Petroleum Act of 1949

Article 38

The term "Exploration" means all work that have for their object the discovery of petroleum, including, but not restricted to, surveying and mapping, aerial photography, surface geology, geophysical investigations, testing of subsurface conditions by means of borings or structural drillings, and all such auxiliary work as are useful in connection with such operations. Test wells drilled for exploratory purposes may be of such size and type suitable for oil production, but the actual production of petroleum is not included in the term "Exploration," except that petroleum found during exploration may be freely used by the concessionaire in his operations for exploration purposes only with the same concession: Provided, That petroleum may be produced and marketed if necessary in the exercise of sound petroleum engineering practices or produced and marketed from wells drilled for the purpose of delineating a discovered petroleum deposit and only after notice to the Secretary of Agriculture and Natural Resources. When petroleum is produced and marketed under such circumstances, the concessionaire shall pay royalty to the Government in the same manner and form as provided in this Act: Provided, however, That the right to produce and market petroleum as authorized herein may be terminated by the Secretary of Agriculture and Natural Resources after a hearing and order to that effect. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 39

Application for Exploration Concession shall be filed with the Director of Mines in accordance with the provisions of article twenty-eight of this Act. The Regulations shall prescribe the form and contents of application for Exploration Concession.

Article 40

A map of the block desired to be explored shall accompany the application for Exploration Concession. This map shall be prepared in accordance with the Regulations, and shall show the location of the block with regard to the municipalities and province or provinces in which it is located, the four corners of the block in case it is rectangular, or the natural boundaries thereof in case the block adjoins rivers, creeks, lakes, or shore lines, or the extension or projections thereof into these bodies of water in case the block is, in whole or in part, on submerged lands. The location of the block shall be plotted on Coast and Geodetic Survey or Army base map, and shall show, among others, the topographic features of the area. The map shall be submitted together with the technical description of the corner markings and the metes and bounds or distances and bearings of the sides of the block. The technical description and map shall also indicate the bearings and distances of the tie line from some known reference location monument to one corner, preferably Number 1, of the block, in such a way that the block desired can be plotted from such tie line and descriptions on the Progress or Index Map of the Bureau of Mines, where all areas applied for shall be plotted to show the relative positions of such areas. The boundaries of the block desired shall be well-established on the ground by placing permanent and conspicuous monuments, posts or mounds of earth on the corners, so that at any time, the block can be identified, and later be tied to accurate surveys. The bearings and distances of the block applied for exploration shall be sufficiently accurate so that the approximate area of the block can be computed from the given bearings and distances on the sides.

Article 41

When an application for an Exploration Concession is filed, the applicant shall pay an application fee of one thousand pesos in the manner prescribed by the Regulations. In the event that no concession is granted corresponding to such application, the sum paid shall be returned to the applicant less such amount as corresponds to the expenses incurred by the Government in connection with the consideration of the application as determined by the Regulations.

Article 42

Exploration Concessions may be granted on any lands within the Free, and National Reserve, Areas which are not covered by valid and existing Exploration or Exploitation Concessions, or by Petroleum Drilling Leases acquired under the Petroleum Act (Act No. 2932), or by petroleum mining claims located and held under the Act of Congress of July first, nineteen hundred and two, as amended.

Article 43

Exploration concessions may be granted in lots or blocks as compact as possible, and as closely rectangular as possible in shape except when contiguous with the sea, bays, lakes, rivers, lagoons, roads, or with other concessions already granted which are of irregular boundaries. "Each block or lot shall not be more than one hundred thousand hectares nor less than twenty thousand hectares in area, and in no case shall the long dimension of the rectangle be more than five times the short dimension: Provided, That the Secretary of Agriculture and Natural Resources may, upon hearing and order, grant exception to the minimum area and shape provisions of this article when reasonably required by adjoining concessions, settlement of conflict, or geographical or geological features that render it impractical to conform with such requirements. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 44

No person shall be entitled to more than five hundred thousand hectares of exploration areas in any one petroleum region established in accordance with the provisions of article twelve of this Act, nor more than one million hectares in the whole territory of the Philippines.

Article 45

The Exploration Concession conveys upon the concessionaire, his heirs and assigns, from the date of the granting of the concession, and during the exploration period and any extension thereof, the exclusive right to explore the block granted, to do geological and geophysical work, to open test pits, to conduct drilling operations, and to do such other work related to exploration.

Article 46

The initial term of an exploration concession shall be not more than four years counted from the date of its issuance: Provided, however, That if the concessionaire has complied with the provisions of this Act and the regulations and with the terms and conditions contained in the contract of concession, the concessionaire is entitled to the grant of an extension of the same for a term of three years, for its entire area or for any part thereof, upon application of the concessionaire made prior to the expiration of the original term. If during the said first extension, the concessionaire has also complied with the provisions of this Act and the regulations and the terms and conditions contained in the contract of concession, upon application of the concessionaire made prior to the expiration of the first extension, the concessionaire likewise is entitled to a further extension of the said concession for its entire area or for any part thereof, for another term of three years. The extension shall be granted under the same terms and conditions as those contained in the original concession, subject, however, to the provisions of Articles forty-seven and forty-nine of this Act. No further renewal shall be allowed to any exploration concessionaire at the end of the second extension. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 47

At the beginning of each calendar year during the life of the concession, the concessionaire shall submit to the Director of Mines, a program of exploration work to be undertaken by the concessionaire with his concession during that year. He is obligated to spend in the direct prosecution of exploration work within his concession, such as topographic, or geological reconnaissance; mapping or cross sectioning, geophysical surveys by magnetometer, gravimeter or seismograph; core or exploratory drilling; or any combination of the said work, the following amounts: Initial term: First year — Not less than fifty centavos per hectare per year, or fraction thereof. Second year — Not less than one peso per hectare per year, or fraction thereof. Third year — Not less than one peso and fifty centavos per hectare per year, or fraction thereof. Fourth year — Not less than two pesos per hectare per year, or fraction thereof. First extension: Fifth to seventh year — Not less than two pesos and fifty centavos per hectare per year, or fraction thereof. Second extension: Eight to tenth year — Not less than three pesos per hectare per year, or fraction thereof. The cost of delivered materials or equipment used in the exploration work shall be considered as proper expenditures for such work. The concessionaire shall give satisfactory evidence to the Government of such expenditures in accordance with the Regulations. Any amount actually spent for exploration work in excess of the minimum amount required for any year or years may be carried forward and credited to exploration work obligations required for the succeeding years during the existence of the concession. For failure to comply with the minimum work obligations in any one year as herein above stipulated, the concessionaire shall pay to the Government the difference between the minimum amount required and that actually spent for any year. Continued failure to perform the necessary exploration work within the area covered by the concession shall. In addition to the above penalty, result in the cancellation of the concession as provided for in this Act. In order to guarantee faithful compliance with the required exploration work, a bond of sufficient amount to be fixed by the Regulation, shall be posted by the concessionaire. [SECTION 18 of RA No 3098.] Reduction and/or moratorium on exploration work obligations and annual exploration taxes. — Notwithstanding the provisions of Article forty-seven of the Petroleum Act of 1949, the minimum amount of work obligations therein required to be spent by a petroleum exploration concessionaire in his concession is hereby reduced by fifty per centum for two consecutive concession years starting with the current concession year when this Act takes effect: Provided, That when circumstances warrant, the Secretary of Agriculture and Natural Resources upon recommendation by the Director of Mines, may extend this period of two years for another period of two years: Provided, further, That upon previous approval by the Secretary of Agriculture and Natural Resources, as recommended by the Director of Mines, said reduced amount work obligation required to be spent for any of the said two concession years may be spent in either of said two concession years. The Secretary of Agriculture and Natural Resources, upon recommendation of the Director of Mines, may give holders of petroleum exploration concession where the provisions of the Petroleum Act, the regulation and the terms and conditions of the concession contract have been complied with for two or more concession years and where the progress of exploration is such that exploration drilling is the next logical step in the operation in accordance with good petroleum field practice, as indicated by technical reports duly submitted to the Director of Mines showing that adequate geological field work was performed and delineating at least a favorable structure with favorable lithology and with satisfactory paleontological correlations of surface and possibly subsurface rock units, and/or when exploratory drilling is shown to be necessary by satisfactory geophysical survey, a moratorium on work obligations for a period of two concession years from the date of the approval of this Act. The term "exploratory drilling" shall mean the drilling of wells suitable to the production of petroleum and does not include drilling wells suitable only for stratigraphic information. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])]

Article 48

Work obligations on two or more exploration blocks within any one sedimentary basin. — In case two or more exploration blocks held by the same concessionaire are in the same sedimentary basin, the total amount of work obligations for exploration required therefor in any concession year during the initial term of four years and its extensions may be spent anywhere within the sedimentary basin where such exploration blocks or any portion thereof are located as if said blocks are covered by a single concession. Any amount spent in excess of the minimum required in any concession year for any of the said concessions herein referred to, may, at the election of the concessionaire, be credited against exploration work obligations in the same year for other concessions in the same sedimentary basin, or carried forward and credited against future exploration work obligations on any of the concession herein referred to: Provided, That, in the event such excess expenditure is carried forward to the succeeding year or years and credited against the work obligations for other concessions the concessionaire shall be obligated to continue exploration operations in each of the said other concessions to the extent of twenty-five per centum of the minimum amount of work obligations required in any concession year. Failure to comply with this obligation shall be considered as non-compliance with the provisions of this Act. However, a concessionaire holding two or more exploration concessions may, upon previous approval of the Secretary of Agriculture and Natural Resources thru the recommendation of the Director of Mines, concentrate the performance of his exploration work obligations required to be performed under Article forty-seven hereof on each of the said concessions held by the said concessionaire by drilling exploratory wells in any one of them whether or not they are located in the same sedimentary basin: Provided, That such approval shall only be given when at least fifty per centum of the total area of all the concessions held by the same concessionaire had already been covered by geological and/or geophysical investigations and the same had already been completed and report thereon submitted to the satisfaction of the Director of Mines. And, provided, further, That the concessionaire has complied with all obligations as to all said concessions. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 49

hereby repealed (Repealing Article 49 of R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 4304, [June 19, 1965])

Article 50

The holder of an Exploration Concession may, at any time, renounce the whole or any part of the total area covered by his concession: Provided, That, in case of partial renunciation, the portion retained shall be not less than twenty thousand hectares, unless the same is contiguous to another exploration block or blocks held by the same concessionaire, in which case, the total area of all the contiguous blocks thus retained for exploration shall be not less than twenty thousand hectares.