(1) This section applies to exploration and development operations conducted by a person as part of a separate petroleum operation before the commencement of production.

(2) A person who incurs a revenue expenditure or a capital expenditure in the course of exploration and development operations shall place the expenditure in a single pool and

(a) a deduction or capital allowance shall not be granted by the Commissioner-General with respect to the expenditure; and

(b) the expenditure shall not form part of the cost of an asset.

(3) A person shall not include an expenditure in the pool referred to in subsection (2) if that expenditure

(a) is a domestic or an excluded expenditure; or

(b) fails to meet the requirements of section 67(2)(b)(i) or (ii).

(4) Except for an amount that will be included to reduce the pool referred to in subsection (2), a person, shall not include in the pool referred to in that subsection

(a) an amount which is included in calculating the income of the person from the separate petroleum operation; or

(b) a consideration received in respect of a depreciable asset or capital asset of the operation.

(5) A person shall carry forward the balance in the pool referred to in subsection (2) from year to year until production commences.

(6) Where at the end of a year of assessment the balance in the pool is negative by reason of a reduction in subsection (4)

(a) the negative amount shall be included in calculating the income of that person from the separate petroleum operation for the year; and

(b) the balance shall not be carried forward to the next year of assessment.

(7) Where a person commences production with respect to a separate petroleum operation, the balance in the pool of exploration and development expenditure at that time shall be capitalised by that person and the Commissioner-General shall grant capital allowances in respect of that expenditure.