Gloves are off in battle for oil sands clients
Czarnecka, Marzena. The Globe and Mail [Toronto, Ont] 27 Feb 2008: B.10.
Two years ago, when ONGC first came sniffing around the sands, the obvious answers might have been Bennett Jones LLP. And not necessarily because the firm has international profile and a “brand” in the world energy arena.
International interest makes Calgary the nation’s most competitive legal market
There’s a bit of Canada tacked up all over China.
“We just had some people come back from a tour of Chinese state oil companies, and on the wall of each, there was a map of the Canadian oil sands,” says Brock Gibson, a partner with the Calgary office of Blake Cassels & Graydon LLP. This despite the pull-back by China’s CNPC International from its Canadian projects and uncertain future of Synenco Energy Inc.’s Northern Oil Sands Project, in which China’s Sinopec has a 40-per-cent stake.
But China is just one example of foreign interest in the oil sands. The Dutch, Norwegians, French, Israelis, South Koreans and Japanese all have stakes in the sands now. India – via the Indian Oil and Natural Gas Company’s (ONGC) – keeps on promising to arrive.
That global interest has turned Calgary into Canada’s most competitive legal marketplace. And it has turned local lawyers into globetrotters.
“We’re travelling the world and crossing the ocean to talk to people about the oil sands, and the interest is huge,” Mr. Gibson says. In the last six months, Blakes partners have done the rounds in Spain, London, and Singapore, as well as less exotic North American points of contact, touting the oil sands (and their law firm) to all and sundry.
And the international interest the sands have garnered so far is just the beginning.
“We continue to see the oil sands migrate towards the majors and the multinationals – the people with deep pockets and technical capabilities,” says Robert Engbloom, a partner with Macleod Dixon LLP. “The Indian group certainly fits into that … We’d love to act for them.”
So would everyone in the patch. But who will? ONGC no historical relationship of note with any Calgary – or, for that matter, Canadian – law firms. Who is it going to go to?
Two years ago, when ONGC first came sniffing around the sands, the obvious answers might have been Bennett Jones LLP. And not necessarily because the firm has international profile and a “brand” in the world energy arena. As vice-chairman and Calgary managing partner Perry Spitznagel is quick to point out, that experience has translated into a mandate on virtually every M & A file the oil sands have seen, including last year’s plays by Norway’s Statoil ASA and Houston’s Marathon Oil Corp. (Acting for the Canadian targets, respectively, were Stikeman Elliott LLP and Macleod Dixon.) Bennett Jones’ real edge, though? Oil sands veteran Shell. Bennett Jones had the lion’s share of Shell Canada’s legal work. And ONGC has joint ventures and partnerships galore with Shell Canada’s parent, mothership Royal Dutch Shell. A nice “in.”
Today? Shell Canada is no more – and even if it was around, when a contingent of Bennett Jones partners walked across to Osler, Hoskin & Harcourt LLP, so did some of the Shell connections. Osler has an in now, too, and the welcome mat out.
“Some of our guys from Toronto were just making the rounds in Asia,” says Robert Desbarats, a partner with Osler in Calgary, and one of the Bennett Jones alumni. Mr. Desbarats is tightlipped about whether ONGC has expressed any interest in Osler. It’d be a coup for the firm’s Calgary strategy if it did.
Then there’s Royal Dutch to consider, and its relationship with Stikeman Elliott, re-cemented in the 2007 buyout of Shell Canada by Royal Dutch.
“It’s a firm relationship that goes back a long way,” says Glenn Cameron, a partner with Stikemans in Calgary. If ONGC asks Royal Dutch for Canadian law firm recommendations, Stikemans might get mentioned.
But there’s no slam dunk for anyone here. Historical relationships don’t mean what they used to. They have to be renewed – or seeded from the start – because being the biggest name in Calgary has zero value in India. Or, for that matter, Norway.
“Statoil came in cold – they didn’t know anyone in Canada,” says Mr. Spitznagel of Bennett Jones. But they knew people at Houston’s international energy powerhouse Vinson & Elkins LLP. Fortunately for Bennett Jones, Mr. Spitznagel had just been in Houston to hobnob with the head of that firm’s corporate department – specifically to “reinvigorate” the relationship between the two firms. There was a lull in patch activity – the Americans weren’t buying much up North – and Mr. Spitznagel was anxious the lull didn’t translate into a permanent loss of connection.
“You can never forget about those relationships,” he says. “You can’t assume this stuff will come in through the door, that the whole world knows who you are. They might – or they might see your ranking in Chambers Global or Lexpert, but they still rely on some person they know and trust to refer them to you. If they go to a Houston law firm, the people there think ‘who do I know in Calgary?’ Well, there’s Bennett Jones, but I haven’t seen anyone from there in five years, but the guy from Macleod Dixon was just here last week …”
Having reconnected, Mr. Spitznagel saw results almost immediately. “Within a month of that, I got a phone call – ‘We’ve been talking about how to reinvigorate our relationship, well, here’s an opportunity,’ ” Mr. Spitznagel says. Vinson & Elkins had gotten a call from Statoil, and Bennett Jones was in the loop.
That was almost four years ago. Statoil’s first attempt to buy into the oil sands went nowhere, and Bennett Jones got no big billables or glory from the representation.
“But the relationship was established,” Mr. Spitznagel says. In 2007, it bore lucrative fruit. Now, should another Scandinavian player venture across the Atlantic, well, Bennett Jones might have an edge. Or not – in 2008, no one is taking anything for granted.
There might not be another Scandinavian play for years. And that Indian play? Well, it could be announced next month. Or next year. Or next decade. The sands transactions, they ooze along very, very slowly.
“We’ve been consulted by some other international companies, including a couple of Asian companies, that have been looking at the oil sands, but nothing has come of that so far,” says Osler’s Mr. Desbarats.
But the global players are interested, if cautious.
“We’re talking about big dollars here, and they want the right deal and the right deals aren’t always available,” Mr. Desbarats says.
When they do come – and they will, eventually, because the oil sands are not going anywhere – who is going to represent them?
The brain trusts at the likes of Osler and Stikemans are betting international clients will find Canada through its financial heart, Toronto.
“For companies that have never done business in Canada – what does Canada mean? They look at the biggest city, the financial capital, and they go to Toronto first,” Mr. Desbarats says.
Bennett Jones has a counter strategy. “Our job is to make sure that in energy, international clients understand that Canadian energy expertise is different from the Toronto expertise,” Mr. Spitznagel says. “We want to nudge them to the side, so they go where the energy expertise resides in Canada.”
Welcome to Canada’s most competitive legal market place.
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