The effectiveness of oil and gas code in Cameroon

Project Details

Department
LAW
Project ID
L044
Price
5000XAF
International: $20
No of pages
23
Instruments/method
X
Reference
YES
Analytical tool
X
Format
 MS Word & PDF
Chapters
1-5

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INTRODUCTION

This paper examines the effectiveness of the main international and national laws and regulations governing the oil and gas operations with particular focus on Cameroon.The following lines will explore the nature of governance in the petroleum industry and the extent to which the oil and gas industry is self-governed and governed by state-made law.

There are regulations that derive from model contracts, industry usages, standards and guidelines promulgated by various industry organizations and associations. These all make up what we call the lexpetrolea. The lexpetrolea is not yet a mature legal order. Its sources are best characterized as transnational layers of governance of the international exploration and production operations. As to the relationship between lexpetrolea and the state-made law, it is demonstrated that the two are vitally important and mutually dependent on each other.

In a globalized environment, with its drive towards the harmonization, if not uniformity, of the governance of operations in many industries, the oil and gas sector is not left out. Hence, the need for an increased standardization of governance and self-regulation[1], in addition to national or state law.

This has been a subject of debate as to the existence, meaning and content of lexmercatoria, the global law merchant that is autonomous from the state-made legal order. Some of the key questions in the debates have been: Does the Law governing the operations of the oil and gas industry autonomous from state-made law really exist? If yes, what are its sources and what legal consequences do they produce? The oil and gas industry is major economic and energy sector with enormous impact on world economy, commerce, environment, employment and daily lives of people.

Oil is unarguably the lifeblood of modern economy and it has now become the most essential commodity in the world. Hence, no Nation today can survive without oil that is why Smil[2]  describes it as the “lifeblood of modern world”, adding that, “without oil, there would be no globalization, no plastic, little transport, and a worldwide landscape that few would recognize”. Yergin[3] also calls it “the world’s most important resource”. In recognition of the significance of Oil, Feyide[4] aptly stated that:  

“Oil is raw material as well as a convenient and effective source of energy. In the form of energy, it increases man’s capacity to get work done. As a raw material it provides the feedback for the fasts expanding industry in the world-the petrochemical industry…All over the world lives of people are affected and the destinies of nations are probably determined by the results of oil industry operations. Oil keeps the factories of the industrialized countries working and provides the revenues which enable oil exporters to execute ambitious national and economic development plans. Those developing countries that have no oil are faced with a grim struggle for survival: if they lose they are relegated to the “fourth world”, the march of progress would be retarded and life itself would become unbearable if the world was deprived of oil. That is why oil has become the concern of governments, a vital ingredient of their policies and a crucial factor in their political and diplomatic strategies”.

Oil and gas are major energy resource, accounting for approximately 60% of the world’s commercial energy and a key driver of the world economy. The role of this natural and the petroleum industry will continue to be highly significant for the world’s economy, economies of individual countries[5]. A wide range of operations must be carried out to ensure that petroleum/petroleum products reach their ultimate consumer. All these operations are usually divided into three stages: upstream, covering exploration, development and production, midstream, covering processing, storage and transportation up to the point of sale and downstream, covering refining, sale marketing distribution.

 

LEGAL FRAMEWORK

TRANSNATIONAL LAW OR LEX PETROLEA

As earlier stated, the oil and gas industry is a major economic and energy sector with an enormous impact on the world economy, commerce, environment, employment and daily lives of people. The industry has developed regulations to guide the exploration and production of oil and gas which are now called lexpetrolea or transnational law. This transnational law alongside state-made laws regulates the oil and gas industry. The lexpetrolea derive from model contracts, industry usages, standards and guidelines promulgated by various industry organizations and associations. This forms part of the legal order known as lexmercatoria

Lexmercatoria has progressively gained significant relevance in the regulation of international contracts. It is important to note that, strict use nsulexmercatoria is understood as the self-produced professional norms regulating commercial transactions.55. Arbitration has widely contributed to the identification, development and consolidation of this set of norms. The development of a specific lexmercatoria for the oil sector, as in the case of any other sector of professional uses and customs, does not take place in a linear way and, therefore, does not exclude its evolution or changes. It is the result of a number of diverse circumstances surrounding the fact that practices in certain businesses tend to be similar, even when they take place in different international environments. It is possible to identify different sources of what may become rules of this specific lexmercatoria. An important number of contractual clauses are construed using national laws or contracts from the more influential countries as models. Others come from principles, standards, recommendations or guides elaborated by international organizations or associations that can be general or sector specific. Examples are:

  • The UNIDROIT Principles on international contracts or the European Principles of Contract Law,
  • The UN Code of Conduct for transnational enterprises,
  • The UN Global Compact Initiative.

There are also model contracts prepared by different professional associations within the sector such as:

  • The International Energy Committee of American Corporate Counsel Association
  • The Association of International Petroleum Negotiators.
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