An umbrella contract (or umbrella agreement) is a broad, overarching contract that establishes the general terms and conditions governing the relationship between two or more parties for future transactions or projects. Rather than negotiating a new contract for each transaction, the parties agree upfront on the foundational rules, which then apply to all subsequent agreements made under the umbrella.
Key Features
General Terms and Conditions:
These set out the main principles, such as confidentiality, payment terms, dispute resolution, and liability, that apply to all future dealings between the parties.
Framework for Future Agreements:
Serves as a master agreement; specific transactions or projects are executed as addendums, statements of work, or sub-agreements referencing the umbrella contract.
Flexibility:
Allows parties to adapt to changing business conditions without renegotiating the core terms each time.
Efficiency:
Streamlines the contracting process, reducing administrative burden and speeding up the start of new projects or orders.
Comparison of Agreements
Umbrella contracts are valuable tools for managing ongoing business relationships efficiently and flexibly. Umbrella agreements can be used in various industries, but their effectiveness and appropriateness depend on the nature of the goods or services involved and the specific business context.
They are especially common in sectors where repeat transactions or ongoing relationships are expected, such as between retailers and manufacturers, but sellers and buyers in many industries can benefit from these agreements. Industries that frequently use umbrella agreements include:
- Retail and manufacturing
- Mining (for repeatable supply of goods or services)
- Fast-moving consumer goods
- Service industries
- Outsourcing and strategic alliances
- Project-based sectors (covering multiple projects or service engagements)
However, umbrella agreements are most useful where the supply of goods or services is repeatable, allowing the parties to minimize the need for renegotiation with each order. They are less effective if used for vastly different types of goods or services not contemplated at the time of drafting, as this can introduce significant risks and reduce the clarity & enforceability of the agreement.
Oil & Gas Sector Utilization
Umbrella contracts are widely used in the oil and gas industry to manage complex, long-term, and multi-phase projects. These agreements establish a framework of general terms and conditions under which specific work orders or projects are later executed. This approach brings flexibility, efficiency, and consistency to contracting relationships in a sector characterized by large-scale, ongoing operations.
Pan-Malaysia Upstream Maintenance Umbrella Contracts
In late 2024 and early 2025, Pan-Malaysia umbrella contracts for upstream maintenance were awarded after years of short-term extensions. These multi-year contracts provide a more predictable outlook for contractors. The umbrella contract is valued at up to RM10 billion over 10 years, with the possibility of exceeding this if packages from Shell are included. Key beneficiaries include DAYANG, which secured two packages from Petronas worth RM3 billion over five years, and an additional package from Shell, potentially valued at RM1 billion over five years. Other notable recipients are T7 and Sapura Energy.
link: https://theedgemalaysia.com/node/734711
Petronas Engineering, Procurement, and Construction (EPC) and Support Services
Petronas has awarded new Pan-Malaysia contracts for providing transportation and installation (T&I) of offshore facilities and major and minor engineering services, construction, and modification works. These contracts span from 2024 to 2026, covering both onshore and offshore projects.
Additional umbrella contracts were issued for logistics, warehousing, chemical supply, and precious metal recovery services for various upstream and downstream operations.
link: https://www.petronas.com/activity-outlook-2024-2026/
India: Oil & Gas Block Awards under OALP and DSF Rounds
In April 2025, India’s Ministry of Petroleum and Natural Gas signed contracts for 28 blocks under the Open Acreage Licensing Policy (OALP) Bid Round-IX and two blocks under the Discovered Small Field (DSF) Round 2024. While these are not strictly umbrella service contracts, they represent significant multi-block, multi-year agreements for exploration and production, with incentives for early monetization and bundled discoveries.
link: https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2121952
Benefits to Oil & Gas Sector
Streamlined Procurement:
By setting out the main commercial and legal terms in advance, companies can issue work orders or call-offs for individual projects or services without lengthy renegotiations.
Competitive Bidding Within a Framework:
For major service contracts, the umbrella agreement often pre-qualifies multiple contractors. Each time a new scope of work arises, these contractors compete in a closed bidding process, ensuring ongoing value and quality.
Support for Local Industry:
Companies like PETRONAS use umbrella contracts to provide ongoing business opportunities to local service providers, supporting the growth of domestic oil and gas capabilities.
Alignment Across the Value Chain:
In large integrated projects, umbrella agreements help align the interests of governments, national oil companies, and private sector partners, reducing risk and improving project coordination.
Differences Between Contract Types
Umbrella Contracts:
These are framework or “call-off” agreements that set out general terms and conditions for a range of future projects or services. Once the umbrella contract is in place, specific work or service orders (call-offs) can be issued as needed, often through mini-competitions among pre-approved contractors. There is no guarantee of a minimum volume of work, and clients can engage multiple contractors under similar umbrella agreements.
Traditional Contracts:
These are typically project-specific, negotiated for a defined scope, price, and timeline. Each new project or service requires a separate contract negotiation, which can be time-consuming and less flexible.
Key Contracts Awarded in India
From 2024 to 2025, India’s oil and gas sector has seen the awarding of significant umbrella contracts primarily through large-scale licensing rounds (OALP, DSF), major long-term supply agreements (crude and LNG), and technical service partnerships. These contracts collectively aim to boost domestic exploration, secure energy imports, and foster technological advancement and sustainability in the sector.
