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2[F1(1)[F2Except in the case of light gases]the market value of any oil shall be determined for the purposes of this Part of this Act in accordance with this paragraph [and, accordingly, references in the following provisions of this paragraph to oil do not apply to light gases].E+W+S+N.I.
(2)Subject to the following provisions of this paragraph, the market value of any oil in a calendar month (in this paragraph referred to as “the relevant month” is the price at which oil of that kind might reasonably have been expected to be sold under a contract of sale satisfying the following conditions—
(a)the contract is for the sale of the oil at arm’s length to a willing buyer;
(b)the contract is for the delivery of the oil at a time in the relevant month;
(c)the contract is entered into within the period beginning at the beginning of the month preceding the relevant month and ending on the middle day of the relevant month or, if the Treasury by order so direct, within such other period as may be specified in the order;
(d)the contract requires the oil to have been subjected to appropriate initial treatment before delivery;
(e)the contract requires the oil to be delivered]—
(i)in the case of oil extracted in the United Kingdom, at the place of extraction; or
(ii)in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom [F3or another country]at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction;
[F4(f)]in the case of oil whose market value falls to be ascertained [F5as in a particular month] for the purposes of paragraph (b) of section 2(4) or paragraph (d) of section 2(5) of this Act or, subject to sub-paragraph (3) below, under paragraph 3 below for the purposes of paragraph (b) or (c) of the said section 2(5), the contract is for the sale of the whole quantity of oil whose market value falls to be ascertained [F5as in that month] for the purposes of the paragraph in question, and of no other oil.
[F6and, for the avoidance of doubt, it is hereby declared that the terms as to payment which are to be implied in the contract shall be those which are customarily contained in contracts for the sale at arm’s length of oil of the kind in question][F7and, for the purposes of paragraph (c) above, the middle day of a month containing an even number of days shall be taken to be the last day of the first half of the month, and the power to make an order under that paragraph shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament].
[F8(2A)For the purpose of sub-paragraph (2) above, the price of any oil in a calendar month shall be determined, subject to sub-paragraphs (2B) and (2C) below, by taking the average of the prices under actual contracts for the sale of oil of that kind—
(a)which are contracts for the sale of oil by a participator in an oil field or by a company which, for the purposes of section 115(2) of the Finance Act 1984, is associated with such a participator; and
(b)which, subject to sub-paragraph (2B) below, satisfy the conditions in paragraphs (a) to (e) of sub-paragraph (2) above;and
(c)which do not contain terms as to payment which differ from those customarily contained in contracts for the sale at arm’s length of oil of the kind in question.
(2B)For the purposes of sub-paragraph (2A)(b) above, a contract shall be treated as fulfilling the condition in paragraph (c) of sub-paragraph (2) above if it contains provisions under which the price for oil to be delivered in the relevant month either is determined or subject to review in the period relevant for the purposes of that paragraph or is determined by reference to other prices which are themselves determined in that period, being prices for oil to be delivered in the relevant month.
(2C)The average referred to in sub-paragraph (2A) above shall be determined—
(a)by establishing an average price for oil of the kind in question for each business day within the period relevant for the purposes of sub-paragraph (2)(c) above; and
(b)by taking the arithmetic mean of the average prices so established;
and in this sub-paragraph “business day” has the same meaning as in the Bills of Exchange Act 1882.
(2D)If or in so far as the Board are satisfied that it is impracticable or inappropriate to determine for the purposes of sub-paragraph (2) above the price of any oil in a calendar month as mentioned in sub-paragraph (2A) above (whether by virtue of an insufficiency of contracts satisfying the conditions or of information relating to such contracts or by virtue of the nature of the market for oil of the kind in question or for any other reason), that price shall be determined,—
(a)so far as it is practicable and appropriate to do so by reference to such other contracts (whether or not relating to oil of the same kind) and in accordance with the principles in sub-paragraph (2C) above; and
(b)so far as it is not practicable or appropriate to determine it as mentioned in paragraph (a) above, in such other manner as appears to the Board to be appropriate in the circumstances.]
(3)If oil whose market value falls to be ascertained [F5as in a particular month] under paragraph 3 below for the purposes of paragraph (b) of the said section 2(5) was not all disposed of to the same person, then the market value [F9at that time] of so much of that oil as was disposed of [F10in that month] to any one person shall be ascertained in accordance with sub-paragraphs (1) [F5to (2D)] above as if that were the only oil whose market value fell to be ascertained [F5as in that month] for those purposes (with sub-paragraph [F11(2)(f)]above applying accordingly).
[F12(3A)Where all or any of the oil whose market value falls to be ascertained in accordance with sub-paragraphs (1) and (2) above has been subjected to initial treatment before being disposed of or relevantly appropriated, the appropriate initial treatment referred to in sub-paragraph (2)(a) above shall, as respects that oil, include the whole of that treatment.]
(4)The provisions of sub-paragraphs (2) and (3) above shall apply for the ascertainment of the market value of oil in any case mentioned in paragraph 2(2) of Schedule 2 to this Act as they apply in relation to the corresponding case mentioned in those provisions.
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