10. The design of joint development zone treaties and international unitization agreements
- Michael Keen, and Victor Thuronyi
- Published Date:
- September 2016
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
Both instruments are a response to distinct situations in which cooperative development of natural resources by states is problematic, whether the resources are located off shore or on land. The first of these has rightly attracted considerable attention from scholars and commentators: how to secure cooperative management of hydrocarbon resources by sovereign states in areas that are subject to overlapping claims. The reasons for this interest are easy to glean from the fact that there are several dozen maritime delimitation disputes going on around the world. A further group of disputes apply to inland lakes or seas such as the Caspian Sea and tracts of land that cross present national borders. The potential for armed conflict arising from such disputes is illustrated by the recent conflicts in the South and East China Seas. However, the discovery of oil and gas is a great incentive to states to negotiate a solution, even if it is only on a provisional basis so as to leave the disputed boundary out of the provisional settlement in order to allow development to commence.2 With an ongoing dispute it is very hard to attract serious, reputable investors. Should an agreement on a JDZ be reached in such circumstances, it would not only resolve this impasse but at the same time would represent a victory of economics over politics.
The second situation in which cooperative development becomes problematic is when the resource crosses or is believed to cross established borders and states have to agree on the next steps if exploration or development is to take place. While this situation, usually formalized as an IUA, lacks the element of an inter-state dispute over borders, many other challenges are likely to face the parties: for example, what kind of cooperative IUA structure is appropriate; how do the parties, not only states but also any international or national oil and gas companies already involved or having an interest, reach agreement on sharing the deposit, and what action can be taken by one state if the other(s) lacks a similar enthusiasm for resource development?
Much of the writing on the subject of cooperative development is characterized by one or both of two features: first, there is a preoccupation with the rules of international law and the framework they provide to states to develop their resources; second, there is an interest in describing and reviewing the various legal structures which states design for cooperative development. Although these concerns have resulted in valuable and pioneering work, the notion is rarely present in this body of writing that the legal frameworks themselves point to wider problems that make cooperative development difficult. For example, in many states there is a lack of institutional capacity to implement complex legal structures. There may also be a lack of confidence in certain kinds of legal arrangements, particularly ones that appear to entrust significant powers to international energy companies. In such situations, formal legal structures may be preferred on the grounds of transparency even though they offer challenges in operational terms against those that might offer a pragmatic, ad hoc and informal approach. The diversity of interests among states is also very wide, with the result that natural resource development gives rise to diverging policies about the rate and manner of development. Legal frameworks have to make allowances for reaching agreement among states with sometimes radically different policies on such matters; these are after all policies that are a response to distinct constellations of national priorities, pressures and interests.
This chapter argues that since international law has developed substantially in this area, it offers states a wide latitude for their choice of instrument in addressing cross-border development. However, this freedom to shape options to particular circumstances has to be set against policy constraints at the national level; these in turn may encourage the adoption of formal (i.e., legal) responses even where flexible ones are available and more appropriate. In its approach, the chapter discusses the structural design of JDZs and IUAs while not discussing tax issues inherent to their design.
2 The basis for any state action
While boundaries of states on land generate disputes and sometimes lead to armed conflict, for the most part such boundaries are securely established. Relative to maritime areas at least, they present a sharp contrast to the very recent efforts to delimit jurisdiction over what was once treated as common space. Disagreements over such boundaries are common. This is where the role of international law could prove significant and helpful.
Any action by a sovereign state to reach agreement with a neighbor or with neighboring states needs to take as its starting point an analysis of the relevant international law relating to its maritime areas. The framework set out by successive conventions on the law of the sea contains several key principles. The most recent and most influential of these is the United Nations Law of the Sea Convention (UNCLOS), which replaces four earlier treaties and to some extent codifies customary international law on this subject.3 Under Article 83(1) of UNCLOS, states are required to cooperate toward reaching agreement regarding their delimitation disputes. Under Article 83(3) they are also required to make every effort to enter into practical provisional arrangements pending agreement on delimitation of the Exclusive Economic Zone (EEZ) or Continental Shelf. Moreover, the same provision requires states not to jeopardize or hamper the negotiation of a final agreement over the disputed area. The exact nature of the provisional arrangements envisaged under Article 83(3) is not specified in the Convention. It simply imposes a general obligation to cooperate when a deposit is found to cross boundary lines which are already delimited or which are situated in an area that is subject to overlapping claims. The substantive content of such a general requirement to cooperate is likely to be highly uncertain. One scholar notes that “the negotiating governments are not constrained, either by international law or by deadlines, to reach agreement”.4
From the foregoing the conclusion is that while the parties appear to be required by international law to notify, inform and consult other interested states and to negotiate with them in good faith, there is no duty following from this to reach a specific type of agreement, such as one establishing a JDZ and related institutions. The existence of procedural rules requiring cooperation is distinct from a requirement that the shared petroleum deposit be developed jointly.
If one were to refer to good practice in cooperation between states on these issues, it quickly becomes clear that there are two principal ways of proceeding with a proposal for a collaborative relationship, the JDZ and the unitized structure. The question then arises of what the key differences are. For the JDZ, the area over which it applies is a stand-alone one, agreed between or among the parties and comprehensive in its scope. It transfers operational management of petroleum resources to an international body. The joint right and risk structure is shared between nation states and not companies. Allocation of production between states is a result of prior knowledge of geology and negotiation power (traditionally 50–50).
By contrast, unitization of a structure arises when the holders of separate licenses or contracts decide to develop jointly a geological structure that lies under several of these grants of rights. When the deposit straddles international boundaries, an IUA may result from discussions among the respective governments. Under this government-to-government agreement, there will be a commercial agreement on unitization involving the private or state companies responsible for petroleum operations.5
The key difference between the JDZ and a unitized structure lies in that the boundary between states is usually settled in a unitized development, whereas a JDZ circumvents an unsettled boundary issue. In other words, the structure it adopts is self-consciously a transitional device. There are other differences: the JDZ carries the risk of political interference and a duplication of state oversight and control; it is a form of governance through a treaty between states; in the JDZ, the key features are a legally binding ‘constitution’; a distinct managerial structure and a dedicated support staff or administration; in a unit which is the subject of an IUA, allocation of jurisdiction is made to existing institutions, rather than to a newly established one where material and procedural rules will govern supervised conduct.
Neither instrument is, strictly speaking, entirely new; in various forms each has been used for a very long time. This chapter compares and contrasts the design of these two different forms of cooperative development when applied to disputed areas. It pays particular attention to their use in West Africa and the Pacific and North Sea regions. Some conclusions will then be drawn about the way forward for the many states that have these problems on their policy agendas.
The sheer diversity of geological, political and historical circumstances among states means that whatever the form of cooperative agreement is chosen, differences will result. There can be no such thing as a ‘one size fits all’ solution for cooperation if that is the goal being sought. Even with apparently ‘standard’ forms like a JDZ or unitization, adaptation is almost inevitable, and the final outcome will depend upon choice and negotiation by the states concerned. This is much more than a challenge to classification. It means that if an international arbitral tribunal or court were to attempt to mandate a form of joint development on states in a case before it, it would face an impossible task.
3 The JDZ: overview
Although more than two dozen legal arrangements have been concluded for joint development of hydrocarbons and other resources, it is striking how diverse the agreements and structures have been to date.6 There has been no uniformity of approach, with some permitting the parties to adopt separate forms of licensing and others not even specifying precisely what the zone or area for cooperation is. For a JDZ as understood here (where some effort is made to institutionalize cooperation), it is useful to distinguish three basic models (see Table 10.1). Model 1 gives the leading role to a single party: one state with oil and gas expertise manages the development of the JDZ, with the other state’s participation confined to revenue sharing according to a pre- agreed formula and monitoring. The early joint development arrangements adopted by Bahrain and Saudi Arabia (1958), Abu Dhabi and Qatar (1969) and Sharjah and Iran (1971) are examples of this. Model 2 develops a structure on a joint party axis: the states retain authority over the JDZ and delegate minimal or no power to the joint authority, or together they may elect to out-source its management to a third party, usually an expert/consultant. An example of this is the Malaysia–Vietnam arrangement for a joint party regime under which each state nominated its national oil companies (NOCs) to undertake hydrocarbons activity in the ‘defined area’.7 Model 3 is highly complex and formal. A strong joint authority with licensing and regulatory powers is charged with the development of the JDZ. It has legal personality and can therefore enter into binding contracts with prospective contractors on behalf of the states concerned. This involves some surrender of sovereignty over the zone of cooperation to a supranational entity and is therefore a matter of some sensitivity. Examples of this include the Timor-Leste–Australia JDZ (known as the Joint Petroleum Development Area or JPDA) and the Nigeria–São Tomé e Príncipe JDZ (the former is examined in Daniel, Veung and Watson, Chapter 11 of this book; the latter is described in what follows).
|Nigeria–São Tomé e Príncipe||2001||3|
Common elements in JDZ frameworks do exist of course. Typically, two states will agree to share resource revenues and costs for a specified period of time (probably in the region of 30 to 50 years). There will be varying degrees of form and complexity, but all will require party agreement. Examples are: Saudi Arabia–Bahrain JDZ (1958) defined in a single article and the Australia–Indonesia Timor Gap JDZ (1989) with 34 articles and four extensive annexes. Other common provisions include delimitation of the JDZ; provision for the sovereign and jurisdictional status of the JDZ; identification of the authorizing entity; taxation; reconciliation of municipal law in both states; treatment of ‘common deposits’ extending beyond the JDZ area; a dispute settlement mechanism; and health, safety and environmental regulation.
4 The JDZ: Nigeria–São Tomé e Príncipe as a case study
Many years ago, in anticipation of an emerging trend in the international law of the sea and particularly the idea that coastal states would be permitted to claim a 200-nautical-mile EEZ,8 Nigeria passed an EEZ Law in 1978 and modified it in 1998 by Decree No 41. The Democratic Republic of São Tomé e Príncipe ratified its Official Maritime Claims Law in 1998. Since that time, the EEZ concept has become established as a defined feature of UNCLOS. Cooperation between these two states was stimulated by the fact that there was considerable overlap between the territorial claims of each country based on the law of the sea; the states merely had to decide how to proceed, and ultimately they agreed to establish a JDZ.
The outcome was far from certain at the outset of negotiations.9 There were important differences between the two states. Although neighbors, each one had a very different colonial history, and neither shared the same dominant language. Nigeria had decades of involvement in the oil and gas industry and is far larger in size than its tiny neighbor. This asymmetry did not affect its sovereignty under international law but could hardly be ignored by its smaller neighbor and partner. Moreover, São Tomé e Príncipe had also awarded acreage to companies prior to the formation of the JDZ, so the issue of pre-existing interests of foreign companies was on the table. What such acreage would yield was shrouded in uncertainty too: seismic coverage was limited. Another factor that underlines the differences is that while for São Tomé e Príncipe this was its first experience with any form of maritime boundary dispute settlement, Nigeria had already tested the formal process of adjudication by referring a disputed boundary with Cameroon to the International Court of Justice in The Hague and had tested unitization with Equatorial Guinea in the Ekanga/Zafiro fields. The confidence with which Nigeria approached such negotiations can be imagined. Its large land mass and population of 120 million had given it the opportunity to manage boundary issues before even if they were largely on land and internal in character. As a small island nation, São Tomé e Príncipe had little experience of boundary issues to date. The risk of being overwhelmed by Nigeria was therefore significant.
In responding to this context, it appears that political will to reach agreement existed at the highest level and was crucial to achieving the resulting JDZ in line with Article 74(3) of UNCLOS. At the same time it was clear to all that the JDZ was to be a temporary solution which did not settle the underlying claims to maritime space by the states. To address the imbalance referred to earlier and improve São Tomé e Príncipe’s leverage in the relationship, the treaty scope was extended to include fisheries as well as oil and gas resources, perfectly compatible with the UN Law of the Sea Convention but unique in the world’s JDZ treaty arrangements. Another key element was the management of popular expectations. In São Tomé e Príncipe in particular, these were high despite the time required to develop the resources; the first licensing round in 2003 included a signature bonus element which generated benefits at a very early stage. So far, around US$350 million has been received in signature bonuses and concession rentals (Yabo, 2013).
The JDZ was established by treaty on February 21, 2001, after brisk but thorough negotiations. It is located in deep offshore waters in the Gulf of Guinea, with an overall size of approximately 35,000 sq km, lying 150 km south of the coast of Nigeria and 90 km west of São Tomé e Príncipe, in water depths from 1,500 m in the north to more than 4,000 m in the southwest. The legal regime comprised a package of instruments such as a treaty; petroleum regulations; tax regulations; environmental regulations; a development contract (production sharing contract or PSC) and a choice of law for ‘unresolved matters’. The treaty covers a 45 year period and allocates benefits and obligations (Nigeria 60%; São Tomé e Príncipe 40%). A governance structure is set up, comprising a Joint Ministerial Council to exercise overall political responsibility and supervise the Joint Development Authority (JDA), charged with managing the JDZ on behalf of the two states. Both bodies are required to reach decisions on a consensual basis. Notably, the treaty contains transparency provisions supplemented by a Joint Declaration on Transparency and Governance signed by the heads of state and governments. The JDZ is also a member of the Extractive Industries Transparency Initiative. Although the treaty was executed in both English and Portuguese, the official language of the JDZ is English.
The first licensing round was held in 2003; the first block was awarded in April 2004; and a second round was held in November 2004, leading to the award of 6 out of the 11 blocks so far delineated. The first PSC was signed in February 2005, and five had been concluded by 2013. By any comparable JDZ standard, this is a rapid process.
Experience with the Nigeria–São Tomé e Príncipe JDZ already points to some wider lessons about this form of cooperation. The idea that a legal regime, however comprehensive, can provide rules for every contingency in the life of a JDZ is illusory. Modifications to the existing regime will be required to deal with a variety of problems that arise in the implementation of the JDZ treaty. For example, the regulations will require some further development, not least as new problems arise which may be unique to the JDZ context. Moreover, the JDZ institutional structure does not replicate the institutions of a state. It will have to interact with existing national institutions and with legal competences that remain rooted in the states themselves. Indeed, support from the respective state departments and agencies, such as tax authorities, police, customs and immigration will be an almost continuous feature of their operation. In this case, the treaty prescribed joint security and policing in Article 42, but this was difficult since it touched upon important issues of sovereignty. Yet the need for such action has been clear due to poaching and illegal fishing in the JDZ, for example. Powers vested in the respective states can have a negative impact on the JDZ institutions, such as state decisions making frequent changes in the JDZ council and authority leading to a lack of continuity in political leadership. Unexpected demands on funding have also put strain on the operation of joint structures: contrary to agreements on budgeting, operational issues have arisen such as cost overruns and delays at times when it became difficult and expensive to secure drilling rigs to operate in the JDZ water depths at a peak stage in drilling activity. Prior to oil and gas production, there were also issues relating to the funding of the joint institutions themselves.
The influence of national policies on the JDZ’s operational functioning can be seen in two areas that have emerged as key planks of resource development policy: local content and the maximization of wider impacts in the local economy such as infrastructure provision. In the former area the general aim is to promote employment for local people and to support local business in providing goods and services to the resource project. In the Nigeria–São Tomé e Príncipe JDZ, local content was promoted by awarding small percentages during the bid rounds to qualified domestic firms to build up their capacity in hydrocarbons operations; training and supply of goods and services were also encouraged. However, the scope of local content measures was limited in São Tomé e Príncipe’s case by the absence of skilled oil and gas staff since the country was new to the oil and gas business. The JDZ itself contributed to training new personnel for the national structures by supporting the recruitment of former and serving JDZ staff to serve in ministries and presidential advisory roles in each of the states. With respect to critical infrastructure and social amenities, special projects have been carried out in communities by operating companies in both of the JDZ states, with a view to sharing the benefits more widely. More than 61 projects have been initiated in different parts of the two states (Yabo, 2013).
In another respect, national interest rather than policy has had a role in JDZ organization. Inevitably, it has been necessary to balance the mix of employees from each state and to manage the social and cultural diversity among staff in the JDA. These practical concerns have had the side effect of creating delays in decision making due to the need for referrals to higher or outside authorities. There is a contrast here with the kind of rapid response typically found in many international oil and gas operating companies when faced with a problem. The structure itself tends toward a bureaucratic approach.
These critical remarks on the Nigeria–São Tomé e Príncipe JDZ should not detract from the undoubted successes it has had in its first decade. Investment levels in oil and gas operations have reached US$400 million. If oil and gas had been discovered in greater amounts, this figure is likely to have been much higher. This underlines a fact of life for any JDZ structure: an assessment of its value will ultimately turn on the commercial prospects of its geology. If the geology disappoints, then no matter how high the quality of design and operation, investment and its impacts will be modest. In this case, the two states’ commitment to the JDZ treaty over a 45-year period means that sustained exploration efforts are likely to be encouraged and more discoveries are possible, an outcome that could not be expected without their commitment to a cooperative approach. Whether it can be seen as a model is harder to argue. It remains the only JDZ of its kind in Africa, and indeed it is one of the few functional JDZs in the world.
The technique called unitization has long been used within a single state when a field straddles two concession areas. The purposes of unitization are to permit economically efficient development of the entire field as a unit by the licensees, sharing costs and production, to avoid wasteful duplication of effort and competition on two sides of the boundary and protect the respective, or in legal terms ‘correlative’, rights of the parties. Its practice has generated a body of literature in its own right.10 In cases where a field straddles an international boundary or boundaries, a state-to-state unitization agreement is necessary – an IUA. Treaties between states on unitization tend to follow the approach adopted in domestic unitization. This is a less complex approach to joint development than a JDZ and is best understood as a technique that may be applied in many contexts rather than a structure in a single area in the way that a JDZ is. The central feature and key difference with joint development is that the boundary between the states on which the geological formation has been found has already been delineated by the states themselves. Hence there are parallels between on-land unitization within a single state and unitization off shore between states. Even so, provisions do exist for JDZs to unitize with other, non–JDZ concession areas or within a JDZ itself. There is provision for this in for example the Nigeria–São Tomé e Príncipe Treaty (Article 30).
The design of an IUA is a process facilitated by the existence of a great deal of government–industry practice within national borders. Since matters of detail about operations will often be left to the industry in a commercial agreement, the number of provisions required in an IUA between governments can be reduced. States may conclude a short treaty in which they provide for certain companies to enter into a cross-border unitization agreement (as is common in the North Sea), or they may choose to conclude a unitization agreement themselves. An example of the latter is the agreement between Trinidad and Tobago and Venezuela for the Loran-Manatee Field made in 2010.11 Typical elements in such IUAs are the definition of a field and/or unit area to which the agreement will apply; the applicable laws; the roles of the respective governments; rules on sharing of petroleum produced and associated costs; and determination of the way in which the commercial exploitation of the unit area is to be undertaken. Prior to the conclusion of any such agreement it is necessary to obtain some idea of the reserve base and make a determination of the total reserves in place within the area. The agreement itself will provide for the apportionment of production from the unit area but may also provide for redetermination at a later date. This mechanism is designed to allow a party or parties to call for a readjustment of shares as knowledge of the geological base increases and can take into account shifts in the deposit itself as a result of drilling activity.
6 Unitization in practice
Several regions provide examples of international unitization. The oldest – at least outside of the Middle East on-land unitizations – are in the North Sea. Asia and Latin America can also provide examples. One such example is the Sunrise International Unitization Agreement in the Timor Sea area in South- East Asia. Several of these will be examined in what follows.
6.1 Norway and the United Kingdom
The cooperative approach of Norway and the UK to the development of common offshore petroleum deposits was path breaking in the 1970s. It initiated a body of literature that has encouraged the idea that inter-state cooperation in the development of a common resource deposit is an emerging rule of customary international law. Since that time, the view has gained ground among states that economic pragmatism should take precedence over political differences. In retrospect, however, the early treaty instruments adopted in the North Sea to promote cross-border unit development appear rather clumsy, overly formal in a legal sense and, as a result of the lengthy times required to negotiate them, likely to undermine the very pragmatism that they were designed to encourage.
For almost 30 years, the approach adopted by the governments of Norway and the UK to the development of a shared petroleum deposit has been to conclude a customized treaty for each new cross-border field. When the licensee companies discovered a petroleum deposit that was thought to extend across a national boundary, negotiations commenced between the governments on joint development of the resource. This resulted in the conclusion of an inter-governmental agreement (IGA). It became the typical legal response by the North Sea states when deposits were found to straddle the international boundaries between, for example, Norway and the UK, the Netherlands and the UK and Norway and Denmark. In each case, the aim of the negotiations was to conclude an international treaty between the two governments and to let the licensee companies reach a separate unitization agreement between themselves, subject to the approval of the respective governments. This pattern began in the North Sea with the negotiation of a treaty for the Frigg gas field in the 1970s and subsequently became familiar in other parts of the world.12
The inter-governmental negotiations took place respecting the existing international maritime delimitation agreements, such as the one between Norway and the UK concluded on March 10, 1965.13 They addressed specific matters in relation to a particular field, on the basis of established international borders: a point of difference between this context and that of many other cross-border disputes around the world. In addition, such agreements usually contained a common ‘unity of deposit’ clause. Essentially, this stated that, in the event of a single petroleum reservoir extending across the dividing line and being exploitable “wholly or in part” from the other side, “the two States are obliged, in consultation with the licensees, if any, to seek to reach agreement as to the manner in which the petroleum reservoir shall be most effectively exploited and the manner in which the proceeds deriving therefrom shall be apportioned”.
The wording of this clause is significant. The trigger for cooperation in developing the reservoir is not the mere existence of a cross-border deposit but rather the technical exploitability of one part from the other side of the dividing line. It does not require the states to develop any shared resource as a unit. Indeed, “the only firm condition imposed is apparently the condition that the proceeds of exploitation should be shared” (Taverne, 1994, p. 155). Such a narrow focus has to be understood in the context in which it was negotiated (even though such clauses can still be found today, as in Australia and New Zealand). Since that time, governments have been much more sensitive to the need to develop the common deposit in a sustainable manner: to ensure maximum recovery of the deposit and to ensure from the outset that the companies entrusted with the task are technically and financially qualified to do so.
Between 1975 and 1992 four bilateral treaties were concluded between Norway and the UK and the Netherlands and the UK14 on specific cross-border unitizations. Although there was a large measure of standardization in the four agreements, there were also some differences among them. The agreements for Statfjord, Murchison and Markham fields all followed the pattern set by the Frigg Agreement of 1976. They start from the boundary delimitation established in the respective Norwegian–UK and Netherlands–UK Agreements of 196515 and the undertaking in those agreements by both governments that if a petroleum field crossed the dividing line and was exploitable from either side, the governments would seek to reach agreement on how the field could be most effectively exploited and how the reserves would be apportioned. In the Statfjord and Murchison Agreements between Norway and the UK, for example, both signed on the same day in Oslo in 1979, there were also provisions which looked to the future when greater geological understanding of the deposit might reveal that the initial division was unfair. Provisions for a subsequent review (or ‘redetermination’ as it is known in the petroleum industry) and reapportionment of reserves among the parties addressed this in a manner that was more detailed than in the Frigg Agreement. There were also provisions that required installations within 500 meters of the dividing line to be jointly determined by both governments, provisional apportionment was no longer to begin at 50–50, there was to be free movement between installations, greater freedom for inspectors in inspecting installations, the implementation of a program for exploitation, an improved measuring system and the introduction of certified production records of petroleum and emergency provisions. In the Murchison Agreement there were only minor changes: a government’s right to call a redetermination schedule was included, as was room for a government request in reassessment of the field, more precise measures for pollution prevention were included and greater clarity over jurisdiction of installations positioned on either side of the maritime boundary. Further modifications were made in the treaty applied to the Markham field. It distinguished for example between redeterminations made at the request of the licensees and those initiated by one of the governments.16 While these differences can be seen as incremental improvements in the governments’ approach to the problem, they also created a patchwork, in which jurisdictional and regulatory responsibilities differed from one treaty to the next, especially when cross-border pipelines were involved.17
Each of these treaties related to an identified geological structure that crossed the dividing line and could be exploited from either side. The respective governments had already granted exploration and production licenses over part of the area under well-established and broadly similar regulatory regimes. The starting point for the governments and their licensees was not therefore very different from a familiar situation in the petroleum industry, where, within a single jurisdiction, licensees discover a petroleum bearing structure which crosses a border line between one license area and another. In that situation, unitization is normally a requirement of the regulatory regime,18 and the key issue is an apportionment of the reserves between one licensed area and another. Apportionment in that context is essentially a technical matter determined by reports provided by reservoir engineers chosen by agreement to exercise an objective judgment. The North Sea Treaties established an analogous framework in the cross-border context. Apportionment of the reserves is again the key issue. When agreed by the two governments, it determines the share of the licensees on either side of the border and the base from which the tax take of the two governments is to be calculated. Otherwise, these treaties deal with a range of regulatory matters that need to be addressed in the context of joint operations, which are in fact similar to matters that would need to be dealt with under a separate jurisdiction if there were no cross-border context.
The driver behind cooperation was and remains a clear economic self-interest. Moreover, alongside the establishment of cooperative arrangements, both governments were scrupulous in preserving what they considered to be their respective sovereign rights, as is clear from the statement of principle which concludes the substantive provisions in the Norway–UK Agreement on the Frigg gas field:
(1) Nothing in this Agreement shall be interpreted as affecting the jurisdiction which each State has under international law over the Continental Shelf which appertains to it. In particular, installations located on the Continental Shelf appertaining to the United Kingdom shall be under the jurisdiction of the United Kingdom, and installations located under the Continental Shelf appertaining to the Kingdom of Norway shall be under the jurisdiction of the Kingdom of Norway. (2) Nor shall anything in this Agreement be interpreted as prejudicing or restricting the laws of either State or the Exercise of jurisdiction by their Courts, in conformity with international law.19
This wording has appeared mutatis mutandis in every agreement made since.
6.2 Timor Sea
The IUA that was concluded between Australia and the Democratic Republic of Timor-Leste was unusual in being closely linked to the other mode of cooperative arrangement, the joint petroleum development authority (JPDA), a form of JDZ, which had established a three-tiered administrative structure. Its aim was to permit the exploitation of the Sunrise and Troubadour oil and gas fields, known together as the Greater Sunrise field. These fields straddled the border between the JPDA set up by the Timor Sea Treaty (2002) and the territorial waters of Australia, which had been delimited several years before in the Timor Gap Treaty between Australia and Indonesia (which claimed Timor as part of its territory at the time). Within that JPDA there had already been a substantial gas discovery in the Bayu–Undan field and oil and gas discoveries in the Elang fields.20
7 The pragmatic use of law: frameworks
In recent years a number of states have experimented with a new form of legal instrument to address the need for cooperation in the event of cross-border deposits being in prospect or already discovered. This is the framework approach. It has been applied to contexts in which there is already agreement on the boundary between the states concerned. Examples are the Framework Agreement on Petroleum Co-operation between UK and Norway (2005) (hereinafter ‘Framework Agreement’); the agreement between Canada and France relating to the Exploration and Exploitation of Transboundary Hydrocarbon Fields (2005); the Framework Treaty relating to the Unitization of Hydrocarbon Reservoirs that extend across the delimitation line between Trinidad and Tobago and Venezuela (2007); the Treaty between Norway and Russia concerning Maritime Delimitation and Cooperation in the Barents Sea and Arctic Ocean (2010) (Annex II) and the Agreement between the United States and Mexico concerning Trans-boundary Hydrocarbons Reservoirs in the Gulf of Mexico (2012). The elements of such framework agreements vary considerably, with wide differences in the scope and depth of commitment made by the respective states. So far, the Framework Agreement between the UK and Norway is the most innovative and is therefore analyzed below at some length.
They can be summarized as being more amenable to the use of discretion by the authorities in specific cases than the structures and techniques discussed so far, designed to facilitate speedy approval of cross-border unit developments proposed by energy companies and including some delegation to the companies themselves, whether they are state or privately owned. Most of them prohibit hydrocarbon production from a cross-border deposit without prior agreement between the states.
For states that are currently considering the adoption of legal forms of cooperation for the development of common resource deposits, the framework approach is worthy of study.21
7.1 The Norway–UK Framework
In February 2005 the two major oil- and gas-producing states in the North Sea area, Norway and the UK, cast aside three decades of cooperation in cross-border petroleum projects in favor of an entirely new approach based on a Framework Agreement.22 The express aim of the agreement is “to deepen further” the co-operation between the UK and Norway “with respect to petroleum cross-boundary projects and to achieve optimal exploitation of the petroleum resources on the continental shelves appertaining to the two States”. While this agreement does not replace or modify any of the existing treaty instruments between the two states on cross-border petroleum development, it rejects a key assumption on which these bilateral agreements were negotiated and concluded: the idea that a distinct inter-governmental treaty is required for each field that is to be developed on a cross-border basis. The considerable influence which the practice of these states has had elsewhere in the world makes this new orientation of more than regional interest. In addition, the bilateral arrangements they have put in place over several decades probably constitute one of the most pragmatic forms of inter-state co-operation on cross-border unitization in operation anywhere in the world. However, the new legal arrangements raise the question of why a change in established practice was considered necessary.
The Framework Agreement sets out an inter-governmental framework within which particular projects may be approved without going through the lengthy procedure of negotiating a separate treaty for each cross-boundary reservoir. When these treaties were concluded in the 1970s and 1980s, the North Sea was at a quite different stage of development, and the respective states had different expectations from future resource development. The UK has become a net importer of petroleum and is preparing for a future of significant gas (and oil) import dependence. Norway, by contrast, will have a growing ability to export petroleum to the UK due to expanding pipeline infrastructure. From a geological point of view, there has been another significant change. At the present time, cross-border projects that are proposed for development are more likely to be for small and medium-sized fields. The traditional approach of concluding a separate treaty for each cross-border development is ill suited to this context, and its complexity and unpredictability are likely to act as disincentives to companies seeking to bring cross-border discoveries forward for development. The Framework Agreement, by encouraging the development of industry confidence about inter-governmental cooperation and simplifying the arrangements for cross-border cooperation, is designed to act as an incentive to the planning and execution of such projects. On one estimate, the simpler procedure could stimulate an investment of up to US$2 billion in the so-called Cooperation Corridor (a 60-km zone extending either side of the trans-boundary line) within the next eight years (Pilot-Kon-Kraft, 2002).
The Framework Agreement states that in the event that a petroleum reservoir is deemed by both governments, following consultations with their respective licensee companies, to be a ‘Trans-Boundary Reservoir’ which should be exploited, it will be exploited as a single unit under the terms of the Framework Agreement. In that case, each government shall issue the authorizations required according to their national law.23 Separate provision is made for a situation in which the exploitation is to take place from infrastructure located on one side of the boundary. The trigger for a cooperative approach is simpler than that provided in the common deposit clause of the delimitation agreement between Norway and the UK, which refers to the field’s exploitability “wholly or in part”. The authorized licensees will conclude inter se a licensees’ agreement, which is to be submitted to the governments for their approval. This is one of three key approvals that each of the governments is responsible for granting. The licensees’ agreement will resemble a typical Unitization and Unit Operating Agreement and will set out the main terms for joint operations.24 Simplicity is a key requirement in the way that licensees address these topics. This is evident in the single, integrated unitization agreement. It contrasts with other framework agreements such as those between Venezuela–Trinidad and Tobago and Norway and Russia, which envisage two separate agreements: the unitization agreement that is drawn up by the respective states and a unit operating agreement that is negotiated and signed by the licensee companies. In the UK–Norway version, the unitization agreement will include provisions for arrangements following a one-off determination of the apportionment of reserves between the licensees (“to apply for all time to all activities”) or procedures (“including a timetable”) for carrying out and applying the outcome of redeterminations (a choice is therefore offered to the licensees on this very delicate issue), and procedures for the settlement of any disputes related to the distribution of the hydrocarbons across the boundary, as well as disputes between the licensees. If the authorization extends into licensed or non-licensed areas, there are provisions to deal with this. A unit operator is appointed by the licensees, but the approval of the two governments is required, as is any proposed change in the operator. This unit operator is responsible for the submission of a development plan to the two governments for approval (and any amendments to the plan). This has to cover both exploitation of the deposit and transportation of the petroleum. This is the third and last of the key approvals required before any petroleum may be produced from the reservoir. Other matters to be agreed between the two governments include the timing of the cessation of production and the use of infrastructure on one side of the delimitation line to explore for or to exploit a hydrocarbon reservoir on the other side or to process hydrocarbons from such a reservoir.
The Unit Operator is responsible for preparing a decommissioning plan for the field and for its installations and facilities. This has to be approved by the competent authority of the state where the installations and facilities are located, but the competent authority of the other state has to be consulted. Where these are located on both sides of the border, a joint plan may be submitted.
Three forms of dispute settlement procedure are provided in the Framework Agreement:25 first, implementation of the Agreement is to be facilitated by a consultative mechanism, the Framework Forum, which meets twice a year and comprises representatives of each government. A principal objective is to try to ensure that any potential disputes are resolved before it is necessary to invoke the formal channels set out in Chapter 5 of the Agreement. The Framework Forum is the primary dispute resolution body. It is very similar to the Consultative Commissions set up under all the earlier Norway–UK agreements26 but has a clearer mandate to act as a dispute resolution body. The second channel for disputes is the procedure involving a Conciliation Board, to which disputes may be submitted by either government. The Board’s decision has to be made “within a reasonable time limit”, and its decisions are binding on both governments. This is in practice little different from the arbitration provisions in earlier agreements except that the Board will consist of five members, and if the two governments wished to agree to different arrangements they may elect to do so under Article 5(1) of the Framework Agreement. Third, an expert determination process is provided for matters relating to field determinations or apportionments, under Article 3.4, subject to procedures to be agreed between the two governments. The expert’s decision is binding on the two governments.
The Framework Agreement is of recent origin, but its initial impact has been very encouraging. Two small oil fields and a gas transmission project (the ‘Langeled’ line) were initiated ‘on the back’ of the treaty process in a spirit of cooperation and were announced at the time of signing the Framework Agreement. In the case of the two oilfields, Boa and Playfair, which span the median line between the two states, each was deemed to be in one country or another to make it easier for field development to proceed. The Boa field is almost entirely on the Norwegian continental shelf with a small extension into the UK. The Playfair field lies almost entirely on the UK continental shelf but has a small extension into Norwegian waters. The governments deemed that Boa should fall entirely within Norwegian jurisdiction and Playfair entirely within UK jurisdiction. Essentially, this is a pragmatic solution in favor of exploitation (but not joint development) rather than an outcome of the treaty itself. The first genuine results of the Framework Agreement were two cross-border fields approved in July 2005, called Enoch and Blane. These were discovered in 1985 and 1989, respectively, but were not developed because of perceived cross-border complications and the difficulty of reaching agreement between UK and Norwegian partners. The projects were approved by relying upon existing infrastructure, and no separate treaty was required in either case for development to go ahead.
7.2 Other examples
The recent Transboundary Hydrocarbons Agreement between Mexico and the U.S.27 establishes a framework that expressly promotes the unitization of maritime transboundary reservoirs. It facilitates the conclusion of voluntary arrangements (unitization agreements) between U.S. leaseholders and the Mexican state company, Pemex, for the joint exploration and development of trans- boundary reservoirs. Incentives are provided to encourage parties to conclude such arrangements if the reservoir is proven to be a cross-border one and if a unitization agreement does not yet exist. However, if the parties cannot reach agreement on authorizing joint production, each one can authorize its licensee to proceed; the only condition being a duty to exchange production data on a monthly basis.28 This provision “is unique and unlike other transboundary hydrocarbon agreements in effect globally”.29 A recent example of the majority, contrasting approach is found in the Norway–Russia Agreement for the Barents Sea.30
All unitization agreements under the Agreement have to be reviewed and approved by the respective states. The Agreement removed one obstacle in particular. Under Mexican law Pemex was prohibited from jointly developing resources with leaseholders on the U.S. side of the boundary. In 2008 an energy reform law was adopted to change this but only if cooperation takes place following an international agreement on transboundary resources. The framework Agreement removes that obstacle.
A few years earlier, in 2007, the Framework Agreement between Trinidad and Tobago and Venezuela was signed. It established a general legal framework for hydrocarbon reservoirs that extend across the delimitation line so that they could be exploited in the most effective and efficient manner. It established a Ministerial Commission as the supervisory body.
7.3 Is the framework approach a new model?
The ‘framework’ approach is significant as a new stage in the evolution of cooperation agreements for cross-border resource development. It is one that seeks to go beyond the cumbersome IGA approach that has become common around the world since it was first concluded between Norway and the UK in 1965. As an example of bilateral state cooperation in resource development, the framework approach – certainly in its current North Sea form – may be the most pragmatic form of cross-border agreement yet seen. In that case, the tensions latent in any bilateral relationship on this sensitive subject have been carefully subordinated to the aim of securing the economic benefits for both states. However, the peculiarities of the circumstances to which it applies mean that it may not perhaps be capable of functioning as a model. This is a mature hydrocarbons province, with extensive cross-border infrastructure already in place and its future determined by policy concerns about maximizing efficient recovery. For areas that have little exploration or little production and where there is a need to provide investors with signals about the stability of the legal framework (as in the South China Sea, for example), there may be few lessons from the framework approach.
By contrast, the ‘model effect’ of the early North Sea unitization agreements is beyond doubt. Their core idea spread to various parts of the globe, partly because of the dearth of alternative models at that time,31 partly because they were pragmatically designed to capture the new economic potential offered by offshore petroleum production and partly because they were the next logical step beyond the ‘unity of the deposit’ clause in the early delimitation agreements. Where states were able to reach agreement on delimitation issues, the wording used in their bilateral agreements often followed verbatim the ‘unity of the deposit’ idea in Article 4 of the Norway–UK Delimitation Agreement of March 10, 1965 (for example, in the cases of Iran and Bahrain; Trinidad and Tobago and Venezuela). This set the scene for the bilateral treaty instrument used extensively and discussed earlier.
With respect to the ‘framework’ approach, a similar degree of international influence may occur, but a note of caution should be sounded first. To succeed, this approach requires an agreed boundary, a high level of willingness to cooperate and a commitment to maximizing recovery of the resource on the part of the states concerned. This has been evident in the North Sea region and in parts of the Americas, especially among the major producing states. Not all states would have the same trust in the international oil companies or even in their own state companies. It is hard to see such an approach finding much support in emerging African producer states, where memories of oil company–state asymmetries are still vivid. Moreover, when progress is slow or lacking altogether, the familiar question will tend to appear: when presented with evidence of a commercial petroleum deposit, can one state unilaterally initiate development? In this sense, the enhanced cooperation offered by the framework agreements to date may not provide a failsafe insurance against the risk that neighboring states with widely different circumstances will take up a confrontational stance on cross-border resource development. It is certainly a very encouraging step, however, in the direction of peaceful resolution of differences.
The development of a co-operative framework for petroleum resource development can be seen as the rational choice of sovereign states since the sources of potential conflict in a long-term petroleum resource project are considerable. They include not only those that can arise in a bilateral relationship between states but also those arising from relations with third states, as well as the interface with international (and national) oil companies and the occasional uncertainties arising from an often complex and changing geological database. If one looks to the future, states will need to develop forms of cooperation that provide predictability and simplicity in a context of strong, continuing interest in petroleum resource development and the inevitable uncertainties that arise in managing diverse rights and claims in a particular setting. International law offers scope and support for such cooperation, which need not diminish the sovereign rights and powers of the states involved.
This is an area in which there is a growing body of international experience. What is clear from the examples presented here is the extent to which national policy considerations will play a major role in shaping and limiting the choices that states make with respect to cooperation. This was very evident in the Nigeria–São Tomé e Príncipe JDZ regime, where local content and wider development policies played a role. The recent evolution of cooperation in the ‘framework’ approach demonstrates a willingness to subordinate potentially troublesome considerations to a commercial logic in this area without compromising the sovereign rights of the states concerned. By contrast, not many joint development structures have yet been attempted. The scale of their design and management would seem to disqualify them as options for many new and emerging producing states given their limits in capacity. The more straightforward unitization agreements have been tested in many settings, but a ‘framework’ approach of some kind is likely to become highly attractive to those states with national companies on which they can rely. Where such domestic agencies are lacking to counter the perceived influence of the international oil and gas companies, there is a risk that states will be wary of such pragmatic approaches and instead favor a more formal, rules-based structure. If so, that would be an ironic development, since a number of countries with established production – such as those in the North Sea and in the Caribbean – seem to be moving away from this approach in favor of more flexible, informal arrangements designed to achieve more rapid but also sustainable results than the formal structures seem able to deliver.
BankesN. and S.Trevisant eds. (2015) Energy From the Sea: An International Law Perspective on Ocean Energy (Leiden: Brill).
CameronP. (2006) “The Rules of Engagement: Developing Cross-Border Petroleum Deposits in the North Sea and the Caribbean” ICLQ55599–626.
DaintithT. (2010) Finders Keepers? How the Law of Capture Shaped the World Oil Industry (Washington, DC: Resources for the Future Press).
EnglishW. (1996) ‘Unitisation Agreements” in M.R.David (ed.) Upstream Oil and Gas Agreements (London: Sweet and Maxwell) pp. 97–115.
Framework Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Kingdom of Norway Concerning Cross-Boundary Petroleum Co-operation signed on April 4 2005. Available at http://www.og.dti.gov.uk/upstream/infrastructure/nfa_2005.doc.
Garcia SanchezG.j. and R.j.McLaughlin. (2015) “The 2012 Agreement on the Exploitation of Transboundary Hydrocarbon Resources in the Gulf of Mexico: Confirmation of the Rule or Emergence of a New Practice?Houston Journal of International Law37 (3) 681–792.
Model Inter-Governmental and Host Government Agreement for Cross-Border Pipelines (2007) (second edition) Energy Charter Secretariat.
NweteB. (2005) “Mitigating Redetermination Problems in Unitised Hydrocarbon Fields” IELTR9228–233.
OngD.M. (1999) “Joint Development of Common Offshore Oil and Gas Deposits: ‘Mere’ State Practice or Customary International Law?” AJIL 93771–804.
Pilot-Kon-Kraft (2002) Unlocking Value through Closer Relationships: www.pilottaskforce.co.uk
TaverneB. (1994) An Introduction to the Regulation of the Petroleum Industry: Law Contracts and Conventions (Deventer, the Netherlands: Kluwer).
WeaverJ. and D.Asmus. (2006) “Unitizing Oil and Gas Fields Around the World: A Comparative Analysis of National Laws and Private ContractsHouston Journal of International Law283–197.
WoodliffeJ. (1977) “International Unitisation of an Offshore Gas Field” ICLQ26338–353.
YaboA.M. (2013) ‘Managing Offshore Oil & Gas Resources: Reservoir Management Unitization & Approaches to Trans-boundary Issues’ Regional Workshop organised by the Energy Governance and Capacity Initiative of the US Department of State in Accra Ghana 14–15 March: ‘Issues that were overcome in the Formation of the Nigeria-São Tomé e Príncipe Joint Development Zone (JDZ) & Ongoing Issues in the Management of the JDZ’.
Detailed fiscal matters for JDZ are addressed in Daniel, Veung and Watson (2016), Chapter 11 in this volume.
The idea is not unique to hydrocarbon development. The Model Intergovernmental and Host Government Model Agreements for Cross-Border Pipelines (second edition, 2008) developed by the Energy Charter Secretariat includes a provision on ‘isolation of any boundary or territorial disputes’. It includes the statement: “No Boundary or Territorial Dispute between or amongst any of the States shall interfere in any manner with any Project Activities”: http://www.encharter.org/fileadmin/user_upload/document/maen.pdf.
The Convention has been ratified by 166 states, giving it very considerable authority: http://www.un.org/depts/los/convention_agreements/convention_overview_convention.htm.
D.M. Ong. (1999), “Joint Development of Common Offshore Oil and Gas Deposits: ‘Mere’ State Practice or Customary International Law?,” AJIL, 93, 771–804, 771. For a comprehensive review of the literature on this subject of cooperation and its limits in relation to hydrocarbons, see Cameron, P.D. (2006), “The Rules of Engagement: Developing Cross-Border Petroleum Deposits in the North Sea and the Caribbean,” ICLQ, 55, 599–626 at 614.
The various terms typically found in an international unitization agreement are the subject of a model form published by the AIPN, intended to work with PSCs (www.aipn.org). Other models have been published by the Petroleum Joint Venture Association of Canada (www.pjva.com), the American Petroleum Institute (www.api.org) and the Rocky Mountain Mineral Law Foundation (www.rmmlf.org).
Without regard for the many significant differences among their arrangements, the countries involved in such joint development schemes include: Bahrain–Saudi Arabia (1958); Czechoslovakia–Austria (1960); Netherlands–Germany (1962); Kuwait–Saudi Arabia (1965); Abu Dhabi–Qatar (1969); Sharjah–Iran (1971); France–Spain (1974); Japan–Korea (1974); Sudan–Saudi Arabia (1974); UK–Norway (1977); Malaysia–Thailand (1979); UK–Norway (1981: Statfjord); UK–Norway (1981: Murchison); Norway– Iceland (1981); Tunisia–Libya (1988); North–South Yemen (1988); Malaysia–Vietnam (1992); Colombia–Jamaica (1993); Netherlands–UK (1993); Guinea Bissau–Senegal (1993) and (1995); UK–Argentina (1995); Cambodia–Vietnam (2001); Nigeria–São Tomé e Príncipe (2001); Timor–Leste–Australia (2002); Tunisia–Algeria (2002); Barbados–Guyana (2003).
Memorandum of Understanding between Malaysia and the Socialist Republic of Vietnam for the Exploration and Exploitation of Petroleum in a Defined Area of the Continental Shelf Involving the Two Countries, June 5, 1992.
The UN Convention on the Law of the Sea set out provisions on the Exclusive Economic Zone in Part V (Articles 55–75): the EEZ is an area beyond and adjacent to the territorial sea reaching a maximum of 200 nautical miles from the landward edge of the territorial sea. The coastal state has sovereign rights (not full sovereignty) for the purposes of exploring and exploiting, conserving and managing natural resources in the seabed and subsoil. In carrying out its rights and performing its duties, the coastal state is required to have due regard to the rights and duties of other states.
The following paragraphs have benefited from a paper presented by A.M. Yabo, Head of the Legal Unit at the Nigeria–São Tomé e Príncipe JDZ at the Regional Workshop, ‘Managing Offshore Oil & Gas Resources: Reservoir Management, Unitization & Approaches to Trans-boundary Issues’, organized by the Energy Governance and Capacity Initiative of the US Department of State in Accra, Ghana, March 14–15, 2013: ‘Issues that were overcome in the Formation of the Nigeria–São Tomé e Príncipe Joint Development Zone (JDZ) & Ongoing Issues in the Management of the JDZ.
For example, Terence Daintith’s comprehensive account of unitization in ‘Finders Keepers? How the Law of Capture Shaped the World Oil Industry’ (2010), Resources for the Future Press, Washington DC; and J.L. Weaver and D. Asmus. (2006), “Unitizing Oil and Gas Fields Around the World: A Comparative Analysis of National Laws and Private Contracts,” Houston J of Int’l Law, 28, 3–197.
Unitisation Agreement for the Exploitation and Development of Hydrocarbon Reservoirs of the Loran-Manatee Field that extends across the Delimitation Line between the Republic of Trinidad and Tobago and the Bolivarian Republic of Venezuela, August 16, 2010.
Agreement relating to the Exploitation of the Frigg Field Reservoir and the Transmission of Gas therefrom to the United Kingdom, May 10, 1976, UK-Nor., Gt. Brit. TS No.113 (Cmnd. 7043), 1098 UNTS 3. For a detailed account of the Frigg Agreement, see J.C. Woodliffe. (1977), “International Unitisation of an Offshore Gas Field,” ICLQ, 26, 338–353. The field ceased production in October 2004.
Agreement between the Government of the United Kingdom and Northern Ireland and the Government of the Kingdom of Norway relating to the Delimitation of the Continental Shelf between the Two Countries (March 10, 1965) Gt Brit TS No. 71 (1965), Cmnd. 2757; UNTS 214.
Frigg, see note 12 above; Agreement relating to the Exploitation of the Statfjord Field Reservoirs and the Offtake of Petroleum therefrom, October 16, 1979, Gt Brit TS No 44 (1981) (Cmnd. 8282); Agreement relating to the Exploitation of the Murchison Field Reservoir and the Offtake of Petroleum therefrom, October 16, 1979, Gt Brit TS No. 39 (1981) (Cmnd. 8270); Agreement relating to the Exploitation of the Markham Field Reservoirs and the Offtake of Petroleum therefrom, May 26, 1992, UK–Neth., 1993 Gt Brit TS No. 38 (Cmnd. 2254). In each case the agreements have been amended by Exchanges of Notes and, in the case of the Frigg Agreement, by a further Agreement of August 25, 1998 (see Framework Agreement, Annex E). Other agreements have been concluded with Norway on pipelines (Agreement of November 21, 1985, amended by the Agreement of 1 November 2004, between the Two Governments relating to the Transmission by Pipeline of Liquids from the Heimdal Reservoir and other Reservoirs to the United Kingdom, and the Framework Agreement of August 25, 1998, relating to the Laying, Operation and Jurisdiction of Inter-connecting Submarine Pipelines) and the Ekofisk Field (Agreement of May 22, 1973, as amended by an Exchange of Notes dated July 27, 1994, relating to the Transmission of Petroleum from the Ekofisk Field and Neighbouring Areas to the United Kingdom).
Agreement relating to the Delimitation of the Continental Shelf between the Two Countries, March 10, 1965, UK–Norway, 1965 Gr Brit TS No 71 (Cmnd. 2757), 551 UNTS 214; Agreement relating to the Exploitation of Single Geological Structures Extending across the Dividing Line on the Continental Shelf under the North Seas, October 6, 1965, UK–Netherlands, Article 1, 1967, Gt Brit TS No 24 (Cmnd 3254).
However, the idea of a redetermination is echoed in Article 3 of the Frigg Agreement and Article 3 of the Statfjord Agreement. For a discussion of this practice in the international petroleum industry, see Nwete, B. (2005), “Mitigating Redetermination Problems in Unitised Hydrocarbon Fields,” IELTR, 9, 228–233.
‘Building UK–Norwegian Cooperation in the North Sea: A Statement by UK and Norwegian Energy Ministers’, October 2, 2003, 2: http://www.ag.dti.gov.uk/upstream/infrastructure/overarching.doc
A unitization agreement will normally be made by the owners of a single field which extends into more than one license area to develop that field as a single unit: see English, W. (1996), “Unitisation Agreements,” in M.R. David (ed.), Upstream Oil and Gas Agreements (London: Sweet and Maxwell), pp. 97–115.
Frigg, see note 12 above, Article 29(1) and (2). The same wording is found mutatis mutandis in Article 22 of both the Statfjord and Murchison Agreements, Article 24 of the Markham Agreement, and Article 1.3 of the Framework Agreement.
For further details, see Daniel, Veung and Watson (2016), Chapter 11 in this volume.
For a recent overview of five of these framework agreements, see ‘Recent Framework Agreements for the Recognition and Development of Transboundary Hydrocarbon Resources’, by Nigel Bankes in ‘Energy from the Sea: An International Law Perspective on Ocean Energy’ (2015), edited by N. Bankes and S. Trevisant, pp. 106–129.
Framework Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Kingdom of Norway concerning Cross-boundary Petroleum Co-operation, signed on April 4, 2005 (http://www.og.dti.gov.uk/upstream/infrastructure/nfa_2005.doc). The agreement covers a variety of potential cross-border projects, including the development of new fields that straddle the maritime boundary, the use of installations on one side of the delimitation line to exploit resources on the other side (host facility development) and the construction, laying and operation of a range of pipelines including landing pipelines. Its origins lie in a joint industry–government report, “Unlocking Value through Closer Relationships”, authored by Pilot-Kon-Kraft in 2002 (available at www.pilottaskforce.co.uk).
Article 3.1(1) and (2).
Department for Energy and Climate Change/Norwegian Petroleum Directorate (2005), ‘UK-Norway. Trans-Boundary Oil & Gas Fields: Guidelines for Development of Trans-Boundary Oil & Gas Fields: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/15574/nor-guide.pdf
A separate procedure is provided for disputes concerning pipeline access: Articles 2.7 and 5(2).
Frigg, Articles 27–28; Statfjord and Murchison Articles 20–21; for a similar approach in the Markham Agreement, see Articles 22–23 (the Markham Commission).
Agreement Concerning Transboundary Hydrocarbon Reservoirs in the Gulf of Mexico, U.S.–Mex., February 20, 2012, T.I.A.S. No. 14–718, Available at http://www.state.gov/documents/organization/231802.pdf. For a detailed assessment of the Agreement, see Sanchez McLaughlin (2015), especially Parts VI and VII.
Article 7(5) of US–Mexico Treaty (see Note).
Houston J of Int’l L, p. 780.
Treaty Concerning Maritime Delimitation and Cooperation in the Barents Sea and the Arctic Ocean, Norway-Russia, Annex II, Article 1(8), September 15, 2010; 50 ILM 1113: this states that the parties have an obligation to refrain from permitting production without a jointly approved unitization agreement.
In Europe there was the treaty between Austria and Czechoslovakia, 1960, 495 UNTS No. 7242, 125; the agreement between the Federal Republic of Germany and the Netherlands, supplemental to the Ems-Dollard Treaty 1969, 509 UNTS No. 7404, 104. In the Middle East there were several such agreements, but their relevance to a study of cooperative arrangements is mixed. For example, the Agreement between the Kingdom of Saudi Arabia and the Government of Bahrain, signed on February 22, 1958 (http://www.un.org/Depts/los/legislationandtreaties), is a revenue-sharing agreement, in which the parties do not envisage any cooperation with respect to the exploration or exploitation of the deposit or field. By contrast, the 1969 agreement on maritime boundaries and sovereign rights between Qatar and Abu Dhabi envisages the joint exercise of sovereign rights over the al-Bunduq oilfield.