OWNERSHIP AND CONTROL ISSUES OF OIL, GAS, AND HARD MINERAL RESOURCES IN AREAS OF DISPUTED BORDERS
| Jurisdiction | United States |
(Feb 1995)
OWNERSHIP AND CONTROL ISSUES OF OIL, GAS, AND HARD MINERAL RESOURCES IN AREAS OF DISPUTED BORDERS
Boulos International
Houston, Texas
Table of Contents
I. INTRODUCTION
A. Practical Topic
B. Consequences
II. INTERNATIONAL LAW AND INTERNATIONAL BOUNDARIES
A. Overview
B. Jurisdiction Over Territory
C. Formulation of Boundary Lines
III. INTERNATIONAL RULES ON TERRITORIAL WATERS
A. The Maritime Boundary
B. Legal Status of Territorial Waters
C. Basis of a State's Rights Over Territorial Waters
IV. DETERMINATION OF THE LIMITS OF TERRITORIAL SEA
A. Measurement of the Width of Territorial Seas
B. Delimitation of Boundaries of Territorial Seas Between Adjacent or Opposite States
C. Prevailing Principles of Boundary Determination
V. CONTINENTAL SHELF AND THE EXCLUSIVE ECONOMIC ZONE
A. Importance of the Continental Shelf
VI. CRITICAL ISSUE IN BOUNDARY DISPUTES: ABSENCE OF AGREEMENT BY HOST GOVERNMENTS
A. Basis of the Problem
B. Principles of Boundary Delimitation in Absence of Agreement
VII. REVIEW OF EXISTING BOUNDARY DISPUTES IN AREAS OF OIL, GAS AND MINERAL RESOURCES
A. Overview of Problem
1. South China Sea 2. East China Sea 3. Japan-Russia and the Kuril Islands 4. Gulf of Thailand 5. Timor Gap 6. Falkland/Malvina Islands 7. Black Sea 8. Hawar Islands/Arabian-Persian Gulf 9. Abu Musa Island
VIII. OBSERVATIONS AND CONCLUSIONS: OIL, GAS AND MINERAL RESOURCES IN DISPUTED BOUNDARY AREAS-WHICH WAY FORWARD?
A. Effect on Exploration and Development
B. Attitude of States to Boundary Delimitation
C. Conclusion—The Way Forward
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I. INTRODUCTION
A. Practical Topic
The issues of ownership and control of oil, gas and hard minerals in areas of disputed borders is both practical and critical for energy companies and host governments who seek to resolve these difficult issues in accordance with the principles of international law and their own particular interests.
Based on my thirty years of experience in the oil industry, I have had first-hand encounter with the difficulty of resolving these perplexing issues.
In one situation, the company I counseled had considered a network of pipelines in the Middle East for the shipment of crude oil to the coast from the oilfields. The pipework network would have to pass through several companies. East host government would have to agree its respective border with its neighboring country and the terms and conditions of transit and transit fees.
After intensive consideration and debate, the company decided that the problems of border transit, border uncertainties and transit fees were too difficult to resolve and so the proposal was not pursued further. It was a necessary but regrettable decision because the logistics and economics had made the proposal most attractive to the company.
In another example, my client company had secured a license in acreage which was considered to be most prospective by the company's geologists and earth scientists in an offshore area which was not at that time considered to be in dispute.
Plans were then prepared to undertake seismic work and to prepare for drilling. A rig was contracted to carry out the drilling. At the 11th hour, just prior to being towed to the drilling site, the neighboring country unilaterally declared that its territorial offshore jurisdiction extended to 200 miles and claimed the area in which the drilling had been planned.
As a result senior management of the company decided that the risks were too great to drill and declared force majeure to the host government which issued the license and cancelled the drilling agreement with the rig.
The next step for the company was to secure international legal advice with respect to its rights and obligations under the license in the disputed offshore border. The company engaged one of the outstanding international lawyers who specialized in the area. The lawyers affirmed what we had believed to be the better opinion under international law,
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that is, that the unilateral declaration of a 200 mile offshore boundary claim had no justification under international law.
Nevertheless, the company would not assume the practical risks of drilling, even though it was advised that international law was on its side. Here was the practical dilemma of issues in border disputes with energy and mineral resources under license from one country in dispute with its neighboring country. Even though the law might be on the side of the company, yet almost all companies would be reluctant to assume the practical risks of drilling for energy and mineral resources in disputed border situations.
The final example to underscore the practical and critical dimension to issues of ownership and control of resources in areas of disputed borders also concerned a company client which secured a license from a host government in an offshore area. Thereafter, a civil war erupted in the country and one of the groups in the civil war claimed the license area as part of its sovereign territory in dispute with the claim of the host government.
In this issue, the company was advised by the Foreign Office of its home office that regardless of which side had the better claim under international law, prudence and common sense required that the company discontinue all operations and not appear to favor one side over the other.
B. Consequences
The consequences of border disputes in areas in which there are petroleum and mineral deposits are to leave both an industrial company and a host government uncertain as to their rights and how to implement them.
Even in those situations wherein rights to disputed border areas are clearly in favor of one side over the other, the further question is that of enforceability.
These situations ask the question of rights of enforceability of the rule of law when the law is clearly in favor of one side and yet the host government on the other side of the border dispute maintains its position.
Does an industrial company or a host government have the means to enforce its right if the threat of military force is imposed and the parties are unwilling to consent to adjudication or otherwise to resolve the issue? Or, absent such willingness on the part of both host governments to the border dispute, what are the remedies, if any, which are available to any of the parties when both host governments maintain their position and are otherwise unwilling to compromise or resolve the issues?
In the world of realism and power politics, in a world in which host governments may not be willing to resolve border disputes, the question we face is that of enforcement of the rule of law when such rule appears to favor one side over the other and the parties are unwilling to resolve the issue.
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Further, even in those cases in which the question of rights in issues of border disputes are more or less evenly divided between the neighboring governments and their respective claims, and the governments are unwilling or unable to resolve such disputes, what does the industrial company do? Does the company have any remedies? Can the company which has license rights to oil, gas or minerals in disputed border areas enforce such rights if the governments are unwilling or unable to resolve their border disputes? These are the difficult questions which we shall analyze further in this paper.
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II. INTERNATIONAL LAW AND INTERNATIONAL BOUNDARIES
A. Overview
The question of where the boundaries between two countries are located has always been a question of great difficulty for nations and for the applicability of international law standards.1
We consider, in the first instance, that historical international law has provided rights to a government based on sovereignty. Sovereignty has been based on occupation, addition by natural causes of new land to riverbanks (accretion, accession or alluvion) as well as jurisdiction over territories in which state apparatuses have been destroyed by conquest.
In addition, rights to territory have also been based on recognition of sovereignty, which precludes third parties from contesting the validity of title and from consent, namely consent of the cession of territory.
Thus, the legal function to settle the boundary areas has been by unilateral action, express consent, recognition or acquiescence.
With respect to internal bodies of water, international law considers that all waters on the landward side of the baseline of the territorial sea and historic bays — bays that, irrespective of their width, are treated on grounds of acquiescence or recognition — are subject to the jurisdiction of the coastal state.
The normal baseline of the territorial sea is the low-water line along a state's seacoast. It is generally recognized that outer limit of the territorial sea, which constitutes the frontier between national territory and high sea, is drawn by reference to the baseline.
While it has not been easy historically to gain the agreement of nations on the breadth of the territorial sea, the 1958 Convention on the Territorial Sea and Contiguous Zone provided that the contiguous zone — a geographically limited zone of the high seas contiguous to the territorial sea — should not extend beyond 12 miles from the baseline of the territorial sea.2
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B. Jurisdiction Over Territory
The importance of determining definite boundary lines is that the state's territorial domain, its property rights and its jurisdiction over persons are co-extensive with its boundaries.
From an historical point of view, the existing boundaries of many nations have been determined by agreement and international conventions. Many of the conventions have been in the form of treaties following wars; others have been in the form of voluntary agreements by which an amicable settlement of the...
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