JOINT OPERATING AGREEMENTS

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JOINT OPERATING AGREEMENTS

• A Presentation ByHEW R. DUNDASDUNDAS ENERGY
  SERVICES
• UNIVERSITY OF DUNDEECENTRE FOR ENERGY,
  PETROLEUM AND MINERA L
• LAW AND POLICY
• 8th NOVEMBER 2002

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JOINT OPERATING AGREEMENTS - 1

• GENERAL INTRODUCTION
• JOINT VENTURES WHY ?
• OTHER MINERALS INDUSTRIES
• POOLING OF RESOURCES
• SCALE OF OIL INDUSTRY OPERATIONS
• USA/CANADA
• STANDARD FORM JOAs

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JOINT OPERATING AGREEMENTS - 2

• INTRODUCTION TO FORMS OF JOA
• RELATIONSHIP BETWEEN THE PARTIES
• OPERATING COMMITTEE
• OPERATOR
• COST CONTROL, BUDGETS AND AFEs
• ASSIGNMENT
• WITHDRAWAL
• SOLE RISK
• DEFAULT
• UNITISATION
• ABANDONMENT/DECOMMISSIONING

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JOINT OPERATING AGREEMENTS - 3

• THE PARTIES RELATIONSHIP
• PERCENTAGE INTEREST
• RESERVATION, INSPECTION AND ACCESS
• JOINT FINANCING/MARKETING/SALES
• SEVERAL LIABILITY, NOT JOINT/COLLECTIVE
• MUTUAL CROSS-INDEMNITIES
• US TAXATION
• OWNERSHIP OF DATA/CONFIDENTIALITY
• COVENANTS AND UNDERTAKINGS

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JOINT OPERATING AGREEMENTS - 4

• OPERATING COMMITTEE
• USA MODEL
• RATIONALE BEHIND BNOC PRO-FORMA
• SUPERVISION AND CONTROL
• MATTERS RESERVED TO OPCOM
• MEETINGS
• VOTING
• PASSMARK vs UNANIMITY
• OTHER COMMITTEES
• TWO TIER COMMITTEES
• MINIMUM PERCENTAGE

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JOINT OPERATING AGREEMENTS - 5

• OPERATOR
• APPOINTMENT
• CHANGE OF OPERATOR
• REMOVAL OF OPERATOR
• RESPONSIBILITY, RIGHTS OBLIGATIONS
• FIDUCIARY DUTIES
• CONTRACTORS EMPLOYEES
• REPORTING CONSULTATION
• LIABILITIES TO NON-OPERATORS
• LIABILITIES TO THIRD PARTIES
• NO PROFIT, NO LOSS

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JOINT OPERATING AGREEMENTS - 6

• COST CONTROL/BUDGETS AFEs
• ANNUAL BUDGET
• OPCOM APPROVAL
• CONSEQUENCE OF APPROVAL
• AFEs
• CONTROL OF COMMITMENTS
• ACCOUNTING PROCEDURES
• CASH CALLS, BILLINGS, REPORTS
• AUDIT

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JOINT OPERATING AGREEMENTS - 7

• ASSIGNMENT
• RATIONALE
• PERMISSIVE OR RESTRICTIVE
• AFFILIATES ASSOCIATES
• PRE-EMPTION
• TYPES OF PRE-EMPTION
• AVOIDANCE ANTI-AVOIDANCE
• CONSENTS APPROVALS
• UK REGULATIONS MODEL CLAUSE 41(5) (1988)
• ENCUMBRANCES

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JOINT OPERATING AGREEMENTS - 8

• WITHDRAWAL NON-CONSENT
• RATIONALE
• RESTRICTIONS ON TIMING
• EXPLORATION
• DEVELOPMENT/PRODUCTION
• OTHER RESTRICTIONS
• EFFECTIVENESS

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JOINT OPERATING AGREEMENTS - 9

• SOLE RISK
• INTRODUCTION
• PRACTICAL IMPLICATIONS

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JOINT OPERATING AGREEMENTS - 10

• DEFAULT
• RATIONALE
• FORFEITURE WITHERING
• EFFECT OF TIMING
• POTENTIAL PROBLEMS IN PRACTICE
• CASE LAW

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JOINT OPERATING AGREEMENTS - 11

• UNITISATION
• RATIONALE
• EFFECT ON JOAS
• REDETERMINATION
• INTERNATIONAL UNITISATION