Post on 15-Dec-2015
transcript
Energy Law
4 – International Petroleum
Fall 2014Sep 23, 2014
Alan Palmiter
Not for distribution- for study purposes only
Topic roadmap
1. International petroleum in energy mix– Compared to other energy sources– Oil and global politics– Relation to energy security
2. Int’l petroleum extraction / transportation– Global oil production– Transportation
3. Governance of int’l petroleum operations– Concessions / agreements – Nationalization
4. Future of international petroleum– Peak oil – Unconventional drilling
Click for video (0:00-14:00)
Black Gold: The Secrets of Oil (Modern Marvels Documentary)
http://www.eia.gov/totalenergy/data/annual/diagram1.cfm
4
Energy Flow, 2011 (Quadrillion Btu)
1. Int’l petroleum in the energy mix
Source: US EIA, Petroleum and Other Liquids – Data (through June 2013)
1. True or false? World oil prices have risen dramatically in the past 15 years.
2. Which is false – a. Year over year increases in
OPEC production are typically followed by oil price declines.
b. U.S. net imports of oil have declined each of the past 3 yrs.
c. OPEC was first formed in 1945.
d. A majority of U.S. oil imports come from nations in the Western Hemisphere.
3. Which is true --a. In 1990, as a result of the first Iraq
war, OPEC began an oil embargo against the United States.
b. Saudi Arabia was not a founding member of OPEC.
c. In the 1980s, the price of oil on the global market reached its all-time low price of $20/bar.
d. The U.S. midwest imports most of its oil from the Mideast.
4. True or false? Most oil imported into the United States is used for power generation purposes?
Pop QuizInt’l petroleum and energy mix
Answers: 1-T / 2-c / 3-c / 4-F
Smart Planet: How oil-producing countries stacked up in 2012
How oil-producing countries stacked up in 2012
2. Int’l petroleum: production & transport
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/08/how-oil-travels-around-the-world-in-one-map/
Keystone Pipeline
Start: Alberta, Canada
Delivery: Nebraska, Oklahoma, Gulf Coast, Illinois
What Will It Carry: Tar Sands Oil
Completion Dates: 2009-2014 (Phases 1-3) / Phase 4 on hold
Strategic Impact: Extensive use of shale oil on North American continent. Allows for reduced need of oil from non-North American sources. Significant business for U.S. refineries.
Subsurface rights
• United States: subsurface rights go with surface title, unless specifically separated
• Mexico: before 1911 landowners could own mineral rights, after 1911 revolution, ownership is in state.
• Canada: before 1887, individuals could own sub-surface rights; today 10% owned by individuals; 10% by federal state; 80% by provinces
• Great Britain: Petroleum Act (1934) vests ownership to the Crown
“Energy Security”
Pros: Insulation from higher
global energy prices Avoids OPEC engaging
in political blackmail Improves our
geopolitical posture Would improve
balance of trade
Cons: Perhaps requires energy
not cheapest available Substantial time and
money to develop suitable domestic energy resources
Perhaps requires relying on ‘dirtier’ forms of energy
International petroleum contracts: • Form• Ad-hoc• Hybrid
Structure of agreements:• concession or license• production sharing• technical service
Processes for awarding contracts: • complete gov’t discretion• public auction• open competition
3. Governance of int’l oil operations
What is a concession agreement?Oil-rich countries contracting with international oil companies to develop reserves
What do concessions look like?Typically: • Stock ownership in local
exploration company• Bonus upon signing agreement• Oil company obligated to pay
royalties to the foreign state based on oil produced
What is international oil arbitration?
• Submission of disputes under international oil agreements
• to binding resolution by one or more arbitrators
Why is arbitration preferred over court litigation?
• Time, expense• Confidentiality• Expert decision maker• Avoid court roadblocks:
Sovereign immunity / Political question doctrine / Act of state doctrine / Forum non conveniens
Early co
ncession agreements
(1930s)
WWII (im
portance of o
il – 1939-1945)
US oil embargo (1
973)
Oil cris
is: low pric
es (1980s)
OPEC form
ed (1960)
Iranian Revo
lution (1979)
1900 19901960 20201930
International petroleum- timeline
Texas oil fi
elds (~1900)
Creation of Arab st
ates (beginning in
1930s)
Peak oil id
entified (Hubbert i
n 1956)
Seven Sist
ers (1940s –
1970s)
2nd Venezuelan nat’l
(2007)
Tar sands (2
010)
Fracking (2
010)
1st Venezuelan nationaliza
tion (1975)
Click for 4:11 audio
1. True or false? Over 50% of subsurface mineral rights in Canada are owned by individuals.
2. Which is false – a. Ad-hoc contract structures
allow for the greatest deal of flexibility in structuring oil agreements.
b. Mineral rights in Mexico belong to the state.
c. Common law jurisdictions allow for private ownership of mineral rights.
d. Nigeria is the African nation that produces the most oil.
3. Which is false --a. Foreign governments typically
auction oil production contracts.b. In 2012, China produced more oil
than Mexico.c. Norway produces more oil than
any other European nation. d. In 2012, Russia produced more
oil than the United States.
4. True or false? More oil travels through the Straits of Hormuz than any other “chokepoint” in the world?
Pop QuizInt’l oil – production, transport & governance
Answers: 1-F / 2-c / 3-d / 4-T
Source: EIA, Analysis and Projections – Shale Oil Study (2013)
Source: EIA, Analysis and Projections – Shale Oil Study (2013)
Alien Tort Claims Act
Arguments for: Non-citizen can bring suit
in the United States Elevates the standing of
international law in U.S. courts
Allows aggrieved party to bring suit for egregious acts that may not otherwise fall within the jurisdiction of a U.S. court
Arguments against: Could lead to
entanglements with other nations
Statutory language is ambiguous, thus limits its effectiveness
Supreme Court ruled that Act does not provide jurisdiction over claims brought against corporations
Class HypoTransCanada submitted a final permit application in May 2012 for the construction of the Keystone XL pipeline from the Canadian Tar Sands to the United States.
President Obama needs to decide on whether or not to approve permit for construction of Keystone XL. Please come up with a list of talking points reflecting your group’s position:
Group 1: 350.org
Group 2: TransCanada
Group 3: Nebraska Governor
In April 2014, the Obama Administration postponed a final decision on whether the proposed Keystone XL pipeline is in the national interest. The State Department said needed additional information regarding potential alternative routes around the Sand Hills in Nebraska – thus to determine if the proposed Keystone XL pipeline is in the “national interest.”
In making the “national interest” determination, DOS (in consultation with other agencies) will consider:
1. Environmental impacts of the proposed project 2. Impact on the diversity of supply to meet U.S.
crude oil demand3. Stability of trading partners from whom the U.S.
obtains crude oil 4. Relationship between the U.S. and various foreign
suppliers 5. Impact of proposed project on broader foreign
policy objectives, including a comprehensive strategy to address climate change
6. Economic benefits to U.S. of constructing and operating the pipeline