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(a) paragraph 18 (Schedule 4 to the Petroleum (Production) (Seaward Areas) Regulations 1988[86]);

(b) paragraph 19 (the said Schedule 4 as amended by the Offshore Safety Act 1992)[87]), and

(c) paragraph 20 (the said Schedule 4 as amended as aforesaid and further amended by the Petroleum (Production) (Seaward Areas) (Amendment) Regulations 1995[88]).

     2. Subject to paragraphs 3, 4, 6 and 7, the current model clauses in relation to the said paragraphs 18, 19 and 20 are those reproduced in Part II.

     3.  - (1) Where the licensed area is in the Scottish area, as defined in article 1(2) of the Civil Jurisdiction (Offshore Activities) Order 1987[89], 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 38 (distress) there were substituted the following clause - 

" Diligence
     38. If and whenever any of the payments mentioned in clause 9(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 43 (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 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 43 (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.  - (1) In relation to paragraph 20 of Schedule 1 to the Act, Part II shall have effect as provided in the following nine sub-paragraphs.

    (2) Part II shall have effect in such a case as if in model clause 9(1) - 

(a) at the end of sub-paragraph (a) there were inserted the word "and"; and

(b) sub-paragraph (b) were omitted.

    (3) Part II shall also have effect in such a case as if in model clause 10 - 

(a) in paragraph (1) - 


(i) the words "Subject to paragraph (2) of this clause" were omitted, and

(ii) for the words "clauses 11 and 12" there were substituted the words "clause 12";



(b) paragraph (2) were omitted;

(c) in paragraph (3), for the words "clauses 11 and 12" there were substituted the words "clause 12"; and

(d) paragraphs (5) to (8) were omitted.

    (4) Part II shall also have effect in such a case as if model clause 11 were omitted.

    (5) Part II shall also have effect in such a case as if in model clause 12(1) - 

(a) at the end of sub-paragraph (a) there were inserted the word "and"; and

(b) sub-paragraph (b) were omitted.

    (6) Part II shall also have effect in such a case as if model clauses 13 and 30 were omitted.

    (7) Part II shall also have effect in such a case as if for model clause 31(3) there were substituted the following paragraph - 

    " (3) The Licensee shall deliver copies of the said records, plans and maps referred to in the two foregoing paragraphs to the Minister when requested to do so either - 


(a) within any time limit specified in the request; or

(b) if there is no time limit specified, within four weeks of the request.".

    (8) Part II shall also have effect in such a case as if at the end of model clause 32 there were added the following paragraph - 

    " (4) The Licensee shall comply with any request for information made in accordance with paragraph (3) above either - 


(a) within any time limit specified in the request; or

(b) if there is no time limit specified, within four weeks of the request.".

    (9) Part II shall also have effect in such a case as if for proviso (iv) to model clause 34 there were substituted the following proviso - 

" (iv) the Minister, the said Council and any other such body shall be entitled to publish any of the specified data of a geological, scientific or technical kind either - 


(a) after the expiration of the period of five years beginning with the date when the data was due to be supplied to the Minister in accordance with clause 31 or 32 of this licence, or if earlier, the date when the Minister received that data; or

(b) after the expiration of such longer period as the Minister may determine after considering any representations made to him by the Licensee about the publication of data in pursuance of this sub-paragraph.".

    (10) Part II shall also have effect in such a case as if for model clause 42(2)(g) there were substituted the following sub-paragraph - 

" (g) if the Licensee is a company, the Licensee's ceasing to direct and control either - 


(i) its operations under the licence; or

(ii) any commercial activities in connection with those operations from a fixed place within the United Kingdom;".

     7. Where

(a) section 1 of the Petroleum Royalties (Relief Act) 1983[90] applies, or

(b) section 1 of the Petroleum Royalties (Relief) and Continental Shelf Act 1989[91] 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[92];

"the Act of 1964" means the Continental Shelf Act 1964[93];

"the Act of 1998" means the Petroleum Act 1998[94];

"appropriate percentage" has the meaning assigned thereto by clause 10;

"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 10;

"development scheme" has the meaning assigned thereto by clause 28;

"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 and "second term" has the meaning assigned thereto by clause 4(4);

"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 28;

"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.

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 of this licence 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 twelve years as provided by clause 4 of this licence and, if the terms and conditions of this licence continue to be duly performed and observed, thereafter as provided by clause 5 (and subject to the provisions of clause 6) of this licence for a further maximum period of eighteen years.

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 7 thereof - 


(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 8 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 twelve years next after the surrender date ("the second term").

Continuance of licence after the second term
     5.  - (1) At any time not later than three months before the expiry of the second 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 this licence to continue in force thereafter.

    (2) If such notice is given this licence shall continue in force after the expiry of the second term as provided by the following paragraphs of this clause in the event that before that date - 

(a) the Minister has given a consent in pursuance of clause 17(1) of this licence and such consent is still in force at that date, or

(b) the Minister has in pursuance of clause 17(4) of this licence approved a programme submitted to him in pursuance of clause 17(2) and such approval is still in force at that date, or

(c) the Minister has served a programme on the Licensee in pursuance of clause 17(6) of this licence and such programme is still in force at that date, or

(d) the Minister has in his discretion so directed in writing.

    (3) Where the Minister has given a direction extending the second term of this licence in pursuance of paragraph (2)(d) of this clause he may in his discretion, on notice in writing being given to him by the Licensee not later than three months before the expiry of such extension or any further extension that he desires the licence to continue in force thereafter, give a further direction that this licence shall so continue in force.

    (4) Where this licence continues in force by virtue of paragraph (2)(a), (b) or (c) of this clause it shall, subject to the provisions of clause 3 of this licence, so continue in force for a further period of eighteen years after the expiry of the second term.

    (5) Where this licence continues in force by virtue of a direction given in pursuance of paragraph (2)(d) or further direction given in pursuance of paragraph (3) of this clause it shall, subject to the provisions of clause 3 hereof, continue in force for such further period after the expiry of the second term as the Minister may prescribe provided that in any event the period for which this licence continues in force after the expiry of the second term by virtue of any such directions shall not in aggregate exceed eighteen years.

    (6) A direction given by the Minister in pursuance of paragraph (2)(d) of this clause or further direction given by the Minister in pursuance of paragraph (3) of this clause may be given subject to such conditions as he may specify and (without prejudice to the generality of the foregoing) such conditions may, subject to the provisions of paragraph (5) of this clause, include conditions as to the duration of the extension or further extension (as the case may be) of the second term.

Power further to extend term of licence
     6. Where this licence has continued in force by virtue of clause 5 of this licence for a total period of eighteen years after the expiry of the second term, the Minister, on application being made to him in writing not later than three months before the expiry of such period, may in his discretion agree with the Licensee that this licence shall continue in force thereafter for such further period as the Minister and the Licensee may agree and subject to such modification of the terms and conditions of this licence (which modification may include making provision for any further extension of the term of this licence) as the Minister and the Licensee may then agree is appropriate.

Right of licensee to determine licence or surrender part of licensed area
     7.  - (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 8 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
     8.  - (1) Within a block any area surrendered by the Licensee pursuant to either clause 4 or clause 7 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 on which any determination of this licence or any surrender of part of the licensed area in manner provided by any of clauses 4, 5 and 7 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
     9.  - (1) The Licensee shall make to the Minister as consideration for the grant of this licence - 

(a) payments of royalty in accordance with clauses 10 to 12 of this licence;

(b) deliveries of petroleum in accordance with clause 13 of this licence; and

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

    (2) The Licensee shall not by reason of determination of the licence or 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 determination or surrender.

Royalty payments
     10.  - (1) Subject to paragraph (2) 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 11 and 12 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.

    (2) 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 13 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 (8) 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.

    (3) For the purposes of this clause and clauses 11 and 12 of this licence the value of the petroleum relating to a chargeable period is, subject to paragraph (4) 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[95], 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.

    (4) The value which, in pursuance of paragraph (3) 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) 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 (3).

    (5) Subject to paragraphs (6) and (7) of this clause, the value of petroleum delivered to the Minister in pursuance of clause 13 of this licence shall be ascertained for the purposes of this clause and clause 11 on such basis (or, where petroleum of more than one kind is delivered, such bases) as the Minister and the Licensee agree.

    (6) If the Minister and the Licensee fail to agree on the value of any petroleum delivered to the Minister in pursuance of clause 13 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.

    (7) The Licensee may, during the period of 28 days beginning with the day on which he receives a notice from the Minister under paragraph (6) of this clause, refer to arbitration in the manner provided by clause 43 of this licence any question as to whether the basis of valuation specified in the notice is fair.

    (8) In this clause and clauses 11 and 12, references to petroleum delivered to the Minister in pursuance of clause 13 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
     11. If in any chargeable period the Licensee delivers to the Minister in pursuance of clause 13 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 10(8) 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 10 and 11
     12.  - (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 13 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[96] 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 10(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 sub-paragraph (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 Oil Taxation Act 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 10(2) 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 10 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 10 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 10 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 43 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.

    (9) If a payment is made by the Minister in pursuance of clause 11 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.

    (10) Interest under paragraph (9) 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)).

    (11) 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.

    (12) 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.

[85] 1988 c.1.back

[86] S.I. 1988/1213.back

[87] 1992 c.15.back

[88] S.I. 1995/1435.back

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

[90] 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

[91] 1989 (c.1) and modified by paragraph 8 of Schedule 3 to the Petroleum Act 1998 (c.17).back

[92] 1934 c.36.back

[93] 1964 c.29.back

[94] 1998 c.17.back