OIL AND GAS CONTRACTS: A LAW IN CONTEXT ANALYSIS USING NIGERIA AS A CASE STUDY JAMIU OLOHUNDARE ADEBAYO, LLB (Hons), LPC, LLM. A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF THE UNIVERSITY OF WOLVERHAMPTON FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DECEMBER 2018 This work or any part thereof has not previously been presented in any form to the University or to any other body whether for the purposes of assessment, publication or for any other purpose (unless otherwise indicated). Save for any express acknowledgements, references and/or bibliographies cited in the work, I confirm that the intellectual content of the work is the result of my own efforts and of no other person. The right of Jamiu Olohundare Adebayo to be identified as the author of this work is asserted in accordance with ss.77 and 78 of the Copyright, Designs and Patents Act 1988. At this date copyright is owned by the author. Signature………………………… Date……………………………… i ABSTRACT The legal and regulatory framework of the oil and gas industry and the contracting obligations arising thereof have evolved over time in many forms across oil producing states. Given the peculiarities of each of these oil producing states, the framework is constantly changing. The changing face of politics, climate and rapidly developing technology are changing the landscape of the industry, demanding a fundamental need for petroleum resource-endowed states to take a strategic view and choose what legal framework and contracting approaches are likely to deliver their ultimate objective: optimum production with topmost financial gains. The idea behind the exploration and exploitation of natural resources is to attract foreign direct investment (FDI) into developing states with the anticipation that such investment will put them on the centre stage of global economics and lead to an improvement in research and technology transfer that would sustain economic growth and development. However, the objective of transnational corporations is to maximise their profits. Ultimately, it is the exploration licensing contracts that states use to implement oil exploration and exploitation policies. The present research therefore seeks to look at the dynamics of the legal and regulatory framework of the oil and gas industry focussing on its everchanging contract types and nature. The research attempts to look at the causes of the imbalance in international oil and gas contracts with an eye on the observation that one of the causes of the imbalance are the investment treaties because they focus on a state’s obligations with little or no focus on obligations from transnational corporations towards the states. Some critical clauses that need to be taken into account by parties to the contract are also explored because it is argued that contractual clauses are also among the causes of imbalance in international oil and gas contracts. This research therefore addresses the causes of imbalance by looking at the problems associated with investment treaties and the long-term contractual relationship between the host states and the transnational corporations, particularly the associated risks with oil and gas contracts such as; political, economic, natural and technical risks. Essentially, the study will narrow down on the processes, technicalities, case studies and the features of four main types of oil and gas contracts namely, Production Sharing Agreement, Joint Ventures, Service Contracts and the two Concessions, (Old and New). The research also attempted to answer the following questions: what is the current structure of oil contracts and to what extent can parties’ commitments be altered to ensure the sustenance of economic stability? Which type of contract is the best for development and financial purposes? What are the causes of imbalance in the oil contract and to what extent have the principles of international environmental law been utilised at a state level and whether developing countries have been able to overcome the pressures from transnational corporations on the issue of environmental law? The research will address these questions through its five chapters. ii ACKNOWLEDGEMENT Special thanks to Almighty God for the grace and opportunity that He has afforded me to complete this research work successfully. My appreciation also goes to everyone that has supported me and contributed to the successful completion of this research. Many thanks to my Supervisor, the Director of Studies, Professor Andrew Haynes for his assistance and guidance during my work on this research. He created time out of his busy schedule to read, comment and discuss in order to improve the quality of my research and I must be honest to say this; Professor Haynes is a good man and an excellent Supervisor. I would like to thank Professor Charles Chatterjee for his valuable contribution and comments on all of this study. I appreciate many useful discussions with him and his criticism has helped me in many ways, particularly on the relevant legal issues surrounding my work on this research. I would love to express my gratitude to my parents, Alhaji Amosa Adebayo and Alhaja Habeebat Odee Adebayo for their support, love, encouragement and care throughout my PhD programme at the University of Wolverhampton. In a magnificent way, I wish to express my gratitude to my beloved wife, Alhaja Bilikis Ajoke Adebayo, my son, Hajj Ibrahim Adebayo and my daughters, Fridaous Adebayo and Iradat Adebayo, without your support and understanding, I could not have completed this research. Many people supported my doctoral research, yet without my brother, Alhaji Ibrahim Ajibola Kareem’s support, this research would not have been completed. I cannot thank you enough, Boda. Equally, I am indebted to my friend, Alhaji Afeez Oladimeji for his support and kindness that have contributed to the completion of this research. Finally, I wish to acknowledge the support given to me during the course of this research by the School of Law, Doctoral College, the Management of the University of Wolverhampton and members of staff in the Walsall Learning Centre. I am grateful to you all. iii TABLE OF CONTENTS ABSTRACT ............................................................................................................................................ ii ACKNOWLEDGEMENT ..................................................................................................................... iii TABLE OF CONTENTS ....................................................................................................................... iv ABBREVIATIONS ............................................................................................................................. viii INTRODUCTION .................................................................................................................................. 1 Hypotheses .............................................................................................................................................. 7 Methodology ......................................................................................................................................... 15 CHAPTER 1 ......................................................................................................................................... 21 THE CURRENT STRUCTURE OF INTERNATIONAL OIL CONTRACTS ................................... 21 1.1 Introduction ............................................................................................................................. 21 1.2 The Balancing of Interest between oil companies and host countries ................................ 29 1.3 Lack of treaty provisions which ensure a symmetric investment-protection system........ 46 1.4 Lack of provision in regulating investor conduct in Investment Treaties ......................... 48 1.5 How may a balance be struck .................................................................................................. 51 1.6 The general aspiration of oil companies in exploring and exploiting natural resources. ... 55 1.7 Economic and tax incentives ................................................................................................. 56 1.8 Expansion of trade .................................................................................................................. 57 1.9 Relaxed legal regimes and tax incentives ................................................................................ 58 1.10 Labour force incentive .......................................................................................................... 58 1.11 The host states’ benefits from the exploitation of natural resources .................................. 60 1.12 Socio-economic development ................................................................................................. 61 1.13 Technology Transfer (TT) and Development ....................................................................... 64 1.14 Conclusions ............................................................................................................................ 78 CHAPTER 2 ......................................................................................................................................... 80 DUTIES OF TRANSNATIONAL CORPORATIONS AND HOW A RIGHT BALANCE MAY BE STRUCK ............................................................................................................................................... 80 2.1 Introduction ............................................................................................................................