Mhairi Main Garcia

8.6 Agreed boundary

Even where there is an agreed boundary, the development of hydrocarbon resources
on either side of the boundary will be subject to differing domestic legal regimes and
procedures applicable to their exploration and exploitation. The problem is
exacerbated where there is a common reservoir. Technical problems can arise in
apportioning the reserves and there is a risk that operations on one side of a
boundary can have a negative impact on the reserves on the other side of the
boundary. Procedures for unitising reserves have thus been adopted in many cases
where such problems arise.

8.7 Assistance to the host state government

Finally, in this context, oil and gas companies can assist a host state government in
understanding the legal complexities, commercial issues, economic analysis and
technical problems. International oil and gas companies may be in a better position
to provide information and data which may be helpful in delimiting a boundary
and/or resolving a dispute. Companies with international resources and technical
expertise can be of positive assistance, although the host state government will
ultimately be the decision-making authority on the strategy it decides to pursue in
relation to its boundaries.

9. Conclusions
The pressure to discover and exploit hydrocarbon resources is intensifying with an
increasingly energy-hungry world. This will lead to a greater likelihood of resources
being exploited in areas where boundaries have yet to be delimited and/or are
disputed. The mix of hydrocarbon resources coupled with an undelimited or
disputed boundary offers the potential for toxic disputes in the future.
Where there is a dispute, it may not be possible to predict the outcome and
timing for resolving that dispute, since a single rule or method may not be
applicable. Although the equidistance line is generally the starting point, it is subject
to extensive uncertainties which arise in the equitable solutions language used in
the Convention and by the International Court of Justice and international
tribunals, and in some cases the equidistance rule may simply not be an appropriate
solution. However, although it may not be possible to eliminate uncertainty, it is
at least possible to minimise that uncertainty. Oil and gas companies seeking an
interest in a potential contract area where the boundaries have not been delimited
or are in dispute should mitigate the risks involved by carrying out careful due
diligence, working proactively with the host state government and seeking the
appropriate contractual safeguards. In so doing, oil and gas companies should be able
to make an informed assessment of the risks involved and reduce the potential for a
toxic mix.

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