Most Negotiated Terms

Energy Sector

In collaboration with

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Introduction

The oil and gas industry today is a sector in conflict, caught between a legacy of traditional contracting practices and the urgent need for transformation. For decades, negotiation within the industry has centered on relatively classical principles: allocating price and risk through formalised structures, relying heavily on established industry standards and well-trodden templates. This has made many aspects of negotiation relatively predictable, with recurring attention paid to liability, indemnities, price adjustments, and change control. Contracts have largely served as instruments of protection and allocation, especially under volatile market conditions.

But this traditional framework is now under pressure. A wave of disruption - economic, environmental, geopolitical, and technological - is reshaping the industry’s foundations. Relationships that were once stable are fragmenting or evolving. The balance of power between buyers and suppliers shifts more frequently and less predictably, and the supply chain faces mounting demands for resilience, adaptability, and shared risk. Legacy approaches are proving increasingly inadequate for a world that demands flexibility and speed.

The way that industry participants approach contract negotiation is a fundamental element in shaping the future. This report highlights the fact that change is slow and the focus still remains on control -handling failure and poor performance – rather than partnering for success. In this report, we compare three different types of terms:

  • Most Negotiated Terms which focus on consequences of failure
  • Most Important Terms which look at the factors that support success
  • Most Disputed Terms which focus on issues related to conflict and disagreements, ultimately leading to poor performance
Facing a volatile mix of liberalization, regulation, shifting legal obligations around emissions, rapid market changes, and growing political pressure the industry confronts an environment where traditional approaches to negotiation are no longer sufficient.
 
In today’s energy sector, there is a clear need to shift from transactional execution to strategic enablement of business resilience and value creation. WorldCC benchmark data reveals that 55% of organizations are experiencing increased executive interest in contract and commercial management (CCM) capabilities, recognizing their critical role in navigating this complex landscape. The sector’s top priorities—improving internal processes (60%) and raising skills of current staff (49%)—reflect the urgent need for adaptation. However, significant barriers exist, including operational workload (50%), difficulties establishing value data (47%), and gaps in existing skills (40%).
 
The traditional negotiation model frequently delays resolution and undermines trust. Over a third of industry respondents indicated these methods hinder resolution speed, while more than half felt they negatively affect customer-supplier relationships. Overall, more than 80% acknowledge that they are typically negotiating the wrong things. Successful negotiation in this environment requires embracing relationship-driven contracting over adversarial approaches. Both buyers and suppliers increasingly recognize that partnerships built on collaboration, clear communication, and shared goals yield more successful long-term outcomes. This is particularly crucial in long-term energy projects where negotiation is not a one-time event but an ongoing process throughout the project lifecycle.
 
This report takes a closer look at the energy sector, through the three types of terms that we use to uncover underlying factors, explore their significance, and outline steps for deeper understanding before proceeding further.

Most Negotiated Terms: Energy Sector

Download the full report to access data on: the differences between other industries and the energy sector, working with SMEs, and the use of CLM technology.

Most Negotiated Terms

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As with the Global/ Rest of the World (RoW) report, the most negotiated contract terms for the OGE sector remain consistent - with limitation of liability and price / charges at the top rankings. Where Liquidated damages (LDs) sits in10th position for the global MNT, we see it rise to 3rd position for OGE. This is due to the high-stakes nature of their projects, which often involve billions of dollars, complex timelines, and interdependent operations. LDs reflect the frequency with which delays occur and are intended to incentivize timely performance, and mitigate risks of delay. Experience suggests that they are not especially effective, often leading to a price premium and acting as a source of contention.
 
Other terms which stand out and are again linked to control include Performance Guarantees and Undertakings (9th) and Responsibilities of the Parties (10th). Provisions such as Termination and Intellectual property are important, but are subject to lower levels of negotiation than in some industries because they are not perceived as such high-risk and positions may be clearer due to the use of well-established industry templates (e.g. FIDIC, LOGIC, or AIPN model contracts). 

Most Important Terms

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For the Most Important Terms (MIT), Acceptance, Product specification and Service levels from the global terms do not figure in the top ten most important terms for the Energy sector. Instead, Invoices / late payment, Warranties and Performance guarantees are seen as critical. The economics of high-value, high-risk projects is at the forefront of industry thinking. Relative to others, Amendments / changes to contract also feature far more strongly, giving organizations the ability to modify contracts to address unforeseen circumstances, incorporate technological advances, and respond to regulatory changes without completely renegotiating agreements.
 
Warranty provisions are vital given the specialized, high-value equipment involved in OGE operations. Equipment failure can lead to catastrophic consequences including environmental damage, production losses, and safety incidents. Comprehensive warranties provide assurance regarding equipment performance and establish clear remediation processes. Performance Guarantees and Undertakings (10th) are essential because OGE projects often involve complex technical specifications with little margin for error. These terms establish measurable performance standards and consequences for noncompliance, particularly important in an industry where operational failures can result in significant financial and reputational damage. 

Most Disputed Terms

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In the Most Disputed Terms (MDT), there is broad consistency across global and the OGE sector, though there are differences in ranking. However, warranty and product specification are present in the OGE sector, replacing Liquidated damages and Termination. These terms are particularly contentious due to the very nature of the energy industry as it operates in extremely challenging environments where equipment failure can lead to catastrophic consequences - from environmental disasters to significant production losses costing millions of dollars per day. This creates tension around warranty terms, as suppliers seek to limit their exposure to these outsized risks while buyers demand comprehensive protection against potential failures.
 
Product specifications become battlegrounds on account of the technical complexity and customization required in energy projects. The highly specialized nature of equipment means that even minor deviations from specifications can have major operational impacts. Additionally, the long lifecycle of energy assets (often 20+ years) means that warranty periods and performance guarantees must address both immediate functionality and long-term reliability.
 
The global nature of energy supply chains further complicates these terms, with different jurisdictions having varying approaches to warranty law. This creates a complex negotiation landscape where parties must balance technical requirements, risk allocation, and commercial considerations against a backdrop of significant financial and operational consequences.
Industry-Specific Challenges
In the oil and gas sector specifically, there are additional factors that may contribute to disputes:
1. Data and Knowledge Sharing Challenges
The industry faces challenges with inadequate technology leading to a lack of performance data. Organizations need to invest in digital systems that support integrated data flows and analytics. This can elevate the quality of contracting and allow rapid assessments of portfolio performance and areas of value leakage.

2. Operational Workload and Skills Gaps
The top barrier for improvement across industries is operational workload, but the oil and gas energy sector specifically faces greater concerns about:
  • Establishing better data to indicate the value of Contract and Commercial Management (CCM)
  • Existing skills gaps
  • Quality of functional leadership
3. Stakeholder Consensus Challenges
Building consensus across stakeholders is particularly difficult in the oil and gas industry due to:
  • Contract management responsibilities being scattered across multiple people
  • Multiple stakeholders having different levels of responsibility
  • Relatively independent business units and divisions

Most Negotiated Terms: Energy Sector

Download the full report to access data on: the differences between other industries and the energy sector, working with SMEs, and the use of CLM technology.

Conclusion

The report indicates a clear need for greater adaptability in negotiation. In this environment, a singular focus on cost and output is not enough. Stepping away from the purely transactional model, the focus should be on value creation and greater collaboration to ensure projects remain viable and profitable across changing market cycles. Resilience and adaptability are ongoing skills that allow companies to absorb shocks and recalibrate their strategies when needed.
 
Moving forward, negotiation strategies must incorporate:
  • Agile, risk-resilient approaches to manage supply chain and geopolitical uncertainties
  • Balanced contracts that foster transparency and fair risk allocation
  • Skills that blend technical expertise (IQ) with emotional intelligence (EQ) and adaptability (AQ)
  • Digital capabilities that enhance collaboration and provide real-time insights
  • Frameworks for proactive conflict management that strengthen rather than damage relationships
By embracing these collaborative approaches, energy companies can transform negotiation from a potential source of conflict into a strategic tool for building resilient partnerships capable of weathering the sector’s ongoing transformation.
 
The energy sector must evolve from simply delivering large assets to building sustainable business models that can thrive amid volatility. This means rethinking project planning and contracting through the lens of long-term value, operational resilience, and strategic adaptability. With the acceleration of the energy transition, the world shifts toward decarbonization and cleaner energy sources. Oil and gas companies face growing regulatory, social, and investor pressure to diversify. Fossil fuelbased projects are increasingly scrutinized for their environmental impact, and emerging technologies like hydrogen, carbon capture, and battery storage add layers of complexity and risk. To remain competitive, companies must not only extract current value but also invest in future-proof assets that align with climate and sustainability goals. Adaptability, therefore, is no longer optional, it’s a requirement for long-term survival.
 

Written by

Tim Cummins Follow me on LinkedIn

President
WorldCC

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