Danielle Beggs, Justyna Bremen

redetermination committee. Often the terms of reference for the

redetermination will be included as an exhibit to the agreement. These terms
of reference would be expected to be based on the procedure that was
followed to work out the original determination of unit equities.
Consequences of the redetermination a redetermination of the unit equity
affects all the rights and obligations that the parties have under the
agreement, from the beginning. Accordingly, the agreement should then
provide for adjustment of any hydrocarbons that have already been lifted by
the parties before the redetermination. The financial investments made by
the parties, which are in proportion to their interests, will also need to be
adjusted. This is often done by giving the parties with the new, larger interest
the right to take an even greater proportion of the hydrocarbons going
forward. These additional rights would be designed to compensate those
parties for the entitlements they should have received before the
redetermination. Such a calculation is quite complex, because it also needs to
take account of the larger expenditure such a party should have made.
Typically (and this is the case under the AIPN model agreement), no
compensation will be given to parties for the fact that the market price of the
hydrocarbons may have changed.
Government consent the redetermination may need to be subject to consent
from the relevant regulatory authority, depending on the legal regime for
petroleum applicable to the unitisation.
Dispute resolution ideally the parties should be able to agree to amend the
unit equities they hold, but provision needs to be made for what will happen
if agreement cannot be reached. Typically, the matter will be referred for
determination by an expert. The agreement may employ different tactics to
ensure that any disputes as to redetermination are resolved quickly. One cited
example is the so-called pendulum procedure, under which an expert is
only able to adopt the position of one of the parties. This is designed to
encourage the parties to be reasonable in the positions they take.11 The expert
would be unlikely to adopt the position of a party who takes an extreme view,
if the position of the other party is more reasonable.

Because redeterminations can give rise to such complex legal and practical
problems, there have been some unitisations where the parties have elected not to
provide for a redetermination of their original unit equities.
7.6

Adjustments to the unit area

Just as the licensee groups participation unit equities can only be estimates based on
seismic data, as well as perhaps some appraisal wells, the extent of the unit area (that
is, the field underlying the licences held by the licensee groups) can also only be
estimated at the time the unitisation agreement is entered into. A change in the area
will usually mean that there will be a change in the licensee groups participating

11

See paragraph 1-743 of United Kingdom Oil and Gas Law (see n 3 above).

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