PETROLEUM (EXPLORATION AND PRODUCTION) ACT
Arrangement of Sections
1. Short title
4. Title to petroleum
RIGHTS TO CONDUCT PETROLEUM OPERATIONS
5. State may conduct petroleum operations
6. Prohibition of searching for or getting petroleum without licence
7. Certain persons disqualified from holding licence
8. Constitution of blocks
PETROLEUM EXPLORATION LICENCES
10. Application for petroleum exploration licence
11. Power of Minister to obtain further information
12. Consideration of application for petroleum exploration licence
13. Grant of petroleum exploration licence
14. Refusal to grant petroleum exploration licence
15. Duration of petroleum exploration licence
16. Rights conferred by petroleum exploration licence
17. Obligations of holder of petroleum exploration licence
18. Discovery of minerals in exploration area to be notified
19. Amendment of programme of exploration operations
20. Relinquishment of exploration area
21. Transfer of petroleum exploration licence
22. Renewal of petroleum exploration licence
23. Refusal of renewal of petroleum exploration licence
24. Directions by Minister
DISCOVERY OF PETROLEUM IN EXPLORATION AREA
25. Discovery of petroleum to be notified
26. Directions of Minister on discovery of petroleum
27. Commercial discovery
28. Non-commercial discovery
30. Restriction on removal of petroleum
PETROLEUM DEVELOPMENT AND PRODUCTION LICENCES
31. Application for petroleum development and production licence
32. Application for petroleum development and production licence to be made to Minister
33. Grant of petroleum development and production licence
34. Restrictions on grant of development and production licence
35. Contents of petroleum development and production licence
36. Rights conferred by petroleum development and production licence
37. Duration and renewal of petroleum development and production licence
38. Unit development
39. Trading in development and production area
RESTRICTION ON EXERCISE OF RIGHTS UNDER LICENCES AND SURFACE RIGHTS
40. Restrictions on exercise of rights by holder
41. Rights under licence to be exercised reasonably
42. Right to access and use of water or graze stock
43. Acquisition of use of land by holder of licence
44. Arbitration of disputes
45. Compensation for disturbance of rights, etc
46. Compulsory acquisition of land
SURRENDER, CANCELLATION OR SUSPENSION OF LICENCES
47. Surrender of area or part thereof covered by licence
48. Minister's power to suspend or cancel licence
TRANSFERS AND REGISTRATION
50. Interest in licence to be created by instrument in writing
51. Transfer, etc., of licence to be approved by Minister
52. Minister may require additional information
GENERAL PROVISIONS RELATING TO HOLDERS OF LICENCES
54. Work practices for holder of licence
55. Wasteful production practices
56. Maintenance, etc., of property
57. Drilling near boundaries
58. Removal of property, etc., by holder
59. Sale of plant
60. Survey of wells, etc.
61. Transfer of control of company
62. Holder to have office in Zambia
63. Preference for Zambian products, etc.
64. Insurance and indemnities
65. Obstruction of holder of licence
SAFETY, HEALTH AND ENVIRONMENTAL PROTECTION
66. Environment and human health to be considered when granting exploration or development and production licences
67. Conditions for protection of environment and human health
68. Direction to comply with conditions of licence
69. Rehabilitation by Minister at holder's expense
70. Petroleum Environmental Protection Fund
71. Liability and redress
72. Income tax
73. Employee taxation
74. Royalty or production payment
75. Provisional royalty
76. Prohibition on disposal of petroleum
77. Remission of royalty, etc.
78. Recovery of royalty, etc.
79. Annual fee in respect of licence
80. Security for compliance
81. Establishment of the Hydrocarbon unit
82. Functions of unit
83. Director and other public officers
84. Public officer not to acquire or hold certain rights
85. Indemnity of officers
86. Prohibition of disclosure of information
87. Continuation of Petroleum Committee
88. Functions of Committee
89. Composition of Committee
91. Petroleum Technical Committee
92. Functions of Petroleum Technical Committee
93. Disclosure of interest
94. Appointment of inspectors
95. Powers of inspectors
96. Duty of inspector to report to Minister
97. Appeals in relation to licence issued by Minister
98. Notification of decisions
99. Scientific investigations
100. National Petroleum Company
101. Petroleum Trust Fund
102. Offences and penalties
103. Offence committed by body corporate or un-incorporate body
104. Transitional provisions
106. Repeal of cap. 440
to revise the law relating to the exploration for, and the development and production of, petroleum in Zambia; to provide for title to and control of petroleum in Zambia; to provide for the continuation of the Petroleum Committee and revise its functions; to provide for the constitution of the Petroleum Technical Committee and define its functions; to establish a Petroleum Environmental Protection Fund; to provide for the registration of the National Petroleum Company; to establish the Petroleum Trust Fund; to repeal and replace the Petroleum (Exploration and Production) Act, 1985; and to provide for matters connected with or incidental to the foregoing.
[26th September. 2008]
Act 10 of 2008.
This Act may be cited as the Petroleum (Exploration and Production) Act.
In this Act, unless the context otherwise requires—
“access agreement” means an agreement entered into between the holder of a licence and an owner or occupier of land over which the licence subsists, for the regulation of exploration or development and production operations authorised by the licence to be carried on upon the land;
“block” means a block constituted under section 8;
“body corporate” means a company or a corporation;
“commercial discovery” means a discovery of petroleum which can be exploited commercially in accordance with good oil field practices in the international petroleum industry;
“Committee” means the Petroleum Committee continued by section 87;
“company” has the meaning assigned to it in the Companies Act;
“condition” includes any term, prohibition, limitation and stipulation;
“corporation” means a corporate body incorporated in or outside Zambia;
“crude oil” means petroleum which is in liquid state at the well head or gas-oil separator or which is extracted from natural gas, including any distillate or condensate;
“development” in relation to petroleum operations, means the mapping, siting, construction, drilling, testing, and commissioning of a production well;
“development and production area” means an area of land, constituted by a block or blocks, and which is subject to a petroleum development and production licence;
“development and production operations” means operations for or in connection with the development or production of petroleum;
“Director” means the person appointed as Director under section 83;
“discovery block”, in relation to an exploration area, means a block in the exploration area in which a discovery of petroleum is located;
“discovery of petroleum” means a discovery of petroleum, not previously known to have existed, recoverable at the surface in a flow which can be measured by conventional petroleum industry testing methods;
“drilling” means the perforation of the earth's surface, whether the hole is vertical, inclined or horizontal, and includes all operations for preventing the collapse of the sides of the hole or for preventing the hole from becoming filled by extraneous materials (including water) and the filling of wellheads, or coring or logging, and any operations incidental thereto;
“environment” has the meaning assigned to it in the Environmental Protection and Pollution Control Act;
“environmental commitment plan” means a plan to mitigate the adverse impact of the exploration, development or production operations on the environment;
“exploration area” means an area of land, constituted by a block or blocks, and which is subject to a petroleum exploration licence;
“exploration operations” means operations for or in connection with the exploration for petroleum;
“Fund” means the Petroleum Environmental Protection Fund referred to in section 77;
“good oilfield practices” means those practices related to petroleum operations that are generally accepted by the international petroleum industry as good, safe, environmentally-friendly, economic and efficient in exploring for and producing petroleum;
“holder”, in relation to a licence, means the person to whom a petroleum exploration or a petroleum development and production licence is granted and, where a licence is granted to a person jointly with others, means every one of the persons to whom the licence is jointly granted, and includes every person to whom the licence or an interest therein is lawfully transferred;
“licence” means a petroleum exploration licence or a petroleum development and production licence;
“licensee” means the holder of a licence;
“person” includes a partnership;
“petroleum” means any naturally occurring—
(b) mixture of hydrocarbons; or
(c) mixture of one or more hydrocarbons and any other substance;
whether in a gaseous, liquid or solid form, and includes any petroleum which has been returned to a natural reservoir, but does not include coal;
“petroleum operations” means the operations related to the exploration, development, extraction and production of petroleum;
“petroleum reservoir” means a naturally occurring discrete accumulation of petroleum in any form;
“prescribed” means prescribed by regulations made by the Minister;
“production” in relation to petroleum operations means the recovery of petroleum from its natural in situ source up to the well head;
“production well” means the infrastructure required for the recovery of petroleum from the natural resource up to the well head;
“repealed Act” means the Petroleum (Exploration and Production) Act;
“resettlement plan” means a plan that outlines the actions to be undertaken by a holder of a licence in order to compensate and resettle persons displaced by petroleum operations;
“Technical Committee” means the Petroleum Technical Committee constituted by section 91;
“Trust Fund” means the Petroleum Trust Fund referred to in section 101; and
“well” means a hole made by drilling in land of the sub-soil of land in connection with exploration or development operations, but does not include a seismic shot hole.
(1) This Act applies to the exploration for, exploitation, conservation and management of petroleum existing in its natural condition in land in Zambia.
(2) A right to search for or mine any mineral, as defined in section 2 of the Mines and Minerals Development Act, 2008, shall not be granted or exercised under this Act.
(1) The entire property in and control over petroleum and accompanying substances, in whatever physical state, located in any land in Zambia is hereby vested exclusively in the President on behalf of the State.
(2) Notwithstanding the provisions of sub-section (1), a licence issued under this Act may provide for a person to acquire property in, title to or control over any petroleum within the Republic.
(3) The provisions of sub-sections (1) and (2) shall have effect notwithstanding any rights which any other person may possess in or over the soil on or under which petroleum is discovered.
RIGHTS TO CONDUCT PETROLEUM OPERATIONS
The State may carry out petroleum operations either on its own or in joint venture with a holder of a petroleum exploration licence or a petroleum development and production licence issued under this Act.
(1) A person shall not search for in, or get from, any land in Zambia petroleum except—
(a) under and in accordance with a licence granted by the Minister under this Act; or
(b) subject to sub-section (2) of section 104 under and in accordance with a contract entered into under the repealed Act before the commencement of this Act.
(2) Any person who contravenes sub-section (1) commits an offence and is liable on conviction—
(a) in the case of an individual, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding ten years, or to both; or
(b) in the case of a body corporate, to a fine not exceeding seven hundred thousand penalty units.
(1) A licence shall not be granted to any person except in accordance with the provisions of this Act.
(2) A licence shall not be granted to, or held by—
(a) an individual who—
(i) is under the age of eighteen years;
(ii) is or becomes an undischarged bankrupt, having been adjudged or otherwise declared bankrupt under any written law, or enters into any agreement or scheme of composition with creditors, or takes advantage of any legal process for the relief of bankrupt or insolvent debtors; or
(iii) has been convicted, within the previous ten years, of an offence involving fraud or dishonesty, or of any offence under this Act or any other law within or outside Zambia, and been sentenced therefor to imprisonment without the option of a fine or to a fine exceeding fifty thousand penalty units; or
(b) a company—
(i) which has not established an office in Zambia;
(ii) unless, in the case of a petroleum development and production licence, the company is incorporated under the Companies Act;
(iii) which is in liquidation, other than liquidation which forms part of a scheme for the reconstruction of the company or for its amalgamation with another company; or
(iv) which has among its directors or shareholders any person who would be disqualified under paragraph (a).
(2) A licence may be granted to two or more persons associated together in any form of joint arrangement, if each one of them is qualified to hold the licence under paragraph (a) of sub-section (1).
(3) Where at any time, a licensee is constituted of two or more persons, the obligations to be observed and performed by the licensee under this Act shall be joint and several obligations, but without prejudice to any right of contribution which may exist between all or any of them.
(1) For the purposes of this Act, the territory of the Republic, or parts of it, shall be divided into blocks, according to a grid system, in accordance with regulations prescribed by the Minister, with the approval of the Committee.
(2) The Minister may reserve blocks to be exploited by the Government.
(1) Subject to the other provisions of this Act, the Minister may, by notice in the Gazette and in two newspapers of general circulation in the Republic, issue invitations for bids for the grant of a petroleum exploration licence in respect of any block or blocks specified in the notice.
(2) The notice referred to in sub-section (1) shall include—
(a) a description of the blocks for which the bids are to be solicited;
(b) the procedures and conditions relating to the submission of the bids; and
(c) the period within which the bids shall be submitted.
(3) A bid submitted pursuant to sub-section (1) shall include—
(a) full information regarding the bidder's financial status, technical competence and experience;
(b) a description of the area constituted by the blocks in respect of which the bid is being made;
(c) the proposed programme of exploration operations and the estimated cost of the proposed exploration operations;
(d) the bidder's proposals with respect to the employment and training of citizens of Zambia;
(e) the bidder's proposals for the promotion of local business development;
(f) an environmental commitment plan;
(g) a tax clearance certificate issued under the Income Tax Act; and
(h) such further information as the Minister may, by statutory instrument, prescribe.
(4) The area described in a bid under this section shall be constituted by blocks which—
(a) form a single area; and
(b) are such that each block in that area has a side in common with at least one other block in that area.
(5) The Minister shall, within five days of the expiry of the period referred to in paragraph (c) of sub-section (2), refer all the bids submitted in accordance with this section to the Technical Committee for evaluation.
(6) The Technical Committee shall consider the matters referred to in paragraphs (a) to (h) of sub-section (3) in evaluating the bids.
(7) The Technical Committee shall, where a bid complies with the requirements of this Act, recommend to the Committee that the bidder with the best proposed programme be granted a petroleum exploration licence in accordance with the provisions of this Act.
PETROLEUM EXPLORATION LICENCES
(1) A person whose bid under section 9 is successful may apply for a petroleum exploration licence to the Minister in the prescribed form upon payment of the prescribed fee.
(2) An application under sub-section (1) shall include such information as the Minister may by statutory instrument, prescribe.
(3) The Minister shall, within five days of receiving—
(a) an application under sub-section (1); or
(b) the information requested for under sub-section (1) of section 11;
forward the application to the Technical Committee for consideration.
(1) The Minister may, before forwarding an application referred to in sub-section (1) of section 10 to the Technical Committee, by notice served on an applicant for a petroleum exploration licence, direct the applicant to furnish to the Minister, in writing, within such reasonable time as may be specified in the notice—
(a) such further information relevant to the application as may be specified in the notice; and
(b) if the applicant, or any of the applicants, is a body corporate, such information as may be specified in the notice to enable the Minister to ascertain to what extent the controlling power, whether directly or indirectly, in the direction of the affairs of the body corporate is vested in a corporation, or an individual or individuals, resident outside Zambia.
(2) Where an applicant for a petroleum exploration licence fails to comply with the requirements of a notice served on the applicant under sub-section (1) within the period specified in the notice, the application shall lapse.
(1) The Technical Committee shall within thirty days of receiving an application forwarded to it under sub-section (3) of section 10, consider such application and may, within that period, cause such investigations to be made or such consultations to be carried on as the Technical Committee may consider necessary to assess whether or not the criteria in sub-section (2) has been met.
(2) The Technical Committee shall, in considering an application made under section 10, take the following into account—
(a) that the applicant has, or has secured access to, adequate financial resources, technical competence and experience to carry on effective exploration operations;
(b) that the proposed programme of exploration operations is adequate and makes proper provision for environmental protection;
(c) that the proposed exploration area is not the same as, nor does it overlap an existing exploration area; and
(d) if the applicant is a holder of another petroleum exploration licence, the applicant has not contravened any condition of the licence or any provision of this Act.
(3) The Technical Committee shall after considering an application under this section recommend to the Committee—
(a) the grant of a petroleum exploration licence where the application meets the requirements of this Act; or
(b) the refusal to grant a petroleum exploration licence where the application does not meet the requirements of this Act.
(1) The Minister shall, with the approval of the Committee, grant a petroleum exploration licence to the applicant where the application meets the requirements of this Act.
(2) A petroleum exploration licence shall be in such form as the Minister may determine and shall—
(a) state the terms and conditions on which it is granted;
(b) identify the block to which the licence relates;
(c) include a description of the exploration area; and
(d) state the date on which, and the period for which, it is granted.
(3) There shall be attached to a petroleum exploration licence the programme of exploration operations as approved by the Minister, which shall form part of the conditions of the licence.
(4) There may be included in an petroleum exploration licence a condition requiring the applicant to agree to the State or a person nominated on its behalf, on such terms as may be agreed, acquiring or having an interest in any venture to explore for petroleum in any block in the exploration area.
(5) The Minister may specify in a petroleum exploration licence a period not exceeding six months from the date of the grant of the licence as the period to enable the applicant to make any necessary preparations to carry on exploration operations.
(1) The Minister shall not grant a petroleum exploration licence to an applicant where—
(a) the applicant is disqualified from holding a petroleum exploration licence under section 7;
(b) the applicant is the holder of another exploration licence and is in breach of any condition of that licence or any provision of this Act; or
(c) the block for which the applicant has made the application, or a part of it, is compromised in a licence already granted.
(2) The Minister shall, where the Minister rejects an application under sub-section (1), inform the applicant of the rejection and give the reasons therefor.
(1) Subject to the other provisions of this Act, a petroleum exploration licence shall be valid for a period of four years.
(2) A petroleum exploration licence may, on its expiry, be renewed for two further periods not exceeding three years each.
Subject to the provisions of this Act and to the conditions specified in the licence, a petroleum exploration licence confers on the holder of the licence exclusive rights to explore for petroleum in the exploration area and to carry on such operations and execute such works as are necessary for that purpose.
(1) A holder of a petroleum exploration licence shall—
(a) commence exploration operations within ninety days, or such further period as the Minister may allow, from the date of the grant of the licence;
(b) give notice to the Minister of the discovery of any petroleum of possible commercial value within thirty days of the discovery;
(c) expend on exploration operations not less than the amount prescribed or required by the terms and conditions of the exploration licence to be so expended;
(d) carry on exploration operations in accordance with the programme of exploration operations;
(e) notify the Minister of the discovery of any minerals in the exploration area within a period of thirty days of such discovery;
(f) backfill or otherwise make safe any excavation made during the course of the exploration operations, as the Minister may specify;
(g) permanently preserve or otherwise make safe any borehole in the manner directed by the Minister and surrender to Government, without compensation, the boreholes and any water rights in respect therefor on termination;
(h) unless the Minister otherwise stipulates, remove, within sixty days of the expiry or termination of the exploration licence, any camp, temporary buildings or machinery erected or installed and repair or otherwise make good any damage to the surface of the ground occasioned by the removal, in the manner specified by the Minister;
(i) keep and preserve such records as the Minister may prescribe, relating to the protection of the environment; and
(j) submit to the Minister quarterly reports containing the information required under the licence and the Act.
(2) A holder of a petroleum exploration licence shall keep full and accurate records at the holder's office, of the exploration operations which shall indicate—
(a) the wells drilled;
(b) the strata penetrated, with detailed logs of such strata;
(c) the minerals and petroleum, if any, discovered;
(d) the number of persons employed;
(e) the costs incurred; and
(f) such other matters as may be prescribed by the Minister by statutory instrument;
and shall furnish, at least once in every three months, digital and hard copies of the records to the Minister.
(3) A person who—
(a) fails to keep any record or information required to be kept under sub-section (2);
(b) fails to supply any record or petroleum samples to the Minister; or
(c) supplies any false or misleading record or information;
commits an offence and is liable, upon conviction, to a fine not exceeding two hundred thousand penalty units or to imprisonment for a period not exceeding two years, or to both.
(4) Where the holder of a petroleum exploration licence fails to carry out any part of the requirement with respect to work and expenditure stipulated in the petroleum exploration licence, or of each programme submitted by the holder pursuant to sub-section (5), without prejudice to any other right which may be invoked by the Minister in respect of that failure, the relevant provision of the licence, if any, shall apply for the purpose of determining the liquidated damages payable to the State by the licensee on account of such failure.
(5) The requirement in sub-section (4) with respect to an adequate programme with respect to work and expenditure shall be deemed to have been met in any case where the programme submitted pursuant to that sub-section is consistent with the requirements, if any, with respect to work and expenditure contained in a petroleum exploration licence.
(1) Where, in the course of exercising the holder's rights under a petroleum exploration licence, the holder of the exploration licence discovers minerals, the holder shall, within thirty days immediately following such discovery, notify the Minister thereof in writing.
(2) Any person who contravenes the provisions of sub-section (1) commits an offence and is liable, upon conviction—
(a) in the case of an individual, to a fine not exceeding five hundred thousand penalty units or to imprisonment for a term not exceeding ten years, or to both; or
(b) in the case of a body corporate, to a fine not exceeding one million penalty units.
(1) A holder of a petroleum exploration licence shall apply to the Minister, where the holder intends to make any amendments to the programme of exploration operations in the prescribed manner and form.
(2) The Minister shall, upon receipt of an application under sub-section (1), forward it to the Technical Committee for consideration.
(3) The Minister may, with the approval of the Committee—
(a) approve the proposed amendments with or without any modifications and on such terms and conditions as the Committee may determine; or
(b) reject the proposed amendments and give the applicant the reasons therefor.
(1) The holder of a petroleum exploration licence may at any time when the licence is in force, by giving notice to the Minister of not less than three months of the holder's intention to do so, relinquish any block or blocks in the exploration area identified in the notice.
(2) Any relinquishment under sub-section (1) shall not relieve the holder of a petroleum exploration licence of any obligation incurred by the holder in respect of the area relinquished prior to the date of the relinquishment.
(3) Subject to the petroleum exploration licence referred to in sub-section (1), any block or blocks relinquished under sub-section (1) shall, unless the Minister otherwise directs, be such as to ensure that the remaining exploration area constitutes a continuous area.
(4) Where any block or blocks are relinquished under sub-section (1), the exploration licence concerned shall cease to have effect from the date of the relinquishment with respect to that block or blocks.
(1) Subject to sub-sections (2) and (3), a petroleum exploration licence or any interest therein or any controlling interest in the holder thereof may be transferred to any other person.
(2) A holder of a petroleum exploration licence who intends to transfer the petroleum exploration licence or any interest therein shall notify the Minister not less than thirty days before the intended transfer.
(3) A holder of a petroleum exploration licence shall, in the notification referred to under sub-section (2), give to the Minister such details of the transferee as would be required in the case of an application for a petroleum exploration licence under section 10.
(4) Where the Minister is satisfied that the transferee is not disqualified under any provision of this Act from holding a petroleum exploration licence, the Minister shall, with the approval of the Committee, authorise the transfer of the exploration licence or an interest therein and notify the applicant accordingly.
(5) Upon the transfer of a petroleum exploration licence, the transferee shall assume and be responsible for all the rights, liabilities and duties of the transferor under the petroleum exploration licence for the unexpired period of the licence.
(6) Any transaction purporting to transfer a petroleum exploration licence in contravention of this section is void.
(1) A holder of a petroleum exploration licence may, not later than three months before the expiry of the petroleum exploration licence, and not more than twice, apply to the Minister for the renewal of the licence in respect of any block in the exploration area upon payment of the prescribed fee.
(2) An application under this section shall be in the prescribed manner and form and—
(a) shall be accompanied by—
(i) particulars of the work carried out and the amount expended in respect of the exploration area during the term of the licence, or, where the application is for a second renewal of the licence, during the period of the previous renewal, up to and including the date of the application; and
(ii) adequate proposals concerning the work to be carried out and the minimum amount to be expended during the period of the renewal for which application is made; and
(b) may set out any other matter which the applicant may wish the Minister to consider.
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