Read Your Agreement

I was working for one of the big operators in the North Sea, and one morning the Exploration Manager asked me to be on standby for a Joint Operating Committee meeting.

Meetings of the Operating Committee are usually highly technical, dealing with decisions such as whether, when and where to drill an exploration well. Lawyers do not generally attend unless a contractual or legal problem arises.

At about 11.30 am the Exploration Manager phoned and asked me to attend urgently. I asked what the problem was, but all he would say is “He’s got a copy of the JOA.” I reached for my copy of the Joint Operating Agreement and hurried to the meeting. This is always a nervous moment. I knew there was a problem, but had no idea what it was.

The problem was Bill, a forceful American representing one of the non-operators. He was waving a copy of the Joint Operating Agreement. He claimed to have read it on the plane.

A JOA provides in detail for the conduct of Operating Committee meetings, and the voting mechanism by which commercial and technical matters are decided.

A draft agenda for the meeting is circulated by the operator ten days or so prior to the meeting. This will include details of any proposed well. The non-operators may add alternative or competing proposals up to five days or so prior to the meeting. No new proposals may be added to the agenda after that except by unanimous consent. This ensures that no co-venturer can be ambushed by a proposal that they have not had the chance to consider.

Bill wanted to make a completely new proposal for the location of the well, and he insisted that the JOA allowed him to do so as long as one other party seconded the proposal. This might have been the case at Bill’s golf club in Houston, but JOAs don’t work like that. The meeting had descended into chaos.

We clashed immediately. He waved the JOA at me and said: “Have you read your operating agreement?” I replied: “Bill, I wrote it.”

That took the wind from his sails, and after a little more bluster Bill went quietly.

Chris Thorpe

Chris Thorpe is a respected independent lawyer in the upstream oil and gas industry, and an established lecturer and author. Chris has a LLB in law from Magdalene College, Cambridge and trained as a barrister in London. He worked for eight years' as an in-house lawyer for BP and Marathon. Since 1991, Chris has run his own upstream legal practice, CPTL, which has acted for many upstream clients. He has extensive experience of international upstream transactions, principally in the North Sea, the FSU, Africa and the Middle East. Chris has spoken at many UK and International Conferences and Seminars, both public and in-house. His most popular current lecture is Fundamental of Upstream Petroleum Agreements, a two-day course with accompanying book.