Investment in the oil industry today, involves staking huge capital, technology and equipments, as the operators are faced with exploration and possibly production activities in areas situated in particularly difficult environments, such as offshore fields and in some cases, rocky areas. Maximizing recoveries from these areas has huge financial implications.
Ultimately, the Oil and Gas industry, like all other industries, perceive project execution success in commercial terms. Does the project work? Was the project completed on time? Was the project on budget? Was the involvement profitable? Will production goals be met? Will the ultimate production cover the invested cost the invested cost plus a return?
Reasonably, given the high risk and complex nature of the industry operations, there is, and should naturally arise disputes. Disputes in the oil and gas industry often take long time to resolve through litigation in the National Courts, as there is strict adherence to due process, procedures, precedents and legal technicalities. There is also much financial resources and time lost in the process, as lawyers have to be paid, each party given fair and responsible time to prepare case and present evidence. The outcome is often uncertain despite the precedents. These perceived lapses defeat the commercial expediency of the industry.
As the industry operations gets complex, dispute remains inevitable, thus the industry stakeholders have consciously, developed alternative mutual ways to contractually control, manage and resolve their disputes as and when it occurs, while still maintaining the desired business relationship.
Thus, to suit the demands of the industry, the stakeholders have streamlined and adopted a preference for a series of Dispute Resolution Processes as against Litigation, these processes are called Alternative Dispute Resolution (ADR). Some of the preferred processes would be examined, and constructively criticized to ascertain if they can in all cases, be used to effectively resolve all disputes in the industry.