Model clauses for production licences
8. In Schedule 4 to the Principal Regulations (model clauses for production licences in seaward areas)—
(a)in model clause 1—
(i)in the definitions of “block” and of “the Minister”, for the word “Energy” substitute “Trade and Industry”;
(ii)for the definition of “initial term” substitute—
““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);”;
(b)in model clause 2, for the words “Department of Energy” substitute “Department of Trade and Industry”;
(c)for model clause 3 (term of licence) substitute—
“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 (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.”;
(d)after model clause 3, insert—
“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)within 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.”;
(e)in model clause 4 (option to continue licence as to part of the licensed area)—
(i)in paragraph (1)—
(a)for the words “initial term” substitute “second term”;
(b)after the words “the terms and conditions herein contained” insert “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”),”;
(ii)for paragraph (2)(a) substitute—
“(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 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;”;
(iii)in paragraph 2(b), for the words “initial term” substitute “second term”;
(iv)in paragraph (3), for the words “to be surrendered” substitute “to be retained”;
(v)in paragraph (4)—
(i)for the words “twelve years” substitute “fifteen years”;
(ii)for the words “the second term” substitute “the third term”;
(f)in model clause 5—
(i)for the heading substitute “Continuance of licence after the third term;”
(ii)for the words “the second term” in each place where they appear substitute “the third term”;
(iii)in paragraphs (4) and (5), for the words “eighteen years” substitute “twenty-four years”;
(g)in model clause 6 (power further to extend term of licence)—
(i)for the words “eighteen years” substitute “twenty-four years”;
(ii)for the words “the second term” substitute “the third term”;
(h)in paragraph (1)(b) of model clause 8 (areas surrendered) omit the words “subject to clause 4(2)(a) hereof,”;
(i)in model clause 12 (provisions supplementary to clauses 10 and 11) omit paragraphs (1)(b), (3), (9) and (10);
(j)in model clause 38 (right of distress), omit the words “the power of distress and”.