Unitization of Petroleum Fields in the Barents Sea: Towards a Common Understanding?

• Author: Daniel Fjærtoft, Arild Moe, Natalia Smirnova, Alexey Cherepovitsyn
• Pages: 171-195

72

Arctic Review on Law and Politics

Vol. 9, 2018, pp. 72–96

*Correspondence to: arild.moe@fni.no

2018 Daniel Fjærtoft et al. This is an Open Access article distributed under the terms of the Creative Commons

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Citation: Daniel Fjærtoft et al. ‘‘Unitization of petroleum elds in the Barents Sea: Towards a common understanding?’’

Arctic Review onLaw and Politics, Vol. 9, 2018, pp. 72–96. http://dx.doi.org/10.23865/arctic.v9.1083

Unitization of petroleum elds in

the Barents Sea: Towards a common

understanding?

Daniel Fjærtoft,

Sigra Group

Arild Moe*,

Fridtjof Nansen Institute

Natalia Smirnova,

Mining University, St. Petersburg

Alexey Cherepovitsyn

Mining University, St. Petersburg

Abstract

The expec ted discover y of petroleu m elds that cr oss the new bou ndary bet ween Russia a nd

Norway in t he Barents Sea could mea n that both par ties will lay cla im to the same subsoil r esources.

The Treaty on Mar itime Del imitatio n in the Bare nts Sea and th e Arctic Oc ean (Ba rents Treaty)

prescrib es that such el ds should be develope d as one unit, gove rned by a un itization a greement

between th e two govern ments and a joint op erating ag reement bet ween license holde rs on the

respecti ve sides of the borde r. Norway has more t han 40 year s’ experie nce from the u nitiz ation

of cross-bo rder elds in t he North Sea w ith the Unite d Kingdom . Russia's exp erience wit h cross-

boundar y petroleum  eld development is li mited to Kaz akhsta n in the Casp ian Sea and on shore,

where bilatera l resource manag ement has been governed by ot her principles a nd institutions. W hile

the Barent s Treaty text clearl y reects t he Norwegia n way of manag ing off shore elds, it does

not preclude the Ru ssian way of doin g so. We nd reason to believe t hat both par ties wi ll enter

negotiation s over a cross- boundar y eld in the Ba rents Sea belie ving t heir unders tandin g reects

the true c oncept of unit ization. De spite objective d iffere nces between Nor wegia n and Russia n

legislation a nd practice, t here is evidence t hat the two nation s have more in common t han not in thei r

underlyi ng princi ples. Discus sions are lik ely to arise re gardin g the pract icalities of i mplementin g

eld uniti zation, and arriv ing at a common underst anding will probabl y require some time.

Keyword s: Norway; Russia; oil; gas; cooperation; e xploration; offshore; deli mitation

Received: November 2017; Accepted: Febru ary 2017; Published: March 2018

Unitization of petroleum elds in the Barents Sea: Towards a common understanding?

73

1. Introduction

Russia and Norway started exploring for hydrocarbons in the Barents Sea around

1980.1 Claims for exclusive resource rights in a large area on the continental shelf—

some 175,000 square kilometers—were put forward by both the Soviet Union and

Norway in the late 1970s; and from the early 1980s both countries refrained from

exploration activity in the disputed area, to avoid conict. However, after almost

forty years of negotiations, an agreement was nally reached in 2010, establishing a

rm delimitation line and dividing the disputed area 50/50 between the two states.2

This allowed seismic surveys to start there in 2011.

The discovery of petroleum elds that cross the boundary between the two countries

are expected. In such a case, both parties could lay claim to the same subsoil resources.3

The boundary agreement “Treaty between the Kingdom of Norway and the Russian

Federation concerning Maritime Delimitation and Cooperation in the Barents Sea

and the Arctic Ocean ”4 (referred to as the Barents Treaty below) prescribes that such

elds are to be developed as one unit, governed by a unitization agreement between the

governments of Russia and Norway, and a joint operating agreement between license

holders on the respective sides of the border.

The principal research question in this article is whether the two countries are likely

to differ in their approaches and policies regarding implementation of the unitization

provisions of the Treaty. We do not attempt to conduct a comprehensive or comparative

legal analysis of the Barents Treaty in the context of international law, as this has been

thoroughly discussed by Bankes,5 Henriksen and Ulfstein6 and others. The relationship

between the Barents Treaty and Russian domestic legislation does, however, constitute

a gap in the legal literature and is addressed in a companion article by Fodchenko.7

In this article, we are concerned with practice and policies: examining how Norway

and Russia have approached and solved similar challenges elsewhere. Some policies

have been codied in agreements and laws; other emanate from experience and tra-

dition. Differences in experience should not be dismissed as inconsequential.8 Even

though stakeholders realize that the situation ahead is fundamentally new, they remain

inuenced (consciously or subconsciously) by what they perceive as their most relevant

past experience. The upshot is that rather than risk failure, the parties should investigate

differences, in order to nd ways to manage them before they become problematic.9

We focus on the overarching principles for trans-border petroleum development:

How have Norway and Russia organized trans-border petroleum development in the

past, what role has unitization played in the policies of the two countries and how is

the concept understood. Special attention is given to the determination and apportion-

ment of resources.

The article is structured in four parts:

a. An introduction to the concept of unitization

b. A study of relevant Norwegian experiences with the UK and other jurisdictions

c. A discussion of Russian approaches to cross-boundary discoveries