The robustness of long-term take-or-pay contracts: What we can learn from the trade in gas between Brazil and Bolivia

Abstract

On the basis of a study of long-term gas contracts, we have underscored the existence of a contract lifecycle in the case of a new relationship requiring investments in infrastructure with asset specificity. The existence of this contractual lifecycle contributes an important rational dimension to our understanding of the appearance of divergent interests and eventual conflicts between the upstream and the downstream. This lifecycle also explains the various contractual safeguard mechanisms that are most relevant to each of the different phases of the cycle.