Force majeure in focus: LNG contracts tested by geopolitical shocks
The legal threshold for invoking force majeure remains highly dependent on the specifics of each contract, partners at Baker Botts reveal
07 April, 2026
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The disruption to global LNG flows has once again put force majeure clauses, contractual risk allocation, and energy security into sharp focus.
As geopolitical tensions ripple through critical trade routes, legal experts say the implications for long-term LNG contracts are significant, but not necessarily transformative. Instead, the current environment is reinforcing long-standing contractual principles while prompting more nuanced risk considerations in future agreements.
The clause has come into focus after a few energy operators in the Gulf moved to declare force majeure or similar emergency measures following attacks on infrastructure and disruptions to regional energy flows.
Read: Why force majeure is spreading across Gulf energy markets
According to Chad Passlow, partner at Baker Botts, the legal threshold for invoking force majeure remains highly dependent on the specifics of each contract.
“While force majeure clauses vary from contract to contract, and those differences are material as to how they should be interpreted, many LNG SPAs provide an excuse to a contractual party that is ‘prevented, impeded, or delayed’ in performing… due to events or circumstances that are beyond the reasonable control of such party,” he says.
However, invoking such provisions is not straightforward. “The affected party must generally show that it is unable to perform… not merely that its performance has become more difficult, expensive, or commercially unattractive,” Passlow adds, noting that mitigation obligations and the ability to resume performance quickly remain central to any claim.
Limited scope for renegotiation, but long-term risks remain
While supply disruptions may place pressure on buyers—particularly in Europe and Asia—legal frameworks governing LNG contracts offer limited room for renegotiation.
Jason Bennett, another partner at the same firm, explains that most long-term LNG sale and purchase agreements (SPAs) are designed to withstand such shocks without reopening core commercial terms.
“Most of them do not include a renegotiation provision due to the existence of force majeure circumstances – the non-performing party is typically excused from performance during the existence and continuance of force majeure,” he says.
That said, prolonged disruptions could trigger more significant contractual consequences. “Many LNG SPAs contain termination rights for if force majeure events prevent performance for an extremely long period… [and] some… have provisions, such an extension of the base term of the agreement,” Bennett adds.
Despite the scale of recent events, both experts caution against expecting a fundamental shift in how force majeure is interpreted globally.
“This event is unlikely to redefine how force majeure is interpreted in global energy contracts, as war and conflicts are quintessential sources of force majeure relief,” says Passlow.
However, he points to a more subtle shift ahead. “We may see contractual parties propose new or different force majeure provisions for future agreements… that seek to define more clearly the relief that would be available in specific conflict scenarios.”
This mirrors the contractual evolution seen after the Covid-19 pandemic, where previously assumed risks became more explicitly defined.
Structural vulnerabilities exposed
Beyond legal frameworks, the current disruption has highlighted the structural fragility of global LNG supply chains—particularly their dependence on key chokepoints.
“With roughly one-fifth of global LNG supply passing through the Straits of Hormuz… the almost immediate result has been an increase in LNG prices,” Bennett says.
The ripple effects are already visible across markets. Buyers in Europe and Asia are competing for available cargoes, while some are resorting to fuel switching to manage costs. At the same time, seasonal dynamics add further pressure, as Europe rebuilds storage ahead of winter and Asia prepares for peak summer demand.
Despite short-term volatility, Bennett does not expect a long-term retreat from LNG as a core energy source.
“The world needs LNG, so we do not expect any long-term movement away from LNG as a source of energy,” he says.
Instead, the focus will shift toward diversification and resilience. “LNG importing countries… can be expected to analyse and evaluate their energy supply sources… [and] diversification… has always been and will remain a key goal.”
This includes reassessing exposure to geopolitical risks, supply routes, and alternative energy sources, without fundamentally altering the role of LNG in the global energy mix.
The current disruption has also reignited debates around pricing mechanisms, particularly the balance between spot markets and long-term contracts.
However, Bennett suggests that structural pricing changes are unlikely. “There is no global price for LNG… we do not think that any fundamental shift will occur in LNG pricing – the decisions will be made by buyers and sellers on a contract-by-contract basis.”
This reinforces the highly bespoke nature of LNG agreements, where pricing reflects individual risk appetites rather than market-wide standardisation.
Risk allocation: evolution, not overhaul
While geopolitical tensions are intensifying, both experts believe the fundamentals of risk allocation in LNG contracts will remain largely intact.
“We do not think the existence of conflicts will fundamentally alter risk allocation in contracts, as they have always been considered a possibility,” Passlow says.
Instead, the focus is likely to shift toward operational resilience and infrastructure strategy.
“The LNG market is incredibly resilient and will continue to adapt to such challenges,” Bennett adds. “We expect that GCC countries will explore more distributed infrastructure, regional gas grids, additional pipelines… to ensure even greater resiliency in the future.”
Ultimately, the current disruption is less about rewriting the rules of global LNG trade and more about stress-testing them.
Legal frameworks such as force majeure continue to function as designed, but the scale and frequency of geopolitical risks are pushing both buyers and sellers to reassess how those frameworks are applied in practice.
For the LNG industry, the lesson is clear: resilience is no longer just operational—it is contractual, structural, and increasingly strategic.
