Joint Operating Agreement Oil And Gas Uk

The key to the JOA is the obligation for the parties to be able to finance in a timely manner the financial commitments arising from the licence and the JOA by making payments in response to cash calls or invoices from the operator. In the absence of an initial and/or permanent solvency of one party, it is prudent (and it is to be expected that the other parties will need some form of collateral) with respect to that party`s payment obligations. In view of the joint and several nature of the licence commitments to the Government, the accession of that Party to the OJA should be subject to the granting of a guarantee, together with its entry into the OJA, with regard to its multiple liability for its obligations under the OJA and the Government. It is not uncommon for a joint venture, particularly in the case of a foreign joint venture, to require that its licensed interest be held by a newly created subsidiary. It could be a subsidiary that lacks a strong financial covenant. Experience also shows that it is common for a foreign newcomer to the UKCS to use its parent company for the purposes of the licence application, but in the event of a successful licence application, it transfers the stake of a newly created subsidiary. Such proposals cause a party with potentially low solvency to become part of the licence and the JOA. At the time of submission of the licence application to DECC, the potential parties to the joint venture must have identified and specified which of the parties will act as operators. This decision to become an operator will therefore be taken before the negotiations and entry into the JOA. This is not an area that is likely to be debated. The parties generally share a predetermined understanding of the general role of the operator and want joint operations to be conducted properly and have therefore identified one of their members as the most suitable candidate. In the UK oil and gas industry, for parties participating in a joint venture, there is a presumption in favour of the existence of a joint venture and not a partnership.

As noted in Spree Engineering and Testing Ltd v O`Rourke Civil and Structural Engineering Ltd (2007), in which the High Court issued a presumption in favour of the existence of an unregistered joint venture, this presumption has a long tradition in the United Kingdom. The statement of reasons relied on by the Court of First Instance was that the parties had carried out a specific activity which they would have expressly avoided by using a partnership in their relationship. It was the same reasoning in brian Pty Ltd v. United Dominions Corporation Ltd (1985) in which Samuel J. stated that a joint venture was an association of persons, whether a corporation or a natural person, who had contractually agreed to participate in a profit joint venture by combining their respective sources, without establishing a partnership within the legal parameters. Under the OGUK Agreement, the exclusion of liability and compensation in favour of the operator do not apply to loss or damage resulting from or incurred by the operator`s intention. The OGUK agreement defines “wilful misconduct” as follows: Joint Operating Agreement (JOA) is the common method by which companies join forces to form a joint venture in their oil and gas exploration and production. .

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