The following Energy practice note Produced in partnership with Matthew Stott of Orrick, Herrington & Sutcliffe and Rebecca Downes of Orrick, Herrington & Sutcliffe provides comprehensive and up to date legal information covering:
Governments permit companies to explore for and produce hydrocarbons (crude oil and natural gas) within a defined area under the terms of a concession. The concession holders will typically seek to define their respective rights and obligations concerning their operations and activities under the concession by entering into a joint operating agreement (JOA). If the exploration, appraisal, development and production operations of the concession holders are successful, then crude oil and natural gas will be produced. For more information on JOAs and concession agreements, see Practice Notes: The purpose and the principles of the joint operating agreement and Understanding upstream petroleum agreements—concessions, production sharing contracts and service contracts
A JOA will usually expressly exclude the marketing and sale of hydrocarbons from its scope. Each concession holder will typically need to enter into separate arrangements to monetise its entitlement to the hydrocarbons produced and lifted from the concession area. These types of sales arrangements may provide for a physical sale and delivery of hydrocarbons from a concession holder to a buyer, which could be an affiliate aggregator entity or a third party.
Once hydrocarbons have been lifted, they may be subsequently traded within a trading regime:
on a physical basis, where (in respect of natural gas, for example) market participants agree to buy and sell capacity and volume rights to
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