Perhaps the most common type of take-take in a large energy project is the take-or-pay contract. A properly constructed take-pay contract provides the seller with an assured source of income, guaranteeing a reasonable return on significant project investments and risks to which they are exposed. In addition, it is a form of contract generally understood by lenders, and is often the most important way for a seller to secure significant financing of the loan under limited regression conditions that normally require energy projects. Typically, a seller is concerned about two fundamental risks: market demand risk and price risk. A take-or-pay contract carries a risk of deterioration of market conditions for the buyer by requiring that he be always responsible for the payment of a minimum purchase commitment (sometimes called volume risk transfer), so that the seller can only face the market price risks that, in some cases, can be covered. It is important that the take-pay buyer does not violate the contract or be late if he does not nominate or receive the amount of TOP in the corresponding year. Often, a buyer has the right to designate zero deliveries in a year, which would not be an offence or a default. Instead, the difference between the quantity actually taken by the buyer this year and the corresponding amount is the basis of a loss-making quantity for which the buyer is required to make a payment at the end of the year to the seller. COVID-19 has forced both buyers and sellers, under long-term commodity supply contracts, to determine whether their contracts contain take-or-pay obligations that could be difficult for buyers to meet, particularly due to declining demand by downstream buyers. Many LNG and gas sales contracts give the purchaser the right to obtain, in subsequent years (or, in some cases, a short period of time after the expiry of the contract), a quantity of „make-up“ equivalent to that for which a payment was made or paid was made. As a general rule, this make-up can only be taken after the buyer has taken the amount of TOP for the first time for this year, thus preserving the seller`s guaranteed annual revenue source.
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