The Petroleum Licensing (Exploration and Production) (Seaward and Landward Areas) Regulations 2004

Made: 11th February 2004

Laid before Parliament: 12th February 2004

Coming into force: 5th March 2004

The Secretary of State, in exercise of the powers conferred on her by section 4 of the Petroleum Act 1998[^f00001], hereby makes the following Regulations—

Citation and Commencement

1

These Regulations may be cited as the Petroleum Licensing (Exploration and Production) (Seaward and Landward Areas) Regulations 2004 and shall come into force on 5th March 2004.

Interpretation

2

In these Regulations—

• “break clause” means a clause in a licence, other than a clause relating to continuation of the licence beyond its initially agreed or any subsequent term, which provides that, in the event of failure by the licensee on or before a date specified in that clause to take specified action or to undertake to complete specified work, the licence shall cease and determine;

• “exploration licence” means a licence to search for petroleum in any seaward area and in those parts of any landward area which are below the low water line;

• “frontier area” means an area whose exploitation is rendered especially difficult by any one or more of the following factors, namely—its distance from existing petroleum-related infrastructure;great water depth; orthe lack of existing pertinent technical data relating to such area;

• “landward area” has the meaning given by regulation 3(1) of the Petroleum (Production) (Landward Areas) Regulations 1995;

• “licence” means any licence granted pursuant to Part I of the Petroleum Act 1998 ;

• “petroleum exploration and development licence” means a licence to search and bore for, and get, petroleum in a landward area;

• “production licence” means a licence to search and bore for, and get, petroleum in strata, in the sea bed and in the subsoil in a seaward area; and

• “seaward area” means an area on the seaward side of the baselines as set out in the Territorial Waters Order in Council 1964 in respect of which the Secretary of State may grant a licence.

Model Clauses

3

• (1) Notwithstanding anything contained in the Petroleum (Current Model Clauses) Order 1999[^f00003] the model clauses prescribed for the purposes of section 4(1)(e) of the Petroleum Act 1998 in relation to—

• (a) exploration licences;

• (b) production licences; and

• (c) petroleum exploration and development licences

are those provided for by paragraphs (2)–(8).

• (2) The model clauses for exploration licences are set out in Schedule 1.

• (3) The model clauses for production licences which relate to frontier areas and which do not include a break clause are set out in Schedule 2.

• (4) The model clauses for production licences which relate to frontier areas and which do include a break clause are set out in Schedule 3.

• (5) Subject to paragraph (6), the model clauses for production licences which relate to areas other than frontier areas are set out in Schedule 4.

• (6) Production licences which relate to areas other than frontier areas shall, in such cases as the Secretary of State may think fit, contain the break clause and related provisions set out in Schedule 5.

• (7) Subject to paragraph (8), the model clauses for petroleum exploration and development licences are set out in Schedule 6.

• (8) Petroleum exploration and development licences shall, in such cases as the Secretary of State may think fit, contain the break clause and related provisions set out in Schedule 7.

SCHEDULE 1 — MODEL CLAUSES FOR EXPLORATION LICENCES

Interpretation

1

• (1) In the following clauses the following expressions have the meanings hereby respectively assigned to them, that is to say—

• “the Act” means the Petroleum Act 1998;

• “the Exploration Area” means the area for the time being in which the Licensee may exercise the rights granted by this licence;

• “Landward Area” means an area on the landward side of the baselines as set out in the Territorial Waters Order in Council 1964;

• “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 Energy and Climate Change;

• “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;

• “Seaward Area” means an area on the seaward side of the baselines as set out in the Territorial Waters Order in Council 1964 in respect of which the Minister may grant a licence pursuant to Part I of the Act;

• “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.

Grant of Licence

2

In consideration of the payments hereinafter provided for and the performance and observance by the Licensee of all the terms and conditions hereof, the Minister, in exercise of the powers conferred upon him by the Act and all other powers in that behalf enabling him, hereby grants to the Licensee licence and liberty in common with all other persons to whom the like right may have been granted or may hereafter be granted during the continuance of this licence and subject to the provisions hereof to search for Petroleum in the strata in the islands and in the sea bed and subsoil in any Seaward Area and in those parts of any Landward Area which are below the low water line provided that no rights conferred by this Licence shall be exercisable in any area in respect of which a licence (not being a methane drainage licence) is for the time being in force, entitling the grantee thereof to search and bore for and get Petroleum, except with the agreement of the holder of that licence to the exercise in any such area of any such rights.

Prospecting methods

3

The right to search for Petroleum conferred by this licence shall include prospecting and carrying out geological surveys by physical or chemical means and drilling for the purpose of obtaining geological information about strata in the Exploration Area but shall not include any right to get Petroleum or any right to drill Wells for production of Petroleum or any other Well of a depth exceeding three hundred and fifty metres below the surface of the sea bed or such greater depth as the Minister may from time to time approve either generally or in relation to a particular Well or in relation to a class of Wells to which that Well belongs.

Term of licence

4

This licence unless sooner determined under any of the provisions hereof shall be and continue in force for the term of three years from (startdate), but may, if the Minister sees fit and the Licensee has at least three months before the expiry of the said term made a written request for its extension, be continued for a further period of three years.

Right of Licensee to determine licence

5

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 by giving to the Minister not less than six months' previous notice in writing to that effect.

Payment of consideration for licence

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• (1) The Licensee shall pay to the Minister during the term of this licence the consideration for the grant of this licence specified in Schedule 1 to this licence at the times and in the manner so specified.

• (2) The Licensee shall not by reason of determination of this licence or of any reduction in the Exploration Area be entitled to be repaid or allowed any part of any sum payable to the Minister pursuant to this licence.

Commencement, abandonment and plugging of Wells

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• (1) The Licensee shall not commence, or recommence, the drilling of a 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 except as provided in paragraphs (4A) to (6) of this clause.

• (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 such condition under paragraph (1) of this clause relates to the position, depth or direction of the Well or to any casing of the Well or any condition under either paragraph (1) or paragraph (2) of this clause 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.

• (4A) The Minister may at any time before the expiry or determination of this licence give the Licensee a notice requiring a Well drilled pursuant to this licence to be plugged and abandoned within the period specified in the notice (but this paragraph is subject to paragraphs (4C) and (4D)).

• (4B) The Licensee shall comply with any notice under paragraph (4A).

• (4C) A notice under paragraph (4A) may not be given less than one month before the expiry or determination of the Licensee's rights under this licence in relation to the area in which the Well is drilled.

• (4D) A notice under paragraph (4A) may be given only in relation to a Well from which the Licensee has not extracted any petroleum within the period of one month ending with the day on which the notice is given.

• (5) Where the Licensee’s rights in any area cease for the time being to be exercisable, by reason of the grant of such a licence as is mentioned in the proviso to clause 2 of this licence or by reason of the ending of any such agreement as is referred to in that proviso, the Licensee, unless the Minister otherwise determines, shall within one month after the date on which such rights cease to be exercisable plug any of the Licensee’s Wells in that area.

• (6) All the Licensee’s Wells (other than Wells to which the last foregoing paragraph applies) in the Exploration Area shall, unless the Minister otherwise determines, be plugged by the Licensee not less than one month before the expiry or determination of the Licensee’s rights under this licence.

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

Distance of Wells from boundaries of Exploration Area

8

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 Exploration Area.

Avoidance of harmful methods of working

9

• (1) The Licensee shall maintain all apparatus and appliances and all Wells which have not been abandoned and plugged as provided by clause 7 of this licence in good repair and condition and shall execute all operations in or in connection with the Exploration Area in a proper and workmanlike manner in accordance with methods and practice of exploration customarily used in good oilfield practice and without prejudice to the generality of the foregoing provision the Licensee shall take all steps practicable in order—

• (a) to prevent the escape or waste of Petroleum discovered in the Exploration Area;

• (b) to conserve the Exploration Area for productive operations;

• (c) to prevent damage to Petroleum-bearing strata;

• (d) to prevent the entrance of water through Wells to Petroleum-bearing strata; and

• (e) to prevent the escape of Petroleum into any waters in or in the vicinity of the Exploration Area.

• (2) The Licensee shall comply with any instructions from time to time given by the Minister in writing relating to any of the matters set out in the foregoing paragraph. If the Licensee objects to any such instruction on the ground that it is unreasonable he may, within fourteen days from the date upon which the same was given, refer the matter to arbitration in manner provided by clause 21 of this licence.

• (3) The Licensee shall give notice to the Minister of any event causing escape or waste of Petroleum, damage to Petroleum-bearing strata or entrance of water through Wells to Petroleum-bearing strata forthwith after the occurrence of that event and shall, forthwith after the occurrence of any event causing escape of Petroleum into the sea, give notice of the event to the Chief Inspector of Her Majesty’s Coastguard.

Fishing and navigation

10

The Licensee shall not carry out any operations authorised by this licence in or about the Exploration Area in such manner as to interfere unjustifiably with navigation or fishing in the waters of the Exploration Area or with the conservation of the living resources of the sea.

Licensee to keep records

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• (1) The Licensee shall keep within the United Kingdom accurate records in a form from time to time approved by the Minister of the drilling, deepening, plugging or abandonment of all Wells and of any alterations in the casing thereof. Such records shall contain particulars of the following matters—

• (a) the site of and number assigned to every Well;

• (b) the subsoil and strata through which the Well was drilled;

• (c) the casing inserted in any Well and any alteration to such casing;

• (d) any Petroleum, water, mines or workable seams of coal encountered in the course of such activities; and

• (e) such other matters as the Minister may from time to time direct.

• (2) The Licensee shall keep in the United Kingdom accurate geological plans and maps relating to the Exploration Area and such other records in relation thereto as may be necessary to preserve all information that the Licensee has about the geology of the Exploration Area.

• (3) The Licensee shall deliver copies of the said records, plans and maps referred to in the two foregoing paragraphs to the Minister when requested to do so either—

• (a) within any time limit specified in the request; or

• (b) if there is no time limit specified, within four weeks of the request.

Returns

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• (1) The Licensee shall furnish to the Minister on or before the fifteenth day of each month in which this licence is in force a return in a form from time to time approved by the Minister of the progress of his operations in the Exploration Area. Such return shall contain—

• (a) a statement of the areas in which any geological work, including surveys by any physical or chemical means, has been carried out;

• (b) the number assigned to each Well, and in the case of any Well the drilling of which was begun or the number of which was changed in that month, the site thereof;

• (c) a statement of the depth drilled in each Well; and

• (d) a statement of any Petroleum, water, mines or workable seams of coal encountered in the course of the said operations.

• (2) Within two months after the end of each calendar year which falls wholly or partly within the period during which this licence is in force and within two months after the expiration or determination of this licence the Licensee shall furnish to the Minister an annual return in a form from time to time approved by the Minister of the operations conducted by him in the Exploration Area during that year or the period prior to such expiration or determination as the case may be together with a plan upon a scale approved by the Minister showing the situation of all Wells. The Licensee shall also indicate on the said plan all works executed by him in connection with searching for Petroleum.

• (3) The Licensee shall furnish to the Minister such other information, including information in the form of maps and plans, as to progress of his operations in the Exploration Area as the Minister may from time to time require.

• (4) The functions of the Minister under paragraph (3) of this clause shall not only be exercisable by him but also be concurrently exercisable by the Chancellor of the Exchequer.

• (5) The Licensee shall comply with any requests for information made in accordance with paragraph (3) above either—

• (a) within any time limit specified in the request; or

• (b) if there is no time limit specified, within four weeks of the request.

Licensee to keep samples

13

• (1) As far as reasonably practicable the Licensee shall correctly label and preserve for reference for a period of five years samples of the sea bed and of the strata encountered in any of the Licensee’s Wells in the Exploration Area and samples of any Petroleum or water discovered in any such Wells.

• (2) The Licensee shall not dispose of any sample after the expiry of the said period of five years unless—

• (a) he has at least six months before the date of the disposal given notice in writing to the Minister of his intention to dispose of the sample; and

• (b) the Minister or any person authorised by him has not within the said period of six months informed the Licensee in writing that he wishes the sample to be delivered to him.

• (3) The Minister or any person authorised by him shall be entitled at any time—

• (a) to inform the Licensee in writing that he wishes part of any sample preserved by the Licensee to be delivered to him; or

• (b) to inspect and analyse any sample preserved by the Licensee.

• (4) The Licensee shall forthwith comply with any request for the delivery of the whole or any part of any sample which is made in accordance with the preceding provisions of this clause.

Reports to be treated as confidential

14

All records, returns, plans, maps, samples, accounts and information (in this clause referred to as “the specified data”) which the Licensee is or may be from time to time required to furnish under the provisions of this licence shall be supplied at the expense of the Licensee and shall not (except with the consent in writing of the Licensee which shall not be unreasonably withheld) be disclosed to any person not in the service or employment of the Crown—

Power to inspect records

15

The Licensee shall—