Oil and gas projects—contracts and disputes
Produced in partnership with John Gilbert of K&L Gates LLP
Oil and gas projects—contracts and disputes

The following Arbitration guidance note Produced in partnership with John Gilbert of K&L Gates LLP provides comprehensive and up to date legal information covering:

  • Oil and gas projects—contracts and disputes
  • Structure of projects
  • Contracts and disputes
  • Challenging issues
  • Concluding remarks

Upstream oil and gas projects based on a licence to explore, develop and/or produce hydrocarbons tend to be formed through a number of contracts, many of which contain arbitration agreements. The projects involve large investments being made and lead to projects (and so contracts) with long lives in which states and businesses have significant interests. Consequently, when disputes happen—like the investments to which they relate—they often concern large sums and are conducted under pressure to avoid any disruption to production.

This Practice Note describes a typical structure for such a project, identifies the key contracts and the dispute resolution provisions that they normally contain and the types of disputes which can arise. It also briefly discusses some of the challenging issues that may be faced in resolving such disputes.

This Practice Note should be read in conjunction with Practice Note: Arbitration in the energy sector.

Structure of projects

The diagram below provides an illustration of how upstream projects are often structured. The items in rectangular boxes refer to contracts and the items in ellipses are participants in the projects. The diagram has been simplified but it identifies the key contracts and how they fit together.

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As the state normally controls the exploitation of hydrocarbons in the areas over which it has sovereign rights, at the heart of any project is the licence