Abstract
This paper analyses the Ethiopian Petroleum Operations Proclamation (the Proclamation) and other relevant laws and regulations to determine whether the current structure and function of the law support Ethiopia’s goals of sustainably developing the petroleum resources for the benefit of the Ethiopian people, which is set out in the preamble to the principal Proclamation. This analysis is undertaken by looking at the form and substance of the Proclamation, as well as its interaction with other Ethiopian proclamations, to determine if they support the goal of the law. Further analysis is also undertaken by considering the Proclamation against the Norwegian (and other) legal framework, which has successfully encouraged the optimal extraction of petroleum for sustainable development for over 40 years. Upon analysis of the Proclamation, this paper finds that although some elements of the Proclamation do support sustainable development, there are several functions, such as field development planning and depletion policy, that should be addressed in order to sustainably develop Ethiopia’s petroleum resources for the benefit of the Ethiopian people.
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Notes
- 1.
In this chapter, the term ‘extraction’ is used to encompass all upstream activities required for the production of petroleum. This includes petroleum exploration, the development of a potential petroleum deposit and the actual production of petroleum from the field.
- 2.
For a discussion of the economic value of petroleum, see Lee (2006).
- 3.
Perez Alfonzo in Strønen (2017), p. 317.
- 4.
The Netherlands experienced a severe decline in its manufacturing sector in the 1960s after the giant Groningen Gas Field was discovered and came into production in the 1950s, because of the high appreciation of the Dutch Guilder. For a further explanation of this concept, see Corden and Neary (1982), pp. 825–848.
- 5.
Kari (1997), p. 5.
- 6.
In this chapter the concept ‘exhaustible’ is used to mean those resources that are non-renewable. Therefore, the terms ‘exhaustible’ and ‘non-renewable’ are interchangeable. The term exhaustible has been chosen as it is the same term utilized by Robert M Solow in his groundbreaking work, Intergenerational Equity and Exhaustible Resources (1973).
- 7.
Hotelling (1931), pp. 137–175.
- 8.
Robinson et al. (2002).
- 9.
The concept of Resource Curse has been considered in detail in Sachs and Warner (2001), pp. 827–838.
- 10.
The paradox of plenty in relation to oil is considered in Kari (1997).
- 11.
Sala-i-Martin and Subramanian (2003).
- 12.
Sachs and Warner (2001), p. 828.
- 13.
Sachs and Warner (2001), p. 837.
- 14.
Dauvin and Guerreiro (2017), p. 225.
- 15.
National Planning Commission Ethiopia (2016), p. 1.
- 16.
Ethiopian Ministry of Mines (2017).
- 17.
Sustainable development and the narrower concept of sustainable extraction are considered in detail in section 4 below.
- 18.
This framework is defined as both the laws and policies pertaining to the extraction of petroleum.
- 19.
Armstrong (2003), p. 12.
- 20.
Li and Filer (2007), pp. 83–84.
- 21.
Doctrinal methodology is defined as ‘a synthesis of rules, principles, norms, interpretive guidelines and values. It explains, makes coherent or justified a segment of the law as part of a larger system of law. A doctrine can be abstract, binding, or non-binding’. See Mann and Blunden (2010).
- 22.
The first International Congress of Comparative Law was held in Paris in 1900, and brought together experts from Europe to consider this area of legal methodology. See Smits (1998), p. 442.
- 23.
Orucu (1998), p. 442.
- 24.
Zweigert and Kotz (1998), p. 34.
- 25.
Zweigert and Kotz (1998), p. 34.
- 26.
- 27.
Onorato (1995).
- 28.
Sala-i-Martin and Subramanian (2003).
- 29.
In order to reform its laws relating to the extraction of petroleum, Nigeria introduced the Petroleum Industry Bill into the Parliament in 2009. A watered-down form of the Bill (which became known as the Petroleum Industry Governance Bill, or PIGB) was passed in May 2017, and will implement sweeping changes in the legal framework and institutions that govern the Nigerian petroleum industry. Such reform has occurred over 70 years after petroleum extraction first occurred in Nigeria, and more than 25 years after protests regarding the law and institutions governing petroleum extraction.
- 30.
World Bank (2016), p. 5.
- 31.
National Planning Commission Ethiopia (2016), p. 6.
- 32.
World Bank (2017).
- 33.
National Planning Commission Ethiopia, GTP II, pp. 20–21.
- 34.
National Planning Commission Ethiopia, GTP II, pp. 33–34.
- 35.
National Planning Commission Ethiopia, GTP II, pp. 22–23.
- 36.
‘Ethiopia eyes gas production and exports from potential reserves’ Oil Review Africa (2015).
- 37.
Established by Council of Ministers Regulation No. 264/2012 (26 June 2012).
- 38.
Council of Ministers Regulation to Provide for the Establishment of the Ethiopian Petroleum and Natural Gas Enterprise Council of Ministers Regulation No. 264/2012 (26 June 2012), r10.
- 39.
Council of Ministers Regulation to Provide for the Establishment of the Ethiopian Petroleum and Natural Gas Enterprise Council of Ministers Regulation No. 264/201 (26 June 2012), r6.
- 40.
World Bank (2016), p. 8.
- 41.
Government of Ethiopia, p. 4.
- 42.
Ethiopian Ministry of Mines (2017).
- 43.
The policy position regarding petroleum development is outlined in the Petroleum Operations Proclamation 1986 Proclamation No. 295/1986, and discussed in detail in section 5.2 below.
- 44.
Italics added by author.
- 45.
Petroleum Operations Proclamation 1986 Proclamation No. 295/1986.
- 46.
Tax Proclamation, Proclamation No. 296/1986.
- 47.
Environmental Assessment Proclamation, Proclamation No. 299/2002.
- 48.
Model Petroleum Production Sharing Agreement (2011).
- 49.
World Commission on Environment and Development, (1987), (known as the Brundtland Commission).
- 50.
Report of the World Commission on Environment and Development (1987), p. 1.
- 51.
Report of the World Commission on Environment and Development (1987), p. 1.
- 52.
Report of the World Commission on Environment and Development (1987), p. 1.
- 53.
As laid down in UN Resolution 1803 (1962).
- 54.
UN Resolution 1803 (1962).
- 55.
World Summit Outcomes, [48] UN GAOR 60th session UN Doc A/60/L.1 (2005).
- 56.
United Nations Development Programme (2000), p. 3. This is UNDP citation, whilst the quote refers to the World Energy Council?
- 57.
Economic benefits include, but are not confined to, economic diversification of industry, and the capturing of production cost spending. Social development includes increases in knowledge, development of skills and competence, and increased social welfare.
- 58.
This can be delineated as upstream petroleum activities. Upstream Petroleum is defined as all the petroleum activities that occur up to the point of transfer of the petroleum for the transport, sale and refining of the product. It includes exploration and production activities.
- 59.
Hartwick (1977), p. 972.
- 60.
Stiglitz (2005), p. 14.
- 61.
Sachs (2007), p. 180.
- 62.
Sachs (2007), p. 175.
- 63.
Sachs (2007), pp. 178–180.
- 64.
Sachs (2007), pp. 178–180.
- 65.
- 66.
- 67.
Sachs (2007), pp. 178–180.
- 68.
Resource sterilisation (also known as a stranded field) occurs where some petroleum is unable to be developed because of reservoir geology, access to the field, or access to facilities for development, or when individual companies develop fields on an individual basis with the combined effect of stranding some petroleum in the reservoir: see Schulte and Asshert (2012).
- 69.
Hunter (2012), pp. 4–6.
- 70.
- 71.
The Ethiopian government is also managing its hydropower in a similar manner. See National Planning Commission Ethiopia, GTP II.
- 72.
Lieberman (1970).
- 73.
Organisation for Economic Cooperation and Development (2005), p. 11.
- 74.
Gordon and Stenvoll (2007), p. 1.
- 75.
It is important to realise that Norway does not necessarily provide an example of the ‘best’ system of petroleum regulation. Rather, Norway provides an example of a successful system where petroleum resources have been developed for the benefit of all Norwegians, including future generations.
- 76.
Humphreys et al. (2007), p. 273.
- 77.
- 78.
Wawryk (2015), p. 21.
- 79.
Wawryk (2015), pp. 21–22.
- 80.
This list has been determined by examining the contents of the primary petroleum Act in Norway, Australia, Canada and the UK.
- 81.
Onorato (1995), p. 3.
- 82.
- 83.
The role of petroleum policy in considered in section 6 below.
- 84.
Frieberg (2017), p. 234.
- 85.
Frieburg (2010), p. 89.
- 86.
Black (2007), p. 7.
- 87.
Black (2007), p. 7. An excellent example of this is the regulation of coal Seam Gas extraction in Queensland, Australia, where thousands of amendments have been made since 2000.
- 88.
Frieburg (2010), p. 89.
- 89.
Frieburg (2010), p. 89. It is important to note that the prescriptive based regulatory framework that existed at the time of the Deepwater Horizon blowout and oil spill was seen as a contributor to the event, and the report from the National Academy of Engineering and National Research Council recommended that the prescriptive regulatory framework be reformed to a hybrid system based on principle-based regulation that incorporates some prescriptive elements. See National Academy of Engineering and National Research Council (2012), pp. 112–121.
- 90.
Government of Victoria (2016), pp. 3–8.
- 91.
Black (2007), p. 7.
- 92.
Black (2007), p. 7.
- 93.
Black (2007), p. 7.
- 94.
Black (2007), p. 7.
- 95.
Act 12 of 21 June 1963 relating to exploration for and exploration of submarine natural resources. This Act contained three basic principles:
-
1.
The right to submarine natural resources was vested in the State.
-
2.
The King may grant Norwegian or foreign persons, including legal persons the right to explore for or exploit natural resources.
-
3.
The King may issue regulations concerning such activities. See Arnesen et al. (2007), p. 896.
-
1.
- 96.
Liberman (1970), Chapter 1.
- 97.
Liberman (1970), Chapter 1.
- 98.
Nelsen (1991), pp. 22–23.
- 99.
Organisation for Economic Cooperation and Development (2005), p. 11.
- 100.
See International Energy Agency (IEA) (2005a, b). The IEA notes that ‘Norway’s skill in the development of its large oil and gas resources has made Norway Europe’s largest exporter of oil and gas, and is contributing significantly to Europe’s security of supply’. It also noted that ‘The government’s transparent and forward-looking way in which it intends to manage the expected decline is commendable as well as its plans to extend production for as long as possible. It has taken strong action to increase exploration for new fields and to open the industry further to smaller companies. It has also made important progress since the last review in reducing state involvement with the partial privatisation of Statoil. Altogether, Norwegian management of its petroleum resources is an example of best practice for the management of valuable natural resources in a small economy’.
- 101.
Norway’s petroleum policy and framework are recognised as ‘a potent example of the successful development of the petroleum sector and surrounding industry’, since it successfully combined the development of State-owned Oil Company and international oil companies as it sought to develop petroleum resources whilst transforming the economy and creating an industry. See Gordon and Stenvoll (2007), p. 1. In addition, see Bunter (2003).
- 102.
Gordon and Stenvoll (2007), p. 1.
- 103.
See section 1-1 of the Petroleum Activities Act 1996 (Norway).
- 104.
Such fluctuations may include the price of oil, changes in technology, the availability of capital, and the prospectivity and attractiveness of the jurisdiction.
- 105.
Onorato (1995), p. 3.
- 106.
Onorato (1995), p. 3.
- 107.
Onorato (1995), pp. 3–4.
- 108.
Black (2007), pp. 7–8.
- 109.
Department of State Development (Qld) (2012). This method of ‘learning by doing’ is implemented in Queensland primarily through the imposition of layered monitoring and reporting duties on the CSG operator alongside obligations to compensate and ‘make good’ any harm caused. For a discussion on adaptive management see Swayne (2012).
- 110.
Such as changes in the regulatory framework for the disposal of water from petroleum extraction activities.
- 111.
The MQRA is an ambitious legislative reform programme that commenced in 2013 and is expected to be finalised in 2017 and integrates the Mineral Resources Act 1989, the Petroleum and Gas (Production and Safety) Act 2004, the Petroleum Act 1923, the Greenhouse Gas Storage Act 2009 and the Geothermal Energy Act 2010.
- 112.
- 113.
See sections 9 (1)–9 (17) of the POP.
- 114.
These are found under section V of the MPPSA.
- 115.
Section 18(1)(a) of the POP.
- 116.
Section 18(1)(b) of the POP.
- 117.
These include the duration of the PPSA, training and preferences for local content provisions, transfer and assignment of interests, operating standards, disposal of assets, record-keeping, insurance and indemnity, supply of petroleum to the domestic market, duties and levies, exemptions, royalties, taxes, payment of contractors, and arbitration/choice of law forum.
- 118.
Onorato (1995), pp. 7–8.
- 119.
As outlined in the preamble of the Petroleum Operations Proclamation, Proclamation No. 295/1986.
- 120.
Sections 3 and 4 are administrative in nature, outlining the scope of the Proclamation (s 3) and the ownership of the resources (s 4), domestic supply reservation (s 20), arbitration provisions (s 25), applicable laws (s 26), and conflict of laws (s 27).
- 121.
The role of the government (s 5) and Ministers (s 6 and s 7) relating to the Minister’s representation and powers and Ministerial discretion to make directives relating to petroleum activities (s 8); set out the capacity of the Minister to make directives in relation to the method for inviting and evaluating petroleum bids, the content of petroleum applications and the requirements of applicants when applying to undertake petroleum operations.
- 122.
S 9 of the POP.
- 123.
Sections 9–28 set out the requirements for a contractor under a PPSA, and includes matters such as particulars to be contained in the petroleum agreement (s 9), Areas precluded from petroleum operations (s 10) duration of agreements (s 11), local content provisions (s 12) transfer and assignment (s 13), operating standards (s 14), disposal of assets (s 15), access to property (s 16), protection of historical sites and other minerals (s 17), Books and records (s 18), insurance and indemnity (s 19), and financial requirements (royalties, tax, etc.—s 21–s 24).
- 124.
These include environmental regulation.
- 125.
Vinent-Akpu et al. (2015), p. 135.
- 126.
As outlined in the preamble to the POP.
- 127.
Proclamation to Promote the Development of Mineral Resources, Proclamation No. 52/1993.
- 128.
Proclamation to Promote Sustainable Development of Mineral Resources, Proclamation No. 678/2010.
- 129.
S18(1) (c) of the Proclamation to Promote Sustainable Development of Mineral Resources, Proclamation No. 678/2010.
- 130.
S 26(1) (c) of the Proclamation to Promote Sustainable Development of Mineral Resources, Proclamation No. 678/2010.
- 131.
S 44(1) of the Proclamation to Promote Sustainable Development of Mineral Resources, Proclamation No. 678/2010.
- 132.
S 52(4)(j) of the Proclamation to Promote Sustainable Development of Mineral Resources, Proclamation No. 678/2010.
- 133.
POP, s 19.
- 134.
POP, s 9(2).
- 135.
POP, s 14.
- 136.
Labour Proclamation No. 377/2003, see section 3.
- 137.
Proclamation to Provide for the Definition of Powers and Duties of the Executive Organs of the Federal Democratic Republic of Ethiopia, Proclamation No. 4/1995.
- 138.
Norwegian Petroleum Directorate (2000).
- 139.
Petroleum Activities Act 1996 (Norway), s 4-1.
- 140.
Petroleum Activities Act 1996 (Norway), s 4-2.
- 141.
Petroleum Activities Act 1996 (Norway), s 4-4.
- 142.
Bygdevoll (2006), p. 5.
- 143.
Bygdevoll (2006), p. 5.
- 144.
As demonstrated in Hunter (2012).
- 145.
Norwegian Petroleum Directorate (2008).
- 146.
Kvendseth (1991), p. 194.
- 147.
Ekofisk Redevelopment Plan Chronology (1994).
- 148.
Ekofisk Redevelopment Plan Chronology (1994).
- 149.
For a discussion of prudent production requirements, see section 5.3.
- 150.
Norwegian Petroleum Directorate (2008).
- 151.
Norwegian Petroleum Directorate (2017).
- 152.
Petroleum Proclamation, Proclamation 286/1986, preamble.
- 153.
The Norwegian ten oil commandments were approved by the Norwegian Storting (Parliament) on 14 June 1971, and comprised the following: 1. that national supervision and control must be ensured for all operations in the Norwegian continental shelf; 2. that petroleum discoveries are exploited in a way that makes Norway as independent as possible of others for its supplies of crude oil; 3. that new industry is developed on the basis of petroleum; 4. that the development of an oil industry must take necessary account of existing industrial activities and the protection of nature and the environment; 5. that flaring of exploitable gas on the Norwegian Continental Shelf must not be accepted, except during brief periods of testing; 6. that petroleum from the Norwegian Continental Shelf must as a main rule be landed in Norway, except in those cases where socio-political considerations dictate a different solution; 7. that the State becomes involved at all appropriate levels, and contributes to a coordination of Norwegian interests in Norway’s petroleum industry as well as the creation of an integrated Norwegian oil community which sets its sights both nationally and internationally; 8. that a State oil company be established which can look after the government’s commercial interests and pursue appropriate collaboration with domestic and foreign oil interests; 9. that a pattern of activities is selected north of the 62nd parallel which reflects the special socio-political conditions prevailing in that part of the country; and 10. that large Norwegian petroleum discoveries could present new tasks for Norway’s foreign policy. See Lerøen (2002), p. 46.
- 154.
Olsen (2002), p. 2.
- 155.
Nelsen (1991), pp. 71–75. This round occurred in 1974, therefore it was the first official implementation of the procurement policy from the 1972 Decree. However, there had been some development of local industry prior to this official decree.
- 156.
Section 1-2 of the Petroleum Activities Act 1996 (Norway).
- 157.
Section 4-1 PAA Norway.
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Legal Instruments
Australia
Petroleum and Gas (Production and Safety) Act 2004 (Qld)
Ethiopia
Council of Ministers Regulation to Provide for the Establishment of the Ethiopian Petroleum and Natural Gas Enterprise Council of Ministers Regulation No. 264/2012 (26 June 2012).
Environmental Assessment Proclamation, Proclamation No. 299/2002.
Model Petroleum Production Sharing Agreement 2011. http://www.mom.gov.et/upload/Model%20Petroleum%20Production%20Sharing%20Agrement(MPPSA).pdf. Accessed 21 July 2017.
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Proclamation to Promote the Development of Mineral Resources, Proclamation No. 52/1993.
Proclamation to Promote Sustainable Development of Mineral Resources, Proclamation No. 678/2010
Proclamation to Provide for the Definition of Powers and Duties of the Executive Organs of the Federal Democratic Republic of Ethiopia, Proclamation No. 4/1995
Tax Proclamation, Proclamation No. 296/1986
Norway
Act 12 of 21 June 1963 Relating to Exploration for and Exploration of Submarine Natural Resources.
Petroleum Activities Act 1996 (Norway)
Petroleum Regulations 1997 (Norway)
United Nations
UN Resolution 1803 (1962)
Report of the World Commission on Environment and Development. UN GAOR 96th Plenary Meeting, UN Doc A/Res/42/187(1987). www.un.org/documents/ga/res/42/ares42-187.htm. Accessed on 12 July 2017
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Acknowledgements
The author thanks Lillnna Kifle for her excellent research help on Ethiopian law. The author also wishes to thank the peer reviewers for their excellent and insightful feedback, which contributed to the improvement of this paper. All errors are, of course, the author’s.
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Hunter, T. (2018). Comparative Perspective on Exhaustible Resource Development in Ethiopia: Lessons from the Norwegian Legal Framework and Experience. In: Yihdego, Z., Desta, M., Hailu, M., Merso, F. (eds) Ethiopian Yearbook of International Law 2017. Ethiopian Yearbook of International Law, vol 2017. Springer, Cham. https://doi.org/10.1007/978-3-319-90887-8_3
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