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Vol 23 No 3 March/April 2018

Book of the Month

Cover of Scamell and Gasztowicz on Land Covenants

Scamell and Gasztowicz on Land Covenants

Price: £225.00

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Accounting Procedures in Joint Operating Agreements: An International Perspective

Edited by: Eduardo G Pereira, Carlos Eduardo Vieira da Silva, Eduardo Seixas

ISBN13: 9781909416604
Published: June 2016
Publisher: Globe Law and Business
Country of Publication: UK
Format: Hardback
Price: £154.00

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The joint operating agreement (JOA) is probably one of the most relevant agreements in the upstream sector. The costs and risks involved in any upstream project are likely to be too great for any company to bear alone, and that’s why it is fairly common for oil and gas companies to combine their efforts with others through joint ventures.

The costs of a joint venture are usually controlled through mechanisms such as work programmmes and budgets, authorisations of expenditure, and the awarding of contracts. But none of these mechanisms are going to regulate when and how the operator can issue a cash call, how the operator can charge the costs related to the joint venture, or how a non-operator can audit those costs.

All of these detailed financial controls are exercised through agreed accounting procedures. Usually, these accounting procedures are set out in an attachment to the JOA. The attachment can be fairly lengthy and complex since it deals with one of the key issues of the consortium: expenditure. If the accounting procedures do not establish clear rules in that area, costs and associated exposure could increase significantly for the parties involved.

This new publication analyses and explores in detail what accounting procedures should apply, what the main issues are for an operator and a non-operator; and how the standard model forms address those issues. Several sets of JOA model forms (from AIPN, OGUK, Greenland and Norway, for example) are explored.

Through the book, international oil companies, independents, national oil companies, legal advisers and consultants can learn how to perfect their accounting procedures and understand the risks and issues that they might face in the future.

Energy and Natural Resources Law
1. Introduction

Chapter one: General provisions

Joint accounts, credits and currency exchange
Cash Calls
Procedures for unschedule direct charges
Industry forum (from Norway)

Chapter two: Chargeable costs and expenses

2.1 Direct charges
Licences and permits
Salaries, wages and related costs
Employee relocation costs
Offices, camps and miscellaneous facilities
Equipment, materials and utilities owned by the operator and affiliates of operator
Technical services
Damages and losses to the property
Litigation, dispute resolution and associated legal fees
Taxes and duties
Decommissioning and reclamation
Other expenses

2.2 Indirect charges
Funding and finance fees (from OGUK JOA)
General research and development (from Norway JOA)

2.3 Materials & inventory
Materials furnished by the operator
Premium prices

2.4 Disposal of materials
Material purchased by a party or affiliate
Division in kind
Sales to third parties

2.5 Inventory
Periodic inventories
Special inventories

Chapter three: Sole risk account

What is a sole risk?
What are the main consequences for the accounting procedures?

Chapter four: Disputes

What are the main areas for conflict?
How to resolve them?

Chapter five: Accounting procedures on host government contract
Key differences from the JOA maccounting procedures
Sensitive issues for the host government, national oil company and investors
Dispute resolution