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On the surface this is not a good time to be working in the upstream oil and gas industry. The oil price is the lowest it has been in real terms for 25 years at $10 a barrel, supply and demand is completely out of kilter and the share prices for many of the major operators are in a trough.As a result, many companies are looking for ways to deliver shareholder value, which means, in many cases, mergers, cost-cutting and job losses. The last six months alone have seen the creation of BP Amoco, the product of the world’s largest industrial merger, and proposed tie-ups of Exxon and Mobil and Enterprise and Lasmo.In-house legal departments are not immune to the job losses. Indeed BP Amoco has revealed that it expects to make more than 30 lawyers in its 160 lawyer-strong worldwide team redundant following the merger – and this was even before last week’s announcement by the oil giant of more job losses.The difficult economic conditions mean that capital intensive projects such as new pipeline developments are failing to get off the ground.“Things are now being tested against a $10 oil price. There are projects which, when modelled against a $14 oil price, would be worth doing but at $10 are a non-starter,” says the head of legal at one oil giant.Dig a bit deeper, though, and it is not all doom and gloom for lawyers in the world of oil and gas exploration and production.“It is not the best of times,” admits Stephen Huddle, head of legal at British-Borneo, “but there are considerable opportunities. The oil and gas industry is a cyclical business. But history shows that the ‘downs’ do not last for ever. It is a very exciting business, but you do need strong nerves at the moment.”In-house lawyers point out that the easing off of the number of development projects getting the go-ahead will in itself help solve the current oversupply problem.And they say the biggest projects are simply too large and have already had too much money invested in them to be cancelled. Although new project work is thin on the ground, companies are actively managing their portfolio of assets. This means that in-house lawyers are being kept busy with a steady stream of acquisitions and disposals of their companies’ interests in different oil fields. The vast majority of this work is done in-house.In-house lawyers are also taking a very active role in the risk assessment exercises many of the companies are holding, following the fall in the oil price. “We are looking at the contracts and our risk exposure,” comments one senior legal adviser. “We are looking at how we could negotiate our way out of difficult or uneconomic positions and what would happen if we terminated agreements.”And despite the poor business climate, oil and gas lawyers say the co-operative spirit that courses through the industry and the lawyers that work in it is still intact.“One thing that strikes you about the industry is that it is very relationship-driven”, says Alan O’Brien, senior legal adviser at Lasmo. “With most projects you are in a consortium of companies and a typical working day is spent dealing with many companies.”“The other thing is that there is often a very long time-scale,” O’Brien adds. “After forming a joint venture, you are living with it for many years. The relationships with individual parties and with governments are long-term.”This is underpinned by the fact that the sheer scale of many of the projects means that the costs and risks often need to be shared across a range of companies. With the success rate for new wells still as low as between three and four in every 10, companies look to take a 25% interest in, say, four wells rather than a 100% interest in one.Because of this, dealings tend to be conducted in a climate of co-operation rather than hostility, despite the fact that the industry is highly competitive.“If you do not act co-operatively, they will get you back one day,” says the head of legal at one of the major companies.This spirit that imbues the relationship between in-house lawyers is, to many of them, one of the great attractions of the industry. If there are particular problems with one project, they are likely to call up one of their peers for advice on how to circumvent them.Apart from being a team player, a good oil and gas lawyer also has to have a very hands-on, practical approach to the job.Oil and gas corporate counsel spend much of their working lives jetting backwards and forwards across the globe, although they say that the apparent glamour of long-distance travel soon wears off.As well as being prepared to work at the coal face, oil and gas lawyers also need strong contractual skills. The legal documentation that is needed to underpin joint operating agreements can run to well over 100 pages. The need for so many joint initiatives also means that, relative to other industries, oil and gas companies are less inclined to resort to litigation.As Alan Dunlop, head of legal in London for Amerada Hess, says: “If you do fall out in a joint venture over something, there is a huge amount of pressure on people to get it sorted out, particularly if, for example, it is a producing platform. It is not a desirable or safe way to conduct operations if the owners are falling out.”The emphasis is therefore very much on resolving disputes commercially long before they threaten to lead to court action. Where companies do decide to litigate, though, the cases can take a number of years and incur huge sums in external legal fees, such as the CATS v Enron case currently heading for the Court of Appeal.The co-operative nature of the industry is also reflected in the strong teamwork ethic that permeates most companies. Most organise themselves on an asset basis. This means that multi-skilled teams made up of lawyers, geologists, geophysicists, financiers and regulatory, tax and environmental specialists take responsibility for certain assets and countries. For this reason, many in-house oil and gas lawyers take a more relaxed approach than some lawyers to multi-disciplinary partnerships. They already have practical experience of working with the Big Five accountancy firms in far flung places where there are few, or no international law firms. For them it is simply a question of getting the best advice.

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