Abstract. Although the oil and gas resources of the Caspian Sea are sufficient, their transportation to world markets requires enhancement. The most suitable fonn for doing so is to ship the resources over waterways, which are limited in the case of the Caspian region or to use pipelines. The existing network of pipelines from the Caspian Sea shall be extended, and tins requires application of international legal standards. In the case of land pipelines there are different legal frameworks available, such as the Energy Charter of 1994, where also the newly independent npanan states are party to. In the case of the maritime pipelines which are to pass through the Caspian Sea, the law of the sea would be respectively applicable. It would be recommendable to place the future legal regime for the Caspian Sea together with the fundamental rules of the law of the sea.
Excerpt from the book: The Legal Status of the Caspian Sea - Current Challenges and Prospects for Future Development
- Pipelines in the Caspian Sea
The oil and gas resources of the landlocked Caspian region are thousands of miles away from open sea ports, from where tankers could deliver them to markets in Europe, Asia, or Amenca. This was one reason why a number of pipelines for the transport of liquids and gases (petroleum and natural gas from the Caspian fields) was built - namely, in order to transport resources overland for distances of several thousand kilometers. Since some large oil and gas deposits are located seaward of the Caspian coast there are plans to construct offshore pipelines on the seabed of the Caspian Sea.
Whereas oil and gas production in the Caspian Sea has been increasing from year to year, the expansion of export capacity has been slow. Many regional and global actors want to gain control of the Caspian's energy reserves and their transport routes in order to strengthen either own political presence in the region, to reduce their dependence on energy supplies from the Gulf region, or (as in the case of the new independent states of the Caspian states) to secure their economic development. This complex geopolitical situation in the region impedes policy with respect to laying pipelines in the Caspian region.
The two oil pipelines Baku-Novorossiysk (the northern route from 1997 and the second route from 2000), as well as the pipeline Baku-Supsa transport oil from the fields of Azerbaijan to the west. The oil from Kazakhstan also flows through two lines: Atyrau to Samara in Russia, where it connects with the Russian main line, and since 2001 also through the pipeline of the Caspian Pipeline Consortium (CPC) from the oil field Tengiz to the Russian ports of Novorossiysk and Tuapse on the Black Sea. The required expansion of the loading capacity of the two ports, however, hampers further oil transport through the Black Sea to the Mediterranean area. An alternative to the CPC is offered by the oil pipeline Baku-Tbilisi-Ceyhan (BTC), which is designed for the transport of oil mainly from Azerbaijan to the world market. The idea remains very controversial of building a trans-Caspian line to deliver oil from the Kazakh Aktau field into the BTC. The completion of other planned pipelines that could to carry Caspian resources both to the west and to the south and east, in the near future is not foreseeable for political reasons. The Kazakhstan-China oil pipeline is China's first direct oil import pipeline from Central Asia. It runs from Kazakhstan's Caspian shore to Xinnang in China. The pipeline is owned by the China National Petroleum Corporation (CNPC) and the Kazakh oil company KazMunavGas. The construction of the pipeline was agreed between China and Kazakhstan in 1997. The first section of pipeline from the Aktobe region's oil fields to Atvrau was completed in 2003. Currently capacity is approx. 14 million tons per year. The pipeline is expected to reach a nominal capacity of 20 million tons per year in 2014. The strategic importance of the Caspian deposits consists not in their actual size, but m their role in diversifying sources of energy for countries seeking resources outside the Arab region. The transportation of Caspian resources via both the existing and the planned routes, requires the adoption of relevant provisions on their construction and operation.
Given the geographical location of the Caspian Sea as landlocked waters, the legal regime of the resource transport routes is subject to disputes between the coastal states. Much greater importance concerns the possible elaboration of legal norms defining the regime of pipelines on the seabed and underground. The final set of rules determining the oil and gas pipeline regime shall reflect international legal standards.
- International law on pipelines
International law provides detailed regulation of the regime for laying submarine pipelines. Pipelines located overland and at the bottom of the sea are defined as a means of transporting petroleum and natural gas. The overland pipelines enjoy no special regime under international law. Submarine pipelines are regulated according to the law of the sea. The existing international rules concerning freedom of transport may apply to pipelines and gas lines when they are used for traffic in transit if agreed upon by the contracting states concerned. There are merely a few treaties regulating this matter. A number of related issues (like property, licensing, safety standards, and the environment) are regulated by the national law of the individual states.
Most transboundary overland pipelines consist of separate parts located on areas covered by the given state's sovereignty and their regime is therefore regulated by national laws. However, it is becoming increasingly common that the transboundary pipelines are regulated by multilateral agreements. They provide for the parties' general obligations regarding pipeline construction, non-discnmmation in usage, etc., or even exact data regarding the delineation of the course for the laying of such pipelines. The pipelines to be laid on the territory of another state for defense reasons require the permission of the state concerned.
Initially, a state's freedom to lay submarine cables was recognized in the 19th century. This was regulated for the first time in the Convention for the Protection of Submarine Cables from 18 84, and recognized as one of the freedoms of the high seas in 1927 by the Institute de Droit International". The legal regime for laying and protecting submarine pipelines was set in the Geneva Convention on the High Seas of 1958 and in the UNCLOS. The coastal state shall have the right to set conditions for pipelines entering its territory or territorial sea, or to establish its jurisdiction over pipelines that are from other states under its jurisdiction. Subject to its right to take reasonable measures for the exploration of the continental shelf, the exploitation of its natural resources and the prevention, reduction and control of pollution from pipelines, the coastal state may not impede the laying or maintenance of such cables or pipelines. The delineation of the course for the laying of such pipelines on the continental shelf is subject to the consent of the coastal state. The coastal state retains the right to establish conditions for pipelines entering its territory or territorial sea, and its jurisdiction over cables and pipelines constructed or used in connection with the exploration of its continental shelf, along with exploitation of its resources and the operations of artificial islands, installations and structures under its jurisdiction.
Outside the temtonal sea, states are free to lay submarine pipelines. When laying submarine cables or pipelines, states shall due regard to pipelines already have in place. In particular, the possibility to repair existing cables or pipelines shall not be prejudiced. In case of interruption or damage to a submarine pipeline by the owner of another submarine pipeline the repair costs incurred by the pipeline owners must be earned by him.The freedom to lay submanne pipelines - including the laying of new pipelines as well as repainng the old - as well as to enjoy other freedoms of the high seas shall be exercised by states with due regard to the interests of other states enjoying similar freedoms on the high seas and to those states' rights with respect to activities in the Area.
A state's nght to lay pipelines on the continental shelf and respectively on the sea bed of the exclusive economic zone is limited by the following nghts of the coastal state: to take reasonable measures for the exploration of the continental shelf, the exploitation of its natural resources, and the prevention, reduction, and control of pollution from pipelines and the coastal state's consent for the delineation of the course for the laying of such pipelines on the continental shelf In the areas where the Exclusive Economic Zone was established above the continental shelf the legal regime of continental shelf prevails. This applies except when the Exclusive Economic Zone exceeds the seaward limits of the continental shelf, as in such a temtory the regime of the high seas is applicable".
The nght of the coastal state to take reasonable measures for the prevention, reduction, and control of pollution from pipelines includes its nght to conduct an inspection and the imposition of safety standards. The pipes require pumping stations for their proper functioning. A safety zone will therefore be created around them.
The mantime pipeline regime for the land-locked countnes is a special case. Land-locked states are those countnes which have no access to the sea coast. Their geographic location hampers their participation in world trade since they need to trade at a great distance from the sea, thus causing relatively high costs. Secunng free and unfettered access to the high seas is of great significance for the landlocked countnes, which in turn is connected with the transit issue. Both persons and property, which onginate from a land-locked state or shall amve at its temtory, must cross the territory of another state, which matter can cause numerous legal, political, and administrative difficulties.
Not all international agreements that guarantee the freedom of transit extend to the nghts of landlocked countnes to lay pipelines, secunng the contractually preferential treatment of landlocked countnes. The Barcelona Convention and the Barcelona Statute on freedom of transit, the first which has provided for freedom of transit, does not apply to laying of pipelines. The Barcelona Convention and the Statute has a more general scope of application in companson to the New York Convention on Transit Trade of Landlocked States. The latest, alongside traditional means of transport, includes rules for "other’ means of transport, including oil and gas pipelines, which shall be established by common agreement among the contracting states concerned, with due regard to the multilateral international conventions to which these States are parties. UNCLOS, while defining the means of transport, states that landlocked states and transit states may, by agreement between them, include as means of transport pipelines and gas lines. Also the GATT-agreement secures the transit right of the landlocked states which may be exercised by state, and not private enterprises ’. None of these provisions allowing the transit freedom for pipelines may be applicable to the Caspian Sea pipeline, since neither the Soviet Union itself, nor its successor states have ever become parties to these conventions. Therefore a particularly important role for the expansion of pipeline transit rights of the Caspian's landlocked countries is played by Energy Charter, which was signed in Lisbon on 17 December 1994 by all the states of the former Soviet Union. Its weakness lies in the fact that Russia has not ratified the Charter".
The Charter defines oil transportation as one of the priority areas for regulation. Its provisions are applicable to all economic activity in the energy sector, including the transportation of primary energy sources (oil and gas) and energy products. It obliges parties to take necessary measures to facilitate the transit of energy materials and products consistent with the principle of freedom of transit and without distinction as to the origin, destination, or ownership of such energy materials and products or discrimination as to pricing on the basis of such distinctions, and without imposing any unreasonable delays, restrictions, or charges. Contracting Parties shall encourage relevant entities to co-operate in: first, modernizing energy transport facilities necessary to the transit of energy materials and products; second, developing and operating energy transport facilities serving the Areas of more than one contracting party; third, applying measures to mitigate the effects of interruptions in the supply of energy materials and products; and fourth, facilitating the interconnection of energy transport facilities. The next, very important provision states that in the event that transit of energy materials and products cannot be achieved on commercial terms by means of energy transport facilities, the contracting parties shall not place obstacles in the way of new capacity being established, except as may otherwise be provided in applicable legislation regarding environmental protection, land use, safety, or technical standards. In the event that transit of energy materials and products cannot be achieved on commercial terms by means of energy transport facilities the contracting parties shall not place obstacles in the way of new capacity being established. However, a party through whose territory primary energy sources and energy products can be routed in transit, is not obliged to permit the construction or modification of energy transport facilities or a new or additional transit through existing energy transport facilities in case when it would endanger the security or efficiency of its energy systems, including the security of supply. A special system of dispute settlement described in the Charter may be applicable only following the exhaustion of all relevant contractual or other dispute resolution remedies previously agreed between the Contracting Parties involved in the dispute.
- Future regulations on pipelines in the Caspian Sea
The pipeline regime in the Caspian Sea has never been subject to separate interstate regulation. It is the draft of the status convention, which for the first time wili regulate this regime. The Draft Caspian status convention is - albeit indirectly - following law of the sea provisions.
"Contracting states may lay submarine cables and pipelines on the bottom of the Caspian Sea. [proposed by Azerbaijan, Kazakhstan and Turkmenistan] in accordance with this Convention, international legal standards and agreed economic standards" [Art 13 (2), Section 1] [proposed by Iran]
"The delineation of the course for the laying of such pipelines is subject to the consent of the state party, if the submarine pipe is to be laid through the mining site of the coastal state." [Art 13 (2), paragraph 2] [proposed by Azerbaijan, Kazakhstan and Turkmenistan]
“Nothing affects the right of the state parties to establish conditions for laying pipelines entering their mining sites on the seabed [Art. 13(2) Abs.3][proposed by Azerbaijan, Kazakhstan, Iran and Turkmenistan/
Regarding the laying of a trans-Caspian pipeline the state parties differ seriously in their positions. Provisions proposed by Iran together with Russia are not compatible with existing international law norms regarding the laying of submarine pipelines
“Contracting states may lay submarine cables and pipelines on the bottom of the Caspian Sea [Art. 13(2) Abs. 1] [proposed by Russia and Iran]
"States Parties establish conditions for the laying of technological pipelines in their own sectors or their zones at the seabed of the Caspian Sea “[Art. 13(2) Abs .2] [ proposed by Russia and Iran]
"The Contracting states mcy lav submarine main pipelines on the floor of the Caspian Sea, under the condition that an ecological expertise of these projects will be approved by all the coastal countries. The state laying the pipeline shall bear material responsibility for damages caused to the other Parties and to the marine environment occurring due to break up of the pipeline [Art. 13(2) Abs.3] [proposed by Russia and Iran]
Iran and Russia rule out the possibility of a unilateral decision with regard to the laying of a trans-Caspian pipeline. Russia's position on the division of the Caspian Sea into Zones of National Jurisdiction, where coastal states' rights have not sovereign character, excludes coastal states' privileges recognized by UNCLOS regarding rights on laying the pipelines. Azerbaijan, Kazakhstan, and Turkmenistan represent the position that each of the coastal states exercises the right to lay submarine trans-Caspian pipeline. Such a right shall be based on an agreement concluded exclusively between states whose seabed mining site is crossed by the routes of pipelines. This proposal complies with the provisions of UNCLOS relating to the rights and obligations of states on the laying of submarine pipelines. It requires the consent of the respective coastal state since nothing affects the right of the coastal state to establish conditions for pipelines entering its territory, or its jurisdiction pipelines constructed.
The Draft of the future convention on the legal status of the Caspian Sea states that the regime of the pipelines in the Caspian Sea shall be designed according to the requirements of both: standards of the law of the sea and rules reflected in the Draft of the future convention. This provision does not allow deriving the final standards for pipelines as long as the coastal states represent entirely diverging views with respect to the legal division of the Caspian Sea into mantime zones which define the coastal states' fundamental right regarding the laying of pipelines.
- Final remarks
Although the oil and gas resources of the Caspian Sea are sufficient, their transportation to world markets requires enhancement. The most suitable form for doing so is to ship the resources over waterways, which is limited in the case of the Caspian region, or to use pipelines. The existing network of pipelines from the Caspian Sea shall be extended, and this requires application of international legal standards. In the case of land pipelines there are different legal frameworks available, such as the Energy Charter of 1994, where also the newly independent riparian states are party to. In the case of the maritime pipelines which are to pass through the Caspian Sea, the law of the sea would be respectively applicable. It would be recommendable to place the future legal regime for the Caspian Sea together with the fundamental rules of the law of the sea.
The legal regime of Caspian maritime pipelines has never been subject to interstate agreements. It was subordinated only to the general practice of the Caspian states in regulating the use of the Caspian Sea. Nowadays, it is only a draft of the convention on the legal status of the Caspian Sea which shall define the future legal framework for the mantime pipeline regime. The challenge related to the settlement of this issue is, as in the case of other legal regimes for use of the Caspian Sea, related to the undefined status of the Caspian Sea. There is still no agreement between the coastal states whether and which parts of the Caspian Sea shall be covered by the coastal states' sovereignty or respective sovereign nghts, as would allow the coastal states to freely build transboundary Caspian pipelines.
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