Stabilization Clauses in Petroleum Agreements: Limitations and Legal Implications of a Breach

State participation in petroleum exploration usually results in contractual agreements between the governments and International Oil Companies (IOCs). The bargaining powers between these are not of equal because the host states reserve the right over their natural resources even in the presence of any contractual provisions. This is recognized and endorsed international law under prescribed conditions put the states at the higher of the bargaining powers and the exercise of state sovereignty. Based on the imbalance of bargaining powers between the contracting parties. The IOCs normally anticipate possibility of unilateral change or untimely termination of investments contracts by the host state through the use of its legislative powers. As an antidote to such unilateral actions of the host governments, foreign investors and for that matter IOCs employ stabilization clauses to indemnify their investments. This paper seeks to explain petroleum agreements, indemnify stabilization clause, the types, limitations and legal implications of a breach of the stabilization clauses.