DISPUTES IN THE ENERGY SECTOR
CD: Have you seen an increase in disputes involving energy and natural resources companies over the last 12-18 months? What broad trends are evident?
Droog: Generally, we have not seen an overall increase. There continues to be an increase generally in the volume of disputes related to environmental issues and incidents. But commercial litigation and arbitration does not seem to be increasing or decreasing. The amount of capital projects, acquisitions and divestments and other transactions continues to increase. This has driven some increase in disputes but nothing that could be considered a trend and, in fact, it appears as though the recent round of transactional activity is less prone to create disputes than prior rounds. It may be too early to tell.
Venegas: We have seen an increase in two types of disputes in the Mexican market. The first wave refers to disputes regarding the adjustment of costs in favour of the contractor, arising because of causes attributable to the owner of the project – which in Mexico is always the Federal Commission of Electricity (CFE) or PEMEX. The second wave refers to problems in achieving the goals set for the production of electricity in some plants. These problems have a multiple sources. Defective planning, unexpected delays and some defective materials have all joined to produce disputes in these projects. Most of these disputes have been settled, however others may be subject to arbitration, which is likely to take one or two years to be resolved.
Emmert: Many of the US unconventional oil and gas resources currently being developed face substantial challenges since they are located in new and different geographic regions than conventional oil and gas production. These regions have insufficient infrastructure and lack experience in operating, regulating, and litigating oil, gas and energy business issues. Since 2009, we have reported quarterly trends in unconventional oil and gas disputes. In calendar 2012, the number of federal and state cases peaked based on a surge of filings in the second half of 2012. However, the number of unconventional oil and gas cases filed in state and federal courts in 2013 decreased by 23 percent and 29 percent respectively, from 2012. Land and lease rights disputes were the most common type of unconventional litigations filed in 2013, accounting for 30 percent, followed by other breach of contract at 25 percent and royalty disputes at 25 percent. By state, Texas had the largest number of cases filed in 2012 and 2013, with 42 percent in 2013.
Oct-Dec 2014 issue
Chevron
Navigant Consulting
Petrobras America Inc.
Von Wobeser y Sierra