Energy 2018: Trends & Conclusions

Although the price of oil has recovered over the past year, following its drop to below $30 a barrel at the beginning of 2016, the renewables market has remained incredibly buoyant and has witnessed significant growth, particularly across Europe. In light of dramatic economic changes, rapid technological developments and evolving political agendas across the globe, both traditional and new players in the energy market have, over the past few years, looked to reassess their portfolios, adapt to the ever-changing nature of the landscape and look forward to what the future of the sector may look like. For the legal market, this has inevitably led to both an increase in and diversification of mandates over the past year.

A global overview

The US saw a boom in fracking activity throughout 2017 with the production of oil from shale rock increasing to over 6 million barrels per day and drilling activity continuing to rise. Earlier this year, the International Energy Agency (IEA) noted that US oil production will continue to surge over the next few years, making it highly likely that it will claim a significant market share from OPEC producers thanks to its huge growth in production.  

Latin America has witnessed a wave of market reforms, most notably in Mexico and Argentina. Both countries have recently seen deregulation across the power and oil and gas sectors. Meanwhile, sources have been keen to highlight the growth in activity in Asia, particularly from China and India. The past year has seen a number of players from both countries come into the global energy market as was seen with the consortium of Indian Oil Corporation (IOC), Oil India (OIL) and Bharat PetroResources (BPRL) who sought to negotiate a 49 per cent stake in Russia’s Vankor Cluster oil fields.

Oil and gas has come back to the fore across Africa, with smaller gas and power projects now increasing in number. Many lawyers have also noted an uptick in lending from development banks when it comes to renewable energy projects. South Africa has seen heightened political tensions over past year which has led to a drop in government-sponsored work in the energy market. However, sources have noted an increase in private sector initiatives, signalling an uptick in work across the country. They have pinpointed Zambia, Nigeria and Kenya as key hubs across the continent that are “making noise and showing interest when it comes to nuclear power”. They say that clients have been asking for proposals for this type of work and seeking counsel, but that “it is all very embryonic at the moment”. Another “big question mark”, according to sources, is the development of gas production in the region, with lawyers keen to see how investment in that area will develop over the coming years.

Key market players

The prominent role of alternative financing has been an ongoing trend for the past two or three years, appearing most notably at the intersection of the energy and project finance space. It appears that 2017 was no exception, with market commentators highlighting infrastructure funds, private equity funds and financial syndicates among the key types of alternative lenders taking on significant roles in investment into the sector. Alternative financing has increasingly become central to projects activity around the world in recent years. In 2017, alternative asset management company The Carlyle Group backed Assala Energy’s $587 million acquisition of Shell assets in Gabon, while private equity-backed Neptune Energy acquired the oil and gas exploration and production business of Engie for €4.7 billion. It is clear that non-traditional lenders have entered the market in a big way, taking on major projects and acquisitions that run into billions of dollars.

Despite the continued presence of alternative financers, lawyers are also “now seeing majors coming back into the market as oil prices have stabilised”. Having witnessed the recent volatility of the energy market, traditional oil and gas entities have begun to reassess and rebalance their portfolios, which has led to a flurry of activity, including both acquisition and divestment of assets on an international level. As one lawyer puts it, “If you’re an oil company, having some geographic diversity in your portfolio helps protect you from price volatility – this is something people have learned from the period of depressed oil prices.” Large-scale deals such as Total’s acquisition of Maersk Oil and Royal Dutch Shell’s sale of assets to Chrysaor for up to $3.8 billion have changed the landscape of North Sea oil and gas operations. These deals form only a part of what one source labels “a big shuffling of the deck on the oil and gas side”, where a number of major players have looked to partially or fully divest their oil and gas businesses.

Time to adapt

When it comes to approaching renewable energy opportunities, lawyers highlight that many traditional energy giants have taken different stances. While some have separated their renewables businesses from their conventional businesses, others, including Shell and BP, are actively looking to get involved in the power mix in recognition of the shift in the market. At the end of 2017, BP acquired a 43 per cent stake in Europe’s largest solar developer, Lightsource, for $200 million, while Shell recently purchased a similar stake in US solar company Silicon Ranch Corporation for $217 million.

These ventures into the clean energy field are revealing not only of the apparent realisation by global energy powerhouses of the need to diversify their business interests, but they also offer a clear indication of the way in which the energy sector is heading. Although oil and gas continue to be an important part of the global market, renewable energy has spread beyond the energy sector to become a wider economic and political touchstone.

The rise of the renewables

Nowhere has this interest been more evident than in the rapid rise in renewables projects around the world – for 2017, the case was no different. One lawyer noted, “Renewables are huge, they’re everywhere! They’re always thought of as ‘the future’ but the future is here.” Europe in particular is “crazy about renewables at the moment”, according to one lawyer, with offshore solar and wind projects notable hubs of activity. According to a report by WindEurope, 2017 saw the installation of 560 new offshore wind turbines across 17 wind farms in Europe. “The appetite in the market for these types of assets has gone up,” according to sources. As wind and solar energy has become more mainstream and more acceptable as a risk profile for non-utility investors, the market has witnessed a significant increase in acquisitions and investment activity in the area. The confidence in renewable energy also derives from the constant technological improvements and innovation in the area, particularly relating to energy production and storage.

The growing movement of the market and clients into the clean energy space has inevitably been reflected within the legal community. As one lawyer put it, “Around 10 years ago, only a handful of firms were involved in the space, but it has now become a honey pot and everyone has been brought into the mix.” Identifying key specialists across multiple areas of energy law will be an increasing concern and priority for clients looking to invest in the sector. As the practice area expands and technologies develop at a fast rate, lawyers will have to ensure that they remain at the cutting edge of new developments and remain informed and on top of market trends.

The legal market

As has been the case with most practice areas we have researched over the past year, cost consciousness has become a permanent factor in competition among firms. Many practitioners we spoke to mentioned the trend, with one commenting “It can often be a race to the bottom fee-wise.” Despite this, activity across the sector remains high, with many sources highlighting the increasingly busy but also increasingly diverse nature of their practices. As clients expand their portfolios and seek business in new areas of energy law, the demand from clients for both broad but specialised services will only grow.


Although the past few years have seen relative turbulence across the energy sector with the dramatic plummet in oil prices, the rise in renewable energy projects and the growing importance of cleaner energy in global political discourse, lawyers are incredibly positive in their outlook for the future of the field. They note that the stability of the oil price ought to underpin a continuing deal flow in the oil and gas space and greater activity in the area after a period of under investment, while they expect to continue to see a lot of new money pouring into the renewables space. Despite recent unease in the market, the next few years look set to be busier than ever for lawyers across the energy sector.

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