- Houston Topic 1 “Effects of Simultaneous Occurrence of Recession and oversupply,” Dr. M.A. Adelman; “After Economic Recovery: Likelihood of Oversupply,” Dr. P.H. Frankel.
- Adelman, p. 10.
- Some unpublished data supplied by the World Bank indicates that:
- (a) In the case of oil importing developing countries (OIDCs) where there is no oil production, seismic lines were shot and wells drilled as follows:
- Seismic lines Wells
- 1974 49.458 1972 35
- 1976 34.240 1974 39
- 1978 55,270 1976 47
- 1980 60.446 1978 38
- 1981 75.755 1980 36
- (b) In the case of OIDCs which are also producers of oil. total wells drilled were:
- 1972 303
- 1974 340
- 1976 375
- 1978 431
- 1980 490
- 1981 562 (estimate)
- Figures on exploration activity are not yet available for 1982 and 1983 but following the oil price rise of 1979/80 there was a large acquisition of rights over exploration acreage by international companies in developing countries and as a result drilling activity should show increases in 1983/83.
- For an examination of some of the evidence for the mining sector see Radetzky, “Has Political Risk scared Mineral Investment away from Deposits in Developing Countries”? World Development (1982).
- On that theme see Brown, “The Relationship between the State and the Multinational Corporation in the Exploitation of Resources” (1984) 33 I.C.L.Q. p. 218.
- Professor Raymond Mikesell believes that “the post-World War II trend of a larger and larger share of the revenue pie going to host governments must be reversed if exploration activities in the non-OPEC LDCs are to expand or even be maintained at current levels.” Mikesell, “Petroleum exploration in the non-OPEC LDCs,” (1984) 12 Energy Policy, 13.
- Mikesell, supra, appears to have in mind: Argentina, Bolivia, Brazil, Colombia, Guatemala, India, Pakistan, Peru and Turkey. All of these have some production though in Guatemala and Pakistan it is a very small quantity—for the first six months of 1983, 7,000 b/d and 13,444 b/d respectively, Oil and Gas Journal, December 1983.
- That course has been followed in a large number of countries many of which received help from the World Bank for exploration promotion projects, e.g. Somalia, Equatorial Guinea, Nepal.
- In that category there are Papua New Guinea (basing its code to a large extent on the Australian Petroleum Submerged Lands Act 1967), Fiji, Tanzania and Botswana.
- In Papua New Guinea, negotiations were going on with oil companies about the grant of exploration rights at the time when the law was being drafted, and some useful cross-fertilisation took place. Much the same thing happened in Tanzania. In Tanzania and Botswana the law expressly recognises that there will be a need to supplement its provisions with other stipulations negotiated with the Companies. In both cases the Minister is authorised to enter into Petroleum Agreements not inconsistent with the Act. It is envisaged that these agreements will:
- (a) cover matters not dealt with in the Act or in Regulations made under it;
- (b) deal with the manner in which the Minister or the Commissioner for Petroleum will exercise some of the discretionary powers which the law confers on them;
- (c) make provision for matters which under some other section of the Act may be regulated under the terms of a Petroleum Agreement.
- On the Tanzania legislation generally, see Brown, in International Bar Association, Banff Energy Law Seminar (1981), Vol. 1, “Topic 4, p. 337.
- The Petroleum (Production) Act 1934, s.6(1)(d).
- In the course of his extremely helpful contribution to the Seminar, Topic 4, Mr. Carl Nordberg made clear that under the latest IRS rules income taxes paid in this way on behalf of U.S. companies will be creditable. In view of this such arrangements may well come back into favour since they avoid difficult and sometimes controversial negotiations about the stabilisation or freezing of rates.
- See, e.g. the series of papers on recent developments in concessions and licences in West Africa by Mr. J.T. Brown, Houston, Topic 7.
- Houston, Topic 1, Recent Developments in Petroleum Laws and Contracts.
- Houston, Topic 13, Wälde, “The Role of Governments in Mineral Development,” Rankin-Reid, “The Nature and Operation of Onshore Hard Minerals Agreements.”
- McPherson, p. 2.
- Ibid. p. 2.
- Houston, Topic 4, “The Principles and Philosophy of Petroleum Taxation.” There is a growing literature on the Resource Rent Tax concept. The classic exposition of the concept is an article by Ross Garnaut and Clunies Ross, “Uncertainty Risk Aversion and the Taxing of Natural Resources” (1975) 85 Economic Journal 272. See also Garnaut and Clunies Ross, Taxation of Mineral Rents (1983) and the “Discussion Paper on Resource Rent Tax in the Petroleum Sector” published by the Australian Government in December 1983.
- In Papua New Guinea, the Additional Profits Tax has a statutory basis in the Income Tax (Mining and Petroleum) Act 1978. There is a separate regime for hardrock mining.
- Two production sharing agreements in Tanzania are set up on that basis, one with Shell/Esso and one with IEDC. In both cases normal income tax is paid by the national oil company on behalf of the contractor. Tanzania is currently discussing similar arrangements with at least two other companies.
- This device is used in the model contract issued by Equatorial Guinea in April 1982 which formed the basis for a production sharing agreement with a group of private sector companies. For a slightly different version see also Model Contract issued by Nepal.
- Kenya is an example although a close examination of the model licence suggests that “participation” is in this case really a euphemism for a resource rent tax (APT).
- An explicit statement of this view is to be found in the submission of European Mining Companies to the Commission of the European Communities in 1976 “Raw Materials and Political Risk.” For a summary see “Mines Fear Third World Grab,” The Guardian, August 5, 1976. There is a critique of the submission by Mike Faber and Roland Brown in “Changing the Rules of the Game: Political Risk, Instability and Fair Play in Mineral Concession Agreements” (1980) 11 Third World Quarterly 100.
- Houston, Topic 13.
- For an account of the takeover see Bostock and Harvey Economic Independence and Zambian Copper.
- Following the redemption of the bonds which secured the payment of the price for the Government's purchase of its 51 per cent, stake, changes were made in the Articles of Association but their effect was more cosmetic than real. Details of these changes were set out in a notice to shareholders in Zambia Copper Investments, the company which held the minority shares in Nchanga Consolidated Copper Mines.
- The experience of the Labour Government in Britain had shown how the concept of majority state participation in commercial fields espoused in the White Paper of 1974 could become under the influence of Lord Lever's “no loss, no gain” principle the relatively innocuous option to purchase 51 per cent, of the oil.
- In view of the importance of this issue for the long term stability of petroleum contracts the rather negative attitude of the U.S. Government and U.S. oil companies to the World Bank Energy Lending Program is surprising. See An Examination of the World Bank Energy Lending Program, Department of the Treasury, July 25, 1981; Report of National Petroleum Council: Third World Petroleum Development: A Statement of Principles, December 1982. For a critique of the N.P.C. Report see Hasan Zakariya, “The Petroleum Lending Programme of the World Bank,” (1983) 17 Journal of World Trade Law, 471.
- In this regard the curious story reported in The Times, p.2 on September 14, 1983 should be noted: “A geologist who tried to sell details of Esso's oil explorations off the Irish Coast to rival companies was acquitted on a judge's directions yesterday. Judge MacDonald told a jury at Bedford Crown Court that the contents of a graphology, a record of geological data found by drilling and an indication of the prospects of finding oil, could not be stolen because they were not defined as property by the law.”
- This, of course, was the issue behind the “crisis of legality” (Cameron, Property Rights and Sovereign Rights, the Case of North Sea Oil (1983)) which resulted from the retrospective changes in licence terms for the North Sea, effected by the U.K. Petroleum and Submarine Pipelines Act 1975. On that topic see also Daintith and Willoughby, Manual of U.K. Oil and Gas Law, pp. 305–306 and Rosalyn Higgins, “The Taking of Property by the State: Recent Developments in International Law,” 176 Recueil des Cours (Hague Academy), pp. 347–354.
- B.P. v. Libya, 53 I.L.R. 297; Texaco v. Libya, 53 I.L.R. f; Liamco v. Libya, 62 I.L.R. 140.
- Aminoil v. Kuwait (1982) I.L.M. 976.
- [1983] 2 All E.R. 884.
- In Amin Rasheed v. Kuwait Insurance (supra) Lord Diplock said “My Lords, contracts are incapable of existing in a legal vacuum. They are mere pieces of paper devoid of all legal effect unless they were made by reference to some system of private law which defines the obligations assumed by the parties to the contract by the use of particular forms of words and prescribes the remedies enforceable in a court of justice for failure to perform any of those obligations…”
- Theidea usually associated with Professor Verdross that a contract can create its own proper law has not been well received. F.A. Mann has described it as “so doctrinally unattractive, so impracticable, so subversive of public international law, so dangerous from the point of view of legal policy and so unnecessary that its novelty will not cause surprise”—”The Proper Law of Contracts concluded by International Persons” (1959) B. Y.B.I.L. 34. For Mann's comments on the Amin Rasheed case see 33 ICLQ 193.
- This is the view espoused by Delaume Legal Aspects of International Lending and Economic Development Financing, pp. 84–85; Transnational Contracts, Vol. I, p. 2.07.
Journal of Energy & Natural Resources Law
Volume 2, 1984 - Issue 4