Conclusion

As the energy trilemma imposes a tightened grip on the industry, NGO challenges to government consents for the development of new projects remain a key issue which threatens to trigger disputes.

In that pressurised environment, there is certainly increasing potential for misalignment between joint venture partners as investment priorities are impacted by each company’s approach to the trilemma. Meanwhile those pressures also bring an increased prospect of supply chain and projects cost overrun, with further delays anticipated due to a significant number of both conventional and renewable energy projects making their way to market at the same time.

Our survey shows that while joint ventures, supply chain issues, and projects remain perceived as the highest risk activities in the sector for disputes, there is also significant variance between the core threats across different global regions.

Developing a deeper understanding of these risks and how they specifically relate to differing global markets of the oil and gas industry will be essential in circumventing many of these challenges. It is therefore encouraging to see that in house counsel continue to recognise that early planning and intervention, along with best practice project management, can significantly reduce the prospects of disputes arising and enhance the chances of success if they do arise. Being proactive on these fronts will always produce better outcomes compared with taking a reactive approach.

Effective engagement with governments and regulators is also essential in understanding their perspective on the energy trilemma and ensuring that companies’ actions will be acceptable under the regulatory regime.

Additionally, seeking early engagement and alignment in joint ventures will be important in resolving disputes. This may include a need for realistic and detailed conversations on planning and costs, and potentially discussions on whether a divestment is needed by joint venture partners that do not wish to develop assets due to differing investment metrics.

On projects and supply chain, systematic and detailed front-end engineering and planning remains vital in avoiding cost overruns and delays.

Legal teams, however, continue to play a significant part in minimising risk and managing disputes. Implementing remedies for cost overrun, scope creep and delay, including contractors’ commitment to meet their obligations or incur the financial penalty for failing to do so, proper management of joint ventures and projects, as well as deep understanding of regulatory requirements are all important aspects of this.

CMS is delighted to provide its extensive global experience and knowledge to continue supporting our clients in managing oil and gas industry disputes.