Member Article

Introduction:

The new reality

As a result of the sudden and dramatic fall in the oil price that had occurred between June 2014, when oil had been trading at prices of around US$115 per barrel of Brent crude, to January 2015 by which time it had fallen to around US$35 per barrel, I was prompted to prepare a “Guide for Contractors”. Parties in the offshore oil and gas sector, and in particular contractors in the industry, were facing turbulent and unpredictable times. Survival was the name of the game for many participants and the Guide was prepared to provide contractors with some insights concerning the typical issues that arise under English law in certain commercial scenarios that would have been common in the circumstances and to provide suggestions for best navigating a way through those scenarios and the associated legal issues.

In the intervening period, the market never returned to the heights of 2015, but as a result of the economies and efficiencies developed in respect of the exploration and production process during the period that had followed the collapse in the oil price, combined with increases in the price of oil to highs of around US$86 per barrel in October 2018, a very large number of participants in the market had managed to sustain themselves and their business operations.

However, in what is turning out to be an unprecedented period of time for the world and the global economy, in only the last month or so again we have had a dramatic and sustained fall in the price of oil to a current price at the time of writing of US$25 per barrel, with the immense and unprecedented issues facing the world and our global economy as a result of the COVID-19 pandemic layering further huge difficulties on top of those already facing offshore oil and gas contractors.

In the circumstances, it seems an opportune time to return to and revise the previous Guide so as to again provide some high-level guidance concerning commercial scenarios that parties may increasingly be facing in the present circumstances and the approach of English law to these issues.

I do of course recognise that the present circumstances are, it is fair to say, beyond the realms of what was comprehensible and foreseeable only several weeks or so ago. As such, I certainly do not claim that this revised Guide will provide the reader with all of the answers to the no-doubt extremely difficult and unusual scenarios that will be playing out in the industry. However, I hope that this Guide will provide at least some assistance towards steering the best course through these issues by providing a high level understanding of what the issues under English law may be, and how our law might determine them.

To read the guide, please click here.