Energy Transit: Intergovernmental Agreements on Oil and Gas Transit Pipelines

Abstract

This article is an analysis of relevant Intergovernmental and Host Government Agreements on oil and gas transit pipelines in several parts of the world. The following questions serve as the basis for the analysis:

1. To what extent can common principles and regional specificities be derived from the agreements in question?

2. How does the content of the agreements relate to the Energy Charter Model Agreements on Cross-border Pipelines and the provisions of the draft Transit Protocol (text as of January 2010)?

3. What recommendations can be made in view of the possible agreement on common principles or rules on Transit and Cross-border energy flows in the Energy Charter context?

The Energy Charter provides principles for cross-border cooperation in the energy industry among the states of Eurasia. The Energy Charter Secretariat produced a second edition of Model Intergovernmental Agreement (Model IGA) and Host Government Agreement (Model HGA) for cross-border pipelines (together defined as the Model Agreements), designed to provide ‘a template of prescriptive clauses that are designed to reflect generally accepted practices within a given field.’ The Model Agreements aim to assist state-state and investor-state in cross-border oil and gas pipeline matters. The agreements seek to balance all participants’ interests in cross-border pipeline projects and provide a starting point for negotiations between potential partners. These Model Agreements are also available to non-parties to the Energy Charter Treaty to use or adopt.

The structure of this article is as follows: after a brief introduction, section II deals with the fundamentals of energy transit; section III provides an analysis of several Intergovernmental Agreements and Host Government Agreements on oil and gas transit pipelines in several parts of the world; and section IV provides a brief conclusion.

The article concludes that the Model Agreements, along with the ECT and the Protocol, form a regulatory umbrella in relation to transit issues at the multilateral level. At present, there are 54 members of the Energy Charter, all of which except five have ratified the ECT. There seems to be a significant interest of some countries (namely India, Indonesia, Pakistan) to join the Energy Charter. In this scenario, the regulation of transit issues based on the Energy Charter’s instruments will provide a scope for creating globally accepted and uniform standards on transit issues. The above agreements show that a number of the standards relating to transit issues are found in many international agreements. However, there is no homogeneity regarding a number of issues.

Keywords: Energy transit; Energy Charter Conference; Energy Charter Treaty; Energy Charter Draft Transit Protocol; Model Inter-Governmental and Host Government Agreements; Nabucco pipeline; South Caucasus pipeline; BTC pipeline; TAPI pipeline; Kirkuk Agreement

JEL Classification: K33, Q43, Q48