Background for Joint Development
In 1972 Malaysia and Thailand agreed on a lateral shelf boundary which
is about 29 N.M. long in the Gulf of Thailand in 1972. However, the two
countries could not agree on a boundary further seaward because of a serious
disagreement between them with regard to the effect of the Thai rock,
“Ko Losin” on the delimitation. Ko Losin is about 1.5 metres high at high
tide and located some 39 N.M. north (i.e., Thailand side) of what would
have been the agreed equidistant lateral boundary if the effect of the island
had been disregarded. Thailand argued for the full effect of Ko Losin,
whereas Malaysia denied any effect of Ko Losin.
Method of Shaping the Joint Development Zone
As an interim measure, the Parties agreed to establish a joint development
zone which is of a roughly triangular-shape covering 5,439 km2 in area in
1979: the outer limits of the joint development zone were made by using
the lines which were claimed by the two countries.
Forms and Provisions
The above arrangement is in the form of an annexed Memorandum of
Understanding to the main Memorandum of Understanding which provides
for a partial continental shelf boundary which was constructed by connecting
point i, point ii, and point iii. The two countries agreed to continue
to seek to delimit the remaining part of the continental shelf by negotiations
or such other peaceful means as may be agreed by them. There is
no provision on ratione temporis in the Memorandum. However, a Joint
Authority is to be established for a period of 50 years. If both States arrive
at a satisfactory solution on the delimitation within 50 years, then the Joint
Authority is to be wound up. If, however, no satisfactory solution were to
be found within 50 years, then the current arrangement would continue. Operational Mechanism and Effectiveness of the Arrangement An important feature of the provisional arrangement is that it has a powerful
Joint Authority. The Joint Authority assumes “all rights and responsibilities
on behalf of both Parties for the exploration and exploitation of the
non-living resources of the sea-bed and subsoil” in the joint development
area. In 1990, the two countries agreed on a production sharing system.
The production sharing system provides terms and conditions for exploitation.
Among others, the conditions State that: the duration of the contract
shall not exceed 35 years; the payment of 10% of gross production of petroleum
shall be made by the contractor to the Joint Authority as royalty; 50%
of gross production shall be taken by the contractor for the recovery of
costs; and the remainder of gross production shall be profit and divided
equally between the Joint Authority and the contractor.