Danielle Beggs, Justyna Bremen

risk and cost. It will generally be provided that such operations may be conducted by
a party, but only with prior approval of the operating committee. At the core of a
unitisation agreement is the intent that the field should be operated as a unit for the
benefit of all the parties. Accordingly, approval for sole risk operations may only be
given where the operations will not prejudice unit operations. The agreement may
provide that if the sole risk operations lead to a discovery and the operating
committee decides that further work is appropriate, then all further work will be
undertaken by the unit operator. The party that undertook the sole risk operations
would then be reimbursed for the cost of the work it had undertaken. All
hydrocarbons recovered will form part of the unit substances divided between all the
unit parties.
7.10

Non-unit operations
A typical unitisation agreement will also deal with non-unit operations (ie, any
operations which are not unit operations or sole risk operations). This usually
describes any operations which are undertaken by a party or licence group within its
licence area, but outside the unit area. The agreement may allow parties to use unit
facilities/property for non-unit operations. This right is usually subject to some
limitations. As with sole risk operations, non-unit operations must not prejudice any
unit operations. Additionally, unit facilities can only be used for this purpose if there
is spare capacity.
There are a number of different approaches to how such operations may be treated
by the parties in the unitisation agreement. The AIPN model agreement, for example,
provides for a number of different options. For instance, the non-unit operations may
be carried out by the unit operator, or by the operator for the relevant group of
licensees (ie, the operator under the relevant joint operating agreement). Naturally,
such operations are at the relevant parties own cost and risk. Usually the parties will
not be charged for using the unit facilities/equipment, but there may be some
circumstances where a fee will be payable (most commonly if the parties use the
facilities more than had been allocated to them according to their unit equity).

7.11

Disposal of hydrocarbons produced

The agreement will typically provide that each party will be free to dispose of its
share of hydrocarbons produced as a result of the unit operations. The agreement
will provide that regardless of which portion of the field the hydrocarbons actually
came from, the hydrocarbons owned by the licensees shall be deemed to have been
produced from that licensees tract and attributed to that licensees licence interest.
Depending on the legal regime applicable, this may be important for the purposes of
tax law and any other laws which require the hydrocarbons to be attributed to a
particular licence interest.
The AIPN model agreement sets out a detailed procedure dealing separately with
the disposal of crude oil and gas. How this is dealt with by parties to a particular
unitisation will depend on what hydrocarbons the parties anticipate will be
produced, and what arrangements for their lifting are in place at the time the
agreement is entered into.

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