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“LoI”

Definition: “LoI” is the acronym for Letter of Intent .

Comments: A LoI is a document by which two parties describe how they intend to work together. It can be just a technical base line of co-operation or a more extended agreement with commercial and financial terms. Depending on the countries, a LoI may be considered as a formal bidding contract or not.

LoI may also be called Memorandum Of Understanding (MoU)

The difference between MoU and LoI is that a MoU may stay as such without further bidding document, while the LoI tells clearly the intention of the parties to convert it into a formal bidding contract.

 In the Oil&Gas sector, MoU is mostly used between partners chasing together the same opportunity, for example it will preliterate joined ventures, while the LoI will be mostly used between customers and suppliers, especially to preserve delivery times in the mean time that a formal order has been placed and acknowledged.

To avoid future potential conflicts between the parties, a LoI should refer more to the intention to provide means than to detailed commitments on goals and results with key performance indicators (KPIs) and so on.

In putting on paper the base line of a potential future contract, the LoI helps the partners to realize in more details what shall be the name of the game and what kind of commitment they can commit on on their side and rely on from the other party. 

For more information and data about oil and gas and petrochemical projects go to Project Smart Explorer

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