By John Vercoe
Abridged by GlobalGovAffairs.com
The importance and impact of government and institutional policy in the oil and gas sector, together with policy driven by the international oil companies is of paramount importance.
Logic does not always apply in matters of policy, yet laws and regulations must be followed. And to be followed, they must be known. Ignoring the rules can have serious consequences for a company, for example large fines or loss of strategic competitiveness.
We all know the importance of baselines in developing benchmarks and models of regulatory behaviour and standards. Experience from established oil and gas regions elsewhere in the world can give invaluable insight for policy in emerging provinces. It can serve as a baseline and a blueprint for the development of policy in these emerging markets, thus helping to avoid previous problems and mistakes.
Today, in the domestic and international arena, oil and gas policy is discussed endlessly in public, governmental, and non-governmental forums and in documents relating to the oil and gas sectors of petroleum provinces around the world.
Understanding the fine detail of policy in your area can be frustrating and time consuming and whilst professionals and industry experts can help you to align policy to company strategy, it will pay dividends if you are vigilant too.
Oil and gas companies are deluged by policy from all directions and continually challenged by the need to bring focus without letting items “fall through the cracks” within their organizations. Individuals can feel that reviewing draft policy documents such as announcements, statements and law is time consuming, offering little reward. Others will have learnt that the effort put in may not reap instant rewards, but further down the line, it might have an indirect benefit such as receiving priority treatment on another matter simply because they remember your earlier work. In the same way, perseverance in getting to know government officials and other useful industry contacts and maintaining dialogue with them can be a very successful strategy. Keeping abreast of draft legislation and other policy initiatives is absolutely essential in updating your company’s approach and strategy towards dealing with future changes. Where the rules are confusing, early consultation is better than confrontation later on!
How do you access policy? There are many sources. Policy will be embedded in country pronouncements and decisions, country legislation, decisions of courts and judicial bodies and through august bodies such as UN, World Bank, OPEC, WTO, IFC, EU, EBRD, IEA, Energy Charter Treaty and oil and gas bodies. Often you will need to read policy in several languages.
It is important briefly to mention international oil companies and their role in driving policy. Today, many international oil and gas companies are leading the ecological crusade.
I have left what I believe is the most important item until last. This is the subject of relationships that you and your company build up and maintain with other organizations and government. Work to develop a close relationship with authorities and key officials so that problem can be resolved behind the scene. Open confrontation with governments rarely works. The oil and gas industry operates in a village-like atmosphere and amongst its various players relationships are crucial. It takes time to build strong business relationships, but they can often be the glue that holds a particular project together.
We often try to map out a blueprint to identify solutions to business issues. How to capture analytical steps towards identifying the key issues is a shifting beast that may need to be changed suddenly when government policy changes. Those of you whose job is to decipher the impact of policy decisions, views, readings and trends at international, regional and domestic level have the opportunity to make it work to your company’s strategic advantage. For others, after reading my article, I hope that you might spot a policy issue from a newspaper or the web that relates to your project and starts you thinking anew. If you do, this article will have achieved its purpose. Good policy hunting!
John Vercoe has practiced law since 1974, spending much of his time abroad in Kazakhstan, The Netherlands and France. John has wide-ranging experience in significant oil and gas transactions and operations in Europe, Kazakhstan, Russian Federation and Nigeria