CHAPTER
ONE
GENERAL
INTRODUCTION
1.0.0 Introduction/Background to the Study
Unitization occurs when licensees
of oil and/or gas reserves pool their individual interests in return for an
interest in overall unit. It is then operated by a single company on behalf of
group. This happens when a field lies under different licences with differing equity
interests[1].
Geology, and nature in general, are
never perfect. Given the migratory nature of oil and gas, a hydrocarbon
reservoir will often straddle two or more licences or contract areas; indeed,
in certain instances, a hydrocarbon reservoir may even straddle international
borders[2].
One of the primary objectives of
host governments and international oil companies (“IOCs”) is to maximize the
economic recovery of petroleum from the “common” hydrocarbon reservoir. Unitization
is an approach which the oil and gas industry has developed to ensure that, to
the extent possible, this is achieved[3].
In essence, unitization is the joint
development of a hydrocarbon reservoir which extends across two or more licence
or contract areas (if the field is governed by a production sharing contract
regime) in order to ensure the efficient production of the reservoir and to maximize
the economic recovery of petroleum from such licences of the contract areas[4].
The net effect of this is that each license
group agrees that the license or contract areas are aggregated as a “unit”,
with each owner receiving a percentage interest in the unit (“unit interest”)[5].
This
study appraise the concept of unitization in the Oil
and Gas sector: A Comparative Analysis of
Nigeria and Sao Tome and Principe. Also, it presents
a general overview of the principles of unitization, how unitization is
commonly documented and what issues generally need to be considered by IOCs when
embarking on a unitization.
1.1.0 Statement of the Problem
Unitization in the oil and gas
sector can be problematic owning to data exchange between the license groups. In the bid to preserve the confidentiality of
each nation’s own data acquired in respect of their license, it give rise to a
lot of issues and concerns among the parties involved.
In practice, negotiation of a
confidentiality agreement between the license groups can be a lengthy process
particularly where parties fail to agree on the precise purpose for the use of
confidential data and subsequently request to see data which is beyond the
scope of the confidentiality agreement in place for protecting the
confidentiality of the data already exchanged[6].
One other problem in unitization is
that of the pre- unitization agreement which parties need to be aware is that interests
of the parties contained in the pre-unitization agreement may not necessarily
be reflected in the subsequent unitization agreement[7].
This is because the parties will find out more about the reservoir through
geological and reservoir engineering studies which will be undertaken as finalization
of the unitization agreement, and subsequently once one or more
redeterminations are undertaken and it is against this background that this
study seeks to investigate the
concept of unitization in the Oil and Gas sector using Nigeria and Sao Tome and
Principe for analysis.
1.2.0 Objectives of the Study
The
main objective of this study is to appraise
the concept of unitization in the Oil and Gas sector: A Comparative Analysis of Nigeria and Sao
Tome and Principe. The specific objectives of the study are;
1. To examine the fully-termed
unitization agreement and to find out better ways on how unitization could be
carried out
3. To assess the Nigeria, Sao Tome and Principe and the
International Legal Framework and to reveal the pros and cons for the
edification and benefit of both countries
2.
To evaluate the taxonomy and Joint Development Agreement and how its contents
for a future guide
4.
To contribute to knowledge
1.3.0 Research Questions
The
following questions will be addressed in the course of the study;
1.
What is the fully-termed unitization agreement and
the benefits to the both countries?
3. How has the International Legal Framework helped in unitization of the Nigeria,
Sao Tome and Principe?
2.
What are the taxonomy and Joint Development Agreement in this case?
1.4.0 Scope of the Study
This
study focuses on the concept of unitization in the Oil and Gas sector. It takes
an in-depth look at the key legal elements of a fully-termed unitization agreement, the Nigeria, Sao Tome and Principe and the International Legal Framework and evaluate the taxonomy of Joint
Development Agreement.
The scope covered in this study
is limited to the examination of the legal framework, concept of unitization in
the Oil and Gas sector, pre-unitization agreement, Joint Development Agreement and
Analysis of Nigeria and Sao Tome and Principe.
1.5.0 Justification of the Study
The
need to carryout study of this nature cannot be overemphasized as this study
will be of immense help to nations on how they can better reach a peaceful
unitization agreement among themselves. The justification for carrying out the
research emerged from a review of the literature on oil and gas joint venture
operations which straddle more than one country’s borders.
Visit www.researchshelf.com or call +2347069373637,
+2348056128950 for complete project materials, project topics, past examination
questions and answers, assignments, research proposals, meet fellow students online, meet with
lecturers and ask for help, read and post news (Campus News). Registration is
Free Of Charge (FOC).
Note also that our Desktop and Mobile
App will soon be launched where you can view all the above features on your
mobile devices and don’t forget to request for any material you need that is
not on our website through contact us page.
[1] Allen, F. (2012)
‘Oil and Security in the Gulf of Guinea: Reflections on the External and
Domestic Linkages. Journals of Sustainable Development 4 (5), 132.
[2] Oduntan,
O.T.(2007) ’Modalities for Post Boundary Dispute, Cross Border Unitization
Upstream Hydrocarbon Exploitation in the Gulf of Guinea? 7 OGEL 37
[3] Pinto,
G. (2013). Upstream Oil and Gas Legal Frameworks: Brazil and the United States
Compared. West Virginia Law Review 115, 975–1004.
[4] Blanchard, J.
M., (2005). Linking Border Disputes and War: an Institutional-Statist Theory.
Geopolitics, 10(4), pp. 688-711.
[5] Okafor, C.B
(2006) Joint Development: An Alternative Legal Approach to Oil and Gas
Exploitation in the Nigeria-Cameroon Maritime Boundary Dispute? International
Journal of Maritime and Coastal Law 21, 489.
[6] Churchill, R.R
(2000) Joint Development Zones: International Legal Issues" in H. Fox ed.,
Joint Development of Offshore Oil and Gas vol. II (London: British
Institute of International and Comparative Law) 55 - 67.
[7] Yusuf, Y.M.
(2009) Is Joint Development a Panacea for Maritime Boundary Dispute and for the
Exploration of Offshore Transboundary Petroleum Deposits? IELR 4.
No comments:
Post a Comment