Unitisation refers to the process where producers jointly develop an oil or gas field according to its actual geophysical boundaries, rather than artificial licence boundaries. This ensures efficient development of cross-boundary fields. Unitisation agreements regulate how the field will be unitized and operated jointly. They may also address cost and production sharing. Pre-unitization agreements sometimes set terms for appraisal work before full unitization. While similar, unitization differs from 'pooling' arrangements, which involve joint development of separate fields rather than a single cross-boundary field.
Unitisation refers to the process where producers jointly develop an oil or gas field according to its actual geophysical boundaries, rather than artificial licence boundaries. This ensures efficient development of cross-boundary fields. Unitisation agreements regulate how the field will be unitized and operated jointly. They may also address cost and production sharing. Pre-unitization agreements sometimes set terms for appraisal work before full unitization. While similar, unitization differs from 'pooling' arrangements, which involve joint development of separate fields rather than a single cross-boundary field.
Unitisation refers to the process where producers jointly develop an oil or gas field according to its actual geophysical boundaries, rather than artificial licence boundaries. This ensures efficient development of cross-boundary fields. Unitisation agreements regulate how the field will be unitized and operated jointly. They may also address cost and production sharing. Pre-unitization agreements sometimes set terms for appraisal work before full unitization. While similar, unitization differs from 'pooling' arrangements, which involve joint development of separate fields rather than a single cross-boundary field.
relevant petroleum authority may have powers to compel producers to develop a
field as a single unit. Unitisation is the term used to describe this process, where the producers agree jointly to develop a particular field as a single unit, in accordance with the geophysical boundaries of the actual field rather than the artificial boundaries of the individual concession areas, determined at the time the licence or concession award was made. Unitisation can apply to several adjacent concession areas in one country (eg, in the United Kingdom, the Britannia gas field). It can also apply to cross-border fields if there is intergovernmental agreement on this issue (eg, in the United Kingdom and Holland, the UK/Dutch Markham Gas Field). Unitisations are becoming increasingly common. There are a number of reasons for this. As oil and gas areas mature, exploration blocks become smaller, making it more likely that two or more licences may relate to one field. At the same time, geophysical studies are become more sophisticated, leading to earlier identification of common fields. Governments are also taking a more proactive role in managing their oil and gas resources and are encouraging or directing producers to unitise common fields. A unitisation and unit operating agreement (in this chapter referred to as a unitisation agreement) is the principal agreement negotiated and entered into by the producers to regulate the basis upon which the unitisation will take place, and the way in which the unitised field will be operated between the unitising producers. In the United States and Canada, it is typical for producers to enter into two separate agreements a unit agreement and a unit operating agreement. The unit agreements deals with the creation of the unit (ie, to set out the parties respective interests in the unit, in terms of the sharing of costs and production, and the appointment of a unit operator). The unit operating agreement, on the other hand, then deals with how operations will be carried out on a day-to-day basis.1 Outside the US and Canadian context, however, it is standard for parties to enter into a single unitisation agreement, dealing with both creation of the unit and unit operations. In some cases, before the producers in a field decide to enter into a unitisation agreement, they will first enter into a pre-unitisation agreement in order to set out the terms upon which the parties may carry out any joint appraisal drilling and evaluation of the field. Such an agreement may provide for the way the cost of the appraisal studies is shared between the parties. This may need to be adjusted once it is determined how production in the field will be split between the parties (ie, once the parties unit equities are determined, as discussed below). 3.
Unitisation distinguished from other arrangements
Sometimes a decision is made by licensees to develop separate fields as one, for greater efficiency and pooling of resources. Such arrangements, often referred to as pooling, must be distinguished from unitisation. Pooling is an established part of US oil and
See para 4.2 of International Unitization of Oil and Gas Fields: the Legal Framework of International Law, National Laws, and Private Contracts, Association of International Petroleum Negotiators (AIPN).