Oil and Gas Joint Ventures in the UAE: Concession Rights, Joint Operating Agreements, and Liability Allocation

Oil and gas joint ventures in the United Arab Emirates sit within a legal structure that is very different from an ordinary corporate joint venture. The private agreement between investors is only one layer. The more fundamental layer is the sovereign right to explore for, develop and produce hydrocarbons in the relevant emirate.

That distinction matters because a joint operating agreement can allocate costs, voting rights, operator duties and liabilities among co-venturers, but it cannot create upstream rights that the parties do not hold under the concession, production-sharing arrangement or other government instrument. Nor can an internal allocation of liability necessarily reduce obligations owed collectively to the relevant emirate, national oil company or regulator.

For investors, the core legal analysis should therefore separate three questions: What rights have been granted by the host emirate? How are those rights exercised between the joint venture participants? And how are operational, financial and long-tail liabilities allocated internally and externally?

Natural resources belong to the individual emirates

Article 23 of the UAE Constitution provides that the natural resources and wealth in each emirate are public property of that emirate. This constitutional allocation is the starting point for the country's upstream hydrocarbons regime.

The consequence is that the UAE does not operate through one single federal petroleum concession law governing every oil and gas field across all seven emirates. Upstream rights are granted and regulated at emirate level, subject to applicable federal laws on matters such as companies, environment, taxation, labour, immigration, competition, sanctions and civil or commercial obligations.

Accordingly, a concession structure used in Abu Dhabi should not automatically be assumed to apply in Sharjah, Ras Al Khaimah or another emirate.

Abu Dhabi: the most significant upstream framework

Abu Dhabi contains the overwhelming majority of the UAE's hydrocarbon reserves and has a long history of concession-based participation by international oil companies.

The Supreme Council for Financial and Economic Affairs (SCFEA) is currently responsible for Abu Dhabi's public policy concerning financial, investment, economic, petroleum and natural-resource affairs. The regulatory powers of the former Supreme Petroleum Council were merged into the SCFEA framework.

Current official Abu Dhabi announcements confirm that SCFEA continues to award oil and gas production concessions to ADNOC and strategic partners. In June 2025, for example, SCFEA awarded production concessions for Onshore Block 4, Offshore Block 2 and Offshore Block 5, with ADNOC holding 60% and the respective international partners holding the remaining participating interests in those concessions.

Other recent Abu Dhabi concessions have used different structures. In September 2024, SCFEA granted PETRONAS 100% exploration rights in Onshore Block 2, while earlier ADNOC exploration bid rounds allowed successful international bidders to hold 100% during exploration with ADNOC retaining an option to take a substantial participating interest at the development and production stage.

The concession is the source of the upstream right

The concession or other government instrument normally establishes the legal right to explore, appraise, develop and produce hydrocarbons within the relevant contract area. It typically addresses matters such as:

• the concession area and contract term;
• exploration work commitments;
• minimum expenditure;
• commercial-discovery procedures;
• development-plan approval;
• production rights and obligations;
• participating interests;
• transfer and change-of-control restrictions;
• reporting and audit rights;
• technology and local-content obligations;
• fiscal and economic terms;
• health, safety and environmental requirements;
• decommissioning and abandonment;
• government termination rights;
• parent-company guarantees or other credit support; and
• dispute-resolution and governing-law provisions.

The precise terms are project-specific and many concession agreements are not publicly available. Public announcements can identify ownership percentages and broad project terms, but they should not be treated as substitutes for the executed concession.

The JOA sits beneath the concession

Where more than one participant holds an interest in an upstream project, the parties commonly enter into a joint operating agreement (JOA). The JOA governs how the concession participants organise themselves and conduct operations as between each other.

Unlike the concession, the JOA does not normally grant the sovereign right to extract hydrocarbons. Its function is to regulate the participants' internal relationship while they exercise rights already granted under the concession or licence.

This distinction creates an important hierarchy:

1. The host-emirate concession or licence establishes the upstream right and the obligations owed to the State or competent authority.
2. The JOA allocates operational authority, costs, benefits, risks and liabilities between the participants.
3. Operating contracts with drilling contractors, EPC contractors, service companies and suppliers sit beneath that joint-venture framework.

A JOA can redistribute risk between co-venturers, but it does not ordinarily release a concession holder from obligations owed directly under the concession unless the relevant authority has agreed to that result.

Contractual versus incorporated joint ventures

Upstream participation can involve both incorporated and contractual structures. An operating company may be formed to conduct field operations, while the participants retain their economic interests under the concession and JOA. In other cases, one participant or a national-oil-company affiliate may act directly as operator.

The choice of operator structure affects governance, employment, procurement and third-party contracting, but it does not eliminate the need to understand which entities are the actual concessionaires and which entities are merely performing operational functions.

Public ADNOC materials show that different Abu Dhabi assets use different partnership models. ADNOC Onshore, for example, reflects a concession structure in which ADNOC holds the majority interest alongside several international strategic partners.

The operator's role

The operator is normally responsible for conducting joint operations on behalf of the participants and implementing approved work programmes and budgets. Typical operator responsibilities include:

• planning exploration, drilling and production operations;
• preparing annual work programmes and budgets;
• issuing cash calls;
• procuring goods and services;
• engaging employees and contractors;
• maintaining accounts and records;
• reporting operational and financial information;
• managing health, safety and environmental systems;
• maintaining insurance required by the JOA or concession;
• dealing with regulators and the national oil company within its authority; and
• responding to emergencies.

The operator is not usually intended to make a profit merely from acting as operator. Industry JOAs commonly apply a no-profit/no-loss concept to the operator's performance of joint operations, with properly incurred joint costs charged to the joint account and then borne by participants according to their participating interests unless the JOA provides otherwise.

The operating committee is the governance centre

Major decisions are generally reserved to an operating committee representing all participants. The JOA should define voting percentages, approval thresholds, annual work programmes and budgets, authorisations for expenditure, development decisions, major contracts, litigation, decommissioning, operator removal, and transfer or default consequences.

Governance thresholds should be aligned with participating interests but should also account for regulatory approvals under the concession. Even unanimous JOA approval cannot make effective a transfer or development plan that still requires consent from the competent authority.

Work programmes, budgets and cash calls

The JOA normally requires the operator to prepare annual work programmes and budgets for operating-committee approval. Once approved, expenditure is allocated among the parties according to their participating interests, subject to any special allocation for sole-risk operations or party-specific costs.

The agreement should state when the operator can exceed an approved budget, emergency-expenditure authority, approval thresholds for revised budgets, cash-call timing, audit rights, treatment of delayed funding, currency and banking arrangements, and how disputed charges are handled pending resolution.

Failure to fund cash calls is one of the most serious JOA defaults because the other participants may be forced either to fund the shortfall or allow operations to stop.

Default remedies must be drafted carefully

Industry JOAs typically create a staged default regime where a participant fails to pay amounts due. Possible contractual consequences include suspension of voting rights, loss of access to production or proceeds, funding of the defaulting party's share by the non-defaulting parties, security over the defaulting party's interest or production, forced transfer, withering of the participating interest, or forfeiture or buy-out rights.

These remedies are highly negotiated. They should be checked against the concession because a forced transfer under the JOA may still require host-government or national-oil-company consent before the concession interest itself can be transferred.

Joint and several liability at concession level

One of the most important risk-allocation issues is the difference between liability owed to the State and liability shared internally between participants.

Current UAE oil and gas commentary indicates that where a concession has multiple co-venturers, the concession may impose joint and several liability on them for concession obligations. This means the competent authority may have recourse against any concessionaire for the full obligation, even though the JOA allocates the economic burden internally according to participating interests.

If one partner becomes insolvent or refuses to perform, the remaining concessionaires may therefore face greater external exposure than their original percentage interest suggests.

The JOA should include contribution and indemnity provisions so that, as between the parties, liabilities can be reallocated according to the agreed percentages or responsibility rules. But those internal rights do not necessarily limit the government's direct rights under the concession.

Operator liability is usually a negotiated carve-out regime

A central JOA negotiation concerns when the operator bears a loss personally rather than charging it to the joint account.

International model JOAs commonly start from the position that ordinary operational liabilities—including those resulting from operator negligence—are shared among the participants according to their participating interests. The operator's personal liability is then increased for defined categories such as gross negligence or wilful misconduct.

However, the drafting varies substantially. The agreement must define whose conduct counts, whether gross negligence and wilful misconduct are separate standards, whether the operator bears only direct loss, whether indirect or consequential loss is excluded, whether environmental loss is treated differently, whether the operator loses protection for breach of specific duties, and whether liability caps apply.

The phrase “gross negligence” should not be assumed to have one universal statutory meaning merely because it appears in an international model. Its interpretation depends on the governing law, defined terms and factual circumstances.

Third-party liabilities versus internal allocation

The operator may sign drilling, engineering, construction, logistics and service contracts as agent or representative of the joint venture participants, depending on the JOA and procurement structure.

Third-party liability can therefore operate differently from internal JOA liability. A contractor may have rights against the operator, the concessionaires collectively or the particular entity named in the contract. The JOA then determines how that external liability is allocated internally.

Transaction counsel should examine who signs each third-party contract, whether the operator acts as principal or agent, which parties receive contractual rights, how indemnities operate, how insurance responds and how net unrecovered exposure is allocated.

HSE and environmental liability

Upstream operations engage both concession-specific HSE requirements and wider UAE environmental legislation. Federal Law No. 24 of 1999 Concerning the Protection and Development of the Environment contains specific provisions relevant to petroleum exploration, drilling, extraction and production, including controls on pollutants and emissions.

The JOA should define responsibility for environmental management, regulatory reporting, remediation, emergency response and environmental claims. But an internal indemnity cannot necessarily prevent regulators or affected third parties from pursuing the person or entity that is legally responsible under applicable law.

For that reason, the parties should distinguish regulatory liability owed to the competent authority, third-party liability for damage or injury, contractual liability under service and operating contracts, and internal contribution between joint-venture participants.

Environmental indemnities need more than percentage sharing

A simple provision stating that every environmental cost is shared pro rata may not adequately address a major spill caused by one participant's separate activity, a legacy contamination event, a contractor's misconduct or operator wilful misconduct.

More sophisticated JOAs distinguish between joint-operation contamination, pre-existing environmental conditions, party-specific activities, operator fault, contractor-caused pollution, emergency-response costs, legally permissible treatment of government penalties, and long-tail remediation after field closure.

Decommissioning can outlive the producing venture

Decommissioning is one of the most important long-term liabilities in an upstream joint venture because abandonment costs can arise decades after the original investment decision.

Current UAE oil and gas practice does not use one universal statutory decommissioning model for every concession. Newer concessions commonly include express decommissioning provisions and may require a funded abandonment or decommissioning arrangement. Older concessions can contain less detailed provisions, leaving significant matters to negotiation or later agreement.

Depending on the concession, a national oil company may undertake physical decommissioning after expiry while the concessionaires finance the work through a decommissioning fund accumulated during the producing life of the field.

The JOA should therefore deal with when decommissioning funding begins, the calculation methodology, security for future obligations, operator responsibility, budget approvals, cost overruns, treatment of facilities left in place, residual liabilities after abandonment, and liabilities of parties that transfer or withdraw before decommissioning occurs.

Withdrawal does not necessarily mean a clean break

A party may wish to exit a mature or uneconomic field without finding a purchaser. A JOA can permit withdrawal, but the economic effect depends on the drafting and the concession.

Industry model agreements often preserve liability for commitments approved before withdrawal, minimum work obligations, pre-withdrawal events and certain abandonment costs. More importantly, the host authority may not release the withdrawing company from the concession simply because the JOA says it has withdrawn.

A participant therefore needs both an internal JOA release and, where required, governmental approval releasing or transferring its concession interest. Without both, the departing party can remain exposed to obligations that it believed had been left behind.

Transfers, pre-emption and change of control

Concession interests are not ordinary freely transferable assets. The concession commonly restricts assignment and change of control and requires government or national-oil-company approval.

The JOA may add another layer through pre-emption rights, rights of first refusal, permitted affiliate transfers, change-of-control restrictions, minimum financial and technical qualification standards, decommissioning security requirements, and continuing liability of the transferor for defined obligations.

An acquisition agreement for a participating interest should therefore not be signed on the assumption that JOA partner consent alone completes the transfer.

Parent-company guarantees and credit support

Current UAE upstream practice, particularly in Abu Dhabi, commonly uses ultimate-parent guarantees or other credit support for concession holders depending on the project and financial standing of the investor.

The JOA may impose additional security requirements where a partner's credit deteriorates or it defaults on funding obligations.

Credit support becomes especially important for long-tail obligations such as decommissioning. A special-purpose concession company may have limited assets by the time abandonment liabilities arise, so the government and co-venturers may require support from a stronger group entity or a funded security mechanism.

Sole-risk and non-consent operations

Joint venture participants do not always agree that a proposed well, appraisal programme or development is commercially justified. JOAs may therefore permit a party or group of parties to carry out an operation at sole risk after the operating committee rejects or fails to approve it.

A sole-risk regime typically addresses who funds the operation, who bears failure costs, data ownership, access to joint facilities, the economic penalty if non-participants later elect to join, allocation of production, and liability for damage to joint property.

The parties should verify that the concession permits the proposed operation and that required government approval is obtained. A contractual right to proceed at sole risk does not override regulatory control of drilling or field development.

Insurance is part of the liability architecture

The JOA and concession will normally require insurance appropriate to upstream operations. Coverage may include property damage, control of well, pollution, liability, construction and other specialised energy risks.

The JOA should specify which policies are maintained by the operator for the joint account, which risks each participant must insure separately, deductible allocation, treatment of uninsured or underinsured loss, waivers of subrogation, additional insured status, claims control and how insurance proceeds are credited to the joint account.

Insurance should support the contractual liability regime rather than contradict it. For example, a JOA that allocates gross-negligence loss to the operator should be checked against the operator's available insurance and any exclusion for such conduct.

Force majeure and emergency operations

JOAs must coordinate with the force-majeure provisions in the concession. A participant should not assume that an event qualifying as force majeure between the co-venturers necessarily excuses the concessionaires from obligations owed to the emirate.

The operator also typically receives special authority to respond to emergencies without waiting for full operating-committee approval where immediate action is required to protect life, the environment, the reservoir or property.

The agreement should define how emergency costs are allocated and when the operator must report or seek retrospective approval.

Dispute resolution

Upstream ventures may contain several dispute-resolution regimes at once. The concession may specify one forum for disputes with the host authority, while the JOA uses international arbitration for disputes among co-venturers. Operating contracts may use yet another forum.

The parties should align governing law, arbitration seat, institutional or ad hoc rules, language, expert determination for technical or accounting issues, interim relief, confidentiality and coordination of related disputes.

A JOA tribunal cannot necessarily determine sovereign rights reserved to the competent authority, and an award between co-venturers cannot automatically amend the concession.

Liability-allocation matrix

Risk	Concession / external position	Typical JOA treatment
Ordinary joint operating cost	Concessionaires must perform required operations.	Shared according to participating interests unless otherwise agreed.
Cash-call default	Government obligation normally remains outstanding despite internal default.	Default remedies, funding by non-defaulting parties, suspension or dilution/transfer mechanisms.
Operator negligence	May expose concessionaires/operator externally depending on law and contract.	Often joint-account liability subject to negotiated operator-liability carve-outs.
Gross negligence / wilful misconduct	External liability depends on concession, law and affected third party.	Frequently shifted toward the operator under negotiated carve-out language.
Environmental incident	Regulatory and third-party liability follows applicable law and concession obligations.	Internal allocation based on joint operations, fault, indemnities and insurance.
Decommissioning	Concession may impose long-term funding and abandonment obligations.	Shared through participating interests, funds/security arrangements and withdrawal/transfer provisions.
Transfer of interest	Usually subject to concession and regulatory approvals.	Pre-emption, qualification and partner-consent mechanics may also apply.
Third-party contractor claim	Depends on contracting party, agency structure and applicable law.	Net exposure allocated through joint-account rules and indemnities.

Due diligence before joining an upstream JV

1. Read the concession first. Confirm the sovereign rights, work commitments, term, transfer restrictions and termination rights.
2. Map the participant structure. Identify concessionaires, operator, operating company, parent guarantors and affiliates.
3. Compare concession and JOA liability. Identify obligations that remain joint and several externally despite internal percentage allocation.
4. Review the operator standard. Understand the gross-negligence, wilful-misconduct and consequential-loss regime.
5. Audit work commitments. Determine remaining exploration, drilling and development expenditure.
6. Review cash-call history. Identify partner defaults and disputed joint-account charges.
7. Quantify decommissioning exposure. Check abandonment estimates, funded reserves and residual liabilities.
8. Review environmental history. Identify spills, contamination, remediation obligations and pending regulatory matters.
9. Check transfers and change of control. Confirm required government, ADNOC or partner approvals.
10. Review insurance. Compare policy limits and exclusions with JOA indemnities.
11. Check credit support. Verify guarantees, letters of credit and decommissioning security.
12. Review dispute history. Include accounting disputes, sole-risk operations, operator claims and partner disagreements.

Key takeaway

Oil and gas joint ventures in the UAE operate through a layered legal structure. The host emirate owns the natural resources and grants the upstream right through a concession or other petroleum instrument. The JOA then governs how the participating companies exercise that right together.

That hierarchy is critical to liability allocation. Co-venturers can agree internally to share costs according to participating interests, place defined fault-based liabilities on the operator, create default remedies and allocate decommissioning costs. But internal allocation does not automatically reduce obligations owed to the host authority, and concessionaires may remain jointly and severally exposed where the concession so provides.

The strongest UAE upstream structures therefore align the concession, JOA, operating-company arrangements, third-party contracts, insurance and long-term decommissioning security from the beginning. The greatest risks often arise where one document assumes that another document has already solved the problem.

HZ Legal can assist energy companies, investors, concession participants and service providers with UAE oil and gas joint ventures, concession and JOA reviews, operator and non-operator liability, transfer and default provisions, decommissioning risk, project contracts and upstream dispute strategy.

Official and authoritative sources

• UAE Legislation — Constitution of the United Arab Emirates, Article 23.
• Abu Dhabi Media Office — SCFEA petroleum and natural-resources mandate.
• Abu Dhabi Media Office — 2025 production concession awards to ADNOC and strategic partners.
• Abu Dhabi Media Office — 2024 Onshore Block 2 exploration concession.
• ADNOC — Upstream business and operating companies.
• ADNOC Onshore — concession history and strategic partner participation.
• Chambers Global Practice Guides — Oil & Gas 2026, UAE.
• UAE Legislation — Federal Law No. 24 of 1999 Concerning the Protection and Development of the Environment.
• Dentons — international JOA operator-liability and risk-allocation principles.

This article provides general information only and does not constitute legal advice. UAE upstream rights and liabilities depend heavily on the relevant emirate, concession, JOA, operator structure, field history, environmental position, government approvals and project-specific documents. Many concession terms are not public. Specific legal advice should be obtained before acquiring, transferring, funding or exiting a participating interest.