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Renegotiation is the way to go

News

Renegotiation as a business strategy could be a way to mitigate the impact of the crisis that the oil and gas industry is fighting.

A webinar organized by NBCC and partners in Team Norway (Innovation Norway, ABRAN and NORWEP) on June 18, 2020, addressed opportunities and challenges in contracts renegotiation in the oil and gas sector. In light of the recent scenario of low oil prices, low demand and the impact of covid-19, it is important to know what legal remedies and solutions can be adopted in case of contract renegotiation, and the webinar brought information and expertise to executives and decision makers in a straightforward and objective way. Almost 70 people attended the event.

A panel of lawyers addressed force majeure, cash flow protection and what to do when things go wrong.

“It is indeed a perfect storm, and there is no size that fits all, but you should prefer renegotiation over termination. The oil and gas industry has always had this capacity to reinvent itself, also in contractual arrangements, and now you need to return to the table and find new ways”, the lawyers Rafael Baleroni from Cescon Barrieu, Nilton Mattos from Mattos Filho and Márcio Leal from Leal Cotrim said. According to Mr. Baleroni, force majeure is difficult to prove in court.

In particular, the law firms experience stakeholders seeking advice and assistance on negotiations over temporary adjustments of rates and postponing payments these days.

“Your bargaining power depends on the service or equipment you provide, but the mindset right now is to find a solution”, said Nilton Mattos. He believes that “the devil is in the details” and says that contractual governance is crucial.

“Leave everything in writing, in a contractual amendment, don´t leave it in an email. It can make a big difference”, he says.

According to Márcio Leal, companies need to keep in mind that they might have more rights than those defined in a contract.

“There are a lot of remedies available, and knowledge of these will give you leverage in a negotiation”, he said.

“Don´t be afraid to negotiate with Petrobras, this is not about size, and even if you represent a small company, you are allowed to say no”, Rafael Baleroni said.

In a separate session, Bianca Soares, who is the Legal Director & Compliance Officer of Subsea 7 Brazil, shared experiences and lessons learned through several crises.

“The target should be to safeguard people and business continuity. I would also like to highlight the role of associations, who can play a key role in times of crisis, by sharing solutions, alternatives and opportunities”, she said.

Bianca Soares also talked about particularities of the Brazilian market, compared to international practices.

“The way to go is to focus on renegotiation, and on adaptability and flexibility. This crisis has resulted in the change of paradigms, and home office is probably the most disruptive action. But my main takeaways is that we need to reinvent ourselves and our business models, but never forget that people are the enablers”, she said.

The webinar was organized by NBCC, Innovation Norway, ABRAN and NORWEP. It was recorded and is available to NBCC associates and partners. Contact us at communication@nbcc.com.br

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