Attacks on Oil Facilities in Saudi Arabia – Potential Legal Issues

News /

On 14 September 2019 a large-scale drone attack targeted some of Saudi Arabia's principal oil production and processing facilities. In particular, the attack targeted the Khurais oil field and the Abqaiq processing facility, which is the world’s largest.

As things stand, it appears that around half of the Kingdom's capacity, or 5% of the daily global oil supply, has been affected by the attacks.  An event on this scale is likely to have serious repercussions for various players in the industry, including traders, end-users of crude and shipowners whose vessels are chartered to those parties.

This article discusses some of the legal issues which may arise from these events.

Sale Contracts

Most buyers of crude produced by Aramco are likely to have bought on FOB terms.  Those sale contracts are also likely to be subject to Aramco’s standard terms for such sales.  As one might expect, those terms are generally very favourable for Aramco and usually include force majeure provisions.

It seems likely, as things stand, that Aramco will seek to rely on force majeure provisions so as to excuse either delayed deliveries under existing sale contracts or possibly, depending upon the scale and duration of the impact of recent events, non-delivery under those contracts. For example, Aramco GT&Cs we have seen include a force majeure clause which provides for war, explosions or other catastrophies, total or partial failure or shortage of crude oil production and breakdown of machinery, equipment or plant not caused by the negligence of the seller as force majeure events.

Aramco’s counterparties under such contracts will need to consider carefully whether Aramco is entitled to rely on any force majeure provisions and also whether any ancillary provisions, such as notice obligations, have been complied with.

A significant further issue arises for parties who have not just bought FOB from Aramco (or another party who benefits from similar force majeure provisions) but have on-sold on other terms, such as CFR or DES.

Contractual terms as to force majeure may differ significantly between FOB and CFR / DES contracts, potentially creating an exposure for such traders.  Parties in this position may also be vulnerable to an argument from their buyers to the effect that they are obliged to procure product from elsewhere and that recent events have not prevented them from doing so. 

Seeking alternative methods of performance may be possible, but certainly not what parties will have intended and very likely a much more expensive means of fulfilling contractual obligations.

Care will also need to be taken in relation to notices where a party is seeking to rely on force majeure provisions.  Parties often simply pass on the notices which they have themselves received.  However, this is often not effective, either because the notice received is in some way defective or because the requirements of different contracts as to notices are different.  In short, a notice which is effective under one contract will not necessarily be effective under another contract.


Both owners and charterers are likely to be affected if the disruption to supply in Saudi Arabia continues for any significant time.

Typical voyage charterparties do not contain force majeure provisions, although longer-term contracts such as COAs often do contain such provisions.  In the absence of such a provision, a charterer’s obligation to provide a cargo under a voyage charter is likely to be unaffected, at least in the short term.

Even where there are no force majeure provisions, however, voyage charters will often deal with the delay aspect, by means of laytime and demurrage provisions.  These may assist charterers where a vessel is left waiting for a cargo for a long time as a result of these incidents.  As always, this will depend upon the exact scope of any laytime exceptions and/or interruptions, as well as whether those are effective once a vessel is on demurrage.


Recent events have potentially very serious implications for many different players in the oil trade.  Force majeure provisions are likely to be invoked, but whether that can lawfully be done will depend upon the exact wording of the clause in each case, as well as on compliance with things like notice requirements.

Parties should beware of simply passing on whatever they receive or otherwise assuming that the position under one contract also applies under other contracts.  Even seemingly minor differences in wording can have serious commercial and legal implications.  That is particularly so when the wording is used in different contexts (for example in an FOB sale contract and in a CFR one).

We will update these comments as the impact of recent events becomes clearer.  Should you have any queries in relation to these issues or wish to discuss them in more detail, please contact the undersigned or your usual Ince contact.

The article was also co-authored by Margo To, paralegal at Ince. 
Wai Yue Loh

Wai Yue Loh Partner and Chief Representative of Beijing Office, Beijing, Partner, Hong Kong and Joint Managing Director, Singapore

Ruaridh Guy

Ruaridh Guy Partner

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