Posted: June 7th, 2014

Evaluating the impact of international environmental laws on oil/gas

Evaluating the impact of international environmental laws on oil/gas production

Depleting hydrocarbon reserves in major oil and gas producing fields in Russia has prompted the Russian government to expedite its exploration activity in the Arctic region. Russia’s Arctic region is expected to have hydrocarbon reserves that will suffice for around 100 to 150 years. However, explorations in the Arctic require huge investments due to its harsh climatic conditions and the challenges posed by compliance with environmental protection measures, which require advanced technologies. This scenario has prompted Russian oil companies to enter into an alliance with international oil companies to expedite the exploration process.
REP-Oil, a Russian oil company, has recently concluded such an agreement for drilling of oil in the Arctic. In 2013 a report by a major international environmental group GreenEn accused Oil companies operating in the Russian Federation of operating irresponsibly especially those in mainland oil and gas fields, including the Arctic portion. They were said to have exceptional disregard to safety and environmental protection of the region. The indigenous peoples in the region also expressed concerned about the possible environmental impact of continual exploration in this region. Bowing to pressures from environmental groups and others to abandon its drilling plans over safety concerns, REP-Oil delayed its oil production in the Artic rig for a few months.
Political and international pressures are also mounting on Russian Oil Companies as Europe expresses disapproval of Russia’s annexation of Crimea. REP-Oil needs to move fast and foster business alliances with companies in Europe or North America.
There is growing concern in the company that further delay in production could affect the operations, partnership agreement, reputation and financial position of the company. The project itself is expected to provide much needed jobs and regenerations to the area as well as provide a new source of revenue generation for the company and country. Taking the above into consideration and concerns over the possible economic social and strategic consequences, the company would like to begin the project as soon as possible. They however also do not want to destroy their image in the region.
Amidst these concerns management would like to be apprised of the situation before going ahead with the project.
You have therefore been asked by management to prepare an evaluation of the situation and make recommendations as to whether they should explore new production. This evaluation is for presentation to Senior Management and the Board of Directors of REP-oil.
Write a Board Paper addressed to the Board of Directors of REP-oil providing an analysis and advice for the company as to whether they should pursue this new exploration of oil in the Arctic region of Russia in order to expand the company’s operations given the current situation. Provide an action plan for the company as a part of the Board Paper. Your proposal should take into account the following issues:
• Application of the principles of international environmental law such as
o the principle of common but differentiated responsibilities
o the precautionary principle,
o Sustainable development,
o The Polluter-Pays Principle and the prevention of Transboundary Principle
o The use/exploitation of environmental resources
• Assess the implications on biodiversity, sustainability and health
• Critically evaluate implications of this pipeline project on the local and international environment
• Critically Analyse the regulatory framework and the impact of this project on (national, local, regional and international) compliance standards
• Develop a step-by-step approach to implementing the proposed project giving consideration to opposing views from the local community

Your analysis and recommendations should also consider the benefits and potential barriers to successful implementation of this project and measures to be adopted to ensure that the project contributes positively to sustainable development.

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