Petroleum Act, 2016 (No. 2 of 2016)

1. Short title and cornmencemcnt... ........................................................................ .3

2. Interprelalion ........................................................................................................ 1 RIGHTS OF GOVERNMENT TO PETROLEUM R1 !80URCES 6

3. Vesting of pdroleum resources in the Government... ....................................... 6 POWERS OF !v11NISTER 7

4. Minister lo be a CorporaLion Sole ........................ . ............................................ 7

5. Power of :Vlinister to grant permits, licences, etc.................................................. 7

6. General powers ofMinister..................................... ......... .... ............ .. ......... ...... .. 8

7. Petroleum agree111ents ........................................ ............... ................................... 9

8. I ligh water and survey marks............................................................................... 9 PART II - PETROLF.UM OPERATIONS 10 KEST1UCT1O'\fS ON GRANT OF PERMlTS, LlCE'\fCES J\'{D LF.,\SES 10

9. Restrictions lo whom permit,;, etc. may be granted............................................ J0

10. Restriction on grant of licence............................................................................ I0 l l. Restriction on grant oflerm: ............................................................................... 10 PF.RMTTS, UCE~CES AND LEASES 11

12. Application for pennil.. ..................................................................................... 11

13. Grant of pen11it. .................................................................................................. l l

14. Ren1::walof pcrmit. ............................................................................................. ll

15. Application for licence or leac;e ...................................................................... 12

16. Conc;idcrations for grant of licence ..................................................................... 12

17. Grant of licence................................................................................................. l 2

18. Considerations for grant of lease ........................................................................ 12

19. Grant of lease..................................................................................................... 13

20. Execution of permit, licence and lease ............................................................... 13

21. Extension ........................................................................................................... 13

22. Renewal of lil:ence or lease................................... .......................................... 14

23. Relinquishment w1dcr licence or lease ............................................................... 15

24. Surrender of licence or lease............................................................................. 15

25. Joint operations ...................................................... ........................................... 15

26. Cross border operations................................................................................... 16 V:\Rlt\llOi'!, ASSlG'l\"MFt,,, TRA)ISfEllAl\D TERM!NAllO. 16

27. Variation by Minister.................................................................................. ....... 16

28. Assignment and tran.sfrr..................................................................................... 16

29. Terminalion .......................... .............................................................................. 17 PART Ill - FINANCIAL PROVISIONS 18 ROYALTIES 18

30. Royalty........................................... .................................................................... 18

31. Petroleum in lieu ofroyalty................................................................................ 19

32. Royalty not payable in ce1iain cases ................................................................... 19

33. Currency........................................................................... .................................. 19 FEES, RENTS ANO OTHER CHARGES 19

34. Fees, rents, etc.................................................................................................... 19

35. Exemption from customs duties ......................................................................... 20 SECURITY 20

36. Security for due performance ofoperations.............................. ........................ .20 DAlvlA.GEAND COMPENSATION 21

37. Liability for environmental damage ................................................................... 21

38. Precautions for environmental damage . ............................................................ 21

39. Inde1nnification... ............................................................................................... 21

40. Financial Security...............................................................................................21

41. Minister may remedy default....................................... ........... ........................... 22 INFORMATION, RECORDS, ETC. 23

42. Duty to furnish information to Minister............................................................. 23

43. Rccords.............................................................................................................. 23 44: Annual reports .................................... ,.......... ,................... ,, ............................... 23 PART IV - ANCILLARY RIGHTS 24

45. Applica!ion for ancillary rights .......................................................................... 24

46. Evaluation of application for ancillary rights ..................................................... 24

47. Right to be heard.......... ,.....................................................................................24

48. Grant of ancillary right and compensation......................................................... 25

49. Effect of grant of ancillary rights....................................................................... 25

50. Restriction on granting ancillary rights .............................................................. 25 PART V - MISCELLANEOUS 26

51. General penalty.................................................................................................. 26

52. Regulations ... ,,........................................................................,....................... ,..26

53. Savings...............................................................................................................27

54. Repeal. ..... ,.......................................... ,.............................................................. 27

SCHEDULE 28  PETROLEUM ACT, 2016 A.l"i AC I I U .t'KU V HJE ~UK 'LH.E EXJ:'LUKALLUJ"i Al"ilJ t'K\JU UC llU1~ , ..., OF PETROLEUM AND FOR MATTERS INCIDENTAL THERETO   PART I • PRELIMINARY 1. Short title and commencement. (1) This Act may be Giled as !he Petroleum Act, 2016. (2) Tbis Act shall come into operation on such day a5 the Minister may, by notice published in the Gazette, appoint. 2. Interpretation. Tn this .t\d- "ancillary right" means any right or privilege required by the holder of an instrument to discharge such operations thereunder and includes where applicable, the right to - (a) enter upon land or submarine areas and to geophysically examine and explore for petroleum; (b) to drill wells or sink boreholes; (c) use and occupy land for the erection of buildings and faci lities; or (d) obtain a supply of water or other substance; "block" means - (a) i.t1 relation to any submarine area, an area of one hw1clrcd square milt.s, in the shape of a square with each side ten miles in length, Page - 3 individually identlflable ui1 a base map of The Bahamas approved by the Minis1:et; (b) in relation lo any hmd area, such area as may be determined by the Minister from time lu time; "change of contrnl" includes a change of control of a parent company in or outside of The Bahamas; "court" means the Supreme Court; "discovery" means discovery of petroleum; "environmental damagej) means damage to the environmeni, induding persons, as a consequence ofoperations under an instrument; "explore" or "exploration" means any activity undertaken for the purpose of identifying petroleum, or petroleum bearing or petroleum generating strata, and indudes geological or geophysical studies or surveys, including seismic and drilling of a well; "exploration licence" confers an exclusive right to explore for petroleum within the land or in any submarine area referred to therein; "facility" means an installation, plant, pipeline or other equipment utilised in connection with exploration or prnduction or the storage or transpo1iation of petroleum; "fuel" means any peLroleum product that can undergo combustion process lo produce energy and i.i1clucles petrol aJ1CI diesel; "installation" means any vessel or structure used or intended to be used for- (a) drilling a well; (b) the extraction and production of petroleum; and includes - (i) a well, by which petroleum is extracted; (ii) a pipe or system of pipes to transport petroleum from a well lo a vessel or structure or to transport gas or liquids from a vessel orsi:ructurc to a well; f"' ,u•j' in respect of an offshore installation, all other works within five hundred metres of any patt of the vessel or structure used in conjunction with exploration and production, but does not include - (i) a vessel or structure dnring mobilisation or demobilisation; or (ii) equipment solely used to drill a hole for conductor casing at a \.Veil sile; "instrument" means a permit, Iicence, lease or petroleum agreement; Page - 4 ''land" indudes all marshes, lands underlying lakes, coastal marine swamp land and lands underlying all bodies of water con.riected with the sea and extendiug inland and excludes ~ubrnarine areas; "lease" means a production lease; "lessee" means the holder of a production lease; "licence" means an exploration licence; "licensee" means the holder of an exploration licence; "major environmental incident" means any unforeseen event or incident, which presents a serious threat to the health and safety of persons and the environment, or causes or is likely to cause disruption to the operations of a facility, pollution or other unforeseen damage to the environment; "mile" means 5280 linear feet; "Minister" means the :\1ini;:;ter responsible for petroleum; ,;operator" m.ea11s - (a) the holder of an instrument where no other person is appointed to be responsible for the operations thereunder; (b) any person appointed by the holder of an instrument lo manage and control the operation of a facility and includes (i) any contractor or manager appointed by the holder; and (i i) any agent or employee of any person referred to in subparagraph (i); or (c) where the holder of an instrument, notwithstanding paragraph (b), notifies that the holder is to be treated as lh~ operator for the purposes of these Regulations; "permit" confers a non-exclusive right to carry out anywhere within the land, or in any submarine area referred to therein any geological or geophysical studies or surveys, including seismic; "petroleum" - (a) means any naturally occurring hydrocarbon or a mixture of hydrocarbons, other than coal, whether in a gaseous, littuid, or sol id state; and (h) includes any petroleum which has been or otherwise recovered from its natural condition, but which has been returned to a natural reservoir for storage purposes; "petroleum operations" means the operations related to the various stages of the petroleum indu5lry und includes nalural gas processing, exploring for, producing, refining, transporting and Page - 5 marketing petroleum or petroleum produt:LS or both and manufacmring and marketing of petro chemicals; but docs not include mining operations involving the extraction of petroleum from bituminous shatcs, tar sans, asphalt or other like deposits; "petroleum products" means any finished or pa1tly finished produd derived from petroleum by any refining process and includes fuel; "production" means the extraction of petroleum from a well and includes (a) the separation, treatment and initial processing of petroleum; (b) the i1*ction of gas and liquids into underground geological formations; and (c) the recovery of gas stored in underground geological formations; "production lease" confers an exclusive right to produce and develop a discovery within the land or in any submarine area referred to lherein; "submarine area" mc:an.s the: 1,ubmc:rged prolongalion of the land mass of The Bahaimis, including lhe seabed and subsoil situated beneath the territorial sea and extending beyond lhe limit of the territorial sea throughout the natural prolongation of the land territory of The Bahamas- (a) to the outer edge of the continental margin; or (b) to a distance of two hundred nautical miles from the base line of the territorial sea where the outer edge of the continental margin docs not extend up to that distance; "unit" means an area of four square miles, in the shape of a square \:Vith each side two milt:s in length, individually identifiable on a base map of The Bahamas approved by the Minister; "·well" means a borehole made by drilling whe::ther or not for the extraction of petroleum and includes any device on it fo r containing the pressure and any borehole for re-injection purposes. RIGHTS OF C'JOVERN1v1ENT TO PETROLEUM RESOURCES 3. Vesting of petroleum resources in the Government. The property in all petroleum vested in the Government by virtue of section 3 of the Petroleum Act, 1971 shall continue so vested in the Government. Piige- 6 POVvERS OP Mil-.JISTER 4. Minister to be a Corporation Sole. (1) All property vested in the Minister pursuant lo this section shall be held by the tfolister in trust for Her Majesty in right of I-for Government of The Bahamas for lhe purpose of lhe aforementioned fonetions. (2) The Minister responsible for petroleum shall as regards his functions in relation to that responsibility be a corporation sok wilh power to acquire, hold, lease and dispose of land, to enter into contracts and to sue and be sued. (3) ~otwithstanding subsection (2), the Minister shall not sell or make any other disposition of the fee simple of any land vested in him without lhe prior approval of both Houses of Parliament signified by resolution thereof. 5. Power of Minister to grant permits, licences, etc. (1) No person shall cany out any activities for which an instrument is required except as provided for under lhis Act. (2) Subject to the provisions of this Act, and any rights under any other law the Minister may, upon application in the manner prescribed, grant as he thinks fit- (a) a permit; (b) an explora~ion lici:mce; (c) a produclion lease. (3) Notvvithstanding subsection (2), the tvlinister may dt\lennine that the grant of a licem:e, lease or petroleum agreement shall be subject to a procedure of competitive bidding. (4) Not\vithstanding subsection (1) and (2) and where a licensee has made a discovery and made an application for a lease, the grant of the lea:je shall not be subject to any procedure of competirive hidding. (5) \.\/here a licensee has failed to prove a commercial discovery and such licence has expired, been terminated or sun-endered, the Minister may prior to the grant of any ne·w licence, cause for such procedure to be sul~ject to competitive bidding. (6) A permit, licence or lease may be granled severally or jointly. (7) Alicen:.eorl~mayregnmted loacornpmy, "vholly owned by the Government. (8) The Government may elect to participate under an instrument and its participating interest thereunder shall be subject to mutual agreement in v..Tiling by the parties thereto. Page - 7 (9) S-ubject to the provisions of thjs }\c-t) n1orc than one licence or !ease may be granted to the same co111pany. (10) Any person who contravenes the provisions of subsection (1) commits an offence and is liable on conviction- (a) to a fine not exceeding five million dollars; (b) to imprisonment for a term not exceeding ten years; or (c) to both such fine and imprisonment, and, in lhe case of a continuing oftence, to a fm1her fine not exceeding one hundred thousand dollars for every day during which the offence continue,;:;. 6. General powers of Minister. In the administration of the Act, the Minister may, in writing, delegate any powers, duties or functions under the A.er, save and except the power of delegation aud may - (a) inspect and cany out studies regarding the manner in which petroleum operations are being conducted; (b) enforce and monitor compliance with all laws and any standards applicable to the petroleum industry; ((.;) at all times, have (he power to inspect operations and audit ,my accounts and records in respect of any operations conduc.ted under this Act; (d) at any time, to enter, access and inspect any place, mobile vehicle or installations, taking such measures as are reasonably necessary, including inter alia - (i) the breaking of seals and the resealing thereof; and (ii) marking of petroleum and petroleum produc.ts; (e) seize., take control and possession of any place, mobile vehicle, installations which poses an immediate risk to health, safety and environment; (f) gather information and tttke samples in connection with the operation or administration of this Act and investigate any offence relating to tl1is Act; (g) in cases of abandonment or decommissioning, inspect, audit premises and take samples to determine whether such premises has been sufficiently restored with regard to the activities conducted thereon; in order not to pose a threat to the environment or to the satety and health of the public; (h) conduct risk analysis and such inspections to determine emergency preparedness; Page - 8 (i) obtain fi1ll access to any intOnn ation, records or other documents held under a licence or other contract; 0) b~ accompanied by such oiTicers as may be necessary or desirable in the circumstances. 7. Petroleum agreements. (1) Notwithstanding section 5(2) or any rule of law to the contrary, the Minister may in his discretion and subject to an application, enter into a petroleum agreement - (a) for the purpose of exploration and production of petroleum within the land or any submarine area referred to therein upon such terms and conditions as determined by the Minister; (b) for terms, conditions and fiscal provisions relating to a permit, licence or lease. (2) \\,'here there is any conflict or variance with reference with any matter behveen the provisions of an agreement pursuant to subsection (l)(a) and this Act, the provisions of the agreement sliall prevail, provided that the provisions thereunder were agreed upon hy the Jvlinister, in accordance with the Act and any other prevailing law. 8. High water and survey marks. for the purposes of this Acl, lhe Minister shall in consultation with the Minister responsible for lamb and surveys_, public works and maritime affairs, where applicable - (a) fix a line which shall be deemed to be the high water mark with respect to any land or submari ne area, by a chart maintained and authenticated by him; (h) direct the holder of an instrument to - (i) erect and maintain at its own expense such survey marks or monuments, as the Minister may consider necessary for the ddimilalion of any submarine area; (ii) illumina!e beLween the hours of sunrise and sunset with respect to land or any submarine area all derricks, piers, survey marks, vessels, facili ties, plants or any other installations erected or anchored in any submarine area or land included in a licence or lease. Page - 9 PARTII-PETROLEUwiOPERATIONS RESTRICTIONS ON GRANT OF PERMITS, LTCENCES AND LEASES 9. Restrictions to whom permits, etc. may be granted. (1) A permit, licence or lease shall only be granted to a company- (a) which has heen incorporated and registered in The Bahamas under the provisions of the Companies Act (Ch 308); or (b) which has been incorporated outside The Bahamas and has been duly registered in The n ahamas under t}1e provisions of the Companies Act (Ch. 308). (2) The requirement for the grant of a permit under this Act shall not apply to a scientific research organisation approved by the Minister. (3) The grant of a permit shall not entitle the holder thereof to a right to the grant of an instrument. (4) No licence or lease shall be granted to a company which - (a) is a member of, or is directly or indirectly owned or controlled by, another company to which an equivalent licence or lease h,1s formerly been granted under the repealed Act and this Act; or (b) is a subsidiary of a parent company that has more than one subsidiary company holding an equivalent licence or leru;e. (5) Subject to section 10(2) and section 11(2)(c), a company which bas been granted a licence or lease under the repealed Act may apply for and be granted a licence or lease under this Act. 1O. Restriction on grant of licence. (I ) A licence shall not be granted for an area in excess of five blocks. ( 2) A licensee shall not be granted a lic,cncc for an area which in the aggregate is in excess of twenty-five blocks whether held severally or joinlly. (3) Notwithstanding subsection (2), where lhe Govermnent is a parly Lo a licenc,c, the Minister may in his discretion in respect of such licence grant jointly to a licensee and the Government, a larger area which in the aggregate is in excess of twenty-five blocks. 11. Restriction on grant of lease. (1) A lea5e shall only be granted in respect of an area divided into units. (2) Su~ject to subsection (3), a lessee shall not be granted a lease in respect of an area- (a) of less than one unit; Page-10 (b) in excess of seventy-five units undcra lease; (c) in excess of three hundred and tweive and a half units in the aggregate under all the leases held by such a lessee (including in such aggregate the proportionate interest in any area subject to a lease jointly held with another lessee). (3) Upon application to the Minister in writing, the Minister may in his discretion, grant to any lessee a larger area than lhat specified in subsection (2)(b) and (c), upon such tenns and conditions as he deems appropriate. (4) Notwithstanding subsection (2), where the Government is a party to a lease, the Minis(er may in his discretion in respect of such lease grant jointly to a lessee and the Governmenl, a larger area which in the aggregate is in excess of h;venty-five blocks. PERMITS, LICENCES AND LEASES 12. Application for permit. An application for a permit may be made by two or more persons jointly, provided that the agreement between the parties Lhereto is submitted with such app Iication. 13. Grant of permit. (1) Thefvfinister may - (a) grant a permit, upon such terms and conditions as he considers appropriate; or (b) refuse a permit. (2) The grant of a permit sball be subject to the rights of any owner of the surface of the land or submarine area in respect of whjch the perm it is granted. (3) The term for which a permit is granted shall not exceed one year. 14. Renewal of permit. (1) An application for the renewal of a permit shall be - (a) made in the form prescribed; and (b) accompanied by the prescribed fee. (2) Subject to subsection (1), the Minister may in his discretion renew a permit for a period not to exceed one year. Pagt: - 11 15. Application foi licence o; lease. (1) An application for a licence or lease may be made by two or more persons jointly, provided that t11e agreement between the parties thereto is submitted \,\~th such application. (2) Notice of every application m1der subsection ( l ), shall be publisl1cd in the Gazette and in at least one daily newspaper printed and circulating in The Bahamas and in such other mam1er as the Minister thinks fit. 16. Considerations for grant of licence. In determining whether to issiie a licenc,e, the Minister shall take into consideralion - (a) whetl1er the applicant is a fit and proper person whose prior conduct, regard for the law, reputation and associations do not poge a threat to the good order and general welfare of the citizens of The Bahamas; (b) the experience, technical and financial capability of the applicant; and (c) any other particulars as the Ivlinister may deem appropriate. 17. Grant oflicence. (1) Where the Minister determines to grant a licence, he shall do so upon such terms and conditions a:; he deems appropriak and in accordance with the provisions of this AcL (2) The term for which a licence may be granted shall not exceed three years. 18. Considerations for grant of lease. In determining whet:her to grant a lease, the Minister i;hall Lake into consideration - (a) whether the applicant is a fit and proper person whose prior conduct, regard for the law, reputation and associations do not pose a threat to the good order and general welfare of lhe cilizens of The Bahamas; (b) the eKperience, technical and finanda l cap~ bilily of the applicant; (c) whether there is a discovery and in so doing, he shall consider - (i) the quality and estimated quantity of recoverable petroleum reserves; (ii) the site and depth at which petroleum is located; (iii) the expected petroleum production rate; (iv) the costs and investment required; (v) the future fair market price of petroleltm; and (d) any o(her particulars as he may deem appropri<1te. Page - 12 19. Grant of lease. (1) Where there is a discovery within an area under a licence, a licensee, by application in writing to the Minister and subject to and in compliance with the provisions of this Act, shall be entitled to the gram of a lease. (2) The term for which a lease may be granted shall not exceed th.irty years. (3) Where the Minister determines to grant a lease, he shall do so upon such terms and conditions as he deems appropriate and in accordance with the provisions of this Act. (4) Upon the grant of a lease, the balance of the original area under the licence shall remain subject to relinquishment in accordance with the provisions of the Act. 20. Execution of permit, licence and lease. Upon receipt of notice of approval of an application for the grant of a permit, licence or lease, the applicant shall be required to accept and execute the same within sixty days thereof, failing which such approval shall be rescinded unless the Minister upon sa(isfactory evidence considers thal the delay is not due to the fault of the applicant. 21. Extension. ( 1) An application for an extension of the term of an instrument shall - (a) be made in writing to the Minister; and (b) include any other particulars as the }.,[inistcr may deem appropriate. (2) Subject to subsection ( 1), an application shall be made - (a) in !he case of a licence, not less (han three monil1s prior to the expiry date thereof; (b) in the case of a lease, not less than 011c year prior to the expiry date thereof. (3) In light of circumstances prevailing and in determining whether to grant the extension of the term of an instrument, the Minister shall take into consideration - (a) whether the applicant has complied in accordance wilh the terms and conditions of the instrument, the prnvisions of this Ad and any other prevailing law; (b) whether the extension of the term of a licence or lease will enable lhe holder of an instrument to furlher assess the extent and characteristics of a discovery in order to determine if such a discovery would result in a commercial discovery; and (c) any particulars which the Minister may deem appropriate. Page - 13 (4) Subject to subsection (3) and in accordance wiih this Act, the tvfinistei may grant an extensiuu uf the lerm of an instrurneut upon such terms and conditions as the Minister may determine and in light of the circumstances thtm prevailing. (5) Tbc term for which a licence may be extended shall not exceed a term of four years. (6) The term for \.Vhich a lease may be extended shall be determined by the Minister. 22. Renewal of licence or lease. (1) \\'here the holder of a licence or lease has not applied for an extension in accordance with section 21, an application may be made in writing to the Minister to renew the licence or lease for the original area identified thereunder and shall - (a) in the case of a licence, be made not less than three months prior to the expiry date thereof; (b) in the case of a lease, be made not less tlian one year prior to the expiry date thereof; (c) include a map showing the art'a and boundaries of the land or submarine area related thereto; and (d) ind ude any other particulars as the ?-.1 inster shall determine. (2) In determining whether to renew a licence or lease, the Minister shall take into consideration - (a) whether an applicant has complied with the terms and conditions of the licence or lease, provisions of this Act and any other prevailing law; and (b) any other particulars which lhe Minister may deem appropriate. (3) Subject to subsection (2) and in accordance witl1 this Act, the Minister shall grant the renewal of a licence or lease upon such terms and conditions as the Minister may determine and in light of eircurmtanccs then prevailing. (4) The knn for which a licence may be renewed shall not exceed a term of three years. (5) The term for which a lease may be renewed shall be dete1111ined by the Minister. (6) Notwithstanding subsection (4) and within no less lhan three months prior to the expiry date of Lhe first renewed lerm of the original licence, an application may be made to further renew the duration of the licence. (7) Subject to subsection (6), ai1 application shall - Paoi:: 0 • 14 (a) be made in writing to the Minister; and (b) include any other particulars as the l'vfinister may deem apprnpriale. (8) The term for which a licence may be further renewed by the Mi nister, shall not exceed a period of three years. 23. Relinquishment under licence or lease. (1) The Minister shall require the holder of a licence or lease to relinquish an amount of the original area thereunder. (2) Subject to subsection (1), the area to he relinquished under a licence or lease shall be determined by the Minister and in the case of u lict:nce, the original area granted shall be reduced by no less than fifty per cent upon the expiry of- (a) Lhe original lerm of the licence; and (b) the first term of the renewal of the original licence. (3) The holder of a licence or lea,;;e shall submit lo the Minister a map of the area which is required to be reli nquished within tl1e time frame specified by the Minister. 24. Surrender of licence or lease. (I) In accordance with the provisions of the Act, where the holder of a licence or lease desires to surrender all or any part of an area thereunder, the Minister shall be notified in v.Titing ninety days prior thcrcco. (2) A summder pursuanl lo subsection (1), shall not affect any obligation or liabilities of the holder of a licence or lease, that have not heen performed or discharged prior to the date of the surrender. 25. Joint operations ( 1) If a discovery extends beyond the boundaries of an area under a licence or lease the Minister shall be notified in 'rvriting within seven days. (2) Subject to subsection ( 1), no t\1rthcr activity shall be canied out without the prior approval of the .tv1inistcr in writing. (3) Su~ject to subsection (2), the Minisler may require the licensee or lessee to :mhmit such documentation as the Mi11ister may determine and in consultation with the licensee or lessee, the Minister may require <;:[forts to be made to conduct or coordinate operations in connection with the discovery. Page - 15 26. Cross border operations. (I) If a discovery extends over the maritime boundary of The Bahamas into the lerriLory of another country the Minister shall be notified in writing within seven days. (2) Subject to subsection (1 ), no forther activity shall be carried out \¼ithout the prior approval of the Minister in writing. (3) Su~ject to subsection (2), the Minister shall in consultation with the relevant authorities take such steps as considered fit. VARIATION, ASSIGNMENT, TRANSPER AND TERMINATION 27. Variation by Minister. The Minister may, vary the terms and conditions of an instrume.nt, in ·writing - (a) at any 6me c.luring the duration of an inslmmenl, in the interest of public safety or national security; (b) upon c.;onsideralion of a written application and such documents which were required by Lhe Minister lo be submitted in support of the application; or (c) subject to mutual agreement, in writing with the holder thereof 28. Assignment and transfer. ( l) The holder of a licence, lease or petroleum agreement shall nol assign or transfer any rights and obligations thereunder without !he prior approval in writing of the J'vfinister. (2) A permit shall not be assigned or transferred. (3) An application to assign or transfer any rights or obligations under a licence, lease or petroleum agreement shall - (a) be made in writing LO the Minister; (b) be accompanied by the requisite application fee; (c) be accompanied by such paiticulars as ai·e required under the Act for application for an instrument; or (d) include such other informa!ion and documentation as the Minister may require. (4) The Minister may in his discretion approve or refuse an application to assign or transfer any right~ and ohligations w1der a licence, lease or petroleum agreement and such assignment or transfer shall be subject to any fees payable in accordance with any other law. Pag~-16 (5) The :-issignment or transfer uf a !icem:e, lease or petroleum agreement sb.311 not in any wuy relieve fhe assignor or transferor from the obligations thereunder, except lo (he extent lo which such obligations arc in fact performed by the assignee or transferee. (6) \.Vithin one month of the date of the execution of an assignment or transfer, copies of all conveyances, assigtm1ents, agree1m:nts, deeds and any other documentation relating to the u ea under a licence, lease or petroleum ;:igreerrnmt shall be submitted to the Minister. (7) For lhe purposes of lhis Act, where the holder of a licence, lease or petroleum agreement is taken over by another company or merges, or is acquired by another company, either hy acquisition or exchange of shares, including a change of control of a parent company outside of The Bahamas, it shall be deemed to be and treated as an assignment and shall be subject to the laws of The Bahamas. (8) Where Lhe holder of an instrumt:mt contravenes the provisions of this section, the \·1inister shall be entitled tu terminate such instrument in accordance with the provisions of this Act. 29. Termination . (I) The Minister may in VvTiting at any time, .:;ubjecl lo subsections (2) and (5), terminate an instrument Ln any case where he is satisfied thal - (a) it was obtained as a result of wilful misrepresentation in any material particular; (b) there is fai lure to provide any security or pay any royalties, laxes, rents or any other payments payahle under this Act ur any other prevailing law; ( c) there is a failure to keep accurate and complete records, books and accounts in accordance with this Act; (d) there is a contravention of any provisions of the Act or a breach of any terms and conditi ons contained therein; (e) the ho ldcr thereof shall become bankrupt, enters into any arrangement with its creditors, or where a receiver or trustee is appointed; (() the holder thereof shall enter into liquidation, whether compulsory or voluntary;or (g) lht: holder thereof fa ils to adhere to an award made against him in arbilraLion proceedings carried out in accordance \\~tb any law governing arbitration, this Act ur any other law. (2) Subject to subsection (1), the Yfinister shall give prior writ!en notice of the intention to terminate an instrument and such notice shall set out - (a) the reasons for termination; Page - 17 (b) the action tu be taken and the period of tin1e \~'ithin vvhich t0 resolve the matter; and (c) the period of time upo n receipt of the notice, within which the the holder of the instrument may inform the lvfinistcr in writing of a desire lo show cause why termination should not be effected. (3) Upon giving no!ice in accordance with subsection (2), the Minister may terminate the instrument, where the holder thereof has failed within the specified period of time under the said notice - (a) to resolve the matter; or (b) to show cause why termination should not be effected. (4) Where an inslrumenl has been !erminaled by the Minister in accordance Vvith this Act or the holder thereof, disputes the reasons for tcnnination - (a) the t\:1inister shall be notified in v.11iting of the dispute; and (b) the dispute shall be referred to arbitration save and except where otherwise provided thereunder or under any other law. (5) The terminalion of an instrument under this section shall not prejudice any other outstanding obligations of the holder thereof. (6) The Minister shall cause notice of the termination of an instrument --· (a) to be sent to the holder thereof by registered post to its registered office; (b) to be published in the Gazette. PART III - FINANCIAL PROVISIONS ROYALTIES 30. Royalty. (I) Subject to such arrangements approved by the Minister in writing, and as set out in a licence or lease, every licensee and lessee shall pay to the lv1inister a royalty calculated - (a) at the well head of the petroleum produced from the area under a licence or lease; (b) on the selling value of retroleum as determined by muhial agreement between the Minister and the licensee or lessee; and (c) at sw.:h intervals as the Minister may determine. (2) For the purposes of subsection (I )(b), the selling v8lue of any petroleum shall be such value - Page - 18 (a) a5 may be stipulated by :he Minister based on the average selling price of petroleum then prevailing in the market; or (b) as may be based upon other valuation parameters a,c; determined by the Minister. 31. Petroleum in lieu of royalty. (1) In lhe national interest and in consLtltation w:i!h the lessee, the tvfj_nister may elect to lake petroleum in kind in lieu of the whole or pml. of the royalty due. (2) Such petroleum as the !vlinistcr elects to take in kind shall be delivered by lhe lessee free of all trarL.~portation or hand] ing charges. (3) The Minister may requirn a lessee to hold such petroleum as elected to take in kind in slorage al the field or at a facility free of any storage charge, bul not for a period exceeding ninety days. (4) Any petroleum which the Minister does not dispose of within the period mentioned in subsection (3) or for which fmiher terms of disposal have not been agreed upon, shall be deemed to have been sold to the lessee at the same prices ;is apply in the cakulation of royalty. 32. Royalty not payable in certain cases. All petroleum that is proved to the satisfaction of the Minister to have been used by the, hold~r of a licence. or lease for the purpose of conducting exploration or production, including pumping or transportation of petroleum to field storage or refineries, shall be free ofroyalty. 33. Currency. All royalties, taxes,. fees, rents, duties, finam:ial instruments an<l any other charges shall be paid in the currency of The Bahmnas, except where otherwise approved by the Government in writing. FEES, RENTS AND OTHER CHA.RGES 34. Fees, rents, etc. (1) The application fees specified in the. Schedule shall be paid in respect of any instrument. (2) Rents shall be payable in respecl of any im.trurnent, as may be determined by the Minister in accordance ·with best industry practices. (3) Any laxi;s, charges and other payments in rdation to any instrument shall be paid in accordance with this Act and any other law. (4) The Minister may by Order amend the Schedule to the Ad. Page - I 9 35. Exemption fro:n customs duties. Notwithstanding the provisions of any other Act, any duties or other charges payable in respect of taking out a bontl or the importation into The Bahamas of equipment or materials peculiar to and necessary t~1r the purposes of an instrument shall be exempt from the payment provided that- (a) prior approval by the Minister responsible for finance in writing is obtained; (b) the equipment or materials so imported or for which a bond has bee n taken out, shall be used for the aforesaid purposes and for no other purpose; (c) the holder of an inslrumenl shall - (i) at all times have and retain the benefi cial ownership of the equipment or materials for which the exemption is sought; and (ii) enter into u bond for the amount of the duties, taxes or other charges payable, which shall be forfeited in the event any such exempted equipment or materials are used otherwise than for the aforesaid purposes. SECURITY 36. Security for due performance of operations . (I) On the date on which a licence, lease or petroleum agreement comes into force, the Minister shall require the holder thereof lo lotlge security with the Minister, to guarantee due performance of operations undertaken thereunder. (2) The quantum anJ form uf the security referred to in subsection ( 1) shall be subjeci Lo prior approval by the Minister it1 writing and calculale<l having regard lo the nature of operati ons to he undertaken or the total amount of the minimum sum per armum which is required for exploration work to be conducted and uny other foctors which the Minster may deem appropriate. (3) The quantum of the security referred to in subsection (2) shall be reduced a l such time, in such manner and for such sum as may be approved by the Minister in writing subject to the submission of such documents as the Minister may require. (4) Where the holder of an instrument fail s to discharge the operations under a licence, lease or petroleum agreement in respect of which security was lodged with the Minister in accordance with subsection (I), any rights to the security may be forfeited and it may he enforced by the Minister. Page - 20 DAMAGE AND COMPENSATION 37. Liability for environmental damage. The holder of an instrument shall be strictly liable for environmental damage, without regard to fuult save and except- (a) where it is demonstrated and proven to the satisfaction of the Ivlinister lhHl (he environmental damage arose from a major environmental int:ident which was caused by- (i) force majeurc; (ii) an act of terrorism; or (iii) an act of belligeren<.:y against The Bahamas; and (b) where the holder uf the instrument has undertaken all reasonable prevenlalive mc::asures to reduce and mitigate the environmental damage. 38. Precautions for environmental damage. The holder of an instrument at its own expense shall adopt all pradi<.:able precautions to avoid envirorunental damage. 39. Indemnification. The Minister and any person engaged in the administration of the Act shall not be personally liable fo r any act or omission in the exercise, discharge or purported exercise of discharge, of a power, function or duty under the /\et, which acl or omission has been exercised or discharged in good faith and without gross negligence. 40. Financial Security. ( l) On the date which an instrument comes into effect, the Minister and the holder thereof shall mutually agree upon the date and period during which the holder of an instrument shall obtain and maintain insurance or other acceptable financial security against liabil ity for- (a) personal injury; (b) damage to propc11y; (c) damage to employees; (d) damage to the environment; and (e) economic loss, arising out of petroleum operations conducted thereunder and as a result of a major enviromuental im:ident. Page - 21 (2) Subject to subsection(! ), the scope, nature and ttuantum of insurance or other financial security, shall be subject lo prior approval by the Minislcr, in ·writing and the holder of the instrument shall be able to demonstsate the validity of such security, for so long as the instrumen( is in force. (3) At all times, the holder of an instrument shall be responsible to pay compensation to any person or business, whe.re such person or business has incurred expense or su!fored economic loss or <lamage to property ,1s a result of a major environmental incident. (4) The compensation payable under subsection (3) :;hall be commensurate with the loss incurred and shall lake into account - (a) tlte geographic proximity between the claimant's activities and the contamination; (b) the degree to which the claimant is economically dependent on an affected natural resource; (c) the extent to which the claimant's business forms an integral part of economic activities in the area which is directly afiecle<l by the contamination; (d) the scope available for the claimant to mitigate their loss; and (c) the effect of any concurrent causes contributing to the claimant's loss. (5) Any person who contravenes or fails to comply with the provisions of this section commits an offence and is liable on conviction to - (a) a fine not exceeding ten million dollars; (b) imprisonment for a term not exceeding twenty years; or (c) to botl1 such fine and imprisonment, and in the case of a continuing offence, to a further fine of five thousand dollars for every day during which the offence continues. (6) Subsection (5) docs not prejudice any right that tile Minister may have to pursue a civil claim against the licensee or lessee. 41. Minister may remedy default Notwithstanding sections 36 and 40 and where in the coLJrse of operations under an instrument, the holder thereof fails to execute works required inter alia to abandon a well, decommission a facility or implement safety, health and welfare measures, the Minister shall notify the holder of the said im;(rument in writing and afford an opportunity to undetiakc and implement such wo rks and measures within a specified period of lime, failing which if it is considered expedient and in the case of an emergency, the Minister shall - (a) cause such works and measures to be executed and implemented; and Page· 22 (b) recove1 li'o111 the holder ot' the instmmenl, all costs and expenses incw-red related thereto. INFORMATION, RECORDS, hl'C. 42. Duty to furn ish information to Minister. Every holder of an instrument shall al his own expe nse prepare and furnish Lo the Minister such information and data concerning the ir operations in such manner an<l detail as the Minister muy delt:nnine from tfo1c to time. 43. Records. (1) The holder of an im;lrumenl shall keep at its registered office in The Bahamai; accurale an<l detailed records, books and accounts in such manner as determined by the Minister of -- (a) the progress and results of its operations; (b) the quantities of petroleum produced and disposed; (c) annual income and expenditure in relation lo its operations in The Bahamas; and (d) such other particulars as the Nlinister may from time to time require. (2) The Minister may, at any time, cause such records, books and account<; of the holder of an instrument to be irupected and obtain abstracts or copies thereof. (3) During the term of an instrument, the holder thereof shall forward annually a report lo Lbe Minist~r detailing the particulars specified in subsection (I) no later than the 30th day of December. 44. Annual reports. The Minister shall lay upon the table of each House of Parliament before the end of June or as soon as practicable thereafter in every year a report dealing with - (a) the progress and results of all petroleum operations; (b) tbe quantities of petroleum produced and disposed; (c) annual income and expenditure in relation to all petroleum operations in The Bahamas. Page - 23 PART IV - ANCILLARY RIGHTS 45. Application for ancillary rights. W11ere an instrument is granted and the holder thereof requires an ancillary right, an application shall -- (a) be made to the Minister in writing; and (b) be accompanied by such information as determined and verified by the Minister. 46. Evaluation of application for ancillary rights. (I) The Minister shall consider and grant an applic-ation for an ancillary right if satisfied that - (a) the. requirements of this Act are complied with in the case of the applicant; (b) it is expedient in the public interest that the ancillary righl applied for should be granted; or (c) there has been prior consultation and consent from the relevant entity or persons where applicable, having the disposition to grant an ancilhll'y righl. (2) Where it is aiieged that the arn.:illary right in question cannot be obtained by reason of any person - (a) not having the necessary po,1vcrs of disposition; (b) having unreasonably refu~ed lo granl it; (c) having demanded terms that are unreasonable; or (d) having any other arguab.le reason, the tv1inister shall communicate with such person with a view lo obtaining the ancillary right. in question by private arrangement (3) \Vhere under this Act an applicant fai ls to obtain an ancillary right, or the tv1inister is unable to make a dctennination on the grant of an ancillary right, the matter may be referred to the court. 47. Right to be heard. ( l) Any person whose interests arc or may be prejudicially affected by the granl of an ancillary right shall he entitled to be heard by himself or hy an attorney before the court. (2) The Rules Committee constituted under section 76 of the Supreme Court Ad (Ch. 53) shall make rules of court prescribin g the procedure to be followed, the forms to be used and the fees to be paid in relation to references to the com1 under section 46. Page - 24 48. Grant of ancillary right and conipensation, ( l) \\There a matter is referred to the court under secti011 46(3), lhe court in determining whether to grant an ancillary right shall take into account - (a) the effect of a grant of an ancillary right on the amenities of the locality concerned; (b) the public interest; (c) any otl1er matters the court deems fit. (2) In accordance with this Ad, the court may grant an ancillary right :rnbjei;t to such terms and rnndilions a;; and for such period of time as the court deems fit. (3) The court may impose as a i;ondition of the grant of an ancillary right and a condiLion precedent before an ancillary right can be exercised that - (a) any compensation to be paid in respect thereof; and (b) any ::;ecurity :;hall be paid to such persons as the court may determine to be entitled thereto. (4) \Vhere the person to whom any such compensation is payable cannot be found or ascertained sui;h compensation shall be paid into the court. (5) 8uch compensation shall, in every case, be assessed on !he basis of what would be fair and reasonable having regard to the conditions subjed to which the ancillary right is or is to be granted. 49. Effect of grant of ancillary rights. An ancillary right granted under this Act shall no\ - (a) confer on the person to whom it is granted any grnater or other power than if the ancillary right had been granted by a person legally entitled to grant such right; or (b) relieve the grantee of an ancillary right from any obligation or liability to which he would have been subject had lhe right been granted otherwise than provided for by this Act. 50. Restriction on granting ancillary rights. (1) No am;illary right shall be granted t!hdei· this Act unless it is shown that it is not reasonably prncticable to obtain the andllary right in question by private arrangement for any of the following reasons - (a) that the person with power to grant the ancillary right are numerous or have conflicting interests; (b) that the person with power to grant the ancillary right, or any of them, cannot be ascertained or cannot be found; !'age - 25 (c) that the person from whom the ancillary right must be obtained, or any of tliem, have nol the nec.essary powers of disposition, whether by reason of defect in title, legal disability or otherwise; or (d) that the person with power to grant the ancillary right unreasonably refuses to grant it or demands terms which, having regard to the circumstances are umeasonable. (2) For the purposes of thi.s Act, a per:=;on whose concunence is necessary for the exercise of an ancillary right shall be deemed to be a person having power to grant the ancillary right, or a person from whom the ancillary right must be obtained, as the case may be. PART V- MISCELLANEOUS 51. General penalty. Any person who contravenes any of the provisions of this Act or any regulations made thereunder commits an offence and where there is no specific penally provided, is liable on conviction - (a) to a tine not exceeding fifteen million dollars; (b) to imprisonment for a tem1 not exceeding twenty-five years; or (c) to both such fine and imprisonment; and (d) in the case of a continuing offence, to a further fine of five thousand dollars for every day during which the offence continues and (e) in the case of a second or subsequent offence, to a further fine not exceeding fifteen mi llion dollars. 52. Regulations. The Minister may make regulations for the purpose of carrying this Act into effect and for the better carrying out of the objects and purposes of this Act and, in pa1iicular, but without prejudice to the generality of the foregoing, for or with respect to - ( a) establishing the manner and fo rm in which an application for an instrument shall be made; (b) establishing the form and procedure for a grant and renewal for an instrument, including competitive hiddi11g; (c) establishing the term~ and conditions upon which an instrument may be granted renewed, surrendered and terminated; (d) regulating and prescribing standards for petroleum and petroleum products; Page - 26 (c) prescribing the fees, royaities, nml and other charges m respect of an mslrumenl or renewals thereof; (f) determining the form and quantum of security to be provided for under the Act; (g) governing the assignment or transfer of a licence, lea'ic or petroleum agreement; (h) s~cifying the tem1s and conditions relating to relinquishment; (i) establishing a base map of The Bahamas; U) requi ring petroleum produced in The Bahamas lo be refined in and or supplied to The Bahamas; (k) the responsibility of an operator in respect of health, safety and environmental protection for the cocduct of operations of a facility under the Act; (I) govemi ng the standards and opcrntion::; of a facility; (m) governing the storage, refining, trampo1t and transshipment of petroleum within The Bahamas; (n) determining the marmer in which the inspection of operations shall be conducted; (o) prescribing any other matkr or thi ng required, authorized or contemplated by this Act to be pre~cribcd or as are necessary or desirable to he prescribed for giving effect to this Act. 53. Savings. Not"'ith!.Landing section 54, any permit, licenc~ or lease which was in force under the Petroleum Act (Ch. 219) immediately before the date of commencement of lhis Act and any provisio11 of the Raid Act or of any regulations made thereunder and in force immediately before that date rcguIating the interpretation, enforct:rnent or control of any such permit, licence or l e as e shall continue in full force and effect until the expiry of such permit, Hcencc or lease according to its tenure. as if thb Act had not hccn passed. 54. Repeal. The Petroleum Acl (Ch. 219) is hereby repealed. Pag~ - 27 SCHEDULE (section 34) APPLIC1\TION FEES - - - For a Permit $10,000.00 per block For a Licence $20,000.00 per block For a Lease S20,000.00 per block - - - For the assignment of a licence, lease S20,000.00 per block or other agreement -- - · - ·-- . - For lhe tran~fer of a licence, lease or $20,000.00 per block other agreement - · For renewal of a Permit $10,000.00 per block For renewal of a Licence $20,000.00 per block For renewal of a Lease $20,000.00 per block Page - 28