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Petroleum Mining Act

LAWS OF TONGA

[1988 Ed.]

CHAPTER 134

PETROLEUM MINING

ARRANGEMENT OF SECTIONS

SECTION
1. Short title.
2. Interpretation.
3. Restriction on petroleum exploring, prospecting or mining.
4. Persons by whom application may be made.
5. Manner in which application may be made.
6. Lapse of application.
7. Exploration licence.
8. Petroleum agreement.
9. Single petroleum agreement for areas in excess of 2,000 square miles.
10. Grant of more than one exploration licence or petroleum agreement.
11. Notification of any execution, surrender etc. of a petroleum agreement.
12. Regulations.
13. Permission to enter upon alienated land.
14. Unilateral Legislative or executive measures.
15. Extent of repeal of Minerals Act.
SCHEDULE

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Acts 3 of 1969, 15 of 1976, 30 of 1978,
10 of 1980, 8 of 1985, 46 of 1988

AN ACT TO MAKE PROVISIONS RELATING TO THE ISSUE OF EXPLORATION LICENCE AND PETROLEUM AGREEMENT WITH REGARD TO EXPLORATION, PROSPECTING AND MINING FOR PETROLEUM IN THE KINGDOM OF TONGA AND TO PROVIDE FOR MATTERS CONNECTED THEREWITH

[30th January, 1970]

Short title.

1. This Act may be cited as the Petroleum Mining Act.

Interpretation.

2. In this Act, unless the context otherwise requires-

"exploration licence" means a licence issued under section 7 authorising the licensee thereof to explore for petroleum;

"exploration work" means any work carried out in connection with exploration for petroleum;

"foreshore" means the land adjacent to the sea alternately covered and left dry by the ordinary flow and ebb of the tides and all land adjoining thereunto lying within 50 feet of the high water mark of the ordinary tides;

"land" means any area of onshore land within the Kingdom of Tonga and includes offshore land adjacent to and contiguous with such onshore land;

"licensee" means a person to whom an exploration licence under section 7 is issued and includes his successors in title and the person deriving title under him;

"Minister" means the Minister for Lands, Surveys and Natural Resources;

"off - shore land" means all submerged lands lying within the internal waters, territorial sea and exclusive economic zone as described in the Territorial Sea and Exclusive Economic Zone Act 1978*;

"on - shore land" means the surface area of the islands of Tongatapu, 'Eua, Ha'apai, Vava'u and other islands within the Kingdom of Tonga, including the foreshores of these islands;

"person" includes a company;

"petroleum" means-

(a) any naturally occurring hydrocarbons, whether in gaseous, liquid or solid state, but excluding coal or bituminous shales or other stratified deposits from which oil can be extracted by destructive distillation;

(b) any naturally occurring mixture of hydrocarbons, whether in gaseous, liquid or solid state;

(c) any naturally occurring mixture of one or more hydrocarbons, whether in gaseous, liquid or solid state, and one or more of the following that is to say, hydrogen sulphide, nitrogen, helium and carbon dioxide and includes any petroleum as defined by paragraphs (a), (b) or (c) of this definition that has been returned to its natural reservoir;

"petroleum agreement" means an agreement entered into by His Majesty in Council with any person who desires to explore, prospect and mine for petroleum in the Kingdom of Tonga in accordance with sections 8 and 9.

Restriction on petroleum exploring, prospecting or mining.

3. (1) No persons shall explore, prospect or mine for petroleum or do any act with a view to such exploring, prospecting or mining upon any land except by virtue of an exploration licence or a petroleum agreement issued or entered into the provisions of this Act.

(2) Any person who acts in contravention of this section shall be guilty of an offence and shall on conviction be liable to a term of imprisonment not exceeding 2 years, or to a fine not exceeding $5,000 or to both such imprisonment and fine; and all machinery, tools, plant, buildings and other property together with any minerals or other products which may be found upon or proved to have been obtained from the land so unlawfully explored, prospected or mined shall be liable to forfeiture.

Persons by whom applications may be made.

4. (1) Any person desirous of exploring, prospecting or mining for petroleum may apply in accordance with the provisions of this Act for an exploration licence or a petroleum agreement in respect of any area of land.

(2) Every application for an exploration licence or for a petroleum agreement under this Act shall be considered and approved or refused, as the case may be, by His Majesty in Council.

Manner in which application may be made.

5. (1) Every application shall be made in writing in the form set out in the Schedule to this Act and shall be addressed to the Minister for consideration by His Majesty in Council.

(2) Every application made under this section shall be accompanied by such fees as may be prescribed.

(3) There shall be attached to the application 2 copies of a recognised official map of the lands or any part thereof upon which shall be delineated the boundaries of the area in respect of which an exploration licence or petroleum agreement, as the case may be, is applied for; and in the case of an application for an exploration licence, such application shall be supported by evidence that the applicant intends to carry out exploration work on a serious basis over the area of land applied for.

(4) The applicant shall, upon request by the Minister, furnish such evidence as His Majesty in Council may consider necessary as to his financial and technical qualifications and as to his ability to comply with any terms and conditions in the exploration license or, as the case may be, in the clauses of the petroleum agreement; and if such evidence shall not have been so furnished within 3 months of the request thereof, the application shall, unless His Majesty in Council otherwise determines, be deemed to have lapsed and become void.

(5) All information comprised in or furnished to His Majesty in Council in pursuance of an application made under this Act shall be treated as confidential.

(6) Where any person requires an exploration licence or a petroleum agreement in respect of 2 or more separate areas, a separate application shall be made in respect of each such area.

Lapse of application.

6. If a petroleum agreement has not been signed by the applicant company or its successor and such applicant company or its successor has not paid the fee in accordance with regulations within 6 months following the approval date of the application, the right of the applicant to such petroleum agreement shall lapse, unless His Majesty in Council considers that the delay is not attributable to the fault of such company.

Exploration Licence.

7. (1) His Majesty in Council may issue an exploration licence in respect of the whole or any part of the area of land applied for, and every exploration licence issued under this Act may, subject to the following provisos, authorise the licensee thereof to explore for petroleum over the whole or any part of the area of land specified in that licence:

Provided that an exploration licence shall not be issued in respect of an area of land which has already been covered by a petroleum agreement entered into under section 8:

And provided further that nothing in this section shall prevent His Majesty in Council from issuing in respect of the same area of land more than one exploration licence or another exploration licence or licences to other person or persons.

(2) Every licensee of an exploration licence shall enjoy rights and liberty granted under his licence during the continuance thereof in common with other licensees to whom exploration licences in respect of the same area may have been issued or may hereafter be issued.

(3) Every exploration licence shall be for an initial period of 2 years and thereafter may be extended from time to time upon an application for the extension thereof made and supported by evidence that the licensee had in fact carried out during the currency of the licence exploration work upon a reasonable scale.

(4) The licensee of an exploration licence may at any time apply to His Majesty in Council for a petroleum agreement in respect of the whole or any part of the area held under his exploration licence; and upon the issue of a petroleum agreement covering such area or any part thereof all exploration licences covering such area or any part thereof shall determine without the Government of Tonga being liable to pay any compensation to licensees.

(5) His Majesty in Council may cause to be prepared and published a model exploration licence. An exploration licence shall ordinarily be in the form and contain the terms and conditions of such model exploration licence:

Provided that in respect of any exploration licence, His Majesty in Council may make such modifications and exclusions and may add such additional clauses as His Majesty in Council may deem fit.

(Substituted by Act 8 of 1985.)

Petroleum agreement.

8. (1) Upon an application made in that behalf by any person desirous of exploring, prospecting and/or mining for petroleum, His Majesty in Council may, subject to the provisions of section 9 and the following subsection, enter with such person into a petroleum agreement in respect of any area or areas of land for which such application therefor has been made as herein provided.

(2) His Majesty in Council may cause to be prepared and published a model petroleum agreement.

A petroleum agreement shall ordinarily be in the form and contain the terms and conditions of such model petroleum agreement:

Provided that in respect of any petroleum agreement His Majesty in Council may make such modifications and exclusions and may add such additional clauses as His Majesty in Council may deem fit and provided further that every petroleum agreement shall cover an area not exceeding 2,000 square miles, or areas which in the aggregate do not exceed 2,000 square miles.

(Substituted by Act 8 of 1985.)

Single petroleum agreement for areas in excess of 2,000 square miles.

9. His Majesty in Council may enter into a single petroleum agreement in respect of an area or areas notwithstanding that the total areas to be covered by such petroleum agreement may exceed 2,000 square miles as required by subsection (2) of section 8.

(Substituted Act 8 of 1983.)

Grant of more than one exploration licence or petroleum agreement.

10. Nothing in this Act shall prevent more than one exploration licence or petroleum agreement being issued to or entered into with the same person.

Notification of any execution, surrender etc. of a petroleum agreement.

11. His Majesty in Council shall, as soon as may be after the execution, surrender, determination or assignment of any petroleum agreement or the rights thereunder, issue a public notification of the fact stating the name of the person with whom such petroleum agreement was made, the name of any assignee and the situation of the area concerned.

Regulations.

12. (1) His Majesty in Council may make and when made vary, alter, amend, revoke or cancel regulations generally for the purposes of carrying into effect the provisions of this Act, and in particular such regulations may provide for-

(i) the model exploration licence and the model petroleum agreement;

(ii) the appointment, duties, privileges and powers of officers to enforce the provisions of this Act including an exploration licence and any petroleum agreement issued or entered into thereunder;

(iii) the prescribing of fees to be paid in respect of the issue of an exploration licence and the entering into of any petroleum agreement;

(iv) the prevention of fires in areas where oil mining is being carried on;

(v) the establishment of safety areas around any petroleum reserve installations erected on the sea bed provided that no safety area around petroleum mining installations erected on the off-shore land shall exceed five hundred metres in radius;

(vi) the general safety, health, working conditions and welfare of persons engaged in oil mining whether on - shore or off - shore; and

(vii) the amendment of the Schedule.

(2) Any rules made in pursuance of paragraph (vi) of subsection (1) may provide that such rules shall be in addition to or in substitution for the provisions of the written law of the Kingdom relating to labour and any rules made thereunder relating to the matters specified in that paragraph.

(3) Any person who contravenes a provision of any regulations made under subsection (1)(iv), (v) and (vi) of this section shall be guilty of an offence and shall on conviction be liable to a term of imprisonment not exceeding 2 years or to a fine not exceeding $5,000 or to both such imprisonment and fine.

Permission to enter upon alienated land.

13. (1) Where a licensee or a person who is a party to a petroleum agreement has been refused entry upon alienated land by the holder thereof, such licensee or such person may make an application to the Minister for permission to enter upon such alienated land; and the Minister may subject to subsection (2) grant the permission applied for on condition that the applicant undertakes to pay compensation for all the damage which may have been caused to the land or crops or property therein or on such other conditions as the Minister may deem fit to impose.

(2) Before granting the permission referred to under subsection (1), the Minister shall grant to the holder of such alienated land the right of being heard, and the permission so granted shall be final and shall not be questioned in any court of law.

(3) Upon the production to the holder of such alienated land of the permission granted under subsection (1), such holder shall allow the person in whose favour the permission is granted or a person authorised by him to enter upon such land.

(4) If, after having been produced to him the permission referred to under subsection (1) the holder of such alienated land refuses or fails to allow entry upon his land by the person in whose favour the permission is granted or a person authorised by him, such holder shall be guilty of an offence and upon conviction shall be liable to a fine not exceeding $1,000 and a further fine not exceeding $20 for every day during which the refusal or the failure continues.

(5) For the purpose of this section the expression "holder" includes chargee, lessee, occupier or any person having interest in the land; and the expression "entry" includes the exercising of any rights contained in the licence or the petroleum agreement.

Unilateral Legislative or Executive Measures.

14. The basic financial, fiscal and other considerations stipulated in any petroleum agreement executed under this Act shall not be changed during the first 10 years of its term by unilateral legislative or executive measures.

(Amended by Act 15 of 1976.)

Extent of repeal of Minerals Act.

15. All references to petroleum exploration and prospecting licences and to petroleum mining leases occurring in the Minerals Act shall on the coming into force of this Act be deemed to have been repealed.
Cap. 133

* This Act (Act 30 of 1978_.) was not in force as at 31 December, 1988, but was published on 29^th June, 1979 at G. 182/79.

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SCHEDULE

(Section 5(1))

APPLICATION FOR AN EXPLORATION LICENCE OR FOR A PETROLEUM AGREEMENT

1. Name(s) of Applicant(s) in full.

2. If application is by an individual or individuals-

(a) Address

(b) Nationality

(c) Occupation of each individual.

3. If application is by a company-

(a) Law under which company in incorporated

(b) Country where company registered

(c) Principal place of business

(d) If principal place of business is outside the Kingdom of Tonga, name and address of duly authorized agent in the Kingdom

(e) Nature of business

(f) Name and nationality of each director

(g) Name of each principal shareholder and the amount of shares held by him.

4. State whether a petroleum agreement or a petroleum exploration licence is required.

5. Situation and approximate size of the area in respect of which application is made.

6. Brief particulars of previous experience in petroleum prospecting or oilfield development work.

7. Name and qualifications of technical experts or advisers.

8. Brief particulars of interest in and access to refining and marketing facilities outside the Kingdom of Tonga.

9. State amount of capital for operations under the exploration licence or petroleum agreement applied for-

(a) at present available;

(b) which applicant can make available and the source.

10. State particulars of work and minimum expenditure proposed to be carried out or expended on the area in respect of which application is made.

(Inserted by Act 8 of 1985.)

11. State any significant adverse effect which the proposed operations would be likely to have on the environment and proposals for controlling or eliminating that effect.

(Inserted by Act 8 of 1985.)

12. Give particulars of proposals with respect to the employment and training of citizens of Tonga.

(Inserted by Act 8 of 1985.)

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SECTION 12 - Petroleum Mining Regulations

ARRANGEMENT OF REGULATIONS

REGULATIONS
1. Short title.

PART I. – DEFINITIONS

2. Interpretation.
3. Graticulation of earth's surface and constitution of blocks.
4. Reference map.

PART II. - FINANCIAL PROVISIONS

5. Royalty.
6. Prohibition of disposal of petroleum.
7. Remission of royalty etc.
8. Security for compliance and recovery of royalty.
9. Right of distress.
10. Fees in respect of petroleum agreement and exploration licence.
11. Company to keep and give records.

PART III. - RECORDS, ACCOUNTS, ETC.

12. Company to keep samples.
13. Company to keep accounts.
14. Company to furnish copy of agreements.
15. Treatment of information supplied by company.

PART IV. - RIGHTS RESERVED BY GOVERNMENT

16. Government may work other substances in Scheduled Lands.
17. Government may enter Scheduled Lands for other purposes.
18. Government may alienate Scheduled Lands to third parties subject to Company's rights.
19. Government may alienate surface in certain cases so as to interfere with Company's
rights.
20. Government may exclude lands for public purposes.
21. Fishing and navigation.

PART V. - MISCELLANEOUS DUTIES OF THE COMPANY

22. Restrictions as to alienated lands.
23. Occupation of Scheduled Lands for surface purposes.
24. Company not to cause damage.
25. Timber cutting in Reserved Forest restricted.
26. Limitation of rights over foreshore.
27. Limitation of rights over sea areas and reclamation.
28. Installations in sea areas.
29. Pollution.
30. Company not to use lands other than for purposes of agreement.
31. Company not to obstruct working of other minerals.
32. Distance of boreholes or wells from boundaries.
33. No drilling operations to be carried on near public roads.
34. Notice of the site and commencement of boreholes and wells.
35. Abandonment and plugging of boreholes.
36. Methods of working.
37. Provision of storage tanks.
38. Disposal of waste oil.
39. Health and safety.
40. Unit development.
41. Refined products.
42. Right of pre - emption in emergency.
43. Land required by a Company for its operations.
44. Compensation.
45. Indemnity against third party claims.
46. Statements, prospectuses etc.
47. Notice of fresh issues of capital.
48. Lands included by inadvertence in Scheduled Lands.
49. Establishment of boundary mark.

PART VI. - MISCELLANEOUS PROVISIONS

50. Notification of Assignments.
51. Measurement of Petroleum.
52. Power for Government to perform Company's obligations.
53. Employment and training of citizens of Tonga.
54. Rate of production.
55. Local resident manager.
56. Delivery up of productive boreholes and wells at end of agreement period.
57. Plugging of boreholes and wells at end of agreement period.
58. Applications.
59. Obstruction of a Company or Licensee.
60. Power of entry.
61. Miscellaneous offences.
62. Offence committed by a body corporate.

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SECTION 12 - Petroleum Mining Regulations

Made by His Majesty in Council G. S. 107/85

Short title.

1. These Regulations may be cited as the Petroleum Mining Regulations.

PART I. – DEFINITIONS

Interpretation.

2. In these Regulations, unless the context otherwise requires-

"agreement period" means the period during which a petroleum agreement subsists as determined under the provisions of these regulations and the petroleum agreement;

"agreement year" means a year commencing on the date or anniversary of the commencement of the agreement period;

"associated natural gas" means natural gas, including the free gas cap, produced from any well in the Scheduled Lands, the predominant production of which is crude oil, and which is separated from crude oil in accordance with normal oil field practice, but shall exclude any liquid hydrocarbons extracted or in a gas plant;

"authorised officer" in relation to any provision of these Regulations means an officer acting under the authority of the Minister;

"barrel" means 42 U.S. gallons or 9,702 cubic inches, being equivalent to 34.9726 Imperial gallons;

"block" means a block constituted as provided by Regulation 3.

"calendar month" or "month" means any of the twelve months of the calendar year;

"calendar year" or "year" means a period of twelve consecutive months according to the Gregorian calendar, starting with 1 January and ending with 31st December;

"casinghead petroleum spirit" means any liquid hydrocarbons obtained from natural gas (before the crude oil from which it is derived has been measured for royalty) by separation or by any chemical or physical process;

"Company" means a party to a petroleum agreement with the Government of the Kingdom of Tonga and for the purposes of these Regulations such party may be an individual;

"crude oil" means mineral oil in its natural state before the same has been refined or otherwise treated, but excluding water and foreign substances;

"Discovery" means a discovery of petroleum, not previously known to have existed, recovered at the surface in a flow measurable by conventional petroleum industry production testing methods;

"discovery area" means a block or blocks within the Scheduled Lands containing, so far as the boundaries of the Scheduled Lands permit, the geological feature (as mapped by the relevant seismic data) or any part thereof, in which a discovery of petroleum is located;

"exploration licence" means a licence issued under Section 7 of the Petroleum Mining Act authorising the licensee thereof to explore for petroleum in Tonga;

"foreshore" means the land adjacent to the sea alternately covered and left dry by the ordinary flow and ebb of the sea tides and all land adjoining thereunto lying within fifty feet of the high water mark of the ordinary tides;

"gas condensate" means the liquid hydrocarbons extracted or recovered from the natural gas either by normal field practices of petroleum gas processing or in a gas plant;

"graticular section" means a section referred to in Regulation 3;

"Government" means Government of the Kingdom of Tonga;

"licensee" means a licensee as defined in the Petroleum Mining Act;

"Minister" means the Minister of Lands, Survey and Natural Resources;

"natural gas" means gas obtained from bore holes and wells and consisting primarily of hydrocarbons;

"non-associated natural gas" means natural gas other than associated natural gas;

"offshore land" means all submerged lands lying within the extent and boundaries of the Kingdom of Tonga, as defined by the Petroleum Mining Act;

"onshore land" means the surface area of the islands of Tongatapu, 'Eua, Ha'apai, Vava'u and other islands in the Kingdom of Tonga, including the foreshores of these islands;

"Part" means a part of these regulations;

"petroleum" means petroleum as defined in the Petroleum Mining Act;

"petroleum agreement" means a petroleum agreement as defined in the Petroleum Mining Act;

"petroleum field" means an area forming a part of a discovery area and including in a single area, so far as the boundaries of the Scheduled Lands permit, the entire area of the reservoir in respect of which a Company has submitted a development plan under the terms of its petroleum agreement;

"petroleum operations" means searching for a winning or obtaining of petroleum in Tonga by or on behalf of a Company for its own account by any drilling, mining, extracting or other like operations or process in the course of a business carried on by that company engaged in the course of a business carried on by that company engaged in such operations, and all operations incidental thereto, and/or any sale or disposal by any petroleum company or companies or any purchase exclusively for sale by way of export by any other company or companies of petroleum so won or obtained, and includes the transportation within Tonga by or on behalf of that company of petroleum so won or obtained to any point of sale or delivery or export, but does not include:

(a) any transportation of petroleum outside Tonga;

(b) any process of refining at a refinery; or

(c) any dealings with products so refined.

"reservoir" means a discrete accumulation of petroleum in a geological feature located in part or in whole within the Scheduled Lands, limited by:

(a) lithological boundaries;

(b) structural boundaries;

(c) the contract zone between the petroleum and water level; or any combination of these limitations, so that the entire accumulation of petroleum is in pressure, fluid or gas communication. If only part of a reservoir is located with the Scheduled Lands, reference in these Regulations to such reservoir shall means only that part thereof located within the Scheduled Lands.

"Scheduled Lands" means the lands specified in an exploration licence or a petroleum agreement, as the case may be, as the areas to which the said licence or agreement is applicable;

"surface lands" means the surface area of the islands of Tongatapu, 'Eua, Ha'apai, Vava'u and other islands in the Kingdom of Tonga, excluding the foreshore of these islands.

Words not defined in these Regulations but which are defined in the Petroleum Mining Act shall, unless the context otherwise requires, have the meaning given to them in the Act.

Graticulation of earth's surface and constitution of blocks.

3. (1) For the purpose of these Regulations, the surface of the earth is deemed to be divided into sections:

(a) by the meridian of Greenwich and by the meridians that are at a distance from that meridian of 10 minutes or a multiple of 10 minutes of longitude; and

(b) by the equator and by parallels of latitude that are a distance from the equator of 10 minutes, or a multiple of 10 minutes of latitude,

each of which is bounded by:

(i) portions of two of those meridians that are at a distance from each other of 10 minutes of longitude; and

(ii) portions of two of those parallels of latitude that are at a distance from each other of 10 minutes of latitude.

(2) Where the area in respect of which a petroleum agreement is in force includes one, or more than one, portion of a block constituted as provided by sub-regulation (1):

(a) the area of that portion or those portions constitutes a block; and

(b) the area of the remaining portion or portions of the first-mentioned block (but not including any part of that area in respect of which a petroleum agreement is in force) constitutes a block.

(3) Where a petroleum agreement ceases to be in force in respect of an area referred to in sub-regulation (2)(a), the Minister may, by instrument in writing, determine that the area shall be amalgamated with another block or blocks, being a block or blocks:-

(a) constituted as provided by this regulation;

(b) forming part of the graticular section of which the area forms part; and

(c) that is or are either;

(i) a block or blocks in respect of which a petroleum agreement is in force; or

(ii) a block or blocks constituted under sub-regulation (2)(b.)

(4) Where a determination is made under sub-regulation (3),

(a) the area and blocks, both of which are the subject of the determination, cease to constitute separate blocks and their areas together constitute a single block; and

(b) in respect of the area and a block, in relation to which there is a petroleum agreement in force, the block constituted by the determination is a block for the remainder of the term of that petroleum agreement.

(5) In these regulations:

(a) a reference to a block that is constituted by a graticular section includes a reference to a block that is constituted by an area of a part of a graticular section; and

(b) a reference to a graticular section that constitutes a block includes a reference to a graticular section, a part only of which constitutes a block.

Reference Map.

4. (1) His Majesty in Council may cause to be prepared a reference map showing the geographical area of the Kingdom of Tonga divided into blocks constituted as provided in regulation 3.

(2) The reference map prepared pursuant to sub-regulation (1) shall be deposited at such office as may, from time to time, be appointed by His Majesty in Council by notice published in the Gazette.

(3) Each block on the reference map may be given a number and a letter, or either, on the map for the purpose of identification.

(4) The Minister may, from time to time, 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 the reference map so prepared.

(5) Following publication of the reference map prepared pursuant to this regulation 4, any reference in an exploration licence or a petroleum agreement granted pursuant to the Petroleum Mining Act to an identified block shall be treated as a reference to the block so identified on the reference map.

PART II. - FINANCIAL PROVISION

Royalty.

5. A Company shall pay royalty in accordance with the petroleum agreement and these regulations.

Prohibition on disposal of petroleum.

6. If a Company fails to pay any royalty payable by it on or before the due date, or any extension thereof allowed by the Minister, the Minister may, by order served on the Company, prohibit the removal of, or any dealings in or with, any petroleum from the petroleum field concerned, or from any other petroleum field covered by a petroleum agreement to which the Company is a party, or from both, until all outstanding royalty has been paid or until an arrangement has been made and accepted by the Minister, for the payment of the royalty; and the Company shall comply with the order.

Remission of royalty etc.

7. The Minister may, on application made to him by the Company:

(a) remit, in whole or part, any royalty payable; or

(b) defer payment of any royalty on such conditions (if any) as he may determine and specify in the instrument of remission or deferment.

Security for compliance and recovery of royalty.

8. (1) The Minister may, from time to time, make such arrangements as appear appropriate to him to secure that a Company complies with these regulations and the petroleum agreement, or either, and in particular may accept guarantees whether from shareholders in the Company or otherwise, in respect of that compliance.

(2) A sum of money payable in respect of royalty pursuant to regulation 5 is a debt due to the Kingdom of Tonga and may be recovered in a court of competent jurisdiction.

(3) A certificate of the Minister certifying that a specified sum of money payable in respect of royalty by a person identified in the certificate shall, in any proceedings instituted against that person for the recovery of any royalty, be received as evidence of that fact, but without prejudice to the right to adduce evidence in rebuttal.

Right of distress.

9. If and whenever any of the fixed periodic payments of royalties reserved by a petroleum agreement or any part thereof respectively shall be in arrear or unpaid for the space of two calendar months next after any of the days whereon the same ought to be paid (whether the same shall have been legally demanded or not); then and so often as the same may happen the Government may by any officer duly authorised thereto (as an additional remedy and without prejudice to any other rights and remedies to which it would be entitled) enter into and upon any area which shall for the time being be possessed or occupied by the Company for the purposes of a petroleum agreement or the exercise of any of the rights granted by such an agreement and may seize and distrain and sell as landlords may do for rent in arrear all or any of the stocks of petroleum and products thereof, engines, machinery, tools, implements, chattels and effects belonging to the Company which shall be found in or upon the area so entered upon and out of the money arising from the sale of such distress may retain and pay all the arrears of the said fixed periodic payments and royalties and also the costs and expenses of and incidental to any such distress and sale rendering the surplus (if any) to the Company, provided that if there is any dispute or failure to agree between the parties affecting the amount of the royalties payable, such amount only as is admitted by the Company to be the minimum amount of royalties payable is paid by the Company then the Government shall not exercise its rights under this regulation.

Fees in respect of petroleum agreement and exploration licence.

10. The fees payable under Section 5(2) of the Petroleum Mining Act shall be $1,000 in respect of an application for a petroleum agreement and $500 in respect of an application for an exploration licence.

PART III. - RECORDS, ACCOUNTS, ETC.

Company to keep and give records.

11. (1) A Company shall keep full and accurate records, in such form as is from time to time approved by the Minister, containing particulars of the following matters:

(a) the drilling, deepening, plugging or abandonment of all boreholes and wells;

(b) the strata and subsoil through which all boreholes and wells are drilled;

(c) the casing inserted in all boreholes and wells and any alteration to such casing;

(d) any petroleum, water and other economic minerals encounters;

(e) the areas in which any geological or geophysical work has been carried out;

(f) such other matters related to the above as the Minister may from time to time reasonably require;

and shall also keep accurate geological maps and plans and geophysical records and interpretations relating to the Scheduled Lands. Such maps, plans, records and interpretations and all geological and geophysical reports made by or for the Company shall be available for inspection by the Minister or his duly authorised officers, and the Company shall deliver copies of such maps, plans, records, interpretations and reports to the Minister whenever required.

(2) The Company shall give the Minister:

(a) within one month after the end of each quarter year period:

(i) a summary of all geological and geophysical work carried out;

(ii) a summary of all drilling activity and results obtained;

(iii) a list of maps, a list of reports and a list of other geological and geophysical data prepared by or for the Company;

(iv) notification of future exploration plans:

(b) 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 four half-year periods immediately following the said date;

(c) within four months after the end of each calendar year:

(i) estimates of economically recoverable reserves of crude oil and natural gas at the end of that year;

(ii) a record, in a form approved by the Minister, which describes the results of all exploration, development and other works carried out by the Company during that year in connection with searching for, boring for and obtaining petroleum;

(d) summaries of exploration wells, including general lithological groups, letter classification boundaries and hydro-carbon zones, within six months of completion of drilling. Such information as cannot reasonably be obtained within this period shall be submitted as soon as available;

(e) from time to time, such other plans and information as to the progress and results or the Company's operations as the Minister may reasonably require; and

(f) on relinquishment of any part of the Scheduled Lands, such maps, plans, reports, records, interpretations and data, made or obtained by or for the Company, relating to exploration, development, production, and any operations in the surrendered lands, as the Minister may require.

Company to keep samples.

12. A Company shall as far as reasonably practicable correctly label and keep for reference for a period of one calendar year characteristic samples of any petroleum found in the Scheduled Lands and for a period of two calendar years characteristic samples of the strata found in any borehole or well. The Minister or his representative shall have access to such samples at all reasonable times and shall be entitled to require that representative specimens of any such samples be delivered to him. Furthermore, the Minister may retain any specimens so delivered.

Company to keep accounts.

13. (1) A Company shall keep full and correct accounts, in such form as is from time to time approved by the Minister, at all times during the agreement period. These accounts shall contain accurate entries of:

(a) the gross quantity of:

(i) crude oil obtained from the Scheduled Lands:

(ii) untreated natural gas obtained from the Scheduled Lands:

(b) the grades and gravity of the crude oil produced and the composition of natural gas produced;

(c) the quantities sold of:

(i) crude oil;

(ii) natural gas;

(iii) casing head petroleum spirit;

(iv) each refined petroleum product, including liquefied petroleum gases;

(v) sulphur, in any form, or any other gases, liquids or solids, together with the names of the purchasers, the quantity purchased and the price paid by each purchaser;

(d) the quantity injected into the formation of:

(i) crude oil;

(ii) natural gas;

(iii) casing head petroleum spirit;

(iv) each refined petroleum product, including liquefied petroleum gases;

(v) water and other liquids or gases;

(e) the quantity consumed for drilling and other production operations (other than quantities reported under (d above) and consumed in pumping to field storage and refineries in the Kingdom of Tonga of:

(i) crude oil;

(ii) natural gas;

(iii) casing head petroleum spirit;

(iv) each refined petroleum product, including liquefied petroleum gases;

(f) the quantity of crude oil refined in the Kingdom and the quantity of each refined product, including liquefied petroleum gases, obtained from it; and

(g) the quantity of natural gas treated in the Kingdom for the removal of casing head petroleum spirit or other liquids and liquefied petroleum gases and the quantity of:

(i) casing head petroleum spirit;

(ii) butane;

(iii) propane;

(iv) any other liquids or gases or any solids obtained from it;

(h) the quantity of natural gas flared;

(i) such further information as the Minister may reasonably require from time to time.

(2) The Company shall, within two calendar months after the first day of January and the first day of July in each year, deliver to the Minister a summary of the said accounts for each such half-year period, in a form from time to time approved by the Minister, together with a statement of all royalties payable in respect of each such half-year period.

Company to furnish copy of agreements.

14. A Company shall, within two calendar months of the date of execution, give to the Minister copies of all conveyances, leases, assignments, agreements and deeds relating to the Scheduled Lands or any interest therein and to which the Company is a party or under which the Company either directly or indirectly obtains any benefit or incurs any liability.

Treatment of information supplied by company.

15. (1) A Company shall keep the Minister currently advised of all major developments regarding the operations under a petroleum agreement including, but not limited to, information in respect of the drilling, deepening, workover, repair, plugging, abandonment or completion of wells.

(2) All well records including lithologies, electric logs, composite well logs, core samples and core descriptions; maps and magnetic tapes; and all other geological and geophysical information interpretations and reports prepared or obtained by it as a result of its activities under a petroleum agreement and all technical, financial, and economic reports, studies, analyses, evaluations and interpretations prepared by or for the Company, relating to the Scheduled Lands shall be the property of the Government, provided, however, that the Company shall be entitled to retain copies of interpretations, reports, maps, tapes, logs and portions of samples for its own use. The Company shall deliver to the Minister within a reasonable time after they have become available copies of the above. Sepia copies shall be supplied by the Company whenever requested.

(3) The maps, plans, reports, tapes, samples, studies, records, interpretations and data which the Company is required to deliver to the Minister under a petroleum agreement shall be supplied at the expense of the Company and, subject to this regulation, shall be treated as confidential by the Company and the Government, except as otherwise agreed. The Government shall be entitled:

(a) at any time to make use of any information received from the Company for the purpose of preparing and publishing aggregated returns and general reports on the extent of operations under a petroleum agreement;

(b) at any time, to make use of topographical survey information, including submarine topography, for any purpose whatever;

(c) at any time, to make use of information received from the Company for the purpose of any arbitration or litigation between the parties;

(d) at any time, to make use of any information regarding economic minerals other than petroleum;

(e) to release or use the materials set out in sub-regulation (2) relating to the surrendered parts of the Scheduled Lands, immediately upon their surrender; and upon termination to release or use the said materials relating to the remainder of the Scheduled Lands not previously surrendered.

(4) The Company shall have the right to use the materials set out in sub-regulation (2) for any purpose in connection with the Company's operations under a petroleum agreement and to disclose the information contained in such materials to outside consultants engaged in connection with the Company's operations thereunder, to a bank or financial institution from whom the Company may be seeking to obtain financing or, with the approval of the Minister, to any third party who has a bona fide interest in acquiring by purchase, exchange or otherwise all or a portion of the Company's rights and interest in a petroleum agreement. The Company shall inform the Government of the disclosure or disposal of any rights or interest pursuant to this provision.

PART IV. - RIGHTS RESERVED BY GOVERNMENT

Government may work other substances in Scheduled Lands.

16. The Government or any other person authorised by the Government for that purpose shall hold the right:

(a) to enter into and upon the Scheduled Lands and the seas over any part thereof in order to search for, dig for and take any substances other than petroleum therein or for all and every purpose other than those for which a petroleum agreement is entered into;

(b) to sink, build and use such pits, shafts, levels, drains, water-courses, tunnels, buildings, engines, machinery and other things on, in or under the Scheduled Lands as the Government thinks necessary or desirable for the purposes specified in paragraph (a) of this sub - regulation; and to grant such rights, permits or wayleaves over the Scheduled Lands as may reasonably be required by other persons for the purpose of laying, operating and maintaining pipes, cables, telephone and power lines and intercommunication and passage to the shore:

provided that the said rights shall be exercised in a manner which does not interfere with the rights of a licensee under an exploration licence or a Company under a petroleum agreement; provided also that fair compensation shall be paid for all loss or damage which a licensee or Company may incur because of the exercise of the said rights.

Government may enter Scheduled Lands for other purposes.

17. The Government or any other person authorised by the Government for that purpose shall hold the right:

(a) to enter a to enter into and upon the Scheduled Lands in order to make and maintain on the Scheduled Lands such reservoirs, pumping stations, generating stations, radio transmitting and receiving apparatus, waterways, roads, railways, telegraph and telephone lines and pipelines or other things as in the opinion of the Government, are necessary or desirable for any purpose;

(b) to obtain from and out of the Scheduled Lands such stone, earth and other minerals as may be necessary or required for making and maintaining the things specified in paragraph (a) of this regulation;

(c) at all times to draw water from the Scheduled Lands and to have free access thereto; and

(d) to go to and fro at all times on and through the Scheduled Lands for all such purposes as may be required:

provided always that the said rights shall be exercised in a manner which does not interfere with the rights of a licensee under an exploration licence or a Company under a petroleum agreement; provided also that fair compensation shall be paid for all loss or damage (but not including the value of any materials taken) which a licensee or a Company may incur because of the exercise of the said rights.

Government may alienate Scheduled Lands to third parties subject to company's rights.

18. The Government shall hold the right at any time to alienate to any person all or any area or areas of the Scheduled Lands for any purpose, provided that such alienation shall be made subject to the rights of a Company under a petroleum agreement.

Government may alienate surface in certain case so as to interfere with Company's rights.

19. (1) The Government may, at any time or times, give notice to a Company that application has been made to the Government to acquire rights over the surface of such area or areas of any Scheduled Lands as is mentioned in such notice.

(2) If the Company does not give notice to the Government that it objects to the Government consenting to such application within ninety days after receipt of such notice, then the Government shall hold the right at any time or times thereafter to alienate all or any part of the surface of such area or areas;

PROVIDED THAT
such alienation shall not exclude the said area or areas from the Scheduled Lands but only exclude the Company's rights to enter on and occupy the surface thereof.

(3) If any such objection is made by the Company within the said period and the Government desires to effect the alienation notwithstanding such objection, then the question whether the proposed alienation ought or ought not to be effected shall be referred to arbitration.

(4) If the arbitrators decide that the proposed alienation may be made without seriously harming the rights of the Company under a petroleum agreement, then it shall be lawful for them to award that it may be made either:

(a) freed from the right of the Company under a petroleum agreement to occupy the surface; or

(b) subject to the right of the Company under a petroleum agreement in relation to the surface of all or any parts of such area or areas (in whatsoever way defined as the Arbitration may determine);

Provided that such rights may nevertheless be exercised only on condition that before the exercise of any right in respect of the surface, the Company:

(i) shall give to the acquirer and his successors in title 60 days' previous notice of the Company's intention to exercise such rights; and

(ii) shall make an agreement with him to pay compensation (to be assessed in a case of dispute by arbitration) for all loss or damage which he may incur because of the exercise of such rights.

(5) Whenever an award is made under paragraph (b) of sub-regulation (4) of this regulation, the proposed alienation, if made, shall be made expressly subject to the provisions of the award.

(6) The Company shall hold a prior right to have any area or areas alienated under this regulation again included in the Scheduled Lands over which the Company holds the right to occupy the surface under a petroleum agreement, if such area or areas shall subsequently become available for this purpose.

(7) The foregoing provisions of this regulation shall not prevent the Company obtaining the right by agreement to occupy the surface of any area or areas alienated under the provisions of this regulation if the title of the acquirer and his successors in title so allows.

Government may exclude lands for public purposes.

20. (1) The Government shall hold the right at any time to withdraw a Company's right to occupy the surface of any area or area_s of any Scheduled Lands if such area or areas are required for existing villages or new villages, village extensions, water reserves, harbour limits, navigational purposes or any other public purposes whatsoever, provided that:

(a) during the agreement period, the area or areas so excluded shall not exceed 10 square miles as regards any one area, and in all shall not exceed 50 square miles; and

(b) the area or areas excluded under this regulation shall continue to form part of any Scheduled Lands subject to a petroleum agreement:

provided that no operations are carried on, in or under such area or areas other than searching for or mining petroleum by means of deviated drilling from Scheduled Lands not so excluded; and

(c) the exclusion of any area or areas shall not be required if:

(i) any active operations such as well drillings, ro_ad construction, waterworks and/or other operations relating to the obtaining of petroleum have previously been commenced or are in progress therein; or

(ii) the Company has given notice that such area or areas are required for occupation and paid or offered compensation in respect thereof under sub - regulation (3) of regulation 23.

Instead, some other equal area or areas of the Scheduled Lands shall be excluded which are suitable in the opinion of the Government for the said public purposes.

Fishing and navigation.

21. A Company shall not carry out any operations authorised by an Government exploration licence or petroleum agreement in or about the Scheduled Lands may exclude in such manner as, in the opinion of the Minister, interferes unjustifiably with lands for navigation or fishing in the waters around or in the Scheduled Lands or with public
the conservation of the living resources of the sea.

PART V. - MISCELLANEOUS DUTIES OF A COMPANY

Restrictions as to alienated lands.

22. To the extent that any part or parts of the Scheduled Lands are at the date of a petroleum agreement held by third parties under the provisions of any written law relating to land tenure:

(a) the rights granted to a Company in respect of such part or parts of the Scheduled Lands shall be subject to the provisions of such written law relating thereto as then existing; and

(b) The Company shall not exercise any of the rights granted under the petroleum agreement in respect of any area or areas of such part or parts of the Scheduled Lands without the previous consent of the Minister who shall give such consent upon proof to his satisfaction that:

(i) the Company has agreed with the registered holder or holders of the surface of such area or areas for payment of compensation to such registered holder or holders in respect of any damage which may be done to such area or areas or to any cultivation or buildings thereon because of the exercise of such rights; or

(ii) the Company has made reasonable efforts to make such an agreement but has failed to do so through no fault of its own; or

(iii) the Company is unable to make such an agreement because such registered holder or holders or any of them cannot be found, or are out of the Kingdom, or are for any reason legally incapable of making such an agreement.

Occupation of Scheduled Lands for surface purposes.

23. (1) Before occupying any area or areas of Government land within the Scheduled Lands for the purposes of surface operations, a Company shall give to the Minister not less than 28 days' previous notice specifying by name, amount or other sufficient designation the area or areas proposed to be occupied and the purpose for which the area or areas is or are required.

(2)The Minister shall state his objections, if any, on the grounds of public interest, to the proposed site within 28 days after receipt of such notice. The validity of such objections, if a dispute occurs, shall be determined by reference to local arbitration by the Land Court, as constituted under the Land Act.
Cap. 132.

(3) The Company shall always pay or offer reasonable compensation to the landholder of any area or areas of the Scheduled Lands before the Company occupies such area or areas. Thereafter the Company shall be entitled to occupy such area or areas (subject to any adverse award by the arbitrators) but shall pay the amount of rent and compensation to the landholder. Rent and compensation hereunder and the Company and any dispute arising shall be assessed by reference to local arbitration by the Land Court as constituted under the Land Act.

Company not to cause damage.

24. A Company shall not exercise the rights granted by a petroleum agreement in a way which may cause damage by water or otherwise to land not occupied by the Company. damage.

Timber cutting in Reserved Forest restricted.

25. The following restrictions on rights granted under a petroleum agreement with regard to the cutting down of brushwood and under - growth and the felling of timber for the purpose of facilitating the carrying out of petroleum operations on the Scheduled Lands shall apply to any Scheduled Lands that may have been proclaimed to be a Reserved Forest:

(a) a plan of the whole of any area or areas which it is proposed to develop shall be given to the Minister;

(b) a plan of any portion of the area or areas to be cleared shall be given to the Minister and the proposed locations for well sites shall be shown on it; such plans shall be made from actual survey and shall, if practicable, be on the same scale as the plan referred to in paragraph (a) of this regulation with points of connection to enable them to be plotted on that plan;

(c) clearings shall be strictly limited to the actual area or areas necessary for the efficient conduct of the operations under a petroleum agreement together with such additional clearings as may be necessary for the protection of such operations from fire and other hazards;

(d) due care shall be exercised in felling all trees so as not to damage other trees outside the area or areas being cleared;

(e) the clearings for well sites shall not usually exceed two acres.

Limitation of right over foreshore.

26. The rights granted by a petroleum agreement shall be exercised on the foreshore only when it is necessary to carry out any operations under a petroleum agreement. A Company shall not cause any reasonably avoidable obstruction to the use of such foreshore for other purposes through exercising such rights.

Limitation of rights over sea areas and reclamation.

27. Nothing in a petroleum agreement shall be deemed to give any rights to a Company over the sea areas of the Scheduled Lands other than such rights as may be necessary for carrying out its operations under the agreement and obtaining petroleum from the Scheduled Lands in a proper and efficient manner or other than such rights as may be expressly mentioned in the agreement.

Installations in Sea areas.

28. Any works or installations erected by a Company under a petroleum agreement in or over any part of the sea-bed for the time being comprised in the Scheduled Lands shall be of such sort and shall be made, placed, marked and buoyed, equipped and maintained in such a way as to leave at all times and in any conditions safe and convenient channels for shipping in the area and as not unreasonably to interfere with any shipping. The Company (if required to do so by the Government) shall maintain audible and visible navigational aids and illuminate between the hours of sunset and sunrise all derricks, piers, survey marks, and any other installations erected in or over such part of the sea bed and in such manner and by such means as are satisfactory to the Minister.

Pollution.

29. (1) A Company shall adopt all practicable precautions (which shall include the provision of modern equipment) to prevent pollution of the high seas or coastal waters by oil, mud or other fluid or substance which might contaminate the sea water or shore line or which might cause harm or destruction to marine life.

(2) In the event that, as a result of the Company's petroleum operations pollution occurs, the Company shall take such measures as shall be specified in its petroleum agreement to remove the said pollution and to minimise the consequences to the environment.

Company not to use lands other than the purposes of Agreement.

30. A Company shall not, except with the consent of the Minister, use the Scheduled Lands in any manner except for the purposes of a petroleum agreement.

Company not to obstruct working of other minerals.

31. A Company shall not, whenever reasonably avoidable, exercise the rights granted by a petroleum agreement in a manner which may obstruct or interrupt the development and working of any minerals (other than petroleum) within the Scheduled Lands or lands adjacent to them. The Company shall at all times (so far as lies within its powers) give the holders of licences or leases in respect of any such minerals reasonable means of access and passage on and across the Scheduled Lands to such minerals for the purposes of searching for, digging for, taking and carrying away such minerals.

Distance of boreholes or wells from boundaries.

32. No borehole or well shall be drilled:

(a) within a distance of 600 feet from the boundaries of the Scheduled Lands except with the consent of the Minister, or

(b) so as to deviate at any point from the Scheduled Lands.

No drilling operations to be carried on near public roads etc.

33. Except with the previous consent of the Minister or of any authorised officer and subject to any conditions which may be connected with such consent, no drilling operations shall be carried on by a Company on the Scheduled Lands at any place within 100 yards of any reservoir, canal, railway or public road which is not constructed by the Company, or within 100 yards of any other public works or any building or inhabited site which is not the property of the Company, other than for maintenance or repair of existing wells. Moreover, no storage tanks shall be erected at any point within 300 yards of such places, provided that if such places are situated on or within any of the areas falling under the operation of regulations 18, 19 or 20 the provisions of this regulation shall not apply.

Notice of the site and commencement of boreholes and wells.

34. (1) As soon as the site of any borehole or well has been decided, a Company shall notify the Minister of the site of it. The borehole or well shall be described by a certain number in the records, maps and plans which the Company is required to keep under the provisions of these Regulations. The Company shall notify the Minister of any change in the number of any such borehole or well which may be made.

(2) No borehole or well shall be commenced and no borehole or well shall be recommenced after work has been discontinued thereat for more than six months unless seven days' notice in writing shall have first been given to the Minister, provided that the operation of this regulation shall not apply to cleaning out operations in a producing well.

Abandonment and plugging or boreholes.

35. (1) No borehole or well shall be abandoned and no cemented string or other permanent form of casing shall be withdrawn from any borehole or well which it is proposed to abandon without the prior consent of the Minister or, in the case of an exploration borehole or well, without notification to the Minister as soon as practicable. Consent shall not be unreasonably withheld in respect of boreholes or wells which have become or are unproductive.

(2) Every borehole or well which a Company intends to abandon shall be securely plugged by the Company in order to prevent entry and exit of water in and from any portion of the strata bored through, unless the Minister otherwise determines.

(3) The Minister may require on any occasion that no borehole or well shall be plugged except in the presence of an officer authorised by him.

Methods of working.

36. (1) A Company shall proceed with all due diligence to carry out exploration and development work at a reasonable and economically justifiable rate.

(2) The Company shall maintain all apparatus and appliances and all boreholes and wells capable of producing petroleum in good repair and condition. The Company shall carry out all operations under its petroleum agreement in a workmanlike manner and in accordance with generally accepted standards of good petroleum field operations and conservation practices. Without prejudice to the general nature of the foregoing provisions the Company shall take all steps practicable in order-

(a) to control the flow and to prevent the escape or waste of petroleum discovered in the Scheduled Lands;

(b) to prevent damage to petroleum bearing strata in the Scheduled Lands and in adjoining areas outside the Scheduled Lands;

(c) to prevent the fortuitous entrance of water through boreholes and wells to petroleum bearing strata; and

(d) to prevent the pollution of any water well, spring, stream, river, lake, reservoir, estuary or harbour, the high seas or coastal waters and shoreline by oil or mud or other fluid or substance which might cause harm or destruction to marine life.

(3) The Company shall obey any instructions from time to time given by the Minister in writing relating to any of the matters specified in paragraphs (a) to (d) of sub-regulation (2) of this regulation, provided that if the Company objects to any such instruction for the reason that it is unreasonable, it may refer the matter to the Supreme Court within 28 days after the date when such instruction was given.

Provision of storage tanks.

37. A Company shall use generally accepted standards of the international petroleum industry for confining the petroleum obtained from the Scheduled Lands in tanks, gasholders, pipes, pipelines or other receptacles constructed for the purpose.

Disposal of waste oil.

38. A Company shall drain all waste oil, salt water and refuse from tanks, gasholders, boreholes and wells into proper receptacles, which shall be constructed and maintained by it for that purpose, at a sate distance from such tanks, gasholders, boreholes, wells and other structures whether situated within the Scheduled Lands or not. The Company shall dispose of such waste oil, salt water and refuse in a manner from time to time approved by the Minister.

Health and safety.

39. A Company shall comply with any instructions given from time to time by the Minister for maintaining the health and safety of persons employed by the Company in or about the Scheduled Lands.

Unit Development.

40. If any time during the agreement period:

(a) other petroleum agreements are at the time in force in respect of a common petroleum reservoir;

(b) the Government shall consider that it is in the interests of the Kingdom, in order to secure the maximum ultimate recovery of petroleum and to avoid unnecessary competitive drilling, that this common petroleum reservoir should be worked and developed as a unit in co - operation by all the persons whose petroleum agreements extend to or include any part of this common petroleum reservoir;

then the following provisions shall apply:

(i) the Minister may require a Company by notice to co - operate with such other persons as are parties to petroleum agreements with the Government in respect of any part or parts of the common petroleum reservoir as may be specified in the said notice (in this regulation called "the other Operators") in the preparation of a scheme (in this regulation called "a development scheme") for the working and development of the common petroleum reservoir as a unit by the Company and the other Operators in co - operation. The said notice shall contain a description by reference to a map of the area or areas in respect of which the Minister requires a development scheme to be submitted and shall state the period within which such scheme is required to be submitted for approval by the Minister.

(ii) upon receipt of such notice the Company shall be bound to submit such a scheme jointly with the other Operators for the approval of the Minister;

(iii) if a development scheme is not submitted to the Minister within the period limited by the said notice, or, if a development scheme is so submitted but is not approved by the Minister, then the Minister may prepare a development scheme which shall be fair and equitable to the Company and the other Operators. Moreover the Company shall obey all the provisions of any such development scheme applicable to the Company, provided that if the Company objects to any such development scheme prepared by the Minister, it may refer the matter within 28 days from the date when notice of such development scheme is given to it by the Minister for decision by a sole expert appointed by agreement between the parties. In the event that the Company and the Minister are unable to agree on a sole expert the said expert shall be appointed by the Secretary-General of the International Centre for the Settlement of Investment Disputes. The costs of the reference shall be borne by the Company.

Refined products.

41. A Company shall, if so requested by the Government, supply as much Refined of its production of crude oil in the Kingdom as shall be necessary for the supply of refined products for local consumption in the Kingdom, in a proportion of total demand in the Kingdom similar to the proportion that its production of crude oil bears to total production in the Kingdom.

Right of pre-emption in emergency.

42. Whenever a Proclamation of Emergency is issued under section 2 of the Emergency Powers Act, the following provisions shall apply:

(a) the Government shall hold the first right to purchase all crude oil obtained by any Company from the Scheduled Lands under its petroleum agreement and all the products of that crude oil;

(b) the Company shall use its best endeavours to increase as far as reasonably possible with facilities that then exist, the supply of crude oil and/or products of that crude oil to the extent required by the Government;

(c) with all reasonable speed, the Company shall endeavour to deliver all crude oil or products of that crude oil which are purchased by the Government under this regulation in the quantities, at the time and the manner required by the Government at a convenient place of shipment or a place of storage in the Kingdom to be determined by the Minister (whether belonging to the Government or otherwise). If a vessel employed to carry any such crude oil or products of such crude oil on behalf of the Government is detained on demurrage at the port of loading, then the Company shall pay the amount owing for demurrage according to the terms of the charter party and/or the rate of loading previously agreed unless the delay is due to causes outside the control of the Company;

(d) the price to be paid for all crude oil or products of it which are purchased by the Government shall be either:

(i) separately agreed by the parties; or

(ii) in default of agreement, a fair price at the places and on the dates of delivery to be settled by a sole expert, appointed by agreement between the parties or in the event of a failure to agree by the Secretary-General of the International Centre for the Settlement of Investment Disputes.

To assist in arriving at a fair price at the places and on the dates of delivery the Company shall give particulars to the Government and the sole expert if so required, in respect of the quantities, descriptions and prices of crude oil or products previously sold to other customers and of charters or contracts entered into for carriage. The Company shall also show to the Government and the sole expert original or authenticated copies of contracts or charter parties entered into for the sale or carriage of such crude oil or products. The foregoing information shall be treated as confidental; and

(e) The Government shall also hold the right to take control of the plant and premises of the Company in the Kingdom, and if this happens the Company shall conform to and obey all directions issued by the Minister or on his behalf. Reasonable compensation shall be paid to the Company for any loss or damage that may be proved to have been incurred by the Company by reason of the exercise by the Government of the powers given by this paragraph of this regulation.

Land required by a Company for its operations.

43. (1) The Government may at the request of a Company use its best endeavours to make available to the Company at the Company's expense such land on shore outside the Scheduled Lands but within the Kingdom, for use by the Company and for erection, operation and maintenance of shore installations, storage, processing, residential and recreational facilities, and facilities for the appropriation of water and pipelines, harbours and jetties and all other buildings and works as the Company may reasonably require for the exercise of its rights under a petroleum agreement or carrying out its operations thereunder:

This land shall be of such a size, in such an area or areas and be made available on such conditions as may be agreed between the Government and a Company.

Provided that-

(a) where such land is alienated land the Company shall first have made an offer to the holder thereof to acquire or lease the land at a reasonable price or on reasonable terms;

(b) where the Crown Land made available to the Company in accordance with the provisions of this regulation is situated within the area of any other lands the subject of a petroleum agreement to which the Company is a party then such land shall be held on the same terms and conditions as if the land so made available had been occupied by the Company in accordance with the provisions of that petroleum agreement;

(c) nothing in this regulation shall compel the Government compulsorily to acquire land for the above purposes under the provisions of any written law relating to the compulsory acquisition of land by the Government.

(2) If the Company's rights over any lands, outside the Scheduled Lands and the subject of a petroleum agreement to which the Company is a party, are surrendered or in any way terminated, the Company shall have the right to occupy for the duration of the petroleum agreement any area of such lands upon which stand shore installations, residential areas, supplies of water or any other building, construction or plant as are necessary for the exercise by the Company of its right under the agreement.

(3) The Government shall also grant to the Company such rights, permits or wayleaves over the continental shelf outside the Scheduled Lands and use its best endeavours to procure the grant of such rights, permits or way - leaves over territorial waters for the purpose of laying operating and maintaining pipes, cables, telephone and power lines and intercommunication and passage between the Section and the shore as the Company may reasonably require for the exercise of its rights under a petroleum agreement or carrying out its operations hereunder.

Compensation.

44. A Company shall pay reasonable compensation in respect of legal liability arising from injury to the property and rights of third persons which may be done by the Company, its agents and servants in the exercise of the rights granted by a petroleum agreement.

Indemnity against third party claims.

45. A Company shall at all times indemnify the Government, the Minister and every public officer of the Kingdom against all actions, costs, charges, claims and demands whatsoever which may be made or brought by any third person in connection with anything done or purported to be done by the Company under a petroleum agreement.

Statements, Prospectuses, etc.

46. (1) No statement shall be made by or with the consent of the Company claiming or suggesting whether expressly or by implication that any Government Department or any person or body acting on behalf of the Government has or have formed or expressed any opinion that the Scheduled Lands are from their geological formation or otherwise likely to contain petroleum.

(2) The foregoing provisions of this regulation or a statement to the effect thereof shall be included in or endorsed on any prospectus, statement in lieu of prospectus, notice, circular advertisement or other invitation issued by or with the consent of the Company offering to the public for subscription or purchase any shares or debentures of a company or a company proposed to be brought into existence.

Notice of fresh issues of capital.

47. A Company shall report to the Minister particulars of any fresh issues of capital which may be made by it from time to time and any alteration which may be made in the Memorandum and Articles of Association or in the constitution of the Company.

Lands included by inadvertence in the Scheduled Lands.

48. In the event of the inclusion by inadvertence in the Scheduled Lands of any area over which it may subsequently be proved that the Government is not entitled to the petroleum rights or of lands or areas in respect of which the petroleum rights have already been granted to other individuals or companies, the petroleum agreement concerned shall be deemed to have been amended by exclusion from the Scheduled Lands of any such lands or areas from the date of such proof or the grant of the said petroleum agreement.

Established of the boundary mark.

49. A Company shall, unless the Minister otherwise determines, carry out at its own expense such survey operations as are necessary to connect every angle and corner of the boundary line of the Scheduled Lands to fixed marks co-ordinated on the 1,000 metre Universal Transverse Mercator Grid Zone, Universal spherical where any angle or corner is at a place which is above low water the Company may be required to erect forthwith and at all times maintain substantial boundary marks of brick stone or concrete not less than one foot high. Such boundary marks shall be connected survey to fixed marks co-ordinated on the 1,000 metre Universal Transverse Mercator Grid Zone, Universal spherical in such a manner that the boundaries of the Scheduled Lands can be accurately traced on the ground. The Company shall ensure that the area demarcated on the ground shall conform as closely as possible to the area delineated on the plan annexed to the relevant petroleum agreement.

PART VI. - MISCELLANEOUS PROVISIONS

Notification of Assignments.

50. Where a Company wishes to transfer its interest or rights under a petroleum agreement or an exploration licence to any person or persons with the consent of the Government as provided for under the terms of a petroleum agreement or an exploration licence, it shall give written notice to the Minister of the transfer to be made at least 60 (sixty) days before the date on which it is proposed to make the transfer effective. The Minister shall notify the Company within 30 (thirty) days after receipt of the Company's notification whether he consents to the said transfer.

Measurement of Petroleum.

51. (1) The Company shall measure or weigh, by a method or methods customarily used in good oilfield practice and from time to time approved by the Minister all petroleum won and saved from the Scheduled Lands.

(2) The Company shall not make any alteration in the method or methods of measurement or weighing used by it or in any appliances used for that purpose without the consent in writing of the Minister and the Minister may in any case require that no alteration shall be made save in the presence of a person authorised by the Minister.

(3) The Minister may, from time to time, direct that any weighing or measuring appliance shall be tested or examined in such manner, upon such occasions or at such intervals, and by such means as may be specified in the direction.

(4) If any measuring or weighing appliance is, upon any such test or examination as is mentioned in sub-Clause (3), found to be false or unjust the appliance shall, if the Minister so determines after considering any representations in writing by the Company be deemed to have existed in that condition during a period that is represented by half of the period from the last occasion upon which the appliance was tested or examined pursuant to sub-regulation (3) the date when appliance was found to be false or unjust, and any royalty or other amounts payable under this Agreement, the Principal Act or the Regulations affected thereby for that period shall be adjusted accordingly.

(5) For the purposes of measuring natural gas won and saved from the Scheduled Lands the volume of the natural gas shall be calculated at an absolute pressure of one atmosphere and at a temperature of 60° F.

Power for Government to perform Company's obligations.

52. If a Company at any time fails to comply with any of the obligations which must be complied with by the Company under these regulations or under its petroleum agreement, then and in any such case, the Government shall be entitled, after giving to the Company reasonable notice, to do any of the things which, in the opinion of the Government, may be necessary to ensure compliance with such obligations and to recover the costs and expenses of so doing from the Company.

Employment and Training of Citizens of Tonga etc.

53. (1) A Company shall, to the extent practicable, employ nationals of Tonga for all types of work in the conduct of its operations. Subject to the law in force from time to time relating to entry into Tonga, to the extent that the local supply of man-power with the necessary qualifications may be inadequate, the Company shall be permitted to bring in expatriate skilled workers and experts (including their spouses and dependent children) into Tonga for the purpose of petroleum operations.

(2) The Company shall use reasonable efforts to train nationals of Tonga for all types of work with respect to its petroleum operations, including technical, administrative, executive and management positions. Towards this end, the Company shall undertake a programme of on–the-job training agreed with the Minister.

(3) The Company shall, to the extent possible, engage local firms in Tonga (including companies incorporated in Tonga) to carry out any works for, or supply materials to, the Company, but nothing in this sub-regulation shall be taken as requiring the Company to engage local firms which are not competitive with non - local firms.

Rate of production.

54. (1) Where petroleum is being recovered in a petroleum field, the Minister may, by instrument in writing served on a Company, direct the Company to take all necessary practicable steps to reduce the rate at which the petroleum is being recovered to such rate as the Minister specifies in the instrument.

(2) Where the Minister is not satisfied with the steps taken or being taken by a Company to whom a direction has been given under sub-regulation (1), the Minister may, by instrument in writing served on the Company, give to the Company such directions as the Minister thinks necessary for or in relation to the reduction of the rate at which petroleum is being recovered in the area.

(3) The Minister may agree to derogate from his powers under this regulation.

Local resident manager.

55. A Company shall, before commencing any operations in the Scheduled Lands, furnish to the Minister the name and address of the manager resident in the Kingdom under whose supervision such operations are to be carried on.

Delivering up of productive boreholes and wells at end of agreement period.

56. Within two months after the end of the agreement period or any earlier determination of a petroleum agreement, the Company shall deliver up to the Government all productive boreholes or wells made by the Company in good repair and condition and fit for further working (unless ordered by the Minister to plug them as provided for in regulation 57 unless boreholes and wells have been previously abandoned with the consent of the Minister).

Plugging of boreholes and wells at end of agreement period.

57. Within two months after the end of the agreement period or at any earlier determination of a petroleum agreement, a Company shall plug all boreholes and wells if required so to do by the Minister.

Applications.

58. (1) The Minister may require an applicant for an exploration licence or petroleum agreement to make such arrangements as may be satisfactory to the Minister for the execution of a bond or some other form of security for the performance and observance of the condition to which the licence, when granted, or the agreement, when entered into, may be subject.

(2) The Minister may require an applicant for an exploration licence or petroleum agreement to furnish him with any information that may be relevant to the application and may, in particular, where an applicant is a body corporate, require the applicant to furnish him with such information as may be necessary to enable him to ascertain the extent of any controlling power over the direction of the affairs of the body corporate by a company incorporated outside Tonga or by individuals resident outside Tonga.

(3) To enable His Majesty in Council to dispose of an application for the grant of an exploration licence or petroleum agreement the Minister may ask the applicant to submit proposals on such matters as he may specify and cause such investigations, negotiations or consultations to be carried on as he considers necessary.

Obstruction of a Company or Licensee.

59. Any person who, without reasonable excuse, molests, hinders or prevents a licensee or a Company in or as the case may be, from the doing of any act which the said licensee or Company is authorised to do by the Petroleum Mining Act, these regulations, a petroleum agreement or an exploration licence, is guilty of an offence and liable on conviction to a fine not exceeding $1,000 and a further fine not exceeding $20 for every day during which the said offence of obstruction continues.

Power of Entry.

60. (1) For the purposes of these regulations, the Minister, or an authorised officer, at all reasonable times may:

(a) enter any area, structure, vehicle, vessel, aircraft or building that, in his opinion, has been, is being, or is to be used in connection with:

(i) exploration operations; or

(ii) production operations.

(b) inspect and test, or have tested by a qualified person, any machinery or equipment that, in his opinion, has been, is being or is to be used in connection with any of the operations referred to in paragraph (a);

(c) take or remove for the purpose of analysis or testing or for use in evidence in connection with an offence against these regulations samples of petroleum, water or other substances from a well;

(d) inspect, take extracts from, and make copies of, any document relating to any of the operations referred to in paragraphs (a);

(e) with respect to the health and safety of persons employed by a licensee or Company as the case may be in or in connection with any of the operations referred to in paragraph (a) issue directions to and impose restrictions on the Company or licensee, or any persons so employed, by instrument in writing;

(f) may order, by instrument in writing;

(i) the cessation of operations on or in, and the withdrawal of any person from, any area, structure or building that is being used in connection with any of the operations referred to in paragraph (a);or

(ii) the discontinuance of the use of any machinery or equipment;

which he considers unsafe, unless and until action as is necessary for safety and specified in the instrument is taken and completed;

(g) make such examinations and enquiries as are necessary to ensure that the provisions of these regulations and any directions issued, restrictions imposed, or orders made under these regulations, are being complied with;

(h) enter any part of the Scheduled Lands to carry out any operations which the Government may be entitled to carry out under these regulations or a petroleum agreement; and

(i) obtain and record statements from witnesses, and appear at or conduct enquiries held regarding accidents occurring in the course of any of the operations referred to in paragraph (a), and appear at inquests, and call and examine witnesses, and cross - examine witnesses.

(2) before exercising any of his powers under sub-regulation (1), if there is any person present who is or appears to be in charge of the area, structure, vehicle, vessel, aircraft, building, machinery, equipment or matter or thing in respect of which the power is about to be exercised, the Minister or authorised officer shall identify himself to that person and to any person to whom he is about to give an order or a direction.

(3) Any person who is aggrieved by a decision, direction or order of an authorised officer made under this regulation may appeal in writing to the Minister or, in the case of a decision, direction or order made by the Minister, to His Majesty's Cabinet, which shall, as soon as practicable, hear and dispose of the appeal, but the bringing of the appeal does not affect the execution and operation of the decisions, direction or order appealed against, pending disposition of the appeal.

(4) On appeal under sub-regulation (3), the Minister or His Majesty's Cabinet, as the case may be, may rescind or affirm the decision, direction or order appealed from, or may make a new decision, direction or order in substitution therefore, and that decision, direction or order shall not be subject to further appeal.

(5) In exercising his powers under sub-regulation (1), the member or an authorised officer may be accompanied by any person who, the Minister or the officer as the case may be believes, has special or expert knowledge of any matter being inspected, tested, or examined.

(6) A person who is an occupier or person in charge of any building, structure or place, or the person in charge of any vehicle, vessel, aircraft, machinery or equipment referred to in sub - regulation (1), shall provide the Minister or an authorised officer with all reasonable facilities and assistance (including the provision of necessary means of transport) for the effective exercise of the powers under this regulation.

Miscellaneous Offences.

61. Any person who:

(a) in, or in connection with, any application under the Petroleum Mining Act or these regulations for an exploration licence or petroleum agreement knowingly or recklessly gives or permits to be given information which is false or misleading in a material particular;

(b) in any report, return or affidavit submitted in pursuance of an exploration licence or a petroleum agreement, knowingly or recklessly includes, or permits to be included, any information which is false or misleading in a material particular; or

(c) places or deposits, or is accessory to the placing or depositing of, any petroleum or substance in any place with the intention of misleading any other person as to the possibility of petroleum or a petroleum reservoir existing in that place;

is guilty of an offence and liable on conviction:

(d) in the case of an individual to a fine not exceeding $20,000 or

(e) in the case of a body corporate to a fine not exceeding $50,000.

Offence committed by a body corporate.

62. Where an offence which has been committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a director, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, that officer, as well as the body corporate, is guilty of that offence and liable to be proceeded against and punished accordingly.

_________

Model Exploration Licence

Prepared and Published Pursuant to Section 7(5) of the Petroleum Mining Act.

ARRANGEMENT OF CLAUSES

CLAUSE

1. Definitions.
2. Grant of Rights and their Duration.
3. Work Practices.
4. Data, Reports and Records.
5. Assignment.
6. Indemnity.
7. Surrender and Termination.
8. Arbitration.
9. Applicable Law.
10. Notices.
Annex A Description of Scheduled Lands.
Annex B Map of Scheduled Lands.

NON - EXCLUSIVE MODEL EXPLORATION LICENCE

Definitions.

1. (1) The words and terms used in this Licence shall have the following meaning unless specified otherwise:

"The Act" means the Petroleum Mining Act 1969 and includes any Regulations made thereunder;

"Effective Date" means the date on which this Licence is executed;

"Government" means the Government of Tonga;

"Scheduled Lands" means on the effective date, the area described in Annex "A" and shown on the map in Annex "B";

"in default" means in breach of any provision of the Act or of this Licence;

"The Licensee" means .......................................... and its successors and includes any person to whom this Licence is assigned hereunder by the Licensee.

(2) Words not defined in this Licence but which are defined in the Act shall, unless the context otherwise requires, have the meanings given to them in the Act.

Grant of rights and their duration.

2. (1) The Licensee during the term of this Licence shall, on the terms and conditions set out or referred to herein, have the right to carry out geological surveys by physical and chemical means and geophysical surveys, photogeological surveys and other surveys utilizing remote sensing techniques for the purpose of obtaining geological information about strata in the Scheduled Lands; but the Licensee shall not have the right to drill any wells, except with the consent of the Minister, or to carry out any production operations in the Scheduled Lands.

(2) This Licence, unless sooner terminated or surrendered pursuant to clause 7, shall be in force for a term of two years from the Effective Date.

(3) The Minister may, at his sole discretion, on an application made by the Licensee not less than one month before the expiry of the term hereof, extend this Licence for a period of one year.

Work Practices.

3. (1) The Licensee shall carry out all its operations hereunder in the Scheduled Lands in a proper, safe and workmanlike manner and in accordance with good oilfield practice.

(2) The Licensee shall take all reasonable steps necessary to secure the safety, health and welfare of persons engaged in those operations in or about the Scheduled Lands.

(3) The Licensee shall not carry out any operations under this Licence in or about the Scheduled Lands in such a manner as to interfere unjustifiably:

(a) with navigation in any navigable waters; or

(b) with fishing in or conservation of the living resources of any waters in or in the vicinity of the Scheduled Lands;

(c) with the operation of their Licence in the Scheduled Lands.

Data, Reports and Records.

4. (1) The Licensee shall submit to the Minister in such form as the Minister directs within 15 days of the end of each calendar month after the Effective Date:

(a) a summary of all geological and geophysical work carried out and the factual information obtained;

(b) a list of maps, or reports and other geological and geophysical data prepared by or for the Licensee in or in respect of the period concerned;

(c) a record describing the results of all operations carried out by the Licensee in the Scheduled Lands;

(d) particulars of the areas in which any geological or geophysical work has been carried out; and

(e) any other matters as the Minister may from time to time direct to be included.

(2) The Licensee shall record in an original or reproducible form of good quality and on seismic tapes where relevant all geological and geophysical information and data relating to the Scheduled Lands obtained by the Licensee and shall deliver all such information and data and the interpretations thereof to the Minister as soon as practicable after the same is available to the Licensee.

(3) Upon termination or surrender of this Licence, pursuant to clause 7 or expiry of this Licence on completion of the term, the Licensee shall forthwith deliver to the Minister-

(a) all records which were maintained hereunder with respect to the Licence;

(b) all plans or maps of the Scheduled Lands which were prepared by or on the instructions of the Licensee;

(c) all tapes, diagrams, profiles and charts which were so prepared; and

(d) such other documents as the Minister may, by notice given to the Licensee, require it to deliver.

Assignment.

5. The Licensee shall not assign to any person, firm or corporation, any of its rights, privileges, duties or obligations under this Licence without the prior written consent of the Minister.

Indemnity.

6. The Licensee shall, at all times, keep the Government effectually indemnified against all actions, proceedings, costs, charges, claims and demands whatsoever which may be made or brought against the Government by any third party in relation to or in connection with this Licence or any matter or thing done or purported to be done in pursuance thereof.

Surrender and Termination.

7. (1) The Licensee, on giving to the Minister not less than thirty (30) days' notice in writing may, at any time during the term of this Licence, surrender its rights and be relieved of its obligations under this Licence.

(2) Subject to this clause, the Minister may, by written notice to the Licensee, terminate this Licence in the following events:

(a) if the Licensee is in default; or

(b) if an order is made or a resolution is passed by a court of competent jurisdiction winding up the affairs of a person constituting the Licensee unless the winding up is for the purpose of amalgamation or reconstruction and the Minister has been notified of the amalgamation or reconstruction.

(3) Before terminating this Licence on any ground specified in sub-clause (2), the Minister shall:

(a) by written notice to the Licensee, give not less than thirty (30) days' notice of his intention to terminate this Licence, stating in detail the grounds of the intended termination;

(b) in the notice, specify a date not less than ten (10) days after the date of the notice before which the Licensee may submit any matter which he wishes the Minister to consider;

(c) in the notice, specify a period of not less than twenty (20) days within which to remedy and remove such ground, where the same is capable of being remedied or removed; and

(d) take into account:

(i) any matter submitted to him by the Licensee pursuant to paragraph (b); and

(ii) any action taken by the Licensee to remedy and remove the ground or to prevent the recurrence of similar grounds.

(4) The Minister shall not, under sub-clause (2), terminate this Licence on the ground that the Licensee has failed to pay any amount payable by him under the Act or this Licence if, before the date specified in a notice referred to in sub-clause (3)(b), the Licensee pays the amount of money concerned.

(5) When a petroleum agreement is entered into by His Majesty in Council in respect of the Scheduled Lands or any part thereof, the Licensee shall upon receiving written notice from the Minister, surrender the Scheduled Lands or such parts thereof as fall within the area covered by the said petroleum agreement.

(6) On termination or surrender of this Licence pursuant to this clause, the rights of the Licensee hereunder shall cease, but the termination or surrender does not affect any liability incurred before the termination or surrender, and any legal proceedings that might have been commenced or continued against the former Licensee may be commenced or continued against it.

Arbitration.

8. (1) In the event of any dispute arising between the Licensee and the Government (or any government authority) touching or concerning the interpretation of performance of this agreement with or the rights and liabilities of either of the Parties hereto, if the Parties hereto should fail to settle such dispute by agreement, such dispute shall, after the Kingdom of Tonga has separately ratified the Convention on the Settlement of Investment Disputes between States and Nationals of other States (hereinafter called "the Convention"), be settled finally by arbitration by the International Centre for Settlement of Investment Disputes (hereinafter called "the Centre") established under the said Convention.

(2) It is agreed that because of foreign control the Licensee is regarded as a national of for the purposes of Article 25(2)(b) of the Convention.

(3) It is hereby agreed that the consent to the jurisdiction of the Centre shall equally bind any assignee of the Company to the extent that the Centre can assume jurisdiction over a dispute between such assignee and the other party, and that neither party to this Agreement shall, without the written consent of the other, transfer its interest in this Agreement to an assignee with respect to whom the Centre could not exercise such jurisdiction.

(4) Until the procedure for the settlement of disputes provided for in sub-clause (1) above can be implemented 30 days after the ratification of the Convention by the Kingdom of Tonga, all disputes referred to in that sub-clause shall be settled by arbitration procedures analogous to those that would be applicable under the Convention, except that the proceeding shall be initiated by a direct communication from either Party to this agreement to the other, and that if the Arbitral Tribunal is not constituted within 90 days after the receipt of such communication either Party may request the Secretary-General of the Centre to appoint any arbitrators not yet appointed.

Applicable Law.

9. This agreement shall be governed by the laws of the Kingdom of Tonga, but in the event of a dispute contemplated by Clause 8, the tribunal appointed pursuant to that Clause shall also apply such rules of International law as may be applicable.

Notices.

10. (1) All notices and other communications to be given under this Agreement shall be given in writing.

(2) Any notice which the Government or any other person is required or entitled to give to the Licensee may be given or sent to the Licensee either at its registered office (if any) in the Kingdom or at*... for service of notices. Any notice which the Licensee is required or entitled to give to the Government or to any other person may be given or sent to the Minister as representative of the Government or such other person either at an address notified by the Minister or such other person, or, if no notification is given, at the office of the Minister.

(* Address of Licensee to be inserted here.)

________

Model Petroleum Agreement

Prepared and Published Pursuant to Section 8(2) of the
Petroleum Mining Act

Preamble

Clause

1. Interpretation.
2. General Grant.
3. Rights of the Company over the Scheduled Lands.
4. Term of Agreement.
5. Work and Expenditure Commitments during the exploration phase.
6. Work Programmes and Advisory Committee.
7. Compulsory Surrender.
8. Discovery of Petroleum.
9. Procedures leading to Submission of Development Plan.
10. Re - inclusion of land surrendered in Scheduled Lands.
11. Consultation on area to be surrendered.
12. Liability in relation to surrendered Lands.
13. Joint and Several obligations.
14. Royalty and Rentals.
15. Reimbursement of data costs.
16. Tax Stabilization.
17. Petroleum Profits Tax.
17A. Taxation of Income Derived from Petroleum Operations (optional)
18. Natural Gas.
19. Domestic Supply Obligation.
20. Tongan Resources.
21. Refinery.
22. Employment and Training.
23. Valuation of Crude Oil.
24. Audit.
25. Consent to assignment.
26. Import Duties.
27. Foreign Currency.
28. Surrender and Termination.
29. Right of Government to determine.
30. Effect of determination.
31. Right of Government to assets at end of Agreement Period.
32. Pollution.
33. Force Majeure.
34. Arbitration.
35. Applicable Law.
36. Notices.
37. Stability of terms of the Agreement.
38. Index and marginal notes.
First Schedule (Scheduled Lands)
Second Schedule (Bank Guarantee)
Third Schedule (Accounting Annex)

MODEL PETROLEUM AGREEMENT

THIS AGREEMENT is made the .................... day of ....................., 19 ..., BETWEEN the Government of the Kingdom of Tonga (in this Agreement called "the Government") of the one part AND
..................... (in this Agreement called "the Company" which expression shall where the context allows include its successors and assignees) of the other part:

WHEREAS-

(A) The Company has applied to His Majesty King Taufa'ahau Tupou IV of Tonga in Council under the Petroleum Mining Act, 1969 (hereinafter called the Principal Act) for a petroleum agreement in respect of certain lands specified in the First Schedule to this Agreement;

(B) His Majesty, by and with the advice and consent of his Privy Council, has agreed to enter into a petroleum agreement under the terms and together with the benefit of but subject to the provisions in this Agreement specified:

NOW THIS AGREEMENT WITNESSETH AS FOLLOWS-

Interpretation.

1. (1) In this Agreement, unless the context otherwise requires -

"agreement period" means the period during which a petroleum agreement subsists as determined under the provisions of this agreement;

"agreement year" means a year commencing on the date or anniversary of the commencement of the agreement period;

"appraisal phase" means the period referred to in clause 8(4)(b) during which an appraisal programme is carried out;

"appraisal programme" means a programme carried out following a discovery of petroleum in the Scheduled Lands for the purpose of delineating the reservoir to which the discovery relates in terms of thickness lateral extent and estimating the quantity of recoverable petroleum therein;

"appraisal well" means a well drilled after the discovery of petroleum to delineate the limits of the field on the same geological entity within the same structural or stratigraphic closure as the discovery;

"associated natural gas" means natural gas, including the free gas cap, produced from any well in the Scheduled Lands, the predominant production of which is crude oil, and which is separated from crude oil in accordance with normal oil field practice but shall exclude any liquid hydrocarbons extracted or in a gas plant;

"authorised officer" in relation to any provision in this agreement means an officer acting under the authority of the Minister;

"barrel" means 42 U.S. gallons or 9,702 cubic inches, being equivalent to 34.9725 Imperial gallons.;

"block" means a block constituted as provided by regulation 3 of the Regulations;

"calendar month" or "month" means any of the twelve months of the calendar year;

"calendar year" or "year" means a period of twelve consecutive months according to the Gregorian calendar, starting with 1st January, and ending with 31st December;

"casinghead offshore spirit" means any liquid hydrocarbons obtained from natural gas (before the crude oil from which it is derived has been measured for royalty) by separation or by any chemical or physical process;

"crude oil" means mineral oil in its natural state before the same has been refined or otherwise treated, but excluding water and foreign substances;

"development phase" means the period during which the Company's activities are directed towards the production of petroleum from the Scheduled Lands;

"development plan" means the plan referred to in clause 9(6);

"Discovery" means a discovery of petroleum not previously known to have existed, recovered at the surface in a flow measurable by conventional petroleum industry production testing methods;

"discovery area" means a block or blocks within the Scheduled Lands containing, so far as the boundaries of the Scheduled Lands permit, the geological feature (as mapped with the relevant seismic data) or any part thereof in which the Discovery is located;

"Effective Date" means the date on which this Agreement is executed;

"exploration phase" means the period during which the Company's activities are directed towards searching for and finding of petroleum on the Scheduled Lands;

"foreshore" means the land adjacent to the sea alternately covered and left dry by the ordinary flow and ebb of the sea tides and all land adjoining thereunto lying within fifty feet of the high watermark of the ordinary tides;

"gas condensate" means the liquid hydrocarbons extracted or recovered from the natural gas either by normal field practices of petroleum gas processing or in a gas plant;

"good oilfield practice" means all those things that are generally accepted as good, safe and efficient in the carrying on of prospecting for petroleum or, as the case may be, operations for the production of petroleum;

"Government" means the Government of the Kingdom of Tonga;

"half year" means either the period between the first day of January and the thirtieth day of June or between the first day of July and the thirty - first day of December. The period between the Effective Date and the first day of January, or of July as the case may be, next following the Effective Date shall be deemed to be a half year period;

"Minister" means the Minister of Lands, Survey and Natural Resources;

"natural gas" means gas obtained from boreholes and wells and consisting primarily of hydrocarbons;

"non - associated natural gas" means natural gas other than associated natural gas;

"offshore land" means all submerged lands lying within the extent and boundaries of the Kingdom of Tonga, as defined by the Principal Act;

"onshore land" means the surface area of the islands of Tongatapu, 'Eua, Ha'apai, Vava'u and other islands in the Kingdom of Tonga, including the foreshores of these islands;

"petroleum" means petroleum as defined in the Principal Act;

"petroleum field" means an area forming a part of the discovery area and including in a single area, so far as the boundaries of the Scheduled Lands permit, the entire area of the reservoir in respect of which the Company has submitted a development plan pursuant to clause 9;

"petroleum operations" means searching for and winning or obtaining of petroleum in Tonga by or on behalf of a company for its own account by any drilling, mining, extracting or other like operations or process in the course of a business carried on by that company engaged in such operations, and all operations incidental thereto, and/or any sale or disposal by any petroleum company or companies or any purchase exclusively for sale by way of export by any other company or companies of petroleum so won or obtained, and includes the transportation within Tonga by or on behalf of that company of petroleum so won or obtained to any point of sale or delivery or export, but does not include:

(a) any transportation of petroleum outside Tonga;

(b) any process of refining at a refinery; or

(c) any dealings with products so refined.

"the Regulations" means the Petroleum (General Provisions) Regulations 1985;

"reservoir" means a discrete accumulation of petroleum in a geological feature located in part or in whole within the Scheduled Lands, limited by:

(a) lithological boundaries;

(b) structural boundaries;

(c) the contact zone between the petroleum and water level; or any combination of these limitations, so that the entire accumulation of petroleum is in pressure, fluid or gas communication. If only part of a reservoir is located within the Scheduled Lands, reference in this Agreement to such reservoir shall mean only that part thereof located within the Scheduled Lands.

"Scheduled Lands" means the lands specified in the First Schedule as the area to which this Agreement is applicable, but shall exclude any area or areas subsequently surrendered by the Company;

"surface lands" means the surface area of the islands of Tongatapu, 'Eua, Ha'apai, Vava'u and other islands in the Kingdom of Tonga, excluding the foreshore of these islands.

(2) Words not defined in this Agreement but which are defined in the Regulations shall, unless the context otherwise requires, have the meaning given to them in the Regulations.

General Grant.

2. In consideration of the Covenants made by the Company hereinafter, His Majesty in Council hereby grants to the Company the exclusive rights for exploring prospecting or mining for petroleum in the Scheduled Lands set out in clause 3 hereunder, to exercise and enjoy all and every the said rights for the agreement period subject to the provisions of the Principal Act, the Regulations and the general law of the Kingdom and of the Agreement.

Rights of the Company over the Scheduled Lands.

3. This agreement, while it remains in force, confers on the Company, subject to the Principal Act, the Regulations, and the general law of the Kingdom, the exclusive right to explore for petroleum and carry on petroleum operations in the Scheduled Lands and to carry on such other operations and execute such works in the Scheduled Lands as are necessary for or in connection with the said operations.

Terms of Agreement.

4. (1) This agreement shall subsist for a period of not more than 38 years from the Effective Date and shall be divided into the following three phases:

(a) exploration phase;

(b) appraisal phase; and

(c) development phase.

(2) The exploration phase shall commence from the Effective Date and shall, subject to sub - clauses (3) and (4), subsist for a period of 11 years, commencing on and including the date above-mentioned unless sooner terminated under sub-clauses (3) and (4).

(3) The exploration phase shall consist of an initial period of four years ("Initial Exploration Period") which may be extended for a second period of four years ("First Extension Exploration Period"), and for a third period of three years ("Second Extension Exploration Period").

(4) (a) The Company may make an application for extension not later than three months before the expiry of the Initial Exploration Period. Where such application is made, the Company shall be entitled to an extension for a period of four years from the date of expiry of the Initial Exploration Period.

provided that

(i) such extension shall be granted only if the Company has duly fulfilled all its obligations assumed in relation to the said Initial Exploration Period; and

(ii) the Company, for the First Extension Exploration Period, undertakes to carry out such work obligations as may be agreed on for the said Period.

(b) The Company may make an application for a further Extension not later than three months before the expiry of the First Extension Exploration Period. Where such application is made, the Company shall be entitled to a further extension for a period of three years from the date of the expiration of the said First Extension Exploration Period:

provided that

(i) such extension shall be granted only if the Company has duly fulfilled all its obligations assumed in relation to the said First Extension Exploration Period; and

(ii) the Company, for the Second Extension Exploration Period, undertakes to carry out such work obligations as may be agreed on for the said Period.

(5) If, at the expiry of the exploration phase, the Company has not notified the Minister that it has discovered on the Scheduled Lands, petroleum in commercial quantity, pursuant to clause 8, this Agreement shall be automatically determined, but without prejudice to the rights and obligations of the parties, accrued or arising prior to such determination.

(6) The appraisal phase shall be the period of two years or longer referred to in clause 8(4)(b).

(7) The development phase in respect of a petroleum field shall commence on the date on which commercial viability of the field is decided pursuant to clause 8, and shall subsist for not more than 25 years, or for as long as the petroleum field remains in commercial production, whichever period is the lesser.

Work and Expenditure Commitments during the expiration phase.

5. (1) Subject to the provisions of this clause, in the course of carrying on exploration operations in the Scheduled Lands, the Company shall during the several periods into which the exploration phase is divided in accordance with clause 4 carry out the work described and spend not less than the sums specified in sub - clause (2) on such work.

(2) (a) Initial Exploration Period

(Commencing on the Effective Date and terminating on the fourth anniversary of that date)

Description of Work:

Minimum Expenditure for this period;

(b) First Extension Exploration Period

(commencing on the date on which the Initial Exploration Period expires and terminating on the fourth anniversary of that date)

Description of Work:

Minimum Expenditure for this period:

(c) Second Extension Exploration Period

(commencing on the date on which the First Extension Exploration Period expires and terminating on the third anniversary of that date)

Description of Work:

Minimum Expenditure for this period.

(3) No exploration well drilled by the Company shall be treated as discharging any obligation of the Company to drill exploration wells hereunder unless-

(a) it has been drilled to a depth of - feet; or

(b) before reaching such depth the basement is encountered in the said well; or

(c) insurmountable technical problems are encountered at a lesser depth in the said well, which in accordance with good oilfield practice make further drilling impractical provided that if the said well is abandoned owing to the said problems before reaching the basement or before encountering petroleum which the Company considers to be of potential commercial interest, the Company shall drill a substitute well to the same minimum depth as aforesaid.

(4) Where in any exploration period specified in sub-clause (2) the Company has spent more than the minimum expenditure specified in sub-clause (2), as adjusted by the factor referred to in sub-clause (5), for that period the excess shall be credited against the minimum expenditure specified in that sub - clause for the next succeeding extension period.

Provided however that nothing in this sub-clause shall be construed as extinguishing or modifying any obligation of the Company to drill exploration wells or to carry out any specific commitment in respect of seismic survey's pursuant to this clause.

(5) The minimum expenditure for each exploration period specified in sub-clause (2), shall not have been satisfied unless the total expenditure attributable to the work described in sub - clause (2) for that period equals or exceeds the sums mentioned in said sub-clause for that period;

Provided that for this purpose all such attributable expenditures shall be adjusted, commencing from the Effective Date by multiplying each of them by the following factor:

1 = A whereby

B

A is the World Consumer Price Index (WCPI) as reported for the first time in the monthly publication "International Financial Statistics" of the International Monetary Fund (IMF) for the month of the Effective Date.

B is the WCPI as reported in the aforesaid IMF publication for the month of the expenditure in question.

(6) For the purpose of this clause, expenditure by the Company on an appraisal programme required to discharge its obligations under clause 8 of this Agreement shall not be treated as expenditure for the purpose of satisfying the minimum expenditure obligations set out in sub -clause (2).

(7) (a) The Company shall on the Effective Date and where the Initial Exploration Period has been extended pursuant to clause 4 for each such extension period, provide in substantially the same form shown in the Second Schedule hereto a bank or other guarantee satisfactory to the Minister in respect of the minimum expenditure obligation for the Initial Exploration Period, or as the case may be, for any such extension period.

(b) The amount of any guarantee given pursuant to paragraph (a) shall be reduced at the end of every calendar year by an amount equal to the expenditure incurred by the Company during that year in discharge of its obligations under sub-clause (2) and as adjusted by the factor referred to in sub-clause (5).

(c) If at the end of the Initial Exploration Period or as the case may be, at the end of any extension period, the expenditure incurred by the Company during that period (as adjusted by the factor referrred to in sub-clause (5) and taking into account any amount carried forward pursuant to sub-clause (4) does not equal or exceed the minimum expenditure obligation for that period the said guarantee shall provide for the immediate payment thereunder to the Minister of the full amount of the shortfall.

Work Programmes and Advisory Committee.

6. (1) Within one month of the Effective Date, the Company shall prepare and submit to the Minister a detailed work programme and budget setting forth the exploration operations which the Company proposes to carry out in the calendar year in which the agreement is made and the estimated cost thereof.

(2) So long as the exploration phase remains in force at least three months prior to the beginning of each subsequent calendar year, the Company shall prepare and submit to the Minister a detailed work programme and budget setting forth the exploration operations which the Company proposes to carry out in that calendar year and the estimated cost thereof.

(3) Every work programme and budget submitted to the Minister pursuant to this clause and every revision or amendment thereof shall be consistent with the requirements set out in clause 5 relating to work and expenditure for the exploration period within which the work programme and budget will fall.

(4) Every work programme and budget submitted by the Company to the Minister pursuant to this clause shall be reviewed by a joint Committee to be established by the Minister and the Company. This Committee (hereinafter referred to as the Advisory Committee) shall consist of four (4) members, two (2) of whom shall be appointed by the Minister and two (2) by the Company. The Chairman of the Advisory Committee shall be designated by the Minister from among members appointed by him. In the event that the Minister wishes to propose any revisions to the proposed work programme and budget submitted by the Company, he shall within three (3) weeks after receipt thereof, so notify the Company specifying in reasonable detail his reasons. Promptly thereafter the Advisory Committee shall meet and shall endeavour to agree upon the revisions proposed by the Minister. Following review by the Advisory Committee, the Company shall make such revisions as the Company deems appropriate and submit the work programme and budget to the Minister.

(5) Subject to sub - clause (3), on giving notice on that behalf to the Minister, the Company may amend any work programme or budget or any revised work programme or budget submitted to the Minister. Subject to any such amendment, the Company shall carry out the exploration operations set forth in the work programme or revised work programme and spend not less than the sum provided for in the budget or revised budget. A notice under this clause shall state the reasons why in the opinion of the Company an amendment is necessary or desirable.

Compulsory Surrender.

7. (1) The Company shall, within one month after the expiration of the Initial Exploration Period, surrender so much of the Scheduled Lands (if any) as, together with any part of the Scheduled Lands surrendered under clause 28, amount to 50 per centum of the original area excluding the area already included in a petroleum field or fields and that included in a discovery area or areas.

(2) The Company shall, within one month after the expiration of the First Extension Exploration Period, surrender so much of the Scheduled Lands (if any) as, together with any part of the Scheduled Lands surrendered under sub - clause (1) and under clause 28, after the end of the Initial Exploration Period, amount to 75 per centum of the original area of the
Scheduled Lands, excluding the area included in a petroleum field or fields and that included in a discovery area or areas.

(3) The Company shall, within one month or such longer period as the Minister may allow, after the eleventh year of the term of this Agreement surrender any part of the Scheduled Lands that is not within the boundaries of a petroleum field, or fields or a discovery area or areas.

Discovery of Petroleum.

8. (1) Where, in the course of petroleum operations, a Discovery of petroleum is made, the Company shall report orally to the Minister within twenty-four hours.

(2) Following the report pursuant to sub-clause (1), the Company shall submit a written report within 30 (thirty) days. The report shall contain a statement indicating whether or not, in the opinion of the Company, the discovery of petroleum is of potential commercial interest. Where appropriate, this report shall also contain:

(a) all the relevant geological information;

(b) basic reservoir data, including drill - stem tests data;

(c) the Company's estimate as to the potential of the reservoir; and

(d) chemical and physical analyses.

(3) (a) Where the Company states in the report referred to in sub - clause (2) that the presence of petroleum is not of potential commercial interest, the Minister may, by notice served on the Company, direct that the discovery area be relinquished.

(b) the Minister shall not give a direction under sub - clause 3(a) unless-

(i) he has given to the Company notice of his intention to do so; and

(ii) he has specified in that notice a date before which the Company may make in writing representations with respect to that intention.

(c) A direction under sub - clause 3(a) may be given only within the period of 12 (twelve) months after the date on which the report referred to in sub-clause (2) is submitted to the Minister, stating that the discovery of petroleum is not of potential commercial interest.

(4) (a) The Company shall, where it is of the opinion that the discovery of petroleum is of potential commercial interest, submit within 90 (ninety) days of the making of the Discovery an appraisal programme for the Minister's approval which shall include drilling of appraisal wells or a reasonable explanation for any delay in submission of such programme. The Minister shall notify the Company within 30 (thirty days) of receipt of the appraisal programme whether he approves it. Where the appraisal programme is not approved by the Minister, the parties shall within a period of 30 (thirty days) from the date on which the Company is notified of the Minister's decision meet to agree on revisions to the appraisal programme. In the event of failure to agree on the said revisions, the issue shall be referred to a sole expert appointed by agreement between the parties or in the absence of such agreement by the Secretary - General of the International Centre for the Settlement of Investment Disputes and the decision of the sole expert so appointed shall be binding on the Company and the Government.

(b) The Company shall, within two years from the date of the Minister's approval of the appraisal programme or the date of the sole expert's decision under sub - clause 4(a) above, or such longer period as the Minister may allow ("the Appraisal Phase"), submit a full report of the results of the appraisal programme, including the location, depth, estimated daily production potential, estimated recoverable reserves and such other supporting data which the Company may consider necessary to support the report. The Minister may require the Company to supply such further information with respect to the report as he sees fit.

(c) Within 3 (three) months of the submission of the report, referred to under sub - clause (4)(b), or such longer period as the Minister may allow, the Company shall discuss the report with the Minister in order to arrive at a decision on whether the field is commercially viable.

(5) (a) If the Company and the Minister cannot agree on whether the field is commercially viable, the Minister may cause an independent evaluation of the field to be carried out. If the results of such an evaluation are positive and the Minister is satisfied that the field could be developed on a viable basis, he may require the Company to relinquish the area of the field within 6 (six) months of service of a notice to that effect on the Company.

(b) Before the Minister serves such a notice on the Company, he shall submit the results of the evaluation to the Company for consideration and review of its position. Where the Company within a period of 3 (three) months of receipt of the results of the evaluation, reviews its position and notified the Minister of its intention to develop the field, the Minister may allow the Company to do so.

Procedures leading to submission of Development Plan.

9. (1) The Minister and Company shall, as soon as possible, and in any event not later than 90 days after the decision in respect of commercial viability of the field has been taken pursuant to clause 8, meet to determine the boundaries of the petroleum field. If in the event that the Minister and the Company are unable to agree on the boundaries of the petroleum field, the matter shall be referred to a sole expert appointed by agreement between the parties or in the absence of such agreement by the Secretary - General of the International Centre for the Settlement of Investment Disputes and the decision of the sole expert so appointed shall be binding on the Company and the Government.

(2) Except as provided in this clause, no area outside the Scheduled Lands shall be included in the boundaries of the petroleum field.

(3) Where the boundaries of the petroleum field extend outside the Scheduled Lands, the Minister may agree to the inclusion in the boundaries of the petroleum field of any area or areas outside the Scheduled Lands if any such area is not subject to a petroleum agreement.

(4) Subject to sub - clause (5), if the Company so requests and the Minister agrees, there may be added to the petroleum field any area or areas adjacent thereto and whether inside or outside the Scheduled Lands, and any such area or areas so added shall form part of the petroleum field.

(5) The Minister shall not agree to the addition to the petroleum field under sub - clause (4) of:

(a) any area outside the Scheduled Lands if it is subject to a petroleum agreement; and

(b) any area greater, or areas greater in total, than 20 per centum of the area of the petroleum field.

(6) Following the determination of a petroleum field and as soon as practicable, and in any event not later than 6 (six) months thereafter pursuant to this clause, the Company shall submit to the Minister for his approval a technological scheme (hereinafter referred to as the "development plan") for the development of the petroleum field prior to the commencement of the development of the said petroleum field.

(7) The development plan referred to in sub-clause (6) shall be prepared on sound engineering and economic principles in accordance with accepted standards prevailing in the international petroleum industry and be designed to ensure the most efficient and beneficial recovery of the petroleum resources concerned and shall take proper account of good oil field practice and safety factors. The development plan shall contain particulars of:

(a) the way in which the development and production of the reservoir is to be financed;

(b) proposals relating to the spacing, drilling and completion of wells, the production and storage installations, and transport and delivery facilities required for the production, storage and transport of petroleum. The proposals shall include the following information:

(i) estimated number, size and production capacity of production platforms, if any;

(ii) estimated number of production wells;

(iii) particulars of production equipment and storage facilities;

(iv) particulars of transportation of the petroleum, including pipelines;

(v) particulars of onshore installations required including the type and specifications and size thereof; and

(vi) particulars of other technical equipment and installations required for the operations.

(c) separate production profiles for crude oil, gas and natural gas liquids (including condensate) from the reservoir;

(d) a detailed forecast of annual capital and operating costs;

(e) technical and economic appraisal of the alternative methods for developing the Discovery and transporting the petroleum including the justification for the method proposed;

(f) proposals (if any) relating to the establishment of processing facilities and processing of petroleum in the Kingdom of Tonga;

(g) safety measures to be adopted in the course of the production operations, including measures to deal with emergencies;

(h) the necessary measures to be taken for the protection of the environment;

(i) proposals for employment and training of citizens of the kingdom of Tonga;

(j) proposals with respect to the procurement of goods and services obtainable in the Kingdom of Tonga;

(k) estimate of the time required to complete each phase of the development plan.

(8) (a) Except where the development plan submitted by the Company does not meet the requirements of sub-clause (7), the Minister shall give his approval to the development plan within a period of six months from the date of such submissions.

(b) Where the development plan is not approved by the Minister, the parties shall, within a period of 30 (thirty) days from the date on which the Company is notified of the Minister's decision, meet to agree on the revisions to the development plan proposed by the Minister. In the event of failure to agree on the proposed revisions, the issue or issues in question between the Minister and the Company shall be referred to a sole expert, appointed by agreement between the parties or in the absence of such agreement by the Secretary-General of the International Centre for the Settlement of Investment Disputes and the decision of the sole expert so appointed shall be binding on the Company and the Government.

(c) Where the sole expert decides that the development plan meets the requirements of sub - clause (7), the Minister shall forthwith give the requisite approval to the development plan submitted by the Company.

(d) Where the sole expert decides that the development plan does not meet the requirements of sub-clause (7), the Minister shall give the Company a reasonable period not exceeding 90 (ninety) days within which to revise the development plan in order to ensure that, taking account of the decision of the sole expert, it meets the requirements of sub-clause (7).

(9) After the Company's development plan has been approved, the Company shall proceed to implement it.

Re – inclusion of land surrendered in Scheduled Lands.

10. (1) Any part of the Scheduled Lands surrendered under clause 7 or 28 may, at a subsequent date, at the request of the Company, be re-included in the Scheduled Lands if the part concerned is not the subject of a petroleum agreement and the Minister agrees to the re - inclusion.

(2) If the re-inclusion in the Scheduled Lands of any part of the Scheduled Lands that has been surrendered would increase the area of the Scheduled Lands to more than 50 per centum of the original area, excluding any discovery area or petroleum field or fields, at the end of the Initial Exploration Period, or to more than 25 per centum of the original area, excluding any discovery area or petroleum field or fields at the end of the first Extension Exploration Period, the Company shall, as a condition of the re-inclusion surrender so much of the Scheduled Lands as is necessary to reduce their area to that 50 per centum or 25 per centum, as the case may be, of the original area of the Scheduled Lands, excluding any discovery area of petroleum field or fields.

(3) The re-inclusion of land surrendered in the Scheduled Lands shall not prejudice the right of the Government to dispose of the data acquired in respect of the re-included land prior to the re-inclusion of such land, as it thinks fit.

Consultation on area to be surrendered.

11. (1) Any area or areas of the Scheduled Lands which is or are surrendered in accordance with the provisions of this Agreement shall, so far as is reasonable, be an area or areas which is or are, at the date or surrender, of sufficient size and convenient shape, having regard to adjacent areas not then the subject of petroleum agreement, to enable oil operations to be effectively carried out thereon.

(2) Without prejudice to the generality of sub-clause 1, every part of the Scheduled Lands surrendered pursuant to this Agreement by the Company shall be bounded by lines of parallels of latitude and longitude expressed in whole degrees and whole minutes. Except with the approval of the Minister, no boundary lines shall be drawn less than two minutes of latitude or two minutes of longitude apart.

(3) The surrendered area shall, as far as practicable, form one continuous area.

(4) The Minister may, where he considers it to be in the public interest, allow the surrender of a lesser portion of the Scheduled Lands than the area specified in sub-clause 2.

(5) No part of the Scheduled Lands shall be surrendered unless the obligations assumed in respect of that part have been met.

(6) Before surrendering, pursuant to this Agreement, any part of the Scheduled Lands, the Company shall consult with the Minister in order to ensure that all the requirements of this clause are complied with.

Liability in relation to surrendered lands.

12. The surrender of the Scheduled Lands or any part thereof does not affect any liability incurred before the date on which the surrender takes effect in respect of the said Lands, and any legal proceedings that might have been commenced or continued in respect of the liability against the Company may be commenced or continued against the Company.

Joint and Several obligations.

13. If the Company is more than one person, all duties and obligations under clauses 14 and 17 hereunder are joint and several.

Royalty and Rentals.

14. (1) The Company shall be liable to the payment of-

(a) royalty in accordance with sub-clauses 5(2), (3), (4) and (5); and

(b) annual rentals in accordance with sub-clause (10) during the exploration phase of this Agreement.

(2) The Company shall pay to the Minister in respect of each half - year in which this Agreement is in force (hereinafter referred to as "royalty period") royalty on petroleum produced and saved under this Agreement. The liability of the Company to pay royalty shall be discharged as follows:

(a) in the case of natural gas, by paying to the Minister royalty at the rate and calculated in the manner specified in an agreement entered into between the Minister and the Company pursuant to clause 18;

(b) In the case of crude oil:

(i) by paying to the Minister royalty at the rate specified in sub - clause (3); or

(ii) by delivering the specified percentage of crude oil as provided in sub - clause (4); or

(iii) partly by so paying royalty and partly by so delivering crude oil as provided in sub - clause (5).

(3) (a) The royalty payable in respect of crude oil shall be 15 per cent of the value of the wellhead of crude oil produced and saved by the Company during each royalty period from the petroleum field.

(b) The value at the wellhead of the crude oil shall be calculated in accordance with clause 23 hereof.

(4) The Minister may, by notice given to the Company not later than 180 days before the commencement of a royalty period, require the Company to deliver the prescribed percentage or such less percentage as specified in such notice, of each quality of crude oil that is produced and saved in that royalty period, and the Company shall comply with the requirement by delivery to the Government at any of the Company's normal loading points in the Kingdom of Tonga ("the Delivery Point") crude oil in accordance with the requirement and where in the royalty period concerned the Company has produced and saved different qualities of crude oil, proportionate quantities of each quality of crude oil shall be so delivered.

(5) Where in a notice referred to in sub - clause (4), the Minister specifies a percentage that is less than the prescribed percentage, the Company shall discharge its liability to pay royalty;

(a) by delivery in accordance with sub - clause (4) the percentage so specified of crude oil; and

(b) by paying in accordance with sub - clause (3) royalty at the prescribed rate in respect of the appropriate percentage of crude oil produced and saved in the royalty period concerned.

(6) (a) For the purpose of this clause "appropriate percentage" means the difference (expressed in percentage) between the prescribed percentage and the amount (expressed as percentage) specified in the relevant notice given under sub - clause (4); and

(b) "the prescribed percentage" means the rate specified in sub - clause (2).

(7) Crude oil royalty delivered in kind by the Company at any location other than the Delivery Point shall be reduced by an amount of crude oil the value of which is equal to the cost incurred by the Company in connection with the delivery of such crude oil royalty between the Delivery Point and such other location for delivery.

(8) The Company shall within twenty (20) days after the end of a royalty period, deliver to the Minister in such form as the Minister may specify, a statement of:

(a) the quantity of petroleum produced and saved from each petroleum field in that period;

(b) the value at the wellhead of the petroleum on which royalty is payable; and

(c) the amount of royalty for that period and give particulars of the calculation of that amount;

(d) any other matters which the Minister may from time to time require.

(9) Royalty in respect of a royalty period is payable not later than sixty (60) days after the end of the first royalty period and not later than thirty (30) days after the end of each subsequent royalty period.

(10) (a) Subject to paragraph (b) of this sub - clause the annual rental payable to the Government under this Agreement during its exploration phase shall be at the rate of US$20 for every square mile of the Scheduled Lands.

(b) The amount referred to in paragraph (a) of this sub-clause shall be adjusted annually by dividing it by the factor

I = C

D

where:

"C" is the World Consumer Price Index (WCPI) as reported for the first time in the monthly publication "International Financial Statistics" of the International Monetary Fund (IMF) for the month of the Effective Date hereunder; and

"D" is the WCPI as reported in the said IMF publication for the month in which the first and any subsequent anniversary of the Effective Date.

Reimbursement of data costs.

15. The Company shall within thirty (30) days of the Effective Date pay to the Government not less than US$.......... for the accumulated data in the possession of the Government which the Government will make available to the Company.

Tax Stabilisation.

16. With the exception of:

(i) Petroleum Profits Tax at the rates and calculated in the manner herein provided;

(ii) Royalty and Rentals payable under clause 14;

(iii) Subject to the provisions of clause 26, import duties at the rates specified from time to time in customs legislation;

(iv) Taxes, duties, fees or other imposts for specific services rendered on request or to the public or commercial enterprises generally and rent due to the Government in respect of any land rights granted or assigned to the Company;

(v) Local Government rates or taxes not in excess of those generally applicable in the Kingdom;

(vi) Stamp duties, registration fees, licence fees and any other tax, duty, fee or other impost of a minor nature;

No tax, duty, fee or other impost shall be imposed on the Company or its shareholders in respect of income derived from petroleum operation hereunder or in respect of any property held or thing done for any purpose authorised or contemplated hereunder.

Petroleum Profits Tax.

17. (1) The Company shall be liable for a Petroleum Profits Tax payable to the Government in respect of any year for which either the first accumulated net cash position ("FANCP") or the second accumulated net cash position ("SANCP") or the third accumulated net cash position ("TANCP") as calculated in the manner set out hereafter is a positive amount. Where the Petroleum Profits Tax is calculated by reference to the FANCP the rate of Petroleum profits tax on that positive amount shall be 45 per cent; where it is calculated by reference to the SANCP the rate shall be .......... per cent and where it is calculated by reference to the TANCP the rate shall be .......... per cent. If for any year both the FANCP and the SANCP are positive amounts the Petroleum Profits Tax payable for that year will be the amounts calculated by reference to both the FANCP and the SANCP. If for any year the FANCP, the SANCP and TANCP are positive amounts, the Petroleum Profits Tax payable for that year will be the amount calculated by reference to all the three accumulated net cash positions aforementioned cumulatively.

(2) For the purpose of Petroleum Profits Tax in relation to the Company:

(a) "Net cash position" in respect of any year is denominated in US dollars and means the result (which may be a negative amount) obtained by deducting from the value of the crude oil produced in that year, calculated in accordance with clause 23:

(i) all cost and expenditures of the Company calculated in accordance with the provisions of schedule 3 of this Agreement, and excluding expenditure in respect of interest on loans raised by the Company for carrying out petroleum operations hereunder.

(ii) royalty and rental paid in that year pursuant to clause 14 and the other imposts listed in clause 16 with the exception of petroleum profits tax.

Provided that where the net cash position is being calculated for the purposes of "C" of the formula in the definition of the SANCP in relation to any year, paragraph (ii) of this definition will be modified to include Petroleum Profits Tax payable in respect of that year which was calculated by reference to the FANCP for that year.

Provided further that where the net cash position is being calculated for the purposes of "C" of the formula in the definition of TANCP in relation to any year paragraph (ii) of this definition will be modified to include Petroleum Profits Tax payable in respect of that year which was calculated by reference to the FANCP and SANCP for that year.

(b) The FANCP in relation to any year means the amount ascertained according to the following formula:

A(100%+B)+C

Where

A = the accumulated net cash position at the end of the year preceding the year for which the calculation is being made.

B = 5 per cent per annum plus the arithmetical average of the percentage yield on US Long Term Government Bonds for each month of the year for which the calculation is being made, as reported in the publication "International Financial Statistics" of the International Monetary Fund.

C = the net cash position for the year for which the calculation is being made.

Provided that where the FANCP for any year is a positive amount, the FANCP at the end of that year shall be deemed to be zero for the purpose of calculating the first accumulated net cash position for the subsequent year.

(c) The SANCP in relation to any year means the amount ascertained according to the formula used for ascertaining the FANCP except that B = .......... per cent per annum plus the arithmetical average of the percentage yield on US Long Term Government Bonds for each month of the year for which the calculation is being made, as reported in the publication "International Financial Statistics" of the International Monetary Fund. And except that C is calculated by reference to the first proviso to the definition of net cash position.

Provided that where the SANCP for any year is a positive amount, the SANCP at the end of that year shall be deemed to be zero for the purpose of calculating the SANCP for the subsequent year.

(d) The TANCP in relation to any year means the amount ascertained according to the formula used for ascertaining the FANCP except that B = ......... per cent per annum plus the arithmetical average of the percentage yield on US Long Term Government Bonds for each month of the year for which the calculation is being made, as reported in the publication "International Financial Statistics" of the International Monetary Fund. And except that C is calculated by reference to the second proviso to the definition of net cash position.

Provided that where the TANCP for any year is a positive amount, the accumulated net cash position at the end of that year shall be deemed to be zero for the purpose of calculating the TANCP for the subsequent year.

(e) The Petroleum Profits Tax, if any, shall be paid in cash at such time and in such manner as, after consultation with the Company, the Minister may reasonably require.

Income Tax (Option)

17A. The Company shall be liable to Income Tax in accordance with Fourth Schedule of this Agreement.

Natural Gas.

18. (1) Where the Company has pursuant to clause 8 notified the Minister that non - associated natural gas discovered in the Scheduled Lands is of potential commercial interest the Parties will as soon as possible after completion by the Company of an appraisal programme relating to such discovery or sooner if so agreed meet together with a view of reaching an agreement on the production, processing and sale of such natural gas. The Company shall in any case elect, within a period of three years or such longer period as the Minister allows, whether or not to develop such natural gas discovery.

(2) For the purpose aforesaid the Minister and the Company shall negotiate in good faith with a view to reaching agreement on a method of valuing the said natural gas and on the royalty payable in respect thereof which, to the extent that market conditions permit, will give to the Company a fair return on its investment taking account of the risk assumed by the Company during the exploration stage.

(3) The Company shall have the right to use natural gas associated with the crude oil produced for oil field operations, including pressure maintenance in the oil fields covered by the Scheduled Lands.

(4) Subject to sub-clauses (1), (3) and (6) the Government shall be entitled to take at the downstream flange of the separator on the production platform or, failing the existence of such a separator, at a point of delivery mutually agreed upon at the collecting and inlet system, and utilise without any payment therefor to the Company, any associated natural gas which is in excess of the quantity of natural gas required for petroleum operations. The costs and risks of taking and utilising such associated natural gas by the Government hereunder will be borne solely by the Government.

(5) Associated and/or non - associated natural gas produced from the Scheduled Lands, except in the case of short term flaring necessary for testing or other operational reasons, may be flared only upon the prior approval of the Minister.

(6) Where there are reasonable grounds for believing that the natural gas associated with crude oil is in such quantities as to enable its commercial exploitation, the Company shall undertake an appraisal of the viability of such commercial exploitation. If such appraisal reveals that commercial exploitation is viable, the Company will be obliged to include proposals for such exploitation in the development plan it submits to the Minister, pursuant to clause 9(6) herein.

Provided that if the Minister is not satisfied with the results of the Company's appraisal, the viability of the exploitation of the said natural gas shall be referred to a sole expert appointed by agreement between the parties or in the absence of such agreement, by the Secretary - General of the International Centre for the Settlement of Investment Disputes and the decision of the sole expert so appointed shall be binding on the Company and the Government.

Domestic Supply Obligation.

19. (1) The requirements of the domestic market of Tonga shall in the first instance be met by crude oil delivered to the Government pursuant to clause 14. If there is domestic demand in excess of the crude oil production available to Government pursuant to the aforesaid clause, the Company may be required by the Minister to sell crude oil in the Kingdom on a pro rata basis with other producers in the Kingdom according to the quantity of crude oil produced by each producer. The Minister shall give the Company at least three (3) months notice in advance of the said requirement and the terms of the supply will be on an annual basis.

(2) Crude Oil sold in Tonga pursuant to sub - clause (1) shall be paid for in foreign exchange and the price for crude oil sold pursuant to this clause shall be the price for crude oil determined in accordance with clause 23.

Tongan Resources.

20. The Company will give preference to the purchase of Tonga goods and materials where such goods and materials are of intentionally comparable quality, quantity, availability at required times and are offered at competitive prices, as well as to the employment of Tongan service contractors who offer competitively priced services. The Company, where reasonably possible, will establish appropriate tender producers for the acquisition of goods, materials and services.

Refinery.

21. If and when annual production in the Kingdom by the Company exceeds 2,000,000 tonnes then the Company shall consult with the Government regarding the economic feasibility of erecting a refinery.

Employment and Training.

22. (1) Subject to the requirements of any law relating to immigration, the Minister shall arrange for the provision of the necessary work permits and other approvals required for the employment of expatriate personnel by the Company in the Kingdom for the purpose of performing its obligations under this Agreement.

(2) In the conduct of the petroleum operations, the Company shall endeavour to employ Tongan citizens having appropriate qualifications to the maximum extent possible. Towards this end, the Company shall in consultation with the Minister propose and carry out a scheme of training and employment of its Tongan employees in each phase and level of operations taking account of the requirements of safety and the need to maintain reasonable standards of efficiency in the conduct of the operations hereunder. Such employees may be trained in the Kingdom or abroad as required by the training programmes prepared by the Company.

Valuation of crude oil.

23. (1) The value of crude oil referred to in clauses 14, 17 and 19 shall be determined as follows:

(a) At the end of each half - year commencing with the half - year in which Commercial production of crude oil begins, a value for each separate volume of crude oil of the same gravity, sulphur and metal content, pour point product yield and other relevant characteristics ("quality") will be determined.

(b) The value aforesaid will be determined on the basis of fair market value as follows:

(i) in the event that 50 per cent or more to the total sales by the Company during the half - year of crude oil produced hereunder have been third party arms length sales the fair market value will be the average price realised in such sales.

(ii) in the event that less than 50 per cent of the total sales by the Company during the half-year of crude oil produced hereunder have been third party arms length sales the fair market value will be determined by the weighted average of:

(A) the average prices realised in third party arms length sales during the half-year of crude oil produced hereunder if any; and

(B) the average prices at which major competitive crude oils of generally similar quality to that of Tongan crude oil produced hereunder are being sold in international markets. The prices of the crude oils used for reference will be adjusted for differences in quality, quantity and contract terms.

The weighting aforesaid will be determined by the percentage volume of total sales that (A) do and that (B) do not fall under third party arms length arrangements. For the purpose of this clause third party arms length sales will exclude crude oil exchanges, barter deals, or restricted or distress transactions and more generally any crude oil transaction which is associated with special financial or commercial considerations.

(iii) all such prices will be adjusted to FOB Tonga.

(2) For the purpose of ascertaining any amount of royalty or petroleum profits tax until such time as the value of the Crude Oil attributable to a half-year is determined, the calculations will be based on the value of the crude oil during the preceding half-year and in the absence of such value, on the value agreed to between Government and the Company. Upon determination of the value of the crude oil attributable to the half-year in question, adjustments shall be made on the basis of the value determined.

(3) In the event of any difference of view between the Company and the Government about the manner in which the prices are to be determined according to the provisions of sub - clause (1) the matter or matters in dispute will finally be resolved by a sole expert appointed by agreement between the parties or, in the absence of such agreement, by the Secretary - General of the International Centre for the Settlement of Investment Disputes.

Audit.

24. (1) The Government shall have the right from the time to time to appoint an auditor who shall have the right to audit for the purpose of Government revenues, the books and accounts of the Company in respect of any year (not being a year that ended more than two (2) years before the year in which the audit is to be carried out).

(2) For the purposes of such audit, the Company shall make available to the auditor all such books, records, accounts and other documents and information as may be reasonably required from the Company by him.

Nothing in this clause shall be construed as limiting the right of the Government or any authorised officer pursuant to any statutory power to audit or cause to be audited the books of any company.

Consent to assignment.

25. (1) Subject to the provisions of the following sub-clauses of this clause, the Company shall not transfer its interest under this Agreement nor any of the rights hereby granted to any person or persons whomsoever without the previous consent in writing of the Government. The Government (without limiting its rights to make such consent subject to any conditions it may think fit) may require that as a condition of giving such consent, the person or person taking such interest or rights at his or their expense shall agree by written agreement to observe and perform the obligations imposed on the Company by this Agreement.

(2) The Company may transfer, in whole or in part, its interests under this Agreement to an affiliate.

(3) For the purposes of this Agreement and in relation to the Company-
"an affiliate" means-

(a) a company in which the Company holds more than fifty per cent (50%) of its shares of full voting rights; or

(b) a company which holds more than fifty per cent (50%) of the Company's shares of full voting rights; or

(c) a company which holds both in the Company and in a company within the meaning of the last two preceding paragraphs (a) and (b) more than fifty per cent (50%) of their shares of full voting rights.

(4) In the case of a transfer within the meaning of this clause, a written notification of the transfer to be made shall be given by the Company to the Minister in accordance with rules and procedures prescribed by His Majesty in Council, and such transfer shall become effective on the date to be designated by the Company in that written notification.

Import Duties.

26. (1) The Company and its sub - contractors engaged in operations hereunder shall be permitted to import free of duty or other taxes on imports machinery, equipment, vehicles, materials, supplies, consumable items (other than food stuffs or alcoholic beverages) and moveable property where imports of any of the said categories have been certified by the Company to be for use solely in carrying out petroleum operations, under this Agreement.

(2) Any of the items imported into the Kingdom may, if no longer required for the operations hereunder be freely exported at any time by the importing party without the payment of any export duty or impost;

Provided, however, that on the sale or transfer by the importer such items to any person in the Kingdom import duty shall be payable by the importer on the value thereof at the date of such sale or transfer.

Foreign Currency.

27. (1) The Company shall be subject to the normal Foreign Exchange Control Regulations applicable in Tonga, provided, however, that:

(a) the Company is entitled to remit or retain abroad all funds or assets acquired by it abroad including the proceeds of sales and to dispose freely of such funds or assets insofar as such funds or assets may exceed the Company's requirements for the purpose of its operations in the Kingdom, but statements of funds and assets held abroad, including proceeds of sales of Tongan petroleum and the disposition thereof, shall be rendered to the Exchange Control, Tonga, in such form and at such intervals as the Exchange Control may require;

(b) the Company shall be entitled to convert freely into foreign currencies acceptable to the Company and remit abroad any funds held by it in the Kingdom in excess of its requirements in the Kingdom and to purchase Tongan currency with foreign currencies at rates of exchange no less favourable than those available to any other purchasers and sellers of foreign currencies provided that the company shall not be entitled to convert into foreign currencies funds generated by its in the Kingdom and not constituting the proceeds of foreign currencies converted into Tonga currency.

(c) no restriction shall be placed on the importation of funds by the Company for the purpose of carrying out its operations under a petroleum agreement.

(2) Payment of royalty, rentals and petroleum profits tax shall be in United
States dollars.

Surrender and Termination.

28. Subject to clause 11, the Company on giving to the Minister not less than sixty (60) days notice in writing may:

(a) if its obligations in respect of any period during the exploration phase have been fulfilled, at any time thereafter during that phase surrender its rights and be relieved of its obligations in respect t of all the Schedules Lands; and

(b) at any time after the Effective Date, surrender its rights and relieved of its obligations in respect of any blocks forming part of the Scheduled Lands;

Provided, however, that –

(i) no surrender by the Company of its rights over any part of the Scheduled Lands shall relieve the Company of its obligations as set out in this Agreement and in the Regulations; and

(ii) after surrender the Scheduled Lands shall constitute a single area.

Right of Government to determine.

29. If –

(a) any payments which must be made by the Company under this Agreement are unpaid for the space of six (6) calendar months following after any of the dates on which the same ought to have been made; or

(b) there is any failure by the Company to comply with any other obligations which must be complied with by the Company under this Agreement; or

(c) the Company ceases to exist either voluntarily or compulsorily (except a voluntary cessation of a solvent company for the purpose of amalgamation or reconstruction), or a receiver is appointed to any part of its undertaking; or

(d) the Company fails to comply with any unit development scheme prepared in accordance with the provisions of regulation 40 of the Regulations;

then and in any such case the Government shall hold the right to determine this Agreement;

Provided that the said power shall not be exercised unless and until-

(i) notice has been given to the Company specifying the particular matter causing the said power to arise, and if the matter is capable of remedy requiring the Company to remedy the matter, and requiring the Company to make reasonable compensation in money for the matter in any case where such compensation may reasonably be required; and

(ii) with a reasonable time thereafter the Company fails to remedy the matter, if it is capable of remedy, and to make reasonable compensation in money, if such compensation is required, to the satisfaction of the Government; or

(iii) where a dispute in relation to a matter referred to in paragraphs (a) and (d) of this clause has been referred to arbitration, an award has been made, and then only in accordance with the terms of the awards.

Effect of Determination.

30. On the determination of this Agreement under any of the provisions hereof, this Agreement and all the respective rights and obligations of the parties under this Agreement shall altogether cease to have effect:

Provided that such determination shall be subject and without prejudice to-

(a) any rights and obligations of the parties respectively expressed to arise under this Agreement on the determination thereof; and

(b) any liability of either party arising out of an earlier failure to comply with any obligation which must be complied with by such party.

Right of Government to assets at end of Agreement Period.

31. Subject to the occupation rights of the Company (if any) under another petroleum agreement, at the end of the agreement period or any earlier determination of this Agreement the Company shall if requested so to do by the Government deliver up to the Government any buildings, plant, railways, pipelines, pumps, machinery and other assets of a fixed or permanent nature constructed, put up or built and used or employed by the Company in or on the Scheduled Lands and which are either at that time necessary for the continued production of any petroleum field therein or are in the nature of public utilities (such as utilities providing electricity, gas, water and telecommunications services to the Government or public). The Company shall if so requested by the Government sell to the Government at that time (at a price which, if agreement fails shall be fixed by arbitration) any moveable assets owned and used or employed by the Company in or on the Scheduled Lands which are then necessary for the continued production of any petroleum field therein and which the Government may wish to purchase:

Provided that-

(a) the foregoing provisions of this Clause shall not apply to moveable assets which are still required by the Company for use or employment in respect of lands held under any other petroleum agreement nor to assets of a fixed or permanent nature which are still required by the Company as aforesaid so long as such assets are so required;

(b) the Government shall give notice of any purchase it wishes to make hereunder at least six (6) calendar months before the end of the agreement period (or, if this Agreement shall be determined before the end of the agreement period at any time within three (3) calendar months thereafter).

(2) The Company shall not within ten (10) years before the end of the agreement period remove from the Scheduled Lands or sell any assets of a fixed or permanent nature which might be deliverable to the Government under this Clause and at no time shall remove or sell any such asset which is in the nature of a public utility while it is required for that purpose.

Pollution.

32. The Company hereby undertakes that in the event of pollution occurring in the Kingdom as a result of its petroleum operations it will adequately compensate persons suffering injury to their person or property in consequence thereof and will adopt the following measures to remove the said pollution:

1..................................................................................................................................
2. ................................................................................................................................
3 .................................................................................................................................

Force Majeure.

33. (1) Any non - performance or delay in performance by the Government or the Company of any of its obligations under this Agreement shall be excused if and to the extent that such non - performance or delay is caused by Force Majeure as defined in this clause. The period of any such non-performance or delay together with such period as may be necessary for the restoration of any damage, caused during the period of Force Majeure shall be added to the time allowed under this Agreement for the performance of any obligation or exercise of any right dependent thereon.

(2) The term "Force Majeure" means any act of God, perils of navigation, storm, flood, earthquake, lightening, explosion, fire, hostilities, war (declared and undeclared), blockade, insurrection, civil commotion, acts of a public enemy, quarantine restrictions, epidemics, strike accident, riot, labour disturbance, any act or failure to act of a Government agency or local body or any other cause beyond the control of the Government or the Company, as the case may be provided that any act or failure to act by a local body shall not constitute. Force Majeure unless such act or failure to act is the proximate cause of non-performance or delay in performance of any obligation under this Agreement or the exercise of any right dependent thereon.

(3) The party claiming suspension of its obligation under this Agreement on account of Force Majeure shall promptly notify the other party of the occurrence thereof. In such event, the party claiming suspension of its obligations as aforesaid shall take all actions that are reasonable and legal to remove the cause thereof and upon removal of the cause, notify the other party and shall take all reasonable action for resumption of its operations as soon as possible after removal of the Force Majeure situation.

(4) Where a Force Majeure situation continues for more than fifteen (15) consecutive days, the parties shall meet forthwith in order to review the situation and to agree on the measures to be taken for the removal of the cause of Force Majeure and for the resumption in accordance with the provisions of this Agreement of the performance of the obligation hereunder.

Arbitration.

34. (1) In the event of any dispute arising between the Company and the Government (or any governmental authority) touching or concerning the interpretation of performance of this Agreement or anything herein contained or in connection herewith or the rights and liabilities of either of the Parties hereto, if the Parties hereto should fail to settle such dispute by agreement, after the Kingdom of Tonga has separately ratified the Convention on the Settlement of Investment Disputes between States and Nationals of other States (hereinafter called "the Convention"), such dispute shall be settled finally by arbitration by the International Centre for Settlement of Investment Disputes (hereinafter called "the Centre") established under the said Convention.

(2) It is agreed that because of foreign control the Company is regarded as a national of .......................................... for the purposes of Article 25(2)(b) of the Convention.

(3) It is hereby agreed that the consent to the jurisdiction of the centre shall equally bind any assignee of the Company to the extent that the Centre can assume jurisdiction over a dispute between such assignee and the other party, and that neither party to this Agreement shall, without the written consent of the other, transfer its interest in this Agreement to an assignee with respect to whom the Centre could not exercise such jurisdiction.

(4) Until the procedure for the settlement of disputes provided for in the sub - clause (1) above can be implemented thirty (30) days after the ratification of the Convention by the Kingdom of Tonga, all disputes referred to in that sub-clause shall be settled by arbitration procedures analogous to those that would be applicable under direct communication from either Party to this Agreement to the other, and if the Arbitral Tribunal is not constituted within ninety (90) days after the receipt of such communication either Party may request the Secretary-General of the Centre to appoint any arbitrators not yet appointed.

Applicable Law.

35. This agreement shall be governed by the laws of the Kingdom of Tonga, but in the event of a dispute contemplated by Clause 34 the tribunal appointed pursuant to that Clause shall also apply such rules of international law as may be applicable.

Notices.

36. (1) All notices and other communications to be given under this Agreement shall be given in writing.

(2) Any such notice which the Government or any other person is required or entitled to give to the Company may be given or sent to the Company either at its registered office (if any) in the Kingdom of Tonga or at its statutory address for service of notices. Any notice which the Company is required or entitled to give to the Company may be given or person may be given or sent to the Minister as representative of the Government or such other person either at any address notified by the Minister or such other person, or if no notification is given, at the office of the Minister.

(3) Any notice sent by registered post shall be deemed to have been received three days after the date of posting in the Kingdom.

Stability of terms of the Agreement.

37. The Government accepts and recognises the binding force of this Agreement and the Parties hereto acknowledge and agree that the legislative competence of the Kingdom of Tonga as a sovereign state is defined by its applicable constitutional instruments and can be exercised only within the limits ordained by established rules of international law.

Index and marginal notes.

38. The index and marginal notes are for convenience only and do not form part of this Agreement.

IN WITNESS WHEREOF these presents have been executed the day and year first hereinabove written.

SIGNED for and on behalf of HIS MAJESTY IN COUNCIL AND OF THE ]
GOVERNMENT OF THE KINGDOM OF TONGA ]

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by .................................................................................................................... ]
in the presence of:

THE COMMON SEAL OF ............................................................. ]
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.......................................................................................................................... ]

was hereunto affixed ^.in the presence ]

of:]

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