International Focus

July 1, 2000
Wherever there are offshore oil and gas operations, there are countries disputing boundary location or aquatory ownership.

Oil and gas operations promote boundary disputes

Wherever there are offshore oil and gas operations, there are countries disputing boundary location or aquatory ownership. Often, these feuds are resolved through years of peaceful negotiations, but sometimes, military conflicts break out. Some of these disputes are critical to major development - or in the case of the Faeroe Islands - Shetland Islands boundary, possible revitalization of Western Europe.

Iran, Kuwait, SA

Iran, Kuwait, and Saudi Arabia have been in discussions for years over boundaries in the Persian Gulf. Recently, the commencement of Iranian drilling operations on the Dorra Field has escalated tensions. Kuwait and Saudi Arabia have protested, and Iran made plans to remove the rig and hold talks.

Iran was praised by its neighbors for a quick response and calls for talks. All three countries have agreed to settle the dispute not only on Dorra, but also over the entire joint continental shelf.

Iran does claim, however, that drilling was within Iranian territorial limits based on international law. Iran said that it took several boundary lines as a basis between Iran and Kuwait before drilling began, and rejected Kuwait's claim that they were in Kuwaiti waters.

Newfoundland, Nova Scotia

Newfoundland and Nova Scotia are eager to get exploration going in a disputed area between their respective provinces. For the past 14 years, the two provinces have been at odds over the offshore boundary line in the Laurentian sub-basin near the French islands of St. Pierre and Miquelon. The dispute arose in 1986, when the Canada-Nova Scotia Offshore Petroleum Accord set a boundary that gave Nova Scotia the largest portion of the acreage. Additionally, Canada had been in a boundary dispute with France over the two islands, but settled in 1992.

Now in an effort to speed up activity, the Canadian government has intervened and assigned an arbitration panel to resolve the dispute. The Canadian Minister of Natural Resources, Ralph Goodale, said that he hopes it will be resolved within 18 months and is prepared to consider a joint proposal from the provinces for an interim arrangement to allow activities to proceed while arbitration is underway.

However, the premiers of the two provinces are at odds over the interim plan. Newfoundland favors settling the dispute before beginning exploration and production activities, while Nova Scotia wants to move exploration ahead as soon as possible. Newfoundland has hence rejected Nova Scotia's interim proposal.

In the meantime, several companies that own interests in the area, including Gulf Canada Resources, Mobil Oil Canada, and Imperial Oil will have to wait. Mobil and Gulf have been reported as saying they will drill a well in the French portion of the area before April of next year.

Mexico, the US

The newly divided Western Gap or Doughnut Hole in the Gulf of Mexico between Mexico and the US.
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Mexico and the US have signed an agreement dividing up the Western Gap or "Doughnut Hole" in the Gulf of Mexico. US President Clinton and Mexican President Zedillo signed the agreement last month which give Mexico 62% of the area. The Western Gap covers an area of 17,190 sq km in the deepwater Gulf of Mexico over 200 nautical miles from the border of each country. The division of the area was established by measuring the distance from each country's coast, which gave Mexico 4,100 sq miles and the US 2,536 sq miles.

Additionally, the two countries established a 10-year moratorium on exploration and drilling in a 2.8-mile-wide buffer zone along the dividing line. The countries claim the moratorium was to allow both time to consult on how to divide up the buffer area. Mexico said that there is a high probability that the area contains oil, but will not rush to exploit it in the near future.

Guyana, Suriname

The Guyana/Suriname border is heating up.
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Small Canadian independent CGX Energy is trying to drill its first well off Guyana without starting a war. After signing a deal with the Guyana government, CGX moved R&B Falcon's C.E. Thornton jackup into the area to drill on the Eagle prospect, located near the Guyana-Suriname border. However, upon arrival, the Suriname navy evicted the rig from the area saying that it was in Suriname waters. Guyana, of course, said that CGX was conducting activities within its maritime boundaries.

Since that time, tensions have mounted on both sides of the border. Both have said they will be prepared at a military level to protect the borders, and in addition, have accused each other of building up military forces.

Representatives from both sides recently met in Port of Spain, Trinidad to keep the situation under control. A draft Memorandum of Understanding, developed to establish a framework to return the rig to work, was given to Suriname by Guyana. Suriname has a time frame to respond.

The two governments also plan a meeting in each capital. CGX has since put the prospect on standby and has said it is encouraged by the memorandum. In the meantime, the company is paying $80,000/day for an idle rig.

The dispute initially began in 1969 when Guyana used force to evict the Suriname military from southeastern Guyana. However, this was not the first boundary dispute for Guyana. A week prior to the Suriname incident, Venezuela verbally attacked Guyana for granting a concession for a commercial rocket launch site to a US company in a Venezuelan-claimed area.

Caspian Sea borders

Ownership of the Caspian Sea has been debated between almost every country along the coast since the breakup of the Soviet Union. Now Russia, has proposed a compromise deal to divide up the riches. A member of the Russian Foreign Ministry said at the Caspian Oil Show in Baku that Russia is proposing an interim solution as a compromise. He said Russia wants to divide the floor of the Caspian among the littoral states for the purpose of subsoil development and leave the body of water in general use for free shipping, fishing, and environmental protection.