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.