Joint operating agreement (JOA)

A crude field is rarely developed alone: three, five, sometimes ten companies hold shares in the license, and one, the operator, runs the work. Their common contract is the JOA, the joint operating agreement, whose most widespread models come from industry trade bodies. It settles an insurance question before any other: who buys. Two arrangements compete. In one, the operator insures the field on behalf of all, partners paying their share of the premium; in the other, each insures its own share, and the operator insures only its own liability. The JOA also fixes the operator's liability to its partners, and that matters. A standard clause relieves it, except for gross or intentional fault, of harm caused to the others: ordinary operating fault is borne by the consortium, therefore by the field's insurance. Gross negligence, defined by each contract with its own case law, shifts the burden to the operator alone. Reinsurers read the JOA to know whether the operator is one insured among others or the only party liable in case of serious fault. The Deepwater Horizon loss tested these clauses: the operator and its partners argued over the characterization of the fault for years. Not to be confused with the drilling contract (day rate), signed between the operator and the contractor.