Petroleum Regulations, 2016 (S.I. No. 37 of 2016)

3. The Bahamas divided into blocks......... ........... ..... ...... .. ...... .......... ................ ....... 3

4. Description of blocks.......... ....................... ...... .. ..... .................. ...... .... .... .. .. .. ...... 3

5. Blocks divided into units ......................... ........ ............ .. ..... ... ................ .... ..... .4

6. Irregular-shaped or partial blocks or units ............... ................. ... ...... .................. 4 PART II-l>ROCEDURE FOR APPLICATIO~ A.1'1D COMPETITIVE BIDDING 5

1. Ap plication for instrnmenL.. ... ...... ................... ... .................. ....... .... .. ......... ......... 5

8. Publication of grant, etc .. ................. .... ............. .. ............ .............. ... ........... ... ...... 6

9. Form of insrrument.. ... ................ .. .... ............. .. ... ............ .............................. ........ 6

10. Competitive bidding.... .. ............. ..................... ..... ....... .............. .... ......... ... ..... .... .. 6

11. Procedure on compeiitive bidding......... ........ .. ..... . .... .......... . .... ..... ..... ..... .6 PART III - GENERAL OBLIGATIONS 7 - - -- - -- -- - -- - --

12. Obligations of holders of instruments ............. ........ .............. .... ....... .......... ........ 7 13 . _1\.11efacts and relics ...... ............ ....... .. ... ...... ...... .... ........ ... .................. .................... 8 PART l V - EXPLORATION WORK PROGRA MME A~n J::Xl' EN V fl' Vllli 9 ltl. Commencement of exploration........................ ........ ......... ................................ .. .9

15. Exploration work programme and minimum expendi ture ............. ........... .. .. ..... ... 9

16. Report of actual expenditure .................... ,........... .... .. ........ .... ... .. ........... ... .... .. .. .. 9 DJSCOYERY l0

17. Discove.ry of petroleum.................................... ................ ........ ..... .............. .. ... 1O

18. Determination of commercial discovery........ .................................... .. ............... IO l'ARl' V- l'ROJHJCTTON ANO DRlLJ.l'.\'G lO

19. Production of petroleum.................. ... ...................... .... .. ......... ......... ....... ...... ..... 10

20. Well location and spacing........... ........ .. ......... .......... .. .. ......... ......... ........... . .. .. 11

21. Directional dri11ing.... ..... ......................... ............. ... _.. ........................... ............. 11

22. Abandonment and decommissioning ... .. .................. .............. ....... ......... ............ . 11 PART VI - MISCELLANEOUS 11

23. Force l\:fajeure...... .. ........... ...... ........................ ............ ......... .......... ... ................. 11

24. Repeal........ .... ........ .... .. ........ ..... ... .............. ....... ...... ........................ ...... 12 FIRST SCHEDUJ,E 13

SECOND SCHEDULE 14 MINISTRY OF THE ENVIRONMENT AND HOUSING S.I . No. 37 of 2016 PETROLEUM ACT, 2016 (NO. 2 OF 2016) PETROLEUM REGULATIONS, 2016 The .vlini ster, in exercise of the powers conferred by section 52 nf Petroleum Act (No 2 of2016), makes the following Regulations - 1. Citation. These Regulations may be cited as the Petroleum Regulations, 2016. 2. Interpretation. In these Regulations - "Act" means the Petroleum Act, 2016; "contractor" means an indh-idual or company that is contracted by the holder of an instrnment or operntor thereunder to provide a specific service or carry out an identified task over a spec ified period of time. PART I - LANDS AND SUBMARINE AREA DIVISION 3. The Bahamas divided into blocks. (1) For the purpose of these Regulations, The Rahama& is divided into bllleks as shown in Part A of the Firs/ Schedule. (2) Blocks relatillg to land areas and the number of units within such blocks shall be established by the Minister in his discretion. (3) Regulations 4 and 5 relate to blocks in submarine areas. 4. Description of blocks. (l) A hlock, the whole of which lies south of latitude 25"00', shall be bounded on the east and west sides by successive meridians of longitude of the series 75°30'. 75°40', 75°50', wh ich series may be extended as required, and on Lhe north and south sides by snaight Iines joining the points of intersection of the east and west boundaries with successive parallels of latitude of the series 2-1°40', 24°50', 25°00', which series may be extended as required. Page - 3 (2} A block, the whole of which lies north of latitude 25°00', shall be bounded on the east and west sides by successive meridians of longitude of the series 75°30', 75°40', 75°50', which series may be extended as required and ou the north and south sides by straight lines joining the points of intersection of the east and west boundaries with successive parallels of latitude of the series 25° l 0', 25°20', 25°30', which series may be extended as required. (3) Every block shall be refen-ed to by the latitude and longitude of the south- west corner of that block. (4) All latitudes and longitudes used-in these Regulations shall be n:ferred lo the l\"nrlh Arnerican Datum of 1927. (5) A block can be identified intersecting t~..-o di ffe.rent prefixed numbers to which it corresponds. (6) 1n the case of the block described in paragraph (3), every block is numbered consecntively with a prefix N in the latitude and W in the longitude. 5. Blocks divided into units. (I) Every block shall be divided into units. (2) Every unit shall be bounded on the east and west sides by meridians spaced at intervals of one-fifth of the interval between the east and west boundaries of the bloc.k. (3) Every unit shall be bounded on the north and south sides by parallels of latitude spaced at intervals of one fifth of the interval berween the north and south boundaries. (4) Every block shall contain twenty-five units. (5) Within any block, a unit shall be identified by the number to which it corresponds but in the case of a block described in regulation 4(6), as shown in Part B of the First Schedule. (6) Alternatively, every w1it shall be referred to by the latitude and longitude of the south-west comer of that unit. 6. Irregular-shaped or partial blocks or units. (l) The Minister ha\ the authority lo approve applications for partial or irregular- shaped blocks, units or parls thereof; consistent with bathymctry, international borders or other irregularities that do nor facilitate straight lines or meridian boundaries and such blocks shall not exceed the area of other blocks described in this regulation. (2) For partial or irregular-shaped blocks, unit~ or parts thereof, the unit or block may be adequately described or referred to by at least six or more bounding points of latit11de and longitude Page - 4 PART II - PROCEDURE FOR APPLICATION AND COMPETITIVE BIDDING 7. Application for instrument. ( l) Every application n>r an instrument shall - (a) he in the form set out in the Second Schedule; (b) be accompanied with the requisire kc; (c) state the name. nature of the business, the de~cripliun of the company. the registered office and principal place of bt1siness thereof and where the principal place of busine:;s is oul'side The Bahamas - (i) the name, nationality and residence of a duly authorised agent in The Bahamas; (ii) the names and nationalities of the directors thereof; and (iii) the names and shareholdings of all shareholders holding at least ten per cent of the voring shares in the company; (d) be accompanied with - (i) a statement of the capital investrnenl involved; (ii) evidence in such detail as the Minister may require as to the financial, technical competence and reputation of the applicant; (iii) a plan showing the area, blocks and boundaries of 1he land or submarine area in respect of which an application is made; (iv) where applicable, a map of the area that covers a common geological structure or series of geological structures with a common or linked oil water contact; (v) where applicable, the details of the location and stalus of all wells drilled within such location; (vi) a reference to the permanent survey markers where established; and (vii) such other particulars as the Min_ister may require. (2) \\'here an applicanr reque,~l.s an instrumem for more than one non-contiguous block or area, a separate application shall be made in respect of such block or c1rea. (3) If before the application is granted or rcfu~cd, a change occurs in respect of any of the particulars contained in the application or in any of the documents accompanying the application, such change shall forthwith be brought to tbe notice of the Minister by the applicant. (4) No fee shall be payable where an application for a permit is made solely for the purpose of research by a scicn1ific research organization subject to prior approval by the Minister in writing. Page- 5 (5) All applications received by the Minister shall be treated as confidential. 8. Publication of grant, etc. (1) The Minister shall cause the grant, assignment, transfer, renewal, surrender, or termination of any instmment to be published by notice in the Gazette stating- (a) the name of lhe holder thereof, or of the assignee or transferee; (b) the location of the area concerned where applicable; and (c) such other particulars that the Minister shall detennine. (2) The Minister shall cause a register to be instituted and mai.ntained for recording every application of grant, assignment, transfer, renewal, surrender or termination of any instrument and such register shall contain a record of any court decision, arbitration award, deed or other instrument of any kind relating to petroleum rights. 9. Form of instrument. The model form of every instrument shall be in such form as may be determined by the Minister and in accordance with the provisions of the Act. 10. Competitive bidding. (! ) 'IVhere the Minister has derennincd that any area shall be subject to competitive bidding, the Minister shall give notice to that effect in- (a) the Gazerte and in at least ooe daily tlC:Wspaper published and circulating in The Bahamas; or (b) such other manner as the Minister thinks fit. (2) A notice shall, in respect of each area declared by the :\1inister to be open for competitive bidding, specify- (a) the geographical description; (b) the types of bid required to be submitted; (c) the period during which a bid may be submitted; (d) the criteria under which a·biu is to be evaluated; and (e) any other conditions and particulars which the :.Vfinister may consider appropriate. (3) The Minister may in his discretion charge a fee for competitive bidding. 11. Procedure on competitive bidding. ( l) Subject to regulation 10, a bid shall be submitted to the Minister in the fonn and within the period provided for in the notice and comply with all other procedures and requirements set out thereunder. Page - 6 (2) Bids received by the Minister under a competitive bidding process shall be evaluared by the Minister taking into consideration - (a) compliance witb all procedures and requ irements as set out under a notice of competitive bidding; (b) the public and national interest; and (c) any other particulars as the ;\•finister may determine. (3) Subject to subsection (2), the Minister, where deemed necessary may - (a) approve a bid; (b) reject a bid; or (c) cancel a notice of competitive hidding at any time. PART Ill - GENERAL OBLIGATIONS 12. Obligations of holders of instruments. ( l) The holder of every instrument shall - (a) act with due diligence and in a prudent and safe manner; (b) act in accordance with sound petroleum industry practice; (c) take due account of the environment and the operational availability of facilities and vessels; (d) protect the health, safety and welfare of persons employed for the purpose of operations; (e) ensure that any operator, contractor or other person engaged in activity thereunder has access to sufficiem physirn\, human and fo1ancial resources to be capable of discharging his fonct ions under the Act to the satisfaction of the Minister; (f) lo the like extent restore, so far as may be possible, to their natural and original condition, any area that may have been damaged in the course of exploration and production: (g) seek prior approval from the Minister in writing with respect to the construction, route, and any related a~tivity of a pipeline for the purpose of conveying petroleum or petroleum prot.lucts; (h) prepare, in consultation wirh the Minister, programmes or industrial and technical education and training, including the grant of sd1olarships; (i) undc1take reasonable precautions to prevcnt - (i) damage to animal life and vegetation i.n the sea, artefacts and relics on the sea-bed: Pnge - 7 (ii) environmental damage and littering of the marine or coastal environment, including !he sea-bed. its subsoil, the sea, the atmosphere or onshore; (j) refrain from conducting activities - (i) which un necessarily or unreasonably impede or obstruct shipping, fishing, aviation or other related activities; (ii) which arc prohibited by lhe Government for the purpo.-e of national interest or ~~curity; (k) refrain from causing any damage or ihreat of damage to pipelines, cables or other subsea fac ilities; and (I) have regard at all times in the conduct of operations to Lhe national interest and to the rights and interests ofThe Bahamas. (2) The holder of every licence or lease shall - (a) appoin t a r~sident manager who shall be approved hy lhe Minister and at all times resident in The Bahamas; (b) have a physical presence and structure in The Bahamas with the necessary capabilities and size that enables rhe licensee or le,see at all times, to make informed decisions about its activitie~. (3) Every lessee shall establish an operating committee to supervise the management of rhc lease and the: Minister shall have the right to appoint a public officer as a non-voling member of the operating committee. 13. Artefacts and relics. (I) \Vnere the holder of an insmmtent in the wurse of activities and operations thereunder discovers artefacts. relics and such other related matter on the seabed in The Bahamas the holder thereof - (a) shall be strictly prohibited from retaining or di~pusing of such; and (b) shall notify the Minister jn writing within twenty-four hour~ thereof. (2) Subject to subsection (l), the :V1inister in con1 ultation with such enlity responsible for artefacts and relics shall Je1ermi11e the manner in which it. shall be dealt with and direct the holder of the instrwneot accordingly. Page - 8 PART IV - EXPLORATION WORK PROGRAMME AND EXPENDITURE 14. Commencement of exploration. A licensee shall commence uxploralion under a licence, no later than one year following the date on wh.ich lhe licence comes into force and where a licensee fails to comn11:nce exploration, the :\1inister may terminate the licence. 15. Exploration work programme and minimum expenditure. (I) The Minister and a licensee shall mutually agree upon an exploration work programme to be carried out ul the area under u licence. (2) Subject to prior app.roval by the Minister in writing, an exploration work programme and the minimum expenditure related thereto shall set out - (a) the work obligation to be performed by tl1e licensee: (b) the time and manner in which such work obligation shall be performed by the licensee; (c) the quantum of the minimum expendiD.tre related to the exploration work programme; and (d) any other particulars which the Minister may consider <1ppropriate. 16. Report of actual expenditure. (1) Within sixty days after the end of each twelve month period under a licence, a licc:nsee shall report to the Minister his actual expenditure in respect of lhe exploration work programme during the said period in satisfaction of the minimum expenditure, in such detail and together with - (a) financial records, accounts and audited firaancial statements related to the exploration wo.rk programme; (b) all technical data including seismic records obtained from surveys and [ht: inkrprelalion thereof; (c) data, results and any otber particu lars from other work required to be performed under the licence; and ( d) such other supporting evidence as the Minister may otherwise require. (2) A.ny sum spent in a twelve month period in respect of the exploration work programme that is in cxces~ nr lhe annual expenditure may be carried forward and sel off against the minimum expenditure of the licensee for the next succeeding twelve month period. Page - 9 DISCOVERY 17. Discovery of petroleum. \\'hem the holder of a licence discovers petroleum or petroleum bearing strata, the licensee shall forthwil.h and not later than seven days of such discovery, report the discovery to the Minister in writing. 18. Determination of commercial discovery. ( 1) Subject to regulation 17, the Minister and a licensee shall agree on the reriod within which the licensee shall appraise whether such discovery is commercial. (2) Within seven days of the expiration of the agreed period referred to in paragraph ( 1), a licensee shall submit to the Minister in writing a report which sllaJl provide- (a) information regarding the size of the petrolettm deposit; (b) results from any further exploration of the area; (c) the plans for further exploration; and (d) any other particulars which the Minister may deem appropriate. (3) \!/here the Mini~ter has approved that a discovery is commercial, the licensee shall apply to the Minister [or the grant of a lease in accordance with the Act and within such time period as the Minister shall detennine. (4) Failure by a licensee to apply for the grant of a lease wilhin the: time period detennined pursuant to paragraph (3), the Minister may terminate the licence. (5) V.-l1ere under paragraph (4), the Minister has made a decision to terminate rhe licence, the Minister may cause the grant of a new licence to be su~ject to competitive bidding. PART V - PRODUCTION AND DRILLING 19. Production of petroleum. (I ) Production of petroleum shall be conducted- (a) in accordance with prudent techn ical and sound economic principles; (b) without unreasonable delay, unless the :\1inister is satisfied that the intcnuption is justified for technical or other reasons; (c} to ensure a reasonable level of petroleum is produced; and (d) in such a manner that waste of petroleum or reservoir energy is avoided. (2) Every operator shall, where applicable - Page - 10 (a) undertake continuous evaluation of produc1ion strategy and technical solutions, and the ncces8ary measures in order to achieve same; anrl (b) rrepare a production sched ule and submit a copy thereof to the Minister in ~uch form as determined by the Minister. (3) 1\o petroleum in excess of the quantity required for the conduct of standard production opemtions shall be humed withou t prior notification lo the Minister in writing. 20. Well location and spac ing. ( l) The locaLion and spncing of a well ~hall together with any plans and relevant information in support thereof be submitted to lhe Mjnister for rrior approval in wTitiug. (2) No well shall be drilled within a distance of om: thousand feet from the boundarie~ of the aJca of the licence or lease and any such well shalI not enter the productive horizon al a lesser distance than one tbou&and foet from the vertical projections of the bounda, ies of tbe an:a of the licence or lea<;t:, without the prior approval of the :\-1inister in writing. 21 . Directional drilling. (1) In the course of drilling operations under an inslrument, no well shall be allowed 1o deviate unreasonably from the vertical directional path, wilJ1out prior approval in writing by the t-.1inistcr. (2) Deviation surveys shall be tnken at five hundred toot intervals or at bil changes, whichever is the lesser distance, during the drilling of any well. 22. Abandonment and decommissioning, fhe holder of an instrument shall not - (a) abandon a well; (b) withdraw a ccmi;nled string or other permanent form of casing; (c) dccommis,;inn a facility, without the prior approval of the Minister in writing. PART VI - MISCELLANEOUS 23. Force Majeure. (l) fior the purposes of this regulation, "force majeure'' means an event beyond lhe control of an operator and includes war, insurrection, riot or act of God. Page- 11 (2) Where an operator is prevenled from. fulfilling obligations under a licence or lease due to the occurrence of force majeure, the Minister shall be notified in writing within twenty-four hours thereof. (3) Upon receipt of notice referred to in paragraph (2), the lv1inister and the operator shall agree upon the period in which the licensee or lessee shall take steps to remedy the effects offorce majeure. (4) Paragraph (3) shall not apply if the period during which the operator was prevented from performing obligations under a li.,ence or lease exceeds the term under the licence or lease. 24. Repeal. The Petroleum Regulations (Ch. 219) arc hereby repealed. Page - 12

FIRST SCHEDULE PART A (roguh,th,n Ji 76. 00" ,~·so" 75°40" 75 '30" 75 °2()" 25'40" N4 2s•3c" · --·---··-------- - ·- I 1.s•20" N2 N2, W2 .. 1 2s•10" 2s•oo .---- \ _______ - / Nt W4 W3 \ W2 r Wl PART B \ \ / I / I / 0 .,-- 75°40" 75°38'' (regul~tlo1._,5 llLOCK N2, W2 75' 36" _)_VL'_____ 75°34" 75':l2" -- 75°30" ~ \ I I / 2s 20" \ I I 1 ----- II 0 2S l 8" G 9 10 25•16'' \ 2s0 14" 15 ;-----..- ----·-··· -.. 14 13 " - .. 12 l] I i \ ,..,, .. 16 17 18 19 20 --- 1 - - --· ......... I \ \ 2s•10" 25 24 23 22 21 I I I \ ·- -------------- I Page - 13 SECOND SCIIRDULE (regulation 7( I)(a)) FOR.'VI FOR APPLICATION FOR AN INSTRUMENT To: The Permanent Secretary, Ministry Responsible tor Petroleum INITIAL APPLICATION r ] RENEWAL [ ] (Please tick apf!licable box) Applicant applying for: (Please lick appropriate box) PER.lv1IT ( ] LICE:KCn [ J LEASE [ ] OTHER [ ] Please specify: _ _ __ __ _ __ __ (l) Name of co1npany.......................................... ,.......... .. ......... .................. ......... ....... (2) :-!atme of business .................... ............ .. .... .. ............... ....... ............ ................. . (3) Des<.:riplion of the company: .......................................................... ......................... (4) Principal place of business .................................................................................. (5) If principal place of business is outside The Bahamas, the mime, nationality and address of duly authorised agent i_n The Bahamas , . . . ••. ••. . ,, ,, ,, .,, •• , , ...••• , , , , •.••.. . .. • ••..• ••• .••.•. •• . ••.• • ••• ••..•. • .•• •• , •• , •• , , .•• .•.• • , 11 , ,, , • • , .• .• •• ,. , , • .• ..•• • (6) Names and nationality of directors: ........... ............. ................ .... , .................. .. , ..... .........., ............................................ . (7) ~ames of all shareholders holding at least ten per cent of lhe voting shares of the company: Name Amount of shareholding Pag~ · I~ (8) State whether the application is in respect of land or submarine areas: .... . ..,, ................................,,,, ............................................................................... ,. , , ..................................................................................... ............ , ................................,. (9) Description of lands 01 submarine areas etc., applied for (plan to be attached) (where applicable): , .... . .. . . ........ . . . . ... . .. . . .. . .. .... ....... ... . .. . . . , 1,,, •. , • • , •• , .. . . .. .. .... . ...... . ... . .... . .......... .. . ... .. . , • ....................... , ............................................. , .......... , ....... ,, ... .. .. ........ ........... .. .. ( l 0) Names, qualifications and experience of technical experts or advisers: .................................................................,.......... .. . ... ........................... .................. ,.. , , , ... ...................................... ,, ......................... , .................................,, ..................... , , ..... , (11) Full particulars of competencies and prev ious experience to conduct snch operations ii1 respect of which application is made: ............................................., , ........... ,,,. , , , ......, ........................................................ .... , ....... , .......... ................. ........ ....................................................................................... , , , ( 12) The smuce and snm of capital for operations under the permit, licence or lease applied for: (a) Available al present.... ........... . .... ............. ... .................. ..... ,.. ..................... .. .. (b) To be available in due course ..................................., ......,, .. ........ ..,, ............... , ... ..... , ................ ,.., ............. .............. , , .. ................................................................................................................................ . , ( 13) Full particulars of any permits, licences or leases previously held. .......... ,, ............ ................................. ,, ................................................ , ........ ,.. ,, ......... . , ( 14) In support of an applicalion, the following documents shall be attached as follows I. Certified copies of applicant's company incorpora1ion documentation; 2. Map of the land or submarine area in respect of which an application is made, with clearly definetl denrnrcntions and boundaries reflected thereon, as arc appropriate;. 3. Detailed description and scope of operations to be conducted; Page - 15 4. Financial Statements and Reports and sucl1 other related accounting information to verify financial competence; 5. Curriculum Vitae for Lechnical experts; 6. Exploration Work Programme; 7. Minimum Expenditure; 8. Any other relevant infom1ation, reports and docurne 1tation. T/V./e hereby declare that all the foregoing particulars are true and correct. Date ...................... ............ ........... .................... , Signarure(s) of applicant(s) Made this 14th day of July, 2016. Signed Kenred Dorsett Minister responsible for Petroleum Page - 16