State participation in international petroleum agreements

Abstract

International petroleum arrangements are the result of interplay of states, often represented by their national companies, and private oil entities, within the oil industry. While the former are interested in economic development of their petroleum resources, the latter offer financial and technical capacities to serve this purpose. Management of resources requires advanced technology and investments, which may be challenging for states who, therefore, seek assistance from professionals. This cooperation takes its legal form through international petroleum agreements. The thesis intends to identify legal mechanisms used by states to improve their legal position in the framework of international legal arrangements concluded with oil and gas companies for the exploitation of their national resources . The question will be raised on how state’s interests and strategies materialize in petroleum agreements. The cornerstone of state participation in petroleum arrangements is its own strategy for management of resources. The process of policy-making is of high relevance, as it forms the background for future contracts. Thorough evaluation of objectives and priorities at this stage fosters state’s position in relations with companies. Therefore, the first part of the paper deals with elements of state’s strategies towards petroleum development, as they have direct impact on the choice of petroleum legislation, type of an agreement or concrete provisions. Furthermore, the most crucial aspects of state’s petroleum development will be analyzed in light of international law. Secondly, the paper deals with the different types of standard petroleum contracts, currently used in the oil industry. The petroleum arrangements are the implementation and realization of state’s objectives. Thus, the assessment of state’s legal position in four most common models of petroleum arrangements is presented, with emphasis on evaluation of advantages and disadvantages of these solutions from the state perspective. Finally, the analysis of concrete contractual and legislative provisions is made, with special focus on those provisions which particularly foster state’s legal position. The concrete legal mechanisms presented are common to all kinds of petroleum arrangements, and may be implemented through different legal forms, like petroleum legislation or contract provisions. In order to give a broader overview of various forms of implementation of these mechanisms, comparative case study of two different systems is provided: the Norwegian concessionary system and the Timor Production Sharing Model Contract.