PETROLEUM (PRODUCTION) ACT

CHAPTER 156

PETROLEUM (PRODUCTION) ACT

To vest in the Government of Malta the property in petroleum and

natural gas within Malta and to make provision with respect to the

searching and boring for and getting of petroleum and natural gas, and for

purposes connected with the matters aforesaid.

8th March, 1958

ACT IV of 1958, as amended by Emergency Ordinance VI of 1958;

Ordinances: VI of 1959, XXV of 1962; Act XV of 1965; Legal Notice 46 of

1965; Acts: XXXV of 1966, XX of 1969, LVIII of 1974 and XIII of 1983;

Legal Notice 410 of 2007; and Acts XXVI of 2014, XIV of 2015 and XXVIII

of 2023.

The short title of this Act is the Petroleum (Production)

Act.

In this Act unless the context otherwise requires

"applicant" means any entity that submits an application for the

grant of a licence in accordance with this Act;

"by-products" means the products derived from the processing of

petroleum;

"competent authority" means the Office of the Prime Minister of

Malta, or any other body or person as the Minister may prescribe

and designate as the competent authority for different purposes in

terms of different provisions of this Act;

"entity" means any natural or legal person or a group of such

persons, including a limited liability company constituted in terms

of the Companies Act, or a similar body corporate established or

incorporated outside Malta, which applies for, is likely to apply for,

or holds a licence pursuant to this Act;

"exploration" means the search for petroleum by any appropriate

method which may include drilling;

"internal waters" shall have the same meaning as is assigned to it

by article 2 of the Continental Shelf Regulations;

"licence" means an authorisation granted pursuant to this Act;

"Malta" shall have the same meaning as is assigned to it by

article 124 of the Constitution of Malta and includes the seabed and

subsoil of the submarine area within the internal waters and

territorial waters of Malta;

"Minister" means the Prime Minister of Malta and includes such

other Minister, public officer or authority as may be authorised by

him, from time to time, for any of the purposes of this Act;

"petroleum" means all solid, liquid or gaseous hydrocarbons

existing in their natural state, including crude oil or natural

gasoline, natural hydrocarbon gases as well as all related minerals

or substances produced in association with such hydrocarbons;

"production" means the development and extraction of petroleum

or any treatment in order to make it marketable and the storage and

the transportation of the petroleum and its by-products to the

loading installations for further disposal. Any treatment referred to

in this definition shall not include refining;

"prospection" means the attempt to locate petroleum in a specific

area by any appropriate method other than drilling;

"territorial waters" shall have the same meaning assigned to it by

article 3 of the Territorial Waters and Contiguous Zone Act.

(1) The ownership of any petroleum existing in Malta is

hereby vested in the Government of Malta. The Government of Malta

has sovereign rights, jurisdiction and exclusivity for the purposes of

prospecting for, exploring for and producing petroleum in Malta. The

right for prospection, exploration and, or production of such petroleum

shall be subject to a licence granted under the provisions of this Act.

(2) Any entity who, without or in breach of any of the

conditions of a licence granted under this Act, prospects for and, or

explores for and, or produces petroleum from Malta shall be guilty,

by reason merely of having done so and without prejudice to

prosecution under any other provision of law, of an offence and

shall be liable, on conviction to a fine (multa) of not less than ten

thousand euro (€10,000) and not exceeding two million euro

(€2,000,000) or imprisonment which shall not exceed a term of five

years, or to both such fine and imprisonment

Provided that where the act constituting the offence subsists

for more than one day, the Court may in addition impose a fine

(multa) not exceeding ten thousand euro (€10,000) for each day

during which such act subsists which fine (multa) shall also be

applicable for the purposes of article 377(3) of the Criminal Code

Provided further that all petroleum so extracted shall be

forfeited to the Government of Malta and that nothing in this Act,

howsoever referred to, shall be construed as imposing any penalty

on any entity where in the course of lawful boring in search of

water or of other lawful operations, petroleum is set free.

(3) The prohibitions imposed by or under this Act and the

rights by and under this Act vested in the Government of Malta, in

the Minister, in any officer of the Government, and in any holder of

a licence under this Act shall have full effect notwithstanding the

provisions contained in article 323 of the Civil Code or in any law

which may be incompatible with such prohibitions and rights

Provided that nothing in this Act shall be construed as

conferring, or as enabling the Minister to confer, on any entity,

whether acting on behalf of the Government of Malta or not, any

right which he does not enjoy apart from this Act, to enter on or

interfere with land.

(1)

The Minister shall retain the right to determine the

areas in Malta for the exercise of the activities of prospecting,

exploring and producing of petroleum.

(2)

Whenever an area is made available for the exercise of the

activities set out in sub-article (1), the Minister shall ensure that there

is no discrimination between entities as regards access to and the

exercise of these activities.

(3) The Minister may, on grounds of national security, refuse to

allow access to and the exercise of the activities referred to in sub-

article (1), to any entity which is effectively controlled by third

countries or third country nationals.

(1)

The Minister shall have the power to grant to the

successful applicant, a licence to prospect for, explore for and produce

petroleum in Malta.

(2)

Any such licence shall be granted for such consideration (by

way of fee, royalty, revenue, profit from the sale or disposal of

petroleum and, or otherwise) as the Minister may determine, and over

such areas, for such periods and upon such other terms and conditions

as may be stipulated in the call for applications and the licence to

ensure the proper performance of the licensed activities

Provided that the Minister may impose conditions and

requirements in the licence in connection with but not limited to

national security, public safety, public health, security of transport,

protection of the environment, protection of biological resources and

of national treasures possessing artistic, historic or archaeological

value, safety of installations and of workers, planned management of

petroleum resources such as the rate at which petroleum is depleted or

the optimisation of its recovery or the need to secure tax revenues.

(3)

The duration of validity of a licence shall not exceed the

period necessary to complete the activities specified in the licence

Provided that the Minister may renew or extend the licence

for such a time period as may be necessary for the proper conduct of

the work obligations specified in the licence

Provided further that the licensee shall not retain exclusive

rights over the licensed area for longer than is necessary for proper

performance of the licensed activities.

(1) Subject to the provisions of this Act and to any

international obligation entered into by Government, the Minister

may make regulations generally for

(a) licensing and regulating the prospection, exploration

and production of petroleum in Malta, including the

conservation of the petroleum resources;

(b) establishing an Advisory Committee, made up of persons

qualified in the relevant subject, to provide advice and

make recommendations to the Minister for any matter

concerning the granting of a licence, the regulation and

monitoring of the contractual obligations and any other

matter in relation to this Act;

(c) reducing as far as possible the occurrence of major

accidents relating to offshore oil and gas operations

and to limit their consequences during such

prospection, exploration and production activities;

(d) providing for the possibility for the issue of

authorisations to public officers or other entities to

ensure the application of this Act and to carry out

inspections, enforcement actions and any other

ancillary action that may be necessary in order to

properly implement the provisions of this Act; and

(e) carrying out any of the provisions of this Act

Provided that, in particular, but without prejudice to the

generality of the foregoing, such regulations may prescribe

(i)

the manner in which and the entities by whom

applications for licences under this Act may be made;

(ii)

the fees to be paid on any such application;

(iii) the conditions as to the size and shape of areas in

respect of which licences may be granted;

(iv) model clauses which shall, unless the Minister

thinks fit to modify or exclude in any particular case, be

incorporated in any such licence;

(v)

anything which is required or may be prescribed

under this Act,

and may provide for the minimum and maximum punishments,

whether by way of fine (multa) or of imprisonment, to be applied in

respect of any non-observance of any regulation made under this

article

Provided further that any punishment prescribed in the

regulations made under this article shall not be less than a fine (multa)

of ten thousand euro (€10,000) and shall not exceed a fine (multa) of

two million euro (€2,000,000), or imprisonment which shall not

exceed a term of five years, or both such fine and imprisonment, in

respect of any non-observance of any such regulation

Provided further that where the act constituting the offence

subsists for more than one day, the Court may in addition impose a fine

(multa) not exceeding ten thousand euro (€10,000) for each day during

which such act subsists which fine (multa) shall also be applicable for

the purposes of article 377(3) of the Criminal Code

Provided further that the Minister may establish different

regulations for different kinds of licences and provide conditions that

bind licencees to be financially liable for any prevention and

remediation of any damage, including damage to the environment,

caused by prospection, exploration and production of petroleum in

Malta.

(2) Regulations, rules and orders made under any of the

provisions of this Act may be made in the English language only.

(1) The Government of Malta or any entity in which the

Government of Malta has majority shareholding, shall have the

right to participate in the activities of prospection, exploration and

production of petroleum in accordance with the licences granted

under this Act.

(2)

The Government of Malta’s participation in the activities of

prospecting for, exploring for and producing petroleum may be

managed by the Government itself or by a legal person that the

Minister may prescribe by order published in the Gazette.

(3)

The rules for payment of considerations referred to in sub-

article (2) of article 4, as well as any requirement for Government’s

participation, shall be fixed by the Minister in such a way as to ensure

that the independence of management of entities is maintained.

(4)

Where the grant of a licence is subject to Government’s

participation in the activities and where a legal person has been

entrusted solely with the management of this participation, or where

the Government itself manages the participation, neither the legal

person nor the Government shall be prevented from assuming the

rights and obligations associated with such participation

Provided that

(a) the legal person or the Government shall not be party

to information nor exercise any voting rights on

decisions regarding sources of procurement for

entities;

(b) the legal person or the Government in combination

with any entity shall not exercise a majority voting

right on other decisions; and

(c) any vote by the Government or the legal person, shall

be based exclusively on transparent, objective and

non-discriminatory principles and shall not prevent the

relevant management decisions of the entity from

being based on normal commercial principles.

(5)

Notwithstanding the provisions of sub-article (4), the legal

person or the Government may oppose a decision by the holders of a

licence which would not respect the conditions and requirements

specified in the licence, regarding depletion policy and protection of

the financial interests of Malta

Provided that, the option to oppose a decision shall be

exercised in a non-discriminatory manner, particularly regarding

investment decisions and sources of supply of the holders of the

licences, unless they are in breach of national legislation or

international law.

(6)

Where the Government’s participation in the activities is

managed by a legal person, which also holds the licences, then

(a)

the legal person shall keep separate accounts for

its commercial role and its role as manager of the Government’s

participation; and

(b)

the legal person shall ensure that there is no flow

of information from the part of the legal person responsible for

the management of the Government’s participation to the part

of the legal person which holds a licence.

(7)

Where the part of the legal person responsible for the

management of the Government’s participation engages the part of the

legal person which holds a licence as a consultant, the former may

make available any information which is necessary for the consultancy

work to be carried out. The holders of all licences to which the

information relates shall be informed in advance of what information

will be given in this way, so that they have sufficient time to raise

objections, which shall be submitted to the Minister and the Minister

shall decide on the matter after having heard the views of the two

parties.

(8)

The Minister shall ensure that the monitoring of the entities

granted a licence is limited to that necessary to ensure compliance with

the conditions, requirements and obligations referred to in sub-article

(2) of article 4 and in particular shall ensure that no holder of a licence

is required to provide information on its intended or actual sources of

procurement except at the request of the Minister in order to ensure

compliance with national and international legislation.

The Minister shall publish and communicate an annual

report to the European Commission which shall include information

on the geographical areas which have been opened for prospection,

exploration and production, licences granted, entities holding licences

and the composition thereof and the estimated reserves contained in

these areas provided that any information of a commercially

confidential nature shall not be published.

(1)

No holder of a licence may transfer a licence or

assign rights arising from a licence to another entity, except upon

written consent of the Minister, which may be granted if

(a)

it does not compromise national security;

(b)

the Minister is satisfied that the entity to whom

the licence would be transferred or the rights arising from a

licence would be assigned has sufficient technical knowledge,

experience and financial resources to secure the proper exercise

of the activities of prospecting for, exploring for and producing

petroleum;

(c)

the entity to which the licence would be transferred

or the entity to which the rights arising from a licence would be

assigned undertakes to comply with such other conditions and

requirements as the Minister may deem proper to impose.

(2) Any holder of a licence who transfers a licence or assigns the

rights arising from a licence without the written consent of the

Minister shall be guilty of an offence and shall be liable, on conviction

to a fine (multa) of not less than ten thousand euro (€10,000) and not

exceeding two million euro (€2,000,000) or imprisonment which shall

not exceed a term of five years, or to both such fine and imprisonment.

(1) Any entity to whom a licence is granted under this Act

may apply to the Lands Authority for permission to examine any

specified area of land with a view to its possible acquisition on

behalf and for the use of such applicant and if in the opinion of the

Chairperson of the Board of Governors of the Land Authority the

examination of such land with a view to its possible acquisition is

necessary to enable the applicant to exploit the licence or to exploit

it fully, the Chairperson of the Board of Governors of the Lands

Authority may declare it desirable that the land should be examined.

When a declaration is so made the Lands Authority may grant, under

sub-article (1) of article 37 of the Government Lands Act or any other

law amending or substituting the said sub-article, such authorisation

as may reasonably be required by the applicant.

(2) If, as a result of any such examination as is mentioned in

the foregoing paragraph, it shall appear to him desirable that such

land should be acquired on behalf or for the use of the applicant,

the Chairperson of the Board of Governors of the Lands Authority

may declare that the land is required for a public purpose within the

meaning of the Government Lands Act or of any law amending or

substituting that Act, and when a declaration is so made the Lands

Authority may in due course proceed to acquire the land under the

provisions of that Act or of any other law as aforesaid.

(3) Before authorisation of examination is granted and before

land is acquired on behalf or for the use of any person under the

provisions of this article, the Lands Authority shall require such

person to enter into an agreement with him providing to the

satisfaction of the Lands Authority for the following matters,

namely

(a) the payment to the Lands Authority of the cost of the

acquisition including all incidental expenses and the

deposit with the Lands Authority of any sum fixed by

the Lands Authority on account of the payment so to be

made;

(b) the transfer, on such payment, of the land to such

person;

(c) the terms on which the land shall be held by such

person;

(d) when the acquisition is required for the construction of

any work or works, the time within which and the

conditions subject to which the work or works shall be

initiated, executed and maintained, and the terms (if

any) on which the public shall be entitled to use or to

acquire the work or works; and

(e) in any case where anything has been done or may be done

under the provisions of sub-article (1) of article 37 of the

Government Lands Act or under any provision of law

amending or substituting that sub-article, by or on behalf

of the Lands Authority, the payment to the Lands

Authority of all damages, to be assessed in accordance

with the provisions of sub-article (2) of article 37 of the

Government Lands Act.

(4) Words and phrases used in this article shall, unless the context

otherwise requires, have the same meaning as in the Government

Lands Act or in any law amending or substituting the said Act.

All relevant provisions of this Act shall apply mutatis

mutandis to the continental shelf as defined in article 2 of the

Continental Shelf Act.

For the purposes of the implementation of the provisions of

this Act and regulations made thereunder, the Minister may designate

any person as a competent authority for the purposes of the

implementation and for exercise of any rights and duties therein.

Any reference to the "Petroleum (Production) Act" in any

licence, contract or agreement relating to the prospection, exploration

and production of petroleum, to which the Government of Malta is a

party, which was granted prior to the coming into force of this Act,

shall continue to be governed and regulated in accordance with the

Petroleum (Production) Act as it was in force prior to the Petroleum

2023. (Production) (Amendment) Act.