Oil Recovery & Sustainable Development

CENTRE FOR ENERGY, PETROLEUM AND MINERAL LAW AND POLICY
STATEMENT OF ORIGINALITY
FOR RESEARCH PAPERS
NAME OF STUDENT: Zaid Mahayni
MATRICULATION NUMBER: 009943036
PROGRAMME: LL.M. in Petroleum Law and Policy
TITLE OF THE RESEARCH PAPER:
The Protection of Ultimate Oil Recovery and the
Applicability of the Concept of Sustainable Development
ABSTRACT OF THE RESEARCH PAPER:
The protection of ultimate oil recoveries is achieved by restricting oil production so that
natural drive mechanisms are maintained. It is a form of oil conservation, but applied at
the production stage. This paper will address the following issues. Can the concept of
sustainable development impose any restrictions on production in order to maximize oil
recoveries? If production restrictions are indeed imposed, what form would these
restrictions take?
WORD COUNT: 4,811
PRESENTED TO: Professor Sergei Vinogradov
TITLE OF THE COURSE: International Law of Natural Resources
I, Zaid Mahayni, have read the Code of Practice regarding plagiarism contained in the
Students’ Introductory Handbook. I realise that this Code governs the way in which the
Centre for Petroleum and Mineral Law and Policy regards and treats the issue of
plagiarism. I have understood the Code and in particular I am aware of the consequences,
which may follow if I breach that code.
Signed:________________
Date:__________________

1
Table of Contents
Table of Abbreviations----------------------------------------------------------------------- 2
1. Introduction--------------------------------------------------------------------------------- 3
2. The Geology of Oil Reservoirs ---------------------------------------------------------- 3
2.1 Natural Drive Mechanisms ------------------------------------------------------------- 3
2.2 The Maximum Efficiency Rate of Production --------------------------------------- 5
3. The Applicability of the Concept of Sustainable Development--------------------- 6
3.1 The Evolution of Sustainable Development ----------------------------------------- 6
3.2 The Applicability of the Concept in the Protection of Ultimate Oil Recovery-- 8
3.2.1 The Conservation of Oil as a Natural Resource ----------------------------------- 8
3.2.2 Oil and the Principles Specific to Environmental Protection-------------------- 9
3.3 The Legal Status of the Concept ------------------------------------------------------- 12
4. Rules for Monitoring Ultimate Oil Recovery------------------------------------------ 13
4.1 Production Allowables or Prorationing Rules --------------------------------------- 14
4.2 Gas/Oil Ratio and Water/Oil Ratio Rules -------------------------------------------- 16
4.3 Well Spacing Rules ---------------------------------------------------------------------- 16
4.4 Unitisation--------------------------------------------------------------------------------- 17
4.5 Economic and Policy Instruments ----------------------------------------------------- 18
5. Conclusion---------------------------------------------------------------------------------- 18
Bibliography----------------------------------------------------------------------------------- 20

2
List of Abbreviations
ILM ----------- International Legal Materials
MER ---------- Maximum Efficiency (Production) Rate
UK ------------ United Kingdom
UNCED ------ United Nations Conference on Environment and Development
UNGA -------- United Nations General Assembly

3
1. Introduction
Oil reservoirs will normally contain natural drive mechanisms that will displace
oil to the surface. Without the proper exploitation of these mechanisms, large quantities
of oil will be locked in the reservoir with no potential for extraction.
It is mainly by overproduction that natural drive mechanisms lose efficiency. It is
therefore important to control oil production in order to achieve maximal recoveries of
oil.
This research paper will be divided in three main parts. In the first part, we will
explain the internal energies typically found in oil reservoirs and describe to the reader
the geological facts that give rise to the issue.
In the second part, we will examine if the concept of sustainable development can
impose restrictions on production towards greater ultimate oil recoveries. This section
will first discuss the evolution, elements and legal status of sustainable development.
Finally, in the third part, we will identify possible measures, mainly used by
national legal systems, to achieve higher ultimate oil recoveries.
2. The Geology of Oil Reservoirs
2.1 Natural Drive Mechanisms
In order to successfully extract oil, there must be more pressure within the
reservoir than at the well. The rate at which the oil will flow towards the well will depend
not only on pressure but also on other factors such as permeability, layer thickness, and
level of oil viscosity.1
Usually, the pressure in the reservoir is initially sufficient to lift the oil to the well.
However, as production advances, this pressure will gradually diminish. This is due to the
loss of natural drive mechanisms that exercise pressure on oil. As we will see, there are
1
Shell International Petroleum Company, The Petroleum Handbook, p. 92.

4
three essential displacement mechanisms: dissolved-gas drive, gas-cap drive and water
drive. A reservoir may contain various combinations of these mechanisms.2
First of all, dissolved-gas drive necessitates the presence of a certain quantity of
gas into solution with the oil inside a reservoir. With the progress of production and the
resulting pressure decline, the gas will take an active role and temporarily maintain
reservoir pressure. Basically, lower reservoir pressure will lead the dissolved gas to
bubble-up. The expansion of these gas bubbles will move the whole oil/gas mixture
towards the well. Eventually, dissolved-gas drive is lost. As enough gas bubbles join, gas
will liberate itself from the oil and will move into voided pore space. This gas liberation
will turn the oil more viscous. The liberated gas may flow to the well or may take a role
in a gas-cap drive. Dissolved-gas drive is characterized as being inefficient, with
recoveries generally ranging between 10 to 25% of the oil initially in place.3
Gas-cap drive assumes the presence of free fluid gas between the reservoir ceiling
and the oil layer. Essentially, the well will be deep into the oil at a point lower than the
gas layer. By its expansion and through the forces of gravity, the gas-cap will help
maintain reservoir pressure and compress some of the remaining oil into the well.4
Generally, the recoverable portion of oil initially in place will rarely exceed 50% with
gas-cap drive.
Finally, water-drive consists of the displacement function of aquifers present
beneath the oil layer. As production advances, the water will enter the reservoir and will
help maintain reservoir pressure. Since the size of aquifers tend to be greater than that of
the oil reservoir, water-drive is described as a very powerful oil-displacing agent.5
This
drive mechanism generally allows for recoveries of up to 75% of the oil initially in
place.6
2
Ibid.
3
E. W., Zimmermann, Conservation in the Production of Petroleum, p. 63.
4
S. L., McDonald, Petroleum Conservation in the United States: An Economic Analysis, p. 17.
5
Shell International Petroleum Company, supra note 1, p. 92.
6
S. L., McDonald, supra note 4, p. 18.

5
2.2 The Maximum Efficiency Rate of Production
Ultimate recovery of oil is sensitive to the rate of production, especially in the
case of reservoirs with gas-cap-drive or water-drive. For instance, in a water-drive
reservoir, production of oil must be slow enough to allow water to invade the tighter
sections of rock and to flush out the oil there. Also, water must be given time to segregate
from oil and to uniformly advance through the reservoir.7
When it comes to a gas-cap reservoir, the rate of production must be slow enough
to allow for proper segregation of gas and oil. Otherwise, the highly mobile gas will
bypass the oil and rapidly reduce reservoir pressure.8
In response to these facts, reservoir engineers have developed the notion of
maximum efficient rate (MER). The MER of a reservoir is defined as
“the most efficient rate at which a well can produce without impairing the efficiency of
reservoir drive with consequent physical, underground waste. MER is the upper limit of
production beyond which any increase will mean a decrease in the amount of oil ultimately
recoverable.”9
The MER will differ from one reservoir to another and will change throughout the
development of a field. It is usually precisely calculated, with a margin of error rarely
exceeding 5 to 10%.10
It should be noted that if natural drive mechanisms are not properly exploited,
some of the lost oil may not even be extracted through secondary and enhanced recovery
techniques. Consequently, since oil is a scarce resource, it should be protected through
efficient conservation programs. The production of oil should be regulated in such a way
that the maximal quantities of oil can be extracted.
7
Ibid, p. 19.
8
Ibid.
9
E. O., Kuntz, et al., Cases and Materials on Oil and Gas Law, p. 87.
10
E. W., Zimmermann, supra note 3, pp. 69-71.

6
It is important to remind the reader of the importance of proper ‘production’
conservation laws. If existent, they allow a field to yield far more oil over a much longer
period of time. Otherwise, as it was seen in the American experience, reservoirs will be
exhausted in five or ten years, after yielding a mere 10 to 25% of the original oil in
place.11
In the following section, we will investigate if the concept of sustainable
development can impose the use of the production methods maximizing oil recovery. In
order to address this question, we must first examine the history and definition of the
concept. We must also consider if it is legally binding at all.
3. The Applicability of the Concept of Sustainable Development
3.1 The Evolution of Sustainable Development
The concept of sustainable development began to evolve through the 1972
Stockholm Declaration on the Human Environment12
, (hereafter referred to as the
Stockholm Declaration). It was later explicitly endorsed by the Brundtland Commission
Report of 1987 (hereafter referred to as the Brundtland Report) and in the work of various
intergovernmental conferences and organizations.13
As we will explain, the existing
definition of sustainable development is the object of considerable controversies.
In 1989, the UN General Assembly convened the UN Conference on Environment
and Development in 1992.14
In 1992, the UN Conference took place in Rio and lead to
the adoption of the Rio Declaration on Environment and Development15
(hereafter
referred to as the Rio Declaration) and Agenda 21, an 800-page document embodying
guidelines in the field of environment and development.16
The concept of sustainable
11
Ibid, p. 27.
12
21 UN Doc. A/Conf.48/14, 1972, reprinted in 11 ILM 1416 (1972).
13
A., Boyle and D., Freestone, Introduction, in, A., Boyle and D., Freestone, (eds.), International
Law and Sustainable Development, p. 5.
14
UNGA Resolution 44/228 (1989).
15
UNCED Doc. A/Conf. 151/5/Rev.1, 14 June 1992, reprinted in ILM 874 (1992).
16
K., Hossain, Evolving Principles of Sustainable Development and Good Governance, in, K.,
Ginther, et al., (eds.), Sustainable Development and Good Governance, p. 18.

7
development is closely associated with the core values and normative prescriptions
embodied in the Rio Declaration.17
The Rio Declaration has often been described as an uneasy political
compromise.18
It was divided in bipolar North-South positions, with the Group of 77 and
China presenting the developing countries’ position. On one hand, the industrialized
countries wanted the developing countries to adopt sustainable models of development.
On the other hand, the developing countries stressed the right for their development.19
Actually, the Rio Declaration placed, just as the Stockholm Declaration did,
human beings instead of the environment at the centre of concerns for sustainable
development.20
As it was noted by Professor Philippe Sands:
“To the G-77, […] placing human beings at the center was of fundamental importance. To
allow human beings to be placed at the service of the environment was to subjugate
development needs to environmental needs. To provide for an environmental right or admit
to an environmental responsibility was to open the door to international interference with
their development plans.”21
As observed by Professor Sands, four recurring elements appear to comprise the
legal elements of the concept of sustainable development:22
1. The need to preserve natural resources for the benefit of future generations;
2. The aim of exploiting natural resources in a manner which is ‘sustainable’, or
‘prudent’, or ‘rational’, or ‘wise’ or appropriate;
3. The Equitable use of natural resources. Basically, this means that a State must
take into accounts the needs of other States;
4. The need to integrate environmental considerations and economic and
development plans.
17
Ibid.
18
P., Sands, Greening International Law, p. 23.
19
Ibid.
20
Please refer to Principle 1 of the Rio Declaration.
21
Ibid, p. 24.
22
P., Sands, Principles of International Environmental Law I: Frameworks, Standards and
Implementation, p. 199.

8
Let us now examine, which specific dispositions might be applied to the issue at hand.
3.2 The Applicability of the Concept in the Protection of Ultimate Oil Recovery
We believe that the concept of sustainable development is large enough to include
the protection of ultimate oil recovery. Indeed, reservoirs, if unsustainably developed will
yield much lower oil quantities. As we will demonstrate, production above the MER
seems prima facie contradictory with the dispositions of various international
instruments. Firstly, it is against the spirit of conservation and secondly, as we will plead,
oil should be protected on the same level as the environment.
3.2.1 The Conservation of Oil as a Natural Resource
If we start with the idea of conservation, Article 7 of the World Charter for
Nature23
declares that:
“In the planning and implementation of social and economic development activities,
due account shall be taken of the fact that conservation of nature is an integral part of
those activities”. (emphasis added).
In addition, Principle 3 of the Rio Declaration stipulates that:
“The right to development must be fulfilled so as to equitably meet developmental and
environmental needs of present and future generations.”
Since oil is a non-renewable and scarce resource, future generations should also be given
the right to benefit from its various utilisations. Essentially, oil conservation has to
protect oil not only downstream but at its upstream stages as well. As Erich Zimmermann
observes:
“The essential feature of early conservation in the United States was that those living
should be restrained on behalf of the yet unborn. Conservation practice of the present day
generally requires a reduction in the rate of speed at which reservoirs are exploited
(‘produced’)…To that extent conservation as now practiced does contribute to future
supplies.”24
Furthermore, on the subject of oil conservation, some principles of the Stockholm
Declaration also seem pertinent.
23
UNGA Res. 37/7, reprinted in 22 ILM (1983).
24
E. W., Zimmermann, supra note 3, p. 27.

9
For instance, Principle 2 may be applied to oil conservation at both the production and
consumption levels. It stipulates that:
“The natural resources of the earth including the air, water, land, flora and fauna and
especially representative samples of natural ecosystems must be safeguarded for the benefit
of present and future generations through careful planning or management, as
appropriate.” (emphasis added).
As we demonstrated earlier, reservoir engineers and geologists have developed the MER
as a calculation of the maximum sustainable level. Its use by the industry would,
effectively, constitute ‘careful planning and management’ in accordance with the above
Principle. Similarly, conservation at the consumption stage could take the form of, for
instance, the use of more energy-efficient cars.
Additionally, Principle 5 of the Stockholm Declaration reiterates that:
“The non-renewable resources of the earth must be employed in such a way as to guard
against the danger of their future exhaustion and to ensure that benefits from such
employment are shared by all mankind.”(emphasis added).
This last Principle is aimed to protect non-renewable resources as a whole. It is
demonstrative of the broad nature of the Stockholm and Rio Declarations. They are
written in such a way that basic rules can be applied to a wide range of scenarios.
On a different note, we believe that oil should be comprised within the term
environment, as used in numerous international legal instruments. This contention will be
the focus of our next section.
3.2.2 Oil and the Principles Specific to Environmental Protection
When we speak of the environment, oil is often perceived solely as polluter but
seldom as a natural resource that needs to be conserved. Such a change in conception
might be undesirable to the eyes of the oil industry. Promoting the idea of oil as being a
scarce natural resource that needs protection might be to some a sign that world oil
reserves are on the verge of depletion. The presence or absence of adequate oil supplies
to satisfy the world demand for oil is beyond the topic of this paper. It should however be

10
noted that any resource, even if abundant, should be managed and developed in the way
that will cause the least amounts of waste. As Principle 10 of the World Charter for
Nature states:
“Natural resources shall not be wasted, but used with a restraint…”
Should oil benefit from environmental protection? Is oil comprised in the term
environment? The Webster’s International Encyclopedia (1999) defines the environment
as:
”The totality of the physical conditions on the earth or a part of it, especially as affected by
human activity.”
We believe that oil, as a natural resource, is part of the environment and should
benefit from all notions specific to environmental protection. If this contention is
embraced by international law then ultimate oil recoveries could be protected by more
recognized and more influential dispositions.
For instance, Principle 4 of the Rio Declaration is said to absorb environmental law into
economic law as it reads:
“ In order to achieve sustainable development, environmental protection shall constitute an
integral part of the development process and cannot be considered in isolation from it.”
This Principle somewhat echoes Principle 13 of the Stockholm Declaration. The practical
relevance of this Principle cannot be undervalued. Indeed, since as early as 1989, the
World Bank and other development banks have sought to integrate environmental
considerations into their lending policies. The environment has also been central issue
affecting international trade.25
Environmental protection also employs the preventive and precautionary
principles. Essentially, the preventive principle requires the prohibition of activities that
will damage or pollute the environment beyond a certain acceptable extent. If pollution or
damage to the environment is expected and cannot be avoided and if economic interests
exceed environmental interests, then all reasonable measures must be taken to reduce the

11
impacts that the proposed activities will have on the environment. An extensive body of
domestic environmental protection legislation and conventions supports the preventive
principle. Actually, the wide acceptance of this principle has offered it a binding effect.26
When it comes to the precautionary principle, it seeks to impose on any proposed
activity the burden to prove that it does not harm the environment. It imposes the
implementation of a cost-benefit element in the evaluation of any project.27
This
obligation is enunciated in Principle 15 of the Rio Declaration:
“In order to protect the environment, the precautionary approach shall be widely applied by
States according to their capabilities. Where there are threats of serious or irreversible
damage, lack of full scientific certainty shall not be used as a reason for postponing cost-
effective measure to prevent environmental degradation.”
In addition, Principle 17 of the Rio Declaration is also pertinent as it establishes the duty
to conduct environmental impact assessments. Principle 17 declares that:
“Environmental impact assessment, as a national instrument, shall be undertaken for
proposed activities that are likely to have a significant adverse impact on the environment
and are subject to a decision of a competent national authority.”
The above principles on environmental protection are more and more followed.
However, it is still obscure as to when they have to be applied. As we saw, they are built
around notions with controversial and ambiguous definitions. What are the exact
boundaries of the word environment? To what extent must it be protected?
Oil, if trapped in a reservoir is not of much use. If oil displacement mechanisms
necessary to extraction are taken away by overproduction, then have we affected the
‘environment’? If yes, have we affected it enough to uphold environmental protection? In
response to these questions, at the present, only argumentation can be presented.
Let us now go back to the general concept of sustainable development and examine its
overall legal status.
25
A., Boyle and D., Freestone, supra note 13, p. 10.
26
M., Sunkin, et al., Sourcebook on Environmental Law, p. 30.

12
3.3 The Legal Status of the Concept
Scholars agree that neither the Stockholm nor the Rio Declarations have raised the
concept of sustainable development to the level of a legally binding principle.28
“It is difficult to see an international court reviewing national action and concluding that it
falls short of a standard of ‘sustainable development’. Normative uncertainty, coupled with
the absence of justiciable standards for review, strongly suggest that there is as yet no
international legal obligation that development must be sustainable, and that decisions on
what constitutes sustainability rest primarily with individual governments.”29
Moreover, as Vaughan Lowe points out, the concept of sustainable development
should receive the same interpretation given by the Court of Justice to the equidistance
rule in the 1969 North Sea Continental Shelf cases30
. Basically, the Court of Justice
estimated that there was simply no point in looking for State practice and opinio juris.
The equidistance rule was not only the subject of too many controversies but it also
lacked indispensable norm-creating character. Similarly, the concept of sustainable
development suffers from this same ambiguity and also lacks necessary norm-creating
character. Hence, without even searching for state practice and opinio juris, it seems clear
that sustainable development cannot qualify as a binding principle of customary law.31
However, in the case of the Rio Declaration, it is believed that since it takes on a
normative character and since it has been adopted by the consensus of 176 States, it
rather constitutes a body of soft law. 32
At this point, it is crucial to make the two
following remarks:
First of all, the rules and principles enunciated in the Rio Declaration, even if not
legally binding, may nevertheless influence judicial or arbitral decision-making. They
could, therefore, constitute persuasive interpretation arguments.33
27
Ibid.
28
P. W., Birnie, and A., Boyle, (eds.), Basic Documents on International Law and the
Environment, p. 9.
29
30
(1969) ICJ Reports 3.
31
V., Lowe, Sustainable Development and Unsustainable Arguments, in, supra note 13, p. 24.
32
P. W., Birnie, and A., Boyle, supra note 27, p. 9.
33
P., Malanczuk, Sustainable Development: Some Critical Thoughts in the Light of the Rio
Conference, in, K., Ginther, et al., (eds.), supra note 16, p. 42.

13
Secondly and more importantly, even though sustainable development is not
required under international law, development decisions cannot be taken without at least
some consideration of the concept. In other words, even if development projects do not
have to be effectively sustainable, considerations for sustainability must be taken into
account prior to the approval of any development strategy.34
This obligation is supported
by ample state practice and has been implicitly confirmed in the Case Concerning the
Gabcikovo-Nagymaros Dam35
.
4. Rules for Monitoring Ultimate Oil Recovery
Again, the concept of sustainable development is too broad to impose specific
legal restrictions on oil production. It is questionable that it can impose restrictions on
development and production at all. Actually, on the specific topic of oil conservation, no
particular international legal obligations seem to be imposed on states. Therefore, it is at
the discretion of individual governments to enact conservation rules and restrictions on
oil production. It is enunciated in Principle 2 of the Rio Declaration that:
“States have, in accordance with the Charter of the United Nations and the principles of
international law, the sovereign right to exploit their own resources pursuant to their own
environmental and developmental policies…” (emphasis added).
It may be observed that the developed countries will often tend to establish the
needed conservation rules. Besides, they will provide the proper mechanisms of
enforcement. However, in some developing countries, even if adequate legislation is
existent, they are not supported by effective enforcement mechanisms. According to the
actual position of international law, as long as damage is not caused to other states and as
long as sustainable development strategies are considered, developing countries do not
have to ensure ultimate oil recoveries. As we previously underlined, they have the
sovereign right to develop their resources as they wish.
34
35
(1997) ICJ Reports 7.

14
Nonetheless, let us examine in the following sections the legal and regulatory
framework that could be introduced to insure ultimate oil recoveries.
4.1 Production Allowables or Prorationing Rules
Production allowables or prorationing rules establish daily, weekly or monthly
limits on the production of oil to prevent overproduction. The limits may be set around
market demand prorationing, which is calculated according to an estimation of the
demand for oil.36
Interestingly, for market demand prorationing in the Texas experience, an
administrative agency would use the oil demand estimations to calculate the total oil
production allowables. This number is then divided among the reservoirs in the State, and
the allowable of each reservoir is then divided among the wells producing from the
reservoir. Each well is then assigned a specific schedule allowable. A statewide
percentage factor may be then applied to calculate the well’s actual allowable. 37
Market demand prorationing, even if it might indirectly protect ultimate oil
recoveries, is not tailored for the purpose. Even more effective would be to regulate
production according to the MER itself. It is important to remember that each reservoir
will have its own unique MER. Therefore, a State may not impose statewide MER-based
production allowables. If we take the Canadian example, the field operator has the
responsibility to adjust production in accordance with the MER. Indeed, Article 28 of the
Canada Oil and Gas Production and Conservation Regulations38
clearly states that:
“(1) Every recovery method included in the development plan in respect of a
pool or field shall provide for the maximum recovery of oil and gas from the
pool or field.
(2) The operator of a pool or field shall locate wells so as to provide, to the
extent possible, for the maximum recovery of oil and gas from the pool or field.
(3) An operator of a pool or field shall carry out and submit to the Chief
36
J. S., Lowe, Oil and Gas Law in a Nutshell, Second Edition, p. 26.
37
W. O., Huie, et al., Oil and Gas: Cases and Materials, Second Edition, p. 36
38
SOR/90-791

15
infill drilling studies, where the operator has reason to believe that infill
drilling could result in an increased recovery of oil or gas from the pool or
field.”
Prior to the commencement of production, the operator must have a development
plan approved by the Canadian National Energy Board. The development plan will
establish a calculated MER and provide for a specific pressure level to be maintained.
This pressure cannot be lowered except with the prior approval of a government official
(the Chief).39
If the pool performance or new geological information shows that the recovery
method needs to be changed to achieve the maximum recovery of reserves of oil, then the
operator must apply for an amendment of the development plan.40
If increased ultimate oil recovery from the field would be economically btainable
by adopting new technology, then the operator must also amend the development plan.41
To the above responsibilities vested on the operator, Article 35 of the Canada Oil
and Gas Production and Conservation Regulations adds that:
“… the operator of a pool or field shall produce oil or gas from the pool or field in
accordance with good production practices to achieve the maximum recovery of oil or gas
from the pool or field and at the applicable rate consistent with the rate specified in the
approved development plan relating to the pool or field.”
In the United Kingdom, licence controls over production and development are
found in Clauses 17 and 1842
. Restrictions on oil production may be imposed either at the
time of initial approval of the development plan or at any time thereafter through a
limitation notice, delivered in accordance with an implemented depletion policy. Yet,
such restrictions have seldom been imposed and will only be justified by national interest.
39
Article 29 of the Canada Oil and Gas Production and Conservation Regulations.
40
Article 6(b) of the Canada Oil and Gas Production and Conservation Regulations.
41
Article 6(c) of the Canada Oil and Gas Production and Conservation Regulations.
42
Petroleum (Production) (Seaward Areas) Regulations 1988, (S.I. 1988 No. 1213), Schedule 5.

16
Therefore, it is interesting to note that the United Kingdom does not impose automatic
production restrictions based on the MER.43
4.2 Gas/Oil Ratio and Water/Oil Ratio Rules
As we previously explained, Gas/oil ratio and water/oil ratio rules are necessary
to maintain reservoir pressure. For example, when there is a great demand for oil but a
little demand for natural gas, producers may wish to flare natural gas so they can produce
oil. If flaring is permitted, reservoir pressure will be lowered in a way that oil will be
trapped beneath the ground forever.44
Gas/oil ratios and water/oil ratios require that producers cease production when
the production ratio of gas or water to oil is exceeded.45
In Denver Producing & Refining Co. v. State46
, the Court wrote the following on the
subject of gas/oil ratios:
“The application of conservation measures necessarily results in curtailment of production
of oil, gas or both in order to prevent waste and to obtain the greatest ultimate recovery
from the pool. Experience has taught us that the heedless dissipation of gas reservoir
energy of oil pools has resulted in the loss of many millions of barrels of oil…In striking a
balance between conservation of natural resources and protection of correlative rights, the
later is secondary and must yield to a reasonable exercise of the former.”47
4.3 Well Spacing Rules
Well spacing serves many purposes. First of all, spacing prevents underground
waste, as fewer wells manage better natural reservoir energies. Secondly, it protects
correlative rights against unfair drainage by preventing competition for the oil in place.48
Well spacing could either imply the regulation of space between wells and/or the
space between wells and licence boundary lines.
43
T., Daintith, and G.,Willoughby, Manual of United Kingdom Oil and Gas Law, pp. 115-117.
44
J. S., Lowe, supra note 35, p. 26.
45
Ibid.
46
199 Okl. 171, 184 P.2d 961 (1947), reported in, E. O., Kuntz, et al., supra note 9, p. 97.
47
E. O., Kuntz, et al., supra note 9, p. 97.
48
Ibid, p. 59.

17
For instance, Article 20 of the Petroleum Production Regulations 1988 imposes that:
“No well shall except with the consent in writing of the Minister be drilled or made so that
any part thereof is less than one hundred and twenty-five metres from any of the
boundaries of the licensed area.”
Well spacing rules, to be effective and equitable, must allow the possibility of
granting exceptions. Indeed, exceptions may be permitted to prevent underground,
surface or economic waste. The geology of a reservoir may justify the granting of an
exception to maximize oil recovery. Exceptions may also be permitted to prevent
topographical and environmental problems at the surface. Besides, it could be
economically wasteful to spend money on the drilling of a non-productive ‘legal’ well.
Breaking the rule and drilling in contradiction of the specified distance may cause no
harm to the recovery potential of a reservoir.49
4.4 Unitisation
Under the rule of capture, the oil at the wellhead will legally belong to the
producer. When an oil reservoir underlies various licence areas, the producers on each
licence area might enter into competitive drilling in order to first seize possession of the
oil. This competitive drilling will deplete reservoir pressure and significantly reduce the
recovery potential of a reservoir. Unitisation aims for the production of an oil reservoir as
if it was under the same licence area. Therefore, licensees from various blocks will have
to negotiate and work under one single (unit) operating agreement.50
Unitisation might be voluntary or compulsory. A responsible government body
may also impose a unit operating agreement on the licensees producing a common
reservoir. Usually, the licensees will prefer to negotiate their own terms.51
In the United Kingdom, Model Clause 2852
gives discretion to the Minister to
impose unitisation on licensees if:
49
Ibid, p. 85.
50
T., Daintith, and G.,Willoughby, supra note 42, pp. 121-123.

18
“…it is in the national interest in order to secure the maximum ultimate recovery of
petroleum and in order to avoid unnecessary competitive drilling”.
4.5 Economic and Policy Instruments
As many scholars noted it, the concept of sustainable development encompasses
not only the legal, but also the economic and political fields. The successful application
of the Concept therefore would require not only legal measure, but also economic and
policy instruments.53
As an example, the use of sliding-scale royalties can encourage the extension of
the life of a reservoir. Diminishing variable costs may create an incentive to prolong the
life of a field.
The threat of the stick is sometimes as effective as the carrot. Hence, governments
may fine overproducing companies or cancel any subsidies they receive. They may also
threaten to revoke their licences. In the UK example, the Minister has the power of
revocation under Clause 2154
and may do so, for instance, in the case of:
“(2)(b) any breach or non observance by the Licensee of any terms and conditions of this
licence.”
Basically, it is not the enforcement instruments that lack. What is important is,
first, for the law to prohibit overproduction and second, that the chosen enforcement
device is indeed applied to discourage offences.
5. Conclusion
Oil is a vital natural resource to our society. Unfortunately, it is a scarce and a
non-renewable resource. There maybe sufficient reserves of it today, however, as the
principle of intergenerational equity imposes, this resource must be conserved as much as
possible for the benefit of future generations.
51
Ibid.
52
53
M., Sunkin, et al., supra note 25, p. 26.

19
We have proposed in this paper the focus of conservation on the production stage.
Production if too rapid, perhaps motivated by short-term desire for profit, will harm the
oil recovery potential of a reservoir. This is the example of production patterns that need
to be restricted.
Finally, it can be concluded that the protection of ultimate oil recoveries is
definitely comprised in the large concept of sustainable development. However, the
broadness of sustainable development also constitutes a fault. Indeed, the Concept is so
vague that it has kept it from constituting an overall binding principle. The concept of
sustainable development is hence unable to impose restrictions on production.
Nevertheless, some national legislatures, especially those of developed countries, have
introduced some of these ‘argued for’ production restrictions.
In our case, it is more likely to see national law create international law than
international law creating national law.
54

20
Bibliography
1. Primary Sources
1.1 International Instruments
Rio Declaration on Environment and Development, UNCED Doc. A/Conf. 151/5/Rev.1,
14 June 1992, reprinted in ILM 874 (1992).
Stockholm Declaration on the Human Environment, in: Report of the United Nations
Conference on the Human Environment, UN Doc. A/Conf. 48/14/Rev. 1 (1972),
reprinted in 11 ILM 1416 (1972).
World Charter for Nature, UNGA Res. 37/7, reprinted in 22 ILM (1983).
1.2 National Statutes
Canada Oil and Gas Production and Conservation Regulations, SOR/90-791 (Can.)
http://canada.justice.gc.ca/ftp/en/regs/chap/o/o-7/sor90-791.txt
Petroleum (Production) (Seaward Areas) Regulations 1988, S.I. 1988 No. 1213, (U.K.)
Saskatchewan Provisions Governing The Regulation and Limitation of Production of Oil,
MRO 501/93, (Sask.)
http://www.gov.sk.ca/enermine/energy/engmro/engmro02.htm
1.3 Judicial Decisions
Case Concerning the Gabcikovo-Nagymaros Dam (1997) ICJ Reports 7.
Denver Producing & Refining Co. v. State, 199 Okl. 171, 184 P.2d 961 (1947).
North Sea Continental Shelf, (1969) ICJ Reports 3.
2. Secondary Sources
2.1 Books
Birnie, P. W., and Boyle, A., (eds.), Basic Documents on International Law and the
Environment, (Oxford, England: Clarendon Press, 1995).
Birnie, P. W., and Boyle, A., International Law and the Environment, (Oxford, England:
Oxford University Press, 1992).
Boyle, A., and Freestone, D., (eds.), International Law and Sustainable Development,
(Oxford, England: Oxford University Press, 1999).

21
Daintith, T., and Willoughby, G., Manual of United Kingdom Oil and Gas Law, (London,
England: Swet & Maxwell, 1984).
Dam, K. W., Oil Resources: Who Gets What How?, (Chicago, USA: University of
Chicago Press, 1976).
European Commission, The Law of Sustainable Development, (Luxembourg, Belgium:
Office for Official Publications of the European Communities, 2000).
Ginther, K., et al., (eds.), Sustainable Development and Good Governance, (Dordrecht:
The Netherlands: Martinus Nijhoff Publishers, 1995).
Huie, W. O., et al., Oil and Gas: Cases and Materials, Second Edition, (St. Paul,
Minnesota: West Publishing Company, 1972).
Kirkby, J., et al., (eds.), The Earthscan Reader in Sustainable Development, (London,
England: Earthscan Publications, 1995).
Kuntz, E. O., et al., Cases and Materials on Oil and Gas Law, (St. Paul, Minnesota: West
Publishing Co., 1986).
Laitos, Jan, G., Natural Resources Law: Cases and Materials, (Saint Paul, Minnesota:
West Publishing Company, 1985).
Lowe, J. S., Oil and Gas Law in a Nutshell, Second Edition, (St Paul, Minnesota: West
Publishing Company, 1988).
McDonald, S. L., Petroleum Conservation in the United States: An Economic Analysis,
(Washington, D.C.: Resources for the Future, 1971).
Robinson, C., and Morgan, J., North Sea Oil in the Future: Economic Analysis and
Government Policy, (London, England: Billing & Sons, 1978).
Sands, P., Greening International Law, (London, England: Earthscan Publications, 1993).
Sands, P., Principles of International Environmental Law I: Frameworks, Standards and
Implementation, (Manchester, England: Manchester University Press, 1995).
Shell International Petroleum Company, The Petroleum Handbook, (Amsterdam, The
Netherlands: Elsevier Science Publishers, 1983).
Sunkin, M., et al., Sourcebook on Environmental Law, (London, England : Cavendish
Publishing Sourcebook Series, 1998).

22
Wheeler, R. R., and Whited, M., Oil: From Prospect to Pipeline, Third Edition, (Houston,
Texas: Book Publishing Division, 1975).
Zimmermann, E. W., Conservation in the Production of Petroleum: A Study in Industrial
Control, (New Haven, United States: Yale University Press, 1957).
2.2 Conferences
Tata Energy Research Institute, Delhi Sustainable Development Summit, February 18-21,
2000, http://www.teriin.org/25years/webcast/day1/day1.htm (Last Visited on December
18, 2000).

Oil Recovery & Sustainable Development

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (7)

Similar to Oil Recovery & Sustainable Development

Similar to Oil Recovery & Sustainable Development (20)

Recently uploaded

Recently uploaded (20)

Oil Recovery & Sustainable Development