What is a tolling agreement?

A tolling agreement is a contractual arrangement between two parties, typically in the energy industry, where one party (the toller) processes or manufactures raw materials or goods on behalf of the other party (the tolling party).

Under this agreement, the toller provides the facilities, equipment, and expertise necessary to process the raw materials or goods into a finished product. The tolling party retains ownership of the raw materials throughout the process and pays the toller a fee for the processing services.

Tolling agreements are common in industries such as oil and gas, chemicals, and manufacturing, where one party may have the resources and expertise to process raw materials more efficiently or cost-effectively than the other party. This arrangement allows both parties to benefit from the transaction, with the toller earning revenue from providing processing services and the tolling party benefitting from access to specialized facilities and expertise.

Tolling agreements typically include details such as the duration of the agreement, the scope of services to be provided, pricing terms, quality and quantity specifications, and dispute resolution procedures. These agreements are legally binding contracts and are often used to facilitate complex transactions and collaborations between companies in the energy industry.