Legal Issues Of Pre-existing Petroleum Contract In Disputed Maritime Zone

There is less attention to pre-existing petroleum contract, but it is a real question. Pre-existing petroleum contract is an unavoidable matter whether to delimit or joint develop in the future disputed maritime zone. Even if disputed maritime zone can't delimit nor develop for long time, pre-existing petroleum contract will also lead parties to unilaterally carry out petroleum operations, and then triggers tension in disputed zone. Study of this matter is also according with China's real need. There are some maritime disputes between China and its neighboring states, and these disputed areas are widely believed containing rich oil and gas resources. Some states concluded petroleum contracts with oil companies for developing of petroleum resources in disputed zones. The pre-existing contracts in disputed areas are questions that must be handled before delimitation or joint development for China. If disputed areas last long, the government of China must take measures to deal with pre-existing contract and consequently unilateral activities. So study of this question is both theoretical value and practical significance.This thesis is divided into four chapters, the viewpoint of each chapter can be summarized as follows:The main work of chapter one is sorting out the basic theory of pre-existing petroleum contract. Firstly, we define the concepts of "disputed maritime area" and "pre-existing petroleum contract". Disputed maritime area means disputed exclusive economic zone or continental shelf which is arising from two or more states' different delimiting claims or land territory disputes, among them the disputed exclusive economic zone or continental shelf is the research priority. Pre-existing petroleum contracts is about exploration and exploitation of petroleum resources in the disputed zone between two or more nations, which are unilaterally concluded between one state party and oil company before reaching of joint development or delimitation agreement. Secondly, analyzing four sorts of pre-existing petroleum contract, namely concession agreement, equity joint venture agreement, joint structure agreement, production sharing contract and service contract. This chapter is also summarizing the four elements which influence the relations between oil producing country and oil corporation. The four elements are the reserve of oil in oil producing country, the degree of political stability and economic developing of oil producing country, power of oil company and oil price. Thirdly, this chapter points out the reasons of pre-existing petroleum contract's rising, which include domestic and international politics, economy and law. At last, this chapter discusses the future of disputed maritime zones, which contains delimitation, joint development and maintaining the status quo.Chapter two is focusing on the legal validity of pre-existing petroleum contract.1. Making a brief analyzing the domestic legal basis for pre-existing petroleum contract. The domestic law of state party stipulates that it enjoy sovereignty or sovereign rights over disputed ocean area on the one hand, it can also sign contract with foreign oil company on developing of ocean oil on the other hand.2. The international legal basis for pre-existing petroleum contract is the key content in this chapter. Firstly, if the state party's maritime claim has a prima facie basis in international law, we can presumed its claim is valid before ultimate delimitation. Consequently, this state party can exercise sovereignty or sovereign rights in disputed zone, and then provide legal basis for pre-existing petroleum contract in disputed area. Secondly, although state party can exercise sovereignty or sovereign rights in disputed area in principle, compared with no disputed maritime zone, the sovereignty or sovereign rights which state party can exercise in disputed zone is incomplete and very restricted. Moreover, the manners of exercise of sovereignty or sovereign rights in disputed area are limited by international law, namely "not to jeopardize or hamper the reaching of the final agreement", that is unilateral non-transitory character activities which will produce irreparable damage to ocean environment are forbidden. Specifically, mere reaching of petroleum contract and transitory character exploration (for example, seismic exploration) are not to jeopardize or hamper the reaching of the final agreement. But non-transitory character exploration (for example, drilling) or exploitation which is not depending on counter measures or other party's consent is of course to jeopardize or hamper the reaching of the final agreement. If one state carries out petroleum operation which is to jeopardize or hamper the reaching of the final agreement, it is under an obligation to cease its act immediately and to offer appropriate assurances and guarantees of non-repetition, if circumstances so require; then other state can require the responsible state to make compensation for the injury caused by the internationally wrongful act; if the other state thinks requirement for compensation may intensify tension, it can also require responsible state to make an acknowledgement of the breach and a formal apology, or require international tribunal to award the illegality of wrongful act.Chapter three is probing into the treatments of pre-existing petroleum contract in different circumstances.1. How to deal with pre-existing petroleum contract in delimiting negotiation. If pre-existing petroleum contract can be taken into account in the delimitation of the maritime boundary, it must get acquiesce of other state or tacit agreement between states. But in practice, the criteria to identify acquiesce or tacit agreement is high, that means state party cannot claim its pre-existing petroleum contract can be taken into account in the delimitation of the maritime boundary in the most delimiting negotiations. Since the state party cannot win the entire contract block, it should take some measures to avoid or reduce the cost of foreign oil company. If the state party loses the whole contract block, it should try to persuade other state party who gets the contract block to sign contract with original foreign oil company; if not, the state party can attempt to conclude petroleum contract with original foreign oil company on developing of other ocean area; if these methods are not working, the state party can only consult with original foreign oil company about compensation. In the case of losing part contract block and finding a single petroleum reserve crossing boundary, the state party should endeavor to put original foreign oil company in charge of developing of the single petroleum reserve if the other part contract block has not been developed by the other state party; if the other state party has define an oil company to develop its part contract block, then the single petroleum reserve can only be developed by the two oil companies through concluding equity joint venture agreement or joint structure agreement.2. How to deal with pre-existing petroleum contract in joint development negotiation is different from the delimitation negotiation. "Not influenced by the joint development" is not giving consideration to the demand of other state party, it is impossible to realize without the consent of other state party. "Unilateral cancelling the contracts" which ignores foreign oil company's interest is also infeasible. "Terminating the contracts according to the relevant terms" which is based on the agreement between state party and oil company can terminate the contract and clear away obstacles for joint development without violating the will of oil company. Moreover "accepted by the joint development" is also relatively comprehensive giving consideration to all parties'interest. Among them, "terminating the contracts according to the relevant terms" and "accepted by the joint development" are comparatively more feasible.3. In the process of maintaining the status quo, pre-existing petroleum contract can also initiate marine environment pollution and maritime enforcement. The petroleum activities of state parties in disputed maritime zone are of course regulated by the environment protection obligation in United Nations Convention on the Law of the Sea (UNCLOS). If the operations of one state party produce marine environment pollution, other state party can claim apply compulsory procedures entailing binding decisions in UNCLOS. With regard to maritime enforcement, it is aiming at one state party's unilateral non-transitory petroleum activities. In the case of enforcement, it must control the use of force strictly. Even if one state party decides to use force, it has to strictly abide by procedure so as to avoid excessive use of force. With respect to the enforcement of navy, it is better not to involve enforcement because of its special status. In respect of maritime standoff caused by enforcement, it should first adopt prior communication mechanism to prevent the happening of standoff; if it does not work, it should launch the mechanism of crisis control between state parties.Chapter four is focusing on the pre-existing petroleum contract of disputed maritime zone between China and its neighbouring states on base of the conclusions of the first three chapters. There are existing disputed zones between China and South Korea, North Korea in the Yellow Sea, but no pre-existing petroleum contract in these disputed zones. Although there are pre-existing petroleum contracts in disputed zone of the East Sea, it is not difficult to handle. Because the potential of the oil resource in the overlapping area where China, Japan and South Korea claim is unclear, the overlapping area is less attractive to the oil company. So the government of China is not necessary to pay close attention to the pre-existing petroleum contract of the overlapping area. With regarding to the disputed continental shelf between China and Japan, on the one hand China should resist an attempt by Japan to make dispute in the west of the "median line", on the other hand China should keep an eye on the latest development of the pre-existing petroleum contract in the east of the "median line". If the government of Japan is determined to carry out petroleum operations in disputed zone, the government of China can take enforcement for these activities. Besides maritime enforcement, according to the rule of counter measures the government of China can also conclude petroleum contract with the oil company in the east of the "median line" for the purpose of oil development. It is need to establish a mechanism of prior communication in order to prevent the maritime standoff between China and Japan. If we can't prevent the crisis, it is necessary to control and handle the crisis through a mechanism of consult and communication. The situation of pre-existing petroleum contracts in South China Sea is more complex. It is impossible to delimit for a long time, and the prospect of joint development is also not optimism. During this time, the legal petroleum operation of China will be disturbed by other claimants, as well China need to reject other claimants' illegal oil activities and take enforcement in necessary. The situation of the South China Sea means tension will arise frequently in this region. In order to prevent the situation out of control, it is necessary to establish crisis mechanism between China and other claimants directly, including talk mechanism and hotline mechanism. Moreover, China should actively guide Association of Southeast Asian Nations (ASEAN) to play a constructive role in the process of maintaining peace and stability in the South China Sea.