Recent Framework Agreements for the
Recognition and Development of
Transboundary Hydrocarbon Resources
Nigel Bankes
February 2014
Outline
• Traditional approaches to transboundary
reservoirs
• The current generation of framework
agreements
– Five agreements
– An analytical framework
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Scope
Identification of transboundary reservoirs
Authorization for production
Apportionment
Dispute resolution
• Conclusions
Traditional approaches
• Unity of deposit clause (UK\Norway, 1965)
– [1] If any single geological petroleum structure or petroleum field
…extends across the dividing line and the [2] part of such
structure or field which is situated on one side of the dividing line
is exploitable, wholly or in part, from the other side of the dividing
line, [3] the Contracting Parties shall, in consultation with the
licensees, if any, [4] seek to reach agreement [4a] as to the
manner in which the structure or field shall be most effectively
exploited and [4b] the manner in which the proceeds deriving
therefrom shall be apportioned.
– Still used (eg NZ\Australia, 2004)
• Specific agreements
– Frigg (1976), Statfjord (1979), Murchison (1979), and Markham
(NL) (1992)
Recent framework agreements
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Framework Agreement between the United Kingdom and Norway
concerning Cross-Boundary Petroleum Co-operation (2005)
Agreement between Canada and the French Republic Relating to the
Exploration and Exploitation of Transboundary Hydrocarbon Fields (2005)
Framework Treaty relating to the unitization of hydrocarbon reservoirs that
extend across the delimitation line: Trinidad & Tobago\ Venezuela (2007)
Treaty between Norway & Russia concerning Maritime Delimitation and
Cooperation in the Barents Sea and Arctic Ocean (2010) Annex II deals
with Transboundary Hydrocarbon Deposits
Agreement between the US and Mexico Concerning Transboundary
Hydrocarbon Reservoirs in the Gulf of Mexico (2012)
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Premise in each case is an agreed boundary; & these are not JDZs
35pp (UK\Norway); 3pp (Norway\Russia);
Not all in force
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ILC declined (2010) to take up the subject of straddling petroleum deposits
Not all similarly situated
• UK\Norway
– Mature basin; transboundary
infrastructure
– A number of existing
agreements
– Issue is how to optimize
production and infrastructure
in the median line corridor
– Goes beyond just
transboundary deposits
• Other agreements
– Little or no exploration
– The goal is to provide certainty
& a clear framework
– Confined to transboundary
deposits
The baguette or key delimitation (1992)
Note the increased potential for transboundary hydrocarbon accumulations
Analytical framework
(1) Scope **
(2) Purpose and objectives
(3) Identification of transboundary accumulations **
(4) Authorization of production **
(5) The role of unitization **
(6) Determination of reserves & apportionment **
(7) Technical issues (measurement etc.)
(8) Fiscal issues (royalties and taxation)
(9) Infrastructure issues
(10) Environmental issues
(11) Institutions and dispute resolution **
(12) Decommissioning
(13) Duration and termination.
Scope
• Generally similar in scope
– Coordinated development and apportionment
of transboundary reservoirs
• UK\Norway
– Broader in scope
– Designed to ensure that the boundary does
not get in the way of the most efficient
development of any reserves (&
infrastructure) located close to the boundary
Identification of transboundary reservoirs
• Surprisingly not a focus of most of the
agreements, or their dispute settlement
provisions
– Simply a major premise of the agreement
– And perhaps an example of deferral to licensees
• Canada\France provides most detailed
treatment
– Exchange of information on any well drilled within 10
nm
– Ability to trigger reference to TWG and expert
determination
• Russia\Norway and US\Mexico (less detail)
Authorizing production from a TBF
• The default rule in international law
– Rule of capture; extensive literature, Onorato, Ong, Lagoni,
Miyoshi, Cameron
– Distinguish between seismic exploration & drilling
– Guyana v Suriname; 74(3), 83(3): (1) every effort, (2) don’t
jeopardize
• The position under most of these agreements?
• The position under the US\Mexico Agreement
– Very complex
– Duty to try to reach agreement on reserves, allocation and
unitization
– Reference to expert determination
– But if cannot reach agreement each can authorize its licensee to
proceed, subject only to a duty to exchange production data on a
monthly basis.
Unitization
• Unitization refers to the joint, coordinated operation of
the reservoir by all tract owners (licensees); costs &
production are shared
• All of the agreements (except US\M) assume or require
unitization prior to production
• Differ as to the parties to the unitization agreement
– Licensee driven
• UK\Norway; US\Mexico; Canada\France
– State driven
• Norway\Russia; Venezuela\T & T
– Canada\France
• Contemplates an Exploitation Agreement (Parties); and a unitization
agreement (licensees)
Apportionment
• Most difficult issue in any unitization
– In UK\Norway; US\M; Canada\France apportionment based on
proposal from licensees
– Norway\Russia; Venezuela\T & T envisage more direct state
involvement; reality may be different
• All of the agreements provide a role for expert
determination
– Result is binding in all cases except V\T & T
• Generally provision for re-apportionment
– In light of new knowledge
– Generally governed by the same procedure
– Who triggers
• State\licensee; unilateral or by agreement
Dispute resolution
• Sophisticated and tailored
– Standing commissions
– Expert determination
– Arbitration
– Technical working groups
– Negotiation, consultation etc
• Exceptions
– Venezuela\T & T, no binding arrangements
– US\Mexico, no binding arbitration
Conclusions
• Common features
– Unitization as the preferred approach
– No production absent agreement
– Binding expert determination to facilitate agreement
on apportionment
– Sophisticated & tailored dispute settlement provisions
• Some differences
– Role of the state vs that of the licensees
– Identification of transboundary reserves
• Outliers
– UK\Norway re scope
– Venezuela\T & T re dispute settlement
– US\M re production without agreement