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123 Cards in this Set
- Front
- Back
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7. NOC
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National Oil Company
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7. AIPN
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The Association of International Petroleum Negotiators - Has developed a Model Form International Study and Bid Group Agreement in order to minimize transaction costs in entering an agreement between parties.
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7. Unitization
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The consolidation of interests covering all or part of a common source of supply (i.e. a single field).
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7. Are mineral rights transferred to oil companies these days?
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Outside of the U.S., virtually no country transfers rights or title to oil in the ground when it grants a concession or production sharing agreement.
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7. How important is confidentiality in the bidding process?
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Very important! Participants in a joint bidding agreement will want the terms of their bid and the data upon which it is based kept confidential.
Ther eis an alternate provision that allows disclosure to third parties in order to solicit their participation in the bidding process but only if they agree to maintain the confidentiality of the data, and agree not to compete against any parties in the target area for a set period of time. |
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7. What is a farmout?
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A farmout is an agreement by one who owns drilling rights to assign all or a portion of those rights to another in return for drilling and testing on the property. If oil is found, they enter into a assignment (3/16)
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7. What is the difference between a farmout and an operating agreement?
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The primary distinction between an operation gagreement and a farmout agreement is that a farmout agreement is a contract where one party earns an interest in an oil and gas lease owned by another.
An operating agreement is entered into to define the rights and duties of parties who already own joint interests in a lease or a drilling unit. Farmees usually "carry" the farmor for all or a portion of the drilling costs in a farmout, while the parties to an operating agreement generally share the costs of drilling. |
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7. JOA
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Joint Operating Agreement
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7. What are the two main functions of a JOA?
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1. to establish the basis for sharing rights and liabilities among parties.
2. To provide for the manner in which operations will be conducted. |
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What are General Principals?
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A rule that is common enough in legal systems that it is elevated to international law. Rules that come from domestic law, not rules that come out of an agreement between states. For example: Prescription in criminal law (the idea that you cannot be persecuted for a crime after a certain number of years) can be found in many legal systems.
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What are the four important elements that define a state? **
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1. Defined Territory
2. Permanent population 3. Government 4. Capacity to conduct international relations |
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How does a state get recognition?
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• The executive or formal power of a foreign government recognizes it.
• Sometimes it is done by an explicit act – membership to an organization that accepts only states. |
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What are the effects of statehood?
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• Sovereignty over the territory, natural resources
• Status as a legal person • Capacity to join with other states in international law i.e. enter into treaties and join in the creation of customary law. • Capacity to create private international law with corporations. |
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Pacta sunt servanda
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A treaty binds only those that are parties to it. (In the Vienna convention, article 26). It is also a principle of customary law.
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Formation of Treaties – What does it take to be bound?
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1. Negotiation of the treaty
2. A head of state signs the treaty o They must then refrain from acts which would defeat the object and purpose of the treaty. (Article 18 of Vienna Convention) 3. The lag before the state ratifies it is useful for a state to bring their own laws into compliance with the treaty. 4. Advice & Consent (Ratification) The president signs and submits a treaty to the senate. The senate must give 2/3 consent. The president then ratifies the treaty. The president doesn’t HAVE to ratify the treaty after 2/3 consent is given. |
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Accession
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"Accession" is the act whereby a state accepts the offer or the opportunity to become a party to a treaty already negotiated and signed by other states. It has the same legal effect as ratification. Accession usually occurs after the treaty has entered into force.
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“Jus Cogens” or just “jus” - What are they?
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Peremptory Rules of International Law - Not a new category of international law, it goes to the substance of the rule and says that there are certain rules that are so important that nothing else can trump it. They can only be trumped by another jus cogens rule.
• The problem with them, is that they may require a state to be bound against their consent. • Some states, flat out, refuse to acknowledge they exist. |
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What are examples of Jus Cogens?
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• Prohibition on torture
• Prohibition against piracy • Prohibition on slavery |
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What are 3 forms of international law in the U.S.?
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1) A “Treaty”
2) Congressional-executive agreements. 3) Presidential Executive Agreement |
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Foreign Sovereign Immunity
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The immunity of a state from the jurisdiction of the domestic courts of another state. (Of course there are some exceptions)
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The Act of State Doctrine
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Deals with the legal effects of certain acts of a foreign state.
• Goes to the idea that the courts of a state (U.S.) cannot sit in judgment of the acts of another state. • Not just practice, but the laws as well. Our courts will not sit in judgment on the legality of laws of another state. • In practice, the courts might have to apply the Act of State Doctrine between two parties (it doesn’t need to involve a foreign state) it only needs to involve the acts of a foreign state. |
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FSIA – U.S. FOREIGN SOVEREIGN IMMUNITIES ACT OF 1976
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The general rule is immunity, with some exceptions.
• The FSIA does not supercede existing treaties. - Amended 1990 to add arbitration |
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What are the exceptions to FSIA?
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• Waiver – You can waive your rights.
• Commercial activity – there are three areas. • Property taken in violation of international law or other conditions. o States confiscating foreign injuries. • Injury • Arbitration agreement (enforced in certain conditions) • Money damages for extrajudicial killings. o Foreign state must be designated as a state sponsoring terrorism. |
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Doctrine of Comity
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Permits a court to decline to exercise jurisdiction in certain circumstances in deference to the laws and interests of a foreign country.
Courts consider the consequences of another state’s courts taking jurisdiction vis a vis international relations. |
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Forum non conveniens
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Permits a court to dismiss a case where an adequate, alternative forum exists and public and private interests favor having the trial in that forum.
Fairly limited use domestically, but used to some extent in suits with an international element. It is essentially an avoidance doctrine. A recent court decision said that a court could dismiss on forum non conveniens whether or not they have determined that they have jurisdiction. |
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Reserves
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Oil in the ground that has not been pumped out that could be pumped out economically (could be produced).
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OIP
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Oil in place. Oil in the ground that includes oil that is not economically feasible to produce.
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Fracing
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Hydraulic fracturing is a method used to create fractures that extend from a borehole into rock formations, which are typically maintained by a proppant, a material such as grains of sand or other material which prevent the fractures from closing. The method is informally called fracing (pronounced "fracking") or hydrofracing.
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Proved reserves
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Those reserves claimed to have a reasonable certainty (normally at least 90% confidence) of being recoverable under existing economic and political conditions, and using existing technology.
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Probable reserves
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Attributed to known accumulations, and claim a 50% confidence level of recovery. Industry specialists refer to this as P50 (i.e. having a 50% certainty of being produced). Referred to in the industry as 2P (proved plus probable).
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Possible reserves
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Attributed to known accumulations which have a less likely chance of being recovered than probable reserves. This term is often used for reserves which are claimed to have at least a 10% certainty of being produced (P10). Reasons for classifying reserves as possible include varying interpretations of geology, reserves not producible at commercial rates, uncertainty due to reserve infill (seepage from adjacent areas), projected reserves based on future recovery methods.
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LNG
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Liquefied natural gas or LNG is natural gas (Predominantly methane, CH4) that has been converted temporarily to liquid form for ease of storage or transport.
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CNG
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Compressed Natural Gas (CNG) is a fossil fuel substitute for gasoline (petrol), diesel, or propane fuel. Although its combustion does produce greenhouse gases, it is a more environmentally clean alternative to those fuels, and it is much safer than other fuels in the event of a spill (natural gas is lighter than air, and disperses quickly when released).
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LPG
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Liquefied petroleum gas (also called LPG, GPL, LP Gas, or autogas) is a mixture of hydrocarbon gases used as a fuel in heating appliances and vehicles, and increasingly replacing chlorofluorocarbons as an aerosol propellant and a refrigerant to reduce damage to the ozone layer. LPG is synthesised by refining petroleum or 'wet' natural gas, and is usually derived from fossil fuel sources, being manufactured during the refining of crude oil, or extracted from oil or gas streams as they emerge from the ground.
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Mineral rights
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The rights to remove minerals, oil, or sometimes water, that may be contained in and under some land.
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Split estates
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The surface is owned by one person and the minerals are owned by another.
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The rule of capture
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In int’l law they say it doesn’t apply.
The U.S. Rule – you can produce “the hell” out of a well, despite the fact that there may be someone else’s well relatively nearby. The general rule is that the first person to "capture" such a resource owns that resource. For example, a landowner who extracts or “captures” groundwater, oil, or gas from a well that bottoms within the subsurface of his land acquires absolute ownership of the substance, even if it is drained from the subsurface of another’s land. |
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“The common heritage of mankind”
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Common law principle applied with regard to the deep seabed, and codified in some treaties. It prohibits states from proclaiming sovereignty over any part of the deep seabed, and requires that states use it for peaceful purposes, sharing its management and the benefits of its exploitation. Due to the ideological differences of developed and developing states, the common heritage of mankind principle has been interpreted in various ways. These interpretations have not been reconciled and there has been no juridical consideration of the common heritage of mankind principle to clarify them.
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FDI
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– Foreign direct investment in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. When someone from the U.S. walks in with a big check and invests it directly in another country. All Oil & Gas companies are FDIs.
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Territorial sea
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A belt of coastal waters extending at most twelve nautical miles from the baseline (usually the mean low-water mark) of a coastal state. The territorial sea is regarded as the sovereign territory of the state, although foreign ships (both military and civilian) are allowed innocent passage through it; this sovereignty also extends to the airspace over and seabed below.
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State waters
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In the U.S. states have 3 nautical mile off-shore rights. (One or two have 10 miles).
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Internal waters
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A nation's internal waters covers all water and waterways on the landward side of the baseline from which a nation's territorial waters is defined. It includes waterways such as rivers and canals, and sometimes the water within small bays.
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Contiguous Zone
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The contiguous zone is a band of water extending from the outer edge of the territorial sea to up to 24 nautical miles (44 km) from the baseline, within which a state can exert limited control for the purpose of preventing or punishing "infringement of its customs, fiscal, immigration or sanitary laws and regulations within its territory or territorial sea".
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OCS (Outer Continental Shelf) / Continental Shelf
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The continental shelf of a coastal nation extends out to the outer edge of the continental margin but at least 200 nautical miles (370 km) from the baselines of the territorial sea if the continental margin does not stretch that far. The outer limit of a country's continental shelf shall not stretch beyond 350 nautical miles (648 km) of the baseline, or beyond 100 nautical miles (185 km) from the 2,500 meter isobath, which is a line connecting the depths of the seabed at 2,500 meters.
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UNCLOS
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(United Nations Convention on the Law of the Sea) – Unpopular in the U.S. when it came out because once you get to the deep sea bed. The U.N. said that drilling in the deep sea bed would require drillers to pay a tax to the U.N. that they would re-distribute to developing countries. The U.S. didn’t ratify it.
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EEZ (Exclusive Economic Zone)
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200 nautical miles from a country’s baselines. It includes the territorial sea and its contiguous zone. A coastal nation has control of all economic resources within its exclusive economic zone, including fishing, mining, oil exploration, and any pollution of those resources. However, it cannot regulate or prohibit passage or loitering above, on, or under the surface of the sea, whether innocent or belligerent, within that portion of its exclusive economic zone beyond its territorial sea. You cannot bar ships or pipelines.
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Isobath
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a contour line on a map connecting points of equal depth in a body of water or below the earth's surface
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Strategic Oil Reserve
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Oil kept by the Gov in case of an emergency since the 1970's. 600 MB
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Barrel
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41 gallons
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ton of oil
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7 barrels
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Basin
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Look for oil in a basin. Needs source rock, res rock, and cap rock
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drilling mud
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clay that can plug the hole.
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Best Oil fields
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Limestone (compressed coral) with lots of permeability and porosity
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How do you Acquire title
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1. Occupation
2.Accretion (sediments added to increase land size) 3. Prescription (Adverse Possession) 4. Voluntary Cession 5. treaties of Peace 6. Conquest |
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Boundry Deleniation
v. Boundry Demarcation |
Boundry on Paper.
v. Boundry marked by people on the ground. |
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Usi Posedatis
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A colony enheriting the previous boundaries
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Res Communis
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Community land (high seas)
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Res Nullias
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No ones land ( Antartica)
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Amount of oil probably left
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1.9 Trillion Barrels
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Trumen Doctrine
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OCS is the property of the U.S.
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MMS
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Mineral Management services. Conducts off-shore bidding
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Acsession
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Country says they won't sign treaty but will follow it.
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Electric Capacity of the the U.S.
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900 Giga Watts
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Oil usage in the U.S.
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86 million barrels per day
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Forced pool
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Driller can force land owner to allow drilling b/c of spacing requirments. Sometimes it requires 2/3 of land owners to be signed up.
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Utinization
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plan of distributing proceeds among multiple owners of a formation.
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Homestead act
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people got the mineral rights. Eastern U.S.
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Stockman Act
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people didn't get the mineral rights
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Oil lease is an easment that has dominence
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Oil driller can use as much as the top land as he needs. This is the common law rule that is not always followed.
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Mediation, Conciliation, Negotiation
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All involve a third party that has no power but to keep them in a room.
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Arbitration
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Has power to make a decision. usually 3 arbitrators. D picks one, P picks one, two arbs pick the third. If they can't decide on third than Arb. body picks the third.
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Bremen v. Zapata
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U.S. courts extend Comity to english courts on Choice of Law provision.
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Sovereign Immunity for oil companies
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A company owned 51% by a state generally has immunity. But if the company is engaged in commercial business that impacts the U.S. then no immunity. Carey v. National oil held that due to intermediaries no direct impact was felt.
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How can a country oil company not have sovereign immunity
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1. Waived
2. Commercial activity carried on in the U.S. 3. Direct effect on the U.S. |
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BIT
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Bilateral Investment Treaty. An agreement establishing the terms and conditions for private investment by nationals and companies of one state in the state of the other. BITs are established through trade pacts. Usually have mandatory arbitration clauses favorable to the U.S.
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Oil Nationalization
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International law requires reperations but no infrorcement mechenism exists. NAtionalization probably doesn't meet international shoe standard.
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Uniform foreign judgement Act
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If foreign judgement looks good, it should be upheld.
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Profit sharing
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Most of the world. Oil Co drills and if they hit oil they will get their costs out before splitting profits with country.
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Price Claw back clause
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At certain oil prices the percentage share between Oil Co and Country will change.
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Relinquishment Claues
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After a period of time, the oil Co needs to give back half of the acres in the lease.
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Land requirment Clauses
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1. Force Oil co to refine in the country.
2. Negotiate amount of oil stored in the country. |
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Local Content Clauses
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1. Carrying Interest: percentage goes to local companies
2. Use of local nationals. 3. Percentage of supplies purchased locally 4. Social Benifits: $ amount to train engineers, $ amount to schools. |
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Outer Continental Lands Act
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sets up bidding process.
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Taxes v. Royalties
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Oil Co. prefer to to pay taxes b/c taxes are deductible. Although IRS could say that part or all of tax is really a royalty.
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Booking Reserves
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Oil in the ground shown on a companies balance sheet.
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Service Buy Back Agreement
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Paying Oil Co fees for services. Oil company has rights to buy 50% of oil at market price.
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Clauses for Oil Co in Production Sharing K
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1. Stabilization Clause, in case the Gov changes the law
2. Manditory Arbitration: Choice of law and Venue |
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Joint Ventures
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1. By Equity: Set up new company owned and staffed by oil co and Counrty. Country contributes land, Co contributes wells
2. By K: negotiable |
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Force Majeure
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Act of god: War.
Relieves Oil co of obligations |
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Employment provision
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One nationality or race given preference in hiring
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Investment Provision
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Country tries to get gasoline or other products made in the country
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Oil production and usage per day
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World Produces 88 mbd.
U.S. consumes 22 mbd. U.S. produces 8 mbd. |
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IEA
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Treaty that created storage of oil for the importers. Chinan dn India are not in it.
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JOA essential provisions
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1. List parties and their %
2. Area covered 3. Fees by well or monthly 4. Removal of operator (gross negligence) (W/O cause removal provision) 5. Non-Consent penalty (investor that sits out can't get in until others get 300-500% return) or an Black out provision (investor that sits out can will get nothing from new well) 6. Limits on expenditure (limites operator on amount they can freely spend) 7. Indemnity (Operator can only be sued for GROSS Negligence) 8. Lien for Operator (In case investors don't pay expences) 9. Fiduciary Duty (Ahead of creditors in case of bankruptcy) 10. AMI (Area of Mutual Interest: partners offered leases for 1 mile) |
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Farmout
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owns land
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farm in
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Drills
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Botton Hole Money
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pay someone fee per foot of drilling
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working Interest
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Investor pays their share of costs to drill
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Carred Interest
or Promoted Interest |
Doesn't pay costs but has a share
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Operating Committee
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Many partners oversee the operator on large complex deals
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ATCA
Alien tort Claim Act |
Alien can bring action in U.S. Fed Cts for violation of laws of nations (Murder, Torture, Slavery, Piracy, Genocide, Protracted Detention, racial/ethnic discrimination) or Customary Law (International common Law)
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Proved Reserves
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Already producing
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Probable Reserves
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Haven't been drilled but near a proven well. 50% discount
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Possible Reserves
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Hasen't been drilled. 755 discount
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Foreign Corrupt Practices Act
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Issuer: public Offerers
Requires "substantial certainty" |
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State Waters
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3 miles
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Territorial Sea
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12 miles. National Jurisdiction
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Contiguos Zone
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24 miles
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EEZ
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Exclusive econimic zone. 200 miles
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UNCLOS
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United Nations Convention on the Law Of the Sea.
1. 200 miles Automatically 2. Need to show proof for anything past 200. 3. some say 350 mile maximum but really 100 miles past 2,500 meter isobath. |
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Alien Tort Claims Act (1789) (lay dormant for almost 200 years)
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Requires three things to get jurisdiction:
1. The plaintiff is an alien 2. The tort was allegedly committed against him/her 3. The tort violates “the law of nations” or a treaty ratified by the U.S. |
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What is the Sosa v. Alvarez-Machain case?
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U.S. government hires people to drag a wanted Mexican drug cartel member out of Mexico into the U.S. so he could be arrested. He claims it was illegal under the ATCA. Is there jurisdiction?
The 9th circuit says he has jurisdiction (Or Alien Torts Statute "ATS"). The Supreme Court says no. The supreme court says there are only 3 offenses which "violate the law of nations" - piracy, violation of safe conduct, violation of the rights of ambassadors. The door is open to other causes of actions (but not very wide) and probably not unless congress explicitly says so. Dissent: No other causes of action ever. Door is not open. They do not approve of a process that usurps lawmaking power & converts norms of international law into american law. |
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Madrid Protocol
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Turns Antartica into a national park for the next 50 years.
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Tight Hole
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Someone who won't say if a well they drilled is producing or not.
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dispute resolution tools
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1. mini trail- informal process when there is a fact question. The outcome is used to prepare for trail or to push through negotiation.
2. Mediation 3. Conciliation 4. Negotiation |
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3 Arbitration bodies
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U.S.
London UNCITRAL United Nations Commission on International Trade Law (preferred) |
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Arbitration History
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There was a common law rule that arbitration was not binding But the passage of the U.S. Arbitration Act made arbitration binding.
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Reg. D
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Cuts you some slack with the SEC. It is only available with rich people. Limited to 35 offerees. You write your own little prospectus.
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profit oil
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The amount of production, after deducting cost oil production allocated to costs and expenses, that will be divided between the participating parties and the host government under the production sharing contract.
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cost oil
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A portion of produced oil that the operator applies on an annual basis to recover defined costs specified by a production sharing contract.
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distinction between an operating agreement and a farmout agreement
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The primary distinction between an operating agreement and a farmout agreement is functional. - A farmout agreement is a contract by which one party earns an interest in an oil and gas lease owned by another.
- An operating agreement is entered into to define the rights and duties of parties who already own joint interests in a lease or a drilling unit and to combine those interests for joint operations. - Another distinction is that the farmee ‘carries” the farmor for all or a portion of the drilling costs in a farmout, while the parties to an operating agreement generally share the costs of drilling. - Typically those who enter into a farmout agreement will also execute an operating agreement to govern their rights after they have performed the farmout contract. |
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concession
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A grant extended by a government to permit a company to explore for and produce oil, gas or mineral resources within a strictly defined geographic area, typically beneath government-owned lands or lands in which the government owns the rights to produce oil, gas or minerals. The grant is usually awarded to a company in consideration for some type of bonus or license fee and royalty or production sharing provided to the host government for a specified period of time.
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Production sharing Agreement
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The country grants to the Oil Co right to explore a lot in exchange to the Co gets oppertunity to recover costs and make a specified profit.
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