Cross-border unitization and joint development agreements: an international law perspective.

The International Unitization Agreement (IUA) between the Government of Australia and the Government of the Democratic Republic of Timor-Leste, formerly East Timor, relating to the Unitization of the Sunrise and Troubadour fields, signed at Dili on March 6, 2003, provides a comprehensive framework for the joint exploitation of the Sunrise and Troubadour Fields (the Greater Sunrise field). (262) The general facts and background to this agreement will be analyzed in the section on Joint Development Agreements below. Basically, Article 9(a) on Unitization of the Timor Sea Treaty, entered into by and between both governments, established that "[a]ny reservoir of petroleum that extends across the boundary of the [joint petroleum development area] shall be treated as a single entity for management and development purposes." (263) Section (b) of the same Article states that the parties "shall work expeditiously and in good faith to reach agreement on the manner in which the deposit will be most effectively exploited and on the equitable sharing of the benefits arising from such exploitation." (264) In Annex E, under Article 9(b), both parties agreed to unitize the Greater Sunrise field, setting the basis for the distribution of production. (265) The parties concluded the separate IUA identified above on March 6, 2003. (266)

The IUA covered matters such as administration of the unit area; establishment of a commission to facilitate the implementation of the IUA; applicable law; taxation and apportionment of production; approval of a development plan; abandonment; point of sale; valuation of petroleum recovered from the field; employment and training; occupational health and safety; environmental protection; customs; security arrangements; and dispute resolution mechanisms. (267)

Although Australia had exercised jurisdiction over the part of the field lying to the east of the joint petroleum development area (JPDA), that jurisdiction had been pursuant to a prior delimitation agreement with Indonesia that East Timor did not recognize. (268) The IUA was therefore without prejudice to the maritime claims of the two states and their ongoing negotiations on a permanent boundary delimitation. (269) However, there are clearly some significant disagreements with respect to these overlapping maritime claims, which may be one reason why East Timor only recently ratified the IUA.

iv. Other Offshore Cross-Border Unitizations

In addition to the six North Sea cross-border unitizations and the Greater Sunrise IUA discussed above, other examples include the Fairley Baram field, between Malaysia (Sarawak) and Brunei Darussalam, (271) and the Ekanga/Zafiro field between Nigeria and Equatorial Guinea. (272) In addition, Venezuela and Trinidad & Tobago agreed in a 2003 Memorandum of Understanding to unitize their cross-border fields. (273)

b. Interlicensee Unitization Agreements

In addition to the unitization treaty between two states, there will also be an agreement between the licensees on each side of the border. (274) These agreements are not in the public domain but are similar to a typical unitization and unit operating agreement found in domestic unitizations, except that they must be consistent with the terms of the treaty. Hence, they will be subject to the approval of both states. (275) The primary differences will be the requirement for certain key issues like selection of operators, approval of the development plan, initial apportionment ratio and any redeterminations thereof, and changes to the unit area to be subject to the approval of both states and the licensees.

In the case of the U.K.-Norway unitization treaties, there were also deeds signed between the licensees and their respective governments binding the licensees to uphold the obligations placed on them by the treaty because they were not parties to the treaty itself. (276)

3. Joint Development Agreements

The following summary of cases is not exhaustive of the list of joint petroleum development agreements, but a sufficient number is covered in detail to provide practical illustrations of the fundamental characteristics of such agreements. (277)

a. Japan-South Korea Agreement, 1974

Japan and the Republic of Korea (South Korea) concluded two maritime agreements in 1974. The first agreement was a delimitation agreement for the area through the southern part of the Sea of Japan and the Tsushima/Korea Strait. (278) The second agreement was a joint development agreement for the part of the continental shelf extending southwards into the northern part of the East China Sea, (279) which is an area where petroleum development is complicated by the overlapping claims not only of these two states, but also of North Korea and China as well. (280)

In the Japan-Korea Agreement, the JDZ was subdivided into subzones and each state was required to authorize one or more concessionaires with respect to each subzone. (281) However, if a state authorized more than one concessionaire with respect to one subzone, all such concessionaires would be represented, for the purposes of the agreement, by a single concessionaire. (282) Therefore, there were two concessionaires for each subzone, one authorized by each state. One of the concessionaires was selected as operator. (283) Laws and regulations were applied within each subzone on the basis of the state that authorized the concessionaire that acted as operator. (284)

Expenses incurred in the exploration and exploitation phases were shared equally between the two concessionaires, as was the production. (285) Each concessionaire was responsible only to its state with respect to any taxes that were imposed. (286)

For the purpose of liaison between the two states, a Joint Commission was established with two members appointed by each state. (287) The Joint Commission acted as a consultative body, without the level of authority seen in some other joint development agreements. (288)

The duration of the agreement was specified as fifty years. (289) It automatically continued in force beyond this until either state gave three years notice of its termination. (290) However, it could also be terminated prior to fifty years "when either Party recognize[d] that natural resources [were] no longer economically exploitable in the Joint Development Zone," provided that the other state concurred with this view. (291)

b. Sudan-Saudi Arabia, 1974 (292)

In 1974 Saudi Arabia and Sudan created a common zone in the central part of the Red Sea that lies between the two states. (293) The agreement established each state's exclusive sovereign rights over the seabed up to a line where the water depth was less than 1000 meters. (294) This left an area extending down the middle of the Red Sea where the water depth exceeded 1000 meters, which was designated as the common zone. (295) In this area, both states possessed equal and exclusive sovereign rights in all the natural resources. (296)

The agreement established a Joint Commission as a corporate body with legal capacity to carry out all its assigned functions in both states. (297) These functions included, among others, the consideration and decision on applications for licenses and concessions for exploration and exploitation in accordance with its own prescribed conditions. (298) The Joint Commission could establish regulations as considered necessary for the discharge of its functions. (299)

c. Thailand-Malaysia, 1979/1990 (300)

Unable to agree to a complete delimitation of their continental shelf boundary, Malaysia and Thailand signed a Memorandum of Understanding (MOU) in 1979 in which they established a JDZ in the Gulf of Thailand. (301) Later that same year they concluded delimitation agreements in regard to the territorial sea and continental shelf boundaries as far as the western edge of the JDZ, pledging to continue negotiations with a view to completing the delimitation process at some time in the future. (302)

The MOU is for a period of fifty years and provides for a powerful Joint Authority with each state designating a cochairman and an equal number of members. (303) The Joint Authority was given all the rights and responsibilities on behalf of both states for the exploration and exploitation of the nonliving resources of the seabed and subsoil of the JDZ. (304) Further, it was given all administrative and developmental powers incidental to or connected with the discharge of its petroleum operations functions. (305) The issue of criminal jurisdiction was handled by dividing the JDZ into north and south areas, with Thailand having jurisdiction over the north and Malaysia having jurisdiction over the south. (306) However, this line was not to be construed as indicating the border or prejudicing the sovereign rights of either state within the JDZ. (307)