Flexibility in the Mechanism of Stability Clauses and Balance of Interests in Oil Contracts

The performance of a petroleum contract is conditioned by the favourable national and international legal, political and market environment. The mechanisms of stability in the forms of legal, contractual and economy for confronting are risks of political, financial and commercial in oil contracts. Looking at the development of stabilization practice over the last decades, stabilization clauses may be classified as classic or modern. Economic equilibrium or rebalancing clauses are perhaps the most familiar modern stabilization mechanisms. In this regard, the main question is “ in the circumstances and conditions that have changed during the implementation of the oil contract, how can the modern stability mechanism and conditions continue the interests of the parties in a fair and conventional way?” With the assumption that their aim is to maintain the same financial situation (economic balance) stipulated in the contract by supporting investment at the date of signing the contract. Thus, the traditional notion of stability of contract which is firmly rooted in the concept of sanctity of contract has largely given way to flexibility in approaching the desired stability in the contract. In this paper, this issue has been investigated with descriptive-library research method. Its achievement “that stabilization mechanisms enhance a government’s ability to attract companies, such provisions are supported by economic logic and imperative, promoting the coordination of interests between the oil companies and host governments. Stability provisions facilitate oil company efficiency and performance, which is typically in the best interests of the government and the balance of interests in the field of oil contracts.”