The concession is of obvious importance to the joint venture between the parties. This will be reflected in provisions in the JOA whereby the operator will undertake to keep the concession in force (see 7.3) and the JOA might also impose an obligation on all of the parties not to do anything that might jeopardise the concession. Any breach of this obligation that leads to loss of the concession would ostensibly expose the party in default to liability to the other parties for breach of contract, but any exclusion of liability for consequential losses that exists in the JOA (see 17.1) would make questionable the real value of such an obligation.
The concession sets out the vertical relationship between the state (as the grantor of the concession) and the parties (in their capacity as the concession-holder), but does not address the terms of the horizontal relationship between those parties.
Therefore it could become necessary for the parties to define their relationship. There is no obligation on the parties to enter into a JOA, and they could hold the concession without a JOA in place. It is, however, advisable to impose a JOA upon their relationship, for reasons that will become apparent.
Where the parties have elected to work together through the vehicle of an unincorporated joint venture, the JOA will be the agreement that defines that relationship and provides for the sharing between the parties of the rights and the liabilities arising in connection with the concession. The JOA underpins the concession and is the accord that records the relationship between the members of the joint venture as the parties that together hold the concession.
The JOA is effectively the constitution for the unincorporated joint venture that exists between the parties for the exploration for and the production of petroleum and for the management of the concession, and it provides for how the operations that are required to be performed under the terms of the concession will actually be performed as between the parties. The JOA establishes a consistent and predictable business foundation between the parties, and promotes best practices for the execution of the joint operations. Essentially, the JOA performs the same role between the parties as a partnership agreement performs between partners (although the JOA could go to some lengths to make it clear that it is not intended to be a partnership; see 1.5).
The JOA might provide that in the event of a conflict between the terms of the concession and the terms of the JOA, the terms of the JOA (or of the concession, depending on what is negotiated) will prevail, but because of the very different nature of the relationships created by the concession and the JOA the prospects for such a conflict should be minimal, and care should be taken to address the potential conflicts.
A somewhat elliptical question that is sometimes asked relates to the nomenclature of the JOA, and specifically to the extent to which (despite the title of the document) the JOA truly entails joint operations between the parties.
On one hand the JOA does not truly connote joint operations because there is only one appointed operator, rather than all of the parties having operational responsibility, and because the concept of exclusive operations (see Chapter 13) runs counter to the idea of joint operations.
On the other hand, however, there are several joint aspects of the relationship between the parties that the JOA creates, such as voting control (see 8.4) and default cover (see 18.4), which makes for an agreement in which the parties are jointly interested.
Perhaps the best way to characterise the JOA therefore is as an agreement for jointly coordinated operations, but not for the appointment of a joint operator.
The Association for International Petroleum Negotiation (AIPN) 2012 model form JOA revision (see 1.7) sought to emphasise the joint nature of the relationship that is created between the parties to the JOA through a change in the title of the agreement from ‘Model Form International Operating Agreement’ to ‘Model International Joint Operating Agreement’.
(b)The JOA and multiple interests
The JOA typically relates to a single concession and applies in respect of petroleum operations in the area that is identified within that concession.
There may be a situation where, as a consequence of, for example, a successful effort by the parties under a joint study and bid agreement (see 5.1), more than one concession has been awarded to those parties by the state. It is possible that the parties might choose to enter into a single JOA in respect of several concessions, with a single operator (see Chapter 7) appointed in respect of all of those concessions, but this approach will not be ideal. For example, it may be that over the lifetime of the concessions, one party might transfer its interests in one of the concessions to another person but remain in the other concessions, or a party might transfer its interests in all of the concessions to different persons – such that in either case there might be different groups of persons that are recited as the parties in respect of the respective concessions, but that are all variously party to the same single JOA.
The position would be further complicated if the party that was appointed as the operator in respect of all concessions later ceased to be the operator in respect of some, but not all, of the concessions, and so the one JOA would need to be interpreted to apply to more than one operator.
In the circumstances, therefore, the preferable solution is to have a separate JOA entered into in respect of each concession, despite the initial commonality of the parties. If the parties wish to operate multiple concession interests as a whole, the implementation of a programme of unitisation might be the preferable solution, although a general pooling of concession interests might also be possible (see Appendix 3). The parties might also consider a more general cooperation agreement (such as a form of area of mutual interest agreement; see 1.6) in respect of their multiple concession and JOA interests.
Whether there might be some advantage in linking the default remedy across more than one JOA and concession is considered separately (see 18.7).
Where separate concessions are granted for the separate activities of exploration and production (see above), a separate JOA might also be entered into, specific to those particular concessions and their defined activities.
(c)The JOA and other activities
The principal use of the JOA is in the context of exploration for and production of petroleum, both onshore and offshore, where technical complexity and/or economic exposure necessitates the creation of a joint venture. On occasion, the typical upstream JOA has also lent itself readily to adaptation for abandoned mine methane/coal bed methane (CBM) project developments, and in 2014 the AIPN issued a model form JOA for use in unconventional petroleum projects (see Appendix 2).
There is no reason why the JOA might not also be used as the constitutional basis for any other mining or wider energy sector project where an unincorporated joint venture approach is required, subject to the changes being made to the text of the agreement that are necessary to reflect the nature of the particular project. This possibility will be reflected in part in the scope of the JOA (see Chapter 6).
1.3 The incorporated joint venture
The principal vehicle by which consortium-based