How are joint operating agreements structured in UAE upstream concessions?

The JOA is where IOCs lose money on UAE upstream concessions, and most of the costly disputes turn on five clauses

A UAE upstream concession sits inside two contracts. The first is the concession itself, between the host emirate and the consortium. The second is the joint operating agreement (JOA), between the IOCs in the consortium. The concession governs the relationship with the State. The JOA governs the relationship between the partners. ADNOC operates most major Abu Dhabi concessions on behalf of the consortium, with non-operating IOCs holding minority interests. The JOA is the document that decides who pays what, who votes on what, and what happens when one partner cannot or will not perform. It is also the document that decides whether a partner can sell its interest, who can step into its place, and what happens to its abandonment liability when the field is decommissioned.

• UAE upstream concessions use AIPN/AIEN-modelled JOAs, with ADNOC typically holding 51 to 60 per cent and acting as operator on behalf of the consortium.
• Default by a non-operating partner usually triggers forfeiture, buy-out, or withering of its participating interest, depending on the JOA's negotiated default ladder.
• Sole risk operations allow a willing party to fund an operation the operating committee has not approved, with non-consenting parties losing the result.
• Pre-emption rights and change-of-control clauses are the heaviest dispute battleground on UAE upstream JOAs, with the Santos v Apache decision setting the leading authority on equivalent terms.

Who this applies to

The article is for the legal and commercial teams of IOCs holding or seeking participating interests in UAE upstream concessions, including BP, ENI, INPEX, JODCO, Total, ExxonMobil, CNPC, CNOOC, ONGC Videsh, Wintershall Dea, OMV, EOG, Cepsa, KUFPEC, GS Energy, and any other foreign oil company entering or expanding in Abu Dhabi or Dubai upstream. It also applies to M&A buyers acquiring listed targets that hold UAE upstream interests, project finance lenders taking security over participating interests, and minority partners considering their position on a partner's default, change of control, or withdrawal.

The article does not cover the concession-level relationship between the State and the consortium. That is set out in our Abu Dhabi upstream concessions piece. It also does not cover the broader UAE oil and gas regulatory framework. For that, see our oil and gas regulatory framework piece.

What a JOA does

The JOA is the contract between the IOCs in a concession consortium. It does six core jobs:

• Establishes the operator and defines the operator's powers and limits.
• Defines participating interests of each non-operating partner.
• Sets up the operating committee and the voting thresholds for joint decisions.
• Defines cash call procedures and the consequences of late or missed payment.
• Sets default remedies for partners that cannot or will not perform.
• Allocates abandonment liability at the end of field life.

Around those six core jobs sit a layer of optional and negotiated provisions: pre-emption rights on transfer, change-of-control triggers, sole risk and exclusive operations, encumbrances and security taking, dispute resolution, and force majeure. The model AIPN/AIEN forms (currently the 2023 International Model JOA) provide standard wording for each of these, with multiple options for parties to choose between. The negotiation of those choices is where the JOA's commercial outcome is set.

A UAE upstream JOA usually runs to between 100 and 200 pages once the accounting procedure, decommissioning provisions, and exhibits are added. Most of the dispute risk sits in fewer than 20 pages of clauses.

How the consortium structure works in Abu Dhabi

Abu Dhabi's largest upstream concessions follow a consistent structure. ADNOC holds the operating role and a majority interest, usually 51 to 60 per cent. The remaining interest is divided among IOC partners, typically four to six in number, holding stakes that range from 2 to 20 per cent each.

The current consortium structure on the major offshore concessions runs as follows:

The voting structure on the operating committee usually reserves day-to-day operational decisions to a simple majority and reserves major decisions (development plan approval, budget approval, abandonment) to a higher threshold (often 65 to 80 per cent or unanimous). ADNOC's majority interest gives it control over routine matters. The IOC partners aggregate to control major decisions only if they vote together. The political dynamic of the operating committee is therefore not a one-side-versus-the-other contest. It is a coalition-building exercise on every major vote.

Cash calls and the default ladder

Every JOA runs on cash calls. The operator forecasts the budget, calls partners for their share monthly, and partners pay within a defined window (typically 10 to 30 days). A partner that misses the deadline triggers the default machinery.

The AIPN-modelled default ladder usually runs:

• Initial default. Default interest accrues on the unpaid amount from day one. Most JOAs use a default rate of LIBOR or SOFR plus 2 to 5 per cent.
• Notice of default. The operator issues a formal default notice. The defaulting party has a cure period, usually 30 days, to pay the outstanding amount plus default interest.
• Suspension of rights. A defaulting party loses its voting rights on the operating committee, its right to receive its share of production, and its right to access information.
• Forfeiture. If the default continues beyond the cure period, the non-defaulting parties can require the defaulting party to forfeit its participating interest and assign it to the non-defaulting parties pro rata.
• Buy-out. As an alternative to forfeiture, the non-defaulting parties can require the defaulting party to sell its participating interest to any non-defaulting party willing to purchase, at the cash value or another negotiated price.
• Withering option. Introduced in the AIPN 2012 JOA, this requires the defaulting party to offer to assign part of its participating interest applicable to the exploitation area in which it is in default. The amount is calculated through a withering formula. This is similar to mining-style dilution.

The choice between forfeiture, buy-out, and withering is the most commercially significant default provision in the JOA. Forfeiture has the strongest deterrent effect but carries penalty risk under some governing laws. UAE-law-governed JOAs face Article 390 of the Civil Transactions Law risk on forfeiture, where a court or tribunal may treat the loss of participating interest as a penalty subject to adjustment. English-law-governed JOAs are more comfortable with forfeiture, although the penalty doctrine can still bite where the forfeiture is disproportionate.

For UAE upstream JOAs governed by English law (the most common position), forfeiture remains the standard default remedy. The withering option is more often selected in JOAs governed by laws with stronger penalty doctrines. The buy-out is the middle ground that most international consortia have used historically.

Sole risk and exclusive operations

A non-operating partner cannot force the consortium to undertake an operation it does not want to undertake. The operating committee votes by majority. If the majority does not approve, the operation does not happen as a joint operation.

The sole risk regime addresses this. A party that wants to undertake an operation the operating committee has rejected can propose it as a sole risk operation. The other parties have a window to elect to participate. Those who do not participate forfeit their right to share in the results of the operation. Those who do participate share the cost and the result.

The 2023 AIEN Model JOA limits sole risk operations to defined categories, including geological and geophysical work, exploration drilling, and certain appraisal activity. Major development decisions usually fall outside the sole risk regime and require operating committee approval.

The disputes that arise under sole risk provisions are typically about:

• Whether an operation properly qualifies as sole risk under the JOA.
• Whether the election notice was issued correctly and within the window.
• Whether a non-consenting party can later "buy back in" to a successful operation, and on what terms.
• Whether the sole risk operation interferes with joint operations.

The AIPN/AIEN models address each of these through specific drafting. The negotiated departures from the model are where dispute risk concentrates.

Pre-emption rights on transfer

A participating interest is a high-value asset. A partner wishing to sell faces two restrictions under the JOA: government consent under the concession (which involves the Supreme Petroleum Council in Abu Dhabi), and pre-emption rights of the other partners under the JOA.

The pre-emption regime usually works as follows:

• The selling partner enters into a Sale and Purchase Agreement with a third-party buyer.
• The selling partner notifies the other partners of the proposed transfer, providing the price and material terms.
• Each other partner has a window (typically 30 to 60 days) to elect to acquire the participating interest on equivalent terms.
• If a partner exercises pre-emption, the third-party SPA is set aside and the partner steps into the buyer's position.
• If no partner exercises, the third-party transfer proceeds, subject to government consent.

The Santos v Apache case in Australia is the leading authority on package deals under AIPN-modelled pre-emption clauses. The Australian court held that "equivalent terms and conditions" in the model wording relates to the consideration to be paid for the participating interest, not to identical commercial outcome on every term. This narrowed the construction of the pre-emption clause and made package deals harder to challenge through pre-emption. The decision has wider resonance because the AIPN model wording is used worldwide, including in Abu Dhabi.

The disputes that arise under pre-emption clauses cluster around:

• Cash valuation. Where the underlying SPA includes non-cash consideration (shares, deferred payments, contingent consideration), the cash value calculation is contested.
• Package deals. Where the underlying SPA covers multiple JOAs across multiple jurisdictions, partners may claim a right to pre-empt only the UAE asset, which would unwind the package.
• Notice timing. Pre-emption windows are short. Selling partners sometimes argue that the notice was not properly served, and partners sometimes claim the window had not yet started.
• Equivalent terms. The Santos v Apache narrow construction reduces this fight, but it still arises.

The pre-emption process is one of the most complex and time-consuming JOA workflows. Buyers structuring acquisitions of UAE-asset-holding companies often spend more time on pre-emption mechanics than on the underlying SPA.

Change of control

A pre-emption right typically applies on direct transfers of participating interests. A change-of-control clause extends the right to indirect transfers, where the participating interest does not move but ownership of the parent company changes.

The AIPN 2012 JOA introduced a value test for change-of-control: the right applies only if the value of the relevant participating interests exceeds a percentage (negotiated between parties) of the assignor's group value. This protects sellers from triggering pre-emption on every parent-level corporate transaction. The 2023 version retains this concept with refinements.

Change-of-control provisions in UAE upstream JOAs are heavily negotiated for the same reasons:

• Listed parent company transactions. A takeover bid for an IOC parent triggers change-of-control on every JOA the IOC's subsidiaries hold an interest in. Without a value test, this could unwind the transaction.
• Internal restructuring. Group reorganisations (for example, moving a holdco from one jurisdiction to another) should not trigger pre-emption. JOAs usually carve out internal restructuring within the same group of companies.
• Multiple-asset transactions. A buyer acquiring a target with multiple JOA participations faces multiple change-of-control triggers, which the buyer cannot resolve until completion.

The drafting choices on change-of-control are commercially material. Sellers want narrow drafting that excludes typical M&A scenarios. Partners want broad drafting that captures any economic transfer.

Withdrawal and abandonment liability

A partner can usually withdraw from the JOA voluntarily, subject to the conditions in the withdrawal clause. The conditions normally include:

• Notice period (often 90 to 180 days).
• Payment of all accrued obligations up to the date of withdrawal.
• Provision of security for abandonment liability allocable to the withdrawing party.
• Continued liability for environmental and decommissioning obligations for activities conducted while the party was in the consortium.

The abandonment provisions are the most economically significant for late-life fields. UAE offshore platforms and subsea infrastructure carry decommissioning costs that can run into hundreds of millions of dollars. Each partner's share of those costs is allocated by the JOA's decommissioning provisions, usually based on cumulative production share or current participating interest.

A withdrawing partner does not escape these obligations. The JOA usually requires the withdrawing party to provide acceptable security (parent company guarantee, bank guarantee, or cash deposit) to cover its share of estimated abandonment costs. The non-operating partners and ADNOC retain a claim against the withdrawing party for actual costs, with credit for security taken.

For the broader regulatory framework on offshore decommissioning, including UAE-specific environmental obligations, see our decommissioning piece.

The disputes that arise on withdrawal cluster around:

• Sufficiency of security. The withdrawing partner argues the security required is excessive. Other partners argue it is insufficient given the long-tail nature of decommissioning.
• Allocation methodology. Whether decommissioning cost share is calculated on cumulative production, current interest, or some hybrid.
• Late-emerging environmental liabilities. Where pollution or contamination is discovered after withdrawal, allocation between the withdrawn party and continuing parties.
• State-imposed costs. Where the State imposes additional decommissioning requirements after a partner has withdrawn, allocation of the new costs.

Encumbrances and security over participating interests

A participating interest can be pledged as security for project finance, reserve-based lending, or corporate borrowing. The JOA usually requires the operator's consent to encumber, and typically requires the encumbrance to be subordinated to the JOA's default and pre-emption rights.

The standard security package over a participating interest includes:

• A pledge or assignment of the participating interest itself.
• A pledge of the bank account into which sale proceeds are paid.
• A direct agreement between the lender and the other JOA partners, similar in structure to a Direct Agreement on a PPA.

The Direct Agreement gives the lender step-in rights if the borrower defaults, allowing the lender to nominate a substitute participant. The other JOA partners typically require the substitute to be acceptable, financially capable, and bound by all JOA obligations including pre-emption and change-of-control.

UAE-law-governed JOAs and their security packages need to address Civil Code requirements on pledge registration, perfection, and enforcement. The DIFC and ADGM legal regimes provide common-law-style security with greater certainty for international lenders. Most UAE upstream JOA security packages route through DIFC or ADGM-licensed special purpose vehicles for this reason.

Dispute resolution and forum

UAE upstream JOAs typically use:

• English law as the governing law, with London-seated LCIA or ICC arbitration as the dispute resolution mechanism.
• DIFC or ADGM-seated arbitration for newer JOAs where the parties want common-law substance closer to home.
• UAE law with DIAC or ArbitrateAD-seated arbitration for some ADNOC-led concessions where UAE law is the natural choice.

The choice has direct consequences for default remedies. English law accepts forfeiture; UAE law applies Article 390 penalty review. English law accepts pre-emption mechanics from the AIPN models; UAE law layers Civil Code construction principles on top.

The arbitration clauses on most UAE upstream JOAs include emergency arbitrator provisions to allow urgent measures during a default or transfer dispute. Without these, a partner facing imminent forfeiture or pre-emption pressure has no fast remedy. UAE onshore courts can support foreign-seated arbitrations involving UAE assets through interim measures, but the procedural pathway is more complex than the LCIA or ICC emergency arbitrator route.

Common drafting failures and their consequences

UAE upstream JOAs fail in litigation for a small number of recurring reasons:

• Default ladder ambiguity. The interaction between forfeiture, buy-out, and withering is not clearly drafted. A defaulting party then disputes which remedy applies, and which window has run.
• Pre-emption notice defects. The notice does not contain the required information, is not served on every partner, or is served outside the contractual method.
• Change-of-control gaps. Internal restructuring carve-outs are not drafted clearly, leading to unintended pre-emption triggers on routine corporate transactions.
• Cash call timing disputes. The operator issues a cash call on a budget that the operating committee has not approved, or partners challenge cost recovery on items they did not authorise.
• Decommissioning security gaps. The withdrawing party offers security that the JOA does not specifically authorise, and the parties argue over what is acceptable.
• Encumbrance flow-down failures. A pledge document does not bind the substitute lender to the JOA's pre-emption and change-of-control obligations, leaving a hole when step-in is exercised.

Each is curable in drafting. None are curable mid-dispute.

How should IOCs approach UAE upstream JOAs in 2026?

UAE upstream remains one of the most attractive investment destinations in global oil and gas. Concession terms are competitive. Reserves are world-class. ADNOC's operating capability has scaled materially over the last decade. The IOCs that build positions in this market are doing it through JOAs that they will live with for 25 to 40 years.

The JOAs that hold up across that timeframe are the ones drafted with full attention to default remedies, pre-emption mechanics, change-of-control triggers, sole risk operations, decommissioning security, and dispute resolution. The boilerplate AIPN/AIEN model wording is the starting point. The negotiated departures from the model wording are where the commercial outcome is set.

For IOCs, JV partners, M&A buyers, and project finance lenders working on UAE upstream JOAs, our upstream energy team advises on JOA drafting, default workouts, pre-emption processes, change-of-control disputes, and abandonment security. The most useful work is at the negotiation stage, when default ladders, pre-emption thresholds, and change-of-control values can still be set. After a default has occurred, the contract decides the outcome.

‍