Fewer than half of the 500 or so potential maritime boundaries in the world have been agreed, creating uncertainty not only for the coastal States involved but also for their investors active in the offshore oil and gas industry. The complex process of agreeing and fixing boundaries or of making provisional arrangements can be time-consuming and expensive but once agreed can significantly contribute to the economic wealth of the affected countries. Disputes over maritime boundaries regularly flare up around the world and sometimes result in skirmishes. Coastal States with competing claims to maritime areas routinely offer and award oil concessions in disputed waters without the investors taking blocks being fully aware of the underlying inter-State dispute and the risks presented by an un-delimited boundary, especially one featuring straddling deposits. Indeed, maritime boundary disputes form a misunderstood and frequently overlooked area of investment risk management in the energy sector. The Figure below shows, in red lines, the limit of the Exclusive Economic Zones ("EEZs") of the world, together with maritime boundaries delimited by treaty (depicted by blue lines) and interpreted "strict equidistance" lines in locations where no current delimited maritime boundary exists (shown in orange). The world's EEZ waters, as measured from coastlines (in black) up to the EEZ legal limit (in red), cover approximately 169,000,000 square kilometers (geodetic).
Andersen, Niels (National Space Institute – DTU Space & Polar DTU) | Bekker, Pieter (University of Dundee and Steptoe & Johnson LLP) | Bishopp, David (Galp Energia) | Nassif, Toufic (Sonde Resources Corporation) | Nordentoft-Lauridsen, Sune (National Space Institute & Polar DTU) | van de Poll, Robert (Fugro N.V.)
This paper provides an overview of the history of global maritime boundary issues, mechanisms to resolve boundary disputes, and the economic potential that can be unlocked by coastal States through the exploitation of hydrocarbons trapped in areas currently unavailable for exploration and production operations.
Vast hydrocarbon reserves are tied up in areas, either underlying waters greater than 200 nm offshore or disputed by coastal States. In the former case technology in the form of deepwater drilling has made testing the potential feasible, whilst in the latter case many of the 311 or so areas in dispute are able to be tested and developed using conventional techniques.
Anything that appears to show a sovereign entity ceding control of land or sea to another country inevitably takes on a high profile in the countries concerned, which in the worst case can lead to armed conflict. It is a credit to those States that subscribe to the principles of the United Nations Charter and the United Nations Convention on the Law of the Sea ("UNCLOS") that they have reached agreement on how the economic potential trapped in disputed areas may be divided or shared.
High-profile, high-stakes disputes relating to offshore oil and gas deposits underscore the importance of the modern law of the sea, and international law generally, to the peaceful settlement of boundary disputes affecting the energy industry. Yet boundary disputes form an overlooked area of investment risk management in the energy sector.
This paper will introduce the technical and legal principles behind the solutions reached by States and will highlight some of the areas with the greatest hydrocarbon potential that have yet to be exploited as well as the areas of risk that require mitigation before investors will advance risk capital.