The Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014

Made: 20th June 2014

Laid before Parliament: 2nd July 2014

Coming into force: 17th July 2014

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

Citation, commencement and interpretation

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• (1) These Regulations may be cited as the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014 and come into force on 17th July 2014.

• (2) In these Regulations—

• “landward area” means an area of Great Britain that is within the baselines established by any Order in Council under section 1(1)(b) of the Territorial Sea Act 1987 (extension of territorial sea);

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

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

Model Clauses

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• (1) For the purposes of section 4(1)(e) of the Petroleum Act 1998—

• (a) the model clauses prescribed for petroleum exploration and development licences are those set out in Schedule 2; and

• (b) the model clauses prescribed for landward petroleum exploration licences are those set out in Schedule 3.

• (1A) For the purposes of section 4(1B) of the Petroleum Act 1998—

• (a) the model clauses prescribed for petroleum exploration and development licences granted by the Scottish Ministers are those set out in Schedule 2A;

• (b) the model clauses prescribed for petroleum exploration and development licences granted by the Welsh Ministers are those set out in Schedule 2B;

• (c) the model clauses prescribed for landward petroleum exploration licences granted by the Scottish Ministers are those set out in Schedule 3A; and

• (d) the model clauses prescribed for landward petroleum exploration licences granted by the Welsh Ministers are those set out in Schedule 3B.

• (2) The model clauses prescribed for petroleum exploration and development licences by regulation 3(7) and (8) of, and Schedules 6 and 7 to, the Petroleum Licensing (Exploration and Production) (Seaward and Landward Areas) Regulations 2004[^f00002] do not apply in relation to any licence granted on or after the date on which these Regulations come into force.

SCHEDULE 1 — Lines dividing Landward Areas from Seaward Areas

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SCHEDULE 2 — Model clauses for petroleum exploration and development licences

Interpretation

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• (1) In this Licence the following expressions have the following meanings—

• “the Act” means the Petroleum Act 1998;

• “Block” means an area comprised in this licence which is delineated on the reference map deposited at the office of the Oil and Gas Authority, Aberdeen, AB10;

• “Development Area” means a Development Area described in an approval notice under clause 19(2)(a) of this licence or, where appropriate, a notice approving an amendment to a Development Area under clause 19(5) of this licence;

• “Development Scheme” has the meaning given to it in clause 28;

• “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;

• “Initial Term” means the period specified as such in Schedule 5 to this licence;

• “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 this licence is granted (specified as such in Schedule 4 to this Licence), his personal representatives and any person or persons to whom the rights conferred by this licence may lawfully have been assigned;

• ...

• “Methane Drainage Licence” means a licence to get natural gas in the course of operations for making and keeping safe mines whether or not disused;

• “the OGA” means the Oil and Gas Authority;

• “Oil Field” has the meaning given to it in clause 28;

• “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;

• “Production Period” means the period specified as such in Schedule 5 to this Licence;

• “Retention Area” means a Retention Area described in an approval notice under clause 16(1) of this licence or, where appropriate, a notice approving an amendment to Retention Area under clause 16(6) of this licence;

• “Second Term” means the period specified as such in Schedule 5 to this licence;

• “source-rock production” has the meaning given to it in clause 19(7);

• “Start Date” means the date specified as such in Schedule 5 to this licence;

• “Well” includes borehole; and

• “Work Programme” means the programme set out in Schedule 3 to this licence.

• (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.

Right to search and bore for and get Petroleum

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In consideration of the payments hereinafter provided for and the performance and observance by the Licensee of the terms and conditions herein contained, the OGA, in exercise of the powers conferred upon it by the Act, hereby grants to the Licensee exclusive licence and liberty during the continuance of this licence and subject to the provisions hereof to search and bore for, and get, Petroleum in the area described in Schedule 1 to this licence provided that nothing in this licence shall affect the right of the OGA to grant a Methane Drainage Licence in respect of the whole or any part of the Licensed Area or affect the exercise of any rights granted under any such Methane Drainage Licence.

Term of Licence

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• (1) This Licence shall commence with the later of—

• (a) the Start Date; and

• (b) the date on which this licence was granted.

• (2) Unless sooner determined under any of its provisions, and provided always that its terms and conditions continue to be performed and observed, this licence shall continue—

• (a) for the Initial Term, subject to clauses 4, 6 and 9;

• (b) for the Second Term, subject to clauses 5, 6 and 9; and

• (c) for the Production Period, subject to clauses 7, 8 and 9.

• (3) On expiry of the Production Period, the licence shall determine unless extended in accordance with clause 8.

Determination of Licence during Initial Term where a Drill-or-Drop Period is specified

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• (1) Where a Drill-or-Drop Period is specified, this licence shall, unless the OGA in its discretion decides otherwise, automatically cease and determine on the expiry of that period in the event of failure by the Licensee before the expiry of that period to—

• (a) take the actions that are described in Part 1 of the Work Programme; and

• (b) undertake to complete on or before the expiry of the Initial Term the work described in Part 2 of the Work Programme.

• (2) In this clause, “Drill-or-Drop Period” means the period (if any) specified as such in Schedule 5 to this Licence.

Option to continue Licence as to part of the Licensed Area

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• (1) At any time not later than 1 month before the expiry of the Initial Term the Licensee may—

• (a) subject to payment of those sums hereinafter provided for and to performance of the terms and conditions herein contained including, without limitation, those set forth in paragraph (2) of this clause; and

• (b) conditional upon due performance by the Licensee of the Work Programme on or before expiry of the Initial Term,

give notice in writing to the OGA in the manner hereinafter provided that he desires this licence to continue in force in relation to part of the Licensed Area (hereinafter called “the Continuing Part”).

• (2) Where the Licensee gives notice to the OGA in accordance with paragraph (1) of this clause such notice must indicate that he will determine this licence in relation to such part of the Licensed Area as shall be described by the Licensee in the notice (hereinafter called “the Surrendered Part”) in accordance with the requirements of paragraph (3) of this clause.

• (3) Subject to paragraphs (4), (5) and (6) of this clause the Surrendered Part, when taken together with any one or more areas previously surrendered in accordance with clause 7 hereof, must consist of—

• (a) not less than half of the Initial Licenced Area; or

• (b) so much of the Initial Licensed Area as is not—

• (i) a Retention Area; or

• (ii) a Development Area.

• (4) The Licensee shall not be obliged to surrender so much of the Licensed Area that following such surrender the Licensed Area comprises less than 25 square kilometres.

• (5) The Licensee shall not be obliged to surrender such part of the Licensed Area as the OGA considers, on an application being made to the OGA in that regard by the Licensee, necessary to secure the recovery of Petroleum from such area.

• (6) Paragraph (2) of clause 9 of this licence applies to the Surrendered Part as it applies to parts of the Licenced Area surrendered under paragraph (1) of that clause.

• (7) Any notice served in accordance with paragraph (1) of this clause shall specify a date not later than expiry of the Initial Term on which the Surrendered Part is to be surrendered.

• (8) This licence shall, upon the option conferred by this clause being duly exercised but subject to the provisions of clause 3 of this licence, continue in respect of the Continuing Part for the Second Term.

Extension of the Initial or Second Term

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• (1) This clause applies to an extension to be made to the Initial Term or as the case may be to the Second Term (“the relevant term”).

• (2) At any time not later than one month before the expiry of the relevant term the Licensee may, subject to payment of the sums specified in Schedule 2 and to performance of the terms and conditions herein contained, give notice in writing to the OGA that he desires that term to be extended for a further period.

• (3) Where notice is given in pursuance of paragraph (2) of this clause, the OGA may in its discretion direct in writing that the relevant term be extended; and paragraph (2) of this clause shall apply to that term as so extended.

• (4) An extension given by a direction in pursuance of this clause shall be for a period, and subject to such conditions, as the OGA may determine.

• (5) Where a relevant term is extended in pursuance of this clause, clause 3 shall apply in respect of that term as so extended.

• (6) Where the Initial Term is extended by a period in pursuance of this clause, the Second Term shall (without prejudice to paragraph (2)) be reduced by the same amount; and where the Second Term is extended by a period in pursuance of this clause, the Production Period shall be reduced by the same amount.

Continuance of Licence after the Second Term (5)

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• (1) At any time not later than three months before the expiry of the Second Term the Licensee may, subject to payment of those sums hereinafter provided for and to performance of the terms and conditions herein contained, give notice in writing to the OGA that he desires this licence to continue in force thereafter.

• (2) If such notice is given this licence shall continue in force after the expiry of the Second Term as provided by the following paragraphs of this clause in the event that before such expiry—

• (a) the OGA has in pursuance of clause 17(4) of this licence approved a programme submitted to it in pursuance of clause 17(2) and such approval is still in force upon expiry of the Second Term;

• (b) the OGA has served a programme on the Licensee in pursuance of clause 17(6) of this licence and such programme is still in force upon expiry of the Second Term; or

• (c) the OGA has with a view to securing the maximum economic recovery of Petroleum so directed in writing.

• (3) Where this licence continues in force by virtue of this clause it shall, subject to the provisions of clause 3 of this licence, so continue during the Production Period.

• (4) A direction given by the OGA in pursuance of sub-paragraph (2)(c) of this clause may be given subject to such conditions as it may specify.

Power further to extend term of Licence

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Where this licence has continued in force by virtue of clause 7 of this licence for the Production Period, the OGA, on application being made to it in writing not later than one month before the expiry of such period, may agree with the Licensee that the Production Period shall be extended for such further period as the OGA and the Licensee may agree in order to secure the maximum economic recovery of Petroleum from the Licensed Area and subject to such modification of the terms and conditions of this licence (which modification may include making provision for any further extension of the term of this licence) as the OGA and the Licensee may then agree is appropriate.

Right of Licensee to determine Licence or surrender part of Licensed Area

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• (1) Without prejudice to any obligation or liability imposed by or incurred under the terms hereof, the Licensee may, at any time, determine this licence or surrender any part of the Licensed Area as is mentioned in paragraph (2) of this clause by giving to the OGA not less than one month’s notice in writing to that effect.

• (2) Any area to be surrendered in accordance with paragraph (1) of this clause shall be a clearly defined two-dimensional 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 OGA may agree in writing prior to the date on which notice is given by the Licensee under paragraph (1) of this clause to accept a surrender of part of the Licensed Area which does not comply with the requirements of this paragraph, which may include agreement to accept the surrender of a clearly defined three-dimensional area.

Consequences of determination or surrender by Licensee

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Upon the date on which any determination of this licence or any surrender of part of the Licensed Area in the manner provided by either clause 5 or clause 9 of this licence is to take effect, the rights granted by this licence shall cease in respect of the Licensed Area or 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 of this licence prior to that date.

Provision of contact details to Minister

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• (1) A notice, direction or other document authorised or required (in whatever terms) to be given to the Licensee by virtue of this licence is treated as given to the Licensee if it is given to the person specified by the Licensee under paragraph (2) at the address so specified.

• (2) The Licensee must supply the OGA with the name and address of a person to whom notices, directions and other documents are to be given.

• (3) The Licensee must ensure that, where there is a change in the person to whom, or the address to which, information should be sent in accordance with paragraph (2), the OGA is notified of the change as soon as is reasonably practicable.

• (4) If the Licensee fails to comply with paragraph (2) the OGA may give the Licensee a notice which—

• (a) requires the Licensee to comply with paragraph (2) within the period of one month beginning with the date of the notice, and

• (b) states that, if the Licensee fails to do so, the Licensee will be treated as having supplied under paragraph (2) the name and address specified by the OGA in the notice.

Payment of consideration for Licence

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• (1) The Licensee shall make to the OGA as consideration for the grant of this licence payments in accordance with Schedule 2 to this licence.

• (2) The Licensee shall not by reason of determination of this licence or surrender of any part of the Licensed Area be entitled to be repaid or allowed any sum payable to the OGA pursuant to this licence before the date of determination or surrender.

Measurement of Petroleum obtained from the Licensed Area

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• (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 OGA all Petroleum won and saved from the Licensed Area.

• (2) If and to the extent that the OGA so directs, the duty imposed by paragraph (1) of this clause shall be discharged separately in relation to Petroleum won and saved—

• (a) from each part of the Licensed Area which is an Oil Field for the purposes of the Oil Taxation Act 1975;

• (b) from each part of the Licensed Area which forms part of such an Oil Field extending beyond the Licensed Area; and

• (c) from each Well producing Petroleum from a part of the Licensed Area which is not within such an Oil Field.

• (3) If and to the extent that the OGA so directs, the preceding provisions of this clause shall apply as if the duty to measure or weigh Petroleum included a duty to ascertain its quality or composition or both; and where a direction under this paragraph is in force, the following provisions of this clause shall have effect as if references to measuring or weighing included references to ascertaining quality or composition.

• (4) The Licensee shall not make any alteration in the method or methods of measuring or weighing used by him or in any appliances used for that purpose without the consent in writing of the OGA and the OGA may in any case require that no alteration shall be made save in the presence of a person authorised by the OGA.