A tolling agreement, also known as a tolling contract or tolling arrangement, is a legal agreement between two parties in which one party agrees to provide processing or manufacturing services to another party. Tolling agreements are commonly used in the oil and gas industry, as well as in the mining and chemical sectors.
The term „tolling“ refers to the toll that is paid by the party receiving the processing or manufacturing services. In a tolling agreement, the party providing the services is known as the toller, while the party receiving the services is known as the tolling party.
The purpose of a tolling agreement is to enable the tolling party to process or manufacture its raw materials without having to invest in the necessary facilities or equipment. This is particularly useful for smaller companies that cannot afford to build their own facilities or for companies that only need to process their raw materials on a temporary basis.
Under a tolling agreement, the tolling party provides its raw materials to the toller, who then processes or manufactures the materials into a finished product. The toller is responsible for all aspects of the processing or manufacturing process, including the purchase of any necessary materials, the use of any necessary equipment, and the hiring of any necessary personnel.
Once the finished product has been produced, the toller returns the finished product to the tolling party. The tolling party is then responsible for marketing and selling the finished product, and is entitled to keep the profits generated from the sale of the finished product.
Tolling agreements are typically structured as long-term contracts, ranging from several months to several years. The terms of the agreement, including the tolling fee, the volume of raw materials to be processed, and the quality standards for the finished product, are negotiated between the parties before the agreement is signed.
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