Regulation of the Upstream Petroleum Sector

Regulation of the Upstream Petroleum Sector

A Comparative Study of Licensing and Concession Systems

New Horizons in Environmental and Energy Law series

Edited by Tina Hunter

This discerning and comprehensive work will be a useful entry point for students embarking on study in petroleum law. Academics will find this timely examination to be an indispensible overview of upstream operations. Practitioners will find this book an illustrative review of the origins of issues surrounding regulatory frameworks in managing natural resources.

Chapter 1: Petroleum regulation in an international context: The universality of petroleum regulation and the concept of lex petrolea

Alex Wawryk

Subjects: law - academic, commercial law, energy law


While energy and resources law is on the one hand national law – sometimes supplemented in the case of regional economic integration as in the European Community – the organisational and contractual practices are greatly affected by the specific technical and economic logistics of the industry. An international ‘lex mercatoria’ of energy and resources law has emerged. Commercial, financing and other contractual practices are often alike, if not identical, all around the globe; with sometimes only scant influence from the idiosyncrasies of national law. The frequent recourse to arbitration tends to enhance the international customary law aspect of energy and resources law. Contractual innovations leapfrog from country to country and over the barriers of different legal systems. Comparative law therefore needs to understand how industry practices and imperatives on the one hand, [and] national law constraints on the other, shape legal instruments and concepts. Petroleum exploration and production activities present complex legal, technical, economic, financial, political and environmental problems. Upstream petroleum activities require considerable financial resources and infrastructure, and involve a high degree of geological and commercial risk. Most of the world’s oil reserves are in developing countries with limited financial resources, infrastructure and technical capabilities, whose governments are unable to bear the risks of exploration and production and thus contract with international oil companies (IOCs) to undertake operations on their behalf. Because these contracts are for very long terms, IOCs are exposed to sovereign risk, that is, the risk of political events that affect petroleum developments.