Legal Insights for Petroleum Companies: Taking the Right Precautions

Legal Insights for Petroleum Companies: Taking the Right Precautions

By Mohamed Agamy – Managing Partner at Links & Gains

There is no doubt that the COVID-19 pandemic and its impact on all the countries all over the world, with no exception, has never been witnessed by the existing governments, authorities, or companies, , especially the oil and gas companies. Hence, the crisis impacts, not only the petroleum sector, but all the other sectors as well, on the economic level at surface, and on the human level at core.

In this article, we will shed light on several important legal issues to be considered for reducing risks,  improving performance, and speeding up production after things are better and this plight is gone.

Liquidity is Mandatory

Liquidity or the cash is recognized as the king nowadays because it has the power in making timely business decisions by either avoiding default, maximizing the benefit, or seizing an investment opportunity. Thus, the positivity of the cash flow can be ensured through several main factors.

These factors are: fully-collecting all third-party debts; cutting expenditure and maximizing deferment of payments; reviewing all contracts that require high cash flow and amending all project payment programs in line with the amended cash flow; urging stakeholders to pump cash flows within the company or increase the company’s capital; amending or concluding credit facilities contract; and issuing financial instruments, shares, bonds, investor floatation, etc. according to each company’s position, procedures, and objectives.

Force Majeure and Given Notices

In these contingent conditions, the company must review all obligations, contracts, and agreements that may make the company under the risk of execution, the default of execution, or in some cases, the impossibility of execution. There are a set of precautionary measures and provisions that should be taken into consideration. For example, to review all contracts and obligations to be in line with the outputs of the crisis. Also, to initiate finding solutions and adjustments so that a company may not in the long term be on the threshold of bankruptcy or subjected to legal threats arisen from the obligation of execution. Besides, notices must be served that such force majeure may have an impact on obligations. Thus, a legal notice must be used as a right to request either to amend the schedule of obligation execution to modify or postpone contracts to all parties, noting that the company under such force majeure has payments or installments; to remove some articles of a contract due to the impossibility of execution; or to request cancellation; or sometimes to reconcile legal status of contracting.

As for the execution of long-term contracts, the relevant contracting parties shall be notified, and it is necessary to review the price items and periods of time or the delivery premises with the legal or bank guarantees to be amended.

Also, a notice must be officially served. Non-official notices, via smart apps, that are not accurately defined in a contract, must be avoided. Such notices are not legally effective.

Internal Policies and Performance Efficiency

Currently, companies must document all administrative decisions they issue, and must ensure that these decisions are announced so that they may be legally effective against third parties. Also, clear rules must be established for using certain smart apps while maintaining the confidentiality of the information and data exchanged between team members and the company, in order to ensure that such confidential information will not be leaked to any competitors.

In addition, call for a general assembly must be taken into consideration in case of approving exceptional resolutions, etc.

Data Privacy Controls

The world is now heading aggressively towards remote working. This strategy may lead to facing some challenges in the data privacy in general. Data privacy challenges are not only controlled by technology, data control software, government employees, and third parties, but data privacy protection challenges extend to the way of applying laws and regulations in practice with full awareness of the applicants, in order to preserve and maintain the privacy of their data including but not limited to main obligations imposed on data holders, controllers, and processors.

The current situation is changing businesses and investments. Digital investment and investment in technologies and artificial intelligence, in particular, should be the center of attention. These kinds of investments guarantee the reduction of risks, while improving performance, and fast-tracking production amid and post the crisis.


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