Comment

The United Nations could be independently financed within 10-15 years, using a portion of funds from licenses granted by the Law of the Sea Treaty for the exploitation of oil, gas, hydrates, and hard minerals in international waters.

Beyond the 200-mile limit

The United Nations could be independently financed within 10-15 years, using a portion of funds from licenses granted by the Law of the Sea Treaty for the exploitation of oil, gas, hydrates, and hard minerals in international waters. In fact, UN funding could follow a healthy distribution for landlocked countries now unable to share in the mineral wealth of their maritime neighbors.

The Law of the Sea Treaty, drawn up some years ago to resolve future issues in international waters, worked out some of the leasing laws and fiscal structure, but left a great deal undone. Also, the document remained unsigned by key maritime powers, some of which viewed mineral exploitation in international waters much the same as the fishing business - every country for itself.

Today, there is more urgency to resolve the underlying issues. Petroleum producers are working right at the 200-mile limit in some areas of the globe and will soon have the technical capability to drill and produce in abyssal depths. By default or design, if the UN winds up managing international areas of the globe, there are other issues to consider:

Would the UN try to constrain production volumes in international waters, or even join OPEC? Assuming that production sharing contracts are acceptable, what would the revenue splits be? Would the UN push to set up its own exploration and production enterprise, thereby cutting private producers out of the business? What happens if the UN takes an environmental position and refuses to license international acreage? What would the UN's position be if global energy supplies began running low?

There are also questions for the oil and gas industry. What sort of revenue splits would be necessary to make costly E&P in ultra-deepwater worthwhile? Do we have reliable assessments of sediment volumes and hydrocarbon prospectivity in international waters? If not - who would conduct that assessment? What tools should be used?

This could be a lot of noise about nothing. But without adequate assessment and more than a few wells, we don't know that. If the administrative entity is not in place to do business in international waters, or countries fail to agree on a licensing mechanism, the momentum and technical research effort being developed to reach hydrocarbons in great water depths could begin unwinding. How unfortunate - and costly to re-start later.

Human rights management

Years ago, oil and gas producers realized, reluctantly, the need for environmental oversight on E&P activities that sometimes created hazardous problems. The development of environmental managers and legal entities to ensure regulatory compliance in upstream and downstream geographic sectors followed.

The same development is now overtaking the human rights function. Populations in weak economies, once undemanding, are now readily influenced by global labor and civil rights organizations. In the retail sector, serious problems with product use, though not strictly a human rights problem, can wreck a name brand on a global scale.

Human rights officers try to evaluate a corporation's human interfaces - with employees, contract staff, people who live or work near company facilities, and customers at all levels. Here are some of the issues they may deal with:

  • Are autonomous local managers mistreating or underpaying workers? What is a reasonable pay scale for local workers? Who decides the local issues - and why?
  • Are local operations imposing onerous environmental, social, or labor conditions on nearby populations? Are there unseen cultural problems, covered over by local managers?
  • Are the royalties and payments used by governments for domestic programs, or are they spirited away, directly or indirectly, to Swiss or Caribbean accounts? Do petroleum royalties reach local populations?

Years ago, these issues didn't register on corporate planning horizons. Today, they must. Producers are global entities, even though they operate locally, and are no longer sheltered from human relation oversights. News-hungry networks beam corporate actions and reactions around the globe instantly, wielding great influence everywhere. Oil and gas producers and service companies cannot be seen as insensitive or removed from the human condition.

Readers wishing to respond to issues presented on this page or elsewhere in Offshore, or offer authored articles or article suggestions, should contact the editor by E-mail (leonardl@pennwell.com) or Fax (1-713-963-6296).

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