Dealing with stressed contracts in the energy sector
The recent collapse of crude oil prices is inevitably putting many contracts in the energy sector under strain. Ashley Wright and Richard Steenhof of Norton Rose Fulbright explore the legal options available to energy companies that need to manage the risk of stressed contracts
In the past few years, energy companies had become used to high oil prices and many expected this trend to continue. Prolonged high oil prices generated significant investment by industry players, which was often underpinned by contracts that assumed such high prices were here to stay.
Now, times have changed. On June 19 last year, front-month Brent North Sea crude oil futures closed at $115.06 a barrel (/bbl). Having plunged below $50/bbl in January, the front-month contract settled at just $58
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