proposed petroleum regulations for the solomon …

PROPOSED PETROLEUM REGULATIONS FOR THE SOLOMON ISLANDS

United Nations Center on Transnational Corporations (UNCTC) J.A. Rodd and W. Barclay'

May 1993 SOPAC Technical Report 170

SOPAC Technical Secretariat

Prepared for: South Pacific Applied Geoscience Commission (SOPAC Hydrocarbon Program: Regional Project 93.RG.21e

[3]

TABLE OF CONTENTS

Page

ACKNOWLEDGEMENTS ...................................................................................................... 4 SUMMARY................................................................................................................................ 5

OBJECTIVES........................................................................................................................ 6

INTRODUCTION....................................................................................................................... 6

COMMENTS AND CORRECTIONS TO THE

....................................................................... PROPOSED PETROLEUM REGULATIONS 7

PROPOSALS FOR FURTHER DEVELOPMENT OF

PETROLEUM LEGISLATION ............................................................................. 12

CONCLUSIONS AND RECOMMENDATIONS ................................................................. 15

REFERENCES.................................................................................................................................. 16

APPENDIX

PROPOSED PETROLEUM REGULATIONS .................................................... 17

TABLE

Comparison of application fees and rentals for SOPAC member countries ................. 14

[TR170 - UNCTC, Rodd & Barclay]

[4]

ACKNOWLEDGEMENTS

This work was supported by the United Nations Center on Transnational Corporations

(UNCTC), the Commonwealth Fund for Technical Co-operation (CFTC), the Canadian

International Development Agency (CIDA) and the Government of Solomon Islands.

Thanks are extended to the UNCTC which cooperated closely with SOPAC throughout the

development of this work and which drafted the proposed Regulations contained herein.


[5]

SUMMARY

This report presents the new proposed Petroleum Regulations for Solomon Islands

(Appendix). The proposed Regulations have been drafted by the United Nations Center on

Transnational Corporations and have been reviewed by SOPAC. The proposed Regulations

are for the most part clear, concise and comprehensive. Subject to a few minor

modifications contained herein, they are ready to be approved by Government as part of

the petroleum legislation of Solomon Islands.

The Regulations will form an important and integral part of the whole petroleum legislation.

They indicate how Government intends to interpret and apply the Petroleum Act, 1987. In

keeping with standard practise, the Regulations are broad in approach rather than

technically detailed. In this way they will not be outdated by the rapid technological

advances and changes in practise that characterise the oil industry. The Regulations will

allow the Minister to regulate licences and petroleum agreements, work obligations and

area relinquishment, the discovery and development of petroleum, the conduct of

operations, environmental protection, navigation, fishing, marine and other resources.

In order to complete the petroleum legislation, it is important to draft and approve a Model

Petroleum Agreement. This should be consistent with the Petroleum Act, 1987, and should

contain competitive licensing terms in order to attract oil companies to invest in exploration.


[6]

OBJECTIVES

This work is a contribution to SOPAC 1993 Work Program project 93.RG.21e: development

of petroleum legislation in SOPAC member countries, and was carried out at the request of

the Government of Solomon Islands. The aim of the work is to coordinate the production of

new proposed Petroleum Regulations with the UNCTC and to review the proposed

regulations.

INTRODUCTION

The development of petroleum legislation in Solomon Islands has had a long history. The

original petroleum legislation was drafted by the Commonwealth Fund for Technical Co-

operation in 1981 (CFTC 1981). Following a subsequent review by the UNCTC (1984), the

Solomon Islands’ Petroleum Act was passed in 1987.

The UNCTC (1984) also provided initial drafts for Petroleum Regulations and a Model

Petroleum Agreement. Subsequently, both were revised by the UNCTC (1990) to

incorporate comments by SOPAC. However, following discussions with the Government of

Solomon Islands in 1991, the UNCTC decided to restyle the Regulations for a last time

using simpler English. This latest version of the Regulations by the UNCTC form the main

part of this report.

At the request of the Government of Solomon Islands, SOPAC has reviewed this latest

version of the Regulations. They are for the most part clear, concise and comprehensive.

Subject to the addition of the several minor corrections and modifications (see Comments

and Corrections to the Proposed Petroleum Regulations), the Regulations are now

considered suitable for ratification by Government.


[7]

COMMENTS AND CORRECTIONS TO THE

PROPOSED PETROLEUM REGULATIONS

A detailed review has been made of the proposed Petroleum Regulations paying heed to

their consistency with the Petroleum Act (1987) and in the light of what is common practice

for petroleum legislation elsewhere. As a result, it is recommended that the following

additions and modifications be made to the proposed Petroleum Regulations.

The corrections and additions to the proposed Regulations appear as underlined text in the

following text. Comments are given in capital letters and square brackets e.g.

[COMMENTS], and should not be added to the Regulations.

[IN THE LIST OF CONTENTS]

41. Stand-by vessel

PART I. GENERAL PROVISIONS

1 (2) These Regulations are made pursuant to the authority conferred by Section

41 of the Petroleum Act, 1987.

PART II. LICENCES AND PETROLEUM AGREEMENTS

3 (1) For the purpose of dividing the Solomon Islands into licence areas, the

surface of the earth shall be deemed to be divided -

(a) by the meridian of Greenwich and by meridians that are at a distance

from that meridian of six minutes of longitude or a multiple of six

minutes of longitude; and


[8]

(b) by the equator of and by parallels of latitude that are at a distance

from the equator of six minutes of latitude, or a multiple of six minutes

of latitude

into graticular sections, each constituting a "block", each of which is

bounded by portions of

(c) one of these meridians that are at distance from each other of six minutes of longitude; and

(d) one of these parallels of latitude that are at a distance from each other

of six minutes of latitude.

4 (1) (e) be accompanied by receipt evidencing payment of an application fee

of 500 US dollars

[SEE ALSO SECTION ON PROPOSALS FOR FURTHER DEVELOPMENT OF

PETROLEUM LEGISLATION FOR FURTHER COMMENTS ON APPLICATION FEES]

PART III. WORK OBLIGATIONS AND AREA RELINQUISHMENT

10 The licensee may be required to provide to the Government a bond or banker's

guarantee, acceptable to the Minister, for either part of, or for the total amount of the

expenditure obligations stipulated under Regulation 9.

PART IV. DISCOVERY AND DEVELOPMENT

14 (d) production forecasts (per well and per field):

[INSERT A NEW SUBSECTION 15(c) AND RE-LETTER ALL SUBSEQUENT

SUBSECTIONS (c) TO (g) ACCORDINGLY]


[9]

15 (c) an account of the Proposed costs of the field development

(d) an environmental impact statement describing the possible environmental

effects of the proposed development plan prepared by an approved

independent agency.

(f) where any pool extends beyond the licence area, the suggested unitization agreement in accordance with Regulation 18(1)

PART V. CONDUCT OF OPERATIONS

[INSERT A NEW SUBSECTION 23(1)(a) AND RE-LETTER ALL SUBSEQUENT

SUBSECTIONS (b) TO (h) ACCORDINGLY]

23 (1) (a) a sea bottom survey for the site of the drilling platform

(e) the geological strata that are expected to be penetrated and the target

interval or intervals;

38 (1) Detailed safety instructions including an emergency evacuation plan

shall be prepared for each drilling platform. Each employee shall be

required to sign a receipt for his individual copy of the safety

instructions.

Stand-by

Vessel 41 When circumstances so demand, the licensee shall provide for a

stand by vessel which shall be stationed at the platform during drilling

operations. The stand-by vessel shall have sufficient capacity and

equipment to take onboard and provide for the total crew of the

platform in cases of emergencies.

44 (1) Personnel and visitors on the drilling platform shall be equipped with safety


[10]

helmets, safety boots, safety belts and other safety equipment which they are obliged to use when working conditions so require.

PART VI. PROTECTION OF THE ENVIRONMENT, NAVIGATION, FISHING, AND MARINE AND OTHER RESOURCES

[INSERT A NEW SUBSECTION 67(1) AND RENUMBER THE SUBSEQUENT

SUBSECTION]

67 (1) A licensee shall prepare a Pollution Control Plan listing equipment and procedures to be used in Pollution prevention and clean up.

PART VII. RECORDS AND REPORTS

70 (a) the gross quantity of crude oil and natural gas won and saved from the

licence area as measured at the well head and at any other points of

measurement as specified by the Minister;

71 (1) On the drilling platform the licensee shall keep a daily log on a form

approved by the Minister. The log shall be made at least in triplicate. One

copy shall be supplied daily to the Minister, and one copy shall be filed at the

licensee’s office in Solomon Islands. The other copy shall at all times be

retained at the platform and be available for inspection by persons authorized

by the Minister.

(3) The daily log shall further contain information about accidents, damages,

injuries and other occurrences and other information which may be deemed

of current or future interest to the Minister.

(4) The Minister may require further information concerning the activities carried

out.


[11]

75 (a) digital tape copies of field and processed seismic and other geophysical and

navigation data;

[INSERT A NEW SUBSECTION 75(b) AND RE-LETTER ALL SUBSEQUENT

SUBSECTIONS (c) TO (o) ACCORDINGLY]

(b) interpretations and maps incorporating geological and geophysical data

acquired by the licensee.

(c) well data, including, but not limited to, electric logs and other wireline

surveys, mud-logging reports and logs, samples of cuttings and cores and

analyses made therefrom;


[12]

PROPOSALS FOR FURTHER DEVELOPMENT OF

PETROLEUM LEGISLATION

The present day approach to petroleum legislation in developing countries is for the

legislation simple, comprehensive and flexible insomuch as revisions can be made which

allow it to keep pace with rapid changes in the international oil industry. The legislation as a

whole should be comprehensive and be kept up-to-date. This is important for two reasons.

Firstly the legislation will thus provide the oil company, as an investor, with the legal

guarantee that its investment is fully protected. Secondly, it will ensure that the legal and

fiscal terms offered by the government are competitive with those offered by other

countries.

To achieve this, one of the most widely used approaches is to divide the legislation into

three components (see also Rodd & Elaisi 1993 and papers therein):

1) A Petroleum Act which sets out the broad terms and conditions by which petroleum

exploration and development is to be permitted. The Act should thus not require

repeated amendments and revisions to keep pace with the rapid pace of

international developments, but should have a long lifetime. The Petroleum Act,

1987, is a good example of this approach.

2) Petroleum Regulations which set out how Government intends to interpret and

apply the Petroleum Act in practice. Although a certain amount of detail is called for

in the rules, it is common practise for the regulations to be broad rather than

technically detailed. In this way they will not be outdated by the rapid technological

advances and changes in practise that characterise the oil industry. The Minister

and his officers are often empowered to execute much of the Regulations and the

Minister to modify them without recourse to Cabinet or Parliament. The proposed

Petroleum Regulations contained herein are consistent with this approach.

3) A Model Petroleum Agreement which sets out in detail the legal and fiscal terms

and conditions by which the government will grant concessions for the exploration

and production of petroleum. It is thus always consistent with the Act and the

Regulations. However, unlike the Act and Regulations, the terms of the Model


[13]

Petroleum Agreement (MPA) are open to negotiation with oil companies, e.g. royalty

and tax rates, licence fees, licence renewals, etc. MPAs are commonly modified for

each new licensing round or acreage offer to reflect the changing perception of

exploration risk, particularly after the discovery of commercial oil or gas, and other

international developments. The Minister is usually empowered to modify the MPA

or to introduce new MPAs. At present Solomon Islands does not have a Model

Petroleum Agreement.

The Proposed Petroleum Regulations

With the addition of the modifications suggested above, the Petroleum Regulations are now

thought to be in a fit state to be ratified by Government. They will form a necessary part of

the legislation and are consistent with the approach outlined above.

An important part of the Petroleum Regulations is the provision and definition of a

petroleum licensing area, as stated in regulations 3(2) and 3(3). A proposed petroleum

licensing area for Solomon Islands is given by Barclay (1993).

Although the UNCTC have not specified the amount of Application Fee to be paid in section

4(1)(e) of the proposed Regulations, it is recommended that the Application Fee should be

US$ 500. This is in keeping with application fees levied elsewhere in the region (see Table

1) and is therefore competitive.

It is suggested that, during periods of exploration activity, a review of these regulations

should be undertaken every 3 years to ensure that they are kept up to date with changing

technology and practises.

Model Petroleum Agreement

At present Solomon Islands does not have a ratified Model Petroleum Agreement (MPA).

This is the next and final component necessary to complete the petroleum legislation. It will


[14]

Table. Comparison of application fees and rentals for SO PAC member countries

Solomon Islands' (US$) Fiji' Papua New Guinea' Tonga2

(F$) (K) (Pa, US$)

Application fees 5003 E: 200-500 E: 2000 Pa 1000

P: 1000-2000 P: 10000

Rentals 400 000 plus E: 30-120 100 (yrs 1-6 & US$ 2445 per block

incremental for no. of per block increasing thereafter)

blocks' P: 1000-5000 per block

, Proposed terms as at May 1993

, Terms in effect July 1988

3 Application fee for Solomon Islands recommended in this report

.Rental for Solomon Islands proposed by UNCTC (1990)

Source: Havard (1993)

provide the basis for negotiation with oil companies and will make this process that much

more attractive to them. The MPA should, in essence, be consistent with the Petroleum Act

(1987) and with the proposed Petroleum Regulations contained herein. Section 31 of the

Petroleum Act (1987) clearly sets out the type of licence agreement that is to be used in

the Solomon Islands: a royalty-tax system. This system is best suited and most

advantageous to Solomon Islands because it makes government revenues relatively easy

to monitor and administer.

Although in their earlier reviews of Solomon Islands petroleum legislation, the UNCTC

proposed two rather similar MPAs (UNCTC 1984, 1990), neither are consistent with the

Petroleum Act, 1987. These MPAs propose that Government obtain its revenues principally

through royalty, production sharing and tax. This is a hybrid licencing system that is

complex, would require a large and costly administration, and is often difficult to effectively

monitor (for further background on petroleum licensing systems see Rodd & Alaisi 1993).

According to the proposed MPAs (UNCTC 1984, 1990), Government would participate in

Joint Management Committee and would thus have to contribute to, and review, the

technical work programme. This requires a considerable breadth and depth of technical

expertise which is not currently available in Government. The proposed MPAs also specify

[TR170 -UNCTC, Rodd & Barclay]

[15]

rental fees that are far too high relative to those in use elsewhere in the region (see Table

1; Havard 1993, Rodd & van Meurs 1993). For example, rental fees are F$ 30-120 and

US$ 2445 per block in Fiji and Tonga respectively, whereas the 1990 MPA proposes a fee

of US$ 400 000 plus an incremental for the number of blocks for Solomon Islands. This is

not in keeping with the high perceived geological risk and so acts as disincentive to oil

companies.

The proposed MPAs (UNCTC 1984, 1990) are, therefore, considered inappropriate in

Solomon Islands’ case and it is strongly recommended that they are dropped. A new MPA

should be drafted which is consistent with the Petroleum Act, 1987, particularly with respect

to the royalty-tax licensing system, and should offer more competitive legal and fiscal terms,

particularly with regard to application fees and licensing fees.

CONCLUSIONS AND RECOMMENDATIONS

1) New proposed Petroleum Regulations for the Solomon Islands have been drafted by

the UNCTC and are presented in this report. The proposed Regulations are for the

most part clear, comprehensive and concise.

2) The proposed Regulations have been reviewed by SOPAC and several minor

corrections and modifications are recommended.

3) Once these changes have been incorporated, it is recommended that the

Regulations will be in a fit state to be ratified by Government to become an integral

and necessary part of Solomon Islands’ petroleum legislation.

4) In order to make the petroleum legislation comprehensive and complete, it is

important to draft and approve a Model Petroleum Agreement. Existing drafts of

Model Petroleum Agreements are considered inappropriate and inconsistent with the

Petroleum Act, 1987. It is recommended that a new Model Petroleum Agreement be

drafted which is consistent with the Act and which offers more competitive licensing

terms.


[16]

REFERENCES

Barclay, W. 1993. A petroleum licensing area and quadrant and block numbering system for the Solomon Islands. SOPAC Miscellaneous Report 152.

CFTC, 1981. Draft petroleum legislation for Solomon Islands. Commonwealth Fund for Technical Co-operation report.

Havard, K. 1993. Comparison of petroleum laws and regulations in SOPAC member countries, in Rodd, J.A. and Elaisi, A. (eds) Papers and Materials Presented at the SOPAC-OIC Hydrocarbon Legislation and Policy Workshop, Port Vila, Vanuatu 13-17 July 1992, SOPAC Miscellaneous Report 143, pages 163-168.

Rodd, J.A. & Elaisi, A. (eds) Papers and Materials Presented at the SOPAC-OIC Hydrocarbon Legislation and Policy Workshop, Port Vila, Vanuatu 13-17 July 1992, SOPAC Miscellaneous Report 143, 215 pages.

Rodd, J.A. & van Meurs, P. 1993. Economic analysis of offshore petroleum prospects for SOPAC member countries. SOPAC Technical Report 162.

UNCTC, 1984. Report to the Government of Solomon Islands on petroleum policy, law, regulations and model petroleum agreement. United Nations Center on Transnational Corporations report.

UNCTC, 1990. Report to the Government of Solomon Islands on the revision of the draft petroleum regulations and model agreement. United Nations Center on Transnational Corporations report.


SOLOMON ISLANDS

PETROLEUM REGULATIONS, 1993


ARRANGEMENTS OF REGULATIONS

PART I GENERAL PROVISIONS

1.

2. Application of regulations

Citation and consistency with petroleum act


3. Demarcation of blocks

4.

5.

6. Bidding for licences

7. Petroleum Agreements

Application for petroleum prospecting licence

Application for petroleum development licence


8. Minimum Work Obligation

9. Expenditure Commitment

10. Performance bond

11. Relinquishment of licence area

12. Shape of relinquished areas

- i -

PART IV. DISCOVERY AND DEVELOPMENT

13. Appraisal Programme

14. Evaluation Report

15. Commerciality and General Development Plan

PART V. CONDUCT OF OPERATIONS

16. Good Oilfield Practice

17. Work programmes

18. Ministerial directions

19. Conservation of petroleum

20. Seismic Surveys

21. Drilling approval

22. Drilling supervision

23. Drilling Programme

24.

25. Towing Drilling Platforms

26. Approval of Platform

27. Safety devices

28. Surface casing

29. Intermediate casing

30. Production casing

31. Deviated drilling

32. Discontinuance of drilling

33. Abandonment of Wells

34. Plugging of Wells

35. Removal of obstructions

36. Raising or lowering platforms

37. Visitors on platforms

Location and removal of installations

- ii -

38. Safety instructions

39. Lighting on platforms

40. Positioning of platforms

41. Stand-by vehicle

42.

43.

44. Safety wear

45. Diving operations plan

46. Condition of working areas

47. First Aid

48. Diseases

49. Fatalities

50. Electrical Installations

51. Fire Prevention

52. Firefighting equipment

53. Fire detection

54. Fire hazards

55. Explosives

56. Explosives magazines

57. Transporting explosives

58. Conditions for using explosives

59.

60. Perforating

61. Telecommunications

62. Communication system

63.

Gas detectors and explosion meters

Chemical treatment of a well

Other laws applicable to use of explosives

Vessel mooring and helicopter decks

PART VI. PROTECTION OF THE ENVIRONMENT, NAVIGATION, FISHING,

AND MARINE AND OTHER RESOURCES

- iii -

64. Conservation of living resources

65.

66. Protection of the environment

67. Pollution control

68.

69. Records to be maintained

70.

71. Daily log

72.

73. Samples

74. Cores

75. Reports

76. Periodic submission of reports

77. Oral reports

78. Access to Information

79. Export of Data

Compliance with navigation and aviation regulations

Government execution of pollution control

Accounts of crude oil and natural gas et.

Record of persons on platform

PART VII. MISCELLANEOUS

80. Inspection

81. Offenses and Penalties

82. Definitions

- iv -


PART I. GENERAL PROVISIONS

Citation and consistency 1. (1) These Regulations may be cited as

with Petroleum Act the Petroleum Regulations, 1993

(2) These Regulations are made pursuant to

the authority conferred by Section 41 of the Petroleum

Act, 1984.

(3) In the event of a conflict between the

provisions of the Petroleum Act and the provisions of

these Regulations, the provisions of the Petroleum Act

shall prevail.

Application of Regulations 2. (1) These Regulations shall apply to

exploration and drilling for and production of petroleum

in Solomon Islands, including its offshore area.

(2) The Minister may, under special

circumstances, grant dispensation from the provisions of

these Regulations.


Demarcation of blocks 3. (1) For the purpose of dividing the Solomon

Islands into licence areas, the surface of the earth shall

be deemed to be divided -

(a) by the meridian of Greenwich and by

meridians that are at a distance from that

meridian of five minutes of longitude or a

multiple of five minutes of longitude; and

by the equator of and by parallels of

latitude that are at a distance from the

equator of five minutes of latitude, or a

multiple of five minutes of latitude

(b)

into graticular sections, each constituting a

"block", each of which is bounded by portions of

(c) one of those meridians that are at

distance from each other of five minutes of

longitude; and

(d) one of those parallels of latitude that

are at a distance from each other of five

minutes of latitude.

(2) showing the division of Solomon Islands into blocks and

The Government shall prepare a reference map

the reference map shall be available for inspection at a

place designated by the Minister.

(3) The Minister may certify a map to be a true copy

of the reference map prepared pursuant to this regulation

and any such copy shall be received in all proceedings as

evidence of the contents of that reference map.

(4) to a numbered block, or to part of a numbered block,

shall be treated as a reference to the block, or part of a

block, so numbered on the reference map prepared

pursuant to this regulation.

A reference in a petroleum agreement or a licence

Application for 4. (1) An application for the grant of a

petroleum prospecting

licence

petroleum prospecting licence may be

made only by a body corporate and in the prescribed

form and shall -

(a) give the body corporate’s name and place

of incorporation, the names and nationality

of the directors or equivalent officers and,

i f the body corporate has a share capital,

the name of any person who is the

beneficial owner of more than five per

centum of the issued share capital;

identify the block or blocks in respect of

which it is made;

be accompanied by particulars of -

(b)

(c)

- 4 -

(i) detailed and adequate proposals

for work and minimum

expenditure in respect of the block

or blocks specified in the

application during the term of the

licence;

(ii) technical qualifications of the

applicant;

(iii) financial resources, including

capital, credit facilities and

guarantees available to the

applicant ;

(d) set out other matters that the applicant wishes the

Minister to consider; and

be accompanied by a receipt evidencing payment

of an application fee of ......... US dollars. (e)

(2) regulation with respect to adequate work and expenditure

proposals is deemed to have been met in any case where

the proposals satisfy the requirements (if any) with

respect to work and expenditure obligations contained in

a relevant agreement of a kind referred to in section 1 1

of the Petroleum Act.

The requirement in paragraph (1) (c) (i) of this

(3) block, the blocks applied for

Where an application relates to more than one

- 5 -

(a) shall be so situated as to form a single

area; and

shall be such that each block in the area

has a side in common with at least one

other block in the area.

(b)

(4) prospecting licence shall be made in the same manner as

is prescribed under paragraph (1) of this regulation and

shall be made not less than one hundred and eighty days

before the date of expiry of the petroleum prospecting

licence held by the licensee.

An application for the renewal of a petroleum

Application for 5. (1) An application for the grant of a

petroleum development

licence body corporate and shall:

petroleum development licence shall be made by a

(a) give the body corporate’s name and place

of incorporation, the names and nationality

of the directors or equivalent officers and,

if the body corporate has a share capital,

the name of any person who is the

beneficial owner of more than five per

centum of the issued share capital;

identify the block or blocks in respect of

which it is made; (b)

- 6 -

(c) state the applicant’s petroleum prospecting

licence in respect of the blocks applied for

(if any);

(d) state the period for which the licence is

sought;

give a comprehensive report of the

petroleum deposit, which report shall

include a description of the petroleum

reservoir or deposit, the form of the

petroleum and an estimate of the

petroleum reserves;

contain a proposed programme of

production operations which shall include -

(i)

(e)

(f)

the date by which the applicant

intends to start production;

the capacity of production and scale

of operations;

the estimated overall recovery of

petroleum and by-products;

the nature of the petroleum and by-

products;

(ii)

(iii)

(iv)

(v) the production and processing

possibilities and the intention of the

applicant in relation thereto;

(vi) the marketing arrangements made

for the sale of the petroleum and

by-products;

- 7 -

(g) provide particulars of the applicants

technical qualifications and financial

resources, including capital, credit

facilities and guarantees,

give a detailed forecast of capital

investment, operating costs and sales

revenues;

contain proposals with respect to the

employment and training of Solomon

Islands citizens;

give a report of the goods and services

required for the production and processing

operations which can be obtained within

Solomon Islands and the applicant’s

intention in relation thereto;

give details of expected infrastructure

requirements; and

may set out any other matter that the

applicant wishes the Minister to consider.

(h)

(i)

(j)

(k)

(l)

(2) An application for the grant of a petroleum

development licence shall be accompanied by a receipt

evidencing payment of an application fee of ..................

US dollars.

Bidding for licences 6. (1) The Minister may direct that a petroleum

prospecting licence or petroleum development licence in

respect of any block or blocks shall be granted only after

- 8 -

bids have been received and evaluated and he may

specify the procedures by which interested parties may

take part in any such bidding.

(2) Neither a request to participate in bidding

nor the submission of a bid in respect of any block or

blocks shall create any right in favour of any applicant.

The Minister shall have the right to reject or accept any

or all bids which may be received, without assigning any

reasons therefor.

Petroleum Agreements 7. (1) The Minister on behalf of the State, may

enter into a petroleum agreement with any body

corporate which is a licensee or a prospective licensee

embodying terms and conditions on which petroleum

operations are to be carried out by the body corporate.

(2) The Minister may from time to time

prescribe and publish in the official Gazette, a model

petroleum agreement.

- 9 -


Minimum Work Obligation 8.

the exploration period a minimum work obligation,

including a minimum drilling commitment, to be

specified in the relevant petroleum agreement.

The licensee shall be required to undertake during

Expenditure Commitment 9. The licensee may be required to spend a

minimum sum, to be specified in the relevant petroleum

agreement, to carry out the minimum work obligation

undertaken by the licensee pursuant to regulation 8.

Performance bond 10.

Government a bond or banker’s guarantee, acceptable to

the Minister, for the total amount of the expenditure

obligations stipulated under Regulation 9.

The licensee may be required to provide to the

Relinquishment of licence 11. (1) Each prospecting licence shall

area provide that the licensee must during various phases of

the exploration period relinquish specific portions of the

licence area.

(2) Not later than the expiration of the

exploration period, the licensee shall relinquish all of the

area the subject of the propecting licence except for any

development area or production area.

- 10 -

(3) To effect the relinquishment requirements

of this regulation, a licensee shall give written notice to

the Minister not less than ninety (90) days prior to the

date fixed by the relevant petroleum agreement for

relinquishment, specifying the blocks or parts thereof to

be relinquished.

(4) A licensee may at any time voluntarily

relinquish all or any part of a licence area, provided that

at the time of such voluntary relinquishment, the licensee

is not in arrears in fulfilling its financial and other

obligations under any petroleum agreement relating to

that licence area.

Shape of relinquished areas 12.

12 shall, unless the Government otherwise determines:

(a) consist of entire blocks or quarter blocks;

(b) insofar as is reasonably possible, be contiguous

and compact and of sufficient size and suitable

shape so as to permit the effective carrying out of

exploration operations on the relinquished area;

and

be such that the licence area remaining after

relinquishment is as far as possible contiguous

and compact; and shall conform to such further specifications as

may be included in the licence or any petroleum

agreement pertaining to the area.

Any area relinquished pursuant to this regulation

(c)

(d)

- 11 -

PART VII. DISCOVERY AND DEVELOPMENT

Appraisal Programme 13. (1) If petroleum is discovered in the licence

area, the licensee shall immediately report in writing

such discovery to the Minister.

(2) Unless the licensee when reporting the

discovery under paragraph (1) of this regulation notifies

the Minister that the discovery does not merit appraisal,

the licensee shall within ninety days, or such other period

as is stipulated, in the relevant petroleum agreement for

this purpose, submit to the Minister, or such Government

agency as may be designated in the petroleum agreement,

a work programme for appraisal of the discovery.

Evaluation Report 14. Within a period of ninety days after the

completion of the work programme submitted under

regulation 13 (2) the licensee shall submit to the

Minister, or such Government agency as may be

designated in the relevant petroleum agreement an

Evaluation Report, which shall include, but not be

limited to the following information:

(a) geological conditions, such as structural

configuration, physical properties and extent of

reservoir rocks;

production volume and temperature analysis of the

reservoir fluid; (b)

- 12 -

(c) fluid characteristics, including oil gravity, sulphur

percentage, sediment and water percentage, and

product yield pattern;

production forecasts (per well and per fuil);

estimation of recoverable reserves; and

evaluation of commerciality in accordance with

criteria specified in the relevant petroleum

agreement,

(d)

(e)

(f)

Commerciality and 15. When the discovery is determined to be

General Development

Plan

commercial in accordance with criteria

stipulated in the petroleum agreement, the licensee shall

submit with the Evaluation Report a General

Development Plan which shall contain but not be limited

to, the following information:

(a) a general description of the techniques and

equipment by which it is proposed that the field

will be developed;

a general description of the goods, labor and

services that could be obtained in Solomon

Islands;

an environmental impact statement describing the

possible environmental effects of the proposed

development plan;

a description of the technical and economical

feasibility of alternative methods of development:

(b)

(c)

(d)

- 13 -

(e) where any pool extends beyond the licence area,

the suggested unitization agreement in accordance

with applicable law;

the manner in which the licensee proposes to

finance the development of the petroleum field;

and

a map delineating the proposed development area.

(f)

(g)

- 14 -

PART IV. CONDUCT OF OPERATIONS

Good Oilfield Practices 16. Exploration for and production of petroleum shall

be carried out at all times in a safe manner in accordance

with good oilfield practices and with the Regulations in

force.

Work programmes 17. Licensees shall conduct their operations in

accordance with work programmes approved pursuant to

petroleum agreements to which they are party in a diligent, efficient and workmanlike manner.

Ministerial directions 18. (1) The Minister may give a licensee

directions, not inconsistent with the terms of any

petroleum agreement, from time to time, and the licensee

shall carry out such directions, with respect to the

following:

(a) the use of local goods, labor, and services

in petroleum operations, provided that

such goods, labor and services are of

adequate quality and can be supplied

competitively;

the training and employment of local

personnel;

the allowable rate of petroleum recovery:

the unitization of oil fields extending

beyond a single licence area.

(b)

(c)

(d)

- 15 -

(2) If a licensee at any time fails to carry out

operations in a safe manner in accordance with good

oilfield practice, the Minister may, after giving to the

licensee reasonable notice, do any of the things which in

the opinion of the Minister may be necessary to ensure

safety and to recover the costs and expenses of so doing

from the licensee.

Conservation of 19. (1) A licensee shall conduct operations petroleum in accordance with the best conservation practices,

bearing in mind the long term objective of maximizing

ultimate recovery of petroleum originally in place.

(2) A licensee shall take all reasonable

measures after the discovery of petroleum in any well

capable of producing in commercial quantities to put

such well into operation without undue delay, subject to

the terms of any petroleum agreement.

(3) A licensee shall not start production from

any field or well before testing and ascertaining to the

satisfaction of the Minister that the well has been

properly completed in accordance with good oilfield

practices. The licensee shall inform the Minister

sufficiently in advance to enable him to send such

representatives to be present at such tests.

- 16 -

Seismic surveys 20. (1) A daily log shall be kept of seismic

surveys which shall at all times be carried out in

accordance with good industry practice.

(2)

(a)

The log shall include information on:

the size of the charges and the number of explosions, with an accurate indication of

the shot points;

charges which fail to fire or which misfire;

any observed effects of the surveys on marine life.

(b)

(c)

(3) The Minister may require the log to be

produced for inpection and copying.

Drilling approval 21. (1) No well shall be drilled -

a) without the approval of the

Minister, which approval shall not

be unreasonably withheld; or

so as to deviate at any point out of

the licence area; b)

(2) No well shall be sited within 200 metres of

the boundary of any licence area.

(3) Each well shall be described by a certain

number (which shall be notified to the Minister) in the

records, maps and plans which the licensee is required to

- 17 -

keep and any change in that number shall likewise be

notified to the Minister.

(4) Where work at a well has been

discontinued for more than three months, the well shall

not be recommenced (except for the purpose of cleaning

out operations in a producing well) unless seven days’

notice of the intended recommencement is given to the

Minister.

Drilling supervision 22. (1) Before any drilling is commenced, an

organization plan shall be submitted to the Minister

identifying the individuals responsible for supervision of

the drilling.

(2) The plan referred to in paragraph (1) must

expressly stipulate the abilities of the responsible

individuals, and the chief responsible individual must, as

far as possible, have maritime experience or always have

an assistant with sufficient maritime experience.

(3) The chief responsible individual or his

deputy shall always be present on the drilling platform or

rig.

Drilling programme 23. (1) The licensee shall submit to the Minister a

drilling programme which, inter alia, shall contain the

following information:

- 18 -

(a) a description of the construction

and equipment of the drilling

platform, as well as information as

to whether the drilling shall be

carried out by persons other than

the licensee;

(b) information on the geographical

position of the well;

the estimated total depth of the

well;

the geological strata which are expected to be penetrated;

depth of the ocean at the well site;

a programme for the installation of

casing and the programme shall

give the necessary details as to

diameter, weight and type of

casing, whether new or used casing

is to be employed, at what depth

the casing is intended to be

installed;

(c)

(d)

(e)

(f)

(g) a cementing programme.

(3) Major changes in the drilling programme

shall not be made without the Minister’s consent:

Provided that in an emergency, the drilling

programme may be departed from without prior consent.

- 19 -

The Minister shall in such cases be notified forthwith of

the alterations and of the underlying circumstances

requiring such changes.

Location and removal of 24. Before provisional or permanent

installations installations, including all types of drilling platforms, are

put in place, the Minister’s written consent to the

location or relocation must be obtained. The Minister shall likewise with sufficient time in advance, be

informed about removals and movements of the said

installations.

Towing Drilling Platforms 25. (1) Towing of drilling platforms shall not be

carried out without prior notification to the Minister.

The towing shall be carried out at all times in accordance

with international and domestic regulations and rules in

force. The Minister or anyone authorized by him may

give further directions for the towing.

(2) Only essential personnel shall remain on

the platform during towing and all proper safety

measures shall be taken for the operation.

(3) Towing shall be carried out in such a

manner that it causes the least possible nuisance in the

area and special care shall be taken with regards to

fishing and shipping in the area.

- 20 -

Approval of Platform 26. (1) A licensee shall, within a reasonable time

period prior to the commencement of drilling operations,

transmit to the Minister a description of the platform,

together with necessary drawings and specifications.

(2) Prior to the commencement of drilling

operations, the consent of the Minister must be obtained

for the use of the drilling platform, installations and

equipment described to the Minister pursuant to

paragraph (1).

Safety devices 27. (1) Prior to the start of initial drilling

operations in a well, all necessary safety devices for the

proper control of the well must be present and easily

available on the platform. The said devices shall be

installed in accordance with good oilfield practice.

(2) During drilling, all necessary steps shall

be taken to keep the well under full control to prevent

the release of oil, gas, water and other substances which

may cause explosions, blow-outs, pollution or other

destruction or accidents.

(3) In the event of an explosion, blow-out or

other accident in a well all necessary steps shall

immediately be taken in accordance with good oilfield

practice to re-establish safe working conditions and bring

the well under control. All necessary measures must

- 21 -

immediately be taken to repair, as far as possible, all

damage sustained.

Surface casing 28. (1) Each well must be equipped with surface

casing according to good oilfield practice. The surface

casing shall be cemented at a depth justified by the

geological conditions and with a view to maintaining

complete control of the well at all times.

(2) The surface casing shall be properly

cemented over its full length. The cement shall be given

sufficient time to set prior to the commencement of

further drilling.

Intermediate casing 29. Intermediate casing must be installed and

cemented in such a manner, and at such time, as to

ensure full control of the well at all times, considering,

inter alia, the geological conditions of the subsurface the

danger of blow-outs, the protection of other resources in

the subsurface and the danger of pollution.

Production casing 30. Production casing shall be installed and cemented

in such a manner as to isolate all hydrocarbon-bearing

strata.

Deviated drilling 31. (1) Drilling which intentionally deviates from

the vertical line drawn from the centre of the well on the

seabed, shall not be allowed without the written consent

- 22 -

of the Minister. Such consent is not required, however,

for deviations over short intervals, deviations to

straighten out the well or to overcome difficulties

encountered during drilling.

(2) The written consent of the Minister is required in cases of drilling multiple holes from the same

location.

Discontinuance of drilling 32.

in advance of discontinuance of extended duration and of

the resumption of drilling operations.

The Minister shall be informed at least 24 hours

Abandonment of Wells 33. (1) A well shall not be abandoned without the

consent of the Minister which shall not unreasonably be

withheld. To obtain such consent a licensee shall notify

the Minister of the reasons for abandoning the well and

submit a plan setting out the manner in which the well

will be plugged, secured and abandoned.

(2) The Minister may stipulate a time limit

within which each installation in or above the well shall

be removed.

Plugging of Wells 34. (1) An abandoned well shall be plugged in

accordance with good oilfield practice with top cement

plugs and with additional cement plugs in such a number.

of flush length and with such spacing between the

- 23 -

individual plugs as is required in order to maintain

complete control of the well and prevent the penetration

of salt water or other alien matter into the well.

(2) The well, including the interval between

the cement plugs, shall be filled with drilling fluid or

other fluid of sufficient density and with such other

properties to safely withstand, together with the plugs,

any pressure which may develop within the well.

Removal of obstructions 35.

and other installations protruding from the seabed shall

except as provided in regulation 34 be removed to such a

depth that no obstruction remains which may cause

danger or impediment to fishing or shipping. Before

final abandonment of the well, the licensee shall ensure

that on the seabed, and on the surface of, or in the

vicinity of drilling location, no obstructions of any kind

remain as a result of his operations which may cause

damage or impediment to fishing, shipping or other

activities.

When a well is abandoned, parts of casing strings

Raising or lowering 36. (1) During operations whereby the

platforms platform is raised or lowered, only essential personnel

shall be present. Personnel remaining onboard shall, as

far as possible, be stationed on deck and be equipped

with approved life vests. Suitable means for safe and

immediate removal of personnel from the platform shall

- 24 -

remain in readiness during the entire operation. In

addition, a stand-by vessel with sufficient capacity and

equipment shall be kept ready in the immediate vicinity

of the platform.

(2) The raising and lowering maneuvers shall,

as far as possible, be undertaken in daylight and only

when rendered safe by wind and weather conditions.

Visitors on platforms 37. (1) No person shall be allowed to enter the

drilling platform without permission from the licensee or

anyone authorized by him.

(2) During their stay on the platform visitors

shall comply with the safety rules applicable to the

platform. Visitors shall upon arrival be instructed about

safety regulations in force. Specific information shall be

given about areas where smoking is allowed.

Safety instructions 38. (1) Detailed safety instructions shall be

prepared for each drilling platform. Each employee shall

be required to sign a receipt for his individual copy of

the safety instructions.

(2) The person in charge of each platform

shall ascertain that the workers have understood all

verbal and written instructions given for the execution of

work operations.

- 25 -

(3) General instructions shall be prepared for

each drilling platform with regard to measures to be

taken in emergencies. These instructions shall likewise

be handed to the personnel in the same manner as the

safety instructions referred to above. At frequent

intervals drill exercises shall be held with a view to

coping with emergencies.

(4) A licensee shall comply with instructions

given from time to time by the Minister for protecting

the safety, health and welfare of persons in or around the

licence area.

Lighting on platforms 39. (1) The drilling platform shall be equipped

with adequate electric lighting to make work and stay

onboard as safe as possible.

(2) The drilling platform shall be equipped

with an adequate emergency lighting powered from an

independent energy source. The emergency lighting

system shall be switched on immediately should the

ordinary lighting system fail.

(3) Flash lights of an approved type shall be

easily available at appropriate places.

(4) The emergency lights and the flash lights

shall be inspected at regular intervals.

- 26 -

Positioning of platforms 40. (1) The drilling platform shall be positioned so

as to give maximum protection to operations performed

thereon, including the mooring of vessels and the landing

and take-off of helicopters.

(2) The lower deck of the drilling platform

must be at a safe distance above the sea level.

Stand-by vehicle 41. When circumstance so demand, the licensee shall

provide for a stand by vessel which shall be stationed at

the platform during drilling operations. The stand-by

vessel shall have sufficient capacity and equipment to

take onboard and provide for the total crew of the

platform in cases of emergencies.

Gas detectors and explosion 42. (1) Gas detectors or explosion meters

meters shall be readily available on the platform.

(2) The platform shall likewise be provided

with sufficient oxygen apparatus for full breathing

protection.

(3) If sulphurous or other poisonous gases are

encountered during drilling, all necessary safety

precautions shall be taken to prevent accidents. The

Minister shall be notified forthwith of any such event.

- 27 -

Chemical treatment of a well 43. (1) Swabbing, formation testing, shooting,

hydraulic fracturing, acidizing or other chemical

treatment of a well, shall take place by daylight and only

when wind and weather conditions render it safe.

(2) The work referred to in paragraph (1) shall

be performed in such a way that the well shall not be

damaged and that salt water or other alien matters shall

not be allowed to penetrate into the well.

(3) Prior to the commencement of the

activities mentioned in paragraph (1), the drilling

platform shall be cleared of all unnecessary obstructions.

Only personnel necessary for the operation shall be on or

below the drilling floor, or in the immediate vicinity.

All necessary precautions against fire shall be taken, and

firefighting equipment shall be ready for immediate use.

(4) During acidizing operations personnel who

may come in contact with acid shall be provided with

protective clothing including hoods, gloves and boots.

(5) Acid-containers shall be handled with care

and shall during transportation and use be properly

secured so as to prevent unnecessary movement,

breakage or the infliction of damage to the surroundings

- 28 -

(6) A sufficient amount of neutralizing

material shall be easily available for neutralizing any

spillage of acid.

(7) After termination of the activities

mentioned in paragraph (1), the well and the drilling

platform shall immediately be cleaned.

Safety wear 44. (1) Personnel working on the drilling platform

shall be equipped with safety helmets, safety boots,

safety belts and other safety equipment which they are

obliged to use when working conditions so require.

(2) No one shall be allowed in areas where

there is lack of oxygen or where the air may be polluted

by inflammable or poisonous gases or by other vapours

or dust in such quantities as to endanger human life or

health, unless that person is equipped with appropriate

breathing apparatus.

Diving operations plan 45. (1) The licensee shall submit a diving

operations plan for approval to the Minister before diving

operations are commenced. The plan shall contain

details concerning the equipment to be used and the

safety precautions to be taken to protect the life and

health of the diver.

- 29 -

(2) Permission shall be obtained in advance

from the Minister before diving operations can

commence.

(3) Diving operations shall be carried out in a safe manner and in accordance with any directions of the

Minister.

Condition of working areas 46. (1) Working areas shall at all times be kept as

clean and free of obstacles as possible. Possible

obstacles, protruding points, low ceilings etc. shall be

properly marked.

(2) The drilling platform shall as far as

possible be kept free of oil spillage.

(3) The living quarters shall at all times be

properly cleaned and kept in good order.

First Aid 47. (1) First aid and resuscitating equipment shall

be available at all times.

(2) On each shift at least one member of the

licensee’s personnel shall have taken an approved first

aid course.

- 30 -

(3) The greatest possible number of the

personnel shall be taught an approved method of artificial

respiration.

(4) Before drilling operations are started,

arrangements shall be made to ensure that a medical

doctor is available at all times for transport to the

platform at the shortest possible notice.

Diseases 48. (1) If a disease is detected on the platform

which may be of contagious nature or otherwise be a risk

to the health of the personnel or others, a medical doctor

shall be called to the platform at once.

(2) transportation of a medical doctor to and from the

platform and transportation of a sick or injured person to

a shore facility.

The licensee is obliged to arrange for and pay for

Fatalities 49. (1) If fatalities or other serious accidents

occur, immediate notification shall be given to the

Minister. In addition, a report shall be forwarded to the

Minister in connection with all accidents or illness which

result in a person being disabled for more than three

days.

Electrical Installations 50. (1) Electrical installations, plant and

equipment of any nature shall be constructed, installed

- 31 -

and maintained in such a manner as to prevent, as far as

possible, danger of accidents, fires, explosions etc., and

shall at all times be maintained in accordance with good

oil field practices.

(2) Portable electrical equipment, installations

and lights to be used in danger areas on the drilling

platform shall be of explosion-proof construction.


with a main switch for all electrical installations in

danger areas. Such main switch shall be installed in a

place easily accessible and outside danger areas. The

main switch shall also be equipped with a remote control

that can be operated from the driller’s stand.

(4) A qualified electrician shall always be

available on the drilling platform. Only qualified

electricians may carry out onboard,

(a) installation and maintenance of electrical

equipment and wires;

examination and testing of electrical

equipment and wires. (b)

Fire Prevention 51. (1) All personnel engaged in petroleum

operations shall exercise care in connection with all

activities which may cause fire. Special care shall be

- 32 -

shown in the handling and storing of inflammable

equipment and materials such as explosives, inflammable

liquids and gases and materials with a tendency for self-

ignition etc.

(2) On each drilling platform there shall be a

firechief who shall have the responsibility for fire

prevention and fire fighting services onboard the

platform. In addition, a firefighting squad shall be

designated, consisting of a sufficient number of personnel

who have received training in efficiently fighting fires

and preventing and reducing the effect of explosions with

the firefighting equipment at hand.

(3) A firefighting plan shall be elaborated

advising each employee of his place and task in case of

fires. For each shift, a firefighting leader shall be

appointed.

(4) All personnel shall be familiar with the

firefighting plan, which shall be posted in conspicuous

places.

(5) Fire drills shall be held regularly and a

record shall be made in the daily log concerning fire

drills held and checks made on the firefighting

equipment.

- 33 -

Firefighting equipment 52. (1) The drilling platform and its installations

and equipment shall as far as possible be of fireproof

material.


with firefighting equipment of an appropriate type and

capacity for effective firefighting operations. Such

equipment shall be located in suitable places and shall

always be ready for immediate use.

(3) Fire pumps and their prime movers shall

be so positioned that sufficient pressure can be

maintained in the fire hoses anywhere on the drilling

platform,

(4) The engine room of the drilling platform

shall be equipped with a permanent main firefighting

system or other firefighting equipment deemed

satisfactory by the Minister.

(5) The drilling platform shall be equipped,

with a sufficient number of approved mobile fire

extinguishers. These extinguishers shall be placed within

easy reach in strategic positions on the platform and shall

always be ready for immediate use.

- 34 -

(6) A sufficient quantity of refill material for the fire extinguishers shall be available on the platform at

all times.

Fire detection 53. (1) Adequate procedures shall be established

on the drilling platform to ensure immediate detection

and alarm of fire.

(2) The platform shall be equipped with a fire

alarm system which can easily be heard throughout the

platform.

Fire hazards 54. (1) Use of fire, naked light or working

operations causing sparks shall be permitted only in

places where such activities will not create danger of fire

or explosions, and only with the consent of the firechief.

(2) Smoking may be allowed in the living

quarters of the drilling platform. In addition to such

areas, smoking may be allowed only in such areas and at

such times when it can safely take place.

(3) Welding or metal cutting by gas or

electricity shall be carried out in a safe manner and in

accordance with any directives issued by the Minister.

All necessary precautions shall be taken during the

performance of such work to ensure that:

- 35 -

(a) the welding and cutting equipment

are in good operating condition;

the place where welding is to be

performed is free of gas and that,

as far as possible, no inflammable

material of any kind is present in

the vicinity of the welding site; and

(c) firefighting personnel and sufficient

firefighting equipment are on hand.

(b)

(4) After completion of any welding or cutting

work, the work area shall be thoroughly checked so that

sparks or glows will not cause fire.

Explosives 55. (1) On a drilling platform, only types of

explosives, including detonators or boosters, approved by

the Minister shall be used. The explosives shall be of

such a type as to be rendered harmless after being in

seawater for a period of 24 hours at the maximum:

Provided that such requirements should not apply

to perforating charges and charges used for casing,

cutting and such similar operations.

(2) Explosives shall be kept onboard the

drilling platform only immediately prior to their use, and

only in such quantities as are required for the expected

use.

- 36 -

Explosives magazines 56. (1) Explosives shall be stored in magazines

which are specially approved for this purpose by the

Minister. Detonators, boosters, and blasting charges

shall be kept separated.

(2) The magazines shall be so placed and

constructed so that the explosives can easily be thrown

overboard in cases of emergency.

Transporting explosives 57.

platform, as well as loading and unloading, shall be

undertaken with the utmost care.

The transportation of explosives to and from the

Conditions for using 58. (1) Blasting shall not be carried out

explosives during thunderstorms or other unfavourable weather

conditions. Blasting shall, as far as possible, be carried

out only during daylight.

(2) Radio equipment and other equipment

which may endanger blasting activities shall not be in

operation while blasting is carried out. Radio silence

shall also be observed on ships and helicopters which are

at a safe distance from the platform, considering the type

and power output of the radio equipment.

(3) There shall be no landing and take off of

helicopters and mooring of vessels during blasting

operations.

- 37 -

Other laws applicable to use of explosives

59.

applicable law regarding transport, storage and use of

explosives shall apply to petroleum operations.

In addition to these regulations, any

Perforating 60. (1) Perforating of wells shall be carried out in

accordance with good oilfield practice.

(2) During perforation work, all necessary

precautions shall be taken. Extreme caution shall be

exercised to prevent premature firing.

(3) Ammunition for perforating guns shall be

stored in metal containers properly earthed.

Telecommunications 61. (1) The drilling platform shall have all

necessary equipment for radio communication.

(2) Before any platform is put into operation,

the radio installation shall be approved by the Minister.

(3) The radio equipment shall be permanently

installed in a suitable radio room so that it will not be

damaged or displaced by sudden movements of the

platforms.

(4) The radio installation shall only operate on

approved frequencies and with approved power output

and in compliance with the conditions laid down in the

- 38 -

radio communication licence issued for the said

installation. It shall be maintained and operated in

accordance with the international conventions in force at

any time to which Solomon Islands is a party and in

accordance with the applicable laws.

(5) Broadcasting (sound and television) from

the platform is prohibited.

(6) The radio installations shall provide

connections with stations on land, ships, helicopters and

other drilling platforms in the area.

(7) The platform shall likewise be equipped

with sufficient number of approved portable radio

receivers and transmitters for lifeboats and other survival

craft.

Communication system 62. (1) The drilling platform shall have at its

disposal a communication system consisting of ships and

helicopters sufficient for good operation and proper

maintenance of the platform.

(2) The communication system shall be

organized in such a way that it can be used promptly and

efficiently in any emergency which may arise.

- 39 -

(3) Before the drilling platform is put into

operation, the licensee shall submit to the Minister a plan

governing the communication system. The platform shall

not be put into operation until this system has been

approved by the Minister.

Vessel mooring and 63. (1) The drilling platform shall be so helicopter decks constructed and have proper fender systems, buoy

systems or similar arrangements making safe transfer of

persons and goods to or from the platform possibly

without creating hazards for the platform, vessel, persons

or goods.

(2) Vessels shall not moor, be moored or

remain alongside the platform when wind and weather

conditions create danger for the vessel or the platform.

(3) The drilling platform shall, where

appropriate, be equipped with an approved helicopter

deck.

(4) The drilling platform shall be constructed

in such a manner as to secure an unobstructed flightpath

to and from the helicopter deck.

(3) The drilling platform shall have such

equipment and installation as are necessary for safe

- 40 -

helicopter operation accordance with the applicable

law.

- 41 -

PART V. PROTECTION OF THE ENVIRONMENT, NAVIGATION,

FISHING, AND MARINE AND OTHER RESOURCES

Conservation of living

resources 64. A licensee shall carry out operations in

such manner as to ensure that there will be no

unnecessary interference with fishing or the conservation

of the living resources of the sea and shall take such steps as the Minister may reasonably direct to ensure that

after the completion of petroleum operations in the

licence area or any part thereof by the licensee there will

be no such interference.

Compliance with navigation 65. (1) Survey vessels and aircraft carrying

and aviation regulations out exploration must comply with international and

domestic regulations and rules in force at the time for the

particular location, in connection with navigation and

aviation respectively.

(2) Vessels to be used for seismic surveys

must be equipped with radar, echo sounder and sonar.

Aircraft shall not to be used for seismic

surveys without written permission from the Minister. (3)

Protection of the 66. A licensee shall carry out petroleum

environment operations in such a manner as to:

(1) ensure minimum ecological damage or

destruction;

- 42 -

(2) control the flow and prevent the escape or

avoidable waste of petroleum discovered in

or produced from the licence area;

(3) prevent damage to petroleum-bearing

strata;

prevent the entrance of water through

bore-holes and wells to petroleum-bearing

strata, except for the purpose of secondary

recovery;

prevent damage to on-shore lands and to

trees, crops, buildings and other

structures; and

avoid any actions which could endanger

the health or safety of persons.

(4)

(5)

(6)

Pollution control 67.

release of petroleum or other materials on the seabed in

the sea, or land or in fresh water, or if a licensee’s

operations result in any other form of pollution or

otherwise cause harm to fresh water, marine or animal

life, the licensee shall promptly take all necessary

measures to control the pollution, to clean up any

released petroleum or other materials, or to repair, to the

maximum feasible extent, any damage resulting from the

said circumstances. The cost of such control, clean-up

and repair activities shall be paid by the licensee.

If a licensee’s operations result in the uncontrolled

Government execution of 68. If a licensee does not act promptly so to

- 43 -

pollution control control, clean up, or repair, as the case may be, the

Government, after giving the licensee reasonable notice

in the circumstances, may itself take any action or

execute any work which is necessary, and the costs and

expenses of such work shall be borne by the licensee.

- 44 -

PART VI. RECORDS AND REPORTS

Records to be maintained 69.

in a form from time to time approved by the Minister

containing particular of the following matters, namely -

Each licensee shall keep full and accurate records

(a) the drilling, deepening, plugging or

abandonment of wells;

the strata and subsoil through which wells

are drilled;

the casing inserted in wells and any alteration to such casing;

any petroleum, water and other economic

minerals encountered;

the areas in which any geological or

geophysical work has been carried out;

such other matters related to the above as

the Minister may from time to time

reasonably require.

(b)

(c)

(d)

(e)

(f)

Accounts of crude oil and

natural gas etc.

70.

Islands full and correct accounts (in a form from time to

time approved by the Minister), which shall contain

accurate entries of -

Each licensee shall, keep in Solomon

(a) the gross quantity of crude oil and natural

gas won and saved from the licence area;

the grades and gravity of the crude oil

produced and the composition of natural

gas produced;

(b)

- 45 -

(c) the quantities sold of - (i) crude oil;

(ii) natural gas;

(iii) natural liquids;

(iv) each refined petroleum product,

including liquified petroleum gases;

sulphur, in any form, or any other

minerals, in any form, or any other

gases, liquids or solids,

(v)

together with the names of the purchasers,

the quantity purchased and the price paid

by each purchaser;

the quantity injected into the formation of - (i) crude oil;

(ii) natural gas;

(iii) natural gas liquids;


(d)


water and other liquids or gases; (v) the quantity consumed for drilling and

other production operations other than

quantities reported under paragraph (d) of

this regulation, and consumed in pumping

to field storage and refineries in Solomon

Islands of:

(i) crude oil;

(ii) natural gas;

(iii) natural gas liquids;

(e)

- 46 -



(f) the quantity of crude oil refined in

Solomon Islands;

the quantity of natural gas treated in the

Solomon Islands for the removal of natural

gas liquids and liquified petroleum gases

and the quantity of any liquids or gases or

any solids obtained from it;

the quantity of natural gas flared; and

such further information as the Minister

may reasonably required from time to

time.

(g)

(h)

(i)

Daily log 71. (1) On the drilling platform the licensee shall

keep a daily log on a form approved by the Minister.

The log shall be made at least in duplicate, and one copy

shall be filed at the licensee’s office in Solomon Islands.

The other copy shall at all times be retained at the

platform and be available for inspection by persons

authorized by the Minister.

(2) The daily log shall contain information and

data on all operations during the day including:

(a) the depth of the well at the

beginning of the day;

the depth of the well at the end of

the day; (b)

- 47 -

(c) (d) the geological formations

the diameter of the borehole;

encountered;

characteristics of the drilling fluid

used; (e)

(f) installation of casing;

(g) if casing is installed, all relevant

data concerning the installation,

indicating the diameter, type,

weight, together with information

whether new or used casing is

employed and to what depth the

casing string has been installed;

(h) particulars concerning cementing;

(i) (k) deviation measurements, formation

water, oil and gas encountered;

tests, pressure tests, temperature

measurements in the well as well as

other tests undertaken;

any other operations carried out,

such as the recovery of broken

drillpipes from the borehole,

shooting, perforating, fracturing or

acidizing of the well, completion or

abandonment of the well.

(l)

(2) The daily log shall further contain

information about accidents, damages, injuries and other

- 48 -

Occurrences and other information which may be deemed

of current or future interest to the Minister.

(3) The Minister may require further

information concerning the activities carried out.

Record of persons on platform

72.

record of all persons present onboard the platform or on their way to and from the platform specifiying the name

of the individual and the name of the company or agency

by whom he is employed. The record shall be available

to the Minister or anyone authorized by him at the

licensee’s office in Solomon Islands.

The licensee shall at all times keep a

Samples 73. (1) The licensee shall, while drilling is in

progress, collect from the drilling fluid samples of all

rock types in all the geological formations penetrated.

(2) All samples collected shall be washed,

dried and preserved in bags suited for this purpose. The

bags shall be labelled with the name of the well and the

date the samples were collected and the depths or origin.

The samples or parts thereof shall within three months

after the completion or abandonment of the well be

dispatched, at the expense of the licensee, to the Minister

or a location designated by the Minister.

- 49 -

(3) Geologists of the Government shall at any

time have access to the samples.

Cores 74. (1) The licensee shall, when it is deemed

necessary, take and keep cores of the various geological

formation penetrated.

(2) Within three months of the termination of drilling, the licensee shall dispatch at his own expense,

complete longitudinal sections of each core to the

Minister or a location designated by the Minister. The

longitudinal section shall contain not less than one half of

the core. The Minister shall receive copies of

descriptions and analyses made of the core.

(3) Geologists from the Government shall at

any time have access to the core.

Reports 75. The licensee shall keep the Minister regularly and

fully informed of operations being carried out by the

licensee and shall promptly provide the Minister with

information, data, samples, interpretations and reports

including progress and completion reports, including:-

(a) processed seismic data and interpretations

thereof;

well data, including, but not limited to,

electric logs and other wireline surveys,

mud-logging reports and logs, samples of

(b)

- 50 -

cuttings and cords and analyses made

therefrom;

special reports, such as those prepared

from drilling data, geological or

geophysical data, including maps or

illustrations derived therefrom;

well testing and well completion reports;

reports dealing with location surveys, seabed conditions, and seafloor hazards, or

other reports dealing with well, platform

or pipeline locations;

(c)

(d)

(e)

(f) reservoir investigations and estimates

regarding reserves, field limits and

economic evaluations relating to future

operations;

daily, weekly, monthly and routine reports

on the petroleum operations;

comprehensive final reports upon the

completion of each specific operation;

contingency programmes, and reports on

safety and accidents;

(g)

(h)

(i)

(j) procurement plans, sub-contracts and

service contracts;

design drawings, design criteria or

specifications, and construction records;

reports of technical investigations relating

to petroleum operations;

(k)

(l)

- 51 -

(m) reports of any other investigations based upon data from the licence area;

such other reports as may be required by Accounting Procedures stipulated in a

petroleum agreement.

(n)

Periodic submission 76. (1) Within forty-five (45) days after

of reports the end of each calendar quarter, the licensee shall

prepare and deliver a quarterly progress report to the

Minister which shall contain a narrative report of

activities during such quarter with plans and maps

showing the places where work was done. Such

quarterly reports shall contain:

(a) a summary of all geological and

geophysical work carried out and

results obtained;

a summary of all drilling activity

and results obtained; and

a list of maps, a list of reports and

a list of other geological and

geophysical data prepared by or for

the licensee.

(b)

(c)

(2) Within four (4) months after the end of

each calendar year the licensee shall prepare and deliver

to the Minister an annual report which shall consolidate

the information contained in the quarterly progress

reports furnished in respect of such calendar year.

- 52 -

(3) The licensee shall also submit to the

Minister the following reports:

(a) within two months after the first

day of January and the first day of

July in each year, estimates of

crude oil and natural gas production

and exports for each of the 4 half

year periods immediately following

each of the said dates;

within four months after the end of

each calendar year an estimate of

economically recoverable reserves

of crude oil and natural gas at the

end of that year;

(b)

(c) summaries of each exploration

well, (stating lithological groups,

the letter classification boundaries

and the hydrocarbon zone) within

six months of completion of

drilling, provided that such

information as cannot reasonably be

obtained within this period shall be

submitted as soon as possible;

from time to time, such other plans

and information as to the progress

and results of the licensee’s

operations as the Minister may

reasonably require; and

(d)

- 53 -

(e) on relinquishment of any part of the

licence area such maps, plans,

reports, records, interpretations and

data, made or obtained by or for

the licensee relating to explorations,

development production and any

operations, in the surrendered

lands, as the Minister may require.

Oral reports 77. (1) A licensee shall report orally to the

Minister within twenty-four (24) hours:

(a) if a well shows the presence of

hydrocarbons; or

when a drill-stem test has been

carried out on a well from which

flows petroleum.

(b)

(2) Following the oral reports, written reports

prepared by the licensee must be submitted within seven

(7) days to the Minister.

(3) The written reports prepared under

paragraph (2) shall, in the case of a showing of

hydrocarbon presences, contain, inter alia, relevant

geological information and chemical analyses and in the

case of drill-stem tests, the report shall contain, inter

alia:

(a) relevant geological information;

- 54 -

(b) conditions and results of drill-stem

tests;

(c) chemical and physical analyses;

(d) any deductions therefrom as to the

potential of the reservoir.

Access to Information 78. Inspectors and other duly authorized

representatives and auditors of the Government shall

have the right at all reasonable times to have access to

and to inspect, test and audit the works, equipment,

operations and financial books, records and registers of

any contractor relating to his activities under any licence

including the transportation and marketing of petroleum.

A licensee shall furnish to the inspectors and other duly

authorized representatives and auditors of the

Government who effect the inspection, testing or audit all

necessary assistance and adequate facilities for the proper

discharge of their duties.

Export of Data 79. A licensee shall not export any document or data

from Solomon Islands unless a duplicate or copy thereof

remains i n Solomon Islands. Notwithstanding the

foregoing, a licensee may, with the approval of the

Minister, which shall not be unreasonably withheld,

export magnetic tapes, core samples of other mineral

samples when necessary and shall return such samples or

tapes to Solomon Islands after completing evaluation.

- 55 -

PART VII. MISCELLANEOUS

Inspection 80. (1) The Government may appoint inspectors

having authority to supervise petroleum operations, and

to ensure that these operations are carried out in

conformity with the applicable law; and conditions

stipulated in the exploration licence or the petroleum

agreement, as the case may be.

(2) The inspectors shall at all times have

access to exploration vessels, drilling platforms,

production facilities, installations for production of

electricity, shipment facilities and other installations, and

to all data pertaining to petroleum operations. The

Government may authorize any public official or other

person to exercise the powers of an inspector.

Offenses and Penalties 81.

any of the provisions of Regulations is guilty of an

offence; and any person guilty of an offense shall be

liable on conviction to a fine not exceeding ..........., and

in the case of a continuing offence to a further fine not

exceeding .........., for each day during which the

offence continues after conviction therefor.

A person who contravenes or fails to comply with

Definitions 82. In these Regulations, unless the context otherwise

requires,

- 56 -

"Accounting Procedure" means the accounting

procedure contained in the relevant petroleum agreement.

"affiliated company" means any shareholder of the

licensee owning five per cent (5%) or more of its shares,

or any entity controlling, controlled by or under common

control with the licensee.

"applicable law" means the laws, regulations, decrees

and other instruments having the force of law, as the

same may be issued and in force from time to time, in

Solomon Islands.

"appraisal well" means an exploration well drilled for the

purpose of appraising the commerciality of the petroleum

accumulation within a trap on which a petroleum

accumulation found by a discovery well has been drilled.

"associated gas" means natural gas produced in

association with crude oil and separated therefrom.

"block" means a section of the surface of the earth

demarcated in accordance with regulation 3.

"calendar year" means a period of twelve (12) months,

according to the Gregorian Calendar, beginning on first

January and ending on the following thirty-first

December.

- 57 -

“commercial field” means a petroleum field in the

Contract Area determined to be commercial in

accordance with the procedures stipulated in regulation

14 hereof.

“crude oil” means solid and liquid hydrocarbons under

normal temperature and atmospheric conditions and

includes condensates and distillates obtained from natural

gas.

“development area” means that portion of the licence

area which is subject to a petroleum development

licence.

“exploration” or “exploration operations” mean all

geological, geophysical and geochemical surveys and the

drilling of exploration wells which are carried out in the

licence area during the exploration period, for the

purpose of discovering petroleum-bearing traps, and shall

include any further exploration and relevant processing

and appraisal work, including economic and technical

feasibility studies, as may be carried out to determine

whether such traps constitute commercial fields.

“exploration period“ means the time period stipulated in

the licence, during which the licensee is to carry out

exploration operations;

- 58 -

"exploration well" means a well, including a dry well,

discovery well or on appraisal well, which is drilled

during the exploration period for the purpose of

discovering or appraising a petroleum field.

"Government" means the Government of Solomon

Islands.

"Inspector" or "Chief Inspector" mean public officers

appointed under the Petroleum Act.

"licence" means a petroleum prospecting licence or a

petroleum development licence, or both, as the context

requires.

"licence area" means the area covered by a licence,

excluding any portions from time to time relinquished

pursuant to the provisions of the relevant petroleum

agreement.

"licensee" means a person granted a licence under the

Petroleum Act.

"Minister" means the Minister (for the time being)

charged with responsibility for petroleum affairs.

"natural gas" means all gaseous hydrocarbons, whether

produced in association with crude oil or from gas wells,

- 59 -

and includes wet gas, dry gas and residue gas remaining

after the extraction of liquid hydrocarbons from wet gas.

"performance bond" means a bond for the satisfactory

performance of licensee's obligations pursuant to the

provisions of the relevant petroleum agreement.

"petroleum" means crude oil or natural gas, or a

combination of both.

"petroleum operations" means all exploration and other

activities contemplated and authorized under the

provisions of the relevant petroleum agreement.

"Petroleum Act" means the Petroleum Act, 1987.

"petroleum development licence" means a petroleum

development licence granted under the Petroleum Act.

"petroleum prospecting licence" means a petroleum

prospecting licence granted under the Petroleum Act.

"production operations" means operations carried for the

extraction, treatment, transport, storage and lifting of

petroleum and includes all works and activities connected

therewith.

- 60 -

"Quarter" means a period of three (3) consecutive

months, according to the Gregorian calendar, starting on

the first January, first April, first July, or first October.

"sub-contractor" means an entity which provides any

services to the licensee in connection with petroleum

operations.

"work programme" means the annual plan for the

conduct of petroleum operations, prepared in accordance

with the provisions of the relevant petroleum agreement.

proposed petroleum regulations for the solomon …

Documents