ENCYCLOPAEDIA

OF
HYDROCARBONS

ISTITUTO DELLA
ENCICLOPEDIA ITALIANA
FONDATA DA GIOVANNI TRECCANI
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 ENCYCLOPAEDIA OF HYDROCARBONS

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 ENCYCLOPAEDIA OF HYDROCARBONS

volume iv

HYDROCARBONS:
ECONOMICS, POLICIES
AND LEGISLATION
SCIENTIFIC CO-ORDINATION
Alberto Clô
(Hydrocarbons: economics and policies)
Piero Bernardini
(Hydrocarbons legislation)
 INDEX OF VOLUME IV

HYDROCARBONS:
ECONOMICS AND POLICIES

1 – MINERAL RESOURCES BETWEEN SCARCITY AND GROWTH

Alberto Quadrio Curzio, Fausta Pellizzari, Roberto Zoboli

1.1 – THE ECONOMIC THEORY OF EXHAUSTIBLE NATURAL RESOURCES 3
1.1.1 – Introduction 3
1.1.2 – Producibility and scarcity: the classical dynamics 3
1.1.3 – From natural to general scarcities: marginalists and neoclassicals 4
1.1.4 – Dynamics with and without natural scarcities: macroeconomists, structuralists, stylizers 7

Alberto Quadrio Curzio, Fausta Pellizzari, Roberto Zoboli

1.2 – TECHNOLOGICAL INNOVATION, RELATIVE SCARCITY, INVESTMENTS 11
1.2.1 – Innovation and resource use efficiency: stylized facts 11
1.2.2 – The mechanisms of technological innovation for energy and the environment 15

Peter R. Odell
1.3 – RESERVES AND RESOURCES 23
1.3.1 – Oil 23
1.3.2 – Natural gas 32

Donald W. Jones
1.4 – THE MACROECONOMIC IMPACTS OF OIL PRICE SHOCKS 43
1.4.1 – A short history of a controversial topic 43

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 1.4.2 – Microeconomic mechanisms that transmit oil price shocks to the macroeconomy 44
1.4.3 – Monetary policy in response to oil price shocks 45
1.4.4 – What constitutes an oil price shock? 45
1.4.5 – The econometrics of oil price shocks 46
1.4.6 – Non-US evidence 46
1.4.7 – The impact of oil prices on the macroeconomy 47

2 – BASIC ECONOMICS OF THE HYDROCARBONS INDUSTRY

Carol Dahl
2.1 – OUTLINE. OIL AND OIL PRODUCT DEMAND 49
2.1.1 – Overview of global oil use 49
2.1.2 – Theoretical issues in modelling energy demand 54
2.1.3 – The effect of demand and supply on market price 57
2.1.4 – Demand elasticities and their uses 61
2.1.5 – Econometric estimates of energy demand models 63
2.1.6 – International data sources 67
2.1.7 – Survey of demand elasticities by product, region and sector 69

Morris A. Adelman
2.2 – BASIC CONDITIONS FOR CRUDE OIL PRODUCTION AND COST FUNCTIONS
IN THE SHORT AND LONG RUN 75
2.2.1 – Introduction 75
2.2.2 – Oil and gas supply: an industry of rising costs 77
2.2.3 – Exploration as permanent source of company/government discord 79
2.2.4 – Conclusions 82

Olivier Appert, Jean-Pierre Favennec

2.3 – ANALYSIS OF COST STRUCTURE AND FUNCTIONS IN OIL TRANSPORT AND REFINING 85
2.3.1 – Oil transport 85
2.3.2 – Oil refining 96

Oliviero Bernardini
2.4 – THE ECONOMICS OF NATURAL GAS 107
2.4.1 – Introduction 107
2.4.2 – The demand for natural gas 108
2.4.3 – Natural gas supply 123
2.4.4 – The production function and the costs 145
2.4.5 – From regional to global markets 149

James T. Jensen
2.5 – INTERNATIONAL TRADE AND THE LNG INDUSTRY 155
2.5.1 – Gas trade 155
2.5.2 – Economies of scale and transport costs 161
2.5.3 – International contracts 167
2.5.4 – The LNG industry 171

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 3 – PUBLIC POLICIES AND THE OIL INDUSTRY

Alberto Clô
3.1 – STATE AND MARKET REQUIREMENTS DETERMINING OIL POLICIES 187
3.1.1 – Oil and the economy: an inextricable link 187
3.1.2 – Oil and politics: the lessons of history 190
3.1.3 – The philosophy of public intervention 192
3.1.4 – Oil policy in the United States 198
3.1.5 – European public policies 201
3.1.6 – Peak and decline of public policy 205
3.1.7 – Oil, social conflict, policy crises 212
3.1.8 – Policies and the market: striking a balance 213

Donald W. Jones
3.2 – URBANIZATION AND ENERGY USE 219
3.2.1 – Urbanization and agricultural change 219
3.2.2 – From agriculture to industry 220
3.2.3 – Building cities 220
3.2.4 – Concentrating populations 220
3.2.5 – Increasing incomes 221
3.2.6 – Substituting modern energy for traditional energy 221
3.2.7 – The bottom line: aggregate energy implications of urbanization 222

Enzo Di Giulio
3.3 – ENVIRONMENTAL EXTERNALITIES 225
3.3.1 – The concept of externality 225
3.3.2 – Regulation or the market? 227
3.3.3 – Oil and gas externalities 228
3.3.4 – Assessment of externalities 232
3.3.5 – Climate change 236

4 – MARKET STRUCTURES AND PRICE POLICIES IN THE OIL AND GAS INDUSTRY

Philip K. Verleger Jr.

4.1 – MARKET STRUCTURES AND PRICE POLICIES IN THE OIL AND GAS INDUSTRY:
THE CASE OF OIL 239
4.1.1 – Introduction 239
4.1.2 – Economic theories of price setting in the oil industry 239
4.1.3 – The oil industry transformation: from coordination to commodity markets 245
4.1.4 – Oil as an economic commodity: OPEC policies and price dynamics 248
4.1.5 – Conclusion 251

Massimiliano Marzo
4.2 – UNCERTAINTY AND RISK MANAGEMENT 255
4.2.1 – Introduction 255
4.2.2 – Forward and futures contracts 256
4.2.3 – Options 261

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 4.2.4 – OTC instruments 266
4.2.5 – Exchanges for physicals 271
4.2.6 – Conclusions 272

5 – KEY ACTORS IN THE HYDROCARBONS INDUSTRY

AND COMPANY STRATEGIES

Alberto Clô
5.1 – THE OIL INDUSTRY: ITS PLAYERS AND STRUCTURE FROM ITS ORIGINS
TO THE OIL SHOCKS OF THE NINETEEN SEVENTIES 275
5.1.1 – The players 275
5.1.2 – From the pioneers to the American oil industry 279
5.1.3 – From American to international industry 282
5.1.4 – An exceptional period 292
5.1.5 – Towards a new equilibrium 297

Robert Grant
5.2 – OIL COMPANY STRATEGIES FROM 1970 TO THE PRESENT 301
5.2.1 – Driving forces of industry change 301
5.2.2 – The oil and gas majors: the traditional model 304
5.2.3 – Diversification and the quest for reserves (1974-1984) 305
5.2.4 – Internal restructuring for efficiency and flexibility (1985-1994) 307
5.2.5 – Changes in organizational structure 310
5.2.6 – Consolidation: the wave of mergers (1995-2002) 312
5.2.7 – Current directions in strategy 315
5.2.8 – Adapting to an uncertain future 320

6 – THE NATURAL GAS INDUSTRY FROM MONOPOLY TO COMPETITION

Carlo Scarpa
6.1 – ECONOMIC ASPECTS 323
6.1.1 – The segments of the gas sector 323
6.1.2 – Redrawing the boundaries of the monopoly 327
6.1.3 – Structural choices and drivers of change 328
6.1.4 – Potential structure and regulation of the gas industry 332
6.1.5 – Regulatory reform in the European Union 334
6.1.6 – Regulation in Italy before the reform 339
6.1.7 – Regulatory reform in Italy 340
6.1.8 – Conclusions: the public interest, monopolies and competition 348

David Bardey, Amedeo Piolatto

6.2 – THE REGULATION THEORY AND ITS PROSPECTS 351
6.2.1 – Introduction 351
6.2.2 – Why regulate? 351
6.2.3 – Regulation under complete information 353
6.2.4 – Regulation under asymmetric information 356

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 6.2.5 – Capturing 361
6.2.6 – Privatization 363
6.2.7 – Conclusions 364

7 – GEOPOLITICS AND SECURITY

Gawdat Bahgat
7.1 – THE AMERICAN POINT OF VIEW 367
7.1.1 – Introduction 367
7.1.2 – The Strategic Petroleum Reserve 369
7.1.3 – The Arctic National Wildlife Refuge 369
7.1.4 – The Gulf of Mexico 370
7.1.5 – Natural gas 371
7.1.6 – Coal 373
7.1.7 – Nuclear energy 373
7.1.8 – Russia’s oil potential: myth or reality? 375
7.1.9 – The Caspian Sea: a new frontier 377
7.1.10 – Africa: security and political challenges 379
7.1.11 – The Middle East: opportunities and risks 380
7.1.12 – Conclusion 382

Jean-Marie Martin-Amouroux
7.2 – THE EUROPEAN POINT OF VIEW 385
7.2.1 – The difficulties of geopolitics and lessons learned from insecurity 386
7.2.2 – Instruments for managing oil crises 387
7.2.3 – Construction of more resilient energy systems for the long term 390
7.2.4 – Diversification of imports and cooperation with exporting countries 393
7.2.5 – Market liberalization and supply security 396
7.2.6 – Results, limitations and uncertainties of the European approach 397

8 – PRODUCER-EXPORTER COUNTRIES

Jean-Marie Chevalier, Marie-Claire Aoun

8.1 – GEOPOLITICS OF OIL AND GAS EXPORTING COUNTRIES 401
8.1.1 – Oil and gas revenues 401
8.1.2 – The Middle East and Far East 406
8.1.3 – Africa: oil curse with a ray of light 413
8.1.4 – Latin America: between strong government control and a competitive market 416

Bülent Gökay
8.2 – OIL AND GEOPOLITICS IN THE CASPIAN SEA BASIN 423
8.2.1 – Geopolitics of Caspian oil 424
8.2.2 – Oil pipelines 425
8.2.3 – NATO’s bombing of Yugoslavia and Caspian oil 426

Øystein Noreng
8.3 – ISLAM AND OIL 431
8.3.1 – Religion and petroleum 431

XIX
 8.3.2 – The present predicament 431
8.3.3 – The historical background 433
8.3.4 – Islam’s economic principles 435
8.3.5 – Oil and Islamic economic principles 438
8.3.6 – Clash of civilizations or clash of interests? 443

9 – FUTURE SCENARIOS

Fatih Birol
9.1 – THE FUTURE OF HYDROCARBONS 447
9.1.1 – The global outlook for oil and gas 447
9.1.2 – Demand 448
9.1.3 – Production and trade 449
9.1.4 – Environmental implications 451
9.1.5 – Investment needs and financing 451
9.1.6 – Major uncertainties 452
9.1.7 – Towards a sustainable energy future 455

Peter R. Odell
9.2 – FUTURE OUTLOOK: THE QUALITATIVE ASPECTS 457
9.2.1 – Oil 457
9.2.2 – Natural gas 463
9.2.3 – Oil and gas as renewable resources 470

The Scientific Co-ordinator expresses his warmest appreciation for the precious collaboration provided by Dr. Lisa Orlandi

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HYDROCARBONS LEGISLATION

10 – INTERNATIONAL LAW

Paolo Mengozzi
10.1 – THE SOVEREIGNTY OF STATES OVER THEIR NATURAL RESOURCES 477
10.1.1 – The end of the Second World War and the tendency of states to extend their sovereignty 477
10.1.2 – The powers of coastal states 477
10.1.3 – Oil concession contracts and stabilization clauses 478
10.1.4 – The principle of permanent sovereignty of states over their natural resources
and developing countries 480
10.1.5 – The pacta sunt servanda principle in western literature and in arbitral case law 481
10.1.6 – The need for a link between the pacta sunt servanda principle
and the rebus sic stantibus rule 484
10.1.7 – Bilateral joint exploitation agreements concluded between coastal states with reference
to common oilfields or awaiting definitive delimitation of the continental shelves 485
10.1.8 – Cooperation among states: the Reformulated and Conventional Gasoline case 486

Tullio Treves
10.2 – INTERNATIONAL LAW OF THE SEA AND EXPLOITATION OF THE SEA’S RESOURCES 491
10.2.1 – The various maritime zones and their evolution 491
10.2.2 – Marine resources in light of the 1982 Convention on the Law of the Sea
and of other international rules 493
10.2.3 – Outer limits and delimitation of the zones under national jurisdiction 494
10.2.4 – Mineral resources in zones under national jurisdiction: the exploration and exploitation
regime 497
10.2.5 – Artificial islands, installations and structures 498
10.2.6 – Cables and pipelines 500
10.2.7 – The regime of mineral resources of the international seabed 500
10.2.8 – Non-mineral resources in the economic zone and on the high seas 503
10.2.9 – Dispute settlement 503

Sergei Vinogradov
10.3 – ENVIRONMENTAL PROTECTION IN THE PETROLEUM INDUSTRY 507
10.3.1 – Introduction 507
10.3.2 – Environmental impact of the petroleum industry 507
10.3.3 – International environmental legal frameworks relevant to the petroleum industry 509
10.3.4 – Soft law relevant to the petroleum industry 519
10.3.5 – National legal frameworks 520
10.3.6 – Environmental management tools 521
10.3.7 – Conclusions 522

Sergio Maria Carbone

10.4 – CIVIL LIABILITY FOR OIL POLLUTION DAMAGE TO THE MARINE ENVIRONMENT 525
10.4.1 – The evolution of international rules. The 1969-71 Convention system 525

XXI
 10.4.2 – The updating of the Convention system 526
10.4.3 – Criticism of the Convention system and the relevance of insurance coverage 528
10.4.4 – The progressive confirmation of the criterion of the shipowner’s strict liability
and its limits 530
10.4.5 – The concepts of compensable damage and ship for the purposes of the application
of the international rules 532
10.4.6 – The Bunker Convention 533
10.4.7 – The relationship between the Bunker Convention and the rules on limitation
of liability for maritime claims 535
10.4.8 – Conclusions and prospects for the evolution of the system 536

Andrea Giardina
10.5 – BILATERAL INVESTMENT TREATIES AND THE NORTH AMERICAN FREE TRADE
AGREEMENT 539
10.5.1 – Introduction 539
10.5.2 – Bilateral investment promotion and protection treaties 539
10.5.3 – The North American Free Trade Agreement (NAFTA) 545

Andrea Giardina
10.6 – THE ENERGY CHARTER TREATY OF 1994 551
10.6.1 – Introduction 551
10.6.2 – Trade, transit, the environment and energy efficiency, and competition 551
10.6.3 – Investment promotion and protection 553
10.6.4 – Dispute settlements between investors and states and between states 555

Thomas W. Wälde
10.7 – ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES (OPEC) 559
10.7.1 – Introduction and background 559
10.7.2 – History and structure of OPEC 560
10.7.3 – OPEC and the international oil market 563
10.7.4 – OPEC and international energy law 564
10.7.5 – Conclusions 571

Thomas W. Wälde
10.8 – THE INTERNATIONAL ENERGY AGENCY (IEA) 575
10.8.1 – Overall profile 575
10.8.2 – Origin 577
10.8.3 – Autonomy or integration: IEA relations with the OECD 577
10.8.4 – Budget 578
10.8.5 – Governance 578
10.8.6 – Membership 579
10.8.7 – Accession 581
10.8.8 – Emergency response mechanisms in the IEA 581
10.8.9 – External relations (relation with “non-member countries”) 584
10.8.10 – Policy and technical research and consultation 585
10.8.11 – Energy research and technology 586
10.8.12 – Conclusion 586

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 11 – SUPRANATIONAL LAW

Peter D. Cameron
11.1 – EUROPEAN UNION AND THE LIBERALIZATION OF THE ENERGY MARKET 591
11.1.1 – Introduction 591
11.1.2 – Hydrocarbons licensing 591
11.1.3 – Gas 595
11.1.4 – The complementary role of competition law 609
11.1.5 – Conclusions 611

12 – NATIONAL REGULATION OF THE HYDROCARBONS INDUSTRY

Ernest E. Smith
12.1 – UNITED STATES OF AMERICA AND CANADA 613
12.1.1 – Preliminary remarks 613
12.1.2 – Ownership of hydrocarbon resources 613
12.1.3 – State participation and state companies 618
12.1.4 – Form and nature of exploration and development agreements 618
12.1.5 – Investment protection 625
12.1.6 – Fiscal and currency regulation 627
12.1.7 – Operating conditions 628
12.1.8 – Environmental issues 632
12.1.9 – Dispute settlement 638
12.1.10 – Conclusions 638

Elizabeth Bastida, Carlos Valiente Noailles

12.2 – ARGENTINA, BRAZIL, MEXICO AND VENEZUELA 641
12.2.1 – Introduction 641
12.2.2 – Argentina 642
12.2.3 – Brazil 648
12.2.4 – Mexico 654
12.2.5 – Venezuela 659

Elena V. Novikova
12.3 – RUSSIAN FEDERATION 671
12.3.1 – Sovereignty 671
12.3.2 – Ownership and title to the underground petroleum resources 671
12.3.3 – Structure of the petroleum legislation 672
12.3.4 – Operating conditions 675
12.3.5 – State control and participation 676
12.3.6 – The price of oil and gas 676
12.3.7 – Contracting for goods and services 677
12.3.8 – Investment protection 678
12.3.9 – Environmental protection 678
12.3.10 – Currency regulation 679
12.3.11 – Applicable law 680
12.3.12 – Dispute settlement 680

XXIII
 Gulmira Utegenova
12.4 – KAZAKHSTAN 683
12.4.1 – Introduction 683
12.4.2 – Petroleum legislation 683
12.4.3 – The subsoil use contract 684
12.4.4 – State participation and key regulatory agencies 686
12.4.5 – Contract duration 687
12.4.6 – General structure of a subsoil use contract 687
12.4.7 – Tax regime of hydrocarbon contracts 688
12.4.8 – Environmental protection 692
12.4.9 – Insurance, governing law, stabilization 693
12.4.10 – Suspension and termination of subsoil use contracts 694
12.4.11 – Dispute settlement 695
12.4.12 – Protection of investments under international treaties 695
12.4.13 – Currency regulations 695

Mette Gravdahl Agerup

12.5 – NORWAY 697
12.5.1 – Sovereignty over the petroleum resources 697
12.5.2 – Ownership and title to the underground petroleum resources 697
12.5.3 – Structure of the petroleum regulation 698
12.5.4 – Operating conditions 701
12.5.5 – State participation through a state oil company or otherwise 702
12.5.6 – Fixing the price of oil or gas for tax and other purposes 703
12.5.7 – Fiscal structure 703
12.5.8 – The petroleum contract and the parties thereto 704
12.5.9 – Applicable law 705
12.5.10 – Dispute settlement 705

Michael Taylor
12.6 – UNITED KINGDOM 707
12.6.1 – Introduction 707
12.6.2 – The structure of petroleum regulation 708
12.6.3 – Operating conditions 710
12.6.4 – Pipelines 712
12.6.5 – UK oil and gas taxation regime 713
12.6.6 – Joint venture management 714
12.6.7 – Safety at work 715
12.6.8 – Environmental regulation 715
12.6.9 – Transfer of interest: licence assignments 716
12.6.10 – Abandonment and decommissioning 717

Mohammed Chemloul
12.7 – ALGERIA, LIBYA AND TUNISIA 721
12.7.1 – Algeria 721
12.7.2 – Libya 727
12.7.3 – Tunisia 735

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Sherif El Atfy, Mohamed M. Badran
12.8 – EGYPT 745
12.8.1 – Introduction 745
12.8.2 – Sovereignty over petroleum resources 745
12.8.3 – Ownership and title to underground petroleum resources 745
12.8.4 – The right to explore, develop, produce and dispose of petroleum resources 746
12.8.5 – Exploration and production terms, and expenditure commitments and bonuses 747
12.8.6 – State participation in the Egyptian Concession Agreement 748
12.8.7 – Pricing oil and gas under the Egyptian Concession Agreement 749
12.8.8 – The fiscal structure under the Egyptian Concession Agreement 750
12.8.9 – The parties of the Egyptian Concession Agreement 752
12.8.10 – Investment protection for exploration, development, and production operations in Egypt 752
12.8.11 – Environmental protection 754
12.8.12 – Applicable law to the Egyptian Concession Agreement 754
12.8.13 – Dispute settlement under the Egyptian Concessions Agreement 755

Adedolapo Akinrele
12.9 – NIGERIA 757
12.9.1 – Introduction 757
12.9.2 – Development of Nigerian oil and gas law 758
12.9.3 – Current structure of the Nigerian oil and gas sector 761
12.9.4 – State participation 762
12.9.5 – The impact of the law of the sea on Nigerian oil and gas law 764
12.9.6 – The licensing of oil and gas exploration and production 765
12.9.7 – Impact of environmental protection laws 767
12.9.8 – Development of natural gas 769
12.9.9 – Taxation of oil and gas 770

Atef Suleiman
12.10 – THE UNITED ARAB EMIRATES 773
12.10.1 – Introduction 773
12.10.2 – Sovereignty over petroleum resources 773
12.10.3 – Ownership and title to underground petroleum resources 774
12.10.4 – The structure of petroleum regulations and the operating conditions 774
12.10.5 – State participation through a state oil company or otherwise 777
12.10.6 – The price of oil and gas 778
12.10.7 – Fiscal structure 781
12.10.8 – The petroleum contract and the parties thereto 781
12.10.9 – Investment protection 782
12.10.10 – Environmental protection 782
12.10.11 – Currency regulation 782
12.10.12 – Applicable law 782
12.10.13 – Settlement of disputes 783

Msoud Vafakish Sistani

12.11 – IRAN 785
12.11.1 – Introduction 785
12.11.2 – Sovereignty over petroleum resources 786
12.11.3 – Ownership and title to underground petroleum resources 786

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 12.11.4 – The structure of petroleum regulations: the right to prospect, explore, develop, produce
and dispose of petroleum resources 787
12.11.5 – State participation through a state oil company or otherwise 787
12.11.6 – Buy-back agreements 788
12.11.7 – Investment protection 790
12.11.8 – Environmental protection 791
12.11.9 – Currency regulation 792
12.11.10 – Applicable law and settlement of disputes 792

Michael A.G. Bunter

12.12 – IRAQ 795
12.12.1 – Introduction 795
12.12.2 – The Islamic law and the early petroleum concessions in the Middle East 795
12.12.3 – Sovereignty over, and the ownership of petroleum resources and reserves 796
12.12.4 – Iraqi petroleum rights 797
12.12.5 – The Iraq Petroleum Company (IPC) concessions 799
12.12.6 – Modern geopolitics and the legal situation of Iraqi oil 801
12.12.7 – State participation and the nationalizations of the 1970s 802
12.12.8 – The Iraqi legal system 803
12.12.9 – The Iraqi legal framework of the petroleum sector 805
12.12.10 – Modern Iraqi draft petroleum agreements and contracts 806
12.12.11 – Arbitration in Iraqi law 808
12.12.12 – The legal status of the petroleum transactions negotiated by the Saddam regime 809
12.12.13 – Future developments 810
12.12.14 – The elections of 30 January 2005 811

Sultan M. Al-Abdulla
12.13 – QATAR 815
12.13.1 – Introduction 815
12.13.2 – Petroleum legislation 815
12.13.3 – Structure of operating conditions 816
12.13.4 – Petroleum operations with government participation 818

William L. MacBride Jr., Dana L. Hupp, Zhang Chunhe

12.14 – CHINA 821
12.14.1 – Sovereignty over petroleum resources 821
12.14.2 – Ownership and title to the underground petroleum resources 822
12.14.3 – Structure of the petroleum regulation 822
12.14.4 – Operating conditions 824
12.14.5 – State participation through a state oil company or otherwise 825
12.14.6 – Fiscal structure 827
12.14.7 – The Petroleum Contract and the parties thereto 828
12.14.8 – Investment protection 828
12.14.9 – Environmental protection 829
12.14.10 – Currency regulations 830
12.14.11 – Applicable law and the settlement of disputes 830

Mark Newbery
12.15 – INDONESIA 833
12.15.1 – Introduction 833

XXVI
 12.15.2 – Indonesian legal system: an overview 833
12.15.3 – Supervision of the oil and gas sector 834
12.15.4 – Upstream business activities 834
12.15.5 – Enviromental law and regional autonomy 839
12.15.6 – Downstream business activities 841
12.15.7 – Settlement of legal disputes 843
12.15.8 – Currency controls 844

13 – CONTRACTUAL REGULATION AND SETTLEMENT OF DISPUTES

Piero Bernardini
13.1 – CONTRACTUAL REGULATION WITH RESPECT TO EXPLORATION FOR
AND PRODUCTION OF HYDROCARBONS 847
13.1.1 – The oil contract 847
13.1.2 – Legal regulation 847
13.1.3 – Contractual regulation 848
13.1.4 – The evolution of the oil contract 850
13.1.5 – Conclusions 857

Paul Griffin, Silke Muter Goldberg

13.2 – IMPORT CONTRACTS AND TRANSPORT OF GAS 859
13.2.1 – Introduction 859
13.2.2 – Review of pipeline and LNG projects 860
13.2.3 – Structure of pipeline projects 860
13.2.4 – Some legal issues in relation to pipeline projects 861
13.2.5 – Allocation and attribution 863
13.2.6 – Structure of LNG projects 865
13.2.7 – Matters of general application 867
13.2.8 – Conclusion 877

Ahmed El Kosheri
13.3 – INTERNATIONAL ARBITRATION AND PETROLEUM CONTRACTS 879
13.3.1 – Introduction 879
13.3.2 – The arbitration precedents pertaining to the interpretation of the classical colonial type
of concession agreements 880
13.3.3 – The different solutions provided for under the arbitral awards rendered in absentia against
an expropriating host state 882
13.3.4 – Case law concerning disputes emerging under the second generation of petroleum
agreements 886
13.3.5 – The new rules conceived by the arbitral Tribunals 890

XXVII
 NOTES

UNITS OF MEASUREMENT

The units of measurement generally adopted are those of the Système International (SI), with corresponding mul-
tiples and submultiples. Only in particular contexts, typically connected with the petroleum industry, certain non-
SI units of current use have been maintained.

Main units of measurement adopted

ampere A henry H pascal Pa
angstrom Å hertz Hz poise P
atomic mass unit u horse-power hp pound lb
bar bar hour h pounds per square inch psi
barrel bbl inch '' (in) radian rad
becquerel Bq joule J second (angle) ⬙
British thermal unit Btu kelvin K second (time) s
calorie cal kilogram kg siemens S
candela cd kilowatt-hour kWh sievert Sv
coulomb C litre l
standard cubic foot scf or SCF or sft3
darcy D lumen lm
steradian sr
day d lux lx
stock tank barrel stb
decibel dB metre m
degree Celsius °C square metre m2 stokes St
degree Fahrenheit °F cubic metre m3 tesla T
degree (sexagesimal) ° minute (angle) ⬘ tonne t
electron volt eV minute (time) min tonnes of oil equivalent toe
farad F mole mol volt V
foot ' (ft) newton N watt W
gram g nit nt weber Wb
gray Gy ohm Ω yard yd
hectare ha parts per million ppm year yr

TERMINOLOGY AND SPELLING

In the sectors of petroleum engineering and chemistry, of the petrochemical industry and of the earth sciences,
specific terms, acronyms and expressions are frequently used. The criterion adopted in this work is based on their
frequency of use, i.e. given two possible terms, the more common one has been used. This criterion has also been
used for economics and law.
British spelling, according to the most authoritative reference works, has been adopted.

XXIX
 CHEMICAL NOMENCLATURE

In the nomenclature of simple compounds, the rules of IUPAC (International Union of Pure and Applied Chemistry)
have been adopted as far as possible, traditional names being limited to the cases admitted by IUPAC. When there
are two or more names admitted, the commonest one is adopted.
Two principal exceptions to the above rule have been applied in this work:
• For organic compounds used in the petrochemical industry, the name adopted is that listed in: Wells G.M.
(1999) Handbook of petrochemicals and processes, Aldershot, Ashgate; Brookfield (VT), Gower.
• The British English spelling of sulphur and sulphur containing compounds is adopted.

FOOTNOTE AND CITATION OF LEGISLATIVE TEXTS

Given the specialized terms used in economics and law regarding hydrocarbons, footnotes have been included that
provide information, observations, and comments that may also include references to the bibliography. References
to legal aspects and internet sites have also been included in the footnotes.
For the United States and Canada, there are some special cases regarding the citation of legislative texts. For Uni-
ted States and Canadian Acts, the Act has been named followed by the year. Where appropriate, such references have
been integrated, in the footnotes, using the standard citation models adopted by both countries.
Reference to the cases can be seen by the italics separated by v. (abbreviation of versus) in roman type, followed by
the year, the court and other references. If, however, a general reference is being dealt with, only the court, number
and date are supplied.

TRANSLITERATIONS

In writing names belonging to other languages with an alphabet other than the Latin alphabet, the Romanization
Tables compiled by the Library of Congress of Washington have been applied, introducing however certain modifications
intended to reduce to a minimum the number of diacritical marks, and – in particular in the case of Arabic and Persian –
adopting a number of transliterations by now accepted in local and international usage.

Opposite page:
Offshore platforms for the production of hydrocarbons in the Gulf of Suez (Egypt). The Belaym field is operated by the company
Petrobel, a joint venture in which Eni has a 50% share, through the company Ieoc, and Egpc, an Egyptian state company, has
the other 50%.
Eni’s presence in this country dates back to the 50s.

XXX