INTERNATIONAL ARBITRATION 1/3LY
GLOBAL OIL PRI CE VOL AT IL I T Y REPORT: RI SKS AND OPPORTUNI T IES 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.
P R I C E V S P R ODU C T I ON 92% have seen themajority, 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
C ONF I DENC E V S C A U T I ON 81% describe their outlook as concerned but 19% are optimistic about the future; of this, 50% of optimistic respondents were fromNOCs
I NF L UENC E OF OP E C R EM A I N S A S I GN I F I C A N T F OR C E I N T HE M A RK E T OPEC policy and the slowing of the Chinese economy are themost significant geopolitical factors affecting businesses (according to 74% and 50% of respondents), followed by the impact of sanctions in locations such as Iran (41%)
KE Y F INDINGS
C URR EN T A ND F U T UR E P R O J E C T S ON T HE L I NE – Reduced profitability/viability of E&P activities, together with lack of appetite for investment in newprojects are the twin leading trends expected to affect oil &gas businesses in the coming year, by somemargin (with 64% and 59% of respondents flagging these up as critical) – However, themyriad 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
R E S P OND I NG T O T HE NE W R E A L I T I E S – 78% say they are reacting cautiously or reactively to market conditions whilst 22% are taking an aggressive or opportunistic approach – Restructuring 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 fromNOCs who listed the development of their downstreamcapabilities as their main focus
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