Exclusive Economic Zone and Legal Provisions

THE LEGAL PROVISIONS
ABOUT THE EXPLORATION OF

HYDROCARBONS
IN AN EXCLUSIVE ECONOMIC
ZONE
Oil and Gas Law
MSc Oil and Gas Technology Eastern Macedonia and
Thrace Institute of Technology School of Engineering
Technology
Athanasios Pitatzis
Leonidas Eleftheriadis
Apostolis Kantartzis
The legal provisions about the exploration of hydrocarbons in an exclusive

economic zone
EXCLUSIVE ECONOMIC ZONE

An exclusive economic zone (EEZ) is a sea-zone prescribed by the United Nations Convention
on the Law of the Sea (UNCLOS), over which a coastal state has sovereign rights to explore and
exploit, conserve and manage its natural resources. It stretches from the seaward edge of the
state's territorial sea out to 200 nautical miles (nm). When two (or more) states coastal baselines
are less than 400 nm apart, overlap of EEZs occurs and it is up to the states to delineate the
actual maritime boundary.
RIGHTS, JURISDICTION AND DUTIES OF THE COASTAL STATE IN THE EXCLUSIVE ECONOMIC ZONE
In the exclusive economic zone, the coastal State has jurisdiction:
the exploration, utilization and management of all natural resources, the waters, the sea
bed and the soil underneath the sea bed
the production of energy
the utilization of manmade islands, installations and structures
scientific research
the protection of the environment and
All rights and duties provided by the UN Convention.[1]
Source: http://www.eoearth.org/view/article/156775/
SOME GENERAL OBSERVATIONS ON THE EXCLUSIVE ECONOMIC ZONE
It is not possible in this article to provide a full commentary on the texts of the provisions on the
exclusive economic zone in the Convention. However, the following general observations on the
regime might be made:
Athanasios Pitatzis Leonidas,Eleftheriadis,Apostolis Kantartzis

economic zone
1. The regime for the exclusive economic zone is sui generis. Under it the coastal states and
other states have specific competences. The legal regime of the exclusive economic zone is thus
different from those of the territorial sea and the high seas. It is a zone which incorporates certain
characteristics of both regimes but belongs to neither. The zone represents a politico-legal
compromise and its various elements constitute a complete unit whose structural harmony and
functional balance will be destroyed if it were to be assimilated into any pre-existing concept.
2. In the exclusive economic zone a coastal state has been given sovereign rights for the
purpose of exploring and exploiting, conserving and managing the natural resources. In
exercising its rights and performing its duties under the Convention, the coastal state is obliged
to have due regard to the rights and duties of other states and to act in a manner compatible with
the Convention (Article 56). The coastal state has been given considerable discretion in the
management of the zone; however, the Convention also imposes specific management
responsibilities on the coastal state, especially as concerns the living resources of the zone. In the
light of these management responsibilities, a coastal state which has claimed an exclusive
economic zone cannot pursue a policy of inaction with respect to its living resources.
3. The Convention refers to specific matters which a coastal state should take into account in
the management of the zone. It contains provisions requiring a state to enter into agreements with
other states, either bilaterally, subregionally or regionally. These references in some cases serve
to highlight the interests of other states in the zone or to create preferences in their favour and
they were essential elements in the compromises which made the concept of the exclusive
economic zone generally acceptable. They now require to be implemented in good faith by all
concerned.
The regime of the exclusive economic zone is clearly a revolutionary legal concept which
evolved very quickly. In about a 30-year time span, an ocean regime has emerged from many
diverse ideas and interests and has found universal acceptance establishing the unlikely
proposition that the whole is greater than the sum of its parts.[2]

economic zone
TERRITORIAL WATERS OR TERRITORIAL SEA

Territorial waters or territorial sea, as defined by the UNCLOS of 1982 (Art 3), is a belt of
coastal waters extending at most 12 nm from the baseline of a coastal state. The territorial sea is
regarded as the sovereign territory of the state.
ARTICLE 87-FREEDOM OF THE HIGH SEAS
The high seas are open to all States, whether coastal or land-locked. Freedom of the
high seas is exercised under the conditions laid down by this Convention and by other
rules of international law. It comprises, inter alia, both for coastal and land-locked
States:
1. freedom of navigation
2. freedom of overflight
3. freedom to lay submarine cables and pipelines,
4. freedom to construct artificial islands and other installations permitted under
international law,
5. freedom of fishing
6. freedom of scientific research
These freedoms shall be exercised by all States with due regard for the interests of
other States in their exercise of the freedom of the high seas, and also with due regard
for the rights under this Convention with respect to activities in the Area.

economic zone
High seas. Mediterranean, Policies, C. (2010). Jurisdictional waters in the Mediterranean and black seas.
Comment: If Greece dont declare EEZ then everyone is free to do anything within our
exclusive economic zone, for instance before some months one American ship chemically
deposited on the seabed under the pretext that it was in High Seas of the Mediterranean.
CONTINENTAL SHELF
It was first established in the first United Nations Convention on the Law of the Sea (UNCLOS
I) in 1958. It was defined as the sea bed surrounding a continent at depths of up to about 200
meters at the edge of which the continental slope drops steeply to the ocean floor.
Even though it is underwater, continental shelf is part of the continent and contains the sea-bed
and subsoil of the submarine areas that extend beyond the territorial sea. Coastal nations have
control of all resources on or under it, living or not, but no control over any living organisms
above the shelf that are beyond its exclusive economic zone.
In 1969 the judgment of the International Court was that the definition of the continental shelf
(articles 1-3) of the international agreement of 1958 (UNCLOS I) consisted a custom for all the
coastal nations of the world, even if they havent proceeded to this agreement. According to this
judgment the islands that are inhabited have the complete rights of continental shelf.
Continental shelf and Exclusive Economic Zone

economic zone
The third Convention on the Law of the Sea (UNCLOS III) in 1982 that came into force in
1994 replaced the international agreements for the continental shelf of 1958 and established for
the first time the definitions of Exclusive Economic Zone and territorial sea.
Territorial sea, as defined in article 3 of the agreement, is a belt of coastal waters extending
at most 12 nm from the baseline of a coastal state. The territorial sea is regarded as the sovereign
territory of the state.
The EEZ regime is described according to part V (articles 55-57) of the international
agreement and is governed according to the legal framework that was established in the same
part.
In the EEZ the coastal state has the sovereign rights in relation with the national resources
(living and non-living), over the seafloor, and other activities related with the economic
exploration and exploitation of the zone.
The rights for the exploration and exploitation in the seabed and subsoil within
the zone are examined according to the provisions about the continental shelf
(Part VI). Since, the continental shelf examines only the seabed and any living organisms below
sea level, the declaration of the EEZ is crucial. Moreover, the EEZ does not belong to the coastal
state, contrary to the continental shelf ipso jure, but has to be declared according to the
International Court.
Inevitably when a nation wants to proceed to the exploration and production of hydrocarbons,
a simultaneous declaration of its continental shelf and EEZ is necessary. Otherwise, the sea
surface and the supernatant waters of the same area, are part of the high seas. This can lead to the
result that, there is a possibility a continental shelf existing without EEZ but not the opposite.
Source: Google images

economic zone
Figure 1: Jurisdictional concepts, Policies, C. (2010). Jurisdictional waters in the Mediterranean and black seas
TYPES OF MARITIME ZONE UNDER NATIONAL

JURISDICTION.
Normal baseline (NBL): this is the line from which the breadth of the territorial sea is measured.
Its course corresponds to the low-water line along the coast. (UNCLOS, Art. 5), (Figure 1).[3]
Straight baseline (SBL): this is obtained by linking points furthest from the coast and must not
depart to any appreciable extent from the general direction of the coast (UNCLOS, Art. 7),
(Figure 1).[3]
Internal waters: waters on the landward side of the baseline of the territorial sea form part of
the internal waters of the state (UNCLOS, Art. 8). States exercise full territorial sovereignty
over such waters, the seabed and subsoil and superjacent airspace (Figure 1).[3]

economic zone
Historic bay: when a state claims the waters of a bay as internal waters on the basis of historic
rights, and can demonstrate effective and continuing authority over those waters (UNCLOS, Art.
10), (Figure 1) [3]
Contiguous zone: waters located beyond the territorial sea and adjacent to it and in which the
coastal state may take customs, fiscal, immigration or health measures. Its breadth may not
exceed 24 nautical miles from the baseline from which the territorial sea is measured.
(UNCLOS, Art.33), (Figure 1).[3]
Area: this is the sea and ocean bed and its subsoil outside the limits of national jurisdiction. The
Area and its resources are the common heritage of mankind; no state or natural or juridical
person can acquire it. The natural resources of the Area are the minerals within it (UNCLOS,
Art. 136, 137), (Figure 1).[3]
PROSPECTING, EXPLORATION AND

PRODUCTION
We will present to you the Cyprus example according to The Hydrocarbons (Prospection,
Exploration and Production) Law 4(I) of 2007 is the latest law adopted by Cyprus to transpose
EC Directive 94/22 into national law.[4]
The law presents us:
Hydrocarbons are defined as any kind of petroleum in solid, liquid or gas form . . . as well as
any kind of minerals or substances that are extracted with them. The law sets out the
framework criteria as to the assessment of licence applications for the prospecting, exploration
and extraction of hydrocarbons in Cypruss territory including its Exclusive Economic Zone.
These criteria may include:
the technical and financial capacity of the applicant;

national security and public interest;
the methods envisaged by the applicant to carry out the activities specified in the license
the economic benefits that the applicant offers in order to acquire the license and
the conduct of the applicant within the framework of any previous license.[4]
Section 13 provides that licenses may be subject to such terms as may be necessary to safeguard:
1.
2.
3.
4.
5.
6.
7.
the correct undertaking of the activities permitted by the licence;

the payment of a levy in a currency or as hydrocarbons;
national security, public health and public safety;
environmental protection;
the protection of resources, national treasures and the environment;
the safety of transport, installations and workers;
the management of hydrocarbons; and

economic zone
8. the necessity to safeguard the income payable to the Government.[4]
The law expressly provides that the criteria for the granting of licenses and the terms applicable
to them must be applied in a non-discriminatory manner. Additionally, an environmental impact
assessment report must support any application.[4]
Types of license
By virtue of the Hydrocarbons (Prospection, Exploration and Production) Regulations 51 of
2007, the Government has published detailed rules on the types of licenses available and
procedural requirements that need to be satisfied by applicants.[4]
Prospecting licenses
These will be valid for up to one year. Their purpose is the evaluation of potential by the
identification of geological structures. Although drilling is not permitted under this type of
license, they do enable their holders to conduct gravity and magnetic surveys as well as two- or
three dimensional seismic surveys.[4]
Source: http://www.krisenergy.com/company/about-oil-and-gas/exploration/

economic zone
A Seismic structure information showing the chalk layer and the two reservoirs close to the chalk. Geo-services, J. M. P., &
Technoimaging, M. S. Z. (n.d.). 3D Anisotropic Inversion of Towed Streamer EM Data over the Mariner Field in the North Sea,
(June 2014), 1619.
The horizontal (top) and vertical (bottom) 3D resistivity cubes after inversion, Geo-services, J. M. P., & Technoimaging, M. S. Z.
(n.d.). 3D Anisotropic Inversion of Towed Streamer EM Data over the Mariner Field in the North Sea, (June 2014), 1619.
10

economic zone
Exploration licenses
This type of license will be valid for three years with the possibility of two renewals, each of
Two years. Holders of such licenses have the right to carry out gravity and magnetic surveys,
Two- and three-dimensional seismic surveys and exploratory drilling. On each renewal, 25 per
cent of the initial license area is relinquished while in the case of a discovery the licensee has the
right to be granted an exploitation license for such discovery.[4]
Source: http://www.offshore-technology.com/features/feature1113/feature1113-2.html
One rig designed for stability is British Petroleum's Thunder Horse, which sits 150 miles south-east of New Orleans in the Gulf
of Mexico. Source: http://www.offshore-technology.com/features/feature1113/feature1113-2.html
11

economic zone
Exploitation licenses
Exploitation licenses will be granted for an initial period of up to 25 years with the possibility of
one renewal of up to 10 years. [4]
Source: http://www.cranfield.ac.uk/about/cranfield/themes/energy/oil-gas-exploration-production.html
12

economic zone
EXPLOITATION OF OFFSHORE TRANS BOUNDARY

OIL AND GAS RESERVOIRS
The United Nations Convention on the Law of the Sea (UNCLOS) provides a legal framework
for maritime boundary delimitation. However, it does not entirely solve the equation in regard to
exploitation of cross-border hydrocarbons. What happens when neighboring states have access to
the same reservoir and any activities by one state would have an impact on the position of the
other to exploit the same?
Transboundary reservoirs may create complex legal and political issues because they do not
conform to property lines, licensing demarcations or political boundaries. Such reservoirs are
normally characterized by a complicated combination of rock pressure, gas pressure and
underlying water pressure so that extracting natural gas or petroleum at one point unavoidably
changes conditions in the whole deposit. Exploitation on one side would unquestionably cause
harm to the neighboring state, especially in cases when significant hydrocarbons are discovered
in maritime zones which are subject of disputes between neighboring states making it difficult
for any state to exploit them.
According to the international law, the exploitation of transboundary resources in disputed
maritime areas without cooperation from the other state is prohibited. Under UNCLOS, there is
an obligation on states to make every effort to cooperate. Even if a state is not a signatory to
UNCLOS, there is clear evidence to support the view that, that obligation exists under
International Customary Law, based on the UN General Assembly Resolutions like Resolution
3281, international judicial opinions and states relevant practices.
There is however, no settled state practice obliging states to enter into a particular arrangement.
In the context of State practice, arrangements are divided into two; cross border unitization
agreements and joint development agreements (JDAs). Both serve the same purpose, though the
structures of the agreements differ. Cross border unitization agreement involve established
boundaries of the states, which demarcate an area as a joint development zone (JDZ). On the
other hand, when deposits are found in the disputed territory, state practice is to enter into a JDA
to cooperate in exploiting the deposits in the designed JDZ. JDA is usually formed before
exploration occurs while cross border unitization is only required once the states have discovered
the deposits.
13

economic zone
Common Provisions of JDAs
Geographical view
In some cases, there is a question of competing claims over sovereignty or sometimes unresolved
boundary claims. States have either entered into arrangements to facilitate the actual delimitation
of boundaries or entered into temporary arrangements for exploitation of deposits without
prejudice to unresolved maritime boundary disputes.
In Respect to Australia-East Timor, the purpose was to clearly define the JDZs to avoid the
imminent impasse on the exploitation of hydrocarbons underlying the overlapping continental
shelves.
Australia - Timor Leste Offshore Reserves
In respect to Nigeria Sao Tome and Principe Joint Development Treaty (Nigeria STP Treaty),
parties failed to agree on their maritime boundaries as a result of positional bargains. However,
they established a JDZ in their economic zones covering seabed, subsoil and adjacent waters and
extended from the median line towards Sao Tome e Principe without prejudice to either partys
claim over the disputed territory
14

economic zone
Nigeria - STP reserves
Law Applicable
Under the Nigeria STP Treaty each state retained civil and administrative jurisdiction as they
would in their respective Exclusive Economic Zones. Criminal jurisdiction within JDZ is
determined by nationality and where nationality and permanent residence conflict, the former
prevails. This is similar under the Timor Sea Treaty. However, the joint authority established has
juridical personality in international law and under the laws of the state parties.
Exploration and Development:

Agreements vary from rather simple schemes of cooperation to highly structured systems of
unitization. Nonetheless, they need to address the foundation for licensing or permitting
development activities or to delegate to a body to appoint or select the operators to undertake the
operations. It is as if the separate leases and licenses are merged into one single lease or license,
with a single supervisor appointed to manage the development of the field.
Australian- Timor-Leste agreed on a single unit operator for the exploitation of the
Greater sunrise fields, appointed by agreement. Production is prohibited unless all the approvals
and necessary authorizations have been obtained. Specifically, the joint venture as a unit operator
is obliged to submit the field development plan to the Regulatory Authorities for approval.
Under the Nigeria STP Treaty, the exploitation of the JDZ has to be by a licensed contractor
through periodical open bids for the development of the JDZs. The contractor prepares a
development plan that is approved by Joint Development Authority.
15

economic zone
Environmental Protection
Offshore petroleum activities can damage the marine environment. While the earliest JDAs
contained no environmental protection provisions, more recent ones are environmentally
focused. Under Timor Sea Treaty, states are obliged to cooperate in protecting the marine
environment from oil and gas pollution.
Under the Nigeria STP Treaty, the Joint Development Authority has the primary responsibility to
take all reasonable steps to ensure that development activities in the JDZ do not cause
pollution to the marine environment. It has the duty to monitor the environmental impact in the
JDZ and party states are obliged to inform it of any spillage or discharges from installations or
activities likely to cause pollution.
Financial Provisions
Resource sharing is a critical element to the success of most of the JDAs. Sharing of production
and cost is usually premised upon a pre-negotiated formula and not on any geomorphologic
basis. Equal sharing is the most common practiced measure although variations do exist.
Timor Sea Treaty provides that upstream taxation of revenue from the JDZ is to be split between
Australia Timor-Leste on a 90/10 basis. However, The Treaty on Certain Maritime
Arrangements in the Timor Sea entered into force in 2007 provides for equal portion sharing for
the proceeds from the Greater Sunrise fields.
Australia - Timor Leste Greater Sunrise Fields
Under the Nigeria STP Treaty, Nigeria shares 60% of the resources and 40% goes to Sao Tome
and Principe.
16

economic zone
Dispute Resolution Mechanisms
In most cases JDAs provide for an informal dispute resolution mechanism between parties before
they may resort to external third party.
Australia Timor Leste provides for dispute resolution by Council of Ministers and if unresolved,
to be resolved by an arbitral tribunal of three arbitrators jointly appointed. Where parties fail to
agree, the treaty provides for the appointment by the president of the ICJ at the request of either
party.
17

economic zone
WHY A STATE TO DECLARE EXCLUSIVE

ECONOMIC ZONE?
Production of Wind Energy
Offshore Installations
18

economic zone
Scientific Research, such as seismic data for the detection of the hydrocarbons and
methane hydrate deposits
Source: http://energypress.gr/news/gnomi/Ydrites-Methanioy:-To-kaysimo-toy-mellontos-kai-to-gewpolitiko-toy-apotypwmaston-pagkosmio-energeiako-harth
Fishing Industry
Protection of Marine Habitats and Ecosystem- Tourism Industry
Protection of the Environment
19

economic zone
CONCLUSION
Greece must declare immediately an Exclusive
economic zone
20

economic zone
REFERENCES
[1] Part, I., Sea, T., & Subsection, A. (n.d.). United Nations Convention on the Law of the Sea,
7208.
[2] THE EXCLUSIVE ECONOMIC ZONE: A HISTORICAL PERSPECTIVE, Food and
Agriculture Organization of the United Nations,
http://www.fao.org/docrep/s5280t/s5280t0p.htm#TopOfPage
[3] Policies, C. (2010). Jurisdictional waters in the Mediterranean and black seas
[4] Exclusive, T., & Zone, E. (2007). Ready, Steady, Drill: The Legislation Governing the Race
for Cypruss Offshore Hydrocarbon Reserves, (12), 417421.

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THE LEGAL PROVISIONS

ABOUT THE EXPLORATION OF

The legal provisions about the exploration of hydrocarbons in an exclusive