Jacob Dut Chol Riak, Ph.D

Abstract

Oil and gas contracting have emerged as a very critical area of research in petroleum industry. While the industry is a beehive of contracting, it has often used Joint Operating Agreements (JOAs). The reasons for usage of JOAs in oil and gas industry is pedigreed on volatility and risky endeavour of the industry. The study has argued the concept of JOA. It also clearly brought out reasons why oil and gas industry uses JOA. Besides, the study discussed the apportionment of rights and duties between and amongst the parties to a JOA. Moreover, the study has explained terms, purpose and effect of sole risk, non-consent and default clauses in JOA. Using process tracing method to discern case studies of Sudan and South Sudan oil and gas industry, the study’s findings noted that JOAs are useful for contractual obligations, enhancement of good relationships between and amongst the parties, allocation of expenses/costs and profits, determination of the responsibilities for obligations and liabilities, allocations of risks as well as mechanisms for disputes resolutions in the riskiest oil and gas industry. The study critically assessed the apportionment of rights and duties between and amongst the parties in the JOA and found out that such rights and duties can be apportioned as the participation interests/shares of the parties in the JOA, selection or appointment of an operator, work programme & budget (WPB), risks allocation and withdrawal from the JOA. It has surfaced that parties in the JOA have clearly defined rights and duties in the model JOA that the parties enjoy. While the study discussed the purpose and effect of sole risk, non-consent and default setting, it has interestingly appeared that sole risk, non-consent and default setting are great provisions in the JOA. However, they must be carefully used so that they don’t disrupt the working relations of the parties in the JOA. The study concludes that JOAs should help enhance relations amongst the parties and not for court disputes resolutions. Further research is hereby recommended to oil and gas contracting scholars to investigate why JOA is regarded as “unincorporated” principal document that govern the “horizontal” relationship between the oil companies.

Keywords: contracting, joint operating agreement (JOA), operating committee (Opcom), appointment, rights, shares, obligations, disputes, sole risk clause, non-consent clause, default clause

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