A joint venture dispute arose when persistent gaps between production forecasts and actual output at a natural gas liquids (NGL) fractionation plant disrupted capacity expectations and commercial planning. Baker & O’Brien supported the arbitration by analyzing forecasting methodologies, data inputs, and processes to identify root causes and quantify inherent uncertainties. The expert findings, presented to the arbitration panel, clarified limitations in the process and helped the parties resolve the matter before hearings began.

In business planning, forecasts are necessary and unavoidable, but they are only as reliable as the assumptions and methods that underpin them. In joint ventures, forecasts are especially critical because they establish expectations of available capacity between the parties. Production forecasts are integral to the NGL business, where demand for many products is highly seasonal. Despite uncertain and uneven production levels, operators must maintain sufficient products to meet this variable demand without exceeding storage capacity.

A fractionation plant separating NGLs into individual components was owned by two joint venture parties that shared capacity rights. The majority capacity holder served as the plant's operator, making accurate forecasting fundamental to operations and commercial planning. A dispute arose from persistent mismatches between monthly forecasts and actual production. These mismatches created uncertainty about available volumes for sale each month, disrupted sales and storage planning, and prompted the retention of Baker & O’Brien.

We investigated the root causes of the predicted volume mismatches by analyzing both the forecasting methodology and the inputs. Our team mapped the multi-month forecasting process, which required several iterations, identified key information flows, and examined dependencies on supply, demand, operations, transportation, and weather. Following detailed analyses, the team documented the inherent uncertainties and limitations of the complex forecasting process. These findings were presented in an expert report submitted to the arbitration panel, which assisted the parties in resolving the dispute before the arbitration hearings commenced.