Oil and gas industry legal eagles are bracing themselves for a “significant threat” to business as pressure over climate change heats up.
Net-zero actions by shareholders, investors or activists present a “real risk”, a survey of senior legal managers in the sector has revealed.
The Oil and Gas Disputes Survey, conducted by law firm CMS, identified these and other forms of climate change activism as the biggest issue of concern, with 37% of respondents saying they represented a “significant threat”.
Protestor disruption to offshore and onshore sites was listed as the second most pressing area of concern, with 26% of respondents saying it was a real risk for their company or group.
The survey was based on more than 50 responses from senior legal managers and senior in-house counsel in the oil and gas industry across Europe, the Middle East, Asia Pacific, Africa and Latin America.
Nearly two-fifths (37%) of all respondents and 50% of those operating in the region identified the UK North Sea as the area with the greatest risk of disputes arising.
Africa was second, with 28% suggesting it presented a significant legal risk to oil and gas companies – with the figure rising to 60% among those with operations on the continent.
Latin America was also on the list, with 17% of total respondents and 40% of those who operate in the region saying it presented the greatest risk for disputes.
Projects, joint ventures and dealings with host nations were seen as the main source of oil and gas legal disputes.
The survey also suggested more could be done to prevent disputes, highlighting areas where they could be mitigated. These included better managing change in projects; better understanding of local market/region-specific factors prior to project execution; and better record-keeping.
Valerie Allan, an Aberdeen-based partner and energy legal specialist at CMS, said: “The CMS Oil and Gas Disputes Survey provides us with interesting insights into how industry disputes are arising and being managed around the globe.
“This is an evolving situation, with the onset of environmental and climate change concerns. Currently, the industry is defending an ever-growing list of climate change cases as activists begin to be more assertive, often through judicial review challenges.
“In 2020 several judicial reviews were brought by environmental campaigners seeking to limit or prevent oil and gas exploration activity.”
Phillip Ashley, a London-based partner on CMS’s energy team, said: “Just as the industry is evolving and shifting according to economic, geopolitical and social changes, so too are the means of addressing risks and minimising the chances of disagreements.
“With more than 90% of our survey respondents indicating there is room for improvement in managing dispute-related risks, external lawyers have a key role to play in supporting the sector as it faces new challenges going forward.”
Oil majors have come under growing pressure from activist shareholders in recent years, while climate change campaigners have disrupted operations offshore in protest over the industry’s fossil fuel activities.
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