Petroleum Contracts Research Articles

Force Majeure Clause in Long-Term Petroleum Contracts: Key Issues in Drafting

Force majeure clauses are now the most widely used contract provisions, protecting parties if part of the contract cannot be performed owing to some extraordinary event, outside the control of the contracting parties. These boilerplate provisions, which are routinely incorporated in commercial contracts, can be used as an effective tool for controlling potential risks that may in the future affect the smooth performance of a contractual arrangement. Depending on the needs of contracting parties, as well as the requirements of a particular branch of industry, such a clause may take different forms. Based on current contract practice, this article seeks to address some critical issues related to the inclusion of force majeure clauses in long-term international petroleum contracts. In the same way, the structure of a force majeure clause and the legal and practical issues that should be taken into account in the course of drafting will be discussed.

Force Majeure - Beyond Boilerplate

This article discusses a common feature in petroleum contracts, the force majeure clause. The force majeure clause is often overlooked by parties and lawyers alike as mere boilerplate; however, the clause has important implications when certain events preclude performance of an agreement. An explanation of what encompasses a triggering event with respect to a force majeure clause is followed by a discussion of the consequences when the clause is invoked in various contractual situations. The authors show how careful drafting of a force majeure clause can minimize the potential for dispute and litigation, with specific regard to the type of contract in which it is placed, the parties involved and the commercial context in which they parties are dealing. Finally, the article addresses how the courts in Alberta and elsewhere have judicially considered force majeure clauses and implications stemming from the cases.

European and American responses to the algerian crisis

Until the recent massacres, the attitude of the international community towards the Algerian conflict has been one of passivity and silence. The European Union (EU) has remained a spectator to the crisis because there has been no agreement between the 15‐nation bloc on a political formula which would be accepted by the authorities in Algiers. EU countries are loath to act in any way that might weaken the regime as a bulwark against Islamic fundamentalism or threaten Algeria's petroleum and natural gas contracts with European companies. France, which is historically and geographically closer to Algeria, has provided crucial economic support for the Algerian government while advocating a posture of non‐intervention. The United States, because of its lack of ties with the country, has kept some distance from the Algerian crisis, leaving France in charge of the situation. The bloody massacres that have taken place since 1997 have caused increasing unease in Europe and the United States. Appeals for intervention in the crisis and criticisms of the Algerian government's handling of the situation are likely to bring about some changes in the attitudes of the international community.

Analysis of Foreign Petroleum Contracts

Most foreign exploration and production contracts are of two basic types: Production-Sharing contracts in which a portion of oil revenues, 'cost oil,' is available to the contractor for recoupment of exploration and production costs with the remainder, 'profit oil,' being shared according to an agreed-upon formula, and the familiar Tax-Royalty contract in which a share of petroleum revenues goes to the host country 'off the top' as royalties, and operating profits are taxed at the going rate. Bottom line splits of profits between host governments and contractors, which are approximately 50-50 in the United States, are typically in the 60-40 to 85-15 range elsewhere, with lower profit shares being offset by the higher volume potential and lower costs that may be associated with less mature exploration areas. Foreign contract qualities can be grossly compared by walking typical field models through the contracts to arrive at the bottom line profit splits. Variations within the contract forms include government participation, sliding scale contract elements, special taxes related to rates of return, etc. Often, contract terms are subject to negotiation and the tradeoffs between contract elements must be understood. Contract life, amortization schedules, fund repatriation, currency exchange rates, and the interaction of foreignmore » and United States tax regimens are among the other factors that must be considered. Final decisions on foreign ventures must combine consideration of contracts, economic projections, hydrocarbon volumes, exploration cost estimates, and the estimated probability of success into an overall project assessment.« less

The Evolution of Petroleum Contracts in Argentina—Issues of the Foreign Investor's Legal Protection

The Evolution of Petroleum Contracts in Argentina—Issues of the Foreign Investor's Legal Protection

Petroleum Taxation and Contracts in the Third World—A Law and Policy Perspective

Petroleum Taxation and Contracts in the Third World—A Law and Policy Perspective