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Live from Sea Asia

Legal maelstrom brewing in offshore sector

Legal maelstrom brewing in offshore sector
There is a gathering storm ahead in the offshore sector and we will start to see the full effects only in the latter half of this year and the beginning of next year, said WIkborg Rein partner Steffen Pedersen.

Speaking at the Sea Asia 2015 forum on the state of the offshore market, Pedersen added that while the dispute side has been relatively quiet for now, defaults and contract disputes and renegotiations, especially from China are imminent.

“We view this very much right now as the lull before the storm,” said Pedersen.

One of the biggest effects of this will be a rise in the number of high-value disputes. “They will be fierce and will be like the disputes we saw in the shipping industry coming out just after the crash in 2008,” said Pedersen.

He revealed that Wikborg Rein has already started handling one dispute in Brazil and the firm sees this as just the beginning of what is going to be a “very difficult time”.

Companies will start to focus more on contractual performance and how they can get out of unprofitable contracts in the same way as they did in 2008 with the shipping market and counterparties will be “nitpicking” through contracts and not very tolerant of any overruns or failure to perform, he advised.

Giving an indication of how bad the situation could be, Pedersen said he is still seeing disputes from 2008 with contract values of $80m to $100m for bulk carrier newbuildings. Meanwhile, the disputes that will be seen in the oil and gas industry will be huge in comparison, running into the hundreds of millions of dollars.

“So I think we’re in for a long period of a lot of litigation and disputes work and people will be focusing on this and not necessarily looking to increase production or do more exploration,” Pedersen warned.