Decree No. (75) of 1973 on forming a committee to adjudicate disputes related to usufruct of tribal lands and wells and determining procedures before the same

Minister of Oil Decree No. (75) of 1973 AD

Issuing Oil Regulations No. (9)

 

The Minister of Oil,

● Upon review of Petroleum Law No (25) of 1955 AD,

as amended;

● Oil Concession Contracts and amendments thereto;

● Law No. (24) of 1970 AD on the National Oil Corporation,

as amended;

● The Commercial Law;

● The Income Tax Law;

● The Stamp Duty Law;

● The Monetary Control Law of 1955 AD, as amended;

● Banks Law No. (4) of 1963 AD, as amended;

● Law No. (53) of 1970 AD on Port Fees;

● Law No. (82) of 1970 AD on the establishment of the General Ports and Lights Authority;

● Law No. (151) of 1971 AD on Administrative Seizure,

as amended; and

● Oil Regulations Nos. (1), (2), (3), (4), (5), (6) and (7), and

● Based on the submission of the Deputy of the Minister,

 

has decreed the following:

 

Article (1)

The provisions of the attached Oil Regulations on financial, administrative and technical control for preserving oil wealth, called Oil Regulations No. 9, shall come into force.

 

 Article (2)

Oil Regulations Nos. 2, 3, 4, 5, 6 and 7 shall be repealed. Any other provisions contained in Oil Regulations No. (1), periodic letters from the Ministry, or any agreements that are in conflict with the provisions of these Regulations shall also be repealed.

 

Article (3)

Any person who violates the provisions of these Regulations shall be liable for the penalties provided in Petroleum Law No. 25 of 1955 AD referred to above.

 

Article (4)

This Decree shall be implemented by the Deputy of the Ministry of Oil; shall take effect on the issuance date thereof; and shall be published in the Official Gazette.

 

Ezzedine Al Mabrouk

Minister of Oil

Issued on the first day of Jumada al Thani 1393 AH

Corresponding to the first day of July 1973 AD

 

Oil Regulations No. 9 on

Financial, Administrative and Technical Control for Preserving

the Oil Wealth

Preliminary Provisions

 

Article (1)

In applying these Regulations:

“Law” means Petroleum Law No. 25 of 1955, as amended;

”Ministry” means the Ministry of Oil;

”Contract Holder” means any person who holds a concession contract in accordance with Law No. 25 of 1955 AD, or an investment contract in accordance with Law No. 24 of 1970 AD, whether his holding of such contract was before or after these Regulations came into effect;

”Operation” means any oil operation carried out by the Contract Holder;

”Minister” means the Minister of Oil; and

“Goods” means the devices, instruments, machines, tools and equipment used in oil exploration, search, prospecting, extraction, transportation, manufacturing and other related works;

The law and the second annex thereto shall be referred to in respect of the terms contained in these Regulations but are not mentioned in this Article.

 

Article (2)

1. The Contract Holder shall take the necessary measures to comply with the requirements of the Commercial Law and other laws in force in the Libyan Arab Republic.

2. The Contract Holder shall renew, replace or complete the guarantee stipulated in Paragraph 3 of Article 9 of the law. Such renewal, replacement or completion of the guarantee shall be made not later than seven days from the date of its expiry or deduction therefrom, as the case may be, as long as the contract is still valid.

 

 Relinquishment

 

Article (3)

1. The area relinquished by the Contract Holder in accordance with the provisions of Article (10) of the Law shall be one plot. It may also be two plots if the contracted area exceeds 12,000 square kilometers, provided that the relinquished area is reasonably close together and specified as far as possible within the boundaries indicated on the official map of the Ministry and adjacent to the boundaries of one or more areas of the Contract.

2. The condition that the Contract Holder notifies the Ministry about relinquishing the entire contract area three months before the relinquishment shall be for considering the relinquishment request. The relinquishment shall only take place upon issuance of a decree of the Council of Ministers in accordance with Article 2 of the Law.

3. In the event that the Contract Holder finds a special case that justifies his non-compliance with the provisions of Paragraph (1) of this Article, he shall notify the Ministry of that case, provided that the notification shall specify the reasons and justifications in detail. All documents and information related to those reasons shall be attached to the notification together with a map based on the Ministry’s map and a detailed written statement indicating precisely the area he proposes to relinquish and the area he proposes to retain.

4. The Ministry shall study the contract documents and, for this purpose, it may request from the Contract Holder any details, documents and papers it deems necessary. The Ministry shall thereafter inform the Contract Holder within a reasonable period of its approval or disapproval of that special case. In the event that the Ministry does not approve, the Contract Holder shall observe the provisions of Paragraph (a) of this Article.

 

Use of Surplus Capacity

 

Article (4)

1. If there is transport capacity in a pipeline that exceeds the needs of the Contract Holder or holders who own the line, such surplus capacity shall be used to transport the petroleum of other contract holders if they so request in accordance with the provisions of Article (12) of the Law. Transportation of such petroleum through the pipeline shall not cause any harm to the transportation of the petroleum of the Contract Holder who owns the surplus capacity of the pipeline. The Contract Holder who owns the surplus capacity of the pipeline may not be obligated to provide additional facilities, invest additional funds, or make any special arrangements for the purpose of transporting the petroleum of another contract holder. The use of the surplus transport capacity may also not give rise to any acquired or permanent right to use this capacity.

2. The owner of the surplus capacity shall inform the Contract Holder requesting its use as well as the Ministry of the price tariff and the requirements for such use. In respect of any arrangements made after the date of these Regulations, the prices to be charged in any year shall be according to the following equation: 

(c+a-r) x l

ــــــــــــــــــــــ

b m

where (c) = the total annual cost of operating the pipeline, including a proportionate share of the pipeline’s general administrative expenses during that year and all taxes related thereto.

(a) = an amount corresponding to the depreciation of the cost of the pipeline at the rate of ten percent (10%) per annum.

(r) = an amount equivalent to twelve percent per annum of the total funds invested in the pipeline including working capital.

The letters (b m) = the total of what is transported in the pipeline, expressed in barrels/mile, during that year, whether this petroleum belongs to the owner of the pipeline or a third party.

(l) = the distance (length) in miles included in the price tariff.

If the owner of the pipeline provides freight services to the other contract holders, then separate and additional rates for port and freight services shall be determined according to the following formula: –

Freight per barrel = c+a+r

ـــــــــــــ

b

where:

(c) = the total operating expenses, including general administrative expenses of the oil port during that year.

(a) = an amount corresponding to the depreciation of the port establishments at the rate of ten percent (10%) per annum. At the end of the period, the establishments may be re-evaluated and the depreciation rate adjusted in accordance with sound accounting principles.

(r) = an amount equivalent to twelve percent per annum (12%) of the total funds invested in the port including working capital.

(b) = the number of barrels of crude oil transported through the port of export during that year, whether this crude oil was produced by the owner of the pipeline or third parties.

3. All operations shall be carried out using surplus capacity to transport crude in accordance with the provisions contained in these Regulations. The Ministry shall issue special rules for individual cases as necessary. When there is a conflict between these special rules and the general rules contained in these Regulations, the special rules shall prevail.

4. If any Contract Holder rejects the prices tariff or the terms of use proposed by the Ministry, the Ministry shall, within two months from the date of its being notified of the rejection, submit the matter to the committee referred to in Article (12) of the Law.

5. If the Contract Holder or holders who own the pipeline are in more need to use the surplus transport capacity or any part thereof to meet their own needs, they shall inform the Contract Holder or holders who are using the same in writing of their desire to use it, and their obligation to put this surplus capacity at his or their disposal shall expire after the lapse of one year from the date of such notification.

6. If more than one Contract Holder wishes to use the surplus transport capacity owned by another Contract Holder, this surplus capacity shall be divided among the said Contract Holders in the manner agreed upon among them. If they do not agree, the surplus capacity shall be divided in proportion to the total quantities prepared for export, which shall be specified by each Contract Holder.

 

Commercial Discovery and Offshore Endpoint

 

Article (5)

In applying the provisions of Paragraph (1) of Article (13) of the Law and Clause (6) of Annex II, oil shall be deemed to have been found in commercial quantities when the first well in which oil was found is produced after testing its production in accordance with the sound principles used in the production of the following quantities, taking into account the depth to the productive layer and the diameter of the control opening.

Depth in Feet Well Production Diameter of Control Opening

Barrels per day (in inches)

-4.000 250 2/1

4.000 – 6.000 400 2/1

6.000 – 8.000 650 2/1

8.000 – 10.000 1000 16/7

10.000 – and above 1500 16/7

In relation to wells drilled in submerged areas, their production must reach three times the quantities indicated in the preceding paragraph.

When determining commercial production in accordance with the provisions of the preceding two paragraphs, the location of the establishments, transportation facilities and the port of export that should be established for the exploitation of the said petroleum shall be taken into consideration.

The Contract Holder shall provide the Ministry with all data in his possession related to this assessment.

After fulfillment of the above conditions, the Ministry shall issue a final decree.

 

Article (6)

In applying the provisions of Paragraph 2 of Article (13) of the Law, Paragraph 4 of Clause 7 and Paragraph 10 of Clause 8 of Annex II, the term “offshore endpoint in Libya” shall mean the offshore endpoint at which the Contract Holder stops and from where he usually ships his petroleum, natural gasoline and natural gas.

If the government wishes to receive the royalty in kind from the oil and gas produced, the Contract Holder shall provide any facilities required by the government, without any consideration.

 

Rentals, Royalties and Uses

 

Article (7)

The Contract Holder shall pay the rentals stipulated in Article (13) of the Law and Clause 6 of Annex II, as follows: –

1. Rentals shall be paid from the date of awarding the contract. The rental shall be paid from that date and shall include the period between that date and the 31st of the following December. Any portion of a month shall be considered a full month when determining the rental and when it is increased. Thereafter, the rental shall be due annually and paid in advance, whether for productive or non-productive contracts, based on the timing of the Gregorian year and no later than the seventh of January of each year. The training obligations stipulated in Clause 18 of Annex II and any other additional financial benefits shall also be paid on the same date.

2. If an increase in the rental is imposed on the Contract Holder according to the provisions of Article 13/1 (b) of the Law due to the discovery of oil in commercial quantities, the higher rental shall be payable from the first day of the month in which the oil was found in commercial quantities.

3. In applying the provisions of Clause 3 of Article 13 of the Law and Clause 7 (5) of Annex II on reducing the royalty by the amount of the rentals for the same period of the royalty entitlement, the word “year” for the first relevant period shall mean the period starting from the date on which the royalty became payable until the 31st of the following December.

4. The Ministry shall send to the Contract Holder, at least thirty days before the start of each year, a statement in four copies for each contract, on the form and conditions decided by the Ministry to determine rentals. The Ministry shall issue to the Contract Holder a decree for the rental, that shall not be subject to objection by the Contract Holder, on the date specified for discovery of oil in commercial quantities, which shall be due and paid according to this statement. The decision in relation to the area covered by the contract shall be taken on the date the rental is due.

5. If the contract is revoked or abandoned by its owner in whole or in part, no part of the rental shall be refunded.

6. If the balance of the contract term when the rental becomes due is less than one year, rental for that period only shall be paid.

 

Article (8)

1. In applying the provisions of Article 13 of the Law and Clause 7 of Annex II thereof, the Ministry, when it takes royalties in kind, has the right to take them for crude oil, natural gasoline, natural gas and all other products exported by the Contract Holder from the offshore endpoint.

2. For the purpose of the application of Paragraph 1 (c) of Article 14 of the Law and Clause 8 of Annex II thereof, when calculating the royalty on the exported quantities, it shall be calculated on the basis of the density of the quantities exported from the fields. The same basis shall be applied when disbursing the royalty amounts taken in kind.

3. The Ministry may instruct Contract Holders, each according to his production, to put at the disposal of the National Oil Corporation quantities of crude oil, gas or natural gasoline for the purposes of local consumption or industry at the cost prices determined by the Ministry. No marketing expenses may be calculated or deducted from supplementary payments.

 

Article (9)

In determining the quantities of crude oil, petroleum products, gas and natural gasoline used by the Contract Holder while carrying out his work in accordance with Paragraph 1-c of Article 13 of the Law and Paragraph 1 of Clause Seven of the Contract, the following procedures shall be applied:

1. In relation to the Contract Holder’s uses of quantities of crude oil and other petroleum products, gas and natural gasoline needed to generate electric power or for use as fuel, it shall be sufficient to inform the Ministry of the quantities used on a continual basis. The Ministry shall have the right to require the Contract Holder to provide any data or documents to prove the validity and appropriateness of use. In the event that it is not satisfied with such data, it may decide to hold the Contract Holder liable for the unapproved quantities at his expense.

2. Before starting to use any quantities of crude oil, petroleum products, gas and natural gasoline for the purposes of road spraying, sand tying, or any other uses other than the provisions stipulated in the previous paragraph, the Contract Holder shall apply for a license to do so in writing and in advance with the supporting data and documents for his application. The Ministry shall grant the required license within a reasonable period when it is convinced of the validity of the reasons for use.

 

Article (10)

In applying the provisions of Paragraph (1) a-f (b) of Article 14 of the Law and Clause 8 of Annex II, fees, rentals and royalties from which 12 1/2% of the value of the exported crude oil is excluded shall mean the total fees payable by the Contract Holder for that year without deduction of any sums for any purpose.

In the event that the 12 1/2% of the value of the exported crude oil in one year exceeds the total fees, rentals, and royalties, this increase shall be added to the government’s share and shall be paid by the Contract Holder in addition to the income taxes and additional taxes due on him in that year. 12 1/2 % of the value of the exported crude oil shall mean any quantities of crude oil as long as they are exported as crude oil, even if diluted with quantities of natural gas.

 

Operating and Administrative Expenses

 

Article (11)

All ships entering any of the oil ports shall pay port, berth and light dues and any other fees imposed on all ships, and they shall be paid directly to the General Ports and Lights Authority. Such fees may not be deemed to be direct taxes or expenses that may be deducted from the income of the Contract Holder in accordance with the provisions of Article 14 of the Law and Clause 8 of Annex II thereof.

These ships shall pay to the Contract Holder who uses an oil port the service fees stipulated in the aforementioned Port Fees Law and shall be deemed to be income for the Contract Holder subject to the provisions of Article 14 of the Law and Clause 8 of Annex II thereof.

 

Article (12)

In applying the provisions of Paragraph (2) (a) of Article 14 of the Law and Paragraph 2 (a) of Clause 8 of Annex II, the term “operating and administrative expenses” shall mean the following expense items as long as these expenses are not related to the acquisition, creation, erection and installation of assets of all types or other capital expenditures, provided that these expenses have been disbursed fairly and correctly and to the extent necessary for the operations of the Contract Holder in the Libyan Arab Republic, whether before or after the start of the production period. These expenses shall be paid in the Libyan Arab Republic, and they may be paid abroad with prior written permission from the Minister of Oil. The Ministry may require the Contract Holder to submit any documents it deems necessary to prove the validity of the expense: –

1. Salaries, wages, retirement funds and other benefits granted to employees, provided that such benefits are granted to all employees in the Libyan Arab Republic, whether nationals, Arabs, or foreigners, without discrimination, with the approval of this policy by the Ministry of Oil;

2. Customs duties paid by the Contract Holder on the occasion of his direct import of non-capital goods and merchandise that did not enjoy the exemption stipulated in Article 16 of the Law;

3. Stamp duty, for which the Contract Holder is directly liable;

4. The bank commission charged by commercial banks operating in the Country or by the Central Bank of Libya when it sells Libyan currency to the Contract Holder for the purposes of paying the tax obligations imposed on him to the Ministry;

5. The cost of consumer goods purchased and consumed by the Contract Holder. The term “consumer goods” shall mean goods that can be consumed within a period of less than one year.

Similarly, the cost of tools, utensils and small inexpensive devices may be calculated as part of operating expenses in accordance with sound accounting procedures;

6. The cost of services rendered by any third party to the Contract Holder. Such services shall be performed in the Libyan Arab Republic to the extent possible;

7. The cost of services rendered by parent companies or an affiliate of the Contract Holder. The cost of these services shall be determined as follows, without the addition of any commissions or profits: –

a) Expenses incurred in connection with employment and administrative services of the Contract Holder’s employees;

b) Actual expenses incurred in order to purchase equipment and supplies. After determining the said expenses, they shall constitute a portion of the cost of these materials and equipment, whether for calculating operating expenses or capital expenditures;

c) Relevant services of a technical nature requested by Contract Holders in the Libyan Arab Republic and provided to them by their parent or affiliated companies against a pre-contracted fee determined on the basis of the cost price, including administrative expenses, without calculating profits. If the nature of this service is a capital expenditure, it shall be added to the capital expenses;

d) The actual cost of any other services of an advisory nature, such as financial and legal advice, etc. The services mentioned in Clauses c and d shall be rendered in the Libyan Arab Republic to the practical extent possible by the Contract Holder’s employees and staff. The services rendered by parent or affiliated companies shall be covered by service agreements approved by the Ministry, and the expenses recorded shall be reasonable and proportional to the type of services rendered.

No expenses other than the expenses stated above shall be permitted to be calculated, in particular the expenses of managing the head office, which include persons who are not employees of the Contract Holder.

In relation to Contract Holders who participate in joint operations rendered by a company carrying out work on behalf of two or more contract holders who own a common interest in the joint operations in one or more of the relevant contracts, all services that fall within the aforementioned services and where they are related to the joint operations shall be recorded for the account of the aforementioned company carrying out the work and then distributed to the contract holders in proportion to their share in one or more contracts.

In relation to the services mentioned in Paragraph (d), these services alone may be recorded directly for the account and with consent of the Contract Holder if these services are directly related to the business of the Contract Holder alone without being related to the joint business of other contract holders;

8. The cost of repairs, services and regular ongoing maintenance of all assets of all types in the Libyan Arab Republic, provided that this does not result in an increase in the productive capacity or the useful life of the asset. Such services shall be rendered locally to the extent possible;

9. Rentals paid for factories, equipment, buildings and other property located in the Libyan Arab Republic only. However, the amounts paid for usufruct rights in the Libyan Arab Republic shall be recovered for the period specified in the usufruct contract, as well as any expenses incurred in preparing and readying the asset subject to the usufruct;

10. Travel expenses of employees when they are on an official mission;

11. Insurance premiums, provided that the insurance is taken out locally;

12. Equivalent losses arising from damage, destruction or loss of property in the Libyan Arab Republic that were not compensated by insurance or any other method, including the loss arising from bad debts after the Ministry is satisfied that the Contract Holder has exhausted all means to recover such amounts, or for claims of legal compensation, except for fines to be paid to the Ministry or sums confiscated by the same.

Incidental or extraordinary losses shall not be charged except after the approval of the Ministry of Oil;

13. The cost of the cultural and welfare activity carried out by the Contract Holder in the Libyan Arab Republic, with the prior approval of the Ministry;

14. The cost of health institutions and services carried out by the Contract Holder in the Libyan Arab Republic, provided that they are enjoyed by all employees, whether nationals, Arabs or foreigners;

15. The cost of education and training carried out by the Contract Holder with the prior approval of the Ministry for Libyan citizens, whether incurred in the Libyan Arab Republic or abroad;

16. The cost of housing employees in the Libyan Arab Republic, provided that this includes all employees, whether nationals, Arabs, or foreigners, without discrimination, with the approval of this policy by the Ministry;

17. The cost of housing, accommodation and travel for any employee appointed by the government outside his official workplace to ensure that the Contract Holder manages his operations in accordance with the provisions of the Law and the Regulations;

18. The cost of guarding oil facilities, provided that such guarding is mandatory and additional to the regular guarding;

19. Any other operating or administrative expenses that are acceptable and approved by the Ministry before they are disbursed; and

20. Elements of the above stated expenses incurred by the operating company on behalf of the Contract Holders. Such expenses shall be recorded in the books of the Contract Holders, respectively, provided that they take place in accordance with the conditions set forth in the above paragraphs.

 

Natural Assets and Capital Expenditures

 

Article (13)

The natural assets and capital expenditures referred to in Paragraph 2 (b) of Article 14 of the Law and Paragraph 2 (b) of Clause 8 of Annex II shall include the assets acquired in the Libyan Arab Republic. The customs duties paid on these assets in the event that they do not enjoy the exemption provided in Article 16 of the Law, and the expenses incurred before or after the start of the production period, shall be included in determining the value thereof. Natural assets shall also include all costs of wells producing petroleum, gasoline, natural gas and auxiliary wells. The assets or capital expenditures related to these assets may be depreciated only after being acquired and put into production. The depreciation on additions to assets during the year shall be calculated on a monthly basis from the beginning of the month following the acquisition.

The assets and properties that are permanently out of use under the provisions of Paragraph 2 (b) of Article 14 of the Law and Paragraph 2 b of Clause 8 of Annex II thereof shall be used and notified to the Ministry on a monthly basis to approve their being out of use. In this event, the Contract Holder shall dispose the aforementioned assets and properties by way of sale at the best prices that can be obtained. The Contract Holder shall provide the Ministry with documents proving the aforementioned, failing which, he shall be obliged to pay their value as if they had not gone out of use. The Contract Holder shall be solely liable for the value of all new goods used in his business in the Libyan Arab Republic. These may not be deducted or taken out from his profits or from the government’s share in his profits in any event whatsoever.

 

Article (14)

Prior to initiating the re-export of any goods used in petroleum operations, the Contract Holder shall apply to a committee formed by the Minister for this purpose for obtaining a written license to do so, provided that the same shall be accompanied by the following details:

a) A detailed statement of the goods to be re-exported;

b) The reasons for re-export and the extent of the need for the goods mentioned and its oil operations; and

c) The country to which it is intended to be re-exported.

The Minister’s decree shall determine the committee’s procedures.

 

Article (15)

The license to re-export goods shall be limited to goods that are permanently out of use.

 

Article (16)

The re-exportation of goods in order to be repaired abroad may be permitted, provided that the Contract Holder shall submit a written declaration that it is not possible to carry out the repair locally and to return the goods after repair within the period specified for him by the committee. In the event that the Contract Holder does not have sufficient assets or financial guarantees, the committee may ask him to provide a bank guarantee for the value of the goods whose re-export is permitted. If the period specified for returning the goods to the country lapses without this being done, the bank guarantee may be forfeited in favor of the Ministry. This shall take place by a decision of the Deputy of the Ministry without prejudice to the Ministry’s right to any other compensation.

 

Article (17)

The re-export of data, analyses and results of geological, seismic and magnetic surveys with the aim of extracting final interpretations of the same may be permitted if they are of a special nature and cannot be carried out locally. The committee shall grant the Contract Holder, in respect of other cases of an ordinary nature, a grace period during which re-export abroad will be permitted. The Contract Holder shall, upon the expiry of the aforementioned period, carry out the interpretations referred to locally.

 

Article (18)

In applying the provisions of Paragraph (3) of Article (14) of the Law and Paragraph (3) of Clause 8 of Annex II of the Law:

1. Survey and research expenses (expenditures) (excluding expenses for the natural assets) shall mean those incurred for investigations, preliminary surveys and geological and geophysical works before commencing drilling in an area.

2. “Intangible exploration expenses” shall mean all expenditures on labor, fuel, repair, maintenance, transportation, materials and equipment for the purpose of drilling or cleaning wells.

3. Exploration expenses for wells that not producing in commercial quantities, as well as the assets used in them, provided that such assets are economically impossible to be moved and benefited in another location.

4. The option granted to the Contract Holder in accordance with Paragraph (3) of Article 14 of the LAW and Paragraph (3) of Clause 8 of Annex II shall apply to the previous Paragraphs (1) and (3). The option granted for exploratory wells only shall apply to Paragraph (2).

5. The following costs may not be deducted in the year in which they were incurred, but shall be considered among the assets owned by the Contract Holder. The following costs shall be depreciated in accordance with Paragraph (2) (b) of Article 14 of the Law and Paragraph (2) (b) of Clause 8 of Annex II.

a) The total tangible or intangible costs of drilling wells producing petroleum, gasoline and natural gas;

b) The cost of drilling missions, including drilling equipment, assembly lines, production and storage lines, tanks, engines, production pipelines, boilers, machinery and similar property;

c) The cost of wells that are drilled for the purpose of draining water or wells that are drilled for the purpose of injection; and

D) The cost of departments specialized in planning and establishing new projects; the share of productive drilling operations out of the cost of managing drilling operations; and an acceptable percentage of the costs of other service departments. All the said costs shall be distributed to the projects that are completed or in progress and shall be deemed part of the cost of the assets owned by the company.

 

Prevailing Prices and Income

 

Article (19)

1. In applying the provisions of Clause 5 of Article 14 of the Law and Paragraph 5 of Clause 8 of Annex II , the prevailing prices shall be applied to the full quantity contained in each shipment of exported crude oil at the prevailing price applicable on the day on which the loading of that shipment ends.

2. In applying the provisions of Clause 5 (b) of Article 14 of the Law and Paragraph 5 (b) of Clause 8 of Annex II, when calculating the Contract Holder’s income out of all his other operations, the inclusion thereof in income for exported crude oil upon calculating the supplementary payment or the non-inclusion of expenses related to such income within income expenses for exported crude oil shall be taken into account.

 

Monetary Control

 

Article (20)

In applying the provisions of Clause 11 of Annex II to the Law, the Contract Holder may not keep abroad the amounts necessary for the needs of his business purposes in the Country. The following are examples thereof: –

1. Salaries, wages and other benefits granted to foreign, Arab or national employees;

2. Amounts due to suppliers and contractors and the cost of services rendered by any person to the Contract Holder;

3. Fees, taxes, rentals and royalties;

4. All other amounts necessary for the operating and administrative expenses provided for in these Regulations; and

5. The value of all assets of the Contract Holder in Libya, their depreciation installments and other capital expenditures provided for in the Law, Annex II thereof and the provisions of these Regulations.

The Contract Holder shall keep these amounts in the Country and pay them locally in Libyan currency. They may be paid abroad in Libyan currency that is convertible to another foreign currency, subject to the general control over money transfer applicable in the Libyan Arab Republic.

 

Collection Rules

 

Article (21)

In applying the provisions of Article 14 of the Law and Clause 9 of Annex II thereof, the collection of the Contract Holder’s tax obligations of fees, rentals, royalties, income taxes, additional taxes and supplementary payments shall be subject to the following procedures: –

1. After the end of each month of the Gregorian year, and in any case within a period not exceeding thirty days from the date of the end of each month, the Contract Holder shall provide the Ministry with a declaration stating his assessment of the due tax obligations estimated on the basis of his potential profits for the period for which the declaration is submitted. This declaration shall be drafted according to the form established in this regard by the General Directorate for Corporate Accounting at the Ministry. In the event of a delay in submitting the financial declaration, or when there is a dispute between the Contract Holder and the Ministry about the estimation of his due profits, the Contract Holder shall pay the approved tax obligations according to the Ministry’s assessment, provided that he submits a statement of his point of view, which the Ministry will decide on thereafter.

2. On the thirtieth day of the second month after the end of the month in respect of which these obligations are due, the Contract Holder shall pay the amounts due by him for the previous month. These amounts shall be deemed part of the tax obligations owed by him and paid on their account, provided that payment is made by cheques approved and certified by one of the commercial banks operating in the Country.

3. As soon as possible and after the end of each full year, and in any case within a period not exceeding four months from expiry of each full year, the Contract Holder shall provide the Ministry with accounts showing the profits of that year as defined in the Law. At the same time of providing such accounts, the Contract Holder shall pay to the Ministry an amount equivalent to 55% of the profits shown by those accounts or any additional supplementary payments owed by the Contract Holder in accordance with the agreements concluded with him in this regard if added to the fees, rentals and royalties (with the exception of 12.5% ​​of the value of the exported crude oil) and direct taxes previously paid, from that year. The amount paid in this manner shall be deemed part of the income tax, additional tax and the supplementary payment and shall be paid against that account.

If, when finally determining the actual accounts of income tax, additional tax, and additional supplementary payments to be paid, it is found that the amounts paid on account are less than the total income tax, additional tax and supplementary payments payable, the Contract Holder shall pay the balance immediately. However, if it is found, when finally determining the actual accounts of income tax, additional tax, and additional supplementary payments, that the amounts paid on account exceed the total income tax, additional tax and supplementary payments payable, the difference shall be carried forward and considered as an amount paid against the account of income tax, additional tax and supplementary payments in the following year(s).

4. Without prejudice to any other penalties or rights established for the Ministry in the Law or the applicable financial laws and regulations, if the Contract Holder fails to make the monthly payments on the specified date, a delay penalty of 1% of the value of each amount whose payment is delayed shall be imposed for each delay period of one month or a part of a month not less than fifteen days. This penalty shall be imposed irrespective of the reason or justification for the delay. This penalty shall also be imposed in the event that the monthly payment statements contain clear arithmetic errors or ignore sound arithmetic principles, if this results in an impact on the value of the payments due to the Ministry. This penalty shall be collected at the same time that the next monthly payment is collected.

5. Without prejudice to any other penalties or rights established for the Ministry in the Law or the applicable financial laws and regulations, if the Contract Holder fails to pay the balance referred to in Paragraph (3) of this Article, a delay penalty of 1% of each amount of the said balance payment of which was delayed by the Contract Holder shall be imposed for each delay of one month or a part of a month not less than fifteen days. This penalty shall be collected at the same time that the delayed amounts are paid. The penalties referred to in this and the preceding paragraphs shall be imposed by a decision of the Deputy of the Ministry. The collection of the above-mentioned amounts, in respect of what is not provided for in these Regulations, shall be subject to the procedures determined by the laws and financial regulations in the Libyan Arab Republic.

 

Article (22)

In order to collect the tax liabilities imposed on the Contract Holder; if it finds that the Ministry’s rights are at risk of being lost; or when imposing the delay fines stipulated in Article 21 of these Regulations, the Ministry shall have the right to take any of the following actions:

a) Deduct the overdue amounts and fines from the letter of guarantee referred to in Article (1). The Contract Holder shall immediately complete the letter of guarantee to the value specified when it was issued; or

b) Administrative seizure of the funds necessary to fulfill the rights of the Ministry in the possession of any person whatsoever. Such funds shall be deemed to be seized in favor of the Ministry and may not be disposed unless the seizure is lifted by a court ruling or by a decree of the Ministry. The procedures referred to in this Article shall be taken by a decision of the Deputy of the Ministry.

 

Production

 

Article (23)

Projects for exploitation of gas and natural gasoline and their derivatives for export or use in industry or domestic purposes shall be treated from a financial and accounting aspect as projects independent of the normal activity of the Contract Holder in respect of the exploitation of crude oil. The costs and expenses of these projects may not be deducted from the income generated by the Contract Holder from the crude oil exported by him, and the said costs and expenses shall be deducted upon realization of income in these projects.

 

Article (24)

If a production company borrows crude oil, gasoline and natural gas from another company, the lending company (the original producer) shall pay the royalty for the petroleum or gas lent in the same year during which the lending took place. When these quantities are returned to the lending company (the original producer), the company that borrowed these quantities shall pay the royalty in the year in which the borrowed quantities are returned.

 

Article (25)

If a production company sells any quantity of crude oil, gasoline or natural gas to another oil company within the Libyan Arab Republic, the value of these sales shall be calculated as part of the revenues of the production company on the basis of the declared prices. The royalty in respect thereof shall be paid in the same year in which this sale took place. However, this purchase shall not affect the financial statement of the purchasing company.

 

Article (26)

The balance of crude oil at the end of the year shall be taken into account when preparing the annual financial statement. This balance shall be evaluated on the basis of the cost of the barrel produced during the year, inclusive of all expenses charged to the financial statement, including depreciation.

 

Article (27)

The following shall be followed to determine the density of crude oil:-

1. For the purpose of reference test (which is relied on), an ordinary hydrometer shall be used (1H to 10H), and the hydrometer to measure temperature (thermometer) may be used in the field test.

2. Density levels of oil raw materials samples shall be measured in the ports at the following temperatures: –

Brega crude oil at a temperature of 65 degrees Fahrenheit or below

Zueitina crude oil at a temperature of 65 degrees Fahrenheit or below

Sirtica crude oil at a temperature of 65 degrees Fahrenheit or below

Sidra crude oil at a temperature of ” ” ” “

Amal-Ras Lanuf crude oil at a temperature of 85 degrees Fahrenheit or higher

Sarir crude oil in Hariqa at a temperature of 95 degrees Fahrenheit or higher

Agip crude oil at a temperature of 110 degrees Fahrenheit or higher

In field tests, density may be measured at a temperature not specified above.

3. The samples shall be cooled or warmed to the temperatures mentioned above in their closed container, and the hydrometer cylinder (the container in which the sample is placed to measure its density) shall be approximately the same temperature as the sample whose density is to be measured as mentioned above.

4. The temperature of the sample shall be observed to the nearest 0.25°F immediately before and after observing the density, such that the liquid sample in the cylinder has been carefully stirred completely by the thermometer and the full mercury thread is immersed.

5. If there is a temperature difference of more than one degree Fahrenheit between the two temperature readings before and after the density reading, the density and temperature readings shall be repeated after the sample’s temperature becomes more stable. The average reading of the thermometer before and after the final hydrometer reading shall be recorded to the nearest degree Fahrenheit, and this shall be the test temperature.

6. In respect of any matter not provided for in these Regulations to measure the density of petroleum the bulletins of the American Petroleum Institute shall be followed.