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| REGULATIONS
ON THE PAYMENT OF ROYALTY FOR THE EXPLOITATION OF OFFSHORE PETROLEUM
RESOURCES
(Approved by the State Council on December 5,
1988 and Promulgated on January 1, 1989) |
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Article 1.In the interest of developing
the national economy,expanding international economic and technological
cooperation and encouraging the exploitation of offshore petroleum
resources in China, these Regulations are formulated in accordance
with the "Regulations of the People's Republic of China on the
Exploitation of Offshore Petroleum Resources in Cooperation with Foreign
Enterprises".
Article 2. Any Chinese and foreign enterprises engaging, in accordance
with the laws, in exploitation of offshore petroleum resources within
the inland water, territorial sea and continental shelf of the People's
Republic of China and in all sea area within the limits of national
jurisdiction of the People's Republic of China shall pay royalty in
accordance with these Regulations.
Article 3. Royalty shall be computed and paid on the basis of the
Annual Gross Production of Crude Oil or Natural Gas of each oil or
gas field at the following rates:
1. Crude Oil:
Royalty shall be exempted on the portion of the Annual Gross Production
of Crude Oil not exceeding one million tonnes;
Royalty rate for the portion of the Annual Gross Production of Crude
Oil within one million tonnes to 1.5 million tonnes shall be 4%;
Royalty rate for the portion of the Annual Gross Production of Crude
Oil within 1.5 million tonnes to 2 million tonnes shall be 6%;
Royalty rate for the portion of the Annual Gross Production of Crude
Oil within 2 million tonnes to 3 million tonnes shall be 8%;
Royalty rate for the portion of the Annual Gross Production of Crude
Oil within 3 million tonnes to 4 million tonnes shall be 10%; and
Royalty rate for the portion of the Annual Gross Production of Crude
Oil exceeding four million tonnes shall be 12.5%.
2. Natural Gas
Royalty shall be exempted on the portion of the Annual Gross Production
of Natural Gas not exceeding 2 billion cubic meters;
Royalty rate for the portion of the Annual Gross Production of Natural
Gas within 2 billion cubic meters to 3.5 billion cubic meters shall
be 1%;
Royalty rate for the portion of the Annual Gross Production of Natural
Gas within 3.5 Billion cubic meters to 5 billion cubic meters shall
be 2%; and Royalty rate for the portion of the Annual Gross Production
of Natural Gas exceeding five billion cubic meters shall be 3%.
Article 4. Royalty for both Crude Oil and Natural Gas shall be paid
in kind.
Article 5. Royalty of Crude Oil and Natural Gas shall be collected
and administered by the tax authorities.
Royalty for the Sino-foreign cooperative oil and/or gas field shall
be first withheld by the operator of such oil and/or gas field and
handed over to the China National Offshore Oil Corporation which will
be responsible for the royalty payment.
Article 6. Royalty shall be calculated on annual basis and pre-payable
periodically or on the basis of operation. The final settlement shall
be made after the end of each year. The timing for prepayment and
settlement shall be determined by the tax authorities.
Article 7. The operator of each oil and/or gas field shall provide
to the tax authorities the production data of the said oil and/or
gas field and other related information required by the tax authorities
within 10 days after the end of each quarter.
Article 8. The withholding agent and paying agent shall make the royalty
payment within the time limit prescribed by the tax authorities. The
tax authorities shall impose a late payment penalty of 1:1000 per
day on the amount of the royalty in arrears, counting from the first
day on which the payment becomes overdue.
Article 9. The tax authorities may, acting at their discretion,impose
a penalty of less than Rmb5,000 on any operator of oil and/or gas
field who has violated the provisions of Article 7 hereof, by not
submitting the royalty, the actual production data of the oil and/
or gas field or relevant information required to the tax authorities
in time. A penalty of less than five times of the royalty otherwise
payable shall be imposed on those who make false report on the actual
production.
Article 10. The definitions of the following terms as used in these
Regulations are:
1. "Crude Oil" means solid and liquid hydrocarbons in their
natural state, including any liquid hydrocarbons extracted from natural
gas except for methane (CH4).
2. "Natural Gas" means non-associated natural gas and associated
natural gas in their natural state.
"Non-associated Natural Gas" means all gaseous hydrocarbons
produced from gas reservoirs, including wet gas, dry gas and residue
gas remaining after the extraction of liquid hydrocarbons from wet
gas.
"Associated Natural
Gas" means all gaseous hydrocarbons produced in association with
Crude Oil from oil reservoirs, including residue gas remaining after
the extraction of liquid hydrocarbons therefrom.
3. "Annual Gross Production of Crude Oil" means the total
amount of Crude Oil produced from each oil field within the contract
area in each calendar year less the amount of crude oil used for petroleum
operations and the amount of losses.
4."Annual Gross Production of Natural Gas" means the total
amount of natural gas produced from each oil field and/or gas field
within the contract area in each calendar year less the amount of
natural gas used for petroleum operations and the amount of losses.
Article 11. These Regulations shall go into effect from January 1,1989.
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