Joint Venture Agreement Project Finance

Joint ventures upstream of the oil industry, without their own legal personality, are almost all subject to the conditions of an OJA. An JOA controls the relationship between the parties to the joint venture and defines the terms and conditions for managing the joint venture activities. Although the participants in the Joint Undertaking are largely free to negotiate the contractual terms they wish, the JOA terms are relatively standardised. In addition, there are different types of contracts that provide a basis for detailed negotiations. Typical JOA terms are as follows. Oil rights: the agreement defines the rights of the joint venture partners to their share in production. Detailed provisions regarding lifting plans and the consequences of non-lifting are usually included. In addition to the financing arrangements provided for in the Joint Undertaking Agreement, promoters are generally required to provide financing commitments to project lenders. Again, the exact nature of these commitments depends on the specific circumstances.

For example, if all equity is financed in advance, lenders are less concerned about funding risks. Even in this scenario, lenders may still require sponsorship undertakings to finance cost overruns. In practice, promoters generally expect promoters to enter into an equity underwriting agreement, both with the project company and with the lenders, in which the promoters undertake to finance their capital obligations in accordance with the requirements of the project company. As a rule, this involves 100% financing by an investor or partner for profit sharing. We have many partner lenders and investors who plan to finance the right project at 100%, the share of profits being determined, among other things, by the risk assessment of each lender. The funds used are also remunerated and deducted from the amount drawn each month. Farm control: Non-operators usually control the farm through decision-making mechanisms and a large number of works councils. The agreement generally provides for tendering procedures for major projects, accounting rules and audit rights. For alliances and joint ventures, the process is very similar. Undertakings or assets invested by partners in a joint venture (JV) should be valued on a stand-alone basis. For reasons of conformity with the model presented in this chapter, one of the partners may be considered as a purchaser and the other as an objective. Their finances are adjusted so that they are considered on an autonomous basis.

Steps 1 and 2 determine the combined value of the joint venture and step 4 takes into account the financing needs of the combined operations. Step 3 is superfluous, as the actual ownership of the partnership or JV depends on the agreed relative value (by the partners) of the assets or enterprises contributed by each partner and the extent to which those assets and enterprises contribute to the creation of synergies. If a developer does not have the financial means to access a more traditional financial product, a joint venture could be considered. We have many lenders and investors who plan to finance 100% of the right project, the share of profits being determined, among other things, by the risk assessment of each lender. The funds used are also remunerated. The developer is responsible for funding all anticipated fees, including scheduling authorization and professional reports, although these can usually be charged to the system. . . .