INTERNATIONAL ARBITRATION 1/3LY
GLOBAL OIL PRICE VOLATILITY REPORT: RISKS AND OPPORTUNITIES IN 2016
In April 2016, the results of Clyde & Co’s independent global survey of the oil & gas industry were published in the Global Oil Price Volatility Report. The report assesses the current landscape of the oil & gas sector, following prolonged downwards pressure on prices, and highlights global trends, challenges and concerns of senior oil & gas executives. Drawing on the issues reported by respondents, partners from Clyde & Co’s Oil & Gas Group outlined proactive legal tips for businesses and identified the positive business opportunities within the current market conditions. The following is a summary of the salient findings published in the report and top tips for dealing with disputes in the sector.
PRICE VS PRODUCTION 92% have seen the majority, or all, of their business affected by the collapse in oil prices. Despite this, half (49%) expect global oil production to remain steady, with just over a quarter (28%) expecting it to increase
CONFIDENCE VS CAUTION 81% describe their outlook as concerned but 19% are optimistic about the future; of this, 50% of optimistic respondents were from NOCs
INFLUENCE OF OPEC REMAINS A SIGNIFICANT FORCE IN THE MARKET OPEC policy and the slowing of the Chinese economy are the most significant geopolitical factors affecting businesses (according to 74% and 50% of respondents), followed by the impact of sanctions in locations such as Iran (41%)
KEY FINDINGS
CURRENT AND FUTURE PROJECTS ON THE LINE – R educed profitability/viability of E&P activities, together with lack of appetite for investment in new projects are the twin leading trends expected to affect oil & gas businesses in the coming year, by some margin (with 64% and 59% of respondents flagging these up as critical) – However, the myriad of factors that respondents also said are coming into play highlights the scale of the challenges faced by the industry – from the cost of transportation and storage to increasing regulation and compliance requirements
RESPONDING TO THE NEW REALITIES – 78% say they are reacting cautiously or reactively to market conditions whilst 22% are taking an aggressive or opportunistic approach – R estructuring entire businesses or asset portfolios is the top priority – 32% identified this as their number one strategy going forward – Almost half (41%) of IOCs outlined restructuring as a key priority in light of current market conditions, in comparison to 25% of those from NOCs who listed the development of their downstream capabilities as their main focus
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