In the spring of 2021, Burford Director Jeffery Commission and Vice President Reda Hicks asked a group of trial attorneys, arbitration leads and dispute resolution specialists in the energy sector about major risks and opportunities in the oil and gas industry following the pandemic. Their insights are gathered and excerpted below.
A year after Covid, what are the major areas of concern and opportunity in the oil and gas sector?
Mark Baker: While everyone says that “volatility is the new normal,” in the oil and gas sector volatility has always been the norm. Covid-19 created larger waves in most economies, with the oil and gas sector hit hard by a seemingly perfect storm: The pandemic, a downturn in demand, steep declines in oil prices followed by sharp rebounds, political instability, trade wars and sanctions. Major areas of opportunity and risk post-pandemic are a dichotomy between those who recognize that the world will need oil and gas to fuel its growth and the increased pressures to move quickly toward the energy transition. Related to that is the increased focus on ESG and Business & Human Rights issues along the energy value chain. Also important are the risks associated with political instability and change including to investment regimes and domestic energy policies.
Joe Buoni: Just five or ten years ago, many clients in Houston would recoil if you started talking about renewable or alternative sources of energy. Now, clean energy is an area of growth for traditional oil and gas firms—especially the larger ones. Just recently, we saw a multinational oil company propose a $100 billion investment for a facility that would capture carbon emissions on the Gulf Coast. While this is a response to the concern of climate change, it’s an area of opportunity to generate revenue and capture public attention. Another opportunity is in the consolidation of the traditional oil and gas industry. Last year, Chevron made a large acquisition, as did Southwestern Energy and Devon Energy. There was a recent wave of bankruptcies at the onset of the pandemic in March 2020. Usually, banks and lenders are reluctant to take over the assets of their companies in the face of a downturn. What was unusual was that many lenders were willing to take on assets of oil and gas companies this time around and—since it paid dividends—were getting more than their loans back.
Michelle Gray: One major area of concern in energy litigation is the uncertainty surrounding many of the lawsuits already on file. More than a year into the pandemic, there is still relatively little precedent from courts on some of the core legal questions posed by the pandemic-driven litigation. While most judges have tried to keep their dockets moving through virtual hearings, the vast majority of courts have not been holding trials and, as a result, it is difficult to predict how courts are going to decide many of these core issues that are percolating in pandemic-driven litigation. The lack of case law is also affecting arbitrations; without clear precedent to follow, arbitrators are often inconsistent in their analyses. However, with the US seeing reduced numbers of Covid-19 infections, there are opportunities for resolution of pandemic-driven lawsuits outside the courthouse (or an arbitrator’s conference room). To the extent possible, now is a good time to reassess ongoing litigation and see if a business solution makes sense. Rather than spending money on litigation, it might make sense to renegotiate deals or try and work out settlements—especially if your disputes are pending in a court backlogged due to the pandemic.
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About the participants
Mark Baker is a Global Co-Head of International Arbitration at Norton Rose Fulbright and a member of the Firm’s Global Supervisory Board. He practices in the areas of complex commercial arbitration, investment arbitration, business litigation and alternative dispute resolution.
James Brown is a partner in the dispute resolution team in the London office of Haynes and Boone. He has more than 19 years of experience as a disputes lawyer, with a primary focus on litigating and arbitrating complex, high-value engineering and construction disputes for international clients operating in the shipping and offshore oil and gas sectors.
Joe Buoni is a litigation and bankruptcy partner in Hunton Andrews Kurth’s Houston office. He represents clients across many industries, but his practice focuses on the representation of energy companies, financial institutions and private equity funds, including their portfolio companies.
Michelle Gray is a trial attorney and founding partner at Fogler, Brar, O’Neil and Gray. She has consistently been named a Texas Rising Star since 2016, and in 2021, Super Lawyers named her to both the Texas “Up and Coming 100” list and the “Up and Coming 50 Women” list. Michelle is on the Board of Child Advocates, a non-profit organization that mobilizes court-appointed volunteers to represent the needs of abused and neglected children.