PROSPERITY OR EROSION THROUGH UNITISATION?

Abstract

An inefficiency which exists in the petroleum industry is that petroleum fields do not recognise permit or licence boundaries-norat the time they are granted do permits or licences recognise field boundaries. The result is that occasionally more than one joint venture has the right to drain a petroleum accumulation. The manner in which the various interested parties address such a situation can materially enhance or diminish the value of their respective interests.

In highly prospective areas and particularly those close to State or national borders, such as the Timor Sea, there is an enhanced likelihood that joint venturers will face the task of overcoming the inconvenience of fields straddling permit and licence boundaries.

Until recently unitisation experiences in Australia have been dominated by the on-shore multi-field units of the South Australian Cooper Basin and Southwest Queensland Cooper Basin.

However, in relatively recent times in the Timor Sea the Bayu-Undan field has been identified as straddling ZOCA 91-12 and 91-13 and the Laminaria field is known to extend from AC/P8 into WA-260P. There is also a greater likelihood of boundary straddling to occur in the Cooper Basin when PEL's 5 and 6 covering the South Australian Cooper Basin are relinquished in 1999, due to the greater number and smaller area of new permits.

This paper addresses issues which arise when a single field straddles a permit or licence boundary1. In particular: (i) in what circumstances may those parties with an interest in the field be required to unitise the field; (ii) how do unit parties derive legal title to petroleum recovered through operations in that part of the field not covered by their respective licence or permit; (iii) how are participation interests to be determined; (iv) what are the other principal issues to be addressed in a unitisation; and (v) what are the alternatives to unitisation.