FORCE MAJEURE IN OIL & GAS CONTRACTS: LESSONS FROM RECENT GEOPOLITICAL DISRUPTIONS

INTRODUCTION

The doctrine of force majeure was derived from the French phrase “superior force.”[1] Within the context of contracting, it refers to a contractual provision that excuses one or both parties from the performance of their obligations when an extraordinary event, wholly outside their control, renders performance impossible, illegal, or radically different from what was contemplated at the time of contracting. The term is commonly understood to encompass both acts of nature, such as floods and hurricanes, and acts of man, such as riots, strikes, and wars. The clause operates as a form of contractual risk mitigation, basically suspending the parties’ contractual obligations in the event of a catastrophic external disruption.

In the oil and gas industry, force majeure clauses are standard features of virtually every long-term contract. The industry’s exposure to geopolitical instability, natural disasters, regulatory change, and infrastructure vulnerability makes such provisions not merely desirable but commercially essential. This briefing note seeks to examine in some detail, how the global oil and gas industry has come to navigate force majeure situations particularly in the wake of recent geopolitical tensions.

QUALIFYING EVENTS OF FORCE MAJEURE

From the outset, it is necessary to clarify that not every hardship or inconvenience experienced by a contracting party will qualify as a force majeure event. Whether a specific occurrence triggers force majeure relief depends on a number of factors namely: (i) the express language of the force majeure clause within the parties’ contract; (ii) the applicable governing law that ultimately regulates the parties’ contractual relationship; and (iii) whether the causal link between the event and non-performance is sufficiently direct.

Force majeure clauses typically enumerate qualifying events in two ways, through specific illustrative lists and through a general “catch-all” provision. Common qualifying events include:

·       Acts of war, armed conflict, invasion, and hostilities — including both declared and undeclared conflicts;

·       Acts of terrorism, sabotage, and deliberate infrastructure attacks (including drone and missile strikes);

·       Government actions: expropriation, sanctions, export controls, embargoes, and regulatory prohibitions;

·       Natural disasters: earthquakes, floods, hurricanes, and extreme weather events;

·       Strikes, labour disputes (other than labour disputes localized to a party), and civil unrest;

·       Disruption to critical maritime corridors and shipping routes;

·       Epidemics and pandemics (a category that gained prominence following the COVID-19 pandemic); and

·       Failure or unavailability of third-party infrastructure or transportation networks.

WHY IT IS ESSENTIAL TO INSERT A FORCE MAJEURE CLAUSE IN OIL AND GAS CONTRACTS

The commercial logic for including a force majeure clause in an oil and gas contract is compelling. Force majeure clauses are a core risk allocation tool without which most long-term energy agreements would be commercially unworkable. Without the clause, the consequences for a non-performing party in case of a deadlock due to unforeseen circumstances can be severe. This can lead to exposure to claims for damages, and contractual termination. Hence, it is pertinent to include a force majeure clause for the following reasons:

1.    Legal Protection: a force majeure clause provides legal protection by temporarily suspending or excusing contractual obligations where performance has been prevented by an event neither party could have controlled. This is particularly important in oil and gas contracts where the value of individual transactions runs into hundreds of millions or even billions of dollars. A party facing a declared force majeure event without contractual protection would be in breach, regardless of the cause where a force majeure clause is not inserted in the contract.

2.    Limitation of exposure to damages and termination of contracts: without a force majeure clause, non‑performance is usually treated as a straightforward breach, entitling the injured party to claim damages and even terminate the contract. In oil and gas, where for instance, a single missed crude‑oil shipment can trigger multimillion‑dollar claims, this can be catastrophic. A force majeure provision caps or suspends liability and provides a structured path such as notice, mitigation, and time limits before termination becomes an option.[2]

3.    Ensures legal certainty in volatile markets: energy markets are extremely sensitive to supply shocks, and prices can spike when chokepoints like the Strait of Hormuz are blocked. In such environments, vague or missing force majeure terms lead to disputes over whether non‑performance was truly “impossible” or the obligation has become more expensive to perform. Explicit language in the contract[3] reduces ambiguity and gives parties a predictable legal framework for handling crises.

4.    Preservation of commercial relationships: oil and gas contracts sometimes span decades and involve complex supply chains, joint ventures, and long‑term customer relationships. When a force majeure event occurs, a well‑drafted clause allows parties to temporarily defer deliveries, renegotiate schedules, or allocate risks contractually rather than rushing into disputes resolution arising from non-performance in the contract. This reduces hostility and helps maintain trust among partners in a critical sector.[4]

5.    Contractual confidence: A well-drafted force majeure clause allows both parties to enter into long-term commitments with greater confidence. By defining in advance which events constitute force majeure, contracts allocate the risk of extraordinary disruption between the contracting parties. This allocation is especially significant in long-term agreements, where due to the long durations of the contracts, the parties are exposed to unpredictable shifts in the geopolitical, regulatory, and physical environment.

CASE STUDY: THE 2026 GULF CONFLICT AND STRAIT OF HORMUZ DISRUPTION

The geopolitical crisis that erupted in late February 2026 involving armed conflict among Iran, Israel, the United States, and neighbouring Gulf States provided the most significant real-life test of force majeure provisions in energy contracts. What began as a regional confrontation involving Iran, Israel, and the United States quickly escalated into a broader geopolitical crisis that disrupted critical infrastructure and global supply chains. The conflict triggered force majeure declarations across global oil and gas supply chains at an unprecedented scale.[5]

At the centre of this disruption was the Strait of Hormuz, a narrow but indispensable maritime corridor through which approximately 20 million barrels of crude oil and petroleum products transit daily, representing nearly one-fifth of global supply.[6]  The Strait also serves as the primary export route for Liquefied Natural Gas (LNG) from Qatar, making it a critical node in both oil and gas markets. Iran’s actions to impede maritime passage through the Strait, compounded by the withdrawal of effective insurance coverage for vessels operating in the region, brought Gulf exports to a near standstill and the market impact was severe.[7]

The most decisive factor in bringing Gulf exports to a near standstill was the rapid escalation and eventual withdrawal of marine war-risk insurance.[8] Insurers, faced with mounting exposure, initially raised premiums to prohibitive levels before suspending coverage entirely. Without insurance, shipowners were unable to comply with contractual and regulatory requirements, while financial institutions refused to support uninsured cargoes. This transformed the situation into one of constructive impossibility, in which performance, though not physically impossible, became legally and commercially untenable.

QatarEnergy in March 2026, halted operations at its Ras Laffan Industrial Complex, one of the world’s largest Liquified Natural Gas (LNG) production hubs following drone and missile strikes on Gulf energy infrastructure. Two days later, QatarEnergy formally declared force majeure to its LNG buyers worldwide.[9] Qatar supplies approximately 20% of global LNG[10], its shutdown alone represented an extraordinary shock to the market. The Qatari Energy Minister warned that other producers throughout the Gulf would likely follow suit within days, a prediction that proved accurate as force majeure declarations cascaded through regional supply chains.[11]

As of May 2026, QatarEnergy has not lifted its force majeure declarations on LNG supply contracts, and has extended them through mid-June 2026.[12] Other entities like Kuwait Petroleum Corporation and Bahrain’s Bapco Energies who also declared force majeure and similar emergency measures earlier in March 2026 have not lifted the declarations.

In summary, the 2026 Gulf conflict represents a defining moment in the evolution of force majeure doctrine. It underscores the growing importance of non-physical impediments such as insurance withdrawal and financial constraints in determining contractual performance, while also revealing the vulnerability of highly integrated global supply chains to geopolitical shocks. The crisis is likely to influence future contract drafting, with parties placing greater emphasis on detailed force majeure provisions that explicitly address insurance risks, supply chain interdependence, and large-scale geopolitical disruptions.

CONCLUSION

Events like the 2026 Gulf conflict and the Strait of Hormuz disruption show how quickly normal operations can collapse. Producers such as QatarEnergy, Bapco, and Kuwait Petroleum invoked force majeure on LNG and crude‑oil contracts because attacks on infrastructure and the near closure of the Strait made shipments unsafe or impossible. A clear force majeure clause sets out what must be done in such situations, how to notify the other party, what mitigation steps are required, and how long the suspension can last, so that parties do not improvise under pressure.

Please do not treat the foregoing as legal advice, as it only represents the public commentary views of the authors. All enquiries on this should be directed to the key contacts.