Conciliation for marine transboundary energy resources: A law and economics approach

The LOS Convention assigns the right to exploit resources exclusively to one or another coastal state. However, much of the world’s marine energy resources, such as oil, gas and renewables, straddle jurisdictional lines. There is a huge risk to the efficient, equitable, legally certain and ultimately secure exploitation of marine transboundary energy resources. The peril arising from the national assignment of the exclusive right to exploit such resources is pervasive, yet remains barely discussed methodically in the literature on the law of the sea, international economic law or cognate disciplines. The objective in this chapter is to characterise axioms of rationality underpinning international conciliation for the governance of marine transboundary energy resources. It takes the successful conclusion of the first ever conciliation between Timor-Leste and Australia, relating to the Greater Sunrise Gas field as a reference. The analytical foundations are the advance of social welfare, the instrumentality of contract, and the integration of legal concepts and economic analysis. The findings of this chapter produce interdisciplinary insights for the formulation of general principles, guiding not only the judicious administration of marine transboundary energy resources through unitisation agreements, but also future efforts at international conciliation to reach such agreements in the likely event of misunderstandings among coastal states over actual or potential resources. Such agreements will, long-term, be self-enforcing and help defuse tensions between riparian states.