Consortium refers in the oil and gas and petrochemical industry to a group of individuals or legal entities or a combination of individuals and legal entities which mobilizes their respective resources for the accomplishment of a task going beyond the capabilities of each member of the group.
A consortium is not a legal entity by itself, the interests, rights and duties of the consortium are supported directly by the individuals or legal entities of the members of the consortium.
A consortium is materialized by a contract called Consortium Agreement.
This contract signed between all the members describes typically:
– The purpose of the consortium, such as an oil and gas project
– The duration
– The members of the consortium with the description of their respective contribution to the common purpose of the consortium
– The Committees representing the members of the consortium and to drive the good execution of the consortium task.
– The rights and obligations of each member between each other and with third parties
– The rules to share the costs of the consortium
– The rules to handle the licenses and intellectual properties
– The liabilities between each other and with third parties
In fact a consortium is running not as a company but as a contract, so that the Consortium Agreement prevails between the members regardless the contracts signed with third parties such as a customer.
In case of failure of the consortium to execute the common task according to plans, each member shall be solely liable for any loss, damage or injury to third parties resulting from its faulty actions or omissions from non-respect of the provisions of the Consortium Agreement.
The communication between all the members and with the third parties is a key factor of success for a Consortium.
Through the Consortium Agreement, each member is committed to allocated the necessary manpower and competences in respect with his own scope of work.
Therefore each member shall be fully responsible to meet its own commitments such as defined in the Consortium Agreement until full completion of the purpose of the consortium.