Oil and Gas Overview Harry W. Sullivan, Jr. Adjunct Professor Texas A&M University, School of Law Ft. Worth, Texas, U.S.A. June 3, 2017
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Origin of Hydrocarbons Source Rock Where hydrocarbon originates Reservoir Rock Where hydrocarbon is stored Seal Rock Prevents seepage Trap Anticlines Faults Pinchouts Source: www.greatsouthlandminerals.com/main/technical
Identification of Drill Prospects Seismic Geophones record the time it takes for waves to reflect/refract off rock formations and travel back to the surface à Speed * Time = Distance (depth) Seismic Source Geophone Array Reflected Waves Geologic Trap Source: Baker Hughes
Offshore Exploration
Identification of Prospects Drilling Prospective geologic structure has been identified How do we verify the interpretation? à Drill a well Numerous wellbore orientations Vertical Directional Horizontal Multi-Lateral
Well Completion Example Drilling Well Cementing Perforating Running Producing Logging Operations Tubing Casing Oil Sealing Rock Gas Zone Oil Zone
Typical Oil and Gas Project Lifecycle Explore Appraise Develop Produce
Complete Value Chain Oil and Gas Value Chain Upstrea m
Oil and Gas Industry Lifecycle Regional Study Seismic Acquisition Seismic Option Agreement Granting Instrument Acquisition Bid Round Direct Negotiation S I G N A T U R E Definition of Prospect(s) Seismic / Drill Well D I S C O V E R Y Appraisal Activities C O M M E R C I A L I T Y Plan of Development Development Exploitation Production Termination Expiration Decommissioning 12
Prospection Contracts Seismic Purchase/License Regional Study Service Contracts Seismic processing/reprocessing Title Opinion Seismic (G&G) Acquisition Agreement Seismic Acquisition Seismic Option Agreement Seismic Lease Agreement / Prospection Agreement / Seismic Option Agreement Right of Way Agreements Claims/Damages Releases Seismic License to third party Area of Mutual Interest (AMI)
Lease Acquisition Contracts Granting Instrument/License Registration Granting Instrument Acquisition Bid Round Direct Negotiation S I G N A T U R E Service Contracts Land Broker Agreement Title Opinion Environmental Baseline Study Bid and Study Group Agreement AMI ORRI Agreement Joint Operating Agreement Assignment/Novation of Lease Registration Farmout Agreement / Sale and Purchase Agreement (SPA) Bond or Guarantee
Exploration Contracts Seismic (G&G) Acquisition Agreements Contribution Agreements Dry Hole / Bottom Hole Definition of Prospect(s) Seismic / Drill Well Service Contracts Seismic (G&G) Contracts Seismic processing/reprocessing Environmental Services Title Opinion ORRI Agreement Farmout Agreement / SPA Assignment/Novation of Lease Registration Joint Operating Agreement Pooling Agreement Drilling Services Contracts Drilling Rig Drilling Related Services Purchase Orders (PO) Claims/Damages Releases
Appraisal Contracts Seismic (G&G) Acquisition Agreements Contribution Agreements Dry Hole / Bottom Hole D I S C O V E R Y Appraisal Activities C O M M E R C I A L I T Y Service Contracts Seismic (G&G) Contracts Seismic processing/reprocessing Farmout Agreement / SPA Assignment/Novation of Lease Registration Joint Operating Agreement Unitization Agreement Drilling Services Contracts Drilling Rig Drilling Related Services Purchase Orders (PO) Claims/Damages Releases
Development Contracts Service Contracts Pre-FEED /FEED Contracts Farmout Agreement / SPA Assignment/Novation of Lease Registration Joint Operating Agreement Unitization Agreement Plan of Development Development Drilling Services Contracts Drilling Rig Drilling Related Services Purchase Orders (PO) Claims/Damages Releases Engineering/Procurement/Construction Contract (EPC) Right of Way Agreements Pipeline Crossing / Tie-in Agreements Gas Processing Agreements Gas Transportation Agreements Crude Oil Transportation Agreements
Production Contracts Crude Oil Sales Agreement Crude Lifting Agreement Crude Oil Transportation Agreement Gas Sales Agreement Gas Balancing Agreement Gas Transportation Agreement Gas Processing Agreement Exploitation Production Termination Expiration Service Contracts Production Services Purchase Orders (PO) SPA Assignment/Novation of Lease and other Contracts Registration Unitization Agreement Drilling Services Contracts (Reworking) Drilling Rig Drilling Related Services Claims/Damages Releases Surplus Sales Agreements
Decommissioning Contracts Surplus Sales Agreements Service Contracts Well Plugging Services Decommissioning Site Restoration Services Environmental Assessment Services Purchase Orders (PO) Claims/Damages Releases
International Business is Different Language Laws/Regulations Taboos Practices Customs Attitudes Barriers Formalities
Foundations of an International Petroleum Contracting System Constitution Petroleum Law Petroleum Regulations Petroleum Contracts
Iraq Constitution Article 111: Oil and gas are owned by all the people of Iraq in all the regions and governorates. People s Republic of China Constitution Article 9: All mineral resources are owned by the state, that is, by the whole people 22
UN Recognizes State Ownership UN General Assembly Resolution 626 (1952); 1803 (1962); 2158 (1966); 3281 (1974); 61/295 (2007) Nation States enjoys full and permanent sovereignty over its natural resources Expropriations are lawful Limitations Public purpose ( formality largely left to HG) Non-discriminatory Due process of law Compensation is paid Non-retaliatory (relatively recent suggested limit) Not contrary to investment contract obligation
Ownership and Control In the beginning... the sovereign owns minerals. Can keep them or transfer them to private ownership. Can develop minerals itself. by a national oil company ( NOC ) by contracting with private companies ( IOCs ) By some combination. 24
Problems With Seeking Redress Against Sovereign States Defenses: Sovereign immunity Act of state doctrine Calvo Doctrine Enforcement
QUESTIONS???? Contact Information: Harry W. Sullivan, Jr. Adjunct Professor ph: +1-214-517-2438 E-mail: hsullivan@tamu.edu