This paper was written in 2000 as part of the CEPMLP's LLM in Petroleum Law and Policy program. It offers drafting suggestions for redetermination provisions in the context of oil unitisation agreements.

1. CENTRE FOR ENERGY, PETROLEUM AND MINERAL LAW AND
POLICY
STATEMENT OF ORIGINALITY
FOR RESEARCH PAPERS
NAME OF STUDENT: Zaid Mahayni
MATRICULATION NUMBER: 009943036
PROGRAMME: LL.M. in Petroleum Law and Policy
TITLE OF THE RESEARCH PAPER:
The Redetermination Provisions: A Proposed Draft for more
Equitable and Industry-Efficient Consequences
ABSTRACT OF THE RESEARCH PAPER:
The redetermination process involves significant costs and risks. When deciding on
the legal framework governing the redetermination process, the parties involved must
be able to reconcile their various interests and provide equitable solutions. This paper
will offer suggestions for the drafting of redetermination clauses. It is vital to realise
that some details in this matter, if neglected or omitted, might end up costing the
parties large amounts of money. The parties must therefore be careful in the choices
they make and must take for a model the experience of the industry.
WORD COUNT: 4,029
PRESENTED TO: Professor Stephen Dow
TITLE OF THE COURSE: UK Oil and Gas Law
I, Zaid Mahayni, have read the Code of Practice regarding plagiarism contained in the
Students’ Introductory Handbook. I realise that this Code governs the way in which
the Centre for Petroleum and Mineral Law and Policy regards and treats the issue of
plagiarism. I have understood the Code and in particular I am aware of the
consequences, which may follow if I breach that code.
Signed:________________
Date:__________________

2. 1
Table of Contents
Table of Abbreviations--------------------------------------------------------------------2
1. Introduction------------------------------------------------------------------------------3
2. Redetermination: A Definition--------------------------------------------------------3
2.1 Unitisation, Tract Participations and Unit Interests ------------------------------3
2.2 Geological and Geophysical Information------------------------------------------4
3. Redetermination: The Problem -------------------------------------------------------6
4. Redetermination Clauses within the Unitisation Agreement ---------------------7
4.1. Timing and Number of Redetermination -----------------------------------------7
4.1.1 Timing of Redetermination--------------------------------------------------------7
4.1.2 Number of Redetermination-------------------------------------------------------8
4.2 Basis for Redetermination -----------------------------------------------------------8
4.3 Redetermination Procedures---------------------------------------------------------10
4.4 Settlement of Dispute Mechanism -------------------------------------------------10
4.4.1 General Issues -----------------------------------------------------------------------10
4.4.2 The Redetermination Expert ------------------------------------------------------11
4.4.3 Pendulum Arbitration --------------------------------------------------------------12
4.4.4 Guided Owner Process -------------------------------------------------------------13
5. Consequences of Redetermination ---------------------------------------------------13
5.1 General Concepts----------------------------------------------------------------------13
5.2 Adjustments in Cash ------------------------------------------------------------------13
5.3 Adjustments in Production ----------------------------------------------------------15
6. Alternatives to Redetermination------------------------------------------------------16
6.1 Possibility for Fixed Equities--------------------------------------------------------16
6.2 Minority Group Sell Out or Possibility of Net Profit Interest ------------------16
7. Conclusion-------------------------------------------------------------------------------17
Bibliography--------------------------------------------------------------------------------18

3. 2
Table of Abbreviations
DTI------------------------------------- Department of Trade and Industry
HCPV---------------------------------- Hydrocarbon Pore Volume
IGIP------------------------------------ Initial Gas in Place
JOA ------------------------------------ Joint operating agreement
OGLTR-------------------------------- Oil and Gas Law and Taxation Review
OGFA---------------------------------- Oil and Gas Finance and Accounting
ORR------------------------------------ Original Recoverable Reserves
PRT ------------------------------------ Petroleum Revenue Tax
STOOIP ------------------------------- Stock Tank Oil Initially in Place
UK ------------------------------------- United Kingdom

4. 3
1. Introduction
The redetermination provisions represent one of the most crucial points in the
negotiation of a unitisation agreement. In a conference on UK Oil and Gas Law,
presented in St. Andrews in September 1998, Mr. Brian Rossiter stated that:
“I doubt that anybody knows the true costs of conducting a redetermination. Obviously,
there is the cost of geologists, geophysicists and reservoir engineers. On average across
all disciplines and owners probably about 12 people for two years. Fully costed that
amounts to about 2 million pounds, though this is spread between the owners. Other
disciplines, in particular tax could add another half a million pounds.”1
Therefore, redetermination clauses have to be drafted in the way that will incur
the least costs possible to the parties. Not only is the process of redetermination is in
itself very expensive but its potential consequences can be disastrous on the excess
parties. Moreover, a potential dispute may create added tensions between the parties
and may prove to be hideously expensive.
This paper will offer suggestions and alternatives in the drafting of the typical
redetermination clauses.
Following an explanation of the concept of redetermination, each one of the
typical redetermination clauses will be examined in detail. This will include the
following points:
- The number and timing of redetermination;
- The basis for redetermination;
- The redetermination procedures;
- The settlement of dispute;
- The methods of readjustment.
2. Redetermination: A Definition
2.1 Unitisation, Tract Participations and Unit Interests
In order to understand the meaning of redetermination, we must first define
the notions of unitisation, tract participations and unit interests. We must then, under a
second title, explain the impact of certain geological and geophysical concepts.

5. 4
Unitisation assumes the presence of an oil or gas reservoir underlying two
separate licence blocks. Unitisation will aim for the development of this deposit as if
it was beneath one single unit.2
Each licence block involved in the unitisation agreement will have specified
rights on the hydrocarbons extracted. These rights are determined according to what is
called the tract participation of each licence group.3
Moreover, in the advent of unitisation between two blocks, it is important to
understand that often, many sub-parties will be involved. Indeed, each licence block
will often be composed of a group of licensees. Each one of these licensees will own
certain interests in both their licence block and in the unitised field as a whole.
Interests in the unitised field are referred to as unit interests or unit participations.4
Hence, the unit participation of a licensee is calculated by multiplying the
percentage interest of this licensee in his or her licence by the tract participation of the
whole licence group.5
Now, before defining redetermination, let us examine the geological and geophysical
concepts that give significance to the term.
2.2 Geological and Geophysical Information
First of all, when a decision to unitise is made, the parties involved often only
have a limited amount of information on the field. The geological and geophysical
information at this point in the life of the project does not allow the exact evaluation
1
B., Rossiter, Determination, presented to, UK Oil and Gas Law Seminar, (St. Andrews,
Scotland: CEPMLP, 21-25 September 1998), par. 9.
2
For a more detailed definition, please refer to R., Paytuvi, Unitization: Salient Aspects, pp.
12-13.
3
M. P., Taylor, Unitisation, in MacDougall D. and Wälde T., (eds.), European Community
Energy Law: Selected Topics, p. 224.
4
Ibid.
5
Ibid.

6. 5
of the dimensions and limits of a reservoir. Therefore, it is still unknown at this stage
how much of the reservoir underlies each of the blocks.6
Secondly, petroleum is a fluid material. Because of its tendency to migrate and
to move around in a reservoir, it becomes hard to accurately evaluate each licence
group’s share of the hydrocarbons. Indeed, petroleum may, at various stages of
production, flow from one licence block to the other.7
Moreover, modern technology does not permit, at the present time, the
accurate determination of the total amount of hydrocarbons contained in a reservoir. It
is only at the end of production, once the maximum amount of hydrocarbons have
been extracted, that the parties to a unitisation will better estimate the volumes they
were entitled to.8
Actually even then, knowing the total recoverable reserves does not
necessarily determine the amount of reserves recovered from each licence area. More
factors, such as migration, water drive and so on, need to be considered in the
formula.9
As development drilling is carried out, the geologists and geophysicists are
supplied with additional information on the characteristics of the field. The exact
boundaries of the reservoir become clearer and the parties may realise that they were
entitled to more or less hydrocarbons.10
Consequently, the parties may choose to re-evaluate or redetermine the initial
tract participation for each licence. Redetermination can be then defined as the re-
evaluation of tract participations as a result of the availability of additional
6
P., Deemer, Unitisation Agreements, presented to, UK Oil and Gas Law Seminar, (St.
Dundee, Scotland: CEPMLP, 8-12 September 1997), p. 5.
7
C., Robson, Transboundary Petroleum Reservoirs: Legal Issues and Solutions, in, Blake, G.
H., et al. (eds.), The Peaceful Management of Transboundary Resources, p. 5.
8
R., Paytuvi, supra note 2, p. 25.
9
G., Hewitt, Unitisation Agreement, presented to, UK Oil and Gas Law Seminar, (Dundee,
Scotland: CEPMLP, 8-12 September 1997), p. 2.
10
P., Deemer, supra note 6, p. 5.

7. 6
information on the field. It basically aims at providing a more accurate answer to two
essential questions: What is the size of the cake? Where is the cake?11
3. Redetermination: The Problem
As we said in the Introduction of this paper, redetermination may be very
costly.
“With three redeterminations, during the average 300 barrel field, one can very easily
spend between 6 and 8 million pounds moving the same oil back and forth between
owners and creating a lot of friction in the process”.12
According, Dr. I. W. Gareth Hughes, company unitisation specialists often lack
the expertise to evaluate the costs of redetermination. Too often, they do not even
consider alternatives to redetermination. This is because they often have too little
experience in such things as the buying and selling of acreage. They lack budgetary
responsibilities and hence, ignore the costs of geologists, geophysicists, geophysicists
and reservoir engineers.13
Doctor Hughes further argues that conversely, the managers who do have
budgetary experience are not in position to question a decision to redetermine. In
general, they also do not have the technical background to suggest a redetermination
method in favour of another.14
As Doctor Hughes admits:
“We too frequently see a company going down a ‘standard’ unitisation /
redetermination path by default. No one has evaluated the alternatives and chosen the
most cost effective path or decided it is the best way to go. What has happened is that
no one combines sufficient of a ‘helicopter view’ with technical know-how to be able
to question the slippery slide towards a unitisation / redetermination path.”15
Another point that needs to be stressed is the potentially ruinous effects of
readjustments following a redetermination. For instance, the excess party could
11
I. W. G., Hughes, Unitisation of Oil and Gas Fields: The Department of Energy Views, 6: 3
OGFA 131, p. 136.
12
B., Rossiter, supra note 1, par. 9.
13
I. W. G., Hughes, The DTI’s Efficiency Scrutiny and Unitisation, 8:4 OGFA 209, pp. 218-
219.
14
Ibid.
15
Ibid.

8. 7
become insolvable when readjustment obligations arise. It could also be already
insolvable at this point in time.
On the legal side of the issue, it could be thought that notions such as unjust
enrichment apply when redetermination sets new tract participations. This statement
is said assuming that the excess party produced and sold petroleum that belongs to the
deficient party. Under such a qualification and assuming readjustments in production
are not possible, the deficient party would be able to enforce, by action, the remedies
specific to unjust enrichment.16
This could include the restitution of the petroleum,
sold by the excess party, from the hands of a buyer that was aware of the possible
defect in the title. However, it is important to underline that such a view would be
legally false since the now excess party did in fact hold proper title over the
petroleum sold. Therefore, unjust enrichment remedies are not open to a party that
becomes deficient. The transaction between a third party and the present excess party
is considered valid under the law.
Essentially, it is crucial that the redetermination clauses provide the buyers of
oil or gas from a unitised field with contractual security. Otherwise, the risk
associated with a sales transaction would indeed justify a much lower price, and hence
much lower company profits.
4. Redetermination Clauses within the Unitisation Agreement
4.1 Timing and Number of Redetermination
4.1.1 Timing of Redetermination
There are two main alternatives as to the timing of redetermination. The
provisions may provide for either redetermination based on development drilling or
specified time periods.17
Alternatively, redetermination may either be automatic or
triggered by a time period or certain field events.18
16
D. M., Walker, The Law of Contracts and Related Obligations in Scotland, Third Edition,
p.585.
17
P., Deemer, supra note 6, p. 7.
18
G., Hewitt, supra note 9, p. 6.

9. 8
Scholars have suggested many practical solutions as to the timing of
redetermination. Daintith and Willoughby suggest that the provisions must establish a
certain time limit between the end of one redetermination and the beginning of the
other.19
Also, no redetermination should be allowed after the production of a certain
percentage of recoverable reserves. This is because, late in the life of a field, the
reservoir is unable to yield enough production to enable ‘make-up’ adjustments.20
Brian Rossiter suggests that predetermined dates should be avoided and that
instead production “milestones” should be used.21
According to Rossiter, the best
solution is often to specify a certain number of wells to be drilled before the
commencement of a redetermination. Additionally, Rossiter favours redetermination
upon request rather than automatic redetermination, since they give the chance to take
a conscious decision.22
4.1.2 Number of Redetermination
Due to the high costs and decreasing marginal utility of redetermination, the
unitisation agreement should limit the number of redeterminations.
It has been advanced that there should be no more than two redeterminations,
regardless of the size of the field.23
4.2 Basis for Redetermination
The unitisation agreement will establish in advance the basis on which
redetermination will be calculated.24
Many different calculation methods are
available. In general, one of the following methods will be used:25
- Stock Tank Oil Initially in Place (STOOIP)
- Initial Gas in Place (IGIP)
- Hydrocarbon Pore Volume (HCPV)
- Original Recoverable Reserves (ORR)
19
T., Daintith and G., Willoughby, United Kingdom Oil and Gas Law, Third Edition, p. 1184.
20
Ibid.
21
B., Rossiter, supra note 1, par. 1.
22
Ibid.
23
Ibid.
24
P., Deemer, supra note 6, p. 7.

10. 9
Other calculations exist but they are simply an adaptation of the above
methods. It is important to note, that the more complicated the calculation method
gets, the more time the redetermination process will require.26
Interestingly, the
calculation method that seems to be used most in the business is STOOIP or a
variation of it.27
According to Taylor and Winsor, this method is relatively easy to
estimate and agree upon. It is rather unlikely to change once development drilling has
been completed. However, it does not distinguish between the reserves that will be
produced from those that will be left in the reservoir.28
Furthermore, Taylor and Winsor argue that there are also disadvantages in
using recoverable reserves as a basis for calculation. First of all, the estimation of
recoverable reserves before the end of production generally suffers from a large
margin of error. Secondly, the recovered reserves may originate from any one of the
unitising blocks and hence, parties will be competing for the maximal recovery of
petroleum from their own block. Such a practice would certainly be against the spirit
of unitisation. Finally, this calculation method does not take into account that non-
recovered reserves generally do contribute, through drive mechanisms, to the
extraction of the recovered reserves.29
One equitable method in the calculation of new tract participations would be
to use moveable oil, even if not produced in reality. Another suggestion would be to
adopt the STOOIP method but with a readjustment in case one unitising block
disproportionately contributes in displacing recoverable reserves to the surface.30
At last, it should be noted that if a disagreement arises on a particular part of
the chosen calculation method, the operator might be enabled to proceed anyway
through the system of ‘Operator Over-ride’.31
25
B., Rossiter, supra note 1, par. 2.
26
Ibid.
27
P., Deemer, supra note 6, p. 8.
28
M. P., Taylor, and S. M., Tyne, Taylor and Winsor on Joint Operating Agreements, Second
Edition, p. 115.
29
Ibid.
30
Ibid.
31
B., Rossiter, supra note 1, par. 2.

11. 10
4.3 Redetermination Procedures
The unitisation agreement may select the operator as the responsible person in
the conduction a redetermination. Habitually, in this case, the operator will need to
report periodically to a ‘redetermination committee’ composed of all the parties to the
unit agreement. Similarly, the relevant provisions can assign the ‘redetermination
committee’ itself32
or a third party consultant33
with the responsibility to conduct the
redetermination.
In an attempt to avoid delays, the unitisation agreement will often impose time
limits on the data gathered in the redetermination process. Consequently, data after
the specified ‘Cut-off Date’ will not be admitted, unless all parties agree
unanimously.34
Moreover, the redetermination provisions should restrict the data used to that
originating from within the unit area. Data originating outside the unit area should
only be used with the consent of all the parties to the unit agreement. The reason
behind such a restraint is to allow, through added participation, a more efficient
control of the input data.35
The unit agreement can also impose time limits on the redetermination process
as a whole. If the redetermination is not completed by the deadline, the parties can
then choose to maintain the tract participations as they were prior to the
commencement of the process or they can decide to restart the process again.
Extensions could also be granted. The main aim here is to restrict the time and
expense associated with the redetermination process.36
4.4 Settlement of Dispute Mechanism
4.4.1 General Issues
32
Ibid, par. 3.
33
M. P., Taylor, and S. M., Tyne, supra note 28, p. 117.
34
B., Rossiter, supra note 1, par. 3.
35
Ibid.
36
P., Deemer, supra note 6, p. 8.

12. 11
It is important to establish in advance the procedure to be followed in case of
disagreement. First of all, if a disagreement arises on the new tract participations, one
suggestion would be to maintain the existing equities until a decision is made. This
will avoid commercial and legal uncertainty. The parties could provide for
readjustments retroactive from the day a decision finally settles the dispute to the date
on which the new tract participations where determined.37
If the disagreement persists beyond a certain amount of time without being
referred to an expert, the redetermination process should be aborted and the existing
equities should prevail.38
However, more importantly, it is essential to determine what is required to
form a valid objection. Who can form an objection? What circumstances can justify
an objection? The requirements for the formation of a valid objection need to be strict
in order to ensure commercial efficiency.
4.4.2 The Redetermination Expert
The unitisation should establish a procedure for the selection of an expert that
will resolve potential disputes between the parties. The parties may propose a list of
experts, ranking them in order in order of preference. In practice, unitisation
agreements will often require the expert to be a member of a professional society or a
“competent and qualified consulting firm”. In any circumstance, it is essential to
ensure that the expert chosen is not in conflict of interest with respect to the object of
dispute.39
Also, the unitisation agreement should delimit the matters that can be the
object of referral and restrict in time such referrals.40
In practice, the expert usually does not calculate new tract participations.
Instead, he or she will simply provide the parties with more clarity on the calculation
37
B., Rossiter, supra note 1, par. 4.
38
Ibid.
39
P., Deemer, supra note 6, p. 9.
40
B., Rossiter, supra note 1, par. 5.

13. 12
method. On the other hand, the agreement could very well require the expert to
personally compute the revised tract participations. The parties must instruct the
expert on the procedure to be followed.41
The parties should have the right to make representations to the expert on the
matters that have been referred and on any finding of significance to the final
outcome.42
Furthermore, it is important to restrict the deliberations of the expert to the
matters submitted by the parties.43
Finally, it should be noted that the courts do not automatically award the
expert with the status of an arbitrator. The parties will therefore be unable to appeal
the decision of the expert. This is probably a good thing since appeal will involve
intolerable delays and costs. However, one considerable disadvantage is that the
parties do not have a body of law, the Arbitration Acts for example, to fall upon if the
expert procedure fails.44
4.4.3 Pendulum Arbitration
There is a notorious tendency for parties involved in a dispute to plead
extreme positions in their allegations. As a result of this tendency, viewed by the DTI
as being unprofessional, experts will often react by adopting a ‘middle-ground’
judgment.45
In an effort to obtain more reasonable allegations, the DTI has suggested the
use of pendulum arbitration. This basically obliges the expert to choose between the
submissions of one party or the other instead of opting for a ‘middle-ground’
solution.46
41
P., Deemer, supra note 6, p. 9.
42
B., Rossiter, supra note 1, par. 5.
43
Ibid.
44
M. P., Taylor, supra note 3, p. 231.
45
Ibid, p. 232.
46
Ibid.

14. 13
4.4.4 Guided Owner Process
The guided owner process has been newly adopted by the industry. It aims at
saving time by implicating the expert as early as the first negotiations on the data. The
presence of the expert throughout the negotiations ensures that he or she witnesses all
technical meetings and settles potential disagreements before they magnify.47
The guided owner process may fix a system of ‘key-step determination’,
according to which all participants have to agree on a specific point before addressing
another. The expert will assist the parties in case of a deadlock and will help them
move on to other issues.48
5. Consequences of Redetermination
5.1 General Concepts
Once a redetermination process is completed, the parties have to readjust their
positions according to the new tract participations. They must reorganize everything
as if the new tract participations prevailed since the outset of production. As Paul
Deemer writes:
“The unitisation agreement will normally provide a mechanism for reallocation or
rebalancing (i) past capital expenditures for the field, (ii) operating costs for the field
incurred prior to the production commencement date, and (iii) past production of oil or
gas.”49
Therefore, the excess party will have to compensate the deficient party in
accordance with the new tract participations. The redetermination provisions might
impose a certain swing level in the ownership for adjustments to take place. The
provisions might also limit the adjustments in amount so that significant changes in
equities do not cause intolerable commercial difficulties to the excess party. As we
will see, adjustments may be either in kind (e.g. production) or in cash.
5.2 Adjustments in Cash
It should be noted at this point, that the industry draws a distinction between
capital costs and operating costs. First of all, since capital costs are shared on the basis
of equities, they should be readjusted when new equities become available. On the
47
Ibid.
48
Ibid.

15. 14
other hand, operating costs are generally shared according to liftings. Therefore, they
will be rather adjusted consequently to the readjustments in the production
entitlements.50
Once the new tract participations have been calculated, a party that turned out
to have over-invested in capital expenditures must be compensated by the under-
investors. The redetermination provisions must set a time limit in which readjustment
payments have to be made. According to Mr. Rossiter, the limit should be positioned
between 30 and 60 days following the introduction of the new tract participations.51
Usually, payments made to the over-investor must include an interest factor.
This would allow the over-investment to earn some form of return. Usually, the added
interest is fixed at 1% over a pre-determined published interest rate.52
It is imperative that the parties keep detailed accounting records since the very
beginning of the project. The parties should agree on the values to be used before the
calculation of new equities.53
The evaluation of cash readjustments can either be according to the monthly
expenditures or according to cash calls. It is advised to use cash calls since they are
easier to determine and agree upon.54
Finally, it is important to mention that when interest accompanies any
readjustment payments, tax must be deducted from the interest element at the standard
rate of income tax. This was decided in the case Chevron Petroleum (UK) Limited vs.
BP Petroleum Development Limited 55
and motivated by the fact the recipients should
recover the amounts deducted by an offset against their corporation tax liabilities.56
49
P., Deemer, supra note 6, p. 10.
50
G., Hewitt, supra note 9, p. 7.
51
B., Rossiter, supra note 1, par. 6.
52
Ibid.
53
Ibid.
54
Ibid.
55
Chevron Petroleum (UK) Limited vs. BP Petroleum Development Limited [1981]
STC 689.
56
M. P., Taylor, supra note 3, p. 233.

16. 15
5.3 Adjustments in Production
Following a redetermination, the deficient party is entitled to receive make-up
oil or gas from the excess party. To prevent undue commercial disadvantage to the
excess party, the make-up quantities will be phased out over a specific period of time.
If the rebalancing of production cannot be achieved within the period of time initially
established, an extension of that period or increase of the make-up quantities can be
made possible.57
The scholars have suggested different ways to achieve adjustment in
production. First of all, if ownership is even between the parties, then the deficient
member should be allocated a percentage of gross production. However, if the
ownership involves rather small companies with small percentage interests, then a
percentage of gross production may exceed the entitlements of the excess parties.
Therefore, in this scenario, it is preferable to use a percentage of the excess parties’
entitlement. This percentage may have to be quite a large figure (possibly 60 % or
80%) to constitute a successful make-up rate.58
When the entire share of the excess party’s production is unable to compensate
the deficient party, then the redetermination provisions should impose additional cash
payments. However, this will lead to problems when assigning a value to the
petroleum deficiency. Should the parties use the current price of oil or the one at the
time of unbalanced production? Should an interest factor be added? Are there any tax
considerations on the sums paid? 59
One suggestion for money payments is to price oil by reference to PRT
reported values at the date the excess party lifted it. Interest is then added from the
date of each lifting. This should effectively transfer to the deficient party the value
obtained by the excess party. However, this calculation is rather complex and involves
the examination of each single lifting.60
57
T., Daintith and G., Willoughby, supra note 19, p. 1185.
58
B., Rossiter, supra note 1, par. 8.
59
P., Deemer, supra note 6, p. 11.
60
A.W., Baker, Unitisation: Legal problems, 2:3 OGLTR 50, p. 52.

17. 16
In brief, the redetermination provisions will have to conciliate the interests of
the parties. Adjustment in production should be achieved in a reasonable time and
with the least harm possible to the excess party.
6. Alternatives to Redetermination
6.1 Possibility for Fixed Equities
Several recent unitisation agreements have been contracted with fixed tract
participations. One argument in support of fixed equities is that, with the current
technology, fewer wells are needed to detail the field and seismic readings yield more
accurate results of recoverable reserves.61
Another advantage of fixed equities is that
they might reduce delays in the development of marginal fields.62
Actually, fixed equities constitute a usual business practice in the case of gas
fields. Indeed, since gas fields are characterized by long-term, multiple gas buyers, the
risks of a party loosing a share of its gas entitlement through redetermination will
devaluate the price of gas.63
Interestingly, in both the Miller and Britannia fields, the parties involved opted
for fixed equities.64
6.2 Minority Group Sell Out and Possibility of Net Profit Interest
In the North Sea, it is common to see a major field buying adjacent acreage
with comparatively small interest or exchanging it for another acreage.65
This practice, encouraged by the DTI, offers advantages for both sides of the
equation. First of all, the minor interest holder will no longer be concerned about
unfair treatment or putting in technical expertise. Second of all, as Dr. Hughes puts it:
“[t]he major interest holder no longer has this minor holder as the thorn in the
flesh coming to operators meetings, having their concerns, asking for more copies of
data, asking for different ways to go ahead and so forth.”66
61
I. W. G., Hughes, supra note 13, p. 216.
62
M. P., Taylor, and S. M., Tyne, supra note 28, p. 116.
63
Ibid.
64
T., Daintith and G., Willoughby, supra note 19, p. 1184.
65
I. W. G., Hughes, supra note 13, p. 216.

18. 17
Another alternative advanced by Brian Rossiter is for the majority interest
holder to offer a net profit interest to the minority group. This solution should avoid
uncertainties associated with redetermination. The minor interest holder will be
guaranteed a share of the pie while the majority interest holder gains more control on
the decisions made.67
7. Conclusion
In conclusion, the redetermination provisions must be constructed in the way
that will involve the least costs and risks possible. In order to achieve this, the parties
must first minimise the costs of conducting a redetermination. One obvious and
efficient solution is to reduce the number of redeterminations in the life of a field.
Actually, redeterminations will yield less marginal utility as they are increased in
number.
A second way to minimise costs is to reduce the risks of disagreement. The
redetermination provisions must establish effective dispute resolution and dispute
avoidance provisions.
Thirdly, adjustments in cash or production must be equitable to both the
excess and deficient parties. The deficient party must be successfully compensated in
accordance to its increased equities. Similarly, the excess party must not be faced with
unreasonable financial difficulties when making this compensation.
Finally, it is important to underline that redetermination is not a suitable
solution in some cases. Indeed, for any redetermination to be worthwhile, there must
be a possibility of substantial swings in the ownership or significant oil or gas at
stake. If the parties believe that fair equities where established since the beginning,
then it is advised for the parties to work with these same tract participations
throughout the life of the field.68
66
Ibid.
67
B., Rossiter, supra note 1, slide 13.
68
I. W. G., Hughes, supra note 13, p. 216.

19. 18
Bibliography
1. Primary Sources
1.1 Legislative
Current Model Clauses for Seaward Production Licences Deriving from Schedule 4 to
the Petroleum (Production) (Seaward Areas) Regulations 1988 as It Had Effect on and
After 16th
December 1996).
1.2 Judicial
Chevron Petroleum (UK) Limited vs. BP Petroleum Development Limited [1981] STC
689.
2. Secondary Sources
2.1 Books
Bundy, R. R., Natural Resources Development (Oil and Gas) and Boundary Disputes,
in, Blake, G. H., et al. (eds.), The Peaceful Management of Transboundary Resources
(London, England: Graham & Trotman: 1995).
Daintith, T. and Willoughby, G., Manual of United Kingdom Oil and Gas Law,
(London, England: Sweet & Maxwell, 1984).
Daintith, T. and Willoughby, G., United Kingdom Oil and Gas Law, Third Edition,
(London, England: Sweet & Maxwell, 2000).
English, Warwick, Unitisation Agreements, in David, M. R., (eds.), Upstream Oil and
Gas Agreements, (London, England: Sweet & Maxwell, 1996).
Laitos, Jan, G., Natural Resources Law: Cases and Materials, (Saint Paul, Minnesota:
West Publishing Company, 1985).
McDonald, S. L., Petroleum Conservation in the United States: An Economic
Analysis, (Baltimore, Maryland: The John Hopkins Press, 1971).
Robinson, C., and Morgan, J., North Sea Oil in the Future: Economic Analysis and
Government Policy, (London, England: Billing & Sons, 1978).
Robson, C., Transboundary Petroleum Reservoirs: Legal Issues and Solutions, in,
Blake, G. H., et al. (eds.), The Peaceful Management of Transboundary Resources
(London, England: Graham & Trotman: 1995).
Salter, J. R., UK Onshore Oil and Gas Law, (London, England: Sweet & Maxwell,
1986).
Shell International Petroleum Company, The Petroleum Handbook, (Amsterdam, The
Netherlands: Elsevier Science Publishers, 1983).

20. 19
Taylor, M. P., and Tyne, S. M., Taylor and Winsor on Joint Operating Agreements,
Second Edition, (London, England: Longman Group, 1992).
Taylor, M. P., Unitisation, in MacDougall D. and Wälde T., (eds.), European
Community Energy Law: Selected Topics, (London, England: Graham & Trotman,
1994).
Turner Kenneth Brown, Alternatives to Litigation in the UK, (London, England:
Customer Satisfaction Surveys, 1993).
Walker, D. M., The Law of Contracts and Related Obligations in Scotland, Third
Edition, (Edinburgh, Scotland: T&T Clark, 1995).
Zimmermann, E. W., Conservation in the Production of Petroleum: A Study in
Industrial Control, (Binghamton, New York: Yale University Press, 1957).
2.2 Articles
Baker, A.W., Unitisation: Legal Problems, 2:3 OGLTR 50.
Campbell, G., Unitisation: A UK Government Perspective on UK and Median-Line
Fields, 2:1 OGLTR 5.
Chatterjee, S. K., Unitisation: Certain Policy Issues, 5:12 OGLTR 309.
Davidson, A., Unitisation of Oil and Gas Fields: Tax Issues, 6:3 OGFA 172.
Hughes, I. W. G., The DTI’s Efficiency Scrutiny and Unitisation, 8:4 OGFA 209.
Hughes, I. W. G., Unitisation of Oil and Gas Fields: The Department of Energy
Views, 6: 3 OGFA 131.
2.3 Graduate Thesis
Choe, K., International Unitisation of Petroleum: Rules and Practices, (Dundee,
Scotland: Centre for Petroleum and Mineral Law Studies, 1985).
Paytuvi, R., Unitization: Salient Aspects, (Dundee, Scotland: Centre for Petroleum
and Mineral Law Studies, 1984).
Risk, R. N., Problems in International Unitised Fields in the North Sea, (Dundee,
Scotland: Centre for Petroleum and Mineral Law Studies, 1980).
2.4 Internet Sources

21. 20
Alexander’s Gas and Oil Connections, Redetermination of Interests in Licence of
Troll in North Sea, 5:4 Company News Europe, March 9, 2000.
(http://www.gasand oil.com/goc/company/cne01010.htm, Last Visited on November
26, 2000).
2.5 Conferences
Deemer, P., Unitisation Agreements, presented to, UK Oil and Gas Law Seminar, (St.
Dundee, Scotland: CEPMLP, 8-12 September 1997).
Hewitt, G., Unitisation Agreement, presented to, UK Oil and Gas Law Seminar,
(Dundee, Scotland: CEPMLP, 8-12 September 1997).
Huxtable, A., Pre-Unitisation Agreements, presented to, UK Oil and Gas Law
Seminar, (London, England: CPMLP, 5-9 September 1994).
Morris, R., Area Developments, presented to, UK Oil and Gas Law Seminar, (St.
Andrews, Scotland: CEPMLP, 21-25 September 1998).
Rossiter B., Determination, presented to, UK Oil and Gas Law Seminar, (St.
Andrews, Scotland: CEPMLP, 21-25 September 1998).