Petroleum Act of 1949

Article 51

"Exploitation" means all work within the area embraced by an Exploitation Concession that have for their object the production of petroleum within such area, including, but not restricted to, drilling and operating wells, providing and operating pumping and storage facilities; pipe lines and other such work and facilities as are useful for the purpose of making petroleum available for sale, manufacture or refining within or for shipment from such area; but does not include any operation which is a part of manufacturing or refining, or any work outside such area which are a part of a pipe line or other special transportation system.

Article 52

Application for Exploitation 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 Exploitation Concession.

Article 53

An exploration concessionaire, at any time during the life of his concession, including any extension thereof, may select for exploitation purposes one or more parcels from the area covered by his exploration concession. Upon application and fulfillment of all the requirements of this Act, and provided that the total area of such parcel or parcels so selected from any one exploration block shall not exceed one-half of the area of such block, an exploitation concession covering such parcel or parcels, shall be granted to such applicant. Such parcels may be selected by the applicant anywhere within the exploration block, whether contiguously or separately: Provided, That any parcel or parcels so selected and applied for shall be charged against the total area to which the exploration concessionaire is entitled for exploration. Provided that all the requirements of this Act and the regulations have been complied with, an application for exploitation concession filed as provided for in this article shall, pending the issuance of an exploitation concession covering the areas for which application has been made, operate to confer upon the concessionaire all the rights and obligations which are conferred by this Act through an exploitation concession: Provided, further, That an exploitation concession may also be granted to any person who, without being a holder of an exploration concession, discovers and registers with the Bureau of Mines in accordance with Article sixty-five hereof any natural deposit or seep or natural gas emanation. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 54

In the exercise of the right of exploration, the concessionaire shall prepare at any time during the exploration period, or during extensions, if there by any, the general map of the respective exploration block, showing the exploitation parcel or parcels he may have selected, in preparation to obtaining the Exploitation Concession. This map shall be prepared from an accurate transit and chain survey or from an aerial photographic survey, or the combination of both, and shall be prepared in accordance with existing regulations governing such kinds of survey issued by the Director of Mines, and shall show the location of the boundary monuments of the exploration block and of the different exploitation parcel or parcels within the block and the area and true bearings and distances of the sides thereof. Copies of this map shall accompany the application for Exploitation Concession.

Article 55

When an application for an Exploitation Concession is filed, the applicant shall pay an application fee of two 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 56

Areas covered by Exploration Concession held by the applicant, subject to the provisions of article fifty-three of this Act, and areas within the National Reserve, are available for exploitation.

Article 57

The exploitation concession shall be granted in parcel or parcels, rectangular in shape as much as possible, except when contiguous with the seas, bays, lakes, rivers, lagoons, roads, or with other existing concessions of irregular boundaries; or when otherwise approved by the Secretary of Agriculture and Natural Resources. The area of any exploitation parcel which may be acquired under a single concession shall not be more than fifty thousand hectares nor less than one thousand hectares, and in no case shall the greater dimension of the rectangle be more than five times the other, nor shall the total area of such parcel or parcels so selected for exploitation concession or concessions within an exploration concession exceed one-half of the total area of the exploration block: 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 feature that render it impractical to conform with such requirement. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 58

No person shall be allowed to hold more than two hundred and fifty thousand hectares of exploitation area in any one petroleum region, nor more than five hundred thousand hectares in the whole territory of the Philippines.

Article 59

An exploitation concessionaire, his heirs and assigns, has the exclusive right, during the term of the concession, to drill within the boundaries projected vertically downward of the parcel or parcels covered by his concession, to extract within the boundaries thereof the substances referred to in this Act, to utilize them once they are extracted, and to do all acts authorized within the scope of exploitation, as defined in Article fifty-one this Act, subject to the provisions of this Act and the regulations that may be issued by the Secretary of Agriculture and Natural Resources in accordance with powers conferred upon him in this Act. casia "In case roads and/or bridges are constructed by the concessionaire in connection with the operation of his exploitation concession, the same shall be available for public use when such use shall not interfere with or destroy the use thereof by the concessionaire in his operation as may be agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire: Provided, however, That the concessionaire shall have no responsibility or liability to the government or to the public for the condition, construction, or maintenance of such roads and/bridges. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

Article 60

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 exploitation work proposed to be undertaken by the concessionaire within his concession during that year. The concessionaire shall commence drilling operations within one year from the date the Exploitation Concession is granted within the area covered by the concession and shall continue diligently such drilling operations in accordance with good oil field practice. He shall be obligated to develop and bring into production the exploitation area granted to him and any discovery areas that he may find, and to continue such development and production until at least the domestic consumption requirements of petroleum in the Philippines, determined in consultation with the Secretary of Agriculture and Natural Resources, are met by the total net production from all sources of indigenous production in the Philippines, if the petroleum deposit discovered by the concessionaire shall permit such development in accordance with good petroleum engineering practice.

Article 61

Exploitation work obligations in two or more Exploitation Concessions in the same petroleum region. — A person holding two or more Exploitation Concessions in the same petroleum region, may be permitted to concentrate the exploitation work obligations required for all the Exploitation Concessions held by him in the same petroleum region, within any one of his Exploitation Concession, as long as the drilling operations are diligently conducted with a creditable expenditure and in accordance with a drilling program: Provided, however, That no Exploitation Concession shall remain for a period of more than five consecutive years without drilling operations. Such work may be credited only upon prior written approval of the Secretary of Agriculture and Natural Resources.

Article 62

Once production is established in an Exploitation Concession, production operations on the concession may not be suspended for more than six months without prior written approval of the Secretary of Agriculture and Natural Resources. Suspension of operations shall in no case be authorized for more than two years at any one time, except in case of force majeure.

Article 63

Existing Petroleum Drilling Leases and petroleum mining claims may come under the provisions of this Act. — Holders of Petroleum Drilling Leases under the provisions of the Petroleum Act (Act No. 2932) and of petroleum mining claims located and held under the provisions of the Act of Congress of July first, nineteen hundred and two, as amended, may surrender their rights thereto by filing applications with the Secretary of Agriculture and Natural Resources for Exploitation Concessions under the provisions of this Act, and the latter may, upon receipt of such applications, grant Exploitation Concessions covering the same, subject to all the conditions, obligations, and privileges provided for under this Act.

Article 64

Each holder of an Exploitation Concession shall pay throughout the life of such concession, in the manner prescribed by the Regulations, an exploitation tax as follows: During the first five-year period, not less than fifty centavos per hectare per year, or fraction thereof. During the second five-year period, not less than one peso per hectare per year, or fraction thereof. During the third five-year period, not less than one peso and fifty centavos per hectare per year, or fraction thereof. During the fourth five-year period, not less than three pesos per hectare per year, or fraction thereof. During the fifty five-year period, not less than five pesos per hectare per year, or fraction thereof. Thereafter, during the period or periods of its renewal, if any, not less than five pesos per hectare per year or fraction thereof, unless modified by the Secretary of Agriculture and Natural Resources.

Article 65

Exploitation concessionaires shall pay to the Government a royalty which shall not be less than twelve and one-half per cent of the petroleum produced and saved, less that consumed in the operations of the concessionaire in the working of such Exploitation Concession: Provided, That natural gas returned to the formation shall not be subjected to royalty. The royalty paid to the Government on petroleum or natural gas produced from the date commercial production is started, from well or wells within the radius of one kilometer from any discovered, located, registered and verified petroleum natural deposit or seep or natural gas emanation, shall be deducted by ten per cent thereof, which deduction shall be due and payable to the discoverer of the said natural deposit or seep or gas emanation: Provided, That the petroleum natural deposit or seep or gas emanation is not covered by another discovery previously registered in the Bureau of Mines: And provided, further, That the discovery and location are made and registered prior to the date of the granting of an Exploration or Exploitation Concession, covering the area where such petroleum natural deposit or seep or gas emanation was discovered. The discoverer shall mark the point of discovery with prominent and permanent object and with a placard stating the name of the discovery, the name of the discoverer, and the date of discovery and location, within a period of thirty days from the date of the discovery or, if discovered before the approval of this Act, within thirty days after such approval. Declaration of discovery and location describing specifically the facts and circumstances of the discovery, and containing such other matters as may be required by the Director of Mines, shall be prepared under oath by the locator or discoverer who shall register the same in the office of the Bureau of Mines, Manila, within ninety days from the date of location. The Director of Mines shall register such declaration upon payment of the registration fee of ten pesos and submittal of a sample of the oil or natural gas discovered. All discoveries not duly declared and registered within the period herein set forth, shall be considered as having been abandoned by the discoverer. The rights acquired by the discoverer shall be based on actual discovery, followed by registration within the period provided for in this article. The rights of the discoverer to his discovery shall expire ten years after the date of registration: Provided, however, That if within the said period an Exploration or Exploitation Concession is granted covering the oil seeps or natural deposits or natural gas emanations discovered, the rights of the discoverer shall be deemed to continue from the date the Exploration or Exploitation Concession is granted until ten years from the date commercial production is first started from any well or wells within the discovery area.

Article 66

All exploitation taxes to which any concessionaire shall be liable under article sixty-four of this Act, during any year on any or all Exploitation Concessions held by him in the same petroleum region, shall be credited against the total royalty payments on all the petroleum produced by the concessionaire from any or all the Exploitation Concessions held by him within the same petroleum region and paid by such concessionaire in the same year: Provided, That, such deduction shall apply only to amounts due for exploitation tax in excess of fifty centavos per hectare per year. For the purpose of computing the deduction due under this article, the value of any royalty paid in kind shall be converted to cash as provided for in article sixty-eight.

Article 67

Royalty may be paid either wholly or partly in kind, or wholly or partly in cash, at the election of the Secretary of Agriculture and Natural Resources, but such election shall not be changed during any quarter for which it has once been made, nor shall it be changed for any succeeding quarter without written notice to the concessionaire at least thirty days prior to the commencement of such quarter. When the Secretary of Agriculture and Natural Resources elects to receive the royalty wholly or partly in kind, the concessionaire shall make delivery thereof at the place of production or at any established receiving and storage station on the transportation system which is employed by the concessionaire for the transportation of his own petroleum or similar kind, as elected by the Secretary of Agriculture and Natural Resources. When the Secretary of Agriculture and Natural Resources elects to receive the royalty in cash, the same shall be paid quarterly in advance, and the amount of royalty to be paid in any quarter shall be determined by the petroleum production during the next preceding quarter. The procedure for determining the amount of royalty due and the payment of such royalty, except as specified in this Act, shall be fixed by the Regulations.

Article 68

When the Secretary of Agriculture and Natural Resources elects to have the royalty paid in cash, as provided for in article sixty- seven of this Act, the market value of the petroleum at the place of its production shall be used for the calculation of the amount due; and it shall be determined by taking as a basis the average price of petroleum of the same quality, during the preceding quarter, in the governing market or markets as specified in the Regulations; and deducting from such average price the cost of transportation from the place of production to such markets; and deducting also the cost of any processing or treatment which is necessary to make the petroleum suitable for such transportation. For this purpose the cost of transportation shall include all actual costs inherent therein, such as freight according to the usual tariffs, port fees, storage costs, pumping costs, and the costs of operating and maintaining the facilities provided expressly for such transportation. Similarly the cost of processing or treatment shall include all actual costs inherent therein, such as for chemicals, stabilization, compression, and the cost of operating and maintaining the facilities provided expressly for such processing or treatment. The Secretary of Agriculture and Natural Resources is empowered to enter into agreement with the concessionaire for the purpose of determining the market value of petroleum and the deductions to be allowed in computing the market value at the place of production, for the purpose set forth in this article.

Article 69

Within sixty days following the end of each month during which the royalty has been paid in kind, or following the end of each quarter in which royalty has been paid in cash, the Secretary of Agriculture and Natural Resources shall notify the concessionaire in writing that such payment is accepted in full discharge of the corresponding obligations as fixed by this Act; or that such is not the case for certain stated reasons, in which latter case the procedure fixed in the Regulations shall be followed for the purpose of making any necessary corrections. Failure of the Secretary of Agriculture and Natural Resources to thus notify the concessionaire of objection to the royalty payments made, within the foregoing time limits, shall be construed as acceptance by the Secretary of Agriculture and Natural Resources of such payments. Acceptance of royalty payments as provided for in this article shall be deemed irrevocable.

Article 70

Exploitation concessionaire is obligated to construct and maintain at, or in the vicinity of, the place or places of production, storage tanks of sufficient capacity to operate the producing field or fields in accordance with good oil field practice. The holder of such concession is under obligation to store, for a period not in excess of thirty days, such royalty in kind, free of expense to the Government. Should the Government have no adequate facilities for the handling and/or storage of such petroleum after said period, the concessionaire shall supply facilities for the handling and/or storage of the same for a reasonable charge, which period and charge shall be as mutually agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire in advance: Provided, That, in no event shall the concessionaire be required to store beyond such thirty days more than one hundred thousand barrels of such petroleum at any one time, nor of any petroleum other than that produced within the area held by the concessionaire.

Article 71

The Secretary of Agriculture and Natural Resources may, after due investigation, require an exploitation concessionaire to refine part or all of the crude oil produced in his concession, in any refinery established in the Philippines in accordance with the provisions of this Act: Provided, That, there is such refinery with sufficient capacity and adequate facilities to handle such crude oil in accordance with good refining practice: And provided, further, That the quantity of such crude oil of the concessionaire that may be required to be refined in the Philippines in relation to the total net production from his concession shall not exceed the proportional amount that the total domestic requirements bear to the total net production from all indigenous sources in the Philippines.

Article 72

The term of an Exploitation Concession shall not exceed twenty-five years counted from the date of its issuance, renewable for another twenty-five years at the option of and upon application of the concessionaire made prior to the expiration of the original term.

Article 73

The holder of an exploitation concession, may, at any time, renounce the whole or any part of the total area covered by his exploitation concession. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])