petroleum conservation: do international framework agreements for the development of ...

228 Pages·2016·1.7 MB·English

PETROLEUM CONSERVATION: DO INTERNATIONAL FRAMEWORK
AGREEMENTS FOR THE DEVELOPMENT OF TRANSBOUNDARY
HYDROCARBON RESOURCES EFFECTIVELY APPLY
CONSERVATION PRINCIPLES?

Thesis submitted for the degree of
Doctor of Philosophy
at the University of Leicester

by
Carlos Canales
School of Law
University of Leicester

2016
Carlos Canales

Petroleum Conservation: Do International Framework
Agreements for the Development of Transboundary Hydrocarbon
Resources effectively apply conservation principles?

Abstract

The relationship between petroleum conservation and sustainable development is
unquestionable. International Framework Agreements for the development of
transboundary hydrocarbon resources play a fundamental role in strengthening
petroleum conservation principles. So far the development of transboundary
hydrocarbon resources has been mainly about drawing squares and triangles, with
conservation as a secondary objective.

This thesis examines the role of petroleum conservation in six recent framework
agreements. The study is built around the application of conservation principles
for the development of offshore transboundary hydrocarbon resources. The work
attempts to identify, analyse and synthesise the legal content regarding petroleum
conservation principles in recent framework agreements, and based upon this
suggest how future international instruments should be developed.

More than half of known petroleum reservoirs lie either across defined boundaries
lines or in contested areas. Their development is becoming necessary to
supplement current production which largely comes from mature basins. The need
to further incorporate petroleum conservation measures for the benefit of
everyone is therefore more apparent than ever.

The ancient choice between cooperation and conflict for developing shared
resources must now be driven by conservation principles. The consolidation of
sustainable development under international law provides a unique opportunity
to see transboundary hydrocarbon resources with fresh eyes, with a more
cosmopolitan approach in favour of nature and humanity as a whole. Petroleum
conservation should not be left out of the broader international discussions on
sustainability. Nations wealth is intertwined with shared geology, peoples and
nature.

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Acknowledgements
I would like to thank my supervisors Professor Malcolm Shaw and Thoko Kaime
for their invaluable advice and help throughout the writing of this thesis. I would
also like to thank the School of Law of the University of Leicester. My special
thanks to Jane Sowler, Loveday Hodson, Anthony Berry, Rossana Deplano, Teresa
Rowe, Henry Jones, Sara Benedi and Maribel Canto-Lopez for all their valuable
advice and assistance. To Shell Mexico for their encouragement and financial aid.
On a personal note, I would like to thank James Shepherd, David Auty and Sandra
Galimberti. I would not have been able to complete the thesis without their advice
and support. My special thanks to Edith Vazquez. To Joaquin Figueroa, Victor
Ochoa, Antonio Juan Marcos, Oscar Langlet, Michael Schwandt and to my friends
the Hienas from my Law Faculty in Mexico City, thanks for your kind words and
nurturing support. This thesis is owed to my parents Carlos and Marvelia, whose
endured love and support made all of this possible.

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List of Contents

Abstract .............................................................................................................................................................. i
Acknowledgements ...................................................................................................................................... ii
List of Contents ............................................................................................................................................... iii
Abbreviations .................................................................................................................................................. viii

Chapter 1. Conservation of Transboundary Hydrocarbon Resources:
Progress and Prospects for the Future ................................................................................. 1
1.1. Context ...................................................................................................................................................... 1
1.1.1. Defining Petroleum Conservation ............................................................................................ 2
1.1.2. Application of Petroleum Conservation to THRs ............................................................. 7
1.1.3. Framework Agreements for the Development of THRs ................................................ 9
1.2. Research Questions ............................................................................................................................. 13
1.3. Methodology .......................................................................................................................................... 13
1.4. Aims of Thesis ........................................................................................................................................ 15
1.5. Structure of Thesis .............................................................................................................................. 16

Chapter 2. Petroleum Conservation begins underground. From the
Law of Capture to Efficient Development ............................................................................ 20
2.1. Introduction .......................................................................................................................................... 20
2.2. Early Development of Petroleum Conservation Laws ......................................................... 22
2.2.1. Nature of Ownership Rights for Oil and Gas Development .......................................... 24
2.2.1.1. Ownership-in-Place Theory: Oil and Gas as Real Estate ........................................ 25
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2.2.1.2. No-ownership Theory .......................................................................................................... 26
2.2.1.3. Judicial Analogies: Wild Animals and Ground Water .............................................. 28
2.2.2. The Rule of Capture ....................................................................................................................... 29
2.2.3. Correlatives Right Doctrine ........................................................................................................ 32
2.2.4. Unitization ......................................................................................................................................... 36
2.3. Modern Conservation Practices ..................................................................................................... 40
2.3.1. Enhanced Recovery ....................................................................................................................... 40
2.3.2. Compulsory Pooling and Fieldwide Unitization ............................................................... 42
2.3.3. Technical Basis for the Apportionment of Oil and Gas Resources ............................ 45
2.4. Recent Trends in Petroleum Conservation Laws and Regulations ................................ 47
2.4.1. Norway Petroleum Conservation Legal Framework ...................................................... 49
2.4.2. UK Petroleum Conservation Legal Framework ................................................................ 52
2.4.3 Trinidad and Tobago Petroleum Conservation Legal Framework ........................... 55
2.5. Conclusion ............................................................................................................................................... 57

Chapter 3. Internationalization of Transboundary Hydrocarbon
Resources ............................................................................................................................................... 59
3.1. Introduction ........................................................................................................................................... 59
3.2. Joint Development of THRs .............................................................................................................. 60
3.2.1. Sovereignty, Sovereign rights and Jurisdiction of Coastal States .............................. 62
3.2.2. Sovereignty, Property Rights and Sustainability .............................................................. 67
3.2.3. Duty to Cooperate for the Development of THRs ............................................................. 71
3.2.3.1. Procedure for Cooperation .............................................................................................. 72
3.2.3.2. Failure to Agree and its Implications .......................................................................... 73
3.2.3.3. Unilateral Action ................................................................................................................... 75
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3.2.3.4. Provisional Arrangements ............................................................................................... 77
3.3. Internationalization of Shared Natural Resources and its Impact to
THRs .......................................................................................................................................................... 79
3.3.1. UNEP Guidelines ............................................................................................................................. 82
3.4. Balancing Rights and Duties of States for the Development of THRs ............................ 85
3.4.1. Environmental Protection ............................................................................................................ 86
3.4.1.1. Due Care for the Environment and Precautionary Action ................................. 86
3.4.1.2. Prior Information, Early Warning and Public Participation .............................. 88
3.4.1.3. Termination of Unlawful Activities and Making of Reparation ....................... 89
3.4.1.4. Duty to Cooperate in Solving Transboundary Environmental
Problems .................................................................................................................................................. 91
3.4.2. Economic Stability .......................................................................................................................... 91
3.4.2.1. Inter- and Intergenerational Equity ............................................................................. 91
3.4.2.2. Equitable Utilization and Apportionment ................................................................. 93
3.4.3. Social Sustainability ....................................................................................................................... 95
3.4.3.1. Common but Differentiated Obligations .................................................................... 95
3.4.3.2. Good Governance and Respect for Human Rights ................................................. 95
3.5. Attempts to Propose Rules on THRs and to Standardize State Practice ...................... 98
3.5.1. The work of the ILC on THRs ..................................................................................................... 98
3.5.2. A Need for a Model Agreement? ............................................................................................... 102
3.6. Conclusion ............................................................................................................................................... 104

Chapter 4. Do Framework Agreements Effectively Apply Petroleum
Conservation Principles? .............................................................................................................. 105
4.1. Introduction ........................................................................................................................................... 105
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4.2. What is Governance? .......................................................................................................................... 107
4.2.1. Governance and the Oil and Gas Sector ................................................................................ 110
4.3. Petroleum Conservation Governance within Framework Agreements ....................... 113
4.3.1. 2005 United Kingdom – Norway ............................................................................................. 114
4.3.2. 2005 France – Canada .................................................................................................................. 118
4.3.3. 2007 Trinidad and Tobago – Venezuela ................................................................................ 122
4.3.4. 2012 Iceland – Norway ................................................................................................................. 126
4.3.5. 2012 Norway – Russia ................................................................................................................. 127
4.3.6. 2012 United States – Mexico ...................................................................................................... 128
4.4. Conclusions ............................................................................................................................................. 133

Chapter 5. How Do Framework Agreements Incorporate Petroleum
Conservation Principles of Environmental Assessment and
Protection? ............................................................................................................................................ 138
5.1. Introduction ........................................................................................................................................... 138
5.2. What is Petroleum Conservation Relevance to THRs? ........................................................ 138
5.3. What Environmental Law is Applicable to Framework Agreements? .......................... 139
5.4. Generally Applicable Environmental Law ................................................................................. 140
5.5. Holistic Environmental Assessment (HEA) .............................................................................. 142
5.6. Environmental Impact Assessment Standards ....................................................................... 146
5.7. Soft Law Concepts ................................................................................................................................ 148
5.7.1. Industry Guidelines. ....................................................................................................................... 150
5.8. What International Environmental Law is Applicable to Offshore Oil
and Gas Activities? ............................................................................................................................... 151
5.8.1. Legal Regime Applying to Shipping ......................................................................................... 152
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5.8.2. Legal Regime Applying to Platforms ....................................................................................... 153
5.8.3. Legal Regime Applying to Pipelines ........................................................................................ 155
5.8.4. Legal Regime During Construction & Operations ............................................................. 156
5.8.5. Legal Regime applying to Decommissioning ....................................................................... 156
5.9. How do Framework Agreements Incorporate Environmental Law
Provisions? .............................................................................................................................................. 161
5.9.1. Framework Agreement Provisions on General Environmental
Principles ................................................................................................................................................. 162
5.9.2. Framework Agreement Provisions on Shipping ................................................................ 163
5.9.3. Framework Agreement Provisions on Platforms .............................................................. 164
5.9.4. Framework Agreement Provisions on Pipelines ............................................................... 165
5.9.5. Framework Agreement Provisions on During Construction &
Operations ............................................................................................................................................... 166
5.9.6. Framework Agreement Provisions on Decommissioning ............................................. 167
5.10. Conclusions ............................................................................................................................................. 169

Chapter 6. Conclusions and Outlook for the Progress of Petroleum
Conservation Principles in International Law ................................................................. 171
6.1. Main Conclusions ................................................................................................................................. 171
6.2. Outlook for the Progress of Petroleum Conservation Principles in
International Law ................................................................................................................................. 176

Bibliography .................................................................................................................................................... 183

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Abbreviations

Aarhus Convention Convention on Access to Information, Public
Participation in Decision-Making and Access to
Justice in Environmental Matters
ACHR American Convention on Human Rights
AJICL African Journal of International & Comparative
Law
AJIL American Journal of International Law
AJCL American Journal of Comparative Law
Alta L Rev Alberta Law Review
Am U Intl L Rev American University International Law Journal
AMPLJ Australian Mining and Petroleum Law Journal
ANZ MAR LJ Australia New Zealand Maritime Law Journal
API American Petroleum Institute
Ark L Rev Arkansas Law Review
ARPEL Industry body representing Oil and gas
companies in Latin America and the Caribbean
ASIL Proc American Society International Law
Proceedings
Aust YBIL Australian Yearbook of International Law
Authority International Seabed Authority
Basel Convention Convention on the Control of Transboundary
Movement of Hazardous Wastes and their
Disposal
BAT Best Available Technique
BC Envtl Aff L Rev Boston College Environmental Affairs Law
Review
BEP Best Environmental Practice
BIICL British Institute of International Comparative
Law
BJIL Berkley Journal of International Law
BPEO Best Practicable Environmental Option
Brundtland Commission Report of the World Commission: Our Common
Future
Cartagena Convention Convention for the Protection and Development
of the Marine Environment of the Wider
Caribbean
viii
Case W Res J Intl L Case Western Reserve Journal of International
Law
CBA Cost Benefit Analysis
CBD Convention On Biological Diversity
CCS Carbon Capture Storage
CCL Climate Change Levy
CEPMLP Centre for Energy, Petroleum and Mineral Law
and Policy
CERDS Charter of Economic Rights and Duties of States
CH4 Methane
CISDL Centre for International Sustainable
Development Law
CJCR Cardozo Journal Conflict Resolution
Climate Change Convention United Nations Framework Convention on
Climate Change
CLR California Law Review
Colo J Intl Envtl L & Pol’y Colorado Journal of International
Environmental Law & Policy
COLR China Oceans Law Review
CO2 Carbon Dioxide
CO2 Tax Act Act 21 December 1990 no 72 relating to tax on
discharge of CO2 in the petroleum activities on
the continental shelf (Norway)
CUP Cambridge University Press
DECC Department of Energy and Climate Change
ECOSOC United Nations Economic and Social Council
EEZ Exclusive Economic Zone
EIA Environmental Impact Assessment
EIA Directive European Directive 2011/92/EU
EILR Emory International Law Review
EJIL European Journal of International Law
ELNI Rev Environmental Law Network International
Review
ELQ Ecology Quarterly Law
ELVs Emission Limits Values
EMPs Environmental Management and Monitoring
Plan
Envtl Impact Assess Rev Environmental Impact Assessment Review
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