Specification Compliance for Export Off-take Agreements

By CHRIS WIBERG | April 04, 2013

For those pursuing pellet exporting opportunities, the first step is to secure a contract with an overseas buyer. As I am sure many of you have discovered, this can be a very time-consuming process. Lately, however, we have been hearing more and more about producers who have secured off-take agreements, and therefore announced plans to construct new plants, often times of massive scale.

The blessing is that these contracts initiate large investments and trigger huge benefits to their regional economies, but the downside is that export contracts are often quite strict in their compliance language. Therefore, it is essential that the supplier fully understands the language of the contract to be certain that their product will comply with the product specifications. 

I am surprised at how often I review contract product specifications where test methods are improperly listed, parameter requirements unclear or, in some cases, not reasonably achievable. Fortunately, it is becoming more common for me to receive a copy of the contract product specification to review prior to the contract becoming final, but that is not always the case. By reviewing the product specifications up front, I am able to catch issues before they are permanently written into the contract. There are also a few other things one can do to better assure that complying with product specifications will not become an unnecessary burden.

Another step that should be taken prior to signing a contract is evaluation of the intended feedstock materials. In some circumstances, feedstock materials are quite consistent, and it is easy to gain confidence that one will be able to satisfy the product specification. That's commonly the case with projects that are planning to use 100 percent green chipped and debarked Southern Yellow Pine.

Conversely, when the project calls for multiple tree species, blends of hardwoods and softwoods or the use of residuals from various suppliers, the variations between these feedstock sources may be larger than realized. It is therefore highly advisable to develop a database of key contract parameters such as calorific value, ash content, ash fusion temperatures, chlorine, etc. These parameters can be evaluated by testing the raw feedstock materials and do not require finished product.

The next step that I recommend is putting some real time and consideration into internal testing laboratories. This does not need to be done prior to signing the contract, but it should be included in the design phase. It is far easier for me to design a lab well-suited for the purpose when given a blank slate, as compared to when it is an afterthought. During the design phase, it is much easier to work in a suitable size, as well as to incorporate other design considerations such as electrical requirements, ventilation, compressed air, accessibility to water, and the right amount of bench space. This is also the time when one should be deciding which tests the lab will be set up for, and what equipment will be needed to perform these tests, as these things obviously go hand-in-hand with how much overall lab space is needed, as well as other design considerations.

Finally, set up lab space and train lab staff as early as possible during the construction phase. It generally only takes me a day or two to set up a lab and provide initial training to the lab staff, however, this should be done as early in the construction phase as possible, because one will want to be able to rely on the lab during the commissioning phase to assure that process equipment is achieving the intended performance. While the lab can be operational fairly quickly after setup, it generally takes a while for the lab staff to become proficient at running the tests. Additionally, there is usually a fair amount of work required in setting up laboratory standard operating procedures, managing data, defining sampling points, and defining the general laboratory flow (these will be the topic of my column next quarter).

While export contract language is generally quite strict, taking the aforementioned steps can greatly reduce risk when it comes to assuring the production facility’s ability to deliver product that complies with the agreed upon specifications. Delaying this process does not necessarily mean that quality compliance will not be achieved, but starting early tends to be far less stressful.

Author: Chris Wiberg
Manager, Biomass Energy Laboratory