International Unitization and the Brazilian State
© Springer International Publishing Switzerland 2015
Yanko Marcius de Alencar Xavier (ed.)Energy Law in Brazil10.1007/978-3-319-14268-5_1212. International Unitization and the Brazilian State
(1)
Department of Private Law, Federal University of Rio Grande do Norte, Natal, Brazil
12.3 Application of International Unitization Agreements in Brazil and Their Constitutional Peculiarities
Abstract
The present chapter considers that oil and gas reserves worldwide are not located only within geographic borders established between countries, in light of the viscosity and fluidity of these resources. They commonly cross borders and lie in areas encompassing more than one State. Technological advances and the constant search for new reserves showed that new thinking with respect to the issues was required on the part of the international community, primarily in the legal sphere. Sovereign States are traditionally the owners of these natural resources of immeasurable value, containing in their constitutional and/or infraconstitutional laws the format by which these activities are executed: whether by themselves through state companies or by contracting private firms. It is up to each State to determine the means of selecting how to exercise its sovereign rights over these natural resources. However, an area encompassing an oil and/or gas reserve that crosses international borders belongs to two or more subjects of public international law (PIL), creating common rights and obligations. State sovereignty over these natural resources is shared between states, not belonging to one or the other outright. The existence of fields and reserves of hydrocarbons shared by everyone, including the likely possibility of discovering communicability involving the Brazilian State, requires, due to the international guidelines and principles applicable, the formulation of mechanisms, instruments and judicial measures that detail the joint actions to be taken, regulating the activities developed with these resources, sharing state sovereignty between each other.
12.1 The International Law Applicable to Cases of Transborder Oil Deposits
Some of the natural resources existing worldwide share a typical element that distinguishes them, that is, the possibility of moving freely and naturally among different geographical spaces. These geographical spaces sometimes establish the borders between countries, that is, cross the limits of territories where sovereignty is exercised individually. This provides an opportunity to share natural resources among two or more nations, in that two or more States have the right to explore, manage and/or produce the natural resource, given its location and physical and chemical composition, not defined exactly and accurately to which country sovereignty belongs.
Two of the resources that frequently face this possibility are oil and natural gas. These resources are characterized by their viscosity, which gives them unique mobility.
Thus, oil and gas can traverse geographic spaces delimited internally in countries. The sharing of oil and gas internally requires a set of internal laws involving natural or legal persons that have the right to explore conceded by legally constituted administrative power. This is granted in the form of concessions, production-sharing contracts, risk contracts or any other form of direct law in each country to regulate the way in which the oil and gas in its territory can and should be explored. Resource sharing makes it essential to create bilateral production agreements for the fields and/or reservoirs involved: the so-called unitization agreements.
International borders, whether between countries or maritime space under shared jurisdiction, are geographic constructions that rarely involve the topography of the land’s surface or even geological aspects. As a result, natural resources in general, including sedimentary basins, have often been located between arbitrarily established borders since the dawn of civilization. Judicial, political and military disputes involving border regions have permeated human history, requiring new definitions that encompass the maximum amount of natural resources possible. Given its economic and geopolitical importance, these resources are mostly hydrocarbons.
The sharing of natural resources between States is therefore a common occurrence on the international stage. In the specific case of oil and gas, international agreements between the sovereign nations involved must be created such that the natural resource, the rights of exploration and economic utilization of States and environmental conservation are considered at the same time, thereby avoiding waste, violation of rights, and degradation of the environment and creating a favorable environment to optimize production.
Thus, shared oil and/or gas fields and/or reservoirs create reciprocal rights and obligations between States since each one has the right to explore and produce resources, albeit limited by the same right that the other State possesses. Those that engage in unilateral activities will be violating the rights of others. Given the nature of the natural resources involved, there is an obligation on the part of both parties not to take such measures.
The emergence of judicial concern in the international community, although casuistic and particularized, occurred unofficially until the first international accords were signed to define maritime borders between the States. These contained clauses on oil and gas sharing in the 1940s, not forgetting the international agreements that regulated the shared production of oil and gas in the North Sea in the 1960s and 1970s.
A more generic and abstract focus, derived from the multilateral organization with the most representativeness and legitimacy in the international community, the General Assembly of the United Nations (UN), was solidified through the Charter of Economic Rights and Obligations of States, approved by Resolutions No. 3281/1974 and No. 34/186, of 1979. It recognized the existence of shared sovereign rights as to transboundary natural resources, underscoring the importance of international cooperation in order to create judicial mechanisms aimed at adopting a set of principles, directives and recommendations.
In this respect, international law seeks not only to establish that the sharing of sovereignty regarding these natural resources generates a need to observe state sovereignty over their natural resources in a limited way but also to create mechanisms that promote the formalization of joint activities. These instruments define the issue between the sovereign parties involved and delimit the degree of participation of each one, structuring the criteria by which the exploration and production of the field and/or reservoir must be regulated.
Thus, international unitization accords emerge in the area of oil and gas, the source of public international law (PIL) that defines the judicial bases of joint exploration and production of a single reservoir and/or field, which, because of its size and/or location, extends to territories belonging to two or more States. The primary purpose of unitization is to enable the control of oil and gas production without abuses and unilateral measures that could compromise productivity of the field, avoiding waste and promoting environmental protection by not applying the rule of capture.
In Brazil, the areas offered in recent auctions of exploratory blocks, promoted by the National Oil, Natural Gas and Biofuels Agency (ANP), especially the ninth, included some located in border regions with other national States, which raises the possibility of natural resource sharing. These are Santos Basin (with the strong possibility of communication with the International Area beyond the exclusive economic zone and Brazilian Continental Shelf), maritime blocks in Amapá state (with possible communication with French Guyana) and maritime blocks in Rio Grande do Sul state (with possible communication with Uruguay).
Furthermore, the Brazilian Amazon, which is interlinked with Venezuela, a large oil and gas producer, has shown to be a source of these natural resources. Exploration and production has already taken place in the state of Amazonas, raising the possibility of oil and gas communication because of its close proximity to the border.
The communication of hydrocarbon fields and reservoirs generates a correlation between the sovereign rights of each State as to the exploitation of these resources, that is, indispensable interdependence is the judicial basis of joint exploitation.
It is for this reason that the nonregulation of judicial instruments related to the joint exploitation of shared natural resources, such that a State promotes unilateral action, violates the sovereign rights of the State with which it shares its resources, since the sovereign rights belong to both.
This interdependence of sovereign rights in relation to shared fields is justified by the near certainty that excessive competition for production, and not acting in conjunction, may lead to serious damage, not only to the field itself but also to the environment as a whole. This is why the participants of a shared region share not only the natural resources that it may provide but also the risks and responsibilities.
Thus, observing cases of field and reservoir communication in the territories of two or more States, it can be seen that international unitization agreements on oil and gas exploration and production are, in accordance with customary international law, the conventional mechanisms that establish and structure the rules to protect the sovereign rights of these States. The aim is to provide joint instruments and regulations for the exploitation of such important natural resources, which can only be achieved in this manner, under penalty of infringing on international rules, reciprocal sovereign rights and compromising the environment itself, due to the consequences resulting from unilateral action in biodiversity.
All international judicial guidelines that cover the sharing of natural resources, such as oil and gas and are related to either international custom or general principles of law, are based on the theory of Neighbor’s Rights, initially conceived to provide solutions to problems arising from the use of international waters common to the States. With the emergence of shared oil and gas reserves, the theory was applied in this setting, resulting in judicial rulings that led to the development and subsequent application of specific guidelines for the sharing of oil and gas between States. Doctrinary thinking has revolved around the application of the theory of Neighbor’s Rights to problems associated with oil and gas exploration in transboundary regions.1
Thus, clear commands derive from some of the principles of international law related to international relationships between States, specifically with respect to the exploitation of international relationships between States, such as oil and gas, with the aim of not compromising the sovereign rights of border countries. These principles are based on the search for cooperation between the countries involved, using tools contained in international law to increase shared exploration and production of oil and natural gas.2
The application of these principles in the international context resulted in guidelines applicable to transboundary reservoirs and fields. Over the years, international custom has solidified the application of these principles that initially only existed internally in certain countries but ended up in the international legal order, regulating specific judicial relationships.
Resolution No. 34/186, of the United Nations General Assembly of 1979, entitled “Cooperation in the Field of the Environment concerning natural resources shared by two or more States,” underscores the importance that the international community gives to such resources. It adopts a set of principles, directives and recommendations for the formulation of agreements that focus primarily on regulating the issue of shared natural resources.
The charter of economic rights and obligations of States, approved by United Nations General Assembly Resolution No. 3281/1974, in turn, states that the parties involved must cooperate in creating judicial mechanisms aimed at the joint production of shared natural resources. According to J. Barberis, the large number of resolutions dealing with the shared natural resources issue is an important element in the formation of guidelines, specifically considering the charter of economic rights and obligations of States an example of opinion gentium in relation to the resources indicated.3
Thus, over time, consolidation of the state practice and the growth in cooperation between countries in situations such as those described contributed to the emergence of customary international law aimed exclusively at formulating cooperative practices in cases of oil and gas sharing between sovereign States. Shihata and Onorato4 summarized these rules as follows: (1) a State involved in a common international deposit cannot exploit it unilaterally without the consent of the other State (s), (2) the exploration method and the legal basis for exploiting the deposit must be agreed upon by the States involved, (3) these States must enter negotiations in good faith, in order to reach an agreement or at least a provisional arrangement until a definitive accord is finalized.
What occurs is that no State is obliged to unitize its production with another State because they are sharing fields. Production can occur up to the point in which there is no harm inflicted on the other party (or even initiate for such a reason) since, from the moment a situation is perceived, it is impossible to continue (or even begin) these activities, based on the general rules mentioned above.
In this respect, as previously underscored, one can observe an evolution in international common law, which permeates the relationships regarding the exploration and/or production of hydrocarbons. In a study conducted by professors of International Law and Geology, from the Faculty of Law and the Center for Natural Resources of the University of Mexico, nine new fundamental principles were developed for Oil and Gas International Unitization Treaties. These further solidify the international custom with respect to international law applicable to the use and conservation of hydrocarbons situated in transboundary regions, summarizing a large part of the discussion. Thomas A. Reynolds,5 in his article entitled “Delimitation, Exploitation and Allocation of Transboundary Oil & Gas Deposits between Nation-States,” listed these principles as follows: