WHAT THE INDUSTRY EXPECTS IN 2008

Law of the Sea Convention membership vital to US energy market

Paul Kelly, Consultant, World Oil Senior Editorial Advisor, Houston

Last month, the US Senate Foreign Relations Committee voted 17-4 in favor of US ratification of the Law of the Sea Convention. Next, the matter goes to the full Senate for approval. The convention lays out a comprehensive international framework to govern the world’s ungoverned spaces: the deep and vast oceans. This is a critical opportunity which must not be missed, especially from the viewpoint of future potential oil and natural gas supply in America, and globally.

The United States has taken a long and winding road to this moment of decision. The Law of the Sea Convention was negotiated for decades and agreed to in 1982. President Reagan directed the country to follow the Convention, with the exception of some rules on mining. After these rules were amended to meet US demands, President Clinton agreed to sign the Convention, but it stalled in the Senate due largely to the opposition of Senator Jesse Helms, while he chaired the Foreign Relations Committee. Now, the Convention has the support of President Bush and a strong majority of that Committee. More than 150 nations are members, including every major power except the US.

Trading route rights. Oil is traded in a global market with US companies as leading participants. The Convention’s protection of navigational rights and freedoms advances the interests of energy security in the US, particularly in view of the dangerous world conditions we have faced since the tragic events of September 11, 2001. About 44% of US maritime commerce consists of petroleum and petroleum products. Trading routes are secured by provisions in the Convention combining customary rules of international law, such as the right of innocent passage through territorial seas, with new rights of passage through straits and archipelagoes. US accession to the Convention would put us in a much better position to invoke such rules and rights.

Continental shelf ownership. The Convention is also important with regard to our efforts to develop domestic offshore oil and natural gas resources. The Convention secures each coastal nation’s exclusive rights to the living and non-living resources of the 200-mile exclusive economic zone. This rule puts 4.1-million square miles of ocean under US jurisdiction, a total area that is larger than the US land area. The petroleum industry has been in favor of the Convention since 1973, when US negotiators consulted with industry leaders through the National Petroleum Council about the Treaty provisions and, in particular, those provisions that enable nations to extend the definition of their continental shelves beyond the 200-mile zone, thereby claiming living and non-living resources in and below an extended seabed.

Determination of continental shelf resources is accomplished by a nation filing a submission supported by seismic, bathymetric and sediment data for review by an International Commission on the Limits of the Continental Shelf. Russia’s recent symbolic planting of their flag in deep waters below the North Pole is a reflection of a submission it has made claiming a vast stretch of the Lomonosov Ridge, which Denmark also claims as part of Greenland. Russia, Norway, Britain, Ireland, Brazil and Australia are a handful of the countries that have already made submissions, and many more are preparing their own submissions. Meanwhile, the United States’ hands are tied because it is not a member of the Convention. Until we sign, we cannot make a submission, nor can we appoint an American scientist to the Commission that reviews all the submissions.

Some of the most recent deepwater discoveries in the Gulf of Mexico are relatively close to the 200-mile limit, and the US should be prepared to take advantage of prospects beyond that limit. Also, we need to protect our interests in the Arctic where, according to geoscientists, the US case for proving an extended continental shelf off Alaska to 350 miles or more looks very good.

From a global perspective, far-from-shore deepwater discoveries have ignited interest in the Convention’s provisions all across the world. The United States Geological Survey estimates that about one quarter of the world’s undiscovered oil and natural gas lies below Arctic waters, which explains competitive actions by countries bordering on that region.

Urgency to join. The Continental Shelf Commission is expected to have a very heavy workload reviewing coastal state submissions in the coming months. Looking ahead, there could be an historic dividing up of many millions of square miles of offshore territory, with management rights to all its living and non-living resources on or under the seabed. This will have important economic impacts on coastal nations, including enhanced energy supplies and revenues.

An advisor who is working with developing nations preparing their submissions said recently, “This will probably be the last big shift in ownership of territory in the history of the Earth. Many countries don’t realize how serious it is.”

How much longer can the US afford to be a laggard in this process? Let’s hope the US Senate finally realizes how serious it is and approves the Law of the Sea Convention without further delay. 

THE AUTHOR
	Paul L. Kelly is a consultant on energy and ocean policy, and a retired senior vice president of Rowan Companies, Inc., where he had responsibility for special projects, and government and industry affairs. He was a member of the US Secretary of Interior’s Outer Continental Shelf Policy Committee, serving as chairman of the Committee from 1994 to 1996, and he is a member of the Joint Ocean Commission Initiative. Mr. Kelly holds BA and JD degrees from Yale University.