Article 82 of the LOS Convention—Revenue Sharing—The Mining Industry’s Perspective

CITATIONS
Mingay, George. "Article 82 of the LOS Convention—Revenue Sharing—The Mining Industry’s Perspective." The International Journal of Marine and Coastal Law. Vol. 21, No. 3 (2006): 335-346. [ More (2 quotes) ]

Quicktabs: Citation

Mining companies have incentive to over develop resource in inefficient manner to avoid paying higher royalty share

While Moore’s view is also that Article 82 is a “small quid pro quo”,11 the Article may nonetheless have undesirable consequences. For example, Rainer Lagoni observed in New Delhi in 2002 that in providing for five years where the revenue share is nil per cent before slowly climbing by one per cent a year there is an incentive of the mining industry to extract resource at a far faster rate than they might otherwise do.12 This may lead to an inefficient, even wasteful use of resource, particularly when taking into account the gearing of refinery resources to the raw resource available.

[ Page 342 ]
Mingay, George. "Article 82 of the LOS Convention—Revenue Sharing—The Mining Industry’s Perspective." The International Journal of Marine and Coastal Law. Vol. 21, No. 3 (2006): 335-346. [ More (2 quotes) ]
Nigeria's difficulties with managing oil resource and collecting royalties is an example of what ISA will have to contend with

The Deep Sea-Bed Authority would need to have a method of verifying pro- duction figures submitted to it. The Nigerian Attorney-General speaking in London at the September 2005 Commonwealth Lawyer’s Conference and noted that Nigeria has only very recently been able to introduce proper checks on the volume of resources extracted. It has taken the Nigerian oil industry approximately 40 years to reach a point where they have developed a reasonably fool proof method of checking that they are receiving their entitlement of proceeds from joint ventures with private oil companies.

There are also significant problems in Nigeria with the bunkering or illegal lifting of oil which have been highlighted by the trouble in the Niger Delta. The pipelines are tapped into directly away from oil company facilities, and pipes are then connected to barges to siphon off oil. Governor Ibori has stated in the past that as many as 300,000 barrels per day or 15 percent of produc- tion is stolen through bunkering activities. The oil companies in the region estimate it to be less, although it is quite possible that 10 per cent of Nigerian production is stolen per annum. These are problems that individual governments have to face and will also need to be faced by the Deep Sea Bed Authority in their application of Article 82.

[ Page 343 ]
Mingay, George. "Article 82 of the LOS Convention—Revenue Sharing—The Mining Industry’s Perspective." The International Journal of Marine and Coastal Law. Vol. 21, No. 3 (2006): 335-346. [ More (2 quotes) ]