Quick answer
A gas purchase agreement is the contract under which a producer sells natural gas to a buyer. It sets the term, how much gas and how firm, the price basis, quality, measurement, delivery point and remedies. When a power user buys gas at the lease, the clauses that matter most are firmness, take-or-pay, price and backup supply.
Most gas purchase agreement pages online are scanned contracts or notes written for lawyers. This one is for the producer across the table: each clause in plain terms, and the questions worth asking before you sign.
The focus is one kind of deal: a long-term sale to a buyer that burns the gas for power at or near the lease, such as a gas-powered data center. That buyer changes some of the usual math. It also asks more of you, mostly on firmness and term.
What is a gas purchase agreement?
A gas purchase agreement is a contract that commits a seller to deliver natural gas and a buyer to take and pay for it, on stated terms. Sellers often call the same document a sales agreement. A gas supply agreement is the same idea, common when the buyer is an end user such as a power plant.
Short-term trading deals often use a standard base contract, published by the North American Energy Standards Board, plus a short confirmation for each sale. Long-term deals with a single end user are usually written from scratch, because the term, volume and risks are particular to the site.
A gas supply agreement for power generation is that long-term kind. The buyer runs engines on your gas, so it cares less about trading flexibility and more about the gas arriving every day, for years, at a known price.
Which clauses matter in a gas supply agreement?
Ten clauses carry most of the value and most of the risk in a long-term gas supply agreement. The table below takes them one at a time.
The last column describes what a buyer like Accretion Compute typically needs. Other buyers differ: a trader may want flexibility where a data center wants firmness. Two clauses are easy to underrate. Measurement decides how many units you are paid for. Assignment decides who you are dealing with in five years.
| Clause | What it means | What to ask | What a buyer like Accretion typically needs |
|---|---|---|---|
| Term | How long the agreement runs and when deliveries start | Is there a start-up period? Can either side extend or exit early, at what cost? | A multi-year term, matched to the lease on the compute modules the gas powers |
| Firm vs interruptible | Whether either side can stop without liability; firm means only force majeure excuses it | What daily quantity is firm? Is any of it interruptible? How is a shortfall counted? | Firm supply only: steady, contracted and backed up |
| Take-or-pay / deliver-or-pay | The buyer pays for a minimum it does not take, or the seller pays when it does not deliver | What is the minimum? Are there make-up rights? How is the remedy priced? | Firm delivery of the agreed volume, with a clear remedy if it falls short |
| Price basis | Fixed, index (hub plus or minus a differential), or netback, with or without a floor or cap | Which index and location? Is there a floor? Who carries basis risk? | A fixed or floored price over the term |
| Quality spec | Heating value and limits on hydrogen sulfide, carbon dioxide, water and liquids | Who pays to treat off-spec gas? Can the buyer refuse it? | Gas the on-site engines can burn, with treatment agreed up front |
| Measurement | Where the meter sits, who owns it, how volume and heating value are measured | How often is the meter tested and the gas sampled? | A meter at the delivery point near the lease, with regular testing |
| Backup supply | Where gas comes from when your wells cannot deliver | Who arranges backup, who pays for it, and at what price? | Backup supply designed in, such as a pipeline tie or other wells |
| Force majeure | Events that excuse performance, such as storms or equipment failure beyond control | Does it cover well decline or low prices? (It usually should not.) | A narrow definition, since the plant runs on the gas every day |
| Assignment | Whether either side can transfer the agreement to someone else | Does it bind a buyer of your wells? Can the buyer assign to a lender? | Consent rules both sides can live with over a long term |
| End of term | What happens when the agreement expires or ends early | Renewal options? Who removes equipment and restores the site? | Renewal tied to the lease, with removal and restoration written in |
Firm vs interruptible gas: what is the difference?
Firm gas must be delivered and taken except when force majeure prevents it. Interruptible gas can be stopped by either side at any time, without liability. Those are the definitions in the standard base contract published by the North American Energy Standards Board, and they are a good plain test for any agreement.
Pipelines use the same split for transport. FERC describes firm service as the highest-quality service, with no planned interruption, paid through a reservation charge plus a usage charge. Interruptible transport costs less, with only the usage charge, but it is cut when higher-priority customers need the space.
For a power user the difference is practical. FERC notes that gas-fired generators struggled to buy gas during the winter storms of 2021 and 2022. A data center running AI hardware around the clock treats a gas interruption as an outage, so it signs for firm supply only.
Firm on paper also has to be firm in the field. If your gas drops whenever the oil side is shut in, it is interruptible in practice. That gas suits a load that can switch off; see what stranded gas is and which uses fit it and ways to monetize flare gas.
How does a take-or-pay gas contract work?
In a take-or-pay gas contract, the buyer pays for a minimum quantity of gas whether or not it takes delivery. It protects the seller's revenue. Deliver-or-pay is the mirror image: if the seller fails to deliver the firm quantity, it pays the buyer's cost of replacing it.
The details that decide how much these clauses are worth:
- The minimum quantity. A daily, monthly or yearly floor, and how it is counted.
- Make-up rights. Whether a buyer that paid for gas it did not take can take it later at no extra cost.
- The remedy. The standard base contract offers two for a missed firm delivery: the cost of replacement gas, or the difference against a published spot price.
- What excuses performance. Force majeure, planned maintenance and agreed curtailment days.
Take-or-pay has a history. EIA's account of FERC Order 436 (1985) describes pipelines with long-term obligations to pay producers for gas whether they received it or not, as their customers left. Courts sent the order back in 1987 for not dealing with those costs. A minimum-take clause is only as good as the buyer's ability to pay when its business changes.
How is the wellhead gas price worked out?
The wellhead gas price is what your gas is worth where it leaves the ground. EIA defines it as the value at the mouth of the well, generally the price a third party would pay in an arm's-length sale. In practice you see a hub price, and the wellhead price is what is left after the costs of getting the gas there.
That calculation is called netback. Start from the price where the gas is sold, then work backward:
- Benchmark price. Henry Hub in Louisiana is the US benchmark, per EIA.
- Basis. The local hub trades above or below the benchmark. In 2024, EIA reports, the Waha Hub in West Texas traded below zero on 42% of trading days because production outpaced pipeline takeaway.
- Transportation. Pipeline charges to the sales point, plus pipeline fuel burned in compressors.
- Processing. Fees, shrink and plant fuel, offset by any liquids value you are paid.
- Gathering and compression, plus lease fuel used in the field.
- What is left is your netback, before royalties and severance tax.
EIA's data shows how these layers stack. Its old wellhead price included gathering, compression and state severance charges, and hub spot prices include processing, gathering and transportation fees to the hubs. EIA stopped estimating a national wellhead price as of January 2013 because of data quality concerns.
Contracts state the price per MMBtu (one million British thermal units, or one dekatherm). So the heating value of your gas, set by testing samples, matters as much as the volume.
Where does an on-site buyer change the math?
When the buyer burns the gas at or near the lease, several netback deductions shrink or disappear. There is no long-haul transport and no pipeline fuel. Processing may come down to conditioning the gas for engines. And the price no longer depends on local basis or downstream pipeline space, so a takeaway squeeze like Waha's in 2024 does not reach you.
The trade runs the other way on four points:
- Term. The buyer builds a plant around your gas, so it wants a long, firm commitment. You give up switching buyers when a pipeline arrives.
- One buyer. Your revenue rests on one counterparty and its credit.
- Firm delivery. You take on a deliver-or-pay duty and usually need backup supply to meet it.
- Price shape. A fixed or floored price protects you when hub prices fall. A fixed price also gives up the upside.
The producers who gain most lose a large share of the hub price to basis and fees, or get shut in when takeaway is full. If you want to sell natural gas to a data center, see how gas-powered data centers work and why the buyer wants power behind the meter.
What should a producer do before signing?
Get your own numbers straight before you negotiate anyone else's.
- Work out your current netback from last year's statements: hub price, basis, every fee and the volume sold.
- Write down your production profile: daily rate, history, forecast and reserve life.
- Get a fresh gas analysis: heating value, hydrogen sulfide, carbon dioxide, water and liquids.
- Map your backup: other wells, a pipeline tie or a second gathering system.
- Check leases and existing dedications. Some acreage is already committed to a gatherer or purchaser.
- Have counsel review the draft, with the table on this page as a checklist.
If the buyer also needs land for its plant, our guide to selling or leasing land to a data center covers that side of the deal.
When is a gas purchase agreement with Accretion Compute a fit?
Accretion Compute develops AI data center capacity at the source of energy, with power generated on site, and leases it to AI companies on multi-year terms. It uses only firm energy, under long-term fuel agreements matched to the lease. For a producer, that means a long-term gas buyer with a fixed or floored price on a multi-year term. The gas or land owner puts in no capital. The first step is by email: send your gas flow and location through submit a site for a free first sizing by email, covering power, land and what the gas and land could earn each year, with the math shown. It is a first read, not an offer, with no cost and no obligation. You can also try the site check or read how we work with partners.
Good fit if
- You produce gas with pipeline or gathering-system access and steady supply, and want a long-term buyer at or near the lease.
- Basis, fees or full takeaway cut into your netback, and a fixed or floored price appeals.
- You can back up supply with other wells, a pipeline tie or a second gathering system.
Probably not a fit if
- Your gas is flare, interruptible or declining. A load that can switch off suits it better than a firm long-term contract.
- You expect a pipeline tie-in soon and want to keep the option to sell into it.
- You need a buyer in weeks. An on-site buyer needs land, permits, fiber and a build first.
- You want a gas price before any review of the site. We don't publish rates.
Frequently asked questions
What is the difference between a gas purchase agreement and a gas supply agreement?
Mostly the point of view. Both are contracts for the sale and delivery of natural gas. Buyers tend to say purchase agreement, sellers say sales agreement, and gas supply agreement is common when the buyer is an end user such as a power plant. What matters is the content: term, firmness, minimum quantities, price basis, quality, measurement and remedies.
What does take or pay mean in a gas contract?
Take-or-pay means the buyer pays for a minimum quantity of gas even if it does not take it. It protects the seller's cash flow and is common in long-term deals. Check how the minimum is counted, whether make-up rights let the buyer take paid-for gas later, and what excuses the buyer. The seller-side mirror is deliver-or-pay.
How is the wellhead gas price calculated?
Usually by netback. Start with the price at the sales point, often an index at a regional hub that trades at a basis to Henry Hub. Subtract transportation and pipeline fuel back to the field, processing fees and shrink, and gathering and compression. What remains is the wellhead value, before royalties and severance tax. EIA defines the wellhead price as the value at the mouth of the well, and stopped publishing a national estimate in 2013.
Can you sell natural gas directly to a data center?
Yes, if the data center generates its own power on site and your gas is firm. The buyer sets up engines or turbines near the gas and signs a long-term supply agreement, usually for years and with backup supply behind it. Flare, declining or interruptible gas does not suit it, because the hardware runs around the clock. Fiber within reach and land for the plant also matter.
Sources
- North American Energy Standards Board, Base Contract for Sale and Purchase of Natural Gas, standard form as posted on naesb.org (redline edition; checked 2026-11-03)
- Federal Energy Regulatory Commission, Fact Sheet: Capacity Release (July 2025, checked 2026-11-03)
- U.S. Energy Information Administration, Energy Glossary: W (checked 2026-11-03)
- U.S. Energy Information Administration, Natural Gas Prices: Definitions, Sources and Explanatory Notes (checked 2026-11-03)
- U.S. Energy Information Administration, Natural Gas Annual 2024: Glossary (checked 2026-11-03)
- U.S. Energy Information Administration, Today in Energy: Natural gas spot prices fell across key regional trading hubs in 2024 (published 2025-02-03, checked 2026-11-03)
- U.S. Energy Information Administration, FERC Order 436: Open Access Blueprint (1985) (checked 2026-11-03)