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" 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.

"the Act of 1934" means the Petroleum (Production) Act 1934[103];

"the Act of 1964" means the Continental Shelf Act 1964[104];

"the Act of 1998" means the Petroleum Act 1998[105];

"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" and "second term" have the meanings respectively assigned thereto by clause 3 and "third 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 three 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 and the Licensee has submitted a programme for further exploration in accordance with clause 3A(1) of this licence, it may be continued for a further term of six years (hereinafter called the "second term"); and if the terms and conditions of this licence continue to be duly performed and observed and, in particular, if a programme for further exploration in the second term served or approved by the Minister or determined in consequence of a reference to arbitration in accordance with clause 3A(4) has been duly performed, it may be continued for a further term of fifteen 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 twenty-four years.

Option to continue licence into second term
     3A.  - (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 submit to the Minister a programme for further exploration for petroleum in the second term.

    (2) Any programme submitted in accordance with paragraph (1) above shall be such a programme for further exploration in the second term as any person, who, if he - 

(a) were entitled to exploit the rights granted by this licence;

(b) had the competence and resources needed to exploit those rights to the best commercial advantage; and

(c) were seeking to exploit those rights to the best commercial advantage,

could reasonably be expected to carry out during the second term.

    (3) Within one month of receipt of a programme submitted in accordance with paragraph (1) above, the Minister shall serve a notice in writing on the Licensee either - 

(a) if he is of the opinion that the programme submitted does not meet the requirements of paragraph (2) above (hereinafter called "the relevant requirements"), stating that that is his opinion and reasons for it; or

(b) stating that he approves the programme.

    (4) Where notice in respect of a programme for further exploration is served upon the Licensee in pursuance of paragraph (3)(a) of this clause he shall either - 

(a) within 28 days beginning with the date of service of the notice refer to arbitration, in the manner provided by clause 43 of this licence, the question of whether the programme satisfies the relevant requirements; or

(b) with a reasonable period beginning with that date submit to the Minister a further programme which satisfies the relevant requirements,

and where it is determined in consequence of any reference to arbitration in pursuance of sub-paragraph (a) of this paragraph that the programme in question does not satisfy the relevant requirements, the Licensee shall submit to the Minister as soon as possible after the date of the determination a further programme which satisfies such requirements.

    (5) If the Licensee either - 

(a) fails to perform the duty imposed on him by sub-paragraph (4)(b) above; or

(b) where he is required to submit a further programme following the conclusion of an arbitration, fails to submit a programme which satisfies the relevant requirements,

the Minister may if he thinks fit, instead of revoking this licence in consequence of the failure, serve on the Licensee such a programme as the Minister considers that the Licensee should have submitted to him in respect of the period to which the rejected programme related.

    (6) The Licensee shall carry out during the second term any programme either - 

(a) served upon him by the Minister in accordance with sub-paragraph (5) above; or

(b) submitted by him pursuant to this clause as to which either - 


(i) the Minister serves a notice in writing on him stating that he approves the programme; or

(ii) it is determined in consequence of any reference to arbitration in pursuance of this licence that the programme satisfies the relevant requirements,



and any programme approved by the Minister in pursuance of this clause shall be deemed for the purposes of this licence to satisfy the relevant requirements.

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 second term the Licensee paying the payments and royalties hereinafter provided and observing and performing the terms and conditions herein contained, and having drilled at least one well in the area described in Schedule 1 to this licence on the date it was granted (hereinafter called "the initial licensed area"), 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 continuing part which, unless the Minister has otherwise agreed in writing before the date on which notice is given by the Licensee to the Minister in accordance with paragraph (1) above, shall be - 


(i) one third of the initial licensed area or, if greater 120 sections, if the Licensee has since the grant of the licence drilled one well in the initial licensed area;

(ii) two thirds of the initial licensed area, or, if greater, 120 sections, if the Licensee has since the grant of the licence drilled two or more wells in the initial licensed area;



(b) specify a date (hereinafter called "the surrender date") not later than the expiry of the second 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 retained 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 fifteen years next after the surrender date ("the third term").

Continuance of licence after the third term
     5.  - (1) At any time not later than three months before the expiry of the third 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 third 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 third 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 twenty-four years after the expiry of the third 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 third 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 third term by virtue of any such directions shall not in aggregate exceed twenty-four 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 third 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 twenty-four years after the expiry of the third 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) 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; 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) 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 clause 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.

    (3) For the purposes of this clause and clause 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[106], 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).

Provisions supplementary to clause 10
     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; 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[107] 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.

    (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.

    (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.

Measurement of petroleum obtained from the licensed area
     14.  - (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.

    (2) 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.

    (3) 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.

    (4) The Licensee shall not make any alteration in the method or methods of measuring 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.

    (5) 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.

    (6) 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.

[97] 1988 c.1.back

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

[99] 1992 c.15.back

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

[101] S.I. 1996/2946.back

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

[103] 1934 c.36.back

[104] 1964 c.29.back

[105] 1998 c.17.back