On Key Issues for a Regime of Joint Development in the South China Sea——with the Experiences of Other Sea Areas

LUO Ting-ting

On Key Issues for a Regime of Joint Development in the South China Sea
——with the Experiences of Other Sea Areas

LUO Ting-ting*

With disputes over islands and maritime delimitations unresolved,joint development of oil and gas will be inevitable for the détente of relationships between neighbor States and peaceful use of resources in the South China Sea.Such joint development shall be under a formal regime to settle down rights and obligations for all related States.This article explores key issues of the future analogous regime in the South China Sea and proposes optional approaches to resolve such issues by referring to practices in other areas and by analyzing the situation in the South China Sea.

Joint development of oil and gas;South China Sea;Key issues

Introduction

Disputes over rights and interests in the South China Sea are essentially disputes over sovereignty and jurisdiction on islands,which become mostly complicate and delicate due to proven rich oil and gas resources.Since disputes over islands and maritime delimitations remain unresolved,joint development of resources,if arranged and accomplished,will undoubtedly contribute to the détente and stabilization of regional relations and to the achievement of winwin ideal in the exploration of the South China Sea region.Consequently,favorable and solid grounds will be laid down for all riparian States to delimit maritime boundaries.

At present,research works on joint development in the South China Sea focus mainly on two aspects.The first one is the necessity and possibility ofjoint development and related difficulties.The second one is possible arrangements for joint development.Arrangements proposed by scholars from the riparian States and Western States are commonplace.①Wang Zhijian,Joint development is the most realistic solution to the South China Sea Issues,avaliable at http://hhlawaid.blog.hexun.com/6886645_d.html,Nov.17 2010.(The Philippines proposed“North Sea Model”in 1988 and“Antarctic Convention Model”in 1999. Vietnam proposed“U-shape”in 1992 and“Annular”in 1994.Indonesia proposed“Indo-Australia Sea Lane”in 1993 and“South China Sea Donut”in 1994.B.A.Hamzah from the Institute of Strategic and International Studies in Malaysia proposed the“establishment of a Joint-development Agency.”Mark J.Valencia from the East-West Center at Hawaii University proposed“devising a shared regime that will serve the interests of each party”in 1992.) Nonetheless,all these proposals are focusing on joint development from a macro perspective.Although the feasibility of joint development and clearance of rights and interests are inter alia to be decided in the first place,this author takes the view that joint development in the South China Sea should be managed in accordance to a certain regime to ensure the rights and obligations of all Parties,just like oil and gas exploitation in other seas.For the future,consideration and arrangement for the regime are to be decided first or last in the South China Sea.Given these considerations,the research focus of this article is the administrating regime for the South China Sea.

Joint development agreements possess unique frames and regime assignments due to the diversity of sea regions,resources,politics,economics laws, historical and cultural backgrounds,and relations between States.Therefore, there is no universal model for joint development for all seas.As indicated in the book Joint development of offshore Oil and Gas by British Institute of International and Comparative Law:

Each of these models has a number of possible variations yet none seems capable of commanding universal acceptance due to differing political and economic systems,traditions of conflict and degrees of national sensitivity.②Hazel Fox QC and Paul Mc Dade et al,Joint Development of Offshore Oil and Gas:A Model Agreement for States for Joint Development with Explanatory Commentary, British Institute of international and Comparative Law(BIICL),1989,p.115.

Still,some general policies and principles of joint development can be outlined,based on existing international agreements on joint development of offshore oil.Such policies and principles will shed light on the basic content of joint development regime of offshore oil and gas.The above mentioned book summarizes the existing international legal instruments,which are:sovereignty disputes resolution,role and position of the third Party,establishment of joint development zones,administration of joint development zones,pattern of development,financial arrangements and revenues distribution,tax arrangements, distribution of jurisdiction and law application,protection of marine environment and pollution prevention and disputes resolution,duration of joint development and its expiration,etc.These practices can be viewed as fundamental contents of a regime of joint development of offshore oil and gas.①XIAO Jianguo,the Joint Development of the Oil Deposits across the International Maritime Boundaries,Ocean Press,2006,pp.233-254.

According to the author,a regime of joint development of oil and gas in the South China Sea should also be based on the above mentioned components. There are inter alia five basic issues which have to be taken into consideration in establishing joint development regime in the area:resolution of sovereignty over islands and boundary delimitation,guarantee of pre-existing rights of the third Party,establishment of joint development zones,administrative pattern, consensus of jurisdiction distribution and law application.From the outset,disputes over rights and interests in the South China Sea have become increasingly complicated and delicate,as they involve six States and seven Parties.Sovereignty over islands gets entangled with maritime delimitations,and other coastal States are more and more engaging in explorations of oil and gas within Chinese Traditional Maritime Boundary Line(the U-shaped line).Furthermore, the essential nature of joint development is a cooperation which is based on political will.Consensus between disputing Parties is the political ground for the realization of joint development.②CAI Penghong,the Current Status of Sino-Japanese Disputes in the East China Sea and the Prospect for Joint Development,Contemporary International Relations,2008(3),p.45.Ibrahim Shihata and Willam Onorato from the World Bank define the concept of joint development as“a regime under which the entire boundary dispute issue is set aside,thus creating an ambient development atmosphere of political cooperation from the outset.”③I.F.I.Shihata and W.Onorato,Joint Development of International Petroleum Resources in Undefined and Disputed Areas,(paper delivered at the International Conference of the LAWASIA Energy Section,Kuala Lumpur,18-22 October 1992),p.6.The Japa-nese scholar Masahiro Miyoshi pointed out that“joint development is a provisional arrangement between governments,an arrangement of Utilitarianism on joint exploration and exploitation.”Due to the complicated South China Sea circumstances,the key factor for cooperation is political will of all riparian States participate in the joint development,which is a combination of political cooperation and utilitarianism.The above mentioned five issues are undoubtedly centered on vital state interests,which may provoke conflicts and deeply affect the political will of participating States.In other words,successful resolution of those five issues could decide whether joint development in the South China Sea will proceed smoothly and could also function as a tool for tackling other issues.

This paper will explore these five key issues of the regime of joint development of oil and gas in the South China Sea.Consequently,possible approaches to these issues will be analyzed through comparative study of analogous regimes in other sea regions and practical conditions in the South China Sea.

Ⅰ.Standpoint on Sovereignty over Islands and Maritime Delimitation

Joint development is a provisional arrangement for optimal use of resources before agreements on delimitation are reached between related States. During negotiation and enforcement of a joint development agreement,involved States hope to preserve their legal standpoints and claims on maritime delimitation,which are especially notable in joint development in disputed sea areas. Therefore,related States will have to put aside disputes and freeze territorial claims on the ground of acknowledging disputes over sovereignty and delimitations.Such practice is reflected in agreements on joint development as a clause“without prejudice against sovereignty or delimitation standpoints.”①XIAO Jianguo,the Joint Development of the Oil Deposits across the International Maritime Boundaries,Ocean Press,2006,pp.105-106.

All the existing agreements on joint development of offshore oil and gas have the clause“without prejudice against sovereignty or delimitation standpoints,”which varies in specific wording.The second clause of Bahrain-Saudi Arabia Boundary Agreement of 22 February 1958,states that arrangement on the Fasht-Abu-Sa’fah oil field“does not infringe the right of sovereignty of the Government of Saudi Arabia nor the right of administration over this above-mentioned area.”

Article 28 of Agreement between Japan and the Republic of Korea concerning the Establishment of Boundary in the Northern Part of the Continental Shelf adjacent to the two Countries of 30 January 1974 states:

Nothing in this Agreement shall be regarded as determining the question of sovereignty rights over all or any portion of the Joint Development Zone or as prejudicing the positions of the respective Parties with respect to the delimitation of the continental shelf.

Article 4(a)in the Malaysia-Vietnam Memorandum of Understanding of 5 June 1992 similarly provides that the positions and claims of the two countries in relation to and over the defined area are not to be prejudiced by any provisions in the Memorandum,which explicitly defines the purpose of this legal instrument as putting aside sovereignty disputes and pursuing joint development of oil and gas deposits.In addition,there are other similar provisions in the 1995 Joint Declaration on developing the South-west Pacific region between the Great Britain and Argentina,and the 1989 Timor Gap Treaty between Australia and Indonesia.This clause has been generally accepted by various Parties, because it protects their respective standpoints and eliminates fears or misgivings.

In the South China Sea,complex and delicate disputes between China and other riparian States,such as Vietnam,Malaysia,Indonesia,the Philippines and Brunei are real and add to the overlapping sovereignty claims among these countries.For the resolution of disputes in the South China Sea,China has consistently proposed and purported the principle of“putting aside disputes and engaging in joint development.”Deng Xiaoping articulated this concept during a meeting with delegates from the Center for Strategic and International Studies at Georgetown University,and it was expounded and promoted later. The contents of putting aside disputes and engaging in joint development can be summarized as four major points First,sovereignty of China shall be put forward as a priority.Second,parties should respect the status quo and putting aside disputes.Given the complication and difficulties in dispute resolution over territory and delimitations,sovereignty claims may be put aside,which does not mean renouncing sovereignty.Third,municipal cooperation is the perspective for joint development.Joint development does not relate to sovereignty or sovereignty rights,therefore such a joint arrangement can be actively promotedin the economic field.Fourth,the purpose of joint development is to deepen mutual understanding through cooperation so as to lay down foundations for final resolution of sovereignty and delimitation issues.①XIAO Jianguo,the Joint Development of the Oil Deposits across the International Maritime Boundaries,Ocean Press,2006,pp.204-205.The original idea of“putting aside disputes and engaging in development”is directed toward the sovereignty disputes over islands and maritime delimitations,while it is entirely correspondent to the nature of joint development.Such an idea implicates that joint development,as a provisional arrangement,does not prejudice against the respective standpoints on sovereignty or delimitation.

The Blue Book on Asia and Pacific 2010 released by Chinese Academy of Social Science noted that the international community has shifted their notions of China from threatening by China to obligations of China,from a stakeholder to G2,which has been to a certain degree aggravating misgivings or fears of neighboring States towards China.In 2009,the concept of G2 became a hotspot in the international community which overestimated China’s influence in the international affairs and misjudged Chinese fundamental foreign policy orientation.What is more critical is that some neighboring States which have such misgivings or fears have been attempting to use outside powers to balance or check the influence of China.②CHEN Yuping,China faces 3 Sources for Security Risks:the Surrounding Countries are more Suspicious,avaliable at:http://news.dayoo.com/china/201004/07/53868_ 12447964.htm,Nov 14,2010.Under such circumstances,it is much more desirable to include a clause“without prejudice against standpoints and positions on sovereignty or delimitation.”This clause will guarantee that joint development will have no effect on respective Parties’claims of sovereignty over islands or delimitations,which will explicitly demonstrate Chinese good will and determination on joint development and will remove concerns of neighbors.

The classic wording for reference is as the following:

Any provisions in the Agreement shall not be interpreted in the way as proof for renunciation of rights or claims to the defined area by the respective Parties,or as acknowledgement or endorsement to the other Party’s position on sovereignty or claim to the defined area;activities or conducts due to the Agreement or enforcing the Agreement shall not beviewed as the proof for claiming or sustaining or denying any Parties’positions on sovereignty or claims to the defined area.①XIAO Jianguo,the Joint Development of the Oil Deposits across the International Maritime Boundaries,Ocean Press,2006,p.236.

The specific wording of the clause will be varying.Nonetheless,brief or detailed,its binding force,the conclusion and enforcement of an agreement on joint development shall not prejudice against respective Parties’standpoints and positions on sovereignty and delimitation,shall be expressed explicitly.

Ⅱ.Pre-existing Rights of the Third Party

Pre-existing rights are rights to explore and exploit by an enterprise of third Party,whose permission to explore and exploit in the disputed area is granted by a signing Party before a joint development zone is established. Thereafter,the third Party will have the right of exploitation in the area.②CAI Penghong,The Management Mode for Joint Development in the Disputed Maritime Zones:A Comparative Study,Shanghai Social Science Press,1998,p.17.

Pre-existing rights of the third Party are to be taken into account when conducting joint development in a disputed area.Pre-existing rights become validated for a number of reasons.Firstly,a State granting its permission does not mean distribution or deposits of natural resources,inter alia oil and gas,in the area.For the purpose of research and deposits evaluation,the State grants its permission to the third Party to explore and exploit so that it may receive necessary data and statistics.Secondly,if a State(third Party)has explored and ascertained a commercially exploitable oil or gas field and secured investments from other Parties,thus the granting State will give its permission for economic ends.Thirdly,a granting State gives its permission with specific intention and purpose which is to engage with international consortia and groups.And by such activities,the State will impress the international community with its jurisdiction over disputed areas and thus increase its influence over future negotiations on joint development of the disputed area.Due to various reasons,pre-existing rights might give rise to serious discrepancies between involved States when negotiating joint development in the disputed area.③CAI Penghong,The Management Mode for Joint Development in the Disputed Maritime Zones:A Comparative Study,Shanghai Social Science Press,1998,pp.18-19.Therefore,when concluding an agreement on joint development and being con-fronted with pre-existing rights,negotiating States will consult with the granted Parties and make specific arrangements.

As for arrangements on pre-existing rights,the existing Agreements on joint development are generally taking two paths.One is to acknowledge preexisting rights explicitly,as it is stated in article 3(2)of the Malaysia/Thailand Joint Development Agreement:

The assumption of such rights and responsibilities by the Joint Authority shall in no way affect or curtail the validity of concessions or licenses hitherto issued or agreements or arrangements hitherto made by each party.

The other option is to deny pre-existing rights while requesting a granted third Party to participate in joint development under new conditions and terms. Typical examples of this type of agreement are the Joint Development Agreement between Sultan and Saudi Arabia and the Agreement between Japan and Korea.

Compared to the Agreement between Sultan and Saudi Arabia,the Japanese-Korean Agreement takes more flexible approach,according to which the two Parties are competent authorities for licensing in the sub-zone of the joint development zone and thus may re-license former permitted parties.In such way,pre-existing rights are practically acknowledged,which legally defines the status of former pre-existing rights owners without substantial difference from existing administration frames of either signing Party.

The flexible way of arranging pre-existing rights of third Party will serve as a great inspiration for the South China Sea region.Oil and gas deposits within Chinese traditional maritime boundary line are estimated at about 1.38 ×1010-1.65×1010t.of oil.①A Special Comprehensive Report Writing Group,A Comprehensive Report on China’s EEZ and Continental Shelf Exploration,Ocean Press,2002,p.120.By August 2009,riparian States such as Vietnam,the Philippians,Malaysia,Brunei and Indonesia have cooperated with over 200 western Corporations such as Exxon-Mobil and Shell to build about 1,380 rigs with annual output of fifty million tons.About eighty to ninety percent of the rigs are located in the South China Sea.②More than One Thousand Oil Wells Built by Use of Force,China Gets Nothing from Nansha Islands,International Herald Tribune,Aug.25,2009.Vietnam is especially active,as itdefined over 100 zones of oil and gas for public bidding in Nansha Island (Spratly Island)region.Public biddings have been invited soon after and cooperative explorations have been launched.In recent years,contracts on cooperative exploration of oil and gas have been concluded with companies from the U-nited States,Russia,France,the Great Britain and German,etc.With so many oil companies present in the South China Sea,arrangements for pre-existing rights of the third Party are inevitable.Unilateral activities will be excluded. China and other Party shall reach consensus before carrying out plans for joint development.

As demonstrated above,pre-existing rights in disputed zones of the South China Sea are due to deeply rooted reasons.At present,oil and gas development has been one of the most desirable impetuses for States with intensive labor to counter impacts from financial crisis and revitalize their economic development.Economy-based security policies result in attaching more importance to oil and gas resources.It is more so for the riparian States dependent on oil energy for industrial development.For the riparian States in short supply of oil one of the principal national security objectives is securing energy resources. One way to realize such goal is to take advantage of western investment and equipment for oil and gas development.In addition,by permitting foreign companies to participate in exploration and exploitation of resources,a State promotes operations in controlled island and sea areas,which thus will result in ipso facto occupation.On the other hand,powers outside the region are involved indirectly into the South China Sea though engagement of foreign companies in the development of resources.This in turn,may internationalize the disputes in the South China Sea,which may be exactly their strategy in the South China Sea.

Whereupon,as a latter participant in exploring the South China Sea,China will definitely benefit without admitting pre-existing rights of the third Party, while it will definitely have great impact on the interests of other riparian States and extra-regional States.For States which are already engaged in exploration,there is no urgent need for them to develop jointly resources.By denying their pre-existing rights,China might be confronted with great difficulties in joint development.Therefore,if an area is defined as a joint development zone,the two contracted operators before the establishment of the zone shall continue the operations with mutual consensus.Operation terms for future exploration shall be consulted with China on the basis of terms and conditions of commercial explorations.Whereby,the Japan-Korea Joint Develop-ment Agreement could be modified,because it does not explicitly define pre-existing rights.Clauses may grant China with power to license in all subzones just like the other Parties.Such an arrangement will be beneficial to existing licensee while it may allow participation of Chinese oil companies in joint development,and resolve problems on joint development between China and other riparian States.

Ⅲ.Defining A Joint Development Zone

Defining the geological scope of a joint development zone is the most fundamental component in the joint development project.There are more than a hundred internationally disputed sea areas which vary in scope.The disputed area in the Persian Gulf is over 200,000 km2,in Jan Mayen-45,470 km2,and in the Thailand Gulf-7,250 km2.①CAI Penghong,the Current Status of Sino-Japanese Disputes in the East China Sea and the Prospect for Joint Development,Contemporary International Relations,2008(3),p.45.We can define a joint development zone in three ways according to analysis of joint development projects in more than twenty disputed areas.The first one is to define the whole disputed area or overlapping jurisdiction area as a joint development zone.The second approach is to define part of the disputed area as a joint development zone.And the third one is to define a joint development zone with equivalent of two parts across the boundary line.Such approach is adopted usually when deposits are still undetected.Although the two involved States have decided boundary line delimitation,they share a common viewpoint that there might be potential oil and gas structures across the boundary line.Therefore,they are prone to make arrangements in advance for joint development.

In order to define the whole disputed area or overlapping jurisdiction area as a joint development zone two Parties have to determine the scope of a disputed or overlapping area at the outset,which relies on consensus on their respective sovereignty and rights.In the 1974 Sultan-Saudi Arabia joint development project in a disputed area in the Red Sea,the two Parties defined the whole disputed area as a joint development zone.Such an approach may be adopted when there is consensus and no third Party involved.If the disputed area is large,the realization of the joint development after reaching consensus will depend on the Parties’real capabilities.

For an area possibly involving with a third Party or in which the two Par-ties being incapable to develop the whole zone,it will be worthwhile considered to take part of the disputed or overlapping area as a joint development zone (unclear sentence).In the Thailand Gulf,there are areas with overlapping claims among Thailand,Malaysia and Vietnam.Joint development zones between Thailand and Malaysia,and between Malaysia and Vietnam are with limited scope and within the bilaterally disputed areas.In the case between Indonesia and Australia,the two Parties undertook joint development activities in a prospective oil field before the joint development Agreement was concluded in 1989.

The third approach is an equivalent arrangement before deposits are proven.In the case between France and Spain,the joint development zone consists of two parts across the boundary line.Such an arrangement appears to be reasonable while there are uncertain factors.Once oil and gas deposits are proven,such an arrangement might be denied,so the two Parties have to define the disputed area again.

In the author’s view,defining overlapping areas in the South China Sea is essential for making real progress in joint development.Since the third approach is applicable only when deposits are unproven,it will not satisfy our needs to promote joint development and to expedite resources exploitation.No doubt,defining the overlapping zones in the South China Sea will not be easy. China and other riparian States are all making claims on marine rights and interests in accordance with the Untied Nations Convention on the Law of the Sea(hereafter referred as the Convention).The Convention is not very precise in regulating islands and only consists of principles on delimitating Continental Shelf and Exclusive Economic Zone.Whereof,defining disputed areas in the South China Sea which relates to the six States or seven Parties will be quite difficult between two Parties,let alone among more Parties.

For various purposes,some States and scholars have made proposals for joint development in the South China Sea,including joint development zones. Here are some of the significant influential proposals.①Li Guoqiang,Analysis on Some Solutions to the Disputes Over Nansha Islands Sovereignty,Studies on the History and Geography of Chinese Frontiers,2000(3).

1.Annular Arrangement

Annular Arrangement was proposed in 1994 by Indonesia.According to the agreemnt,all riparian States may claim 200 nautical miles from the baseline from which the breadth of territorial sea is measured.The seaward line of theouter limit of the Exclusive Economic Zones may form a circle line.Annular area,including Nansha Islands(Spratly Islands)and the surrounding sea area, circled by that line shall be a potential joint development zone.Such a proposal completely denies Chinese traditional boundary line and shall be unacceptable. Other ASEAN Parties are all indifferent to this proposal.

2.Sharing Resources Arrangement/Applicable to Each Party Arrangement

The concept of Sharing Resources Arrangement or the so-called Applicable to Each Party Arrangement was proposed by the American scholar Mark J. Valencia.According to this arrangement,all disputing Parties should put aside sovereignty claims over Nansha Islands and draw an equidistance line between undisputed territory and disputed islands.The area within the equidistance line shall be a joint development zone,which may be outside the 200 nautical miles zone of each Party,excluding the Xisha Archipelagoes(Paracel Islands)or the Nansha Islands.Such an arrangement in fact delimits maritime zones and includes sea areas over which China enjoys definite rights.

3.South China Sea Donut Arrangement

The South China Sea Donut Arrangement was proposed by an Indonesian Ambassador in Germany Hasjim Djalal in May 1994.According to it,all riparian States could claim 200 nautical miles Exclusive Economic Zones.The central part of the South China Sea is way beyond the scope of all Exclusive Economic Zones and is proposed as a joint development zone.All riparian States shall not claim continental shelves beyond Exclusive Economic Zones.Islands or rocks in the zone are accessible for people from all coastal States,as they are permitted to land there freely.Islands or rocks which are designated for joint development shall not be used for military bases or other related purposes and shall exclude any maritime zones,such as territorial sea,contiguous zone,Exclusive Economic Zone or continental shelf.The joint development zone shall be used only for peaceful purposes,excluding military purposes such as drills. Duration of the joint development zone shall be limited to fifty years,which can be extended by the Parties.This proposed arrangement also neglected Chinese sovereignty.

4.Three-dimension in the South China Sea

The idea of Three-dimension in the South China Sea is proposed by Kuenchen Fu.In his views,there should be three dimensions to be considered in the binding forces of the U-shape Line.The first dimension is the whole South China Sea as a semi-enclosed sea.In accordance with Article 123 of the Convention,all riparian States may cooperate with each other on living resourcesmanagement,marine environment,shipping and scientific research.The second dimension is the“historical waters”of China within the U-shape line according to Chinese governmental conduct in 1947,where China is enjoying all privileges.The third dimension is archipelagic waters formed by straight baselines of the Xisha Archipelago and the Nansha Islands,where China has integrate exclusive sovereignty without prejudice against passage rights of other States.①Prof.Kuenchen FU’s Academic Lecture on the South China Sea Issues,avaliable at:http://www.sjtu.edu.cn/news/shownews.php?id=27893,Nov.14,2010.

In other words,the three above mentioned proposals do not fully respect Chinese sovereignty.According to them,the Nansha Islands are either equivalent to an area of res nullius,or thier sovereignty to be defined based on status quo to redistribute their deposits.In fact,the Nansha Islands are being internationalized,which makes Nansha Islands region a reserved international area or an international ocean park.②Li Jinming,The Oil Resources Development in Nansha Islands Area and the Prospect for Resolving the Disputes,Xiamen University Journal(Philosophy and Social Science Edition),2002(4),p.56.The fourth proposal aims at maintaining Chinese sovereignty and is of principle nature.However,there is no specific definition of joint development zone,which makes the proposal difficult to implement since the Nansha Islands and sea area are occupied by other neighboring States.

In order to resolve so complicate and delicate issue of defining a joint development zone in the South China Sea under the present circumstances,the author takes the view that practical principles should be applied,starting with the easiest one to implement.Generally speaking,in resolving international disputes,bilateral negotiation will be more successful,while multilateral format could be employed in the long term.According to the practice of joint development in international seas,bilateral development in a relatively small disputed area without a third Party involved could be the first step for starting joint development.Precedents may be found in overlapping areas among Thailand, Malaysia and Vietnam in the Gulf of Thailand.Joint development zones between Malaysia and Vietnam and between Thailand and Malaysia are defined with appropriate scale,limited within bilaterally disputed areas.As for in the South China Sea,at first we may consider establishment of bilateral joint development zones,which could be extended to multilateral zones when conditions are favorable.

Here are some specific suggestions.Firstly,the eastern part of the LileBasin could be jointly developed with the Philippines.The Lile Basin is a land of Epicontinental Cleavage with an area of 39,000 km2which meets the six requirements for oil and gas deposits.The central and eastern fracture parts are believed to have oil and gas deposits.Although exploration in Lile Sand may be more economically acceptable,it is not an ideal area of rich deposits.In future explorations,deep and large fractures should be detected in the central and eastern parts to find large oil and gas fields.①Sun Longtao,The Potential of the Oil and Gas Resources in the Liyue Bank of Nansha Islands Area,Geoscience-China University of Geology Journal,Jan,2010(vol.35(1)),p. 137 and p.143.

Secondly,the James Shoal Basin may be jointly developed with Malaysia. This Basin is located on the Sarawak continental shelf with a size of 183,000 km2,of which 127,000 km2are within Chinese Traditional Boundary Line.At present,there are 72 oil and gas fields and structures detected.Roughly calculated by using volumetric method of sedimentary rock,Guangzhou Marine Geological Survey of the Ministry of Geology and Mineral Resources estimates that the total oil and gas deposits are 10.72 billion tons,of which 7.74 billion tons are within Chinese Traditional Boundary Line,including 0.7 billion cubic meters natural gas.

Thirdly,the Brunei Basin and the Vanguard Bank Basin could be jointly developed with Vietnam.The Brunei-Sabah Basin stretches 940,000 km2from north to east,including 33,000 km2within Chinese Traditional Boundary Line, while the sedimentary marine facies are over 10,000 meters.At present,there are 72 oil and gas fields and structures detected,in which oil is the major product.The Virginia Barrow Oilfield has deposits of 29.74 million cubic meters oil and 35.6 billion cubic meters natural gas.The Pablo Southwest Oilfield is estimated to have 144 million tons of oil deposits.According to an estimation made by China Offshore Oil Exploration Research and Development Center deposits of the Brunei-Sabah Basin are 8.5 billion tons,while the Ministry of Geology and Mineral Resources estimated them at 5.56 billion tons.About 1.85 billion tons or one third of the deposits are located within Chinese Traditional Boundary Line.

The Vanguard Bank Basin is located southwest of the Nansha Islands, whose long axis north to south is 600 km long and with area of 85,000 km2. There are at least 21 proven structures with oil and gas,and another 21 structures are appear also to be filled with oil and gas deposits.Estimated depositsare 4.1 billion tons,among which 2.7 billion tons are within the Chinese Traditional Boundary line.①Zhang Xunhua,The Geological Formation of Chinese Seas,Ocean Press,2008,pp.303-311.

In conclusion,bilateral joint development in a more defined area will confront fewer difficulties,which may serve as example and impetus for multilateral joint development in broader areas.

Ⅳ.Management Patterns

The management pattern in joint development zone can be divided into operational pattern and administrative pattern,which are key issues to be clarified by Parties in joint development throughout the whole term.Since a joint development zone bears nature of sovereignty rights as well as cooperative operations,its management shall meet the needs of administrative supervision and cooperative operation.Upon analyzing joint development cases,we can identify four management patterns in jointly developing offshore oil and gas.

The first pattern is when one state manages joint zone on behalf of both Parties,or may be viewed as an agent of the other Party.The agent Party carries out or manages joint development of oil and gas in the defined zone and apply its own domestic laws on licensing and administration.This pattern was usually adopted in early cases of joint development.Its examples can be found in the 1958 Bahrain-Saudi Arabia Joint Development Agreement and the 1969 joint development Agreement between Qatar and Abu Dhabi.The second pattern is joint management.Under such a pattern,the two Parties can license their own concessionaires.The concessionaires shall conclude an agreement on joint operation,conducting exploitations and explorations in the zone through a joint venture.The agreement on joint operation shall be approved by governments of the Parties.Examples of such a pattern are the 1974 France-Spain Joint Development Agreement on the Gulf of Biscay,the 1992 Malaysia-Vietnam Joint Development Agreement on the Gulf of Thailand and the 1995 Britain-Argentina Joint Development Agreement on Southwest Atlantic.The third pattern is“Super-national authority”management.Under such an arrangement,the Parties establish International Authority with legal entity with the same number of delegates from each Party to take all responsibilities on licensing exploitations and setting down terms and conditions for explorations andexploitations in the zone.In practice,this model is reflected in the Malaysia-Thailand Joint Development Agreement,the Agreement on Management and Cooperation between Guinea Bissau and Senegal in 1993 and 1995.

Agent pattern is rarely seen in practice.Such a pattern will be fitting in limited number of cases.States have long-standing good and friendly neighboring relationship,and the joint development zone between them is on comparatively small scale,which may make complicated management arrangement serve non-economic ends as well.Joint operation pattern has the merit of simplicity and practicality,which fits in zones with historical conflicts of economic interests and in zones where neighboring States adopt different models in exploiting natural resources.States are limited to rights of licensing while specific operations are left to the concessionaires.In that sense States will have very limited control over joint development.Super-national Authority pattern is the most complicated and institutionalized one,which will demand cooperation at a much higher level.Such a pattern appears to be less attractive unless the two Parties have great discrepancies on some key matters or are eager to pursue oil and gas development.①Xiao Jianguo,the Joint Development of the Oil Deposits across the International Maritime Boundaries,Ocean Press,2006,pp.123-127.

The above mentioned three patterns have both advantages and disadvantages.If all advantages are focused in one zone,both Parties can balance their interests more successfully.The Timor Gap Treaty is such an example,in which the most promising zone A is defined as a major zone of joint development with zones B and C are defined as auxiliary zones.The auxiliary zones are taken as a micro adaptation and supplementation to the major zone,so as to minimize difficulties in balancing interests and be more acceptable by the disputing Parties. The advantage of this pattern is that a joint development zone can have different layers of organization,be divided into subzones with different interest shares,and apply different rules.Such a mixed management pattern will be a great inspiration for the countries of the South China Sea-a region of heated disputes.②Onorato,W.T.and Valencia,M.J.,“International Cooperation for Petroleum Development:The Timor Gap Treaty”,ICSID Review:Foreign Investment Law Journal,vol.5, No 1,Spring 1990,p.21.

First of all,for prospecting core zones with rich resources and important economic interests,Super-national Authority pattern is worthwhile considering,according to which a Joint Authority shall be established for exploration,exploitation and management.Such cooperation on a high level can contributiee to the efficiency of joint development and to the enhancement of mutual trust. Nonetheless,if it is difficult to reach a consensus on key matters such as framework of development,law application,financial arrangement and taxes at an early stage,joint operation pattern will be preferable as the second best choice. This pattern has merit of full scale project,which will attract investment since concessionaires undertake specific operations.Agent pattern won’t be fitting in joint development of core zones.Firstly,one Party acting as an agent on behalf of the other Party in exercising sovereignty rights will make the latter Party uneasy about potential unequal position,or even feel that its own sovereignty rights over the resources are being prejudiced against or diminished.In the South China Sea,practical management and jurisdiction exercised in core zones might inter alia make one Party fear that sovereignty ipso facto is acknowledged.

Secondly,for a disputed zone in the vicinity of one Party which explores it to a certain degree,agent pattern might be taken into consideration.The Party will carry on managing operations with a certain share of revenues generated by the other Party.In some disputed zones of the South China Sea,Vietnam,Indonesia and the Philippines have concluded contracts on developing oil and gas with the United States,Russia,France and German,and thus have gained enormously.Under such circumstances,China shall respect the status quo explorations and not get involved in the management of the zones.Alternative approach to joint development in the zones is revenue sharing,which is more adaptable.

Thirdly,for zones with potential strong opposition and contention from third Parties,joint operation pattern shall be considered.At present,existing joint development agreements are almost all bilateral,while establishing a joint development zone in a disputed region will always be related to a third Party or Parties.Existing practices of coping with sovereignty or sovereignty rights of third Party or Parties have three options,which are avoiding third Party or Parties,excluding the third Party/Parties,or providing for procedures on how third Party/Parties shall participate in the agreements.We will not elaborate further on how to cope with rights of third Party/Parties in joint development in disputed zones of the South China Sea.Joint operation pattern shall be favorably considered for such zones,for it is more adaptable to inclusion of third Party or Parties.According to this pattern,licensed concessionaires by the twoParties will conclude an Agreement on joint operations.Joint development will be undertaken through a joint venture.States have powers on licensing,while daily operations will be left to the concessionaires.Public powers are reflected in licensing,and equal private rights are reflected at later stages.The third Party participates in joint development by licensing its domestic concessionaires,which will have the least impact on established regimes and more easily accepted by the two Parties engaging in joint development.

It is certain that disputed zones in the South China Sea shall not be sub-divided into the above mentioned three categories.Choosing management pattern of joint development will not be easy due to the complex situation in the South China Sea.The will of all related States shall be taken into account on case-by-case basis in specific zones.The most important task is to balance all interests and promote joint development.Whereupon all above mentioned patterns might be applied to joint development in different zones.Furthermore, such patterns could be replaced by each other in the same zone due to changes of circumstances in joint development.Therefore,the selection shall be made according to changing circumstances and shall be readjusted in time.

Ⅴ.Jurisdiction over a Joint Development Zone and Law Application

There are plenty of rights and obligations to be regulated in a joint development zone,including legal relationships between operators in the zone,between the government and operators,between operators and contractors,between contractors and the third Party.Who shall exercise jurisdiction on what conditions shall be bound by international rules without jeopardizing coastal State’s jurisdiction over the sea area?When negotiating,signing and enforcing a joint development agreement,member States hope to expand their jurisdiction and enforce their domestic laws in the zone.Whereas,jurisdiction over and law application in joint development are to be resolved through negotiation between involved States.

At present,we can identify four types of jurisdiction and law application in a joint development zone.One is sole jurisdiction by one State and application of its domestic laws,which can be seen in the 1958 Bahrain-Saudi Arabia agreement on joint development in the Persian Gulf.The agreement stipulated that jurisdiction was to be solely exercised by Saudi Arabia,and it was a typical agreement in early times.Another type is to divide the zone into two parts,inwhich each Party shall exercise its jurisdiction and apply its domestic law from its coast line to the delimiting line.Joint development between France and Spain,and the agreement between Iceland and Norway on joint development of Jan mayen are such cases,in which way conflicts of law application will be avoided.A third type of jurisdiction is condominium in overlapping area.Condominium mostly relates to the Super-national Authority adopted by member States.In the joint development between Malaysia and Thailand,the two Parties established a Joint Authority in charge of exploration,exploitation and control of non-living resources in seabed and subsoil of the area.The last type is jurisdiction by the operator’s Home State in overlapping area.The joint development agreement between Japan and Korea can serve as an example.When starting negotiation,the two Parties attempted to make a specific set of legal rules for the joint development zone,which proved very time-consuming and complicated.The two Parties also tried to divide the zone into two parts and exercise jurisdiction respectively,which appeared to be contradicting with the guiding idea of the agreement to put aside disputes and be without prejudice against delimitation.In the end,the two Parties decided to divide the joint development zone into several subareas,each of which would be under the jurisdiction of the operator’s Home State.In other words,operators should be bound by their domestic laws.In article 19 of the Agreement it is stated:

Except where otherwise provided in this Agreement,the laws and regulations of one Party shall apply with respect to matters relating to exploration or exploitation of natural resources in the subzones with respect to which that Party has authorized concessionaires designated and acting as operators.

The Agreement between Japan and Korea on joint development is featured with equality and simplicity,avoiding law conflicts between the two Parties, which is known as“operator formula”and proved fruitful,inter alia for States with similar cultural background and legal regime.①Xiao Jianguo,the Joint Development of the Oil Deposits across the International Maritime Boundaries,Ocean Press,2006,p.150.

In the author’s views,joint development in some areas of the South China Sea may use such a model,as it won’t be applicable to the whole South China Sea region.Jurisdiction and law application cannot be an isolated issue andshould be considered in combination with the administrative regime of a joint development zone.As for the South China Sea,there are generally three areas or subzones,which require a unique way of jurisdiction and law application.

The first subzone has potential for development and involves critical economic interests.Under such circumstances,a Supra-national Authority will be a suitable administrative model,according to which explorations and exploitations are under a joint Authority established by member States.Condominium thereof will contribute to the Authority fulfilling its duties and carrying out development activities.If overall condominium is difficult to realize,the Parties could consider condominium over specific affairs.In the joint development between Malaysia and Thailand,the two Parties set up condominium for the joint Authority over exploring and exploiting non-living resources on the seabed and subsoil,while jurisdiction over fishing,navigation,scientific research,pollution prevention and other issues is still solely exercised by each State.The two Parties drew a delimitation line in the zone in order to avoid conflicts over penal jurisdiction.

The second subzone is in the vicinity of a State which has explored the disputed area to a certain degree.A preferable approach in this case is the agent pattern,according to which the State is responsible for management and exercises sole jurisdiction by applying its domestic laws.In the 1958 Bahrain-Saudi Arabia joint development agreement,jurisdiction by Saudi Arabia does not jeopardize the right of Bahrain to get half of the revenues from the oil field.

The third subzone has disputes among several States.Jurisdiction by the operator’s Home State set by the Agreement between Japan and Korea is a benchmark for joint development in such subzone.Disputed zones are often put under pressure from external Powers,so joint operation pattern is more adaptable to unexpected changes.As for jurisdiction and law application,such an approach is also worthwhile considering.On one hand,jurisdiction by the operator’s Home State is based on the premise that all involved States’laws are equal.On the other hand,applying different laws to different operators might stimulate the resolution of such problem due to the impact on existing regimes of joint development brought by new Parties of the Agreement.

Ⅵ.Conclusion

This paper examined key issues on joint development of oil and gas in the South China Sea,while taking into account experiences and precedents in othersea areas.Accordingly,it offered some solutions and approaches.Needless to say,each Agreement on joint development of offshore oil and gas is marked with its own unique characteristics.It remains to be seen whether such simple modifications are applicable to the South China Sea.Furthermore,joint development of oil and gas in the South China Sea is only one of the disputed themes in the region,and its resolution is linked to other themes.Nonetheless,a journey of a thousand miles begins with a single step.This author hopes to contribute to the final resolution by exploring a specific theme.

(Senior Editor:ZHANG Xiangjun; Editor:SU Baoqing;English Editor:Avram Agov)

*LUO Ting-ting holds a Master degree in science of law(majoring in international law), and is an assistant researcher at the department of marine information and rights of the National Marine Data and Information Service.E-mail:misslaw1983@sohu.com.