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"the Act of 1934" means the Petroleum (Production) Act 1934[123];

"the Act of 1964" means the Continental Shelf Act 1964[124];

"the Act of 1998" means the Petroleum Act 1998[125];

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

"development scheme" has the meaning assigned thereto by clause 23;

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

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

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

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

"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;

"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 twenty years next after .................. 19 ... but if the terms and conditions hereof are duly performed and observed it may be continued for a further period or periods under clause 4.

Extension or further extension of term
     4. The Minister, on application being made to him in writing prior to the final year of the term or any extension thereof, may grant an extension or further extension of this licence. If granted, the extension or further extension shall be for such period as the Minister may determine.

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 and conditions hereof, the Licensee may, at any time, determine this licence or surrender any such part of the licensed area as is mentioned in paragraph (3) of this clause by giving six months' written notice to that effect to the Minister.

    (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.

    (3) Any area to be surrendered in accordance with paragraph (1) of this clause shall be a clearly defined area whose surrender will leave a retained area the boundaries of which - 

(a) run north, south, east and west; and

(b) each extend for 100 metres or a multiple of 100 metres:

Provided that the Minister may agree in writing prior to the date the appropriate notice is given by the Licensee to accept a surrender of part of the licensed area which does not comply with the requirements of this paragraph.

Consequences of determination or surrender by Licensee
     6. Upon the date on which any determination of this licence by the Licensee or any surrender of a part of the licensed area is to take effect, the rights granted by this licence shall cease or cease in respect 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 and conditions 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 this licence or the surrender of any part of the licensed area be entitled to be repaid or allowed any sum payable to the Minister hereunder before the date of the determination or surrender.

Royalty payments
     8.  - (1) Subject to paragraphs (2) to (4) of this clause 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) The Licensee shall not be required to make a payment in pursuance of paragraph (1) of this clause in respect of a chargeable period if he is required by virtue of clause 10 of this licence to deliver to the Minister all the royalty petroleum for that period.

    (3) The Licensee shall not be required to make a payment in pursuance of paragraph (1) of this clause in respect of a chargeable period if he is required by virtue of clause 10 of this licence to deliver to the Minister some but not all of the royalty petroleum for that period, but in respect of that period the Licensee shall, subject to paragraph (4) of this clause, pay to the Minister a royalty of an amount determined in accordance with the formula - 

A is the value of the petroleum relating to that period, B is the number of units of royalty petroleum multiplied by one hundred and divided by the number of relevant units as defined in paragraph (1) of this clause and C is the number of per cent. in the percentage which the royalty petroleum required to be delivered to the Minister in that period is of the petroleum won and saved in the licensed area in that period.

    (4) Where, in a chargeable period in respect of which, apart from this paragraph, royalty is payable in pursuance of paragraph (3) of this clause, the petroleum won and saved in the licensed area includes both petroleum in the form of gas and petroleum in other forms, that paragraph shall have effect - 

(a) in relation to the petroleum in the form of gas, as if references to petroleum in the provisions of that paragraph relating to the meaning of A and C excluded petroleum in other forms; and

(b) in relation to the petroleum in other forms, as if those references excluded petroleum in the form of gas;

and in such a case the value of the petroleum relating to that period shall be apportioned between the petroleum in the form of gas and the petroleum in other forms in such manner as the Minister and the Licensee may agree.

    (5) 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 (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[126], 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) 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) In this clause - 

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

"royalty petroleum", in relation to a chargeable period, means the petroleum which by virtue of clause 10 of this licence the Minister is entitled to require the Licensee to deliver to him in that period;

"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;

(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[127] 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 relevant fraction 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 8(3) or (4) 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 to be 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 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 be referred to arbitration in the manner provided by clause 36 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) or (5) any amount already paid by the Licensee in pursuance of this clause.

    (9) In this clause - 

"chargeable period" and "royalty petroleum" have the same meanings as in clause 8 of this licence;

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

"the relevant fraction", in relation to a chargeable period, means the fraction produced by dividing the amount of royalty petroleum for that period by the amount of the petroleum won and saved in the licensed area in that period, and for the purpose of determining that fraction 1,115 cubic metres of petroleum in the form of gas at a temperature of 15 degrees Celsius and a pressure of 1.0132 bar shall be treated as the equivalent of one tonne of petroleum in any other form.

    (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 percentage of all the petroleum or of all that kind of petroleum which is won and saved in the licensed area in that half year exceeding the percentage at which, apart from the notice, royalty for that half year would be payable in respect of the petroleum in pursuance of clause 8(1) of this licence, but may provide that the quantities of petroleum or of a kind of petroleum so won and saved which are to be so delivered shall not in the aggregate exceed a quantity specified in the notice;

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

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.

    (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
     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.

[123] 1934 c.36.back

[124] 1964 c.29.back

[125] 1998 c.17.back

[126] 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

[127] Paragraph 2 was amended by section 62 of, and Part X of Schedule 16 to, the Finance Act 1987 (c.16), section 187 of the Finance Act 1993 (c.34) and section 236 of, and Schedule 23 to, the Finance Act 1994 (c.9).back