مسعود حبیبیان

Abstract

Gas sale agreements are concluded on a long-term basis because enormous investments are required to implement gas sale and transmission projects. The advantages of long-term agreements are that, on the one hand, it guarantees a stable flow of money for gas sellers, and on the other hand, it provides energy security for buyers. However, these agreements may be affected by change of circumstances over time and thus become ineffective agreements so that the parties can only implement their contractual obligations with onerous costs. Pricing in traditional gas sales agreements is index-based pricing. This means that pricing is done through indexes such as the price of crude oil or petroleum products. Therefore, the change in the oil price affects these agreements so that the contract price of gas is no longer proportional to the real value of gas in the end-user market. In addition, other changes such as sanctions, changes in political systems, wars and conflicts including the Ukraine-Russia war and its consequences on gas sales agreements between Russia and Europe, epidemics such as the Corona pandemic in the last few years have caused the change of circumstances in gas sale agreements. Therefore, the purpose of this research is to investigate the conditions and effects of changed circumstance in gas sale agreements.

The conditions of change of circumstances are: I) A fundamental change in economic circumstances, such as a significant change in the price of oil; II) Not attributing the change of circumstances to the fault or negligence of the parties; and III) The inevitability of the change of circumstances despite taking all necessary measures by the injured party in accordance with the Standard of a Reasonable and Prudent Operator to fix the problem. If the conditions of the change of circumstances are met, either parties can request to adjust the agreement through renegotiation based on one of the contractual clauses related to the change of circumstances, such as the price revision clause, the hardship clause or the force majeure clause. If no agreement is reached, either parties may refer the dispute to the arbitration tribunal or the court. Depending on the case, this authority will try to restore the initial contractual balance by reviewing the price, adjusting the Take or Pay clause, eliminating or limiting the responsibility of the sellers or buyers due to the contractual obligations. If it is not possible to restore the initial contractual balance, both parties have a right to terminate the agreement as a last resort.

Keywords: change of circumstances, gas sale agreement, revision price, take or pay clause, adjustment, renegotiation, economic termination.