

4. Payment terms, including who is responsible for shipping and processing costs

5. Quality control procedures and inspection rights

6. Ownership and transfer of the final product

7. Termination and extension provisions

Conclusion

Tolling agreements are an important tool for companies in the energy and manufacturing industries. By understanding the key elements of a tolling agreement and drafting a clear and comprehensive agreement, companies can ensure that their tolling arrangements are successful and beneficial for both parties.