In the Name of Allah
OIL AND GAS LAW
By: Dr S N EbrahimiLLB, LLM, PHDInternational law
24.10.1385Imam Sadiq [email protected]
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Overview of the Topics
4. AN OVERVIEW OF OIL AND GAS INDUSTRYOil and gas law in IranOil
and gas law in Middle East Oil and gas law in the European
UnionInternational Oil and gas law Energy Law in Europe, National,
EU and International Law and InstitutionsCase StudiesOil and Gas
law in Latin AmericaOil and Gas law in European UnionNorth Sea Oil
and Gas LawUkrainian Oil and Gas LawRussian Oil and Gas LawOil and
Gas law in African ContinentOil And Gas Law in Far EastIndonesian
StyleOil and Gas in Middle EastSaudi ArabiaKuwaitOmanUAEOil and Gas
in the Caucasus/Caucasian regionOil Consortium Agreement with
Azerbaijan OIL AND GAS LAW-Kazakhstan style Turkmen Oil and Natural
Gas
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North Sea oilOpportunities of North Sea Oil Since the 1970s :a
major source of wealth for both the British and Norwegian economies
a way for Europe to cut its dependence on Middle East oil. key
component of the increase in non-OPEC oil production over the last
20 years
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North Sea oilStudies show that using development of small
marginal fields and introduction of sophisticated exploration and
drilling techniques continues:
North Sea output peaked in 1999 and has been on the decline ever
since.
North Sea already peaked in 2000 at 6.4 mbd. At that point North
Sea oil was 9% of global production and 22% of OPEC production.
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North Sea oilNorth sea, the Most Challenging Areas of Oil
Exploration and Development:With severe wind gusts and waves 30
metres highDeclining of Many of the major fields in the North
SeaLosing its prominent role as one of the world's leading oil
domains.Increase of oil demand in European Union (EU) countries
0.4% per year from 2004 to 2030North Sea output in 2004 would drop
to 3.7 million barrels per day (mbd) from over four million last
year.
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North Sea oilPrediction of Oil Production in EU (most of it from
the North Sea) is predicted to fall:2.3 mbd in 2010 *1.1 mbd in
2030** According to the World Energy Outlook 2002 of the
International Energy Agency, EU oil production,, is projected
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North Sea oil
Challegnes of North sea countries (particularly Britain, Norway
and Denmark):Swing from net exports to net imports, particularly
from the Persian GulfGeneration of a major additional annual burden
on the balance of trade of Britain and Norway adding 65 to 85% to
the level of these countries trade deficit. Will be forced to
import more oil from remote areas incurring higher transport
costs.
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General Glance on Oil Industry in Iran
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General Glance on Oil Industry in Iran
2nd largest gas reserves4th largest oil reservesRich in
mineralsFounding member of OPECImportant player in todays world oil
market, Great potential for future oil and gas discoveries and for
increasing production and exports.
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General Glance on Oil Industry in Iran
National Iranian Oil Company Oil Reserves Natural Gas Foreign
Investment Buy-Back Contracts Petrochemical Industry Major Oil and
Gas Projects
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Chronology events of Iran Oil Industry
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Chronology events of Iran Oil Industry
100 years of Oil and Gas activities in IRANIn 1901, wealthy
Englishman William Knox Darcy obtains a 60 year concession from
Shah for exploration of the countrys oil resources
In 1906, Constitutional Monarchy is established. No change in
Darcys concession
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Chronology events of Iran Oil Industry
In 1908, Darcy team makes the first commercial discovery in the
middle east, at Masjid-I-Soleiman in south-west Iran
In 1909, The Anglo-Persian Oil Company, APOC is formed to
develop the field
In 1911, A 138 mile pipeline between Masjid-I-Soleiman and a
refinery at Abadan is completed (cap.: 2,400 bpd)
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Chronology events of Iran Oil Industry
In 1914, APOC signs a 10 year contract to supply the British
Admiralty with fuel oil for Navys ships.
The British Government injects 2 million into APOC and gains
majority shareholding
In 1917, the APOC buys the British Petroleum Company, thus
aquiring a marketing organisation for its products.
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Chronology events of Iran Oil Industry
1n 1917, Darcy dies while still holding a seat in the borad of
APOC
In 1925, Reza Shah, aided by the British Government, establishes
himself as the new king of Iran
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Chronology events of Iran Oil Industry
In 1928, The worldwide economic depression causes problems of
excessive oil supply and falling prices.
APOC and Shell become 50:50 partners for distribution of oil
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Chronology events of Iran Oil Industry
In 1932, Falling profits lead to reduced royalties to Iranian
government.
Consequently, Reza Shah cancels the APOCs concession
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Chronology events of Iran Oil Industry
In 1933, The British impose a new concession on Reza Shah, the
concession extends for an extra 30 years, i.e. until 1991!
In 1933, APOC changes name to Anglo-Iranian Oil Co, AIOC
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Chronology events of Iran Oil Industry
In 1939, World War II breaks out. Demand for Iranian oil
increases. Abadan refinery becomes vital source of aviation spirit
for the war effort
In 1941, Reza Shah is forced by Allied Forces to abdicate.His
son Mohammad-Reza Shah becomes the king
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Chronology events of Iran Oil Industry
In 1951, Dr Mosaddegh, the popular Iranian Prime Minister
nationalizes the AIOC and forms National Iranian Oil Company, NIOC.
This causes an international crisis. AIOC steps up production
elsewhere.Dr Mosaddegh becomes man-of-the-year by TIME magazine in
US
In 1953, Dr Mosaddegh is removed by a CIA led coup.
Mohammad-Reza Shah returns to power by American/British
aid.Americans get heavily involved in Iranian politics
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Chronology events of Iran Oil Industry
In 1954, Irans oil industry restarts under a consortium of oil
companies. AIOC is renamed The British Petroleum Company , BP and
holds 40% share in the consortium. Americans get 40% with the rest
going to the other European oil companies
In 1960, Organisation of Petroleum Exporting Countries, OPEC is
formed with Irans membership. Falling oil prices were blamed
In 1965, North Sea oil becomes a reality. West Sole gas field in
the UK is discovered that comes to stream in 1967 by BP
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Chronology events of Iran Oil Industry
In 1970, price of oil shoots up to above 30 dollars following
Arab countries imposition of oil embargo. Iran does not particpate
in the boycott. BP discovers Forties oil field in the North Sea .
First major commercial oil find in the UK.This comes into stream in
1975. Cod and Thor fields intorduce oil era in Norway
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Chronology events of Iran Oil Industry
In 1979, Iranian revolution occurs led by the spiritual guidance
of a great Islamic Revolution leader, Ayatollah Khomeini
(r.a.).
NIOC becomes part of Iranian Ministry of Petroleum
In 1997, BUY BACK concept for foreign oil companies to venture
in the Iranian oil & gas fields.
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History of Oil Contractsin IRAN
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History of Oil Contractsin IRAN
Before Nationalization of oil in the early 1950sConcession
Agreement
After Nationalization of oil in the early 1950s Production
Sharing (Enactment of First Irans Oil Law in 1957) Joint Venture
Agreements, (Enactment of the Second Irans Oil Law in 1974) Service
Contracts (1976)
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History of Oil Contractsin IRAN
After Islamic Revolution 1979Service Contracts Financing Oil
Projects by NIOC Conclusion of EPC Contracts Risk Service
ContractsBuy-Back Contracts for Development Operations Buy-Back
Contracts for Exploration and Development OperationsOther
Contractual Mechanism?
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Iran Oil Industry Organisation Chart:
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Iran Oil Industry Organisation Chart:
Iran Oil Industry Organisation Chart:MINISTER OF
PETROLEUMNational Iranian Oil Co., NIOC National Iranian Gas Co.,
NIGCNational Iranian Oil Refining and product Distribution Co.,
NIORDCNational Petrochemical Co., NPC
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Iran Oil Industry Organisation Chart:
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Iran Oil Industry Organisation Chart:
FOUR MAIN COMPANIES UNDER MINISTRY OF PETROLEUM1. National
Iranian Oil Co. (NIOC)All upstream operations and activities of the
petroleum industry are executed via its four directorates of;
Exploration, Onshore Production, Offshore Production, International
Affairs.
These cover:1) Geological activities, geophysical survey and
topography, sesimography, graviometry and magnetometry
2) Exploration and development drilling operations in offshore
and onshore zones and duties and responsibilites of National
Iranian Drilling Co. (NIDC)
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Iran Oil Industry Organisation Chart:
3) Exploitation of oil and gas resources situated onshore4)
Exploitation of oil and gas resources situated offshore.KEPCO,
afiliated to NIOC, covers Iranian Caspian Sea5) Supply of basic
feed stock of oil refineries and petrochemical complexes6)
Management of marketing operations7) Transport of crude and refined
oil products by sea
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Iran Oil Industry Organisation Chart:
2. National Iranian Gas Co. (NIGC)The new national policies
adapted with a view to promoting greater use of gas, as a clean
energy in various economic sectors in order to reduce the
consumption of middle distillates.
Paying special attention to the environmental protection issues
brings about heavy responsibilities and duties on NIGC.
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Iran Oil Industry Organisation Chart:
NIGC is responsible for treatment, transmission to consumption
centres and delivery of treated natural gas to the ultimate users
in the domestic, industrial and commercial sectors. For instances,
NIGC has five Gas Treatment Plants, GTPs, with a total of process
capacity of 207.9 mill.m3 per day:Bid-Boland GTP 34.00Shahid
H.Nejad GTP 31.30Aghar & Dalan GTP 39.60Vali-e-Asr GTP
89.00Sarkhoon GTP 14.00
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Iran Oil Industry Organisation Chart:
3. National Iranian Oil Refining product Distribution Co.
(NIORDC)The main responsibilities and functions of NIORDC, are
production and distribution of various kinds of refined oil
products, such as LPG, gasoline, kerosene, gas oil, motor oil, and
fuel oil within Iran.
The company also transports the crude oil by pipelines from the
oil fields in the south to the refineries all over Iran and
transports and distributes their refined products.
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Iran Oil Industry Organisation Chart:
The followings are some illustrations of nominal Capacity of
NIORDCs refineries:Abadan Refinery 350,000 bpdArak Refinery 150,000
bpd (cf. Slagen)Isfahan Refinery 200,000 bpdBandar-Abbas Ref.
232,000 bpd (cf. Mongstad)Tabriz Refinery 80,000 bpdTehran Refinery
225,000 bpdShiraz Refinery 40,000 bpdKermanshah Ref. 15,000
bpdLavan Refinery Complex 20,000 bpd
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Iran Oil Industry Organisation Chart:
4. National Petrochemical Co., (NPC)NPC receives feed stock or
feed gas (natural gas, condensate and certain cuts from
distillation towers). It produces varieteis of petrochemicals which
the surplus to the local demand is exported abroad via its
afiliated company Petrochemical Commercial Co., PCC. Over 2000
down-stream chemical plants operating throught Iran receive their
basic feed stock from the petrochemical complexes affiliated to the
NPC.In order to facilitate greater flexibility in operational and
commercial fields the affiliated complexes are managed and operated
as joint-stock companies.
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Iran Oil Industry Organisation Chart:
Illustrations of the nominal capacities of these units are as
follow:Arak Petrochemical Complex 951,000 tonnesIsfahan
Petrochemical Complex 193,000 tonnesBandar-Abbas Petroc. Complex
4331,000 tonnesTabriz & Orumieh Petroc. Cplx. 677,000
tonnesKharg Petrochemical Complex 431,000 tonnesKhorassan Petroc.
Complex 825,000 tonnesRazi Petrochemical Complex 3226,000
tonnesShiraz Petrochemical Cplx. 1799,000 tonnes
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Buy-Back Projects in Iran since 1995
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Buy-Back Projects in Iran since 1995BUY BACK Concept for
development of the Iranian fieldsIn this concept the foreign
company will act as a contractor in the name and on behalf of NIOC
to develop the Iranian oil and gas fields and in return will be
repaid to the value of the capital expended plus a remuneration fee
from the revenues generated from the fields.
Typical development operations period can be 4 to 5 years with 7
to 9 years of amortization period before the field is bought-back
by the Iranians through the fields own generated revenues
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Buy-Back Projects in Iran since 1995This concept puts a heavy
initial responsibility on the contractor but can be very rewarding
at the end.
However, many companies have managed to satisfy their own
investors as to the viability and profitability of such a
concept
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Buy-Back Projects in Iran since 1995Example of Fields under
development or explorationDespite the 1996 American law that
forbids investment of more than $20 million in any Iranian Oil&
Gas project, many foreign companies have chosen to ignore it.
The result has been a net loss of opportunities for American oil
companies!
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Main Buy-Back Projects in Iran since 1995
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Main Buy-Back Projects since 1995 (cont.)
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Reading Materials
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Reading Materials
David B Keto, Law and offshore oil development : the North Sea
experience, New York, Praeger, 1978, ISBN: 0030466466
Peter N Swan, Ocean oil and gas drilling and the law, Dobbs
Ferry, New York, Oceana Publications, 1979
Hossein Esmaeili, The legal regime of offshore oil rigs in
international law, Aldershot, Hants, England ; Burlington, VT :
Ashgate/Dartmouth, 2001
Hazel Fox, Joint development of offshore oil and gas : a model
agreement for states for joint development with explanatory
commentary, British Institute of International and Comparative Law,
London, 1989.
Ian Townsend Gault, Offshore petroleum installations law and
financing : Canada and the United States, International Bar
Association, Section on Energy and Natural Resources Law, London,
1986.
Bernard Taverne, Petroleum, industry, and governments : an
introduction to petroleum regulation, economics, and government
policies, The Hague, Kluwer Law International, 1999
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Reading Materials
Legal aspects of offshore operations (1976-Dec. 82).,
Springfield, Va.] : U.S. Dept. of Commerce, National Technical
Information Service, [1983]
Ian Townsend Gault, The international legal context of petroleum
operations in Canadian arctic waters, Canadian Institute of
Resources Law, Faculty of Law, University of Calgary Calgary,
Alta,1983
Harry Whitehead, United Kingdom offshore legislation guide,
Serial Publication, London, Kogan Page, 1980-
Michael Brynmor Summerskill, Oil rigs : law and insurance :
(some aspects of the law and insurance relating to offshore mobile
drilling units), London, Stevens, 1979.
Hans Jacob Bull , Norwegian offshore petroleum : the legal and
administrative response, Stockholn : Almquist and Wiksell,
1981]
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Reading Materials
Canadian continental shelf law : a proposal for a comprehensive
research project by the Canadian Institute of Resources Law to
examine all legal aspects of the exploitation of petroleum
resources in Canada's continental margin and to publish a treatise
thereon, Canadian Institute of Resources Law, Faculty of Law,
University of Calgary , Calgary, Alta, 1980.
Andrew B Derman , International oil and gas joint ventures : a
discussion, with associated form agreements, Chicago, Section of
Natural Resources, Energy, and Environmental Law, American Bar
Association ; [Tulsa], National Energy Law & Policy Institute,
University of Tulsa College of Law,1992.
Michael P G Taylor, Joint operating agreement, London : Longman,
1988
Contracts, dispute resolution and the UK petroleum regime in
1989 : Park Lane Hotel, London, 8th and 9th June, 1989 : speakers
papers, University of Dundee, Centre for Petroleum and Mineral Law
Studies, University of Dundee, 1989
Norsk petroleumsforening, Contracts and taxation in the
Norwegian north sea, Norwegian Information Publishers, Oslo,
1977
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Reading Materials
Oil and gas leasing procedures guidelines Gulf of Mexico
Regional Office, United States. Minerals Management Service. Gulf
of Mexico OCS Region, Metairie, La. : The Service, 1984
Linda Phillips;Peter Ringrose , Offshore oil development and the
law : a nontechnical introduction, St. John's, Nfld., Public Legal
Information Association of Newfoundland,1995.
Masahiro Miyoshi , The joint development of offshore oil and gas
in relation to maritime boundary delimitation, Durham, UK :
International Boundaries Research Unit, University of Durham,
1999.
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rights
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Reading Materials
Kirsten Rohrmann , Offshore oil and gas exploration and
production : installations : law and insurance, Geneve : Institut
universitaire de hautes etudes internationales, 1990.
E D Brown , Sea-bed energy and mineral resources and the law of
the sea., London : Graham & Trotman 1984-
Deborah Harrington , Environmental regulation of offshore
petroleum exploration and production : an international response,
Archival Material, 1990.
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Reading Materials
Pinheiro Neto Advogados, Oil & Gas Law In Latin America,
ISBN:1-57823-082-9,
George Philip , Oil and Politics in Latin America, Nationalist
Movements and State Companies, Cambridge Latin American Studies
(No. 40), ISBN-10: 052123865X
Latin America has considerable oil and gas deposits. Argentina,
Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and
Venezuela are the oil countries.
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Reading Materials
Iran Oil and Gas - The Emerging Giant, May 2001, 155 Pages,
Houston, TX, http://www.emerging-markets.com
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Articles for ConsiderationOil Consortium Agreement with
Azerbaijan (Case Study)OIL CONCESSIONS IN FIVE ARAB STATES 19111953
(Kuwait, Bahrain, Qatar, Trucial States, Oman)OIL AND GAS LAW -
INDONESIAN STYLE Oil Industry in Saudi ArabiaOIL AND GAS IN Persian
Gulf STATES
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Articles for ConsiderationOil and Gas Exploration and
Production: Russian LegislationNORWEGIAN OIL AND GAS IN AN
INTERNATIONAL PERSPECTIVENigeria: Oil and Gas OverviewNORWEGIAN OIL
AND GAS IN AN INTERNATIONAL PERSPECTIVEMiddle East Oil: State
Domination in the Sector - An asset or a liability in a low price
world?Nigerias Oil Revenues and the Oil Producing Areas
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Articles for ConsiderationMorocco - Oil and Gas: Crude Petroleum
and Natural Gas Extraction AN INTRODUCTION TO KANSAS OIL & GAS
LAW Azerbaijan Oil Industry: An Overview Legislative and
Contractual Framework for Oil Exploration and Production in Sudan
Kuwait - Oil Industry
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Articles for ConsiderationKazakhstan and Oil (Case Study)Future
Prospects for Oil Revenues in the Persian Persian Gulf Cooperation
CouncilInternational Good Governance and Civilised Conduct among
the States of the Caspian Region: Oil&Gas as Lever for
Prosperity or ConflictGlobal Oil and the Nation State
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Articles for ConsiderationForeign Oil / Gas Investment in the
C.I.S.: Implications for Foreign Investors Egypt - Oil and Gas:
Crude Petroleum and Natural Gas ExtractionThe Emerging Oil And Gas
Law In The Faroe Islands
In addition to the cost reductions and sales optimizations you
just heard about, there is an explosions of LNG supply and
receiving projects being either planned or constructed with the
capacity to impact US trade. Trinidad and Tobago sold the bulk of
imports to the US last year, nearly 100 Bcf. And Nigeria is
factoring in as a spot sale trader and may increase its trade with
the US when its new expansions are on line. Both of these
liquefaction plants came on only 3 years ago and are expanding
their plants. Annual LNG liquefaction capacity in Trinidad could
more than triple 450 Bcf year by early 2003 and continue to
increase thereafter. Nigerian LNG capacity could almost double
current capacity of 292 Bcf per year later this year and more than
triple current capacity by late 2007. Liquefaction capacity
expansions are also underway in the Middle and Far East.In 5 years
we should see many new countries entering into the LNG supply
trade. Ive listed the ones that seem most certain, because they
have signed Sales and Purchase Agreements. The less well-developed
projects are in brackets.In addition to the new LNG supply
projects, there are numerous receiving terminal projects announced,
and well show the ones impacting the US market in a moment.Overall,
the increase in supply and receiving projects will add increasing
fluidity and flexibility to LNG trade into the US (more?) LNG
imports to the United States will continue to grow, reflecting
expanding world liquefaction and U.S. import capacity. In addition
to the cost reductions and sales optimizations you just heard
about, there is an explosions of LNG supply and receiving projects
being either planned or constructed with the capacity to impact US
trade. Trinidad and Tobago sold the bulk of imports to the US last
year, nearly 100 Bcf. And Nigeria is factoring in as a spot sale
trader and may increase its trade with the US when its new
expansions are on line. Both of these liquefaction plants came on
only 3 years ago and are expanding their plants. Annual LNG
liquefaction capacity in Trinidad could more than triple 450 Bcf
year by early 2003 and continue to increase thereafter. Nigerian
LNG capacity could almost double current capacity of 292 Bcf per
year later this year and more than triple current capacity by late
2007. Liquefaction capacity expansions are also underway in the
Middle and Far East.In 5 years we should see many new countries
entering into the LNG supply trade. Ive listed the ones that seem
most certain, because they have signed Sales and Purchase
Agreements. The less well-developed projects are in brackets.In
addition to the new LNG supply projects, there are numerous
receiving terminal projects announced, and well show the ones
impacting the US market in a moment.Overall, the increase in supply
and receiving projects will add increasing fluidity and flexibility
to LNG trade into the US (more?) LNG imports to the United States
will continue to grow, reflecting expanding world liquefaction and
U.S. import capacity. In addition to the cost reductions and sales
optimizations you just heard about, there is an explosions of LNG
supply and receiving projects being either planned or constructed
with the capacity to impact US trade. Trinidad and Tobago sold the
bulk of imports to the US last year, nearly 100 Bcf. And Nigeria is
factoring in as a spot sale trader and may increase its trade with
the US when its new expansions are on line. Both of these
liquefaction plants came on only 3 years ago and are expanding
their plants. Annual LNG liquefaction capacity in Trinidad could
more than triple 450 Bcf year by early 2003 and continue to
increase thereafter. Nigerian LNG capacity could almost double
current capacity of 292 Bcf per year later this year and more than
triple current capacity by late 2007. Liquefaction capacity
expansions are also underway in the Middle and Far East.In 5 years
we should see many new countries entering into the LNG supply
trade. Ive listed the ones that seem most certain, because they
have signed Sales and Purchase Agreements. The less well-developed
projects are in brackets.In addition to the new LNG supply
projects, there are numerous receiving terminal projects announced,
and well show the ones impacting the US market in a moment.Overall,
the increase in supply and receiving projects will add increasing
fluidity and flexibility to LNG trade into the US (more?) LNG
imports to the United States will continue to grow, reflecting
expanding world liquefaction and U.S. import capacity.
