Danielle Beggs, Justyna Bremen

objective of the treaty is to facilitate all future cross-border projects in the North Sea,
and to avoid the need for individual treaties, such as the ones mentioned above, to
be negotiated for future cross-border oil and gas projects. Chapter 3 of the treaty
deals specifically with unitisation of transboundary reservoirs and provides a good
example of the process followed for international unitisations. It provides for a
process where the two governments will agree, after consultation with the licensees,
that a particular field should be exploited as a single unit. Provision is made for the
licensees to enter into a Licensees Agreement (ie, a unitisation agreement), which
is then to be approved by both governments. The unitisation agreement is to provide
for such matters as the apportionment of the reserves as between the licensees of
each state. If there is a dispute between the two governments relating to issues such
as the apportionment of reserves, then the matter is to be referred to expert
determination in accordance with the procedure set out in Annexure D of the treaty.
The unit operator appointed by the licensees needs to be approved by both
governments. Before production can commence, the unit operator would need to
submit for approval by both governments a development plan for the exploitation
of the reservoir.
A treaty such as the one discussed above is only binding on the governments, not
the licensees. Accordingly, there needs to be specific provision dealing with
international unitisation in the national laws of the countries involved. This is
required so that once an intergovernmental agreement is reached, the respective
governments can direct their licensees to cooperate with each other as per the
agreement reached. In the United Kingdom, model clause 288 gives the secretary of
state power to give directions to licensees about the manner in which the rights
conferred by [the] licence shall be exercised where he/she is satisfied that any strata
in the Licensed Area or any part thereof form part of an Oil Field, other parts whereof
are in an area [outside the United Kingdom], and the Minister is satisfied that it is
expedient that the Oil Field should be worked and developed as a unit in cooperation by the Licensee and all other persons having an interest in any part of the
Oil Field.
6.

Unitisation and other contractual arrangements

In addition to considering the national and international laws relevant to their
unitisation arrangements, licensees also need to be mindful of the impact of the
unitisation on other contractual arrangements. In particular, the joint operating
agreements (JOAs) entered into between the individual groups of licensees will still
remain in force, to govern the relationship between the licensees inter se. So in effect
the joint operating agreement and the unitisation agreement will exist side by side.
However, the unitisation agreement will usually provide that its terms will prevail
over the joint operating agreement to the extent of any inconsistencies.
Where joint operating agreement operations commenced before the unitisation
takes place, there may be issues that need to be dealt with for a smooth transition
from joint operating agreement operations to unit operations. In particular, the

See Schedule 1 of the Petroleum Licensing (Production) (Seaward Areas) Regulations 2008/225.

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