Role of oil service agreements in a petroleum project

A typical oil and gas project can be divided into four key stages:

1. •

   exploration/appraisal—when a company will look for oil/gas and determine if the project is economically feasible

2. •

   development—this phase commences once the project has been appraised as economically viable, and therefore the relevant infrastructure to search for and get the oil/gas out of the ground must be constructed

3. •

   production—during this stage, oil/gas is produced and sold; and

4. •

   abandonment—when the company proceeds to its plugging and abandoning operation, which takes place once the economics are no longer sustaining the project as a whole

For more details on the typical agreements seen in the UK upstream oil and gas projects, see Practice Note: Upstream Oil and Gas Agreements on the UKCS.

The exploration phase is arguably the most critical within the cycle of an upstream petroleum project, given that the oil and gas operator will determine, during the appraisal stage, whether