A survey of senior oil and gas sector legal managers has revealed a substantial number believe net zero actions, by shareholders, investors or activists, present a real risk to their business.
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 per cent of respondents saying they represented a significant threat.
Protestor disruption to offshore and onshore worksites was listed as the second most pressing area of concern with 26 per cent of respondents saying it was a real risk for their company or company 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.
37 per cent of all respondents, and 50 per cent of those operating there, identified the UK Continental Shelf as the global region with the greatest risk of disputes arising. Africa was second with 28 per cent of respondents suggesting it presented a significant legal risk to oil and gas companies with the figure rising to 60 per cent amongst those with operations on the continent. Latin America was also on the list with 17 per cent of total respondents and 40 per cent of those who operate in the region saying it presented the greatest risk for disputes.
Projects, joint ventures and dealings with host nation states were seen as the main factors behind oil and gas legal disputes. The survey also indicated that more could be done to prevent them, highlighting a number of areas where disputes could be mitigated. These include 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 per cent 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.”