The University of Texas School of Law Presented: International Upstream Energy Transactions January 17-18, 2013 Houston, TX How to Deal with Maritime Boundary Uncertainty in Oil and Gas Exploration and Production Areas* Written by: Martin Pratt International Boundaries Research Unit Durham University Derek Smith LeBoeuf, Lamb Greene & MacRae LLP *Paper reprinted with permission of AIPN.
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How to Deal with Maritime Boundary Uncertainty in Oil and Gas Exploration and Production Areas Paper prepared for the Association of International Petroleum Negotiators May 2007 Martin Pratt International Boundaries Research Unit Durham University 1 Derek Smith LeBoeuf, Lamb Greene & MacRae LLP 2 1. Introduction Under the 1982 United Nations Convention on the Law of the Sea coastal states are entitled to claim rights over the resources of the sea and seabed out to at least 200 nautical miles (nm 3 ) from their coasts and, in the case of the seabed, potentially much further. 4 As a result, more than 30% of the world s oceans now fall under state jurisdiction, with overlapping maritime zones creating the need for some 430 international maritime boundaries fewer than half of which have been even partially agreed. With the oil and gas industry operating in ever-deeper waters, exploration and production companies increasingly find themselves interested in areas over which two or more states claim jurisdiction. The purpose of this paper is to offer guidance to decision-makers seeking to minimize the risks associated with operating in such areas. The paper begins with an overview of the law of the sea relating to maritime jurisdiction and boundary delimitation. It then examines the types of situation in which boundary disputes arise and the options available for resolving such disputes. With the help of case studies, it also considers the practicalities of operating in uncertain or disputed waters. 1 2 3 4 International Boundaries Research Unit, Department of Geography, Durham University, Durham DH1 3LE, UK. Tel: +44 191 334 1961 Fax: +44 191 334 1962 Email: ibru@durham.ac.uk Web: www-ibru.dur.ac.uk LeBoeuf, Lamb Greene & MacRae LLP, 1875 Connecticut Ave, NW, Suite 1200, Washington, DC 20009, USA. Tel: +1 202 986 8000 Fax: +1 202 986 8102 Email: dsmith@llgm.com Web: www.llgm.com 1 nautical mile = 1,852 metres. There is no internationally-agreed symbol for a nautical mile. As well as nm, M, NM, Nm and nmi are all widely used. A coastal state has sovereign rights over the resources of the continental shelf throughout the natural prolongation of its land territory to the outer edge of the continental margin, subject to certain geographical constraints. The definition of the outer limit of the continental shelf is discussed in section 2.2.3. How to Deal with Maritime Boundary Uncertainty in Oil and Gas Exploration and Production Areas 2
2. The law of the sea and maritime jurisdiction 2.1 From the cannon-shot rule to UNCLOS Control over the world s oceans has been a source of international debate since the early seventeenth century. Maritime powers have traditionally sought to maximize the freedom of the seas and, until the late nineteenth century, state coastal state jurisdiction offshore was generally limited to a narrow band of coastal waters determined by the so-called cannon-shot rule the distance out to sea that a cannon ball fired from the shore could reach. However, the twentieth century witnessed a dramatic expansion of state control over maritime space, with some states claiming sovereign territorial seas extending as far as 200 nm from their coasts. A series of international conventions signed in Geneva in 1958 were partially successful in codifying the law of the sea, but it was not until 1982 that a comprehensive regime for the world s oceans was agreed in the form of the United Nations Convention on the Law of the Sea. UNCLOS (as the 1982 convention is commonly known) is perhaps the most wide-ranging and sophisticated treaty ever agreed by the international community. Comprising 320 articles and nine annexes, UNCLOS not only codifies the principles of maritime jurisdiction and boundary delimitation; it also provides the international legal framework governing issues such as navigation, marine scientific research, the utilization of living and non-living resources, the protection and preservation of the marine environment, and the settlement of ocean-related disputes. Although UNCLOS was signed by 119 states when it was opened for signature in 1982, it did not enter into force until November 1994, when the sixtieth instrument of ratification or accession was deposited with the United Nations. At the time of writing (May 2007) there are 152 states parties to UNCLOS 5 and many of its provisions are widely considered to have become customary international law, and therefore binding on all states. Although UNCLOS is undoubtedly a major achievement, its negotiation like all agreements between a large number of parties with diverse interests involved numerous compromises. As a result many of its provisions, not least those relating to maritime jurisdiction, are somewhat vague and open to differing interpretations. The following sections highlight the key elements of the convention relating to maritime jurisdiction and examine issues which are likely to be of particular relevance to operators in boundary areas. 6 2.2 Zones of maritime sovereignty and jurisdiction 2.2.1 Territorial sea The sovereignty of a coastal State extends beyond its land territory and internal waters to an adjacent belt of sea known as the territorial sea. This sovereignty extends to the air space over 5 6 The European Union has also ratified UNCLOS. The USA is the most notable non-party to the convention, although the Bush administration now supports ratification. The full text of UNCLOS is available online from the UN Division of Ocean Affairs and the Law of the Sea at http://www.un.org/depts/los/convention_agreements/texts/unclos/closindx.htm. Readers with an interest in maritime boundary delimitation should familiarise themselves at least with Parts II (Territorial Sea and Contiguous Zone), V (Exclusive Economic Zone), VI (continental shelf) and VIII (Regime of Islands). The convention is written in plain language that should be as easily understood by lay readers as by international lawyers. How to Deal with Maritime Boundary Uncertainty in Oil and Gas Exploration and Production Areas 3
the territorial sea as well as its bed and subsoil. 7 The maximum breadth of the territorial sea is 12 nm, measured from the low-water line and other baselines allowed under UNCLOS (see section 2.2.5). 8 A small number of states claim territorial seas narrower than 12 nm and a few claim territorial seas wider than 12 nm 9 ; the former practice is perfectly permissible, the latter is no longer defensible under international law. A state s sovereignty over its territorial sea has all the attributes of its sovereignty over its land territory, with one significant exception. Under Article 17 of UNCLOS, ships of all States, whether coastal or land-locked, enjoy the right of innocent passage through the territorial sea. Innocent passage is defined as passage which is not prejudicial to the peace, good order or security of the coastal state. In the territorial sea the coastal state s rights over hydrocarbon resources and oil and gas infrastructure are absolute. 2.2.2 Contiguous zone The contiguous zone is a zone adjacent to the territorial sea in which a state may exercise control necessary to: (i) prevent infringement of its customs, fiscal, immigration or sanitary laws and regulations within its territory or territorial sea; and (ii) punish infringement of the above laws and regulations committed within its territory or territorial sea. 10 The outer limit of the contiguous zone may not extend more than 24 nm from the state s baseline. With the introduction of the exclusive economic zone in UNCLOS, the significance of the contiguous zone has been somewhat reduced. Since the contiguous zone overlaps the exclusive economic zone, it rarely figures prominently in boundary delimitation and is not of practical importance to international oil and gas companies. 2.2.3 Continental shelf States have been claiming rights over the resources of their continental shelves since the middle of the 20 th century. 11 The 1958 Geneva Convention on the Continental Shelf gave states parties the right to explore and exploit the resources of the seabed and subsoil of the submarine areas adjacent 7 8 9 10 11 UNCLOS Article 2. UNCLOS Article 3. Benin, Congo, Ecuador, El Salvador, Liberia, Peru and Somalia claim 200 nm territorial seas; Togo claims a 30 nm territorial sea. Australia (around islands in the Torres Strait), Belize (in the Gulf of Honduras), Denmark (around Greenland and several islands in The Sound), Japan (in Soya Strait, Tsugaru Strait, the eastern and western channels of the Tsushima Strait and the Osumi Straits), Jordan, Palau, Papua New Guinea (in certain areas), Singapore, and the UK (around various dependent territories) claim 3 nm territorial seas; the Dominican Republic, Greece and Turkey (in the Aegean Sea) claim 6 nm territorial seas. Estonia and Finland have reduced the width of their territorial seas in the Gulf of Finland by varying amounts to maintain a navigation corridor. UNCLOS Article 33. The starting-gun for extended jurisdictional claims was the Truman Proclamation of September 1945, in which US president Harry Truman announced that The Government of the United States regards the natural resources of the subsoil and seabed of the continental shelf beneath the high seas but contiguous to the coasts of the United States as appertaining to the USA, subject to its jurisdiction and control. (Presidential Proclamation No. 2667 of 28 September 1945). How to Deal with Maritime Boundary Uncertainty in Oil and Gas Exploration and Production Areas 4