Section 78: Work Commitment, Commercial Discovery and Significant Gas Discovery.

1 A petroleum prospecting licence shall contain a requirement that the licensee commit to a work programme and such other terms and conditions as the Commission shall determine.

2 A licensee shall, during the initial exploration period and the optional extension period provided for in a petroleum prospecting licence, commit to drill at least one exploration well to a minimum depth specified in the licence for each period, except for frontier acreages, where the work program during the initial exploration period may only consist of geophysical work.

3 Where a licensee makes a discovery during the initial exploration period or the optional extension period provided for in the applicable petroleum prospecting licence, the licensee shall inform the Commission within 180 days of the discovery if he considers that the discovery merits appraisal or is of no interest to him.

4 Where a licensee considers that a discovery merits appraisal, the licensee shall submit to the Commission within one year for approval—
a a commitment to an appraisal programme of not more than three years with a scope and nature permitting the licensee to declare a commercial discovery, where the result of the appraisal is positive; and
b the appraisal area, not larger than the outer boundary of the discovery, as determined by the licensee and a zone of not more than two kilometres surrounding the outer boundary, provided that the appraisal area does not extend beyond the area provided for in the applicable petroleum prospecting licence.

5 The Commission shall act on the approval request for the appraisal programme within 60 days after its submission and a licensee shall, upon the approval of the appraisal programme and appraisal area by the Commission, promptly carry out the committed appraisal programme.

6 Where the Commission fails to act on the appraisal programme referred to under subsection (5) within 60 days, the appraisal shall be deemed approved.

7 The provision of section 88(3) of this Act shall apply to any appraisal area under subsections (5) and (6).

8 The licensee shall, upon the completion of the appraisal program—
a declare a commercial discovery;
b declare a significant gas discovery or a significant crude oil discovery; or
c inform the Commission that the discovery is of no interest to the licensee.

9 Where a significant gas discovery or significant crude oil discovery has been declared, the licensee shall be entitled to retain the area of such significant gas discovery or significant crude oil discovery for a retention period as may be determined by the Commission, which shall not be more than 10 years from the day the declaration was made and with the approval of the Commission a licensee is entitled to drill further appraisal wells.

10 The retention area of a significant gas discovery or significant crude oil discovery shall continue to subsist pursuant to a petroleum prospecting licence until the expiration of the period under subsection (9) or declaration of a commercial discovery by the licensee.

11 The Commission shall approve an area of a significant gas discovery or significant crude oil discovery which shall not be larger than the outer boundary of the discovery declared by the licensee, including a zone of not more than two kilometres surrounding the outer boundary, provided that such area shall not extend beyond the area described in the applicable petroleum prospecting licence.

12 The provision of section 88 (3) of this Act shall apply to any retention area.

13 Where, upon the expiry of the retention period determined under subsection (9), the licensee has not declared a commercial discovery, the area declared under subsection (9) shall be immediately relinquished by the licensee.

14 Upon the relinquishment of the retention area with the latest expiry date referred to in subsection (13), the applicable petroleum prospecting licence shall expire.

15 Where a licensee declares a discovery of no interest under subsection (3) or (8), the Commission may require the relinquishment of the parcels that cover the structure of such discovery.

16 A commitment by a licensee under this section shall be supported by a bank guarantee, letter of credit or performance bond issued by a bank acceptable to the Commission for an amount determined by the Commission.

17 The licensee shall in each calendar year present an annual work program and status report as prescribed by regulations for approval by the Commission and such program shall as a minimum, contain the committed work.