PREFACE
This year saw a change in the structure of the editorial team which comprised the appointment of two editors with joint responsibility supported by several advisors with expertise in the various disciplines covered in this edition. Warmest congratulations are due to the former for their efficient organisation, collation and processing of the data presented in this issue of the review and also to their supporting team for the technical editing of the various contributions. The two chief editors Ernest Enobun and Diana Bayzakova are responsible for the attractive design of the innovative 'new look' cover which indicates at a glance to the busy viewer the scope and range of the papers published in the final edition. The forty six papers selected for publication in this year's journal comprise the most suitable submissions selected from a total of more than 75 papers.
It is important to appreciate that this year's CAR goes on line against the sombre backdrop of what is arguably the worst recession in the past two centuries fuelled largely by the erratic performance of top banking executives and financiers which has impacted drastically upon the lives of millions around the world. This adds a heightened poignancy to some of the issues highlighted in this review and has coloured the thinking in the context of economic, energy, and financial perspectives. It remains to be seen if the Herculean international efforts that are being put in place will counteract the shrinkage in international commerce and prove capable of putting globalisation back on track.
The dramatic fluctuation in the oil price and to some extent comparable behaviour on the part of the natural gas industry which have impacted directly on the price structure focus attention on the overwhelming importance of the petroleum industry which holds centre stage in terms of its manifold aspects that are addressed in this review. Also covered by three papers is the rising demand for gas and the pros and cons of LNG and tanker transportation to the main consumption centres versus transnational pipelines. The former is gaining popularity notably in the context of 'spot sales' The problem with the pipelines is the huge investment involved and the risk over the length of the payback period and also the transit fees payable to the countries traversed en route.
Nuclear energy also receives a mention echoing a timely reminder of the safety hazard entailed in harnessing atomic energy taking the Windscale accident as an example. Nevertheless it remains to be seen if other conventional energy sources and renewables can cope with the ever increasing demand in line with the rising world population. Moreover, plans have already been laid for the construction of a second generation of nuclear power stations, notably in the US and UK and there is also the example of the successful switch in France to nuclear energy as the mainstream source to power for their industries which has proved successful so far.
Looking at the broader issues on a continental scale in terms of energy requirements from the perspective of international relations, some contributions highlight the oil potential in Africa as the world's third largest producer, spot lighting the possible implications of the increasing role played by China on the region.
Papers dealing with the complexities involved in the development of natural gas in both political and economic contexts draw attention to problematical issues. In one instance prudence has apparently been overridden by emotive political decisions in Bolivia, to the detriment of the nationals through the nationalisation of the gas industry and the loss of promising markets in the neighbouring states. Another paper emphasises the enormous cost involved in terms of capital out lays in the oil industry and also in the case of gas. The need for adequate security in terms of repayments extending over long periods to recoup the outlay and also generate a profit is also emphasised.
Yet another critical factor in the context of exploration for and the development of oil and gas fields is the way in which the enormous capital outlay, particularly in the case of gas fields is funded. This is due to the protracted period of repayment entailed during which repayment is totally dependent on the cash flow. Despite similarities - the latter factor means that gas ventures carry a much greater risk than in the case of oil, thus requiring different methodologies entailing more difficulties in the case of fund raising than in the case of oil. Consequently this contribution attempts to explain the characteristics of funding of oil ventures and examines which of these might be applicable to gas projects.
The key features in the drafting and interpretation of oil and gas contracts are examined in another contribution. The need is also emphasised for the allocation of risk to those best capable of bearing it. A further submission reviews the changes in emphasis in privity relative to the participants brought about by the increasing technological complexity of oil ventures which renders the conduct of such operations by a single entity untenable. The question then arises concerning the degree of risk that should be borne by non-active participants who solely provide funding. Also examined is the topical issue of the benefits derived by NOC's from joint ventures taking Colombia as an example.
A problem common to petroleum and oil, as well as mineral deposits that can arise is where a resource is split by a frontier between two countries. The most frequent solution resorts to unitisation which although apparently the only practical method, could however cause more problems leading to conflicts than it resolves. The volatility of petroleum compounds including their migratory tendencies further increases the difficulties in achieving a workable solution.
With an uprising trend towards nationalism again evident in Latin America a paper on mixed companies in Venezuela could offer a possible compromise. Whether this could become a workable solution or not remains to be seen. Turning to the special case of Iraq, controversy has been generated over the role and degree of control to be exercised by the National Oil Company (INOC) and the use of Production Sharing Contracts (PSCs). The perceived stakes are high. Handled correctly it could mean economic salvation while the downside could spell political disintegration and the resource curse.
Inputs in terms of the mineral industry are limited in the current annual review and are restricted mainly to policy and sustainable development. Concern focuses on the ability of mining operations to contribute significantly to sustainable development which will provide for the benefit of future generations.
Climate change and emissions trading are considered from a variety of viewpoints. Further analyses are made to determine the individual components in CO2 emissions in the US and the findings are used to assess the likely National Energy Policy. Could this lead to a change of stance on the part of the United States towards a more pro-active position with regard to greenhouse gases? Also a case is made for inviting international investors to purchase carbon credits which could then provide the means for the promotion of sustainable development. Of particular interest is a paper that makes a case for a conflict of interest that apparently undermines the EU's emissions trading scheme due to perceived incompatibility with the objectives of renewable energy targets under two separate instruments. Apparently one consistent legislation could serve for both while substantially reducing the cost. A further paper addresses the current position of the EU on climate change and takes a forward look at a potential post Kyoto regime.
Issues concerning international investment feature again in this year's CAR. They include a contribution highlighting the difficulty in defining when a standard measure to ascertain when a regulatory taking has occurred. Some International Arbitration cases are explored and the paper also looks at US case law for sources that have shaped decisions in international arbitration. Apparently it is assumed that in lieu of the inability to establish a general standard, a case by case approach is inevitable and may have to conclude that, after all, arbitration tribunals might not prove the best way to settle disputes over regulatory takings. Thus governments and investors may have to find other alternatives in dealing with regulatory risk. Another contribution on investment arbitration perceives the doctrine of sovereign immunity as a potential threat to investment arbitration on the grounds that the state can seek immunity from jurisdiction and the execution of arbitral awards. Past evidence shows that there is always a possibility that the state may want to fall back on this entrenched position.
Dr Arthur J. Warden
Co-ordinator
