The mismatch between where natural resources are found and where they, or their derivatives, are needed means that the business of finding, developing and selling them has for centuries been inherently international. The modern manifestation of this is the importance within the sector of large multinational enterprises – and their dominance where the state does not own all assets above the ground, as well as the resources below. Several state-owned enterprises have now themselves become important multinationals in the resource sector. Among resource-rich countries, for instance, multinationals account for the vast bulk of fiscal receipts from private business activity in the sector, especially in petroleum: in Ghana, Liberia, Peru and Trinidad and Tobago, they account for all such receipts (see Figure 1.1). In designing fiscal regimes for the extractive industries, international aspects – including the opportunities for tax planning by multinationals to avoid their liabilities – thus need to be center stage. This book aims to provide a comprehensive (and comprehensible) account of these sometimes difficult issues.
In this chapter, I examine two ways in which states can work together and develop hydrocarbons resources to their mutual benefit. The opportunities for peaceful exercise by coastal states of sovereign powers over very extensive maritime spaces have never been greater, but the combination of political will and economic aspiration still presents significant challenges. It is in this setting that there is scope for using mechanisms such as joint development zones (JDZs) and international unitization agreements (IUA). These legal instruments have assumed an important role in the past few decades as states have sought to interpret and implement the evolving international law of the sea to their advantage.1