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JOINT OPERATING AGREEMENTS
A Presentation By
HEW R. DUNDAS
DUNDAS ENERGY SERVICES
UNIVERSITY OF DUNDEE
CENTRE FOR ENERGY, PETROLEUM AND MINERA L
LAW AND POLICY
8th NOVEMBER 2002
JOINT OPERATING AGREEMENTS - 1
 GENERAL INTRODUCTION
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JOINT VENTURES – WHY ?
OTHER MINERALS INDUSTRIES
POOLING OF RESOURCES
SCALE OF OIL INDUSTRY OPERATIONS
USA/CANADA
STANDARD FORM JOAs
JOINT OPERATING AGREEMENTS - 2
 INTRODUCTION TO FORMS OF JOA
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RELATIONSHIP BETWEEN THE PARTIES
OPERATING COMMITTEE
OPERATOR
COST CONTROL, BUDGETS AND AFEs
ASSIGNMENT
WITHDRAWAL
SOLE RISK
DEFAULT
UNITISATION
ABANDONMENT/DECOMMISSIONING
JOINT OPERATING AGREEMENTS - 3
 THE PARTIES’ RELATIONSHIP
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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
JOINT OPERATING AGREEMENTS - 4
 OPERATING COMMITTEE
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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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 OPERATOR
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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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 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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 ASSIGNMENT
 RATIONALE
 PERMISSIVE OR RESTRICTIVE
 AFFILIATES & ASSOCIATES
 PRE-EMPTION
 TYPES OF PRE-EMPTION
 AVOIDANCE & ANTI-AVOIDANCE
 CONSENTS & APPROVALS
 UK REGULATIONS
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MODEL CLAUSE 41(5) (1988)
ENCUMBRANCES
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 WITHDRAWAL & NON-CONSENT
 RATIONALE
 RESTRICTIONS ON TIMING
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EXPLORATION
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DEVELOPMENT/PRODUCTION
OTHER RESTRICTIONS
EFFECTIVENESS
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 SOLE RISK
 INTRODUCTION
 PRACTICAL IMPLICATIONS
JOINT OPERATING AGREEMENTS - 10
 DEFAULT
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RATIONALE
FORFEITURE & WITHERING
EFFECT OF TIMING
POTENTIAL PROBLEMS IN PRACTICE
CASE LAW
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 UNITISATION
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RATIONALE
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EFFECT ON JOAS
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REDETERMINATION
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INTERNATIONAL UNITISATION