the validity and enforceability of take or pay clauses in LNG contracts

Since the LNG projects are so capital intensive, often financers do not finance in these projects without making sure about its certain income stream. The main instrument to reach into this certainty for the sellers and financers is inserting the “Take or Pay” clause in the contract. Therefore, today the “take or pay” clause has become the defining characteristic of long term LNG sales contracts. In different legal regimes, some doubts have been raised against the validity and enforceability of this clause. In addition with changing feature of LNG projects, it seems that traditional “take or pay” clauses have lost their efficiency and we need to step back and reevaluate the traditional “take or pay” structure in today’s evolving LNG marketplace. Considering the validity and enforceability of “take or pay” clauses in different legal regimes and the reasons of their inefficiency and finding some ways to improve the efficiency has been considered in this article.