"the Act of 1934" means the Petroleum (Production) Act 1934[24];

"the Act of 1964" means the Continental Shelf Act 1964[25];

"the Act of 1998" means the Petroleum Act 1998[26];

"block" means an area delineated on the reference map deposited at the principal office of the Minister's department;

"continuing part" has the meaning assigned thereto by clause 5 (the marginal note whereof is "Option to continue licence as to part of the licensed area");

"development scheme" has the meaning assigned thereto by clause 25 (the marginal note whereof is "Unit development");

"half year" means the period from 1st January to 30th June in any year and the period from 1st July to 31st December in any year;

"the licensed area" means the area for the time being in which the Licensee may exercise the rights granted by the licence;

"the Licensee" means the person or persons to whom the licence is granted, his personal representatives and any person or persons to whom the rights conferred by the licence may lawfully have been assigned;

"the Minister" means the Secretary of State;

"petroleum" includes any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in strata, but does not include coal or bituminous shales or other stratified deposits from which oil can be extracted by destructive distillation;

"surrendered part" has the meaning assigned thereto by clause 5 (the marginal note whereof is "Option to continue licence as to part of the licensed area");

"well" includes borehole.

    (2) Any obligations which are to be observed and performed by the Licensee shall at any time at which the Licensee is more than one person be joint and several obligations.

    (3) Any clause of this licence which refers to any provision of Part I of the Oil Taxation Act 1975[27] shall, unless the contrary intention appears, be construed as referring to that provision as it has effect for the time being for the purposes of petroleum revenue tax.

(a) be bounded by lines which unless they are boundaries of the area originally comprised in the licence run either due north and south or due east and west;

(b) not comprise any part of a block being a part having an area of less than twenty square kilometres.

    (2) Any area to be surrendered by the Licensee pursuant to the last three foregoing clauses, in any case where the foregoing paragraph does not apply, shall unless the Minister has otherwise agreed in writing prior to the date at which the notice is given by the Licensee to the Minister be - 

(a) not less than twenty square kilometres in extent and such that the area remaining subject to this licence after such surrender will be not less than ten square kilometres in extent;

(b) clearly defined and as far as possible compact;

(c) such that any area remaining subject to this licence after such surrender will be clearly defined and as far as possible compact; and

(d) such that the greatest length of any area remaining subject to this licence after such surrender will not exceed three times the average width thereof.

    (3) Upon the date upon which any determination of the licence or any surrender of part of the licensed area in manner provided by the last three foregoing clauses is to take effect the rights granted by the licence shall cease in respect of the licensed area or of the part so surrendered as the case may be but without prejudice to any obligation or liability imposed upon the Licensee or incurred by him under the terms of the licence prior to that date.

(a) payments of royalty in accordance with clauses 9 and 10 of this licence;

(b) deliveries of petroleum in accordance with clause 11 of this licence; and

(c) payments in accordance with Schedule 2 to this licence.

    (2) The Licensee shall not by reason of the determination of this licence or the surrender of any part of the licensed area be entitled to be repaid or allowed any sum payable to the Minister hereunder before the date of the determination or surrender.

(a) 5 per cent of the value of all relevant units up to the first 100,000 units won and saved in the year which includes that period;

(b) 7½ per cent of the value of all further relevant units up to the next 50,000 units so won and saved;

(c) 10 per cent of the value of all further relevant units up to the next 50,000 units so won and saved; and

(d) 12½ per cent of the value of all further relevant units so won and saved;

and for the purposes of this paragraph "relevant unit" means a unit won and saved in the chargeable period in question and the value of a relevant unit is the amount produced by dividing the value of the petroleum relating to that period by the number of the relevant units.

    (1A) Paragraph (1) of this clause shall not apply to a chargeable period in which the Licensee delivers petroleum to the Minister in pursuance of clause 11 of this licence; but if the petroleum delivered has a value of less than the relevant percentage of the aggregate of - 

(a) the value of the petroleum delivered (ignoring any such excess as is mentioned in paragraph (7F) of this clause), and

(b) the value of the petroleum relating to that period,

he shall pay to the Minister a royalty of an amount equal to the difference.

    (5) For the purposes of this clause and clauses 9A and 10 of this licence the value of the petroleum relating to a chargeable period is, subject to paragraph (6) of this clause, the total of the amounts which, if the words "one-half of" were omitted from paragraph (b) of subsection (4) and paragraph (d) of subsection (5) of section 2 of the Oil Taxation Act 1975[28], would in pursuance of paragraph (a) of the said subsection (4) fall to be taken into account in relation to that period in respect of the persons who by reference to this licence are or are treated as participators for the purposes of those subsections, reduced by - 

(a) the total of the market values which would in pursuance of the said paragraph (b) fall to be taken into account as aforesaid; and

(b) a sum ascertained in pursuance of paragraph (7) of this clause in respect of the cost of conveying and treating petroleum.

    (6) The value which, in pursuance of paragraph (5) of this clause, is the value of the petroleum relating to a chargeable period shall be increased by - 

(a) the amount of the price received or receivable for any petroleum consisting of gas won and saved in the licensed area in that period which is sold to British Gas Trading Ltd in that period under a contract made before the end of June 1975; and

(b) an amount equal to the value, as determined for the purposes of income tax or the charge of corporation tax on income, of so much of the petroleum won and saved in the licensed area as falls within section 10(1)(b) of the Oil Taxation Act 1975 and was in that period disposed of or relevantly appropriated (within the meaning of Part I of that Act) by the persons mentioned in the said paragraph (5).

    (7) The Minister may from time to time, by notice in writing given to the Licensee, determine the mode of ascertaining any sum for the purposes of sub-paragraph (b) of paragraph (5) of this clause; but - 

(a) the Minister shall not give a notice in pursuance of this paragraph unless he has consulted persons appearing to him to be representative of the holders of petroleum production licences about the terms of the notice; and

(b) any dispute between the Minister and the Licensee as to the amount of such a sum shall, in default of agreement before the expiration of fourteen months beginning with the last day of the chargeable period to which the sum relates and subject to sub-paragraph (c) of this paragraph, be determined by the Minister; and

(c) the Licensee may, during the period of 28 days beginning with the day on which he receives from the Minister particulars of a determination in pursuance of sub-paragraph (b) of this paragraph, refer to arbitration in the manner provided by clause 38 of this licence any question as to whether the determination is in accordance with the relevant notice given to the Licensee in pursuance of this paragraph.

    (7A) A notice under paragraph (7) of this clause may, if the Minister thinks fit, provide for the costs in respect of which a sum is ascertained for the purposes of paragraph (5)(b) to include, to such extent as may be specified in the notice - 

(a) costs incurred in relation to assets which have ceased to be used in connection with the conveying or treating of petroleum;

(b) costs incurred after the end of the chargeable period to which the sum relates.

    (7B) If a notice under paragraph (7) of this clause contains a provision relating to costs incurred after the end of a chargeable period, sub-paragraph (b) of paragraph (7) shall have effect in relation to a dispute concerning such costs as if the chargeable period there referred to were that in which the costs were incurred.

    (7C) Subject to paragraphs (7D) and (7E) of this clause, the value of petroleum delivered to the Minister in pursuance of clause 11 of this licence shall be ascertained for the purposes of this clause and clause 9A on such basis (or, where petroleum of more than one kind is delivered, such bases) as the Minister and the Licensee agree.

    (7D) If the Minister and the Licensee fail to agree on the value of any petroleum delivered to the Minister in pursuance of clause 11 of this licence, it shall be ascertained on such basis as the Minister may specify as fair in a notice in writing given by him to the Licensee.

    (7E) The Licensee may, during the period of 28 days beginning with the day on which he receives a notice from the Minister under paragraph (7D) of this clause, refer to arbitration in the manner provided by clause 38 of this licence any question as to whether the basis of valuation specified in the notice is fair.

    (7F) In this clause and clauses 9A, 10 and 11A, references to petroleum delivered to the Minister in pursuance of clause 11 include references to any excess over the quantity required to be delivered by a notice served in pursuance of paragraph (1) of that clause.

    (8) In this clause - 

"chargeable period" means a half year in which this licence is in force;

"relevant percentage", in relation to a chargeable period, means the effective rate at which, apart from any notice under clause 11 of this licence, royalty would be payable for that period in pursuance of paragraph (1) of this clause;

"unit" means one metric ton of petroleum won and saved in the licensed area except that in the case of petroleum so won and saved in the form of gas it means a quantity of it equal to 1400 cubic metres of the gas at a temperature of 0 degrees centigrade and a pressure of one kilogramme force per square centimetre; and

"year" means a year consisting of a chargeable period in which such a periodic payment as is mentioned in Schedule 2 to this licence is payable and the following chargeable period.

(a) the value of the petroleum delivered (ignoring any such excess as is mentioned in clause 9(7F) of this licence), and

(b) the value of the petroleum relating to that period,

the Minister shall pay to the Licensee a sum equal to the difference.

    (2) In this clause, "chargeable period" and "relevant percentage" have the same meanings as in clause 9 of this licence.

(a) the quantity of petroleum won and saved in the licensed area in that period;

(b) the quantity of that petroleum delivered to the Minister in that period in pursuance of clause 11 of this licence;

(c) the amounts of the prices and market values which are required by paragraph 2 of Schedule 2 to the Oil Taxation Act 1975[29] to be stated in the returns made for that period in pursuance of that paragraph in consequence of this licence;

(d) the amount mentioned in clause 9(6)(a) of this licence; and

(e) the amount which the Licensee estimates will be the sum ascertained as respects that period for the purposes of clause 9(5)(b) of this licence (ignoring, in a case where they might otherwise be taken into account in the estimate, any costs incurred after the end of the period).

    (2) The Licensee shall, when he delivers a statement to the Minister in pursuance of paragraph (1) of this clause for a chargeable period in respect of which royalty is payable in pursuance of clause 9(1) of this licence, make to the Minister a payment on account of royalty for that period equal to the relevant percentage of the sum produced by aggregating the amounts which in pursuance of sub-paragraphs (c) and (d) of paragraph (1) of this clause are specified in the statement and reducing the aggregate by the amount so specified in pursuance of sub-paragraph (e) of that paragraph and by the amount which, by virtue of paragraph 2(2)(d)(ii) of Schedule 2 to the said Act of 1975, was specified in the statement delivered to the Minister in pursuance of the said paragraph (1) in respect of the preceding chargeable period; but the Licensee may reduce the amount of the payment by the amount of any deduction from it authorised by paragraph 2(2) of Schedule 2 to this licence.

    (3) The Licensee shall, when he delivers a statement to the Minister in pursuance of paragraph (1) of this clause for a chargeable period in respect of which royalty is payable in pursuance of clause 9(1A) of this licence, make to the Minister a payment on account of royalty for that period equal to the amount which would be so payable for that period if the royalty so payable for that period fell to be determined by reference to the amounts specified in the statement and the amount which, by virtue of paragraph 2(2)(d)(ii) of Schedule 2 to the Oil Taxation Act 1975, was specified in the statement delivered to the Minister in pursuance of paragraph (1) of this clause in respect of the preceding chargeable period; but the Licensee may reduce the amount of the payment as mentioned in paragraph (2) of this clause.

    (4) The Minister shall make to the Licensee payments equal to the amounts by which, in consequence of paragraph (1A) of clause 9 of this licence, the deductions which the Licensee was entitled to make in pursuance of paragraph 2(2) of Schedule 2 to this licence fall short of the deductions which the Licensee would have been so entitled to make if royalty were only payable in pursuance of paragraph (1A) of that clause and paragraph (2) of it were omitted; and payments by the Minister in pursuance of this paragraph shall be made as soon as the amounts of the relevant deductions have been determined.

    (5) The Minister may from time to time, after a statement in respect of any chargeable period has been delivered to him in pursuance of paragraph (1) of this clause and before he has given to the Licensee a notice in pursuance of paragraph (6) of this clause in respect of that period, give a notice in writing to the Licensee specifying the amount which the Minister estimates is payable by the Licensee in pursuance of clause 9 of this licence in respect of that period; and where the amount specified in the notice is larger or smaller than the total amount already paid by the Licensee in pursuance of this clause in respect of that period, then - 

(a) if it is larger the difference shall be paid forthwith by the Licensee to the Minister; and

(b) if it is smaller the difference shall be paid forthwith by the Minister to the Licensee.

    (6) When it appears to the Minister that the value of the petroleum relating to any chargeable period has been finally determined for tax purposes, he may give to the Licensee a notice in writing specifying the amount which the Minister considers is payable by the Licensee in pursuance of that clause in respect of that period; and where the amount specified in the notice is larger or smaller than the total amount already paid by the Licensee in pursuance of clause 9 of this licence in respect of that period, then, subject to paragraph (8) of this clause - 

(a) if it is larger the difference shall be paid forthwith by the Licensee to the Minister; and

(b) if it is smaller the difference shall be paid forthwith by the Minister to the Licensee.

    (7) If after the date when the Minister gave notice to the Licensee in pursuance of paragraph (6) of this clause or this paragraph in respect of a chargeable period it appears to the Minister, in consequence of a relevant assessment or determination made after that date which relates directly or indirectly to the value of petroleum by reference to which the amount specified in the notice was determined, that another amount ought to have been so specified, he may give notice in writing to the Licensee specifying the other amount; and where he does so, then, subject to paragraph (8) of this clause - 

(a) if the other amount is larger than the total amount already paid by the Licensee in pursuance of this clause in respect of that period the difference shall be paid forthwith by the Licensee to the Minister; and

(b) if it is smaller the difference shall be paid forthwith by the Minister to the Licensee.

    (7A) If, after the date when the Minister gave notice to the Licensee in pursuance of paragraph (6) of this clause or this paragraph in respect of a chargeable period, it appears to the Minister that as a result of costs incurred after the end of the period there is an increase in the sum to be taken into account by virtue of clause 9(5)(b) of this licence, and accordingly a reduction in the amount payable by the Licensee in respect of that period, he may give notice in writing to the Licensee specifying the reduced amount; and where he does so he shall forthwith pay to the Licensee an amount equal to the difference between the reduced amount and the total amount already paid by the Licensee in pursuance of this clause in respect of the period.

    (8) A decision made by the Minister for the purposes of paragraph (5), (6), (7) or (7A) of this clause shall not be called in question by the Licensee except that any dispute between the Minister and the Licensee as to whether an amount specified in a notice given in pursuance of the said paragraph (6), (7) or (7A) is payable by virtue of clause 9 of this licence may, during the period of 28 days beginning with the day on which the Licensee receives the notice, be referred to arbitration in the manner provided by clause 38 of this licence; and on a reference to arbitration in pursuance of this paragraph any relevant assessment or determination for the time being in force shall be binding on the Minister and the Licensee so far as the assessment or determination relates directly or indirectly to the value of petroleum relating to the chargeable period in question.

    (9) An amount in respect of interest shall be payable when a notice is given under paragraph (5), (6), (7) or (7A) of this clause, and that amount shall be calculated in such manner as the Minister may specify from time to time in a notice in writing given by him to the Licensee; but - 

(a) a notice in pursuance of this paragraph shall provide for amounts by way of interest to be calculated by applying a rate of interest which is for the time being a commercial rate of interest;

(b) any such amount in respect of interest shall be disregarded in calculating for the purposes of paragraph (5), (6), (7) or (7A) of this clause any amount already paid by the Licensee in pursuance of this clause;

(c) where costs of the kind mentioned in clause 9(7A)(b) of this licence are taken into account, they shall not affect the amount of interest payable in respect of any period ending earlier than two months after the chargeable period in which they were incurred.

    (9A) If a payment is made by the Minister in pursuance of clause 9A of this licence more than two months after the end of the chargeable period to which the payment relates, an amount in respect of interest on the payment from the end of those two months shall also be payable by him to the Licensee.

    (9B) Interest under paragraph (9A) of this clause shall be calculated in such manner as the Minister may specify from time to time in a notice in writing given by him to the Licensee (but sub-paragraph (a) of paragraph (9) of this clause shall apply to such a notice as it applies to a notice under paragraph (9)).

    (10) In this clause - 

"chargeable period" and "relevant percentage" have the same meanings as in clause 9 of this licence;

"relevant assessment or determination" means an assessment or determination made by the Commissioners of Inland Revenue for the purposes of petroleum revenue tax, income tax or the charge of corporation tax on income or a determination made in proceedings arising out of such an assessment or determination made by the said Commissioners.

    (11) For the purposes of this clause any amount paid by the Licensee or the Minister on account of a prospective liability under paragraph (5), (6), (7) or (7A) of this clause shall be treated as paid in pursuance of that paragraph.

(a) give the Licensee a copy of the proposed notice and an opportunity of making representations to the Minister about it; and

(b) consider any representations then made to him by the Licensee about the proposed notice;

and the Minister shall, in deciding upon the terms of the actual notice, have regard to the desirability of not disturbing unduly any arrangements made by the Licensee for transporting and delivering petroleum won and saved from the licensed area.

    (3) Subject to paragraph (4) of this clause, a notice served in pursuance of paragraph (1) of this clause - 

(a) shall specify the date on which the notice is to come into force and may contain provisions with respect to the time when it shall cease to be in force;

(b) shall specify the quantity of petroleum won and saved in the licensed area during each half year in which the notice is in force which, up to any maximum quantities specified in the notice in pursuance of paragraph (4)(b) of this clause, is to be delivered to the Minister in consequence of the notice;

(c) may relate to all petroleum so won and saved or may be limited to and specify different quantities of such petroleum which is of one or more of the following kinds, namely, crude oil, condensate, natural gas and natural gas liquids, in each case of a quality or composition or of each quality or composition determined in the manner specified in the notice;

(d) shall contain provisions with respect to the place or places at which any petroleum or kind of petroleum is to be delivered in pursuance of the notice and may contain provisions with respect to the times at which any quantities of it are to be so delivered.

    (4) Such a notice - 

(a) shall not specify as the date on which it is to come into force a date before the expiration of the period of six months beginning with the date on which the notice is served on the Licensee but shall, if the Minister serves on the Licensee a further notice in writing stating that it is to cease to be in force at a time specified in the further notice which is not earlier than six months after the date of service of the further notice, cease to be in force at that time;

(b) shall not specify, as the quantity of petroleum won and saved in any half year which is to be delivered in pursuance of the notice or as the quantity of any kind of such petroleum, a percentage of all the petroleum or of all that kind of petroleum which is won and saved in the licensed area in that half year exceeding the percentage at which, apart from the notice, royalty for that half year would be payable in respect of the petroleum in pursuance of clause 9(1) of this licence, but may provide that the quantities of petroleum or of a kind of petroleum so won and saved which are to be so delivered shall not in the aggregate exceed a quantity specified in the notice;

(c) shall not specify, or enable to be specified, as a place at which delivery is to be made in pursuance of the notice a place which is not a point at which the Licensee normally delivers petroleum of any kind from the licensed area.