In Part Three of this series,1 we discussed the general use of defined terms in the AIPN Model Form International Operating Agreement. At that time, we pointed out that discussion of the actual definition of these terms under the AIPN form would be deferred till we reached the place in this Primer where the terms are actually coming into use.  However, there are several terms defined in Article I of the AIPN Model Form which are used so broadly and frequently in the form that an early discussion is called for.2

The interrelationship between the Government Contract international oil & gas's equivalent of the domestic oil & gas lease and the Operating Agreement has been discussed in an earlier article.3 It's important that references in the Operating Agreement to these different contractual arrangements be clear as to which document is meant. Accordingly, in Article I,  "Agreement" is defined as the Operating Agreement, including its Exhibits;4 and "Contract" is defined as the contract with the Government identified in the Agreement, including any extensions and renewals, and further including applicable laws and regulations of the host country concerning the exploration, development and production of "Hydrocarbons."5

(Remember: the "Agreement" must give way to the "Contract" in the event of a conflict; and definitions contained in the Agreement should conform both to any similar definitions in the Contract and to the laws and regulations of the host country: see Part One of this Primer.)

"Contract Area" is another important concept defined in Article I.  Under the AIPN form, the term is defined as of the "Effective Date"6 as the surface area described on Exhibit B to the Agreement, but adding that these perimeters are to correspond to the area prescribed by the Contract, as these may vary from time to time. 

The concept of "Joint Operations" and "Exclusive Operations" has also been discussed in an earlier article.7 As mentioned in that article, "Joint Operations" are those operations and activities carried out by the Operator pursuant to the Agreement whose costs are chargeable to all the Parties; "Exclusive Operations" are those operations and activities carried out pursuant to the Agreement whose costs are chargeable to the account of less than all the Parties.8 Thus, "Joint Account" and "Joint Property" are defined in Article I as accounts maintained for "Joint Operations"9 and wells, facilities, equipment, information, funds, etc., held for use in "Joint Operations." (Don't worry:  there will be similar concepts, to be discussed later, for "Exclusive Operations.")

Finally, "Party" is defined in Article I as the entities named in the first paragraph of the Agreement, and would also include permitted successors and assigns of the original Parties.  (The first paragraph of the Model Form also authorizes the reference to "Party" or "Parties.")

Next issue: "Effective Date and Term of the Agreement"


1See "Coverage of Preliminary Matters in the AIPN Model Form: 'Parties' and 'Definitions': In General," contained in the January/February, 1998 issue of this Newsletter (Vol. 2, No. 1).

2The definitions in Article I of the AIPN form are arranged in alphabetical order, making a given term easy to fine.

3See "Part One: Introductory Concepts," in the December, 1996 issue (Vol. 1, No. 2).

4One of these authorized Exhibits, the "Accounting Procedure," which will form the basis for the charges and credits to the "Joint Account" (see below), is also defined very simply in Article I as the rules, etc., set forth in Exhibit A to the Agreement.  (The Accounting Procedure, and the basis for charges and credits to the Joint Account, will be discussed at length in later articles in this Primer.) See also the discussion below concerning the use of an Exhibit to delineate the "Contract Area."

5"Hydrocarbons," also defined in Article I, is a perfect example of a clarifying definition: as defined in the Agreement, the term includes all substances covered by the Contract.  Thus, if nitrogen (clearly, not a hydrocarbon absent some special definition) were covered by the Contract, it would also be a "Hydrocarbon" for purposes of the Agreement.

6Again, another defined term, to be discussed in a later article.

7See "An Overview of the AIPN Model Form," in the January/February 1997 issue (Vol. 2, No. 1).

8Both types of operations will be discussed extensively in later articles.

Note that "'Exclusive' Operations" are thus not truly "exclusive":  any time even a single Party properly rejects participation in a proposed operation which is then carried out by less than all of the Parties, an "Exclusive Operation" has occurred.

9The "Joint Account" is to be maintained in accordance with the terms of the Agreement and the Accounting Procedure.

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