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

The terms of the MOU made a practical implementation difficult in the establishment of a petroleum fiscal regime for the JDZ. At the time, Malaysia operated a Production Sharing Contract (PSC) system, while Thailand used a tax and concession system. (308) Resolving this and other issues led to a substantial delay in the conclusion of the subsequent Agreement on the Constitution and Other Matters Relating to the Establishment of the Malaysia-Thailand Joint Authority, which was eventually signed in 1990. (309) This agreement established a production sharing system for the petroleum fiscal regime within the JDZ and set out the primary contract terms, which included a duration, not to exceed thirty-five years; royalty, of ten percent of gross production, payable to the Joint Authority for remittance of an equal share to the two states; a cost recovery limit of fifty percent of gross production; and a profit share requiring the balance of gross production to be shared equally between the contractor and the Joint Authority. (310) The 1990 agreement also confirmed the juristic personality of the Joint Authority and such capacity as provided for in the acts of parliament to be enacted by both states. (311)

This joint development area has already witnessed significant petroleum activity with several gas discoveries. In 1994, the Malaysia-Thailand Joint Authority (MTJA) awarded production sharing contracts for Block A-18 to Petronas Carigali (JDA) Sdn. Bhd. and Triton Oil Company of Thailand (wholly-owned by Amerada Hess). The other two blocks, Block B-17 and Block C-19, where awarded to Petronas Carigali (JDA) Sdn. Bhd. and PTTEP International Limited. (312) In both cases, the contractors formed joint operating companies to act as operator. (313) Those parts of the JDZ that were not agreed by MTJA as part of the "Gas Field Holding Area"--that is containing significant gas discoveries--were relinquished back to the MTJA in 2002, including the whole of C-19. (314)

Petronas and the Petroleum Authority of Thailand (PTT), as buyers, and MTJA and the A-18 contractors, as sellers, concluded a gas sales and purchase agreement for Block A-18. (315) Under the agreement, Petronas and PTT would buy gas from the JDZ on a 50:50 basis and then bring their respective share of gas back for use. (316) Gas purchases from Block A-18 were expected to amount to 390 million standard cubic feet per day and commercial delivery of gas was scheduled to commence in 2002, when the offshore production facilities were completed. (317) However, work on the Thailand-Malaysia gas pipeline and processing plant project in southern Thailand was expected to be completed by early 2005, with the pipeline going online by the middle of 2005 transporting natural gas from the MTJA area. (318)

d. Tunisia-Libya, 1988 (319)

Tunisia and Libya have signed three agreements in relation to the disputed border. As discussed earlier, the first one was a delimitation agreement in accordance with the ICJ judgment of 1982, while the second and third agreements related to the joint development undertaking. (320) This agreed scheme appears to have followed the dissenting judgment of Judge Evensen. (321) The second agreement established a JDZ in the Gulf of Gabes area, split into two parts by the delimited continental shelf boundary. (322) It imposed measures for joint development activities, including the creation and financing, of joint-venture projects for oil exploration and exploitation. (323) A joint Libyan-Tunisian exploration company was established in Tunisia and was given the special status of an offshore enterprise to explore the gas field in the northwestern part of the JDZ. (324) The third agreement established the right of Tunisia to ten percent of the income from future production in the oilfields in the southeast part of the joint zone, that is, within the Libyan continental shelf. (325)

e. Timor Gap Treaty (Australia-Indonesia), 1989 (326)

The origin of this JDZ is the agreements between Australia and Indonesia over much of the maritime boundary between them in 1971 and 1972, which gave significant emphasis to Australia's claim based on continental shelf principles. (327) However, there remained a part of the boundary that was not settled at that time, which became known as the Timor Gap. (328) As discussed earlier, this gap arose because in 1972 East Timor was still governed by Portugal and negotiations between Australia and Portugal had not been concluded. (329) In 1975, East Timor was invaded by Indonesia, and Australia and Indonesia eventually negotiated a JDZ in the Timor Gap Treaty of 1989, which came into force in 1991. (330) The need for a JDZ stemmed from the fact that Indonesia claimed a median line basis for delimitation, whereas Australia maintained its position based on the continental shelf, reflecting the principle of natural prolongation of its territorial land, as promulgated in the North Sea Continental Shelf Cases. (331)

The Timor Gap Treaty is considered to be one of the most comprehensive joint development agreements, extending to thirty-four articles and four annexes. It established a Zone of Cooperation, which comprised three distinct areas: Area A under joint control, Area B under Australian jurisdiction, and Area C under Indonesian control. (332) Area A, where there was shared jurisdiction, was managed by a Ministerial Council and a Joint Authority, with equal representation by each state and equal sharing of the resources. (333) In Areas B and C each state retained exclusive sovereign rights subject to notifications and remittance of ten percent of Indonesian income tax, to Australia, and ten percent of Australian resource rent tax, to Indonesia. (334)

The definition of the boundaries of the three areas illustrates the position of the states with respect to their maritime claims and demonstrates a potential solution to other situations where a "simple" joint-sovereignty JDZ alone is not sufficient to satisfy one or both states. The boundaries of the zones approximate, from north to south:

* The bathymetric axis of the Timor Trough (being the northern limit of Area C);

* The 1500m water depth line (the boundary between Areas A and C);

* The median line (the boundary between Areas A and B);

* The southern limit of the EEZ (200 nautical miles) of East Timor (being the southern boundary of Area B). (335)

The Joint Authority had juridical personality and legal capacity under the laws of both states as required in order to exercise its powers and functions. (336) It was responsible to the ministerial council. (337) Petroleum operations were to be carried out through production sharing contracts entered into between the Joint Authority and the limited liability corporations. (338) For Area A the annexes included a taxation code, a petroleum mining code, and a model production sharing contract. (339) The Ministerial Council had the overall responsibility for exploration and exploitation in Area A and could give directions to the Joint Authority, amend the petroleum mining code, and modify the model production sharing contract. (340)

Several production sharing contracts were issued and oil and gas discoveries were made prior to the agreement being nullified by the independence of East Timor and replaced with a new treaty negotiated between Australia and East Timor. (341)

f. Guinea-Bissau-Senegal, 1993/1995 (342)

The Management and Cooperation Agreement of 1993 was an outline agreement that only set out the fundamental principles of the arrangement between the impacted states of Guinea-Bissau and Senegal. (343) This was supplemented by the 1995 Protocol of Agreement relating to the Organization and Operation of the Agency for Management and Cooperation, which established the International Agency that was responsible for management of the zone. (344)

These agreements were concluded after a history of maritime boundary litigation before an arbitral tribunal and the ICJ. (345) In the absence of a satisfactory settlement of the boundary of their EEZ claims, the parties decided to establish a JDZ beyond their territorial sea within a designated area around Cape Roxo. (346) This zone served the dual purposes of exploiting both fishery, petroleum and mineral resources. (347) The fishery resources were to be shared equally, but the petroleum and minerals were split with eighty-five percent going to Senegal and fifteen percent going to Guinea-Bissau. (348) These proportions were subject to revisions in the event of discovery of additional resources. (349) The agreement was without prejudice to the claims of the two states to the nondelimited areas and the agreement would be effective for an initial period of twenty years. (350)

The protocol established the Agency for Management and Cooperation of the JDZ, based in Dakar. (351) With regard to petroleum activities, the agency was required to carry out all relevant petroleum operations or make arrangements to have them carried out. (352) This included overall responsibility for all activities related to the exploration for and exploitation of petroleum resources, including the promotion of such activities and the marketing of petroleum resources that were produced from the area. (353) The agency was also charged with monitoring the rational exploitation of these resources and environmental protection within the joint zone. (354)