Minimum Volume Commitment (MVC): Midstream Contract Volume Floors

A minimum volume commitment (MVC) is a contractual obligation requiring a customer to ship, gather, process, fractionate, or otherwise support at least a stated volume of product over a defined period.

A simplified contract test is:

1Volume Deficiency
2= Contracted Minimum Volume
3- Eligible Actual Volume

If the result is positive, the contract may require a shortfall or deficiency payment, subject to its specific terms.

An MVC is a contract floor, not actual throughput

A customer can satisfy an MVC by physically moving the required volume. If actual volume falls short, some contracts require the customer to pay for all or part of the deficiency.

That means an MVC is different from Pipeline Throughput, Natural Gas Gathering Volume, or Natural Gas Processing Volume.

Those metrics measure physical activity. An MVC measures a contractual obligation.

MVC economics depend on the remedy for a shortfall

The phrase "minimum volume commitment" does not by itself tell you exactly what happens when volume is below the minimum.

Possible structures include:

• immediate deficiency payments;
• make-up rights allowing later excess volume to earn credits;
• reduced commitments when capacity is unavailable;
• annual rather than monthly testing;
• separate commitments for different assets or services; and
• expiration of unused make-up credits.

MPLX has disclosed agreements where a shipper that misses a minimum throughput requirement makes a deficiency payment and can, under specified conditions, apply that payment as a credit against later excess volumes.

MVC is not automatically the same as take-or-pay

A Take-or-Pay Contract generally requires payment for a reserved service or quantity whether or not the customer fully uses it.

MVC arrangements can have take-or-pay-like economics, but the terms should not be collapsed automatically. An MVC defines the minimum volume or payment obligation; "take-or-pay" describes a broader contractual payment structure that can apply to transportation, processing, storage, or other services.

The actual remedy, make-up rights, timing, and revenue recognition depend on the contract.

MVCs can stabilize revenue without eliminating credit risk

An MVC can reduce exposure to short-term physical-volume weakness because the customer may still owe money when throughput falls below the contractual floor.

But an MVC does not eliminate:

• customer default risk;
• bankruptcy or restructuring risk;
• contract expiration;
• renegotiation risk;
• force-majeure provisions;
• capacity-performance obligations;
• commodity-basin decline after the contract term; or
• concentration in a small number of customers.

An MVC is therefore a revenue-protection mechanism, not a guarantee of cash collection.

Contracted minimum is not system capacity

A pipeline can have capacity of 1 million barrels per day while customers collectively commit to only 700,000 barrels per day. Or contracted commitments can exceed a particular asset's currently usable capacity when commitments apply across systems, periods, or service classes.

Keep these concepts separate:

1Physical capacity ≠ Contracted minimum ≠ Actual throughput

A simple example

Suppose a customer commits to ship 100,000 barrels per day during a 30-day month but actually ships 80,000 barrels per day.

1100,000 committed bbl/d
2- 80,000 actual bbl/d
3= 20,000 bbl/d deficiency
4
520,000 × 30 days
6= 600,000 barrels of deficient volume

If the contract requires a $1.00-per-barrel shortfall payment, the nominal deficiency payment would be $600,000 before considering make-up rights or other contract provisions.

Revenue recognition can differ from cash billing

A deficiency payment may not always become revenue immediately. If the customer can use the payment as a credit against future excess throughput, the midstream operator may defer revenue until the credit is used, expires, or becomes unusable under the applicable accounting rules and contract terms.

This makes the cash-flow and accounting timing important.

Filing examples

MPLX's 2025 Form 10-K describes long-term fee-based agreements with minimum volume commitments and separately discusses third-party minimum volume, throughput, or payment commitments. Summit Midstream states that customers below certain MVCs owe shortfall payments designed to provide a minimum contractual revenue stream. ONEOK describes minimum dollar or volume commitments within take-or-pay arrangements.

Sources:

• MPLX 2025 Form 10-K
• Summit Midstream 2025 Form 10-K
• ONEOK 2025 Form 10-K

Bottom line

A minimum volume commitment is a contractual volume or payment floor, not actual throughput, capacity, or guaranteed cash. Preserve the testing period, eligible volume, fee, shortfall remedy, make-up rights, capacity relief, credit quality, and revenue-recognition terms before comparing MVC protection across midstream companies.

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