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Renegotiation and Adaptation of Petroleum Contracts: The Quest for Equilibrium and Stability

Renegotiation and Adaptation of Petroleum Contracts: The Quest for Equilibrium and Stability 1.1 INTRODUCTION Petroleum contracts need to survive the change of circumstances that may occur from external factors due to their long-term nature, and the uncertainty associated with exploitation of petroleum resources, and which are often beyond the control of the parties. Petroleum contracts like many other long-term contracts need renegotiation, revision and adaptation for various reasons such as introducing flexibility, ensuring a stable contractual relationship and achieving the desired economic outcome from the project in the event of changes of circumstance. Although de facto changes or informal renegotiation is quite a common practice in long-term contracts, it is recognised that substantive provisions in law and contract in this regard can facilitate the parties' demand for the establishment of renegotiation on the footing of legal rights. An appropriate procedural provision for renegotiation within the legal and contractual framework is also seen as an essential condition for the orderly operation of renegotiation. Unlike earlier concession agreements, modern petroleum contracts incorporate various provisions allowing renegotiation, revision and adaptation of contract terms in order to meet the changing needs and entitlements of the parties in the context of new circumstances. The increasing phenomenon of the contractual mechanism of renegotiation can be explained http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of World Investment and Trade Brill

Renegotiation and Adaptation of Petroleum Contracts: The Quest for Equilibrium and Stability

Journal of World Investment and Trade , Volume 9 (2): 33 – Jan 1, 2008

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Publisher
Brill
Copyright
Copyright © Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1660-7112
eISSN
2211-9000
DOI
10.1163/221190008X00124
Publisher site
See Article on Publisher Site

Abstract

1.1 INTRODUCTION Petroleum contracts need to survive the change of circumstances that may occur from external factors due to their long-term nature, and the uncertainty associated with exploitation of petroleum resources, and which are often beyond the control of the parties. Petroleum contracts like many other long-term contracts need renegotiation, revision and adaptation for various reasons such as introducing flexibility, ensuring a stable contractual relationship and achieving the desired economic outcome from the project in the event of changes of circumstance. Although de facto changes or informal renegotiation is quite a common practice in long-term contracts, it is recognised that substantive provisions in law and contract in this regard can facilitate the parties' demand for the establishment of renegotiation on the footing of legal rights. An appropriate procedural provision for renegotiation within the legal and contractual framework is also seen as an essential condition for the orderly operation of renegotiation. Unlike earlier concession agreements, modern petroleum contracts incorporate various provisions allowing renegotiation, revision and adaptation of contract terms in order to meet the changing needs and entitlements of the parties in the context of new circumstances. The increasing phenomenon of the contractual mechanism of renegotiation can be explained

Journal

Journal of World Investment and TradeBrill

Published: Jan 1, 2008

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