(Promulgated by the State Council on January 30, 1982)
Contents
Chapter 1 General Provisions
Chapter II Rights and Obligations of the Parties to a Petroleum Contract
Chapter III Petroleum Operations
Chapter IV Supplementary Provisions
Chapter 1 General Provisions
Article 1
In the interest of developing national economy and expanding international economic and technological co-operation, these Regulations are formulated, under the precondition of maintaining national sovereignty and economic interests, to allow foreign enterprises to participate in the co-operative exploitation of offshore petroleum resources of the People's Republic of China.
Article 2
All petroleum resources in the inland waters, territorial sea and continental shelf of the People's Republic of China and in other sea areas within the jurisdiction over maritime resources of the People's Republic of China are owned by the People's Republic of China.
In the sea areas referred to in the preceding paragraph, all buildings and structures set up and vessels operating to exploit petroleum, as well as the corresponding onshore oil (gas) terminals and bases, shall be under the jurisdiction of the People's Republic of China.
Article 3
The Government of the People's Republic of China shall protect, according to the law, the investments of foreign enterprises co-operating in development of offshore petroleum resources, the profits due to them and their other legitimate rights and interests, and shall protect, according to law, the co-operative exploitation activities of such foreign enterprises.
All activities for co-operative exploitation of offshore petroleum resources within the scope of these Regulations shall be governed by the laws and decrees of the People's Republic of China and relevant stipulations of the State; all persons and enterprises taking part in petroleum operations shall be subject to the laws of China and shall accept inspection and supervision by the competent authorities of the Chinese Government.
Article 4
The Ministry of Petroleum Industry of the People's Republic of China is the competent authority in charge of the exploitation of offshore petroleum resources in co-operation with foreign enterprises, and it shall determine the forms of co-operation and demarcate areas of co-operation in accordance with the zones and the surface areas of such co-operation as designated by the State; it shall work out a plan for the exploitation of offshore petroleum resources in co-operation with the foreign enterprises in line with State long-term economic plans, formulate operation and management policies for the cooperative exploitation of offshore petroleum resources and examine and approve the overall development program for offshore oil (gas) fields.
Article 5
The China National Offshore Oil Corporation (CNOOC) shall have exclusive and overall responsibility for the work of exploiting offshore petroleum resources in the People's Republic of China in co-operation with foreign enterprises.
CNOOC is a State corporation with legal person status, and has the exclusive right to prospect for, develop, produce and market petroleum, within the zones of co-operation with foreign enterprises.
CNOOC may, as the work requires, establish regional corporations, specialized corporations and overseas representative offices to carry out the tasks as delegated by the head office.
Article 6
CNOOC shall, by means of calling for bids and signing petroleum contracts, co-operate with foreign enterprises to exploit petroleum resources in the designated zones, blocks and surface areas of co-operation, for the exploitation of petroleum resources.
The petroleum contracts referred to in the preceding paragraph shall come into force upon approval by the Foreign Investment Commission of the People's Republic of China.
All the documents signed by CNOOC for other forms of co-operative exploitation of petroleum resources utilizing technology and funds provided by foreign enterprises shall also be subject to approval by Foreign Investment Commission of the People's Republic of China.
Chapter II Rights and Obligations of the Parties to a Petroleum Contract
Article 7
CNOOC shall co-operate with foreign enterprises to exploit offshore petroleum resources, on the basis of petroleum contracts, and, unless otherwise specified by the Ministry of Petroleum Industry or by a petroleum contract, the foreign enterprise which is a party to the petroleum contract (hereafter referred to as foreign contractor) shall provide the investment for the prospecting work, be responsible for the prospecting operations and bear all the prospecting risks; and after a commercial oil (gas) field is discovered, both the foreign contractor and CNOOC shall be responsible for the development operations and production operations until CNOOC takes over the production operations when conditions permit as stipulated in the petroleum contract. The foreign contractor may, in accordance with the provisions of the petroleum contract, recovers its investment and expenses and collects its income out of the petroleum produced.
Article 8
The foreign contractor may export the petroleum it is entitled to obtain or it has purchased, and may also, in accordance with law, remit abroad its recovered investment, its profits and its other legitimate income.
Article 9
All Chinese enterprises and foreign enterprises participating in the cooperative exploitation of offshore petroleum resources shall pay taxes and mining royalties according to law.
All the employees of the enterprises referred to in the preceding paragraph shall pay individual income tax according to law.
Article 10
The equipment and materials imported for carrying out the petroleum contact shall be taxed at a reduced rate, or be exempted from tax, or be given other preferential-tax treatment in accordance with the law.
Article 11
The foreign contractor shall open a bank account in accordance with the provisions of the Interim Regulations on Foreign Exchange Control of the People's Republic of China.
Article 12
In implementing the petroleum contract, the foreign contractor shall use the proper and advanced managerial skills and shall be obligated to transfer the technology and pass on the experience to the personnel of the Chinese side involved in the petroleum-contract (hereinafter referred to as "Chinese personnel"). During the petroleum operations, the foreign contractor must give preference to employing Chinese personnel, progressively increase the ration of Chinese employees and train Chinese personnel in a planned manner.
Article 13
In implementing the petroleum contract, the foreign contractor must promptly and accurately report to CNOOC on the situation of petroleum operations; and it must acquire complete and accurate data, records, samples, vouchers and other original data on the various aspects of the petroleum operations, and regularly submit to CNOOC the required data and samples as well as the various technological, economic, financial and accounting and administrative reports.
Article 14
In implementing the petroleum contract, the foreign contractor shall establish a branch or subsidiary or representative office within the territory of the People's Republic of China and fulfill registration formalities in accordance with law.
The location of the offices referred to in the preceding paragraph shall be determined through consultation with CNOOC.
Article 15
The provisions in Articles 3, 8, 9, 10 and 14 of these Regulations shall, mutatis mutandis, apply to foreign subcontractors that render services related with the petroleum operations.
Chapter III Petroleum Operations
Article 16
In order to achieve the highest possible oil recovery ratio, the operation must, in accordance with these Regulations and the relevant provisions stipulated by the Ministry of Petroleum Industry on the exploration of petroleum resources and in line with international practice, formulate an overall development program for the oil (gas) field and carry out production operations.
Article 17
In implementing the petroleum contract, the foreign contractor shall use the existing bases within the territory of the People's Republic of China, and if new bases are needed, they must be established within the territory of the People's Republic of China.
The specific locations of the new bases, as mentioned in the preceding paragraph, and other measures that may be necessary under special circumstances, must all be agreed upon in writing by CNOOC.
Article 18
CNOOC shall have the right to send its personnel to join the foreign operator in drafting master designs and engineering designs for carrying out the petroleum contract. Design firms within the territory of the People's Republic of China shall enjoy priority in undertaking subcontracts for the above-said master designs, so long as their terms are competitive.
Article 19
Where subcontracts are to be commissioned for facilities to be built in implementing the petroleum contract, such as artificial islands, platforms, buildings and structures, the operator must give preference to manufacturing plants and engineering corporations located within the territory of the People's Republic of China.
Article 20
Where equipment and materials are to be procured for implementing the petroleum contract, the operator and contractors shall give priority to buying and using such equipment and materials produced and provided by the People's Republic of China.
Article 21
Where sub-contractors are to be commissioned, during implementing the petroleum contract, for such service as geophysical prospecting, well-drilling, diving, aircraft, ships and bases, the operator and contractors must give priority to engaging the service of relevant units within the territory of the People's Republic of China, provided that they are competitive in terms of price, efficiency and service quality.
Article 22
The ownership of all assets purchased or built by the foreign contractor for implementing the petroleum contract in accordance with the prescribed plan and budget, excluding equipment leased from a third party, shall belong to CNOOC after the foreign contractor's investment has been re-compensated as agreed; However, within the prescribed term of the contract, the foreign contractor may continue to use those assets in accordance with the provisions of the contract.'
Article 23
CNOOC shall have the ownership of all data, records, samples, vouchers and their original data used in the petroleum operation as stipulated in Article 13 of these Regulations.
The utilization and transfer, donation, exchange, sale and publication of the above said data, records, samples, vouchers and their original data and their export and transmission from the People's Republic of China must all be conducted in accordance with the "Provisions on the Control of Data" as formulated by the Ministry of Petroleum Industry.
Article 24
In the course of petroleum operations, the operator and contractors shall comply with the relevant laws and provisions on environmental and safety protection of the People's Republic of China, and shall, in the light of international practice, protect fishery resources and the natural resources and safeguard the environment, including the air, seas, rivers, lakes and land, from damage or pollution, during the petroleum operations.
Article 25
The oil produced within the petroleum contract area shall be brought to the land of the People's Republic of China or may be exported from oil (gas) metering stations on offshore terminals. In case such petroleum has to be landed at point outside the People's Republic of China, an approval must be obtained from the Ministry of Petroleum Industry.
Article 26
In the event of war, the threat of war or other emergencies, the Chinese Government shall have the right to compulsory purchase or requisition of a portion or all of the petroleum obtained or purchased by the foreign contractor.
Chapter IV Supplementary Provisions
Article 27
Any dispute arising between foreign and Chinese enterprises during the cooperative exploitation of offshore petroleum resources shall be settled through friendly negotiation. If the dispute cannot be resolved through negotiation, it may be settled through mediation and arbitration conducted by an arbitration board of the People's Republic of China, or the parties to the contract may agree to seek arbitration by another arbitration body.
Article 28
In case an operator or contractor violates the provisions of these Regulations during the petroleum operations, the Ministry of Petroleum Industry shall have the right to issue a warning and demand the violator to make due corrections before a prescribed deadline; and if the violator fails to make the correction as required, the Ministry of Petroleum Industry shall have the right to take necessary steps, including suspending the petroleum operation of the operator or contractor in question. All economic losses arising therefrom shall be borne by the party responsible. A party responsible for serious violations of these Regulations may be fined by the Ministry of Petroleum Industry and/or prosecuted according to law.
Article 29
The terms used in these Regulations are defined as follows:
(1)"Petroleum" means crude oil or natural gas deposited underground, currently being extracted or already extracted.
(2)"Exploitation" means, in general, the exploration for and development, production and marketing of petroleum, as well as other related activities.
(3)"Petroleum contract" means a contract signed, in accordance with the law, between CNOOC and foreign enterprises for the cooperative exploitation of offshore petroleum resources of the People's Republic of China, including the exploration for and development and production of petroleum.
(4)"Contract area" means a surface area designated within a sea area demarcated by geographic coordinates in the petroleum contract for the cooperative exploitation of petroleum resources.
(5)"Petroleum operations" means all exploration, development and production operations and other related activities conducted in implementing the petroleum contract,
(6) "Exploitation operations" means all work done to locate the petroleum-bearing traps by means of geological, geophysical and geo-chemical methods, including drilling exploratory wells, etc., and all work done to determine the commercial value of discovered petroleum traps, including appraisal drilling, feasibility studies and preparation of the overall development program for an oil (gas) field.
(7)"Development operations" means projects, such as those of designing, construction, installation and drilling, and related research work, conducted from the date of the approval of the overall development program for an oil(gas) field by the Ministry of Petroleum Industry, in order to bring about petroleum production, including production activities carried out before the commencement of commercial production.
(8)"Production operations" means all operations aimed at producing petroleum conducted after the commencement of the commercial production of an oil (gas) field and related activities, such as extraction, injection, production enhancement, processing, storage and transportation and lifting of petroleum and other operations.
(9)"Foreign contractor" means a foreign enterprise that signs a petroleum contract with CNOOC. The foreign enterprises may be a corporation or a consortium of corporations.
(10) "Operator" means an entity that is responsible for implementing the operations pursuant to the provisions of the petroleum contract.
(11)"Subcontractor" means an entity that renders services to the operator.
Article 30
Rules for the implementation of these Regulations shall be formulated by the Ministry of Petroleum Industry.
Article 31
These Regulations shall go into effect as of the date of promulgation.
