Onshore Energy Conference — Dubai Onshore Energy Conference — Dubai 01 | Page 36

CONTRACTUAL
COMMITMENTS
CONSEQUENCES

&

Contractual commitments are common in the
energy and petrochemical sectors as a way
of ensuring continuity of feedstock supply for
buyers, or of revenue for sellers. Often these
agreements are a condition of sourcing finance.

By Justin Crick
and Clive Burrows,
RGL Forensics

F

ollowing an incident, an Insured
party may be restricted by the
conditions of the contract, which could
significantly impact the business
interruption loss, due to the effect on  the
costs of raw material / feedstock or  sales
of final products to the business. However,
the policy language does not always take
into account the contractual commitments.

Feedstock / Raw Material Commitments
There are various contracts available on the
“buy” side, however two common forms are:
i  Take-or-Pay-Contracts – these are longer
term commitments (typically 1 to 5 years) where
the buyer must pay the contracted price even if
the minimum volume of feedstock is not taken;

ii Rolling
Order Contracts – this is where

the quantity supplied is set out over a
defined rolling period with a shorter-term
commitment, for instance 3 months.
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