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What a difference a year makes.
When the second edition of The Oil and Gas Law Review went to press last year, oil prices were nearly $100 per barrel, service contractors’ order books were full, and the North American shale boom was in full swing. Fast forward twelve months, and the oil and gas world is vastly different. Oil companies are slashing capital expenditures and cancelling projects, contractors are laying down rigs and laying off staff, production from North American unconventional fields has dropped, and producing countries are struggling to plug budget deficits caused by the sharp decline in petroleum revenues.
A war of attrition has set in. The wealthy Gulf oil producers, led by Saudi Arabia, seem determined to defend their markets against upstart North American producers. While the Saudis, Kuwaitis, Emiratis and Qataris have the resource base and financial reserves to sustain a prolonged price war, other less-wealthy producing countries such as Iraq, Algeria and Venezuela are under severe pressure.
While previous editions of The Oil and Gas Law Review highlighted new jurisdictions opening up for investment and efforts by producing countries to tighten fiscal terms to capture a greater portion of the benefit from high prices, I suspect that legal developments in the oil and gas sector over the next few years will reflect a different reality as producers struggle to cope with lower prices and a reluctance by IOCs to commit to substantial investment projects. After having come to expect that high prices were here to stay, producing jurisdictions may be forced to up their games and compete for a much more limited pool of investment capital, and frontier jurisdictions such as Mozambique and Tanzania which just a year ago seemed on the brink of transformational development due to recent major offshore gas finds may be forced to defer their dreams of petroleum-fuelled prosperity.