We are de­lighted to present this year’s CMS Oil and Gas Dis­putes Sur­vey. Once again, we have reached out to a wide cross sec­tion of seni­or leg­al man­agers and seni­or in-house coun­sel rep­res­ent­ing key play­ers to get their views on the main drivers of dis­putes and dis­pute man­age­ment with­in the glob­al oil and gas in­dustry. As part of our in-depth sur­vey, we have also fo­cused on what leg­al ex­perts are do­ing to man­age the risk of con­flicts arising with­in their op­er­a­tions and to mit­ig­ate the pro­spect of dis­putes. The sur­vey rep­res­ents the views of over 50 in­dustry pro­fes­sion­als cov­er­ing all corners of the globe: Europe, the Middle East, Asia-Pa­cific, Africa, Lat­in Amer­ica, and North Amer­ica. We are grate­ful for their valu­able in­sights in­to how and where dis­putes arise and how they are man­aged in dif­fer­ent mar­kets across the in­dustry. Giv­en the mul­tiple in­ter­na­tion­al re­gions covered by our re­port, with their dif­fer­ent re­gimes and dif­fer­ing pri­or­it­ies and is­sues, it’s not sur­pris­ing to see a broad range of views be­ing con­veyed by the sur­vey par­ti­cipants. There are how­ever some com­mon areas of con­cern that re­spond­ents in all re­gions have high­lighted in terms of the im­pact they have on trig­ger­ing in­dustry dis­putes. These in­clude the po­ten­tial for sup­ply chain is­sues to lead to a dis­pute, a con­cern which will only have been heightened by Rus­sia’s in­va­sion of Ukraine.

Leg­al Is­sues to Con­sider and Man­age in 2022/2023 2022 was a chal­len­ging year for many busi­nesses, in­clud­ing for those in the en­ergy sec­tor. 2023 looks to be just as de­mand­ing. Slow glob­al growth, the war in Ukraine, con­tinu­ing sup­ply chain chal­lenges as well as the after-ef­fects of the COV­ID-19 pan­dem­ic are some of the factors caus­ing dis­rup­tion to busi­ness.Here, we high­light some of the leg­al is­sues that a party do­ing busi­ness in the en­ergy sec­tor in a volat­ile mar­ket could ex­pect to en­counter, and how the risks may be man­aged. Sup­ply chain risk Cur­rent sup­ply chain short­ages and re­stric­tions, ex­acer­bated by la­bour and ma­ter­i­als cost in­fla­tion which con­tin­ue from the Cov­id-19 pan­dem­ic.Man­age risks by:Act­ively re­view­ing ro­bust­ness of sup­ply chain in a crisis (at all tiers). Ef­fect­ive force ma­jeure draft­ing and plan­ning.En­sur­ing there is suf­fi­cient se­cur­ity for de­liv­ery ob­lig­a­tions and car­ry­ing out reg­u­lar cred­it checks on sup­pli­ers.  Ter­min­a­tion risk Volat­ile mar­kets tend to res­ult in ad­di­tion­al ter­min­a­tion risks:Man­age risks by:Re­view port­fo­lio of key con­tracts for con­tracts at risk. Act­ively en­gage with coun­ter­parties to mit­ig­ate risk of ter­min­a­tion for es­sen­tial con­tracts.Util­ise ter­min­a­tion rights to es­cape oner­ous con­tracts. Coun­ter­party risk In­creased coun­ter­party in­solv­ency risk caused by mar­ket volat­il­ity.Man­age risks by:Con­duct­ing ef­fect­ive due di­li­gence.Car­ry­ing out de­tailed as­sess­ments on cred­it­wor­thi­ness.En­sur­ing fin­an­cial se­cur­ity in the event of in­solv­ency (on-de­mand bonds, let­ters of cred­it etc.). Gov­ern­ment in­ter­ven­tion The in­creas­ing ex­port or im­port-re­lated re­stric­tions im­posed by Gov­ern­ments.Man­age risks by:Con­sid­er­ing ful­fil­ment of con­trac­tu­al ob­lig­a­tions.Re­view­ing con­trac­tu­al rights and abil­ity to use al­tern­at­ive sources of sup­ply.Care­ful con­sid­er­a­tion of trade port­fo­lio. EPC ‘Hot mar­ket’ A per­fect storm of un­der sup­ply, over de­mand, in­fla­tion pres­sures, and leg­acy of the Cov­id-19 pan­dem­ic for the en­gin­eer­ing pro­cure­ment and con­struc­tion mar­ket will re­quire ef­fect­ive man­age­ment of:Prop­er as­sess­ment of abil­ity to de­liv­er at tender stage.Con­trac­tu­al dam­ages and in­cent­ives for ‘on time’ de­liv­ery.Man­aging pro­ject change. Sanc­tions Sweep­ing fin­an­cial glob­al sanc­tions as a res­ult of Rus­sia’s War on Ukraine may im­pact your busi­ness.Man­age risks by:Re­view­ing nex­uses to Rus­sia.Identi­fy­ing sanc­tions which ap­ply.Man­aging any busi­ness from a repu­ta­tion­al and ESG-based per­spect­ive, and con­sider al­tern­at­ive op­tions. Price volat­il­ity LNG spot price is at an all-time high, with po­ten­tial volat­il­ity in all com­mod­ity mar­kets.Man­age risks by:Care­ful con­sid­er­a­tion of counter-party non-de­liv­ery, force ma­jeure/ter­min­a­tion.Pre­par­ing for cir­cum­stances of an in­ab­il­ity to de­liv­er / ac­cept de­liv­ery and wheth­er any force ma­jeure clause ex­cuses per­form­ance.Check price re­view / re­open­er clauses in long-term agree­ments.Care­ful con­sid­er­a­tion of any im­pact on cost base and mar­gin calls. ESG trans­form­a­tion The drive to­wards net zero and ESG ex­pect­a­tions.Man­age risks by:Re­view­ing con­trac­tu­al ar­range­ments for car­bon neut­ral trad­ing and con­tract­ing.Con­sid­er­ing wheth­er counter-party net zero and / or ESG com­mit­ments have ad­equate rem­ed­ies in the event of breach.Man­aging reg­u­lat­ory changes and com­pany policies.

Wel­come to the ICE Dis­putes pod­cast series, 'Build­ing Voices'. The CMS ICE Dis­putes team has launched a new pod­cast series, Build­ing Voices.Build­ing Voices is a new pod­cast series that fo­cuses on the...

1. Do the words “con­sequen­tial loss” have a giv­en mean­ing in law? Yes. Aus­trali­an law fol­lows the ap­proach taken by the Eng­lish courts to the as­sess­ment of dam­ages set out in the case of Had­ley...

Wel­come to the CMS Oil and Gas 2020 An­nu­al Re­view pod­cast and video series. In this series we dis­cuss the latest de­vel­op­ments in Eng­lish Oil and Gas law and what it means for the in­dustry. Top­ics in­clude:Joint...