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(a) paragraph 14 of that Schedule (Schedule 5 to the Petroleum (Production) Regulations 1982)[61]); and

(b) paragraph 15 of that Schedule (the said Schedule 5 as amended by the Petroleum Act 1987[62]).

     2. Subject to paragraphs 3, 4 and 6, the current model clauses in relation to the said paragraphs 14 and 15 are those reproduced in Part II.

     3.  - (1) Where the licensed area is in Scotland or the Scottish area as defined in article 1(2) of the Civil Jurisdiction (Offshore Activities) Order 1987[63], Part II shall have effect as provided in the two following sub-paragraphs.

    (2) Part II shall have effect in such a case as if for model clause 35 (distress) there were substituted the following clause - 

" Diligence
     35. If and whenever any of the payments mentioned in clause 7(1) of this licence or any part thereof shall be in arrear or unpaid for 28 days next after any of the days whereon the same ought to be paid (whether the same shall have been legally demanded or not) then and so often as the same may happen the Minister may (as an additional remedy and without prejudice to any other rights and remedies to which he would be entitled) do diligence in respect thereof in like manner as a landlord may do diligence in respect of unpaid arrears of rent and such diligence shall be effectual to attach all or any of the stocks of petroleum, engines, machinery, tools, implements and other effects belonging to the Licensee which shall be found on or about any of the Licensee's installations and equipment used or to be used in connection with searching, boring for or getting petroleum in the licensed area, and where in pursuance of such a diligence a sale of such effects as shall have been attached thereby takes place the Minister may out of the proceeds thereof retain and pay all the arrears of the said payments and also the expenses of and incident to such diligence and sale and shall pay the surplus thereof (if any) to the Licensee.".

    (3) Part II shall also have effect in such a case as if, in model clause 40 (arbitration) - 

(a) for the word "arbitrator", wherever it occurs in paragraphs (2) and (3), there were substituted the word "arbiter", and

(b) for the words "the Lord Chief Justice of England for the time being", in paragraph (2), there were substituted the words "the Lord President of the Court of Session".

     4. Where the licensed area is in both a designated area, within the meaning of the Continental Shelf Act 1964[64], and the Northern Irish area, as defined in article 1(2) of the Civil Jurisdiction (Offshore Activities) Order 1987, Part II shall have effect as if in model clause 40 (arbitration) for the words "the Lord Chief Justice of England", in paragraph (2), there were substituted the words "the Lord Chief Justice of Northern Ireland".

     5. In paragraphs 3 and 4, any reference to the licensed area is a reference to the licensed area within the meaning of model clause 1(1) in Part II.

     6. Where - 

(a) section 1 of the Petroleum Royalties (Relief) Act 1983[65] applies, or

(b) section 1 of the Petroleum Royalties (Relief) and Continental Shelf Act 1989[66] applies,

Part II has effect subject to the provisions of the said Act of 1983 or, as the case may be, the said Act of 1989.

"the Act of 1934" means the Petroleum (Production) Act 1934[67];

"the Act of 1964" means the Continental Shelf Act 1964[68];

"the Act of 1998" means the Petroleum Act 1998[69];

"appropriate percentage" has the meaning assigned thereto by clause 8;

"block" means an area comprised in this licence which is delineated on the reference map deposited at the principal office of the Minister's department and to which a reference number was assigned at the date of this licence;

"chargeable period" has the meaning assigned thereto by clause 8;

"development scheme" has the meaning assigned thereto by clause 25;

"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;

"initial term" has the meaning assigned thereto by clause 3;

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

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

"the Minister" means the Secretary of State for Trade and Industry;

"oil field" has the meaning assigned thereto by clause 25;

"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;

"section" means a part of a block comprising an area bounded by minute lines of latitude and longitude one minute apart respectively;

"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[70] 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.

Term of licence
     3. This licence unless sooner determined under any of the provisions hereof shall be and continue in force for the term of six years next after .................. 19... (hereinafter called "the initial term"); but if the terms and conditions hereof are duly performed and observed and, in particular, if the work programme described in Schedule 4 to this licence has been duly performed, it may be continued for a further term of thirty years as hereinafter provided.

Option to continue licence as to part of the licensed area
     4.  - (1) At any time not later than three months before the expiration of the initial term the Licensee paying the payments and royalties hereinafter provided and observing and performing the terms and conditions herein contained may give notice in writing to the Minister that he desires the licence to continue as to a part of the licensed area (hereinafter called "the continuing part") in the manner hereinafter provided and to determine as to the residue thereof (hereinafter called "the surrendered part").

    (2) Such notice shall - 

(a) describe the surrendered part which shall be an area which shall together with any area previously surrendered in accordance with clause 5 hereof - 


(i) if the area originally comprised in this licence consisted of sixty or more sections, be not less than half the number of such sections; or

(ii) if the area originally comprised in this licence consisted of more than thirty but less than sixty sections, be such a number of sections as will leave a continuing part consisting of thirty sections;



provided that if the area originally comprised in this licence consisted of not more than thirty sections the Licensee shall not be obliged to surrender any part of the licensed area and provided that any area surrendered in accordance with this clause shall comply with clause 6 hereof; and

(b) specify a date (hereinafter called "the surrender date") not later than the expiry of the initial term upon which the surrendered part is to be surrendered.

    (3) The Licensee may at any time not less than one month before the surrender date give further notice in writing to the Minister varying the part of the licensed area to be surrendered and in the event of such further notice being given the provisions of the previous paragraphs of this clause shall apply mutatis mutandis to such notice but so that the surrender date specified in such notice shall be the same as that specified in the first notice.

(4) This licence shall upon the option conferred by this clause being duly exercised but subject to the provisions of clause 3 of this licence continue in respect of the continuing part for a term of thirty years next after the surrender date.

Right of Licensee to determine licence or surrender part of licensed area
     5.  - (1) Without prejudice to any obligation or liability imposed by or incurred under the terms hereof, the Licensee may at any time, by giving to the Minister not less than six months' notice in writing to that effect to expire on an anniversary of the date of commencement of the initial term, determine this licence or surrender any part of the licensed area being a part which complies with clause 6 hereof.

    (2) A notice given pursuant to paragraph (1) of this clause may be cancelled by a further notice in writing given to the Minister not less than one month before the expiration of the notice.

Areas surrendered
     6.  - (1) Within a block any area surrendered by the Licensee pursuant to either clause 4 or clause 5 of this licence and any area accordingly retained by him or, where the surrendered or retained area comprises separate parts, each part of each area shall, unless the Minister has otherwise agreed in writing before the date at which the appropriate notice is given by the Licensee to the Minister - 

(a) be bounded by minute lines of latitude extending not less than two minutes of longitude and minute lines of longitude extending not less than two minutes of latitude;

(b) subject to clause 4(2)(a) hereof, consist of not less than thirty sections; and

(c) have boundaries which, whether they run north and south or east and west, either coincide with the corresponding boundaries of the block or are not less than two sections distant from those boundaries;

and where the surrendered or retained area comprises separate parts, each part of that area shall be not less than two sections distant from any other part of that area.

    (2) Upon the date upon which any determination of this licence or any surrender of part of the licensed area in manner provided by either clause 4 or clause 5 of this licence is to take effect the rights granted by this 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 this licence prior to that date.

Payment of consideration for licence
     7.  - (1) The Licensee shall make to the Minister as consideration for the grant of this licence - 

(a) payments of royalty in accordance with clauses 8 and 9 of this licence;

(b) deliveries of petroleum in accordance with clause 10 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 the licence or the surrender of any part of the licensed area be entitled to be repaid or allowed any sum payable to the Minister pursuant to this licence before the date of the determination or surrender.

Royalty payments
     8.  - (1) Subject to paragraph (1A) of this clause the Licensee shall pay to the Minister, in respect of each half year in which this licence is in force (hereafter in this clause and in clauses 8A and 9 of this licence referred to as a "chargeable period"), a royalty of an amount equal to the percentage specified in Schedule 3 to this licence (hereinafter referred to as "the appropriate percentage") of the value of the petroleum relating to that period.

    (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 10 of this licence; but if the petroleum delivered has a value of less than the appropriate percentage of the aggregate of - 

(a) the value of the petroleum delivered (ignoring any such excess as is mentioned in paragraph (10) 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 8A and 9 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[71], 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 the total of the market values which would in pursuance of the said paragraph (b) fall to be taken into account as aforesaid.

    (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 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) Subject to paragraphs (8) and (9) of this clause, the value of petroleum delivered to the Minister in pursuance of clause 10 of this licence shall be ascertained for the purposes of this clause and clause 8A on such basis (or, where petroleum of more than one kind is delivered, such bases) as the Minister and the Licensee agree.

    (8) If the Minister and the Licensee fail to agree on the value of any petroleum delivered to the Minister in pursuance of clause 10 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.

    (9) The Licensee may, during the period of 28 days beginning with the day on which he receives a notice from the Minister under paragraph (8) of this clause, refer to arbitration in the manner provided by clause 40 of this licence any question as to whether the basis of valuation specified in the notice is fair.

    (10) In this clause and clauses 8A and 9, references to petroleum delivered to the Minister in pursuance of clause 10 include references to any excess over the quantity required to be delivered by a notice served in pursuance of paragraph (1) of that clause.

Payments by the Minister
     8A If in any chargeable period the Licensee delivers to the Minister in pursuance of clause 10 of this licence petroleum having a value greater than the appropriate percentage of the aggregate of - 

(a) the value of the petroleum delivered (ignoring any such excess as is mentioned in clause 8(10) 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.

Provisions supplementary to clauses 8 and 8A
     9.  - (1) The Licensee shall, within two months after the end of each chargeable period, deliver to the Minister, in such form as the Minister may specify, a statement of - 

(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 10 of this licence; and

(c) the amounts of the prices and market values which are required by paragraph 2 of Schedule 2 to the Oil Taxation Act 1975[72] to be stated in the returns made for that period in pursuance of that paragraph in consequence of this licence.

    (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 8(1) of this licence, make to the Minister a payment on account of royalty for that period equal to the appropriate percentage of the sum produced by aggregating the amounts which in pursuance of subparagraph (c) of paragraph (1) of this clause are specified in the statement and reducing the aggregate 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.

    (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 8(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.

    (4) 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 (5) 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 8 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.

    (5) 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 clause 8 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, subject to paragraph (7) 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.

    (6) If after the date when the Minister gave notice to the Licensee in pursuance of paragraph (5) 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 (7) 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.

    (7) A decision made by the Minister for the purposes of paragraph (4), (5) or (6) 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 (5) or (6) is payable by virtue of clause 8 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 40 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.

    (8) When any payment is made by the Licensee or the Minister in pursuance of paragraph (4), (5) or (6) of this clause, an amount in respect of interest on the payment shall also be payable by him to the recipient of the payment 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; and

(b) any such amount in respect of interest shall be disregarded in calculating for the purposes of the said paragraph (4), (5) or (6) any amount already paid by the Licensee in pursuance of this clause.

    (8A) If a payment is made by the Minister in pursuance of clause 8A 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.

    (8B) Interest under paragraph (8A) 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 (8) of this clause shall apply to such a notice as it applies to a notice under paragraph (8)).

    (9) In this clause "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.

    (10) For the purposes of this clause any amount paid by the Licensee or the Minister on account of a prospective liability under paragraph (4), (5) or (6) of this clause shall be treated as paid in pursuance of that paragraph.

Deliveries of petroleum in place of royalties
     10.  - (1) If during the term of this licence the Minister serves on the Licensee a notice in writing in accordance with the following provisions of this clause requiring the Licensee to deliver to the Minister part of the petroleum won and saved by the Licensee in the licensed area, the Licensee shall comply with the notice.

    (2) Where the Minister proposes to serve a notice on the Licensee in pursuance of paragraph (1) of this clause, he shall before doing so - 

(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 quantity greater than the appropriate percentage of all the petroleum, or as the case may be of all the petroleum of that kind, which is won and saved by the Licensee in the licensed area in that half year, but may provide that the quantities of the 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 neither a point at sea at which the Licensee normally loads, nor a point on land at which the Licensee normally lands, petroleum of any kind from the licensed area.

Measurement of petroleum obtained from the licensed area
     11.  - (1) The Licensee shall measure or weigh by a method or methods customarily used in good oilfield practice and from time to time approved by the Minister all petroleum won and saved from the licensed area.

    (1A) If and to the extent that the Minister so directs, the duty imposed by paragraph (1) of this clause shall be discharged separately in relation to petroleum won and saved - 

(a) from each part of the licensed area which is an oil field for the purposes of the Oil Taxation Act 1975,

(b) from each part of the licensed area which forms part of such an oil field extending beyond the licensed area, and

(c) from each well producing petroleum from a part of the licensed area which is not within such an oil field.

    (1B) If and to the extent that the Minister so directs, the preceding provisions of this clause shall apply as if the duty to measure or weigh petroleum included a duty to ascertain its quality or composition or both; and where a direction under this paragraph is in force, the following provisions of this clause shall have effect as if references to measuring or weighing included references to ascertaining quality or composition.

    (2) The Licensee shall not make any alteration in the method or methods of measurement or weighing used by him or any appliances used for that purpose without the consent in writing of the Minister and the Minister may in any case require that no alteration shall be made save in the presence of a person authorised by the Minister.

    (3) The Minister may from time to time direct that any weighing or measuring appliance shall be tested or examined in such manner, upon such occasions or at such intervals and by such persons as may be specified by the Minister's direction and the Licensee shall pay to any such person or to the Minister such fees and expenses for test or examination as the Minister may specify.

    (4) If any measuring or weighing appliance shall upon any such test or examination as is mentioned in the last foregoing paragraph be found to be false or unjust the same shall if the Minister so determines after considering any representations in writing made by the Licensee be deemed to have existed in that condition during the period since the last occasion upon which the same was tested or examined pursuant to the last foregoing paragraph.

Keeping of accounts
     12.  - (1) The Licensee shall keep in the United Kingdom full and correct accounts in a form from time to time approved by the Minister of - 

(a) the quantity of petroleum in the form of gas won and saved;

(b) the quantity of petroleum in any other form won and saved;

(c) the name and address of any person to whom any petroleum has been supplied by the Licensee, the quantity so supplied, the price or other consideration therefor and the place to which the petroleum was conveyed pursuant to the agreement for such supply; and

(d) such other particulars as the Minister may from time to time direct.

    (2) The quantities of petroleum stated in such accounts may exclude any water separated from the petroleum and shall be expressed as volumes in cubic metres measured at, or calculated as if measured at, a temperature of 15 degrees Celsius and a pressure of 1.0132 bar but if the Minister serves notice in writing on the Licensee determining any other manner in which any quantity of petroleum or any quantity of any form of petroleum is to be expressed that quantity shall be so expressed.

    (3) Such accounts shall state separately the quantities used for the purposes of carrying on drilling and production operations and pumping to field storage, and quantities not so used, and in the case of petroleum not in the form of gas shall state the specific gravity of the petroleum and, if petroleum of different specific gravities has been won and saved, the respective quantities of petroleum of each specific gravity.

    (4) The Licensee shall within two months after the end of each half year in which this licence is in force and within two months after the expiration or determination of this licence deliver to the Minister an abstract in a form from time to time approved by the Minister of the accounts for that half year or for the period prior to such expiration or determination as the case may be.

[60] 1988 c.1.back

[61] S.I. 1982/1000.back

[62] 1987 c.12.back

[63] S.I. 1987/2197.back

[64] 1964 c.29.back

[65] 1983 c.59; extended by section 2 of the Petroleum Royalties (Relief) and Continental Shelf Act 1989 (c.1) and modified by paragraph 8 of Schedule 3 to the Petroleum Act 1998 (c.17).back

[66] 1989 c.1; modified by paragraph 8 of Schedule 3 to the Petroleum Act 1998 (c.17).back

[67] 1934 c.36.back

[68] 1964 c.29.back

[69] 1998 c.17.back

[70] 1975 c.27.back