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RPPL No.               8-37                               
(Passed as House Bill No.  8-112-8,HD2, SD2, CD1)
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PALAU

RPPL No.               8-37                             
(Passed as House Bill No.  8-112-8,HD2, SD2, CD1)

AN ACT

To enact a Petroleum Act for the Republic of Palau to govern the prospecting, exploration, exploitation, development and production of oil and gas resources, including mineral resources which are found on land, offshore within the 200 nautical mile exclusive economic zone, or on the continental shelf subject to the sovereign jurisdiction and exclusive ownership of the Republic of Palau, and for other related purposes. 

THE PEOPLE OF PALAU REPRESENTED IN THE OLBIIL ERA KELULAU DO ENACT AS FOLLOWS:

The Petroleum Act
 Chapter 1 

INTRODUCTION

Section 1. Legislative Findings. The Olbiil Era Kelulau hereby finds that, in order to carry out the authority vested in it by the Constitution, Article IX, Sec. 5(12) Ato regulate the ownership, exploration and exploitation of natural resources,@ including all mineral resources, it is imperative that the Olbiil Era Kelulau enact a comprehensive petroleum law prescribing the procedures and the manner by which its legislative power is to be exercised, executed or otherwise implemented. The Olbiil Era Kelulau further finds that it is essential to set forth, apportion, allocate and otherwise reconcile, in specific provisions of the comprehensive petroleum law, the rights and obligations of the National Government and individual State Governments constitutionally conferred upon them as follows: 

(a) the National Government AYshall have exclusive ownership and shall exercise its sovereign rights to conserve, develop, exploit, explore and manage at a sustainable manner, all living and non-living resources within its exclusive economic zone and its continental shelfY@ (Constitution, Article I, Sec. 2 (a) of the Constitution, as amended in 2008); 

(b) AEach state shall have exclusive ownership of all living and non-living resources, except highly migratory fish, within the twelve (12) nautical mile territorial sea, provided, however, that traditional fishing rights and practices shall not be impaired@ (Constitution, Article I, Sec.2(b), as amended in 2008), and 

(c) AEach state shall be entitled to revenues derived from exploration and, exploitation of all living and non-living resources, except highly migratory fish, and fines collected for violation of any law within the marine area extending from the land to twelve (12) nautical miles seaward from the traditional baselines.@ (Constitution, Article XII, Sec. 6(a)), and 

(d) AThe national government shall be entitled to all revenues derived from the exploration and exploitation of all living and non-living resources, except highly migratory fish, and fines collected for violation of any law beyond the areas owned by the state.@ (Constitution, Article XII, Sec.6(b)). 

Section 2. Intent and Purpose. The intent and purpose of this Act is to establish a comprehensive, national petroleum law, incorporating international guidelines, standards and practices in the petroleum field, that will promote the prudent development and effective regulation of petroleum operations and related activities within the Territory in fulfillment of the national government=s responsibility for AYconservation of a beautiful, healthful and resourceful natural environment; promotion of the national economy; protection of the safety and security of persons and property; promotion of the health and social welfare of the citizensY@ in accordance with Article VI of the Constitution. 

Section 3. Short Title . This Act shall be formally known and may be cited as AThe Petroleum Act of the Republic of Palau@ or simply the APetroleum Act@ 

Section 4. Application. This Act applies to all Petroleum Operations within the Territory notwithstanding any terms or conditions contained in any lease, license, agreement or other arrangements issued or entered into prior to the enactment of this Act. 

Section 5. Interpretation. All references to this Act, the Regulations and Applicable Law shall include any amendment, variation, modification or replacement as may be made to same from time to time. 

Section 6. Definitions. In this Petroleum Act, the following words or terms shall have the meanings as they are defined hereunder: 

(1) AAct@ means the Petroleum Act of the Republic of Palau, enacted by the Olbiil Era Kelulau, together with the Regulations hereunder. 

(2) AAffiliate@ means, in respect of a Person, a Person that Controls, is Controlled by, or is under the common Control of, such Person. 

(3) AApplicable Law@ means this Act, together with any act, regulation, by-law, code, rule or enactment lawfully enacted and promulgated by a Government, and any international convention or treaty to which a Government is a signatory, having application to any matter which may be incidental to a matter dealt with pursuant to this Act. 

(4) AAppraisal@ means the activities carried out following a Discovery pursuant to a License with the objective of better defining the extent of the Reservoir in order to determine commerciality, and which may include drilling appraisal wells, running depth tests, collecting geological samples and reservoir fluids, together with the acquisition, study and processing of geological and other data. 

(5) AApproved Person@ means a Person having the necessary experience, technical competence, financial resources, legal standing and other qualifications to undertake certain Petroleum Operations as reflected by an approval of such Person by the Ministry, to undertake such Petroleum Operations, whether in connection with the grant of a License, permit, or other approval required under Applicable Law. 

(6) AArms Length@ means a relationship between two or more Persons where no Person in such relationship is an Affiliate of, or exercises Control over, or otherwise shares any joint interest with any other Person in such relationship. 

(7) ABlock@ means a specified area of land or water or both land and water, within the Territory, determined in accordance with the Regulations, as delineated on the Reference Map.

(8) ABureau of Revenue, Customs and Taxation@ means the Bureau of Revenue, Customs and Taxation within the Ministry of Finance, or such successor public authority as may be designated by the National Government to perform similar functions and activities.

(9) AClosed Area@ shall have the meaning set forth in Chapter 7, Section 1. 

(10) ACode of Ethics@ means the Code of Ethics Act, RPPL No. 5-32. 

(11) ACommercial Discovery@ means a Discovery which, as determined in accordance with the Regulations and the provisions of the relevant License, can be exploited commercially in accordance with accepted practices and standards within the international petroleum industry. 

(12) AConstitution@ means the Constitution of the Republic of Palau ratified on July 9, 1980 and entered into force on January 1, 1981, amended in the 1993 and the 2008 constitutional referenda. 

(13) AControl@ means the power of a Person to secure the right to manage or operate another Person, either:

(a) by holding of the number of shares necessary for voting power, or the possession of such voting power, entitling the Person with voting power to make decisions for the Person in question; or

 (b) by virtue of the articles of association conferring such power to a Person to make decisions for another Person on behalf of the Person who actually holds the number of shares necessary for voting power or possesses such voting power.

(14) ACrude Oil@ means crude mineral oil and all hydrocarbons which are produced at the wellhead in a liquid state at atmospheric pressure or obtained from Natural Gas by condensation or extraction. 

(15) ADecommissioning@ means, in respect of a Licensed Area or part thereof, the dismantling, abandonment, transfer, removal and disposal of Facilities used in Petroleum Operations in such Licensed Area or part thereof and the remediation of the environment affected by such Petroleum Operations to the natural or pre-existing state in accordance with this Act and Applicable Law. 

(16) ADelivery Point@ means the point of measurement of Petroleum for the purposes of valuation as defined in the Development Plan or the License. For greater certainty, the Delivery Point shall be: 

(a) if Petroleum is exported, the terminal point of export; 

(b) if Petroleum is sold in the domestic market: 

I) the entry point into any refinery, gas treatment facility, natural gas liquefaction facility or similar facility; or 

 ii) the measurement point agreed between the Licensee and the Minister in respect of sales under Chapter 8. 

(17) ADevelopment@ means activities carried out in order to achieve Production pursuant to a Production License issued in respect of a Development Area, which may include:

 (I) geophysical, geological and reservoir studies and surveys;

 (ii) drilling of production and injection wells; and

 (iii) the design, construction, installation, connection and initial testing of Facilities and related activities necessary to produce and operate said wells, to take, save, treat, handle, store, transport and deliver Petroleum. 

(18) ADevelopment Plan@ means the program and cost estimate of Upstream Activities to be undertaken by a Licensee in respect of a specified area within a Production License, prepared in accordance with the Regulations. 

(19) ADevelopment Area@ means an area, and depths or formations if applicable, which encompasses one or more Commercial Discoveries, bounded by lines of latitude, longitude and, where applicable, coastline as established with reference to the Discovery Area. 

(20) ADiscovery@ means a discovery of Petroleum in a Reservoir in which Petroleum has not previously been found that is recoverable at the surface at a flow measurable by conventional petroleum industry testing methods. 

(21) ADiscovery Area@ means the area encompassing one or more Discoveries, which shall be designated by geographical co-ordinates, and by depths or geological formations if appropriate. 

(22) ADownstream Activities@ means all Petroleum Operations other than Upstream Activities. 

(23) AEnvironmental Assessment@ means the document prepared by a Licensee in accordance with Applicable Law.

(24) AEnvironmental Impact Statement@ means the document prepared by a Licensee in accordance with Applicable Law. 

(25) AExploration@ means those activities carried out within the Territory, and which include Prospecting and are intended to lead to the better knowledge of the Petroleum potential of a given area, the drilling and testing of wells that may lead to a Discovery, and the Appraisal of such Discovery. 

(26) AExploration Period@ shall have that meaning set forth in Chapter 4, Section 3. 

(27) AFacilities@ means all items, equipment, structures, buildings and infrastructure used directly or indirectly in the conduct of Petroleum Operations. 

(28) AFOB@ means Free On Board as defined by the International Chamber of Commerce, international commerce terms (INCOTERMS), and designates contracts requiring the seller to deliver goods on board a vessel at the named port of origin. The buyer is responsible for the carriage, freight, insurance and other costs and risk related to the cargo from the ship=s rail onward. 

(29) AForeign Licensee@ means a Licensee with a place of incorporation other than the Republic. 

(30) AGood Oil Field Practice@ means any practice, action, procedure, method, industry standard, specification or code of conduct which is generally applied by the international petroleum industry as good, safe, efficient and necessary in the carrying out of Petroleum Operations and may include, without limitation, any practice, procedure or specification which has been approved by internationally recognized organizations, together with the exercise of that degree of skill, diligence, prudence and foresight that reasonably would be expected from Persons subject to this Act under comparable conditions and circumstances and acting in light of known facts or facts which should reasonably have been known at the time, all as more specifically set forth in the Regulations. 

(31) AGovernment@ means the National Government or the State Government as applicable and AGovernments@ means both of them. 

(32) AInter-Governmental Committee@ shall have the meaning set forth in Chapter 3, Section 4. 

(33) ALIBOR@ means the rate per annum, rounded upwards, if necessary, to the nearest 1/10th of 1 percent, appearing as the London Interbank Offered Rate for deposits in U.S. Dollars as published in the World Interest Rates section of the Financial Times newspaper. 

(34) ALicense@ means a license issued pursuant to the Act substantially in the form of the Model Licenses contained in the Regulations. 

(35) ALicensee@ means the holder of a License. 

(36) ALicensed Area@ means an area subject to a License.

(37) ALicensing Round@ means any competitive tendering or bidding round relating to selected Blocks or specified areas within the Territory initiated by the Minister for the purpose of granting Licenses to Approved Persons. 

(38) AMarket Price@ means the price used in the valuation of Crude Oil and Natural Gas. 

(39) AMinistry@ means the entity designated by an Executive Order of the President of the Republic to administer the Petroleum Act consistent with the statutes contained herein. 

(40) AMinister@ means the individual in charge of the AMinistry@ that is designated by an Executive Order of the President of the Republic to administer the Petroleum Act consistent with the statutes contained herein. 

(41) AModel Licenses@ mean those Licenses setting forth the terms and conditions governing the performance of Petroleum Operations within the Territory, as set forth in the Regulations. 

(42) ANatural Gas@ means all hydrocarbons and inerts that, at atmospheric conditions of temperature and pressure, are in a gaseous state, including wet mineral gas, dry mineral gas, casing head gas and residue gas remaining after the extraction, separation, treatment and processing of liquid hydrocarbons from wet gas, but not Crude Oil. 

(43) ANational Government@ means the government of the Republic of Palau, acting through its appropriate representatives, officials or ministers, in accordance with, and pursuant to, the Constitution. 

(44) AOperator@ means, in respect of:

 (I) a Study License, an Exploration License or a Production License where the Licensee is comprised of more than one Person, the Person designated to carry out some or all of the Petroleum Operations in the Licensed Area; and

 (ii) any other business license, permit or authorization, the license holder. 

(45) APerson@ includes any individual, corporation, partnership, joint venture or other commercial entity. 

(46) APetroleum@ means Crude Oil and Natural Gas and any other naturally occurring hydrocarbon or mixture of such hydrocarbons, whether in a gaseous, liquid or solid state, together with other substances produced in association with such hydrocarbons. 

(47) APetroleum Operations@ means all activities and operations relating to:

 (I) the Exploration, Development, Production, processing, refining, transportation, storage, sale, marketing and disposal of Petroleum; and

 (ii) the construction, installation, operation, and Decommissioning of Facilities. 

(48) AProduction@ means the activities involved in the extraction of Petroleum including without limitation, planning, scheduling, controlling, measuring, testing, gathering, treatment, field separation, transportation, storing and dispatching of Petroleum from a Reservoir to the Delivery Point. 

(49) AProfitability Index@ means, for each License, either:

 (I) the ratio of cumulative after tax receipts to cumulative capital expenditure and operating costs; or

 (ii) the target rate of return on Licensee=s investment in a Development Area; or 

(iii) such other criteria as may be provided for in the Regulations. 

(50) AProspecting@ means those operations carried out within the Territory, through the use of geological, geochemical or geophysical methods, as well as the processing, analysis and interpretation of data so acquired, and regional studies and mapping, or other activities with a view to locating Petroleum deposits, including the obtaining of piston core samples but explicitly excluding any other form of drilling or coring. 

(51) APetroleum Register@ shall have that meaning set forth in Chapter 3, Section 5. 

(52) APublic Official@ means an Employee, Former Employee or Public Official, as defined pursuant to the Code of Ethics Act, RPPL No. 5‑32. 

(53) AReference Map@ means that map of the Territory, prepared in accordance with the Regulations, and which shall:

 (I) be divided into Blocks according to a grid system conforming to the Regulations and accepted international standards and norms of graticulation;

 (ii) identify all areas subject to a License together with a description of the type, date, and holder of such License;

 (iii) identify all areas which are not subject to a License; and

 (iv) set forth any other information required pursuant to the Regulations. 

(54) ARegulations@ shall mean those rules, guidelines, policies and codes by the Ministry or any other competent authority regarding the administration, management, environmental, health and safety, and oversight of Petroleum Operations, as provided for by Applicable Law. 

(55) ARepublic@ means the Republic of Palau. 

(56) AReservoir@ means a porous and permeable underground formation containing an individual and separate natural accumulation of producible Petroleum that is confined by impermeable rock and/or water barriers and is characterized by a single natural pressure system. 

(57) ARoyalty@ means a Crude Oil Royalty, or a Natural Gas Royalty, or both of them, as determined pursuant to Chapter 8, Section 5. 

(58) AState Government@ means the government of each State of the Republic, acting through its appropriate representatives, officials or ministers, in accordance with, and pursuant to, the Constitution. 

(59) ASub‑Contractor@ means such contractors and consultants as Licensee may engage to conduct Petroleum Operations pursuant to a License; provided, however, that at all times Licensee shall provide appropriate oversight, direction and supervision of such Sub‑Contractors in accordance with Good Oil Field Practices and shall remain liable for the actions and inaction of Sub‑Contractors in accordance with this Act, the Regulations and Applicable Law. 

(60) ATaxable Person@ means a Person that carries out Petroleum Operations or any other activities subject to this Act. 

(61) ATaxable Profits@ means the profits derived from Petroleum Operations, less all deductions permitted pursuant to this Act, a License, or any Applicable Law. 

(62) ATerritory@ means all terrestrial and oceanic areas over which the Republic of Palau has sovereignty and jurisdiction which AYconsist of all the islands, atolls, reefs, and shoals that have traditionally been in the Palauan archipelago, including Ngeruangel Reef and Kayangel Island in the north and Hatohobei Island (Tobi Island) and Hochaihie (Helen=s Reef) in the south and all land areas adjacent and in between, and also consist of the internal waters and archipelagic waters within these land areas, the territorial waters around these land areas and the airspace above these land and water areas extending to a two hundred (200) nautical miles exclusive economic zone, unless otherwise delimited by bilateral agreements or as may be limited or extended under international law.@ (Constitution, Article I(1)(a)), and shall include the Republic of Palau=s continental shelf areas as determined by the United Nations Commission on the Limits of Continental Shelf (UNCLOS) as set forth in Article I, Sec. 1 (a) and Article I, Sec. 2 (a) of the Constitution and any modification thereof. 

(63) AUpstream Activities@ means all activities and operations relating to:

 (a) the Exploration, Development, Production, field separation, transportation, storage, sale or disposal of Petroleum, excluding any transportation or other operations beyond the point of export, or in the case of Petroleum which is processed within the Republic, beyond the entry point into any refinery, gas treatment facility, natural gas liquefaction facility or similar facility;

 (b) the construction or installation or operation of Facilities directly related to these activities; and

 (c) the Decommissioning of any Facilities directly related to these activities.

 Chapter 2 
TITLE TO PETROLEUM 

Section 1. National Government Rights. In accordance with, and pursuant to, the Constitution: 

(1) the Olbiil Era Kelulau shall regulate the ownership, Exploration and Production of natural resources together with matters regarding navigation, shipping and the use of navigable waters, within the Territory; and 

(2) all title, right, interest and sovereign ownership in and to Petroleum which is beyond the twelve (12) mile limit of the territorial seas of each State but within the Territory, shall vest with the National Government, together with all revenues derived therefrom. 

Section 2. State Government Rights. In accordance with, and pursuant to, the Constitution, all title, right, exclusive interest and sovereign ownership in and to petroleum on and under land territory and internal waters within a State and within the twelve (12) mile limit of the territorial seas of each state, shall vest with such state=s government; provided, however, that traditional fishing rights and practices shall not be impaired. 

Section 3. Prohibitions. No Person shall: 

(a) conduct Petroleum Operations within the Territory except in accordance with this Act; or 

(b) acquire title to Petroleum unless it has been lawfully recovered pursuant to a License issued in accordance with this Act [sic]

and any action or activities to the contrary shall be punishable pursuant to Chapter 9 and Applicable Law. 

Section 4. Petroleum Operations by the National Government. The Minister, or such other public authority or publicly owned corporation, or similar entity as may be designated or established by the National Government, may conduct Petroleum Operations within the Territory, subject to those State Government=s rights set forth under Chapter 2, Section 2. 

Section 5. Paramountcy. [Comment by COMMENT (COMMENT): This provision has no legal meaning, as it is inherently true that this law trumps any regulations or any previously passed laws.]
(1) In the event of any conflict or inconsistency between this Act and the Regulations, this Act shall prevail.

(2) In the event of any conflict or inconsistency between this Act together with the Regulations, and any terms or conditions contained in a License, this Act together with the Regulations shall prevail. 

(3) In the event of any conflict or inconsistency between this Act and provisions of any Applicable Law, unless specifically provided to the contrary in the Applicable Law, this Act shall prevail. 

Chapter 3 
ADMINISTRATION 

Section 1. National Government. The National Government is hereby empowered to perform, and shall be responsible for, the oversight, supervision, coordination and administration of the following activities: 

(1) establishing the Inter‑Governmental Committee in accordance with Chapter 3, Section 4; 

(2) in consultation with the Environmental Quality Protection Board, declaring, classifying or declassifying an area within the Territory as Closed Area pursuant to Chapter 7, Section 1; and 

(3) exercising all other powers and functions assigned to the National Government under this Act. 

Section 2. State Governments. Each State Government is hereby empowered to perform, and shall be responsible for, the oversight, supervision, coordination and administration of the following activities: 

(1) in consultation with the Environmental Quality Protection Board, declaring, classifying or declassifying an area as Closed Area pursuant to Chapter 7, Section 1; and 

(2) exercising such other or additional powers and functions as may be necessary to give effect to the objectives of this Act within the jurisdiction of such State. 

Section 3. The Ministry: Functions, Duties, Powers and Responsibilities. 
(1) The Ministry, acting through the Minister, is hereby empowered to perform, and shall be responsible for, the oversight, supervision, coordination and administration of the following activities: 

(a) administering this Act; 

(b) monitoring Petroleum Operations within the Territory; 

(c) formulating and implementing policies relating to Petroleum and its development within the Territory, including policies for the promotion of private investment in Petroleum Operations; 

(d) developing, formulating, issuing and enforcing the Regulations; 

(e) supervising any public agencies and publicly‑owned corporations which regulate or carry out Petroleum Operations; 

(f) chairing the Inter‑Governmental Committee established in accordance with Chapter 3, Section 4; 

(g) overseeing Licensing Rounds and License tender procedures; 

(h) subject to the approval process described in Chapter 4, Sections 3, 4 and 5, issuing Licenses; 

(I) administering, enforcing and terminating Licenses as provided for in this Act; 

(j) approving the assignment of Licenses, with the prior approval of the Inter‑Governmental Committee; 

(k) receiving monthly reports from the Bureau of Revenue, Customs and Taxation regarding all rental fees and royalties collected by such Bureau pursuant to this Act; 

(l) dividing the Territory into Blocks in accordance with the Regulations; and 

(m) exercising such other or additional powers and functions as may be necessary to give effect to the objectives of this Act. 

(2) The Minister shall: 

(a) organize the Ministry, and appoint such administrative and technical staff and advisors as may be determined to be necessary, in a manner consistent with internationally accepted petroleum industry standards and on the basis of appropriate qualifications, capability and experience; 

(b) develop, formulate and issue the Model Licenses; 

(c) develop, formulate and issue tender procedures and bidding terms in respect of Licensing Rounds; 

(d) subject to the approval process described in Chapter 4, Sections 3, 4 and 5, negotiate Licenses; and 

(e) have the power to delegate to any Public Official, agency, advisor or consultancy, any of the functions assigned to him under this Act. 

Section 4. The Inter‑Governmental Committee: Duties, Powers and Membership. 
(1) There is hereby established a committee to be known as the AInter‑Governmental Committee@ responsible for the oversight, supervision, coordination and administration of the following activities: 

(a) reviewing and approving the terms and conditions of the Model Licenses, all bid documents to be issued by the Minister in connection with a Licensing Round, the terms of bidding, and the bid analysis criteria; 

(b) receiving, reviewing and evaluating all bids and applications made for all Exploration Licenses and all Production Licenses as applicable; 

(c) selecting all successful bids made for all Exploration Licenses and all Production Licenses; 

(d) rejecting all unsuccessful bids and applications made for all Exploration Licenses and all Production Licenses; 

(e) approving the terms and conditions of all Exploration Licenses and all Production Licenses; 

(f) approving or rejecting all applications for the assignment, or transfer of Licenses; and 

(g) providing advice and recommendations regarding matters relating to Petroleum Operations and this Act, when requested to do so by the Minister. 

(2) The Inter‑Governmental Committee shall consist of the following voting members: 

(a) for matters relating to a Licensed Area or proposed Licensed Area located beyond the contiguous zone extending 24 nautical miles from the baseline, and without prejudice to its ownership rights under Chapter 2, Section 1: 

(I) the Minister of Public Infrastructure, Mineral Resources[sic], Industries, and Commerce; 

(ii) the Minister of Finance; 

(iii) the Attorney General; 

(iv) the Minister of Natural Resources, Environment and Tourism; and

(v) the Minister of Health; 

(b) for matters related to a Licensed Area or proposed Licensed Area located in the territory of a State and in the contiguous zone up to 24 nautical miles from the baseline, and without prejudice to its ownership rights under Chapter 2, Section 2: 

(I) the Minister of Public Infrastructure, Mineral Resources[sic], Industries, and Commerce; 

(ii) the Minister of Finance; 

(iii) the Attorney General; 

(iv) the Governor of such State; and 

(v) the Speaker of the State Legislature of such State. 

(c) with respect to all matters set forth in Chapter 3, Section 4(2)(a) and (b), as non‑voting observers only: 

(I) the Chairperson of the Chamber of Commerce; and 

(ii) the Chairperson of the Palau Conservation Society. 

(3) In the event that any member of the Inter‑Governmental Committee is unavailable for any proceeding under this Section 4, such member shall appoint an alternate in writing. 

(4) In the evaluation of all bids received and Licenses to be issued, the Committee shall conduct such evaluations fairly, impartially and without discrimination, and select that bid which provides the greatest benefits to the Republic and the State within which the proposed Licensed Area is situated, on the basis of criteria set forth with respect to the relevant Licensing Round, which shall take into consideration the technical and financial capabilities of the bidders, the proposed work plan contained within the bids, the adequacy of environmental policies proposed by the bidders, and other socio‑economic advantages for the Republic and the residents of such State. 

 (5) All decisions of the Inter‑Governmental Committee shall be made in accordance with the Regulations governing its deliberations and shall require an affirmative vote of not less than: three‑fourths (3/4) or seventy‑five percent (75%) of those entitled to vote, with all such votes to be issued in writing. 

(6) Every vote cast by those committee members designated pursuant to Chapter 3, Section 4(2)(b) (iv) and (v), must first be authorized in accordance with the provisions of the relevant constitution for the State within which the proposed License is situated. 

(7) No Person may serve as a member of the Inter‑Governmental Committee if such Person is, whether as owner, shareholder, director, officer, partner or otherwise, engaged in the business of producing, selling, buying, transmitting, exporting, importing or otherwise dealing in Petroleum or conducting Petroleum Operations within the Territory or holds any interest, share, stock, bond, debenture or other security of a Person engaged in any such business. 

(8) The Inter‑Governmental Committee may engage the services of such financial, technical, legal or other advisors as may be determined necessary in order to discharge its obligations. 

Section 5. The Petroleum Register. 
(1) The Ministry shall establish and maintain a Petroleum Register in the office of the Ministry or in such other location as may be determined by the Minister, which shall contain the following: 

(a) the Reference Map; 

(b) a listing of all Licenses issued in accordance with this Act describing:

 (I) the Licensed Area;

 (ii) the type of License;

 (iii) the holders of the License; (iv) the date of issue and expiration of the License; and

 (v) any other information required pursuant to the Regulations. 

(c) copies of all Licenses issued in accordance with this Act, together with all instruments of approval, extension, renewal, termination or expiration; and 

(d) copies of this Act, the Regulations, and any ministerial orders or policies issued pursuant to this Act. 

(2) Except as may be restricted pursuant to Applicable Law, all records maintained within the Petroleum Register shall be available to the public for inspection on those days and during those hours set forth in the Regulations and copies of all such records may be obtained by the public upon payment of the prescribed fee set forth in the Regulations. 

(3) Registration of any License, document, record or other instrument in the Petroleum Register shall not cure any defect in such License, document, record or instrument or confer upon it any validity which it would not otherwise have. 

Section 6. The Petroleum Data Base. 
(1) Every License shall require the Licensee to submit to the Ministry, within the time periods set forth in the Regulations, all data set forth in Chapter 3, Section 6(2). 

(2) The Ministry shall establish and maintain a Petroleum Data Base which shall contain the following data: 

(a) all original geophysical and geological data, information and reports obtained pursuant to any License or otherwise developed during the course of Petroleum Operations, whether processed, unprocessed, interpreted or uninterpreted and regardless of the form or medium in which such data is recorded; 

(b) all well data obtained pursuant to any License or otherwise developed during the course of Petroleum Operations, including well position, well name and well type, together with all log data, core data and geochemical data; and 

(c) copies of all production reports, and any other record or material required to be filed by Applicable Law. 

(3) All data contained within the Petroleum Data Base shall: 

(a) be the exclusive property of the National Government; provided, however, that every State Government shall have the right to obtain, without charge, a copy of all data regarding the land territory and internal waters of such State as determined by State Government Rights pursuant to Chapter 2, Section 2; 

(b) be maintained in the office of the Ministry or in such other location as may be determined by the Ministry; and 

(c) be subject to conditions governing confidentiality, disclosure, reproduction and use as set forth in the Regulations.

Chapter 4 
LICENSES 

Section 1. General Provisions. 
(1) The following Licenses, which shall be substantially in the form of the Model Licenses set forth in the Regulations, may be issued in accordance with this Act: 

(a) a Study License; 

(b) an Exploration License; and 

(c) a Production License. 

(2) The Minister may establish such further Licenses governing Petroleum Operations as may be determined to be necessary to give effect to the objectives of this Act. 

Section 2. Study License. 
(1) The Minister may issue a Study License to an Approved Person for a term of not more than two years, which shall provide the Licensee with an non‑exclusive right to perform Prospecting activities within the Licensed Area, on terms set forth in the Regulations. 

(2) Subject to the restrictions set forth in Chapter 7, a Study License may be granted over any part of the Territory which is not covered by an Exploration License or a Production License. 

(3) A Study License shall not: 

(a) entitle the Licensee to conduct any Petroleum Operations governed by an Exploration License or a Production License, except Prospecting; or 

(b) provide the Licensee with any preferential right or entitlement to obtain any other License. 

Section 3. Exploration License. 
(1) The Minister may, whether following an award by public tender through a Licensing Round or otherwise in accordance with the Regulations and upon the approval of the Inter‑Governmental Committee, issue an Exploration License to an Approved Person for a term of not more than ten years, unless extended by the Minister in his sole discretion, such an Exploration License shall provide the Licensee with the exclusive right to perform Exploration operations within the Licensed Area, on terms set forth in the Regulations. 

(2) Subject to the restrictions set forth in Chapter 7, an Exploration License may be granted over any part of the Territory which is not governed by a Production License. 

(3) Every Exploration License shall: 

(a) be divided into no more than three Exploration Periods. The duration of each Exploration Period shall be specified in the relevant License, and if such License is offered pursuant to a Licensing Round, in the relevant tender document; 

(b) provide for the relinquishment of specified areas at the end of each Exploration Period as set forth in the Regulations; 

(c) permit for the extension of the final Exploration Period, for the purposes of the Appraisal of a Discovery and limited to the Discovery Area, in accordance with the Regulations; and 

(d) set forth the process for the Appraisal of a Discovery and delineation of the Discovery Area in accordance with the Regulations. 

(4) In the event that a Commercial Discovery is made during the term of the Exploration License, upon the application of the Licensee and without the necessity of the approval of the Inter‑Governmental Committee, the Minister shall issue a Production License with respect to the Development Area; provided however, that: 

(a) the Licensee is not in breach of any of the terms and conditions of the Exploration License; and 

(b) the Production License so issued shall be conditional upon the Licensee diligently preparing and submitting to the Ministry a Development Plan, including an Environmental Assessment and an Environmental Impact Statement, within two years from the date of the issuance of the Production License. 

(5) For greater certainty, in the event that the Licensee fails to submit a Development Plan within the term set forth in Chapter 4 Section 3(4)(b), or such Development Plan does not meet the requirement for approval set forth in the Regulations, the Production License issued by the Ministry shall be deemed invalid. 

Section 4. Production License. 
(1) The Minister may, subject to the approval of the Inter‑Governmental Committee as set forth in Article 3, Section 4, issue a Production License to an Approved Person, for the term set forth herein, which shall provide the Licensee with the exclusive right to produce Petroleum from within the Licensed Area, on terms set forth in the Regulations and, if the Production License is issued pursuant to Chapter 4, Section 3, in the relevant Exploration License. 

(2) Subject to the restrictions set forth in Chapter 7, a Production License may only be granted over a Development Area. 

(3) A Production License shall be for a term of: 

(a) in the case of Crude Oil, not more than twenty‑five years, unless extended by the Minister in his sole discretion, and 

(b) in the case of Natural Gas, not more than thirty years, unless extended by the Minister in his sole discretion. 

Section 5. Licensing Procedures. 
(1) A License may only be granted in accordance with the procedures set forth in the Regulations. 

(2) The Regulations shall set forth: 

(a) the procedures governing unsolicited applications; 

(b) the procedures governing Licensing Rounds; 

(c) the criteria upon which the Minister shall evaluate Study License applications; 

(d) the criteria upon which the Inter‑Governmental Committee shall evaluate Exploration License applications and Production License applications; 

(e) the fees payable for all License applications; and 

(f) any other matters regarding the procedures for the issuance of Licenses which the Minister deems appropriate. 

(3) The decision to invite bids for License applications in respect of a Block or series of Blocks shall take the form of an order of the Minister that shall stipulate the Licensing Round procedure, including the fees payable by the bidders for the acceptance and processing of their applications, and the criteria for award, all as set forth in the Regulations. 

Section 6. Approved Persons. 
(1) A License may only be granted to an Approved Person or a group of Approved Persons. An individual, group of individuals, trust or partnership of individuals shall not be an Approved Person. 

(2) In determining whether a Person qualifies, and remains qualified, as an Approved Person, the Minister shall have the right to require the submission of evidence demonstrating the expertise and technical and economic capability of such Person. 

(3) An Approved Person, and every Person within a group of Approved Persons, mustbe and shall remain in good legal and financial standing, and shall provide evidence of its ability to contribute, whether on its own behalf or pursuant to a financial guarantee or performance guarantee from an Affiliate, the funds, assets, machinery, equipment, tools and technical expertise necessary for the effective performance of the terms and conditions of the proposed License or of Petroleum Operations. 

(4) Every Foreign Licensee that is granted an Exploration License, or acquires an interest in such License, shall be required to establish and maintain a representative office within the Republic or appoint and maintain an agent resident within the Republic having authority to receive on behalf of such Person notices and other communications provided in said License. Every Foreign Licensee that is granted a Production License shall be required to establish and maintain a branch office, or incorporate a company, within the Republic. 

Section 7. Geological and Geophysical Data Services Agreement. 
(1) The Minister may, in order to improve the knowledge of the geological potential of areas that may be included in Licensing Rounds, enter into a Geological and Geophysical Data Services Agreement with a contractor, which shall provide the contracting party with the exclusive right to conduct, at its sole risk and expense, geophysical and geological surveys within the area subject to the agreement, and to license the data obtained to Persons upon payment of such fee as may be determined by the contractor: 

(2) Every Geological and Geophysical Data Services Agreement shall provide: 

(a) that all rights, titles and ownership of the data obtained pursuant such agreement shall be deemed the property of the National Government or State Government or both of them as applicable; 

(b) that such agreement does not provide the contractor with any preferential right or entitlement to obtain any License; 

(c) that the applicable Government shall have the right to use the data for internal purposes only, and shall undertake not to disclose or transfer the data to thirdparties for the duration of the agreement, except as may be required by such Government in order to facilitate such studies, analysis, evaluations and reporting as may be reasonably required; and 

(d) the terms for sharing of the proceeds of licensing of the data between the contractor and the Government. 

(3) A Geological and Geophysical Data Services Agreement may only be entered into with geophysical company specialized in the acquisition, processing, and interpretation of geological and geophysical data. 

Chapter 5 
LICENSE TERMS 
Section 1. Standards. Every Licensee shall carry out all Petroleum Operations in a proper, efficient and workmanlike manner in accordance with Good Oil Field Practice. 

Section 2. Obligations of General Application. Every Licensee shall comply with the following obligations which shall be obligations of general application, as more particularly set forth in the Regulations: 

(a) to adopt all practicable measures to protect the environment in order to preserve the same, namely in respect to health, water, soil and subsoil, air, the preservation of bio-diversity, flora, fauna, ecosystems, landscape, and cultural, historical and archaeological heritage; 

(b) where applicable, to prepare an Environmental Assessment and Environment Impact Statement in accordance with Applicable Law; 

(c) to promptly remedy any damage or loss caused to the environment; 

(d) to ensure the safety, health and welfare of individuals engaged in Petroleum Operations and the public; 

(e) report any serious or fatal accidents that occur, or any imminent hazard that arises, by the most rapid means of communication, both to the Minister and to the administrative authorities under whose jurisdiction the accident or hazard occurs or arises; and 

(f) to furnish to the Minister copies of all policies, procedures and standards required by Applicable Law; 

(g) to maintain, and furnish to the Minister periodic reports, records, returns, samples and data concerning the activities governed by such License; 

(h) to fulfill all obligations under any work program and budget submitted with such License application or as may be set forth in such License; 

(I) to keep current financial and cost accounting records of Petroleum Operations, in accordance with normal accounting practices in the international petroleum industry and Applicable Law; 

(j) to permit the Minister or his authorized representatives reasonable inspection and audit rights over all Petroleum Operations; 

(k) to indemnify the National Government and State Governments and their representatives and agents against all and any claims made by third parties in respect of any injury, damage or loss caused by an act or omission of the Licensee, its Sub‑Contractors or its agents, employees or representatives in the course of the conduct of Petroleum Operations; and further, to the extent applicable: 

(l) to give preference to goods and services from within the Republic, if, in terms of quantity, quality and availability, such goods and services are offered on terms equal to those applicable to the imported goods and services, and if their prices are within such margin of competitiveness with the price of the imported goods or services; 

(m) to ensure that all equipment, materials, supplies and installations comply with generally accepted best standards in such industry and are of proper construction and kept in good working order; 

(n) to prevent the loss, escape or waste of Petroleum, drilling fluids, water, and other products or substances used in or derived from Petroleum Operations; and 

(o) to prevent damage to all Petroleum bearing strata whether within, or outside of, a Licensed Area. 

Section 3. Additional Obligations Under Exploration Licenses. In addition to the obligations set forth in Chapter 5, Section 2, every Licensee under an Exploration License shall also comply with the following additional obligations as more particularly set forth in the Regulations: 

(a) to present annually to the Minister a report detailing the work program and budget for Petroleum Operations to be conducted in the following year, and indicative work programs and budgets for the two subsequent years; 

(b) to report immediately to the Minister any Discovery, and supply a sample thereof to the Minister within a reasonable time after the date of such Discovery; 

(c) in case of a Discovery, to delineate the Discovery Area, carry out Appraisal, and where applicable, develop the Discovery and commence Production with due diligence upon the approval of the Development Plan and the issuance of the Production License; 

(d) to employ and train qualified nationals of the Republic, including administrative and executive management positions in accordance with training programs approved by the Minister and to gradually replace its expatriate staff with qualified nationals of the Republic as they become available; 

(e) to furnish such sureties, financial guarantees, bonds or other instruments to secure Decommissioning and performance obligations as may be required by the License and the Regulations; and 

(f) upon termination of the Exploration License to promptly perform such Decommissioning operations within the Licensed Area as may be required pursuant to Applicable Law. 

Section 4. Additional Obligations Under Production Licenses. In addition to theobligations set forth in Chapter 5, Sections 1 and 2, every Licensee under a Production License shall also comply with the following additional obligations, as more particularly set forth in the Regulations: 

(a) to produce Petroleum at the maximum efficient rate compatible with the nature and extent of the Reservoir, and with due regard for the environment; 

 (b) to furnish such additional sureties, financial guarantees, bonds or other instruments to secure Decommissioning and performance obligations as may be required by Applicable Law; and 

(c) upon termination of the Production License to promptly perform such Decommissioning operations within the Licensed Area as may be required pursuant to Applicable Law. 

Section 5. Unitization Obligations. 
(1) If a Reservoir is discovered to lie within two or more Licensed Areas the Minister may, by written notice to the Licensees of such Licensed Areas, order the Licensees to enter into a unitization agreement for the purpose of securing effective and optimized production of Petroleum from the Reservoir and if no unitization agreement has been reached by all parties within six months from delivery of such written notice the Minister: 

(a) shall decide the terms and conditions of unitization in accordance with the Regulations; and 

(b) may suspend, modify or cancel some or all of the rights of the Licensees until the terms and conditions of unitization are complied with. 

(2) If a Reservoir is discovered to lie partly within a Licensed Area and partly within an area not subject to any License the Minister may, by written notice, notify the Licensee, impose such terms and conditions on the Licensee as may be appropriate so as to ensure the effective and optimized production of Petroleum from the Reservoir.

Section 6. Stabilization. 
(1) In the event that after the issuance of a License: (a) an amendment is made to this Act, a Regulation, any Applicable Law, or the Model Licenses; or (b) a new Regulation or Applicable Law is enacted; which results in a material adverse change to the economic value derived from the Petroleum Operations by the Licensee, the Inter‑Governmental Committee shall, upon receipt of written notice from the Licensee, commence negotiations with the Licensee and reach agreement on such revisions or modifications to the terms of such License to ensure that the Licensee enjoys the same economic benefit as would have been derived, if such amendment, new Regulation or Applicable Law had not been made. 

(2) In the event the parties cannot reach an agreement within 180 days of the date of the written notice set forth above, either party may commence arbitration proceedings pursuant to Chapter 5, Section 7, and the Arbitrator shall be empowered to determine whether a material adverse change to the economic value derived from the Petroleum Operations of the Licensee has occurred, and the remedies, including modifications to the License, necessary to protect the Licensee against such changes. 

(3) Notwithstanding the foregoing, no relief shall be available pursuant to Chapter 5 Section 6(2) if the amendment or new Regulation or Applicable Law relates to: 

(a) matters regarding health, and safety; or 

(b) matters regarding the protection or preservation of the environment; or 

(c) matters regarding the preservation of matters of cultural heritage. 

Section 7. Disputes Resolution. 
(1) In the event of any disagreement between Governments, whether National or State, with respect to the location or extent of any boundaries, borders or territories within the Territory, all monies, funds and revenues arising from Petroleum Operations within such disputed areas shall be deposited into an escrow account, to be maintained by the Minister of Finance for the benefit of the claimants, until the resolution of the disagreement in accordance with the provisions of this Section. 

(2) If a dispute arises between a Licensee and a Government, relating to the interpretation or implementation of the terms of this Act or a License, the parties shall first attempt to resolve that dispute by means of negotiation. If such a dispute cannot be resolved by negotiation, it shall be submitted to arbitration in accordance with this Chapter. 

(3) Any arbitration between a Licensee and a Government shall be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce, with proceedings to be convened in Singapore. 

(4) The Regulations shall: 

(a) provide that any award resulting from such arbitration shall be final and enforceable both in the Republic and in the jurisdiction of the Licensee upon application of any party to such arbitration to the appropriate courts; 

(b) provide that the Attorney General of the Republic, or such other official as may be appropriate, shall represent the Republic in any arbitral proceedings where the Republic is a party; 

(c) provide that the Attorney General of the Republic, or such other official as may be appropriate, shall represent any State or States in an arbitral proceedings where a State or States are a party; and 

(d) provide that the obligations of the Parties under the License shall continue pending the resolution of any matter submitted to arbitration. 

Section 8. Amendments and Waivers. 
(1) No amendment, modification, supplement, addition or revision may be made to any License unless done in writing and duly executed by the Minister and any amendment to a License shall be published in accordance with the provisions of this Act. 

(2) No failure by the Minister, or a Government to enforce any right or institute any proceedings, and no delay in the exercise of any right or any proceedings under this Act or the Regulations in connection herewith shall operate as a waiver thereof nor shall any single or partial exercise of any such right or remedy prevent or preclude any further or other exercise thereof by such participant of that or any other such right or remedy. 

Section 9. Transfers, Assignments, Change of Control, Surrender and Termination. 
(1) No transfer, assignment, encumbrance, sale, disposition or disposal of any License or interest, right or obligation arising pursuant to such License shall be valid without the prior written consent of the Minister, and any merger, whether by acquisition or exchange of shares, or other change of Control, including a change of Control in a parent corporation, shall be treated as a transfer for the purposes of this Chapter. Prior to granting or refusing such consent, the Minister shall have the right to require the submission of evidence demonstrating the technical and financial capability of the proposed transferee, assignee, encumbrance holder, purchaser or party acquiring Control, on such terms and conditions as may be appropriate.

(2) A Licensee may surrender a License, or any interest thereunder, at any time, upon written notice to the Minister, provided that all obligations thereunder, including arrangements regarding Decommissioning obligations satisfactory to the Minister, have been discharged. 

(3) In the event that a Licensee: 

(a) fails to comply with the provisions of this Act; 

(b) fails to comply with the terms and conditions under such License; 

(c) is Controlled directly or indirectly by a Public Official; 

(d) is Controlled directly or indirectly by a former Public Official who has held such position within the previous two years; or 

(e) obtained such License contrary to the provisions of Chapter 12; then the Minister, upon consultation with the Inter‑Governmental Committee in accordance with the provisions of Chapter 3, Section 3 and 4, may, upon written notice, terminate the License. 

Section 10. Ownership and Confidentiality of Data. 
(1) All geological, geophysical, production and engineering data, and reports and samples collected or compiled by a Licensee in the course of Petroleum Operations shall be deemed property of the National and State Governments, and shall be submitted to the Petroleum Data Base in accordance with the terms of the Regulations. 

(2) Every Licensee shall have the right to use copies of any data submitted pursuant to Chapter 5 in accordance with the terms of the Regulations. 

(3) The confidentiality and permitted disclosure of such data by Licensee shall be in accordance with the Regulations. 

Chapter 6 
FACILITIES 
Section 1. General Provisions. No Person shall construct, own or operate Facilities except pursuant to a License or other authorization issued by the Minister in accordance with this Actor [sic]any Applicable Law. The Regulations shall provide: 

(1) the terms and conditions under which Facilities may be constructed, owned or operated including the design and safety requirements of same; and 

(2) that any Licensee shall have the right to access any uncommitted capacity in specified Facilities used in the pipeline transportation and storage of Petroleum, upon entering into an agreement with the owner of such Facility. 

Section 2. Third Party Access. 
(1) Upon receipt of a written application from a third party requesting access to a Facility referred to in this Chapter 6, Section 1(2), the Minister may grant third party access if, upon due inquiry, the Ministry is satisfied that: 

(a) the granting of such access is reasonable and meets the objectives of the Act; 

(b) the granting of such access will not have an adverse effect on the Facility owner; and 

(c) the third party and the Facility owner reach an agreement regarding the terms and conditions of such access. 

(2) In the event that agreement cannot be reached between the third party and the Facility owner within 90 days from the date upon which the Minister instructs such owner to grant access to the third party, the Minister may order such access on such terms andconditions as it deems appropriate, taking into consideration existing contractual commitments in respect of the Facility and, where the Facility owner holds a Production License, the Licensee=s obligations to transport Petroleum produced under such Production License. 

Section 3. Promulgation of Additional Regulations. The Minister may enact such additional regulations, and such additional licenses, as may be necessary to further regulate the construction, ownership and operation of, and third party access to, Facilities, in a manner consistent with this Act. 

Chapter 7 
AREAS OF OPERATION AND SURFACE RIGHTS 

Section 1. Closed Areas. 
(1) The Minister may designate any areas within the Territory as closed to some or all Petroleum Operations for reasons of health, safety, public order or public necessity, or the incompatibility of Petroleum Operations with other existing or planned uses of such area, or the protection of the environment or preservation of matters of cultural heritage. 

(2) The State Government may designate any areas set forth in Chapter 2, Section 2 as closed to some or all Petroleum Operations for reasons of health, safety, public order or public necessity, or the incompatibility of Petroleum Operations with other existing or planned uses of such area, or the protection of the environment or preservation of matters of cultural heritage.

Section 2. Restricted Areas. 
(1) No Petroleum Operations may be performed in the following areas: 

(a) any area designated an[sic] Historical Preservation Site in accordance with 19 PNC ' 181 or 306; 

(b) any area within one thousand meters of an area which has been designated a Marine Conservation Area in accordance with Applicable Law; 

(c) any area within five hundred meters of a building or dam owned by the State Government; 

(d) any area designated for purposes of national defense, whether pursuant to Applicable Law or any arrangement with a foreign government; 

(e) any area which forms part of an airport or cemetery; and 

(f) any area designated as a restricted area in accordance with any Applicable Law respecting: 

(I) matters of public health or safety; 

(ii) matters of environmental conservation; or 

(iii) matters of cultural heritage. 

Section 3. Land Use and Occupation. 
(1) Every Licensee may enter into and leave from a Licensed Area at any time for the purpose of Petroleum Operations; provided, however, that no Licensee shall cause or permit any Persons, equipment or goods to enter into a Licensed Area without first meeting the lawful entry requirements of the Republic, including duties, tariffs and customs. 

(2) Where a Licensee has been granted a License to conduct Petroleum Operations on lands which are owned by a Government, upon payment of such fees as may be set forth in the Regulations and other Applicable Law, the Licensee shall be granted by such Government, a right‑of‑way, easement or other right of access as may be required for Petroleum Operations. 

(3) Where a Licensee has been granted a License to conduct Petroleum Operations on lands which are not owned by a Government, such privately owned land shall be made available to the Licensee, to the extent required for Petroleum Operations and the Government shall undertake, upon application of the Licensee to the Minister to compulsorily acquire or otherwise secure a right‑of‑way, easement, ownership or such other right of access as may be necessary for the conduct of Petroleum Operations thereon; provided, that all reasonable compensation due for the acquisition of such rights on behalf of the Licensee shall be borne by the Licensee and; provided further, that the rights so acquired by the Licensee shall automatically expire upon termination of the License. 

(4) Upon a demand being made by any Person having a lawful interest in land upon or under which Petroleum Operations are being carried out, a Licensee shall pay to such Person fair and reasonable compensation for any disturbance of his or her surface rights, and for any damage done as a result of Petroleum Operations, to the land, or to any livestock, crops, trees, buildings or works. 

(5) In the event that the amount of such compensation due hereunder cannot be determined by agreement the matter shall be: 

(a) referred to the Inter‑Governmental Committee for determination; and 

(b) in the event that the parties do not accept the recommendation of the Inter‑Governmental Committee, either party may commence proceedings in accordance with Applicable Law. 

Section 4. Other Minerals or Substances. 
(1) Nothing in a License or this Act shall restrict the rights of Persons to conduct prospecting, exploration or extraction of substances other than Petroleum within any Licensed Areas; provided, that such activity is conducted in accordance with Applicable Law and does not hinder Petroleum Operations and every Licensee shall be required to afford safe passage to such Persons for the purposes or such activities. 

(2) If minerals or substances of economic interest, other than Crude Oil or Natural Gas, are discovered by a Licensee during the course of Petroleum Operations, the Licensee shall promptly report such discovery to the Minister and supply a sample of such discovery. The Minister may impose such fees, charges, royalties, taxes or levies on the sale such substances as may be determined. 

Chapter 8 
FISCAL TERMS 

Section 1. Administration. 
(1) In this Chapter 8, APetroleum@ means Crude Oil and Natural Gas and, for greater certainty shall not include any other minerals or substances governed by Chapter 7, Section 4. 

(2) All Taxable Persons shall submit periodic and annual tax returns to the Bureau of Revenue, Customs and Taxation which shall be prepared in accordance with Applicable Law. 

(3) All payments under this Chapter 8, together with all other fees, charges and levies payable pursuant to this Act or a License, shall be paid by the following dates: 

(a) all Royalties shall be paid on a provisional basis within twenty days following the end of each calendar month in which Petroleum produced pursuant to a License was sold or disposed of by Licensee and, to the extent required, quarterly adjustments shall be made in accordance with the Regulations; 

(b) all Petroleum Rent Tax and all Corporate Income Tax shall be paid on a provisional basis within thirty days following the end of each calendar quarter in accordance with the Regulations and, to the extent required, quarterly adjustments shall be made in accordance with the Regulations; 

(c) all Rental Fees shall be paid within thirty days following the beginning of each calendar year, as adjusted for partial years; and 

(d) all Personal Income Tax, additional fees, other duties, fees and levies referred to in Chapter 8 shall be paid by the date set forth in the relevant Applicable Law. 

(4) All payments under this Chapter 8, together with all other fees, charges and levies payable pursuant to this Act or a License, shall be paid to the following offices in accordance with procedures set forth in the Regulations: 

(a) all Royalties arising from Petroleum Operations subject to State Government Rights set forth in Chapter 2, Section 2, to the Bureau of Revenue, Customs and Taxation for allocation to the producing State Government, other State Governments and the National Government in accordance with Applicable Law, and, to the extent applicable, the provisions of Chapter 5, Section 6; 

(b) all Royalties arising from Petroleum Operations subject to National Government rights set forth in Chapter 2, Section 1, to the Bureau of Revenue, Customs and Taxation for allocation to the State Governments and the National Government forthwith, in accordance with Applicable Law, and, to the extent applicable, the provisions of Chapter 5, Section 6; 

(c) all Rental Fees, Bonuses, Petroleum Rent Tax, and Corporate Income Tax, to the Bureau of Revenue, Customs and Taxation for allocation between the National Government and the State Governments forthwith, pursuant to Applicable Law and, to the extent applicable, the provisions of Chapter 5, Section 6; 

(d) all Personal Income Tax, and Customs Duties, to the Bureau of Revenue, Customs and Taxation; and 

(e) all Additional Fees, to the Treasury of the State Government in which State the applicable Petroleum Operations are carried out or of the State Government which provided the service in accordance with the Regulations. 

Section 2. Maintenance of Accounts, Books and Records. 
(1) Every Taxable Person shall maintain accounts, books and records: 

(a) which reflect all revenues, costs and expenses associated with Petroleum Operations under this Act in accordance with accepted international petroleum industry accounting standards and procedures; 

(b) as prescribed by Regulations; 

(c) at an office located within the Republic; and 

(d) in U.S. dollars. 

(2) All books, accounts and records shall be prepared on an accrual basis. Revenues from Petroleum Operations shall be attributed to the accounting period in which they are earned, and costs and expenses to the accounting period in which they are incurred, without regard to whether cash is received or disbursed in connection with a particular transaction. Costs and expenses shall be deemed to have been incurred, in the case of physical items, in the accounting period when the Taxable Person acquires title thereto, and in the case of services, in the accounting period when such services are performed. 

Section 3. Audit Rights and Penalties. 
(1) The Bureau of Revenue, Customs and Taxation shall have the right to inspect and audit, directly or through an independent third party, the accounts, books and records and supporting documentation relating to any Petroleum Operations carried out by any Taxable Person. The Ministry shall have the right, if it so wishes, to join the Bureau of Revenue, Customs and Taxation in such inspections and audits. If the Taxable Person=s accounts, books, records, and related supporting documentation are not available for inspection within the Territory, the Bureau of Revenue, Customs and Taxation shall have the right to audit such books and accounts, in the jurisdiction in which they are kept, and the cost associated therewith shall be borne exclusively by the Taxable Person. 

(2) The audit rights set forth in Chapter 8, Section 3, shall terminate five years from the closure of any calendar year=s accounts provided however that no time limit shall apply if the Bureau of Revenue, Customs and Taxation notifies the Taxable Person that they have reason to believe that a fraudulent activity has taken place. 

(3) Interest at a rate equal to LIBOR plus five percent shall apply to any payment that remains due after the due date set forth in this Act and the Regulations, and any License, approval, or permit may be revoked in accordance with Chapter 9, Section 1, where unpaid amounts arising under such License remain outstanding more than ninety days from the due date. 

Section 4. Rental Fees and Bonuses. 
(1) A Rental Fee with respect to all or any part of a Licensed Area shall be payable by a Licensee as set forth in License or the Regulations. 

(2) A Bonus may be payable by Licensee upon the issuance of an Exploration License or following a Commercial Discovery as set forth in the Regulations and the relevant License. 

Section 5. Royalties. 
(1) Subject to Chapter 8, Section 5(2), a Royalty on the sale or other disposition of Petroleum produced and saved under a Production License shall be payable by every Licensee in accordance with the terms set forth in the Regulations. The Royalty shall vary between a minimum of five percent and a maximum of twelve and one half percent of the value of Petroleum on the basis of the Profitability Index set forth the Regulations. 

 (2) Royalty may be taken in kind as follows: 

(a) all Royalties arising from Petroleum Operations subject to State Government Rights set forth in Chapter 2, Section 2, may be taken in kind upon an affirmative decision by the Inter‑Governmental Committee and in accordance with the Regulations, and, to the extent applicable, the provisions of Chapter 5, Section 6; and 

(b) all Royalties arising from Petroleum Operations subject to National Government rights set forth in Chapter 2, Section 1, may be taken in kind upon the decision of the Minister in accordance with the Regulations. 

(3) The Minister shall notify the Licensee in writing of the election of the Inter‑Governmental Committee or the Minister, as the case may be, to take the Royalty in kind at least one hundred and eighty days prior to the date of the intended delivery of the Royalty in kind. This election shall remain valid for twelve months. 

(4) The determination of all volumes and values of Petroleum for the purposes of calculating the Royalty shall be made at the Delivery Point. In the event of Production pursuant to an Exploration License the Minister shall determine the Delivery Point for the purposes of such determination. 

(5) Production shall be measured at standard temperatures and pressures as set forth in the Regulations and shall not include: 

(a) any volumes of Petroleum burned, flared or vented with the approval of the Minister or as may be permitted pursuant to the Regulations; 

(b) any volumes of Petroleum re‑injected by the Licensee into a Reservoir for the purposes of enhancing the production of Crude Oil, for the conservation of Natural Gas or otherwise used in Petroleum Operations; and 

(c) any water or sediments produced in association with Petroleum. 

Section 6. Petroleum Rent Tax (PRT). 
(1) A Petroleum Rent Tax shall apply to income from Upstream Activities as determined in the Regulations. Subject to Chapter 8, Section 12, the Petroleum Rent Tax shall be calculated with reference to the Licensed Area of each Production License separately. 

(2) The Petroleum Rent Tax rate shall vary between a minimum of zero percent and a maximum of forty percent on the basis of the Profitability Index set forth in the Regulations. 

Section 7. Valuation and Measurement of Petroleum. 
(1) The unit sale price of Crude Oil the[sic] for purposes of calculating Royalties, Petroleum Rent Tax and Corporate Income Tax shall be the Market Price at the Delivery Point, expressed in U.S. Dollars per barrel, for the relevant reference period as determined in accordance with the Regulations on the basis of the following principles: 

(a) if sales to independent purchasers represent fifty percent or more of the Crude Oil from the Licensed Area sold by Licensee at the Delivery Point during the course of the reference period, the Market Price applicable for that reference period shall be equal to the weighted average of the net realized prices FOB at the Delivery Point received by Licensee for such Crude Oil; or 

(b) if sales to independent purchasers represent less than fifty percent of the Crude Oil from the Licensed Area sold by Licensee at the Delivery Point during the course of the reference period, the Market Price applicable for that reference period shall be the weighted average of: 

(I) the weighted average of the unit prices FOB received by Licensee from sales to independent purchasers at the Delivery Point during the reference period, if there has been such sales of Crude Oil from the Licensed Area; and 

(ii) the weighted average of the unit prices for which Crude Oils from the Republic (or elsewhere if no other Crude Oils from the Republic were sold during the reference period) of similar quality to the Crude Oil from the Licensed Area were sold during the course of the reference period under comparable commercial conditions by independent sellers to independent buyers. The prices of reference Crude Oils shall be adjusted to take account of differences in quality, transportation costs, and any commissions paid in relation to such sales, and other special circumstances with respect to such sales; 

(iii) the weighted averages referred to in this Section 7(1)(b) shall be determined on the basis of the percentage by volume represented by the total of the sales from the Licensed Area under sub‑paragraph (I) above and those made under sub‑paragraph (ii) respectively. 

(2) In the event that Petroleum Operations involve the segregation of Crude Oil of different quality, and if the parties do not otherwise mutually agree, any and all provisions of this Chapter concerning valuation of Crude Oil shall separately apply to each segregated Crude Oil. However, in electing to take its Royalty in kind pursuant to Chapter 8, Section 5(2), the Minister shall have the right to specify the quality of Crude Oil. 

(3) The unit sale price of Natural Gas for purposes of calculating Royalties, Petroleum Rent Tax and Corporate Income Tax shall be the Market Price at the Delivery Point, expressed in U.S. Dollars per million British thermal units, for the relevant reference period as determined in accordance with the Regulations on the basis of the following principles: 

(a) for sales to independent purchasers, the Market Price shall be equal to the weighted average of the net realized price obtained by Licensee at the Delivery Point for sales of Natural Gas from the Licensed Area over the course of the reference period; 

(b) for sales other than to independent purchasers, be determined by expert determination; provided, however, that such price or value shall reflect the following as appropriate:

 (I) the quantity and quality of the Natural Gas;

 (ii) the price at which sales of Natural Gas from other sources in the Republic, if any, are then being made;

 (iii) the price at which sales, if any, of Natural Gas imported into the Republic for consumption in the Territory are being made;

 (iv) the purpose for which the Natural Gas is to be used; and (v) the international market price of competing or alternative fuels or feedstocks; and 

(c) for sale in the domestic market, be established by expert determination with reference to import parity prices, adjusted to take into account the quality and quantity of the Natural Gas. 

(4) Products obtained from the refining of Crude Oil or the processing of Natural Gas shall: 

(a) for sales to independent purchasers, be equal to the weighted average of the net realized price obtained by the seller for sales of products FOB at the Delivery Point or other measurement point as determined in the Regulations, over the course of the reference period; 

(b) for sales other than to independent purchasers, be determined by expert determination; provided, however, that such price or value shall reflect the following:

 (I) the quality of such products; 

(ii) the price at which sales of such products from other sources in the Republic, if any, are then being made;

 (iii) the price at which sales of such products are being made on the international market, adjusted to take into consideration any transportation advantage or disadvantage and other special circumstances with respect to sales of such products; and 

(c) for sales to the domestic market, be determined by Regulation, and in the absence of Regulation, in accordance with paragraphs (a) and (b) of this Chapter 8, Section 7(4). 

(5) The unit price for Petroleum taken in kind by a Government pursuant to Chapter 8, Section 5, and the unit price for Petroleum sold to the National Government pursuant to Chapter 8, Section 8, as well as their treatment for the purposes of calculating Royalties, Petroleum Rent Tax, and Corporate Income Tax, shall be as determined in the Regulations. 

(6) Sales to independent purchasers referred to in this Chapter 8 shall mean sales, other than swaps, barter sales or distress sales, made by a Licensee to purchasers of a Licensee in an Arms Length transactions. 

(7) For the purposes of this Chapter 8, sales to the Republic=s internal market under Chapter 8, Section 8 shall be excluded from the calculation of the Market Price, and commissions or brokerages incurred in connection with sales to independent purchasers, if any, shall not exceed the customary and prevailing rates. 

(8) Licensee shall supply, operate and maintain equipment for measuring the volume and quality of the Petroleum produced and saved pursuant to a License, including gravity, temperature and pressure measuring devices and any other devices that may be required. All measurement equipment and devices shall, prior to their installation or usage, be approved by the Ministry. Such equipment and devices shall at all reasonable times be available for inspection and testing by the Ministry or its authorized representatives. Any such inspection or testing shall not interfere with the normal operation of the Facilities involved. The equipment and devices used or installed pursuant to this Chapter shall not be replaced or altered without the prior approval of the Ministry. 

(9) Licensee shall undertake to measure the volume and quality of Petroleum produced and saved pursuant to a License, with the frequency and according to procedures established in the Regulations. 

Section 8. Domestic Market Obligations. 
(1) Licensee shall be obliged to sell and transfer to the National Government, on the written request of the Minister, out of any Petroleum to which it is entitled under a License, such quantity of Petroleum as may be required to meet the requirements of the Republic for internal consumption. Each Licensee shall be responsible for supplying its pro‑rata share of the internal consumption requirements that Licensees in the aggregate are required to supply. 

(2) Deliveries shall be made in accordance with the procedures set forth by mutual agreement between the Ministry and Licensee, and may include the obligation of Licensee to provide storage at agreed rates. 

Section 9. Allowable Expenditures. 
(1) All transactions giving rise to revenues, costs or expenses which will be credited or charged to the books, accounts, records and reports prepared, maintained or submitted pursuant to this Act, the Regulations and any Applicable Law shall be conducted at Arm=s Length or on such a basis as will assure that all such revenues, reasonable and necessary costs or expenses will not be higher or lower, as the case may be, than would result from a transaction conducted at Arms Length and on a competitive basis. 

(2) The Regulations shall specify the costs and expenses that are allowed in deduction of revenues for the purpose of calculating the Corporate Income Tax, as well as the cost and expenses to be used for the calculation of the Petroleum Revenue Tax. 

Section 10. Corporate Income Tax (CIT). 
(1) Each Taxable Person shall be subject to corporate income taxes on the basis of taxable income obtained from Petroleum Operations in each calendar year as defined in Applicable Law and the Regulations. Subject to Chapter 8, Section 12, Downstream Activities and Upstream Activities shall be subject to separate taxation. 

(2) Where a License is held by more than one Approved Person, taxable income shall be calculated for each of them separately, and each of them shall be responsible for the preparation and submission of the relevant income tax declaration, and for the payment of the respective income tax. 

(3) The rate of Corporate Income Tax applicable to Petroleum Operations is thirty percent. 

Section 11. Depreciation. Depreciation of capital costs shall be calculated using the straight line method. The definition of capital costs and the maximum annual depreciation by category of assets shall be set forth in the Regulations. 

Section 12. Tax Relief.
(1) The Regulations shall provide for some or all of the following tax relief: 

(a) deferral and accumulation of losses, which may be carried forward to subsequent calendar years for a period to be determined by Regulation or until the end of the relevant License whichever is earlier; 

(b) reduction or elimination of all value added or similar taxes, provided that such relief shall apply in respect of Upstream Activities only; 

(c) the inclusion of Royalties as deductible costs for the purposes of calculating Petroleum Rent Tax and Corporate Income Tax. 

(2) The Minister may, upon application by a Taxable Person, and subject to an affirmative decision of the Inter‑Governmental Committee, issue a certificate providing for the combined taxation of Upstream Activities and Downstream Activities for Corporate Income Tax purposes for integrated projects. 

(3) Where the Minister, whether on application or otherwise, considers that Upstream Activities carried out in two or more Licensed Areas are sufficiently related to be considered for the purposes of this Act an integrated project, the Minister shall issue an order specifying the extent to which Petroleum Operations are eligible for integration for the purposes of Petroleum Rent Tax and Royalty calculations. 

(4) In making the determination under this Chapter 8, Section 12, the Minister shall consider the Petroleum Operations, Facilities, and other matters that comprise, have comprised, or will comprise the integrated project, and the geological, geophysical, geochemical and other features of the Licensed Area or Licensed Areas in relation to the integrated project; provided, that: 

(a) there shall be common Licensees in respect of all adjoining Licensed Area; and 

(b) there shall be common Facility ownership with respect to all other proposed integrated projects. 

Section 13. Personal Income Tax and Social Contributions. 
(1) Salaries and wages, including bonuses, of employees directly engaged in Petroleum Operations and while in the Territory, irrespective of the location of such employees, shall be subject to Personal Income Tax, calculated in accordance with Applicable Law. 

(2) Employers shall pay all social contributions in respect of their employees in accordance with Applicable Law. 

Section 14. Ring Fences. 
(1) Corporate Income Tax shall be assessed and paid on a Taxable Person basis. 

(2) Subject to Chapter 8, Section 12, Royalties and Petroleum Rent Tax shall apply to Petroleum produced from within a Licensed Area under each Production License separately.

Section 15. Customs Duties. 
(1) Every Licensee shall be entitled to import freely and shall not be liable for any duties, charges or similar fees, into the Republic, and shall be entitled to the subsequent re‑export from the Republic, all equipment, materials, vehicles, machinery, spare parts, foodstuffs, and other goods or items necessary for Petroleum Operations, and for the personnel engaged therewith. 

(2) No Licensee shall sell, trade or otherwise dispose of any goods, subject to the exemption set forth in Chapter 8, Section 15(1), within the Republic without the prior written consent of the Minister, and the Minister may: 

(a) refuse such consent and require the re‑export of such goods; or 

(b) grant permission for such sale, trade or disposal of such goods on the condition that all duties, charges or similar fees are first paid. 

(3) Every Licensee shall have the right to export Crude Oil and Natural Gas freely and without the need for an export license, and shall be exempted from any sales taxes or customs duties, charges or similar fees in relation thereto. 

Section 16. Additional Fees. Every Taxable Person may be subject to such other fees or charges for services provided by a State Government or the National Government in such amounts and on such terms as may be prescribed by Applicable Law.

 Chapter 9 
PENALTIES 

Section 1. Revocation. 
(1) The Minister may deliver written notice to a Licensee requiring such Licensee to show cause within thirty days as to why a License should not be revoked where: 

(a) the License was granted as a result of any false statement, fraudulent representation or incorrect information submitted by, or on behalf of, the Licensee; 

(b) the Licensee is in repeated breach of any material provision of this Act or term of the License; or 

(c) the Licensee, or any Person within a group of Approved Persons, fails to remain an Approved Person, as required pursuant to Chapter 4, Section 6. 

(2) In the event that a Licensee fails to show cause as required pursuant to Chapter 9, Section 1, the Minister may revoke the License without further notice or proceedings and notice of such revocation shall be published pursuant to the Administrative Procedures Act with a copy sent to the Licensee. 

(3) Upon receipt of a notice of revocation: 

(a) the Licensee shall immediately discontinue all Petroleum Operations, except for those reasonably required in order to: ensure the safety, health and welfare of the public; the protection of the environment; and the preservation of all Petroleum bearing strata whether within, or outside of, any Licensed Area; 

(b) the Minister may immediately take steps to enforce any surety, guarantee or other performance obligation which the Licensee has furnished in accordance with the terms of the License; and 

(c) the revocation shall not affect the liability of any Person concerned arising out of such breach before such revocation. 

Section 2. Monetary Penalties. 
(1) Any Person who directly or indirectly, in any measure or by any means, hinders, or leads someone else to hinder, the exercise of powers and rights of a Public Official acting under this Act or a License, may be punished by the imposition of a fine or imprisonment or both, as prescribed by Regulation. 

(2) Any Person who in, or in connection with, any application under this Act or the Regulations, knowingly or recklessly gives information that is materially false or misleading; or in any report, return or affidavit submitted under any provision of this Act or License knowingly or recklessly includes or permits to be included, any information which is materially false or misleading, may be punished by the imposition of a fine or imprisonment or both, as prescribed by Regulation. 

(3) Any Person who engages in Petroleum Operations other than pursuant to a License may be punished by the imposition of a fine or imprisonment or both, as prescribed by Regulation. 

(4) Any Person who, by conduct that contravenes the provisions of this Act or a License endangers the life or safety of a Person or endangers the environment may be punished by the imposition of a fine or imprisonment or both, as prescribed by Regulation and Applicable Law. 

(5) Any Person who fails to make any payments as provided for in this Act shall be guilty of a criminal offense and is liable for the penalties prescribed by Regulation. 

Section 3. Additional Penalties. 
(1) In relation to the penalties set forth herein, upon conviction under this Chapter 9 the Minister may: 

(a) take steps to enforce any surety, guarantee or other performance obligation which the Licensee has furnished; 

(b) suspend or terminate the right of the Licensee to participate in Licensing Rounds or Petroleum Operations; 

(c) publish the terms and circumstances of the conviction; and 

(d) take such other steps, actions or proceedings as may be permitted by Applicable Law. 

Section 4. Representative Liability. 
(1) Persons shall be liable for contravening this Act where such contravention is committed by an agent or representative of, in the name of, or on the behalf of, such Person. 

(2) Where Petroleum Operations are collectively carried out by more than one Person, or by one Person on behalf of one or more other Persons whether pursuant to a joint operating agreement or otherwise, all such Persons shall be jointly and severally liable for the payment of any penalties imposed hereunder, and for the fulfillment of any obligations imposed pursuant to this Act. 

Section 5. Restitution. 
(1) Where a Person fails or neglects to comply with this Act or a License, the Minister may cause to be done all or any of the things required by this Act or the License at the cost and expense of such Person. 

(2) All costs and expenses incurred by the Minister under this Chapter 9, together with interest thereon at a rate prescribed by Regulations, shall be a debt due to the National Government. 

(3) Without prejudice to any other right or remedy available to the Minister under any Applicable Law, a Person who fails or neglects to comply with the Regulations or fails to comply with a term of a License, shall make restitution to the Minister of an amount equal to the costs of any consequences suffered as a consequence of the failure, neglect or non‑compliance. 

Chapter 10 
CURRENCY CONTROLS 

Section 1. Currency Rights. Every Foreign Licensee shall, subject to Applicable Law, have the right to: 

(a) retain outside the Republic, and freely transfer, currency received by it outside the Republic, including the proceeds of sales of Petroleum to which it is entitled under a License; 

(b) export from the Republic, free of limitation or restriction, the funds held by it, including any funds received from an assignee as a result of an assignment of a License or from a Government as a result of an exercise of its right of eminent domain; 

(c) freely open and maintain bank accounts in the Republic and abroad for the purpose of Petroleum Operations; 

(d) import all funds necessary for carrying out Petroleum Operations; and 

(e) pay directly outside the Republic from its offices abroad for purchases or services for Petroleum Operations. 

Chapter 11 
EMINENT DOMAIN AND RIGHTS OF LICENSEES 

Section 1. Exercise of Eminent Domain Power. 
(1) Where a Government exercises its power of eminent domain by expropriating, whether directly or indirectly, a Licensed Area, or any rights of a Licensee under a License, or the property or assets of a Licensee or a share of Petroleum to which a Licensee is entitled, such exercise of eminent domain shall only be done for a public purpose, on a non‑discriminatory basis, and pursuant to Article XII of the Constitution and any other Applicable Law. 

(2) Upon the exercise of the rights set forth, the Government shall provide the Licensee with prompt, and adequate compensation including interest, in conformity with principles of international law, equivalent to the fair market value of the expropriated License, right or assets immediately before the expropriatory action was taken, as detailed in Applicable Law. 

Chapter 12 
TRANSPARENCY 

Section 1. Transparency is a Requirement for All Transactions. 
(1) In addition to the duties and obligations arising pursuant to this Act, the Licenses, Applicable Law and the Code of Ethics, the principles of transparency, ethics and fairness shall apply in respect of all activities, decisions, actions, rules, directions, and orders made with respect to the subject matter of this Act and the conduct of Petroleum Operations. 

(2) There shall be annual publication of all payments made by or on behalf of each Licensee in the conduct of Petroleum Operations in a publicly accessible, comprehensive and comprehensible manner. 

(3) All payments and revenues arising from or relating to Petroleum Operations shall be subject to a credible, independent audit, applying international auditing standards and all such payments and revenues are to be reconciled by a credible, independent administrator appointed by the National Government, applying international auditing standards and with publication of the administrator=s opinion regarding that reconciliation including discrepancies, should any be identified. 

(4) No Public Official shall, while subject to the Code of Ethics, RPPL 5‑32, and for a period of two years following the expiration of such status, acquire, hold or attempt to acquire or hold: 

(a) a License, whether held directly or indirectly; or 

(b) a share in a corporation, trust or other entity or an Affiliate of same, which holds a License; and any License so granted, or agreement or instrument that grants or purports to grant, such an interest, whether direct or indirect, shall, to the extent of the grant, be void. 

(5) The acquisition or holding of a License, interest or share by the minor children or spouse of a Public Official shall be deemed to be an acquisition or holding by such Public Official. 

(6) The Model Licenses shall provide that each Licensee must agree and undertake, on behalf of themselves, their Affiliates, their Sub‑Contractors, and their respective personnel, to act at all times in a manner which is consistent with the highest ethical standards and must warrant that they will not make or offer with respect to all matters which are the subject of this Act, any payment, gift, promise or other advantage, whether directly or through intermediaries, to or for the use of any Public Official including any Person exercising a public function for a public agency, a public enterprise or a public international organization, where such payment, gift, promise or advantage would violate the laws of the Republic or the laws of any country having jurisdiction over such Licensee. 

Chapter 13 
SEVERABILITY 

Section 1. Severability. If any Chapter, Section or any provision of this Act is repealed, or is rendered invalid, or deemed null and void, by a court of competent of[sic] jurisdiction, all other Chapters, Sections and provisions shall remain valid and enforceable notwithstanding such repeal or invalidation.

Chapter 14
EFFECTIVE DATE

Section 1. Effective Date.
This Act shall take effect upon its approval by the President of the Republic, or upon its becoming law without such approval, or as otherwise provided by Applicable Law.

PASSED: November 03, 2011

 December
Approved this 29th day of November 2011.

 /s/ 
 Johnson Toribiong
 President
 Republic of Palau