As a Business Lawyer it will be really interesting and exiting, if you have the experience accompanying your Client in negotiating a Joint Operation Agreement (JOA) which are entered by the Participant Interests Holders of a Technical Assistance Agreement (TAC) in Indonesia.
The position as a Business Lawyer may be different from one case to another. If for instance, you are a Business Lawyer, who are representing your Client, who needs some additional investors to support its cash flows to perform the oil and gas operations as agreed upon under the TAC with BP Migas, and decides to transfer or assign a major portion of its undivided interest under the TAC to a certain potential Investors, you may be in a position to be more of a listening and wait for the proposal of a draft JOA from such prospective Oil/Gas Investors.You may also submit a proposal of the first draft to be further reviewed by such potential prospective oil/gas investors. Some significant elements which are usually touched in a JOA, when you just entered into a negotiation are among others concerning the issues describing or clarifying the purpose the Parties entered into this JOA.
As we are aware in the Oil and Gas Business several Investors are involved into this venture since significant amount of Monies are involved where the Parties shall share the costs and expenses in such Oil and Gas Business Operations in proportion to the percentage of their Participant Interest Share. The operations usually involved activities such as exploration, appraisal, exploitation, development, storage, production and disposition of Hydrocarbons from the Contract Area. There are operations that are being Jointly Operated in the sense that the costs shall be shared, this will be the Joint Operations.
The position as a Business Lawyer may be different from one case to another. If for instance, you are a Business Lawyer, who are representing your Client, who needs some additional investors to support its cash flows to perform the oil and gas operations as agreed upon under the TAC with BP Migas, and decides to transfer or assign a major portion of its undivided interest under the TAC to a certain potential Investors, you may be in a position to be more of a listening and wait for the proposal of a draft JOA from such prospective Oil/Gas Investors.You may also submit a proposal of the first draft to be further reviewed by such potential prospective oil/gas investors. Some significant elements which are usually touched in a JOA, when you just entered into a negotiation are among others concerning the issues describing or clarifying the purpose the Parties entered into this JOA.
As we are aware in the Oil and Gas Business several Investors are involved into this venture since significant amount of Monies are involved where the Parties shall share the costs and expenses in such Oil and Gas Business Operations in proportion to the percentage of their Participant Interest Share. The operations usually involved activities such as exploration, appraisal, exploitation, development, storage, production and disposition of Hydrocarbons from the Contract Area. There are operations that are being Jointly Operated in the sense that the costs shall be shared, this will be the Joint Operations.
However there are also circumstances where Only a number or some of the Participant Interest Holder who participates in the operations, which shall be usually called Sole Risk Operations.Thus in order to create a clear understanding between the Parties who intends to participate in the TAC , the Parties requires a separate agreement among themselves which is covered by this JOA. Accordingly this JOA is required to regulate the rights and obligations of the Parties ( which does not include BP Migas) concerning the operations to be conducted under the TAC between the Signing Parties mentioned under the TAC as the Participant Interest Holder, who had signed the TAC with BP Migas. These includes among others the joint exploration, appraisal, exploitation, development, storage, production and disposition of Hydrocarbons from the Contract Area, the decommissioning of the joint property and conditions for carrying out Exclusive Operation in the Contract Area.
This JOA shall usually be agreed by the Parties as the entire agreement between the Parties regulating the terms and conditions between them related to the Joint Operations, unless there exists other documents which are agreed by the Parties to also also govern their agreements. The scope under the JOA may include the terms under the TAC between The Parties with BP Migas, but may also contain activities which are under the TAC but is not intended to be addressed in this JOA.
These for instance may consists of construction, operation, ownership, maintenance, repair and removal of facilities downstream from the delivery point, transportation of the Parties’ Entitlements downstream from the delivery point, marketing and sales of the Hydrocarbons and other issues which are not intended to be addressed in such JOA.The Parties shall further specify the composition of the Participating Interests of the Parties. The composition of the Parties will play an important role in describing the portion of rights, obligations and liabilities.
The major portion holder of the Participant Interest under the TAC, shall usually be elected as the Operator of such TAC.
The Parties will decide which part of the expenses incurred by the Operator are being considered and be charged to the Joint Account and which are not.
Thus, before a work program is being submitted to BP Migas, such work program will be first discussed and agreed upon through this Operating Committee mechanism.
If the results of such Sole Risks Operations happens to be a commercial field, the Non-Participating Party may participate, provided however, that on top of the Real Expenses and Costs which had to be met pursuant to its portion of Participant Interest, such Non-Participating party has to pay and compensate a certain percentage payment.
These for instance may consists of construction, operation, ownership, maintenance, repair and removal of facilities downstream from the delivery point, transportation of the Parties’ Entitlements downstream from the delivery point, marketing and sales of the Hydrocarbons and other issues which are not intended to be addressed in such JOA.The Parties shall further specify the composition of the Participating Interests of the Parties. The composition of the Parties will play an important role in describing the portion of rights, obligations and liabilities.
The major portion holder of the Participant Interest under the TAC, shall usually be elected as the Operator of such TAC.
The Parties will decide which part of the expenses incurred by the Operator are being considered and be charged to the Joint Account and which are not.
Thus, before a work program is being submitted to BP Migas, such work program will be first discussed and agreed upon through this Operating Committee mechanism.
If the results of such Sole Risks Operations happens to be a commercial field, the Non-Participating Party may participate, provided however, that on top of the Real Expenses and Costs which had to be met pursuant to its portion of Participant Interest, such Non-Participating party has to pay and compensate a certain percentage payment.
Please note that the above items are not intended to be a legal advise nor legal opinion in any form or manner by the Writer and thus shall not be used as a legal advise or legal opinion, but is merely intended to share information and experiences.
Cheers
Agung Supomo Suleiman
Law Firm Suleiman Agung & C0
Mobile Phone : 0816830647
