throughput contract

Type of take-or-pay contract used mainly in oil and gas industry, often as an indirect guaranty for project financing. In this arrangement, a party (usually a group of producers) undertakes to pass (put through) an agreed minimum amount of material (such crude or refined oil or gas) through a processing plant (called a processing agreement) or a pipeline (called a pipeline agreement) during a fixed period (month, quarter, year). Also called throughput agreement. See also tolling contract.