Nature of international petroleum industry practices and their impacts on law governing upstream contracts

International petroleum industry practices represent activities of industry players aiming to optimize the procedures and increase the efficiency of production, safety of petroleum operation and environmental protection. In this paper, first, nature of these practices and similar concepts are examined and their sources are described. Then, having reviewed the characteristic of upstream contracts, impact of these practices on the law governing such contracts has been studied. It was shown, using the depecage theory, that international petroleum industry practices, as set of transnational rules, play the role similar to applicable law, as agreed by the parties in an upstream contract. Finally by analyzing the international arbitration tribunal in the petroleum industry, it was revealed that despite the host countries’ efforts to apply national law on all aspects of an upstream contract, these tribunals tend to prioritize international law over the national one, on the international commitments of the host country. Especially states may not invoke their internal law to extract themselves from an international law obligation. Considering the domestic law applicable to the contract, this would only be limited to those issues within the scope of international law.