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    (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 all or any part of the sum payable to the Minister hereunder.

Royalty payments
     8.  - (1) The Licensee shall pay to the Minister, in respect of each chargeable period, a royalty equal to the sum of the percentages specified in Schedule 3 to this licence of the value of the relevant units won and saved in the year which includes that period, 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.

    (2) For the purposes of this clause and clause 9 of this licence the value of the petroleum relating to a chargeable period is, subject to paragraph (3) 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[118], 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.

    (3) The value which, in pursuance of paragraph (2) 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 (2).

    (4) In this clause - 

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

"unit" means one tonne 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 1,115 cubic metres of the gas at a temperature of 15 degrees Celsius and a pressure of 1.0132 bar; 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.

Provisions supplementary to clause 8
     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; and

(b) the amounts of the prices and market values which are required by paragraph 2 of Schedule 2 to the Oil Taxation Act 1975[119] 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 sum produced by aggregating the amounts which in pursuance of sub-paragraph (b) 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 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 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 (4) 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.

    (4) 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 (6) 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.

    (5) If after the date when the Minister gave notice to the Licensee in pursuance of paragraph (4) 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 (6) 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.

    (6) A decision made by the Minister for the purposes of paragraph (3), (4) or (5) 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 (4) or (5) is payable by virtue of clause 9 of this licence may be referred to arbitration in the manner provided by clause 34 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.

    (7) When any payment is made by the Licensee or the Minister in pursuance of paragraph (3), (4) or (5) 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 (3) or (4) any amount already paid by the Licensee in pursuance of this clause.

    (8) In this clause, "chargeable period" has the same meaning as in clause 8 of this licence; and "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.

    (9) For the purposes of this clause any amount paid by the Licensee or the Minister on account of a prospective liability under paragraph (3), (4) or (5) of this clause shall be treated as paid in pursuance of that paragraph.

Measurement of petroleum obtained from the licensed area
     10.  - (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) 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 the 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 inaccurate to a material degree 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
     11.  - (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.

Working obligations
     12.  - (1) The Licensee shall perform the obligations specified in Schedule 4 to this licence prior to the date therein specified.

    (2) If the Licensee fails to perform the obligations specified in Schedule 4 to this Licence prior to the date therein specified, this licence shall automatically cease and determine on that date but without prejudice to any obligation or liability imposed upon the Licensee or incurred by him under the terms and conditions of this licence prior to that date.

    (3) During the initial term of this licence the Licensee shall carry out with due diligence (subject to the provisions of clause 13) the appraisal of any discovery of petroleum within the licensed area.

    (4) The Licensee shall give the Minister at least 21 days' written notice of any proposed seismic survey during the term of this licence of any area which is not wholly on the seaward side of the low water line and such notice shall indicate the nature of the survey and the total number of kilometres to be shot and shall be accompanied by a copy of an Ordnance Survey map for the relevant area drawn to the scale of 1:50,000 or 1:63,360 upon which the proposed lines of survey are indicated and by evidence that the planning authorities for the area to be surveyed have been consulted about the proposed survey and, in a case where any planning permission under the Town and Country Planning Act 1990 or the Town and Country Planning (Scotland) Act 1997 is required for the survey in question, evidence that such permission has been granted.

    (5) The Licensee shall not carry out any seismic survey during the term of this licence of any such area as is mentioned in paragraph (4) of this clause if notice has not been given as aforesaid or if the Minister indicates to the Licensee within 14 days of the receipt of such notice that the survey is not to be carried out.

Appraisal production
     13.  - (1) The Licensee shall not - 

(a) get petroleum in the course of or for the purposes of appraisal; or

(b) otherwise get petroleum pursuant to this licence,

except with the consent in writing of the Minister.

    (2) A consent given by the Minister in pursuance of paragraph (1) of this clause may be given subject to such conditions as are specified in the document signifying the consent and may in particular, without prejudice to the generality of this paragraph, be limited to a period or periods or be given in respect of a quantity or quantities of petroleum specified in the consent.

Commencement and abandonment and plugging of wells
     14.  - (1) The Licensee shall not commence, or after abandoning in the manner hereinafter provided shall not recommence, the drilling of any well without the consent in writing of the Minister.

    (2) The Licensee shall not abandon any well without the consent in writing of the Minister.

    (3) The Licensee shall ensure compliance with any conditions subject to which any consent under either of the foregoing paragraphs is given.

    (4) If any condition subject to which a consent under paragraph (1) of this clause is given relates to the position, depth, or direction of the well, or to any casing of the well or if any condition subject to which a consent under either paragraph (1) or paragraph (2) of this clause is given relates to any plugging or sealing of the well, the Minister may from time to time direct that the well and all records relating thereto shall be 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 such examination as the Minister may specify.

    (5) The plugging of any well shall be done in accordance with a specification approved by the Minister applicable to that well or wells generally or to a class of wells to which that well belongs and shall be carried out in an efficient and workmanlike manner.

    (6) Any well drilled by the Licensee pursuant to this licence, which at the expiry or determination of the Licensee's rights in respect of the area or part thereof in which that well is drilled has not with the consent of the Minister been abandoned, shall be left in good order and fit for further working together with all castings and well head fixtures the removal whereof would cause damage to such well, or, if the Minister so directs in the manner provided by paragraph (8) of this clause, be plugged and sealed in accordance with the Minister's direction.

    (7) All casings and fixtures left in position pursuant to the last foregoing paragraph shall be the property of the Minister.

    (8) In any case to which paragraph (6) of this clause applies, a direction by the Minister may be given by notice in writing to the Licensee not less than one month before the Licensee's rights in respect of the area or part thereof in which the well is situate expire or determine, specifying the manner in which the well is to be plugged and sealed and the time within which such work is to be done.

    (9) An application for the consent of the Minister to the drilling of a well at any place above the low water line shall be accompanied by evidence that the planning authority for the relevant place has been consulted about the drilling and that any planning permission required by the Town and Country Planning Act 1990[120] for the drilling of that well has been granted.

Distance of wells from boundaries of licensed area
     15. No well shall except with the consent in writing of the Minister be drilled or made so that any part thereof is less than one hundred and twenty-five metres from any of the boundaries of the licensed area.

Further controls on wells
     16.  - (1) The Licensee shall not suspend work on the drilling of a well, or having suspended it in accordance with this paragraph shall not begin it again, except with the consent in writing of the Minister and in accordance with the conditions, if any, subject to which the consent is given.

    (2) When work on the drilling of a well is suspended in accordance with paragraph (1) of this clause, the Licensee shall forthwith furnish the Minister with such information relating to the well as the Minister may specify.

    (3) The Licensee - 

(a) shall not do any completion work in respect of a well in the licensed area except in accordance with a programme of completion work approved by the Minister in respect of the well;

(b) shall furnish to the Minister, in accordance with the provisions of such a programme, particulars of any completion work done by him in respect of a well in the licensed area; and

(c) shall not remove or alter any casing or equipment installed by way of completion work in respect of a well except with the consent in writing of the Minister and in accordance with the conditions, if any, subject to which the consent is given.

    (4) In this clause, "completion work", in relation to a well, means work, by way of the installation of a casing or equipment or otherwise after the well has been drilled, for the purposes of bringing the well into use.

[116] 1988 c.1.back

[117] S.I. 1991/981.back

[118] 1975 c.27; section 2(4) and (5) was amended by section 133 of, and Schedule 19 to, the Finance Act 1982 (c.39), sections 61 and 62 of the Finance Act 1987 (c.16) and section 236 of, and Schedule 23 to, the Finance Act 1994 (c.9).back