You should read this article if you are involved or interested in unconventional oil and gas projects in the United Kingdom or internationally. In this article, BLP oil and gas lawyers Adam Dann and Tim Sumner provide an introduction to the new 2014 AIPN Unconventional Resources Operating Agreement.
On 25 September 2014 the Association of International Petroleum Negotiators (“AIPN”) published the first edition of its Unconventional Resources Operating Agreement (the “UROA”). The publication comes at a particularly opportune time in the United Kingdom, with the 14th onshore licensing round closing on 28 October 2014.
When might I use the UROA?
The UROA is designed to cater for joint operations in relation to:
- shale oil and gas;
- tight oil and gas;
- coal bed methane / coal seam gas; and
- other unconventional production methodologies involving wellbore operations.
It is not intended for non-wellbore operations, such as tar sands, underground coal gasification or syngas.
We do not expect the UROA to replace industry standard operating agreements used for unconventional resource projects in North America in the near term, but do expect the agreement to gain traction in the UK and elsewhere where there is likely to be less familiarity with unconventional resource issues.
How does the UROA differ from the standard AIPN JOA?
The UROA is based on the standard 2012 AIPN JOA and the bulk of its provisions will be familiar to negotiators who have used the 2012 AIPN JOA.
The UROA builds on the 2012 precedent by specifically addressing a number of the challenges and unique features of unconventional resource projects. Specifically, it contains provisions dealing with:
- pilot projects - the potential use of pilot projects to determine the commercial viability of large scale exploitation; to test whether the production technology and methodology is effective and commercial given the particular resource characteristics;
- sub-areas - the exploration and development of concessions by sub-area;
- multi-pad drilling and production - the production of projects using multiple pads and the use of these pads to process production from outside of the joint operations; and
- horizontal drilling and fracking - the use of horizontal drilling and hydraulic fracturing to access unconventional resources.
Where did the UROA come from?
The UROA has benefited from the input of industry representatives across five continents over two years. It clearly draws on the North American experience in exploiting unconventional prospects.
BLP has extensive experience advising oil and gas companies on corporate and commercial oil and gas transactions. The firm is currently advising on a series of mandates involving unconventional resources in the UK and internationally.