Author: bomuo

Any party in a Joint Operating Agreement that is not the operator

Non-conventional gas is natural gas found in unusual underground deposits such as very impermeable reservoirs, tight deposits, hydrates, coal bed methane or coal deposits.

An unconventional reservoir is one that cannot be produced at economic flow rates or that does not produce economic volumes of oil or gas without assistance from massive stimulation treatments or special recovery processes and technologies. Unconventional reservoirs are often larger than conventional ones, but also more difficult and expensive to develop.

Parties with small percentage interests in a JOA will not want to be voted into activities which they may not support or not be able to fund, whereas parties with significant interests in the block may not want to be prevented from developing the asset because they cannot pass the voting hurdle. There are thus two methods by which parties can protect their interests further: non consent and sole risk. Parties can non-consent only after a proposal has been passed whereas a proposal giving rise to sole risk will not have received passmark approval. Non consent clauses are not always part of a JOA agreement whereas sole risk provisions are fairly universally accepted. They recognize that a proposal (drilling, appraisal or development) may be considered worthwhile by some parties but may not meet the majority passmark hurdle. To allow the parties to proceed to develop their asset they may do so at their sole risk. It is thus normal when a well is drilled that if some partners want to continue possibly to a deeper layer but some don’t, then those that wish to continue “sole risk” those that don’t and they pay for the extra costs. If the deepening of the well then finds oil or gas, those that opted out usually have the option to come back in, as long as they pay a very hefty premium for doing so (i.e. 2-5 times the extra drilling costs)

An oil or gas field which is deemed cannot be produced commercially because although it may contain hydrocarbons these cannot be produced and marketed to the market at a commercial viable price. A well that cannot be produced and marketed economically, because the cost of development is too high, the price that the hydrocarbons can fetch in the market place is too low, etc