October 07, 2026
Key Takeaways:
I. Saudi Supply Disruption and Buyers’ Exposure
Saudi Arabia’s state oil company, Saudi Aramco, has told certain European customers that they will receive no oil in October under their long-term contracts because of an attack on a key pipeline running to the Red Sea.
The reported non-delivery follows the September 12 shutdown of Saudi Arabia’s 1,200-kilometer East-West pipeline (known as the Petroline) after drone attacks. The pipeline connects the Kingdom’s eastern oil fields to Yanbu on the Red Sea and has carried approximately 4–5 million barrels per day. It had become an important export route as transit through the Strait of Hormuz became more difficult.
For buyers, key questions include whether the pipeline attack, the resulting loss of available crude, or related transport constraints satisfy the particular delivery and force majeure provisions in their long-term contracts.
The surrounding security developments may strengthen or weaken that analysis depending on the particular contract and the facts. We note that in early September Houthi forces had seized the Red Sea port city of Mokha and captured Perim Island in the Bab el-Mandeb Strait. The October 4, 2026 Joint Maritime Information Cooperation Centre Advisory Note states that Houthi forces still control islands commanding both channels of the strait. In that context, Houthi forces also declared that maritime navigation in the Red Sea was safe except for Saudi vessels.
Since, there has been an offensive by the Yemeni government to retake Mokha, the East-West pipeline has been reopened, reportedly attacked again, and is now partially protected by the stationing of French troops to Yanbu. These developments may be relevant to causation, alternative routing, insurance, and mitigation, but they do not by themselves establish a contractual excuse for every affected seller or buyer.
Moreover, the reopening of the East-West pipeline is of particular contractual relevance. Where force majeure or hardship clauses have been triggered, it is often equally important that prompt notice is given once the triggering event has ended, and that performance is duly resumed without delay.
II. How Should Buyers Respond?
Buyers told they will receive no oil in October should evaluate their contractual and legal rights to determine the full menu of available options in their relationships with their supplier, and also their downstream customers. We focus on three key doctrines below, but in every supply relationship there will also be other relevant clauses (such as those addressing price revision, substitution rights, suspension or extension rights, termination triggers, damages limitations or war risks specifically):
1. Force majeure
Force majeure (“FM”) in supply contracts normally suspends delivery obligations, and relieves the affected party from liability for breach, when an unforeseeable circumstance impedes performance.
In many jurisdictions, such as England and Wales, force majeure is purely a creature of contract and cannot be invoked without an FM clause. Conversely, some civil-law regimes include statutory safeguards of a similar nature.1
Where the doctrine is contractual, everything turns on the clause’s precise language. For instance, does it apply when the relevant event prevents, materially impedes, or delays performance? This wording is crucial: some clauses require absolute impossibility, while under others performance becoming substantially more difficult is enough.
Clauses commonly identify specific events as qualifying as force majeure, such as armed conflict, terrorism, sabotage, governmental measures, labor disruption, and natural catastrophes. Whether this list is exhaustive or instead allows scope for other unforeseeable events to qualify can be determinative.
Most FM clauses are worded to further require causal analysis. The party invoking the clause must connect the disruption to the missed obligation by identifying what had to be done, which operational step was affected, and why that event, rather than an independent commercial or financial difficulty, prevented the required performance. Relief is usually temporary, tailored to the affected obligation, and often contingent on mitigation efforts by the seller (and sometimes by the buyer as well).
Depending on the wording, a successful claim may suspend performance, excuse liability for the period of the impediment, extend delivery dates, permit partial performance or allocation, or trigger a termination right.
Case law: the facts and wording matter
In Gujarat State Petroleum v. Yemen (ICC Case No. 19299/MCP), the tribunal accepted the claimants’ force majeure arguments where armed conflict made performance impossible. It held that the effects of the force majeure event could continue throughout the relevant period even if the underlying events were not continuous. The case illustrates the importance of showing the operational impacts caused by the force majeure event.
By contrast, in National Oil Corporation (Libya) v. Sun Oil (ICC Case No. 4462), the tribunal rejected the defense on the basis that Libyan law required proof of impossibility rather than merely increased difficulty, and the wording of the relevant clause did not alter this requirement. The decision underscores the need to identify both the contractual threshold and the governing law when FM is invoked.
In Southern Solar Power v. Bangladesh Power Development Board (ICC Case No. 23904/TO), the tribunal summarily dismissed the claims under Article 22 of the ICC Rules for being manifestly devoid of merit, as the claimant had failed to comply with force majeure notice requirements. The tribunal did not assess whether a force majeure event had occurred. This underscores the importance complying strictly with notice requirements in force majeure and hardship clauses.
In Litasco SA v. Der Mond Oil & Gas Africa SA, the court rejected force majeure because the real obstacle was the buyer’s lack of foreign currency, not the claimed force majeure event. Factual analysis of what actually caused the non-performance is always crucial.
2. Hardship and MAC: when the buyer’s costs surge
Hardship and material adverse change (“MAC”) provisions may provide additional tools when oil products cannot be obtained at the prices previously foreseen and must be purchased on the spot market at higher prices. They apply when performance remains possible but changed circumstances make it excessively burdensome or materially alter the economic balance of the contract. Remedies may include good-faith renegotiation, price adjustment, rebalancing, suspension, or termination.
Buyers should also check whether applicable law supplies a statutory hardship or imprévision remedy even when the contract is silent. Examples include Article 1195 of the French Civil Code, Article 97 of the Saudi Civil Transactions Law, and Article 224 of the UAE Civil Transactions Law. The scope, mandatory character, and available relief vary, so the governing law and any choice of forum should be reviewed before relying on a statutory remedy.
Hardship remedies are likely to be of particular relevance in contracts with downstream customers, where buyers of Saudi crude find themselves faced with either (i) breaching those downstream contracts by non-delivery, or (ii) performing at a much higher cost further to spot purchases.
3. Mitigation
A buyer cannot simply wait and allow losses to accumulate. Even while challenging the seller’s force majeure declaration, the buyer should actively explore replacement supply, including alternative cargoes, grades, suppliers, ports, and routes, while preserving its claims and its right to recover the additional cost. The cost, availability, and commercial reasonableness of each option should be recorded.
That said, mitigation will not always be possible. In Gujarat State Petroleum v. Yemen, the tribunal accepted that the security situation made mitigation unfeasible. Conversely, under English law, at least, mitigation is directed at maintaining contractual performance, not forcing a party to accept a non-contractual substitute.
III. Practical Steps for Buyers Facing Non-Delivery
Buyers should treat threatened October shortfalls as both an operational incident and a contractual claims event. The following steps are designed to preserve supply, protect legal rights, and put the buyer in the best position for negotiations and/or dispute resolution.
1. Review the contract in the context of its governing law
When responding to an invocation of force majeure, the buyer should assess whether the declared event genuinely satisfies the contractual requirements: To what extent was it foreseeable? Did it meet the relevant standard to prevent or impede delivery? Did the events relied upon actually cause the problems with supply? Has the seller taken adequate mitigation steps? In practical terms this usually means an analysis of alternative routes to supply the same product, or alternative sources from which to supply the product. The buyer should also examine what remedies the clause provides, whether they accord with the seller’s conduct, and whether the FM clause imposes obligations on the buyer.
The buyer should also consider the broader contractual package: definitions, hardship or price-revision clauses, termination and damages provisions, insurance, delivery and title provisions, notice, governing-law, and dispute-resolution clauses.
This contractual analysis should be periodically revisited as conditions change.
The ultimate goal of this exercise is to determine whether the seller is in breach of its duty to deliver petroleum, and if so whether it is excused by the FM clause or otherwise. If this analysis shows it is liable for breach, that conclusion can be immediately leveraged to press for delivery (as well as being used later in the context of any dispute).
2. Map the supply chain and related stakeholder obligations
Buyers may find themselves squeezed between a supplier that has declared force majeure and downstream customers to whom the buyer owes delivery without equivalent force majeure protection. In the short term, buyers should examine if their downstream contracts contain hardship, force majeure, price adjustment, or other relevant clauses and whether their terms are met.
In the medium term, buyers should audit the entire supply chain, compare the clauses, thresholds, notice periods, and governing laws in each agreement, and identify where they may bear non-delivery, replacement-cost, or damages exposure.
Buyers should also check whether financing documents require lender notification in the context of an event like Saudi Aramco ceasing to supply. An early analysis of these issues can prevent a notice or settlement from unintentionally compromising another contract.
3. Issue timely, contract-compliant notices
Under all relevant contracts, whether to contest an FM claim by a supplier, or to assert hardship or a right to a price adjustment to a downstream buyer, buyers should issue timely notices containing the detail required by the relevant clauses. Many agreements and clauses allow only brief notification windows to exercise these rights, which may otherwise be extinguished.
4. Mitigate and preserve the contractual position
Available alternatives should be investigated promptly: replacement petroleum products, alternative suppliers, ports, shipping routes, delivery windows, inventory releases, and operational adjustments should all be examined. Ideally, this would involve going as far as seeking quotations and capacity information, as opposed to a purely internal analysis. These exercises should be recorded to establish a paper trail showing mitigation. Decisions about why an option was accepted, rejected, or unavailable should also be recorded, and revisited periodically to confirm their continuing validity.
5. Review insurance and changes to cover
Conduct a coverage review including war-risk, political-violence, political-risk, marine cargo, business-interruption, and contingent business-interruption policies. Ordinary property and business-interruption coverage may leave losses arising from armed conflict outside their scope, while a standalone war policy or political-violence extension could provide protection (subject to its precise terms).
6. Negotiations
While much of the analysis described above would, ultimately, be of use in any potential dispute, in the short term it should be used to support negotiations. A buyer that can demonstrate that it understands its legal rights is in a good position to seek to negotiate partial performance by means of a (lesser) allocation of available cargoes, or a temporary price or delivery adjustment. That said, negotiated solutions should be documented carefully so as not to unintentionally waive legal rights providing for a more advantageous result.
IV. Conclusion
Buyers facing non-delivery should act decisively to assess their contractual relationships, comply with their performance obligations and notice requirements, mitigate losses, and preserve evidence. The timing and effectiveness of those steps can provide useful leverage in negotiations, as well as ultimately determine who bears liability for losses. Foley Hoag’s International Litigation & Arbitration Department regularly handles disputes arising from oil and gas supply disruptions, including arbitrations under ICC, LCIA, UNCITRAL, and ICSID rules. Our team also prevailed in the Southern Solar Power v. Bangladesh Power Development Board case described above, achieving the first summary dismissal ever under Art. 22 of the ICC Rules. Our team combines deep experience in the energy sector with recognized expertise in international arbitration and public international law, including matters involving sovereign acts, sanctions, and the law of the sea.
For guidance on the contractual, arbitral, and international law issues—including force majeure, hardship, mitigation, and insurance—please contact Diana Paraguacuto-Maheo, Constantinos Salonidis, Jago Chanter or Baldomero Casado in Foley Hoag’s International Litigation & Arbitration Department.
1 For instance, Saudi Civil Transactions Law, Article 110; UAE Civil Transactions Law, Article 236.
