View Full Version : How North Sea Oil was Divided Up

Michael Smart
10-12-2013, 05:07 AM
In August 1973 Britain’s offshore oil industry was still very much in its infancy. Although significant gas discoveries had been developed in the shallower southern basin, only ten commercial oil deposits had been found since the discovery of oil in 1969. In the northern basin off Scotland, there was no archipelago of production platforms breaching the horizon, no vast network of subsea pipelines delivering crude to shore‑based refineries, no flare stacks billowing black smoke across the pale northern sky—just a handful of nomadic drilling rigs wandering a gray liquid landscape in search of Britain’s destiny far beyond her three-mile territorial limit.

In 1608, a Dutch scholar by the name of Hugo Grotius wrote a legal brief on behalf of the Dutch East India Company after a Dutch ship was captured in the Strait of Malacca by the Portuguese who claimed that body of water as their possession. In his treatise, Grotius argued that the ocean, like the air we breathe, could not be possessed but was itself the possessor of the earth and “the home of the human race.”1 His writings were so persuasive that they would eventually help form the principle in international law that the High Seas should always remain free and common property to all.

As time passed, nations began to accept three nautical miles—the maximum distance over which a cannon ball could be hurled from shore—as the extent of their territorial jurisdiction. Everything outside that jurisdictional belt was considered to be the High Seas. But as countries grew more powerful and technological, particularly after the Second World War, many nations began to extend their sovereignty unilaterally beyond the accepted limit. Some nations desired a twelve‑mile jurisdiction, others 200.2 Very quickly crucial navigation lanes became threatened as issues erupted over such things as fishing rights, acts of piracy, right of innocent passage, and the exploitation of a country’s Continental Shelf.

In 1956 the United Nations International Law Commission addressed these and other issues when it drew up a series of Articles codifying the law of the High Seas. But in order for the member nations to accept them and put them into practice, the Commission wanted the measures put to a vote by the international community. Two years later, the Conference on the Law of the Sea was convened in Geneva, Switzerland to do just that.

While the dispute over what constituted the breadth of territorial sea (three-miles or otherwise) was never resolved, the concept of a Continental Shelf and a nation’s right to exploit its natural resources was newly adopted into international law.3 Cleverly defined, the Continental Shelf was construed to be the seabed and subsoil extending into the High Seas to a depth of 200 meters, “or beyond that limit, to a depth allowing for the exploitation of natural resources.”4 Outside the territorial limit the seas were still free to all, but the resources that lay beneath them were viewed as the property of the coastal state.

Under Article 5, “installations and other devices” could be built, maintained, and operated offshore with safety zones established around them, and their protection provided for by whatever measures the coastal state deemed necessary. In the coming years, ships with names like HMS Jura and Reward would be dispatched to protect Britain’s offshore assets.

A year after the Geneva Conference, Holland discovered a major gas field in the northern province of Groningen, which bordered the North Sea. The find was so massive—the second largest in the world—that it triggered a sudden interest in the North Sea basin which geologists believed was really a submerged part of the European continent. Seismic surveys were quickly conducted and the results looked favorable. Was it possible that the North Sea held untapped riches? Perhaps, but the oil companies were not about to embark upon an expensive High Seas drilling program without a legal framework to protect their property rights.5

In 1964, Britain’s Parliament provided such a framework by passing the Continental Shelf Act which extended the Crown’s right to grant licenses to “such persons as they think fit” to search for and extract oil from the Continental Shelf.6 The only remaining question was: how should this potential economic pie be divided up by the five principal bordering countries?

Article 6 of the 1958 Convention provided the necessary guidance. It stipulated that the boundaries should be determined by agreement between the coastal states. To Norway, dividing the pie down the middle seemed logical and fair. The average depth of the North Sea was about 94 meters and sloped towards deeper water in the northeastern direction. But when British ministers inspected a sounding map they noticed that a deep trench—much deeper than 200 meters—lay just off Norway’s coast. In a somewhat laughable move to gain more than its fair share, they tried to suggest that Norway’s claim extended only as far as the edge of the trench.7 The Norwegians, however, were not buying that argument, and the matter was eventually settled by employing another provision of Article 6, namely, that in the event of a dispute, the territorial boundary should be determined by the “median point” equidistant between the countries.a

Although the final agreement did not arrive until 1965, Britain had been selling exploration licenses for nearly a year. Once established, however, the boundaries gave rise to national sectors, with Britain and Norway capturing the lion’s share.b

a Britain, Norway, Denmark, West Germany, and Netherlands
b Britain 46.7%, Norway 25.1%, Netherlands 10.7%, Denmark 9.2%, West Germany 6.8%. Source: D.I. MacKay and G.A. Mackay, The Political Economy of the North Sea, p. 21.

1 Sir Leslie Munro, Hugo Grotius on Freedom of the Seas, United Nations Review, vol. 4, February 1958, p. 8.
2 Time Magazine, International Law: The Three‑Mile Limit, May 5, 1958: p. 27.
3 Yearbook of the United Nations 1958, The Law of the Sea, p. 379.
4 Yearbook of the United Nations 1958, The Law of the Sea, p. 379.
5 W. G. Carson, The Other Price of Britain’s Oil, p. 116, 140.
6 Petroleum (Production) Act 1934.
7 D. I. MacKay and G. A. Mackay, The Political Economy of the North Sea, p. 20-21.