Canadian Addendum to the LEAP Master Agreement

The Canadian Addendum to the LEAP Master Agreement Version 2.3a was released in March, 2010 for voluntary use in physically-settled transactions in Canada where oil title transfers within tanks or pipelines.  The release was the culmination of over 5 months of document drafting and negotiation among committee members including representatives from Nexen, Morgan Stanley, BP, and Shell.  It is intended to be executed between two counterparties in conjunction with the execution of Master Agreement for Purchasing and Selling Refined Products and Crude Oil Version 2.1.

The Canadian Addendum has also been used as the basis for parallel Addendum to the ISDA North American Crude Oil and Refined Petroleum Products Annex, a document created by ISDA in order to allow their members to leverage the common terms and clauses developed by LEAP within the ISDA documentation framework.

In general, master agreements simplify individual transaction documentation and facilitate the electronic matching of contractual economic terms.  To the extent that a company has executed master agreements across a large portion of their business, they also reduce the legal basis risk inherent in having purchase and sale trade activity on ‘mismatching’ terms.  In certain cases, master agreements also allow for the netting of default risk across transactions between two counterparties.

As with The LEAP Master Agreement, counterparties who have executed the Canadian Addendum with each other are able to use the eConfirm service in order to electronically match their individual trade transactions and focus in a structured manner on discrepancies that may occur between the two companies’ understanding of the economics of an individual trade.

LEAP members assisted with eConfirm team in developing requirements for the creation of a solution to support the electronic matching of physical oil transactions, and LEAP continues to dedicate resources, ideas, and initiatives to faciliitate the expansion of electronic matching solutions to facilitate the expansion of electronic matching solutions to support wider segments of the trading market to benefit our members.

LEAP has also developed a User Guide to assist contract administration professionals in implementing the Canadian Addendum to The LEAP Master Agreement.

If you have any questions about its use or have suggestions related to expanding its scope or increasing its adoption, please contact (403) 699 4206