NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here
PRODUCTION SHARING CONTRACT
EXHIBIT 10.56
AMONG
THE GOVERNMENT OF INDIA
AND
OIL & NATURAL GAS CORPORATION LIMITED
AND
RELIANCE INDUSTRIES LIMITED
AND
ENRON OIL & GAS INDIA LTD.
WITH RESPECT TO CONTRACT AREA
IDENTIFIED AS MID AND SOUTH TAPTI FIELD
TABLE OF CONTENTS
ARTICLE
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
APPENDICES:
CONTENTS
Preamble
Definitions
Duration
Relinquishment
Work Programme
Management Committee
Operatorship and Operating Agreement
General Rights and Obligations of the Parties
Government Assistance
Discovery, Development and Production
Unit Development
Measurement of Petroleum
Protection of the Environment
Recovery of Costs
Production Sharing of Petroleum between Contractor
and Government
Taxes, Royalties, Rentals, etc.
Payment
Customs Duties
Domestic Supply, Sale, Disposal and Export of Crude Oil
Valuation of Oil
Currency and Exchange Control Provisions
Natural Gas
Employment, Training and Transfer of Technology
Local Goods and Services
Insurance and Indemnification
Records, Reports, Accounts and Audit
Information, Data, Confidentiality, Inspection
and Security
Title to Petroleum, Data and Assets
Assignment of Interest
Guarantee
Termination of Contract
Force Majeure
Applicable Law and Language of the Contract
Sole Expert, Conciliation and Arbitration
Entire Agreement, Amendments, Waiver and Miscellaneous
Certificates
Notices
Appendix A
Appendix B
Appendix C
-
Appendix D
-
Appendix E
Appendix F
Appendix G
-
Appendix H
-
Appendix I
-
Description of Contract Area
Map of Contract Area
Accounting Procedure to Production Sharing
Contract
Calculation of the Investment Multiple for
Production Sharing Purposes
Form of Financial and Performance Guarantee
Equipment
Development Commitment Specified by the
Companies
Production Profile of the Mid and South Tapti
Fields
Payment for Use of Onshore Plant
-----*****-----
This Contract made and entered into as of the 22nd day of December 1994
by and among:
THE PRESIDENT OF INDIA, acting through the the Joint Secretary
(Exploration), Ministry of Petroleum and Natural Gas (hereinafter
referred as Government);
AND
OIL & NATURAL GAS CORPORATION LIMITED (ONGC), a body corporate established under
the provisions of the Companies Act, 1956, which expression shall include its
successors and such assigns as are permitted under Article 28 hereof acting
through its duly authorized Chairman & Managing Director;
AND
RELIANCE INDUSTRIES LTD. ("RIL"), a body corporate established under the laws of
India, which expression shall include its successors and such assigns as are
permitted under Article 28 hereof acting through its duly authorized Chief
Executive Officer (Oil & Gas)
AND
ENRON OIL & GAS INDIA LTD. ("EOGIL"), a body corporate established under the
laws of the Cayman Islands, which expression shall include its successors and
such assigns as are permitted under Article 28 hereof acting through its duly
authorized (Vice) President;
WITNESSETH:
WHEREAS
1.
By virtue of Article 297 of the Constitution of India,
Petroleum in its natural state in the Territorial Waters and
the Continental Shelf of India is vested in the Union of
India;
2.
The Territorial Waters, Continental Shelf, Exclusive Economic Zone And
Other Maritime Zones Act, 1976 (No. 80 of 1976) provides for the grant of
a Lease or letter of authority by the Government to explore and exploit
the resources of the Continental Shelf;
3.
The Oil Fields (Regulation and Development) Act, 1948, (53 of 1948)
(hereinafter referred to as "the Act") and the Petroleum and Natural Gas
Rules, 1959, made thereunder (hereinafter referred to as "the Rules") make
provision inter alia for the regulation of Petroleum Operations and the
grant of petroleum exploration licenses and mining leases for exploration
and development of Petroleum in India;
4.
The Act and the Rules provide for the grant by the Government of mining
leases in respect of the Territorial Waters and the Continental Shelf, and
the Contractor is being duly granted a mining lease to carry out Petroleum
Operations in that area offshore identified as Mid and South Tapti Field,
more particularly described in Appendices A and B;
5.
The Government desires that the Petroleum resources which may exist in the
Contract Area be discovered and exploited with the utmost expedition in
the overall interest of India in accordance with sound international
petroleum industry practices;
6.
The Government is satisfied that it is in the public interest to enter
into this Contract on terms different from those specified in Section 12
of the Oil Fields (Regulations and Development) Act, 1948, and the
Government is entering into this Agreement on the terms and conditions
specified herein.
7.
EOGIL and RIL have represented that they have, or will acquire
and make available, the necessary financial and technical
resources and the technical and industrial competence and
experience necessary for proper discharge and/or performance
of all obligations required to be performed under this
Contract in accordance with good international petroleum
industry practices and will provide guarantees as required in
Article 29 for the due performance of their undertakings
hereunder;
8.
The Parties desire to enter into this Contract with respect to the
Contract Area referred to in Appendices A and B on the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and covenants and conditions
herein contained, IT IS HEREBY AGREED between the Parties as follows:
-----*****----2
ARTICLE 1
DEFINITIONS
In this Contract, unless the context requires otherwise, the following
terms shall have the meaning ascribed to them hereunder:
1.1
"Accounting Procedure" means the principles and procedures
of accounting set out in Appendix C.
1.2
"Affiliate" means a company that directly or indirectly controls or is
controlled by a Party to this Contract or a company which directly or
indirectly controls or is controlled by a company which controls a
Party to this Contract, it being understood that "control" means
ownership by one company of more than fifty percent (50%) of the voting
securities of the other company, or the power to direct, administer and
dictate policies of the other company even where the voting securities
held by such company exercising such effective control in that other
company is less than fifty percent (50%) and the term "controlled"
shall have a corresponding meaning.
1.3
"Appendix" means an Appendix attached to this Contract and
made a part hereof.
1.4
"Appraisal Programme" means a programme, approved by the Management
Committee for the appraisal of an Existing or New Discovery of
Petroleum in the Contract Area for the purpose of delineating the
Petroleum Reservoirs to which the Discovery relates in terms of
thickness and lateral extent and determining the characteristics
thereof and the quantity and quality of recoverable Petroleum therein.
1.5
"Appraisal Well" means a Well drilled within the Contract Area pursuant
to an approved Appraisal Programme.
1.6
"Arms Length Sales" means sales of Petroleum made freely on the open
international market, in freely convertible currencies, between willing
and unrelated sellers and buyers and in which such buyers and sellers
have no contractual or other relationship, directly or indirectly, or
any common or joint interest as is reasonably likely to influence
selling prices and shall, inter alia, exclude sales (whether direct or
indirect, through brokers or otherwise) involving Affiliates, sales
between entities comprising the Contractor, sales between governments
and government-owned entities, counter trades, restricted or distress
sales, sales involving barter arrangements and generally any
transactions motivated in whole or in part by considerations other than
normal commercial practices.
1.7
"Article" means an Article of this Contract and the term
"Articles" means more than one Article.
3
1.8
"Associated Natural Gas" or "ANG" means Natural Gas occurring in
association with Crude Oil either as free gas or in solution, if such
Crude Oil can by itself be commercially produced.
1.9
"Barrel" means a quantity or unit equal to 158.9074 litres (forty-two
(42) United States gallons) liquid measure, at a temperature of sixty
(60) degrees Fahrenheit (15.56 degrees Centigrade) under one atmosphere
of pressure (14.7 psia).
1.10
"Basement" means any igneous or metamorphic rock, or rock or any
stratum of such nature, in and below which the geological structure or
physical characteristics of the rock sequence do not have the
properties necessary for the accumulation of Petroleum in commercial
quantities and which reflects the maximum depth at which any such
accumulation can be reasonably expected in accordance with the
knowledge generally accepted in the international petroleum industry.
1.11
"Calendar Month" means any of the twelve (12) months of the
Calendar Year unless specified otherwise.
1.12
"Calendar Quarter" means a period of three consecutive Calendar Months
commencing on the first day of January, April, July and October of each
Calendar Year.
1.13
"Calendar Year" means a period of twelve consecutive months according
to the Gregorian calendar commencing with the first day of January and
ending with the thirty-first day of December.
1.14
"Commercial Discovery" means a Discovery which, when produced, is
likely to yield a reasonable profit on the funds invested in Petroleum
Operations, after deduction of Contract Costs, and which has been
declared a Commercial Discovery in accordance with the provisions of
Article 9 and/or Article 21, after consideration of all pertinent
operating and financial data such as recoverable reserves, sustainable
production levels, estimated development and production expenditures,
prevailing prices and other relevant technical and economic factors
according to generally accepted practices in the international
petroleum industry.
1.15
"Commercial Production" means production of Crude Oil or Natural Gas or
both from a Field within the Contract Area and delivery of the same at
the relevant Delivery Point under a programme of regular production and
sale.
1.16
"Company" means either EOGIL or RIL.
1.17
"Companies" means EOGIL and RIL.
1.18
"Condensate" means those low vapour pressure hydrocarbons
obtained from Natural Gas through condensation or extraction
4
and refers solely to those hydrocarbons that are liquid at normal
surface temperature and pressure conditions (provided that in the event
Condensate is produced from an Oil Field and is segregated and
transported separately to the Delivery Point, then the provisions of
this Contract shall apply to such Condensate as if it were Crude Oil.)
1.19
"Contract" means this agreement and the Appendices attached hereto and
made a part hereof and any amendments made thereto pursuant to the
terms hereof.
1.20
"Contract Area" means the area described in Appendix A and delineated
on the map attached as Appendix B, or any portion of the area remaining
after relinquishment or surrender from time to time pursuant to the
terms of this Contract.
1.21
"Contract Costs" means Exploration Costs, Development Costs, Production
costs, and all other costs related to Petroleum Operations as set forth
in Section 3 of the Accounting Procedure.
1.22
"Contract Year" means a period of twelve consecutive months counted
from the Effective Date or from the anniversary of the Effective Date.
1.23
"Contractor" means EOGIL, RIL and ONGC.
1.24
"Cost Petroleum" means the portion of the total volume of Petroleum
produced and saved from the Contract Area which the Contractor is
entitled to take from the Contract Area in a particular period for the
recovery of Contract Costs as provided in Article 13.
1.25
"Cost Recovery Limit" shall have the meaning given in
Article 13.1.2.
1.26
"Crude Oil" means crude mineral oil, asphalt, ozokerite and all kinds
of hydrocarbons and bitumens, both in solid and in liquid form, in
their natural state or obtained from Natural Gas by condensation or
extraction, including distillate and Condensate when commingled with
the heavier hydrocarbons and delivered as a blend at the Delivery Point
but excluding verified Natural Gas.
1.27
"Delivery Point" means, except as otherwise herein provided or as may
be otherwise agreed between the Government and the Contractor, the
point at which Petroleum reaches the upstream weld of the outlet flange
of the delivery facility, either offshore or onshore and different
Delivery Points may be established for purposes of sales to the
Government, export or domestic sales.
1.28
"Development Area" means that part of the Contract Area corresponding
to the area of an Oil Field or Gas Field delineated in simple geometric
shape, together with a
5
reasonable margin of additional area surrounding the Field consistent
with international petroleum industry practice and approved by the
Management Committee or the Government, as the case may be.
1.29
"Development Costs" means those costs and expenditures
incurred in carrying out Development Operations, as
classified and defined in Section 2 of the Accounting
Procedure and allowed to be recovered in terms of Section 3
thereof.
1.30
"Development Operations" means operations conducted in accordance with
the Development Plan and shall include, but not be limited to, the
purchase, shipment or storage of equipment and materials used in
developing Petroleum accumulations, the drilling, completion,
Recompletion and testing of Development Wells, the drilling, completion
and Recompletion of Wells for Gas or water injection, the laying of
gathering lines, the installation of offshore platforms and
installations, the installation, hook up and commissioning of
separators, tankage, pumps, artificial lifting and other producing and
injection facilities required to produce, process and transport
Petroleum into main oil storage or Gas processing facilities, either
onshore or offshore, including the laying of pipelines within or
outside the Contract Area, storage and Delivery Point or Points, the
installation of storage or Gas processing facilities, the installation
of export and loading facilities and other facilities required for
development and production of the Petroleum accumulations and for the
delivery of Crude Oil and/or Gas at the Delivery Point(s) and also
including incidental operations not specifically referred to herein as
required for the most efficient and economic development and production
of the Petroleum accumulations in accordance with good international
petroleum industry practices.
1.31
"Development Plan" means a plan containing proposals
required under Article 9 or Article 21.
1.32
"Development Well" means a Well drilled, deepened, completed, or
Recompleted after the date of approval of the Development Plan pursuant
to Development Operations or Production Operations for the purposes of
producing Petroleum, increasing production, sustaining production or
accelerating extraction of Petroleum including production Wells,
injection Wells and dry Wells.
1.33
"Discovery" means the finding, during Exploration Operations, of a
deposit of Petroleum not previously known to have existed, which can be
recovered at the surface in a flow measurable by conventional petroleum
industry testing methods, including an Existing Discovery and a New
Discovery.
6
1.34
"Discovery Area" means that part of the Contract Area about which,
based upon Discovery and the results obtained from a Well or Wells
drilled in such part, both the Government and the Contractor are of the
opinion that Petroleum exists and is likely to be produced in
commercial quantities.
1.35
"Effective Date" means the date on which this Contract is
executed.
1.36
"Environmental Clearance" means permission granted in writing by the
Government to the Contractor to perform all activities necessary and
appropriate to conduct Petroleum Operations subject to conditions
specified with regard to protection of the environment and minimizing
Environmental Damage.
1.37
"Environmental Damage" means soil erosion, removal of vegetation,
destruction of wildlife, pollution of groundwater or surface water,
land contamination, air pollution, noise pollution, bush fire,
disruption to water supplies, to natural drainage or natural flow of
rivers or streams, damage to archaeological, palaeontological and
cultural sites and shall include any damage or injury to, or
destruction of, soil or water in their physical aspects together with
vegetation associated therewith, aquatic or terrestrial mammals, fish,
avifauna or any plant or animal life whether in the sea or in any other
water or on, in or under land provided such damage is in violation of
legislation relating to the protection of the environment.
1.38
"Excess ANG" shall have the meaning given in Article 21.4.
1.39
"Existing Discovery" means a Discovery made by ONGC before the
Effective Date and accepted by the Parties as a Commercial Discovery.
1.40
"Exploration Costs" means those costs and expenditures
incurred in carrying out Exploration Operations, as
classified and defined in Section 2 of the Accounting
Procedure and allowed to be recovered in terms of Section 3
thereof.
1.41
"Exploration Operations" means operations conducted in the Contract
Area pursuant to this Contract in searching for Petroleum or in the
course of an Appraisal Programme and shall include but not be limited
to aerial, geological, geophysical, geochemical, palaeontological,
palynological, topographical and seismic surveys, analysis, studies and
their interpretation, investigations relating to the subsurface geology
including structure test drilling, stratigraphic test drilling,
drilling of Exploration Wells or Appraisal Wells and other related
activities such as testing, surveying, drill site preparation and all
work necessarily connected therewith that is conducted in connection
with Petroleum exploration.
7
1.42
"Exploration Well" means a Well drilled for the purpose of searching
for undiscovered Petroleum accumulations on any geological entity (be
it of structural, stratigraphic, facies or pressure nature) to at least
a depth or stratigraphic level specified in the Work Programme.
1.43
"Field" means an Oil Field or a Gas Field in the Contract Area in
respect of which a Development Plan has been duly approved in
accordance with Article 9 or Article 21 hereof.
1.44
"Financial Year" means the period from the first day of April through
the thirty-first day of March of the following Calendar Year.
1.45
"Foreign Company" means a Company within the meaning of Section 591 of
the Companies Act, 1956, as amended from time to time.
1.46
"Gas" means Natural Gas.
1.47
"Gas Field" means an area within the Contract Area consisting of a
single Gas Reservoir or multiple Gas Reservoirs all grouped on or
related to the same individual geological structure or stratigraphic
conditions, designated by the Contractor and approved by the Government
or Management Committee, as the case may be, (to include the maximum
area of potential productivity in the Contract Area in a simple
geometric shape) in respect of which a Commercial Discovery has been
declared or a Development Plan has been approved in accordance with
Article 9 or Article 21 hereof.
1.48
"Investment" shall have the meaning assigned in paragraph 3
of Appendix D.
1.49
"Investment Multiple" means the ratio of accumulated Net Cash Income to
accumulated Investment in the Contract Area, earned by the Companies,
as determined in accordance with Appendix D.
1.50
"LIBOR" means the London Inter-Bank Offering Rate for six-month
deposits of United States Dollars as quoted by the London office of the
Bank of America (or such other Bank as the Parties may agree) for the
day or days in question.
1.51
"Lessee" means any person or body corporate, including the Contractor,
which holds a mining lease under the Petroleum and Natural Gas Rules,
1959, for the purpose of carrying out Petroleum Operations in the
Contract Area and their successors and permitted assigns.
1.52
"Management Committee" means the committee constituted
pursuant to Article 5 hereof.
8
1.53
"Minimum Work Obligation" means the Work Programme related to those
items specified in Appendix G as approved by the Management Committee.
1.54
"Natural Gas" means wet Gas, dry Gas, all other gaseous hydrocarbons,
and all substances contained therein, including sulphur and helium,
which are produced from Oil or Gas Wells, excluding those condensed or
extracted liquid hydrocarbons that are liquid at normal temperature and
pressure conditions, and including the residue Gas remaining after the
condensation or extraction of liquid hydrocarbons from Gas.
1.55
"Net Cash Income" shall have the meaning assigned in
paragraph 2 of Appendix D.
1.56
"New Discovery" means a Discovery made after the Effective
Date.
1.57
"Non Associated Natural Gas" or "NANG" means Natural Gas which is
produced either without association with Crude Oil or in association
with Crude Oil which by itself cannot be commercially produced.
1.58
"Oil" means "Crude Oil".
1.59
"Oil Field" means an area within the Contract Area consisting of a
single Oil Reservoir or multiple Oil Reservoirs all grouped on or
related to the same individual geological structure, or stratigraphic
conditions, designated by the Contractor and approved by the Government
or the Management Committee, as the case may be (to include the maximum
area of potential productivity in the Contract Area in a simple
geometric shape) in respect of which a Commercial Discovery has been
declared and a Development Plan has been approved in accordance with
Article 9 hereof and a reference to an Oil Field shall include a
reference to the production of Associated Natural Gas from that Oil
Field.
1.60
"Operating Agreement" means the Joint Operating Agreement entered into
by the Parties constituting Contractor in accordance with Article 6,
with respect to the conduct of Petroleum Operations.
1.61
"Operating Committee" means the committee established by
that name in the Operating Agreement.
1.62
"Operator" means the Party so designated in Article 6.
1.63
"Participating Interest" means the percentage of participation of the
constituents of the Contractor at any given time in the rights and
obligations under this Contract. Initially the Participating Interest
of the constituents of Contractor are as follows:
9
1.
2.
3.
ONGC
RIL
EOGIL
40%
30%
30%
1.64
"Parties" means the Parties signatory to this Contract including their
successors and permitted assigns under this Contract and the term
"Party" means any of the Parties.
1.65
"Petroleum" means Crude Oil and/or Natural Gas existing in
their natural condition.
1.66
"Petroleum Operations" means, as the context may require, Exploration
Operations, Development Operations or Production Operations or any
combination of such operations, including, but not limited to,
collection of seismic information, drilling and completion and
Recompletion of Wells, construction, operation and maintenance of all
necessary facilities, plugging and abandonment of Wells, environmental
protection, transportation, storage, sale or disposition of Petroleum
to the Delivery Point, Site Restoration and all other incidental
operations or activities as may be necessary.
1.67
"Production Costs" means those costs and expenditures incurred in
carrying out Production Operations as classified and defined in Section
2 of the Accounting Procedure and allowed to be recovered in terms of
Section 3 thereof.
1.68
"Production Operations" means all operations conducted for the purpose
of producing Petroleum from the Contract Area after the commencement of
production from the Contract Area, including the operation and
maintenance of all necessary facilities therefor.
1.69
"Profit Petroleum" means all Petroleum produced and saved from the
Contract Area in a particular period as reduced by Cost Petroleum and
calculated as provided in Article 14.
1.70
"Recompletion" means an operation whereby a completion in one zone is
abandoned in order to attempt a completion in a different zone within
the existing wellbore.
1.71
"Reservoir" means a naturally occurring discrete
accumulation of Petroleum.
1.72
"Section" means a section of the Accounting Procedure.
1.73
"Self-Sufficiency" means, in relation to any Financial Year, that the
volume of Crude Oil and Crude Oil equivalent of Petroleum products
exported from India during that Financial Year either equals or exceeds
the volume of Crude Oil and Crude Oil equivalent of Petroleum products
imported into India during the same Financial Year.
10
1.74
"Site Restoration" shall mean all activities required to return a site
to its state as of the Effective Date pursuant to the Contractor's
environmental impact study or to render a site compatible with its
intended after-use (to the extent reasonable) after cessation of
Petroleum Operations in relation thereto and shall include, where
appropriate, proper abandonment of Wells or other facilities, removal
of equipment and structures (whether installed before or after the
Effective Date), and debris, establishment of compatible contours and
drainage, replacement of top soil, revegetation, slope stabilization,
infilling of excavations or any other appropriate actions in the
circumstances.
1.75
"Subcontractor" means any company or person contracted by
the Operator to provide services with respect to the
Petroleum Operations.
1.76
"Well" means a borehole, made by drilling in the course of Petroleum
Operations, but does not include a seismic shot hole.
1.77
"Work Programme" means all the plans formulated for the
performance of the Petroleum Operations.
1.78
"Year" means Financial Year.
-----*****----11
ARTICLE 2
DURATION
2.1
The term of this Contract shall be for a period of twenty-five (25)
years from the Effective Date, unless the Contract is terminated
earlier in accordance with its terms, but may be extended on such terms
and conditions as may be mutually agreed by the Parties hereto.
-----*****----12
ARTICLE 3
RELINQUISHMENT
3.1
The Contractor may, with the approval of the Management Committee,
voluntarily relinquish a portion of the Contract Area other than an
area for which a Development Plan has been approved. Contractor shall
give the Government written notice of relinquishments thirty (30) days
prior to the end of any Calendar Year.
3.2
Relinquishment of less than all of the Contract Area shall
be in blocks of not less than one hundred square kilometres
(100 sq. kms.) and be of such shape and location as the
Government may deem appropriate for enabling effective
exploration and exploitation of such area.
3.3
Relinquishment of all or a part of the Contract Area or termination of
the Contract shall not be construed as absolving the Contractor of any
liability undertaken or incurred by the Contractor in respect of the
Contract Area prior to the date of such relinquishment or termination.
-----*****----13
ARTICLE 4
WORK PROGRAMME
4.1
The Contractor shall commence Petroleum Operations not later than six
(6) months from the Effective Date.
4.2
As soon as possible after the Effective Date, in respect of the period
ending with the last day of the Financial Year in which the Effective
Date falls and thereafter ninety (90) days before commencement of each
following Financial Year, the Contractor shall submit to the Management
Committee, through the Operating Committee, the Work Programmes and
budgets relating to Petroleum Operations, including the Minimum Work
Obligations, to be carried out during the ensuing Financial Year.
4.3
The Contractor may propose amendments to the details of an approved
Work Programme and budget in the light of the then existing
circumstances and shall submit to the Management Committee, through the
Operating Committee, modifications or revisions to the Work Programme
and budgets.
-----*****----14
ARTICLE 5
MANAGEMENT COMMITTEE
5.1
For the purpose of proper and expeditious performance of Petroleum
Operations under the provisions of this Contract, there shall be
constituted a committee to be called the Management Committee.
5.2
The Management Committee shall consist of four (4) members, one (1)
member nominated by and representing Government and one (1) member
nominated by and representing each constituent of the Contractor. The
member nominated by ONGC shall act as chairman.
5.3
A representative of the Operator acting as the convenor
shall call the meetings of the Management Committee.
5.4
Government and the Contractor may nominate alternate members with full
authority to act in the absence and on behalf of the members nominated
under Article 5.2 and may, at any time, nominate another member or
alternate member to replace any member nominated earlier by notice to
other members of the Management Committee.
5.5
A quorum of the Management Committee shall consist of three
(3) members.
5.6
The following matters shall be submitted to the Management
Committee for approval:
(a)
annual Work Programmes and budgets and any modifications or
revisions thereto, as proposed by the Operating Committee, for
Exploration Operations, Development Operations and/or Production
Operations;
(b)
proposals for an Appraisal Programme, the declaration of a New
Discovery as a Commercial Discovery and the approval of
Development Plans as may be required under this Contract, or
revisions or additions to an Appraisal Programme or a Development
Plan;
(c)
delineation of a Field and a Development Area;
(d)
appointment of auditors;
(e)
collaboration with lessees or contractors of other
areas;
(f)
claims or settlement of claims for or on behalf of or against the
Contractor in excess of limits specified in the Operating
Agreement or fixed by the Management Committee from time to time;
15
(g)
any proposed mortgage, charge or encumbrance on
petroleum assets, petroleum reserves or production of
Petroleum;
(h)
any other matter required by the terms of this Contract
to be submitted for the approval of the Management
Committee;
(i)
any other matter which the Contractor or the Operating
Committee decides to submit to it.
5.7
The Management Committee shall not take any decision without obtaining
prior approval of the Government, where such approval is required under
this Contract.
5.8
The Management Committee shall meet at least once every three (3)
months or more frequently at the request of any member. Operator shall
convene each meeting by notifying the members at least twenty eight
(28) days prior to such meeting (or a shorter period of notice if the
members unanimously so agree) of the time and place of such meeting and
the purpose thereof and shall include in such notice a provisional
agenda for such meeting. The Operator shall be responsible for
processing the final agenda for such meeting and the agenda shall
include all items of business requested by the members to be included,
provided such requests are received by the Operator at least ten (10)
days prior to the date fixed for the meeting. The Operator shall
forward the agenda to the members at least nine (9) days prior to the
date fixed for the meeting. Matters not included in the agenda may be
taken up at the meeting by any member with the unanimous consent of all
the members.
5.9
The Chairman, and in his absence any other member nominated by ONGC,
shall preside over the meetings of the Management Committee.
5.10
The Operator shall appoint one of the members nominated by the
constituents of the Contractor as secretary to the Management Committee
with responsibility, inter alia, for preparation of the minutes of
every meeting in the English language and provision to every member of
the Management Committee with two (2) copies of the minutes not later
than twenty-eight (28) days after the date of the meeting.
5.11
Within twenty-one (21) days of the receipt of the minutes of a meeting,
members shall notify the Operator and the other members of their
approval of the minutes by putting their signatures on one copy of the
minutes and returning the same to the Operator or by indicating such
approval to the Operator by telex, cable, or facsimile, with copies to
the other members. Any member may suggest any modification, amendment
or addition to the minutes by telex, cable or facsimile to the Operator
and other members or by indicating such suggestions when returning the
copy of the minutes to
16
the Operator. If the Operator or any other member does not agree with
the modification, amendment or addition to the minutes suggested by any
member, the matter shall be brought to the attention of the other
members and resubmitted to the Management Committee for approval at the
next meeting and the minutes shall stand approved as to all other
matters. If a member fails to appropriately respond within the
aforesaid twenty-one (21) day period as herein provided, the minutes
shall be deemed approved by such member.
5.12
The meetings of the Management Committee shall be held in New Delhi,
India unless otherwise mutually agreed by the members of the Management
Committee.
5.13
All matters requiring the approval of the Management Committee shall be
approved by a vote of three (3) or more members of the Management
Committee one (1) of whom shall be the Government representative.
-----*****----17
ARTICLE 6
OPERATORSHIP AND OPERATING AGREEMENT
6.1
EOGIL shall be the Operator for purposes of this Contract.
6.2
No change in operatorship shall be effected without the consent of the
Government, which consent shall not be unreasonably withheld.
6.3
The operating functions required of the Contractor under this Contract
shall be performed by the Operator on behalf of all constituents of the
Contractor subject to, and in accordance with, the terms and provisions
of this Contract, and generally accepted international petroleum
industry practice.
6.4
The constituents of the Contractor shall execute a mutually agreed
Operating Agreement. The Agreement shall be consistent with the
provisions of this Contract and shall provide for, among other things:
(a)
the appointment, resignation, removal and
responsibilities of the Operator;
(b)
the establishment of an Operating Committee;
(c)
functions of the Operating Committee taking into account the
provisions of the Contract, procedures for decision making,
frequency and place of meetings; and
(d)
contribution to costs, default, sole risk, disposal of petroleum
and assignment as between the parties to the Operating Agreement.
-----*****-----
18
ARTICLE 7
GENERAL RIGHTS AND OBLIGATIONS OF THE PARTIES
7.1
7.2
Subject to the provisions of this Contract, the Contractor
shall have, but not be limited to, the following rights:
(a)
the exclusive right during the term hereof to carry out Petroleum
Operations in the Contract Area and to recover costs and expenses
as provided in this Contract;
(b)
the right to use, free of charge, such quantities of Petroleum
produced from any Field as are reasonably required for conducting
Petroleum Operations in the Contract Area in accordance with
generally accepted practices in the international petroleum
industry;
(c)
the right to lay, build, construct or install
pipelines, roads, bridges, ferries, aerodromes,
landing fields, radio telephones, satellite
communications and related communication and
infrastructure facilities and exercise other ancillary
rights as may be reasonably necessary for the conduct
of Petroleum Operations subject to such approvals as
may be required, which shall not be unreasonably
withheld, under the applicable laws and/or regulations
in force from time to time for the regulation and
control thereof;
(d)
the right to have an expatriate work force as required
and necessary together with their required personal
effects;
(e)
the right to flare Gas temporarily when and as necessary,
provided the Operator shall give notice thereof to the Government
within forty-eight (48) hours of the start of such flaring and
the issue shall be discussed in the next meeting of the
Management Committee;
(f)
the right to use all wells, equipment and facilities installed as
of the Effective Date in the Contract Area ("Assets") free of any
additional cost or charges or encumbrances and assignment of such
Assets to Operator on behalf of the Contractor;
(g)
such other rights as are specified in this Contract.
The Government reserves the right to itself, or to grant to the Lessee
or others the right, to prospect for and mine minerals or substances
other than Petroleum within the Contract Area; provided, however, that
if after the Effective Date, the Lessee or others are issued rights, or
the Government proceeds directly to prospect for and mine in the
Contract Area for any minerals or substances other than
19
Petroleum, the Contractor shall use reasonable efforts to avoid
obstruction to or interference with such operations within the Contract
Area and, in either case, the Government shall use reasonable efforts
to ensure that operations carried out do not obstruct or unduly
interfere with Petroleum Operations in the Contract Area. In the event
of any conflict, Petroleum Operations shall take preference.
7.3
The Contractor shall:
(a)
except as otherwise expressly provided in this Contract, conduct
all Petroleum Operations at its sole risk, cost and expense and
provide all funds necessary for the conduct of Petroleum
Operations including funds for the purchase or lease of
equipment, materials or supplies required for Petroleum
Operations as well as for making payments to employees and
Subcontractors;
(b)
conduct all Petroleum Operations within the Contract Area
diligently, expeditiously, efficiently and in a safe and
workmanlike manner in accordance with good international
petroleum industry practice pursuant to the approved Work
Programmes;
(c)
ensure provision of all information, data, samples etc.
which the Contractor may be required to furnish under
the applicable laws;
(d)
ensure that all equipment, materials, supplies, plant and
installations used for Petroleum Operations comply with generally
accepted standards in the international petroleum industry and
are of proper construction and kept in good working order;
(e)
in the preparation and implementation of Work Programmes and in
the conduct of Petroleum Operations, follow good international
petroleum industry practices with such degree of diligence and
prudence reasonably and ordinarily exercised by experienced
parties engaged in a similar activity under similar circumstances
and conditions;
(f)
after the designation of a Field and a Development Area, pursuant
to this Contract, forthwith proceed to take all necessary action
for prompt and orderly development of the Field and the
Development Area and for the production of Petroleum in
accordance with the terms of this Contract;
(g)
appoint a technically competent and sufficiently experienced
representative, and, in his absence, a suitably qualified
replacement therefor, who shall be resident in India and who
shall have full authority to take such steps as may be necessary
to implement this Contract and whose names shall, on appointment
within
20
ninety (90) days after commencement of the first
Contract Year, be made known to the Government;
7.4
(h)
provide acceptable working conditions, living accommodation and
access to medical attention and nursing care in the Contract Area
for all personnel employed in Petroleum Operations and extend
these benefits to other persons who are engaged in or assisting
in the conduct of Petroleum Operations in the Contract Area;
(i)
be always mindful of the rights and interests of India
in the conduct of Petroleum Operations;
The infrastructure such as pipelines as may be developed/established by
the Contractor within the country may, to the extent capacity is
available, be available to the Government or any other entity upon
payment of compensation which shall include, but not be limited to,
cost of operation, repair, maintenance, interest and profit. The
Government and any other entity using any of Contractor's facilities
shall indemnify and hold harmless Contractor from and against any and
all loss, damage or injury arising out of or connected with such use.
-----*****----21
ARTICLE 8
GOVERNMENT ASSISTANCE
8.1
Upon application in the prescribed manner, and subject to compliance
with applicable laws and relevant procedures, the Government will
without any cost to itself:
(a)
provide the right of ingress and egress from the Contract Area
and any facilities used in Petroleum Operations, wherever
located, and which may be within their control;
(b)
use their good offices, when necessary, to assist
Contractor in procurement of facilities and services
required for execution of Petroleum Operations
including necessary approvals, permits, consents,
authorisations, visas, work permits, licenses, rights
of way, easement, surface rights and security
protection, required pursuant to this Contract and
which may be available from resources within the
Government's control;
8.2
(c)
use their good offices to assist in identifying and
making available necessary priorities for obtaining
local goods and services;
(d)
in the event that onshore facilities are required
outside the Contract Area for Petroleum Operations
including, but not limited to, storage, loading and
processing facilities, pipelines and offices, use their
good offices in assisting the Contractor to obtain from
the authorities of the state government in the state in
which such facilities are required, such licenses,
permits, authorizations, consents, security protection,
surface rights and easements as are required for the
construction and operation of the said facilities by
the Contractor;
(e)
in the event there is no economical passage other than through
national parks, sanctuaries, mangroves, wetlands of national
importance, biosphere reserves or other biologically sensitive
areas, assist in obtaining the prior written permission of the
concerned authorities.
ONGC shall provide data, if any, related to the Contract Area to the
Contractor which has not been previously provided.
-----*****----22
ARTICLE 9
DISCOVERY, DEVELOPMENT AND PRODUCTION
9.1
9.2
9.3
If and when a New Discovery is made within the Contract
Area, the Contractor shall:
(a)
forthwith inform the Government of the Discovery;
(b)
promptly thereafter, but in no event later than a period of
thirty (30) days from the date of such Discovery, furnish to the
Government particulars, in writing, of the Discovery;
(c)
promptly run tests to determine whether the New
Discovery is of potential commercial interest and,
within a period of sixty (60) days after completion of
such tests and analysis of results, submit a report to
the Management Committee and the Government containing
data obtained from such tests and its analysis and
interpretation thereof, together with a written
notification to the Government of whether, in the
Contractor's opinion, such New Discovery is of
potential commercial interest and merits appraisal.
If, pursuant to Article 9.1(c), the Contractor notifies the Government
that a New Discovery is of potential commercial interest, the
Contractor shall prepare and submit to the Management Committee, within
one hundred and twenty (120) days of such notification, a proposed
Appraisal Programme with a Work Programme and budget to carry out an
adequate and effective appraisal of such New Discovery designed to
achieve both the following objectives:
(a)
determine without delay, and, in any event, within the period
specified in Article 9.5, whether such New Discovery is a
Commercial Discovery; and
(b)
determine, with reasonable precision, the boundaries of
the area to be delineated as a Field.
The proposed Appraisal Programme for a New Discovery shall be
considered by the Management Committee within forty-five (45) days
after submission thereof pursuant to Article 9.2. The Appraisal
Programme, together with the Work Programme and budget submitted by the
Contractor, revised in accordance with any agreed amendments or
additions thereto, approved by the Management Committee, shall be
adopted as the Appraisal Programme and the Contractor shall promptly
commence implementation thereof; and the Yearly budget adopted pursuant
to Article 4, shall be revised accordingly. Where, in the case of an
Existing Discovery, Contractor desires to carry out additional
appraisal work, the Contractor shall submit its proposed Appraisal
Programme in respect of the Existing Discovery with a Work Programme
and
23
budget to the Management Committee for its approval within one hundred
twenty (120) days of the Effective Date.
9.4
The Contractor shall, unless otherwise agreed, in respect of a New
Discovery of Crude Oil, advise the Management Committee, by notice in
writing within a period of twenty-four (24) months from the date on
which the notice provided for in Article 9.1 was delivered, whether
such New Discovery is a Commercial Discovery or not. Such notice shall
be accompanied by a report on the New Discovery setting forth all
relevant technical and economic data as well as all evaluations,
interpretations and analysis of such data and feasibility studies
relating to the New Discovery prepared by or for the Contractor, with
respect to the Discovery. If the Contractor is of the opinion that
Petroleum has been discovered in commercial quantities, it shall
propose that the Government or Management Committee, as the case may
be, declare the New Discovery as a Commercial Discovery based on the
report submitted. In respect of a New Discovery of Gas, the provisions
of Article 21 shall apply.
9.5
The Management Committee shall, within forty-five (45) days of the date
of the notice referred to in Article 9.4, consider the proposal of the
Contractor and request any other additional information it may
reasonably require so as to reach a decision on whether or not to
declare the New Discovery as a Commercial Discovery. Such decision
shall be made within the later of (a) ninety (90) days from the date of
notice referred to in Article 9.4 or (b) ninety (90) days of receipt of
such other information as may be reasonably required under this Article
9.5. In the case of an Existing Discovery, Contractor shall within
ninety (90) days of the Effective Date propose a Development Plan
following the plan brought out in Appendix G, intended to achieve the
production profile brought out in Appendix H, containing the detailed
information required in Article 9.6, with supporting budget. Where a
Development Plan is so agreed it shall be the approved Development Plan
pursuant to Article 9 hereof.
9.6
If a New Discovery is declared commercial the Contractor shall submit
to the Management Committee, a comprehensive plan for the development
of the Commercial Discovery within two hundred (200) days of the
declaration of the Discovery as a Commercial Discovery. Such plan shall
contain detailed proposals by the Contractor for the construction,
establishment and operation of all facilities and services for and
incidental to the recovery, storage and transportation of the Petroleum
from the proposed Development Area to the Delivery Point together with
all data and supporting information including but not limited to:
24
(a)
Description of the nature and characteristics of the Reservoir,
data, statistics, interpretations, and conclusions on all aspects
of the geology, reservoir evaluation, petroleum engineering
factors, reservoir models, estimates of reserves in place,
possible production magnitude, nature and ratio of Petroleum
fluids and analysis of producible Petroleum;
(b)
Outlines of the development project and/or alternative
development projects, if any, describing the production
facilities to be installed and the number of wells to be drilled
under such development project and/or alternative development
projects, if any;
(c)
Estimate of the rate of production to be established
and projection of the possible sustained rate of
production in accordance with generally accepted
international petroleum industry practice under such
development project and/or alternative development
project, if any, which will ensure that the area does
not suffer an excessive rate of decline of production
or an excessive loss of reservoir pressure;
9.7
(d)
estimates of Development Costs and Production Costs under such
development project and/or alternative development projects, if
any;
(e)
Contractor's recommendations as to the particular
project that it would prefer, if any;
(f)
Work Programme and budget for Development and
Production Operations;
(g)
anticipated adverse impact on the environment and measures to be
taken for prevention or minimization thereof and for general
protection of the environment in conduct of operations; and
(h)
production profiles, financial/commercial analysis of
the project proposal.
Any proposed Development Plan submitted by the Contractor pursuant to
Articles 9.5 and/or 9.6 will be approved by the Management Committee
with such amendments and modifications as may be agreed upon by the
Contractor, within seventy-five (75) days of submission of the
Development Plan, which approval shall not be unreasonably withheld. If
such a Development Plan has not been approved by the Management
Committee within the seventy-five (75) day period, the Contractor shall
have the right to submit such plan directly to the Government for
approval, which approval shall not be unreasonably withheld. The
submission will be answered within sixty (60) days of receipt.
25
9.8
The Management Committee shall obtain such approvals from the
Government as may be required, except where this Contract provides that
the Contractor may obtain such approvals directly.
9.9
If the Management Committee fails to declare a New Discovery of Oil to
be commercial while the Contractor consider that it is commercial or
the Management Committee fails to declare the New Discovery as a
Commercial Discovery within the time limit stipulated in Article 9.5
hereof, the Contractor may declare the New Discovery as a Commercial
Discovery and submit development and production plans in respect of the
Discovery to the Management Committee as per the provisions of Article
9.6 and after such plans have been approved by the Management
Committee, the Contractor shall, acting solely,provide the entire
Development Costs and undertake development of the Oil Field. If,
however, the Field turns out to be non-commercial, the entire
Development Cost of the Field shall be borne solely by the Contractor
and shall not be recoverable as Cost Petroleum from any other Field or
Contract Area but shall be recoverable solely from such Field.
9.10
In the event that the Government considers a New Discovery to be
commercial but the Contractor considers the same as non-commercial, the
Government shall give notice to the Contractor to that effect and
thereafter the Field relating to such New Discovery shall be excluded
from the Contract Area for all purposes. In this event, the Contractor
shall have no claim on the production from such Field.
9.11
Work Programmes and budgets for Development and Production Operations
shall be submitted to the Management Committee, as soon as possible
after the designation of a Development Area and thereafter not later
than 31st December each Calendar Year in respect of the Financial Year
immediately following.
9.12
The Management Committee, when considering any Work Programme and
budget, may require the Contractor to prepare an estimate of potential
production to be achieved through the implementation of the programme
and budget for each of the three (3) Financial Years following the
Financial Year to which the Work Programme and budget relate. If major
changes in Financial Year to Financial Year estimates of potential
production are required, these shall be based on concrete evidence
necessitating such changes.
9.13
Not later than the fifteenth (15) day of January each Calendar Year, in
respect of the Financial Year immediately following, the Contractor
shall determine the "Programme Quantity". The Programme Quantity for
any Financial Year shall be the maximum quantity of Petroleum based on
Contractor's estimates, as approved by the Management Committee, which
can be produced from a Field consistent
26
with sound international petroleum industry practices and minimizing
unit production cost, taking into account the capacity of the producing
Wells, gathering lines, separators, storage capacity and other
production facilities available for use during the relevant Financial
Year, as well as the transportation facilities up to the Delivery
Point.
9.14
Proposed revisions to the details of a Development Plan or an annual
Work Programme or budget in respect of Development and Production
Operations shall, for good cause and if the circumstances so justify,
be submitted to the Management Committee for approval, through the
Operating Committee.
-----*****----27
ARTICLE 10
UNIT DEVELOPMENT
10.1
If a Reservoir in a New Discovery Area is situated partly within the
Contract Area and partly in an area in India over which other parties
have a contract or license/lease to conduct Petroleum Operations, the
Government may, for securing the most effective recovery of Petroleum
from such Reservoir, by notice in writing to the Contractor, require
that the Contractor:
(a)
collaborate and agree with such other parties on the
joint development of the Reservoir;
(b)
submit such agreement between the Contractor and such
other parties to the Government for approval; and
(c)
prepare a plan for such joint development of the Reservoir,
within one hundred and eighty (180) days of the approval of the
agreement referred to in (b) above.
10.2
If no plan is submitted within the period specified in Article 10.1(c)
or such longer period as the Contractor and other parties may agree or,
if such plan as submitted is not acceptable to the Government and the
parties cannot agree on amendments to the proposed joint development
plan, the Government may cause to be prepared, at the expense of the
Contractor and the other parties referred to in Article 10.1, a plan
for such joint development consistent with generally accepted practices
in the international petroleum industry which shall take into
consideration any plans and presentations made by the Contractor and
the aforementioned other parties.
10.3
If the Parties are unable to agree on the plan for joint development,
then any of them may refer the matter to a sole expert for final
determination pursuant to Article 33, provided that the Contractor may
in case of any disagreement on the issue of joint development or the
proposed joint development plan, or within sixty (60) days of
determination by a sole expert, notify the Management Committee that it
elects to surrender its rights in the New Discovery Area in lieu of
participation in a joint development.
10.4
If a proposed joint development plan is agreed and adopted by the
parties, or adopted following determination by the sole expert, the
plan as finally adopted shall be the approved joint development plan
and the Contractor shall comply with the terms of the Development Plan
as if the Commercial Discovery is established.
10.5
The provisions of Articles 10.1, 10.2, 10.3 and 10.4 shall apply
MUTATIS MUTANDIS to a New Discovery of a Reservoir located partly
within the Contract Area, which, although not equivalent to a
Commercial Discovery if developed alone,
28
would be a Commercial Discovery if developed together with that part of
the Reservoir which extends outside the Contract Area to areas subject
to contract or given on license/lease for Petroleum Operations by other
parties.
10.6
If a New Discovery is situated partly within the Contract Area and
partly outside the Contract Area, the area outside the Contract Area
over which, at the time of the making of the New Discovery by the
Contractor, no production sharing contract similar to this Contract has
been granted or is under negotiation and/or no license/lease to conduct
petroleum operations has been granted, the Government will favourably
consider the extension of the Contract Area to include the entire area
of the Reservoir if so requested by the Contractor.
-----*****----29
ARTICLE 11
MEASUREMENT OF PETROLEUM
11.1
The volume and quality of Petroleum produced and saved from a Field
shall be measured by methods and appliances generally accepted and
customarily used in generally accepted international petroleum industry
practice.
11.2
The Government may, at all reasonable times, inspect and test the
appliances used for measuring the volume and determining the quality of
Petroleum, provided that any such inspection or testing shall be
carried out in such a manner so as not to unduly interfere with
Petroleum Operations.
11.3
Before commencement of production in a Field, the Parties
shall mutually agree on:
(a)
methods to be employed to optimize the measurement of
volumes of Petroleum;
(b)
the point at which Petroleum shall be measured and the respective
shares allocated to the Parties in accordance with the terms of
this Contract;
(c)
the frequency of inspections and testing of measurement
appliances and relevant procedures relating thereto;
and
(d)
the consequences of a determination of an error in
measurement.
11.4
The Contractor shall undertake to measure the volume and quality of the
Petroleum produced and saved from a Field at the agreed measurement
point consistent with generally accepted practices in the international
petroleum industry. The Contractor shall not make any alteration in the
agreed method or procedures for measurement or to any of the approved
appliances used for the purpose without the written consent of the
Government.
11.5
The Contractor shall give the Government timely notice of its intention
to conduct calibration operations or any agreed alteration for such
operations and the Government shall have the right to be present and
observe, either directly or through authorized representatives, such
operations.
-----*****----30
ARTICLE 12
PROTECTION OF THE ENVIRONMENT
12.1
The Government and the Contractor recognise that Petroleum Operations
will cause some impact on the environment in the Contract Area.
Accordingly, in performance of the Contract, the Contractor shall
conduct its Petroleum Operations with due regard to concerns with
respect to protection of the environment and conservation of natural
resources. In the furtherance of any laws, regulations and rules
promulgated by the Government, the Contractor shall:
(a)
employ generally accepted industrial standards, including as
required, advanced techniques, practices and methods of operation
for the prevention of Environmental Damage in conducting its
Petroleum
Operations;
(b)
take necessary and adequate steps to prevent Environmental Damage
and, where some adverse impact on the environment is unavoidable,
to minimize such damage and the consequential effects thereof on
property and people; and
(c)
adhere to the guidelines, limitations or restrictions, if any,
imposed by Environmental Clearance as applicable on the Effective
Date and as such Environmental Clearance may be revised, expanded
or replaced as a result of Contractor's application(s) duly
submitted after the Effective Date.
12.2
If the Contractor fails to substantially comply with the provisions of
Article 12.1 or materially contravenes any relevant law, and such
failure or contravention results in substantial Environmental Damage,
the Contractor shall forthwith take all necessary and reasonable
measures to remedy the failure and the effects thereof.
12.3
If the Government has, on reasonable grounds, reason to believe that
any works or installations erected by the Contractor or any operations
conducted by the Contractor are endangering or may endanger persons or
any property of any person, or are causing avoidable pollution, or are
harming fauna and flora or the environment to a degree which is
unlawful, the Government may, pursuant to applicable law, require the
Contractor to take remedial measures within such reasonable period as
may be determined by the Government and, if appropriate, repair such
damage. The Government may, pursuant to applicable law, require the
Contractor to discontinue Petroleum Operations in whole or in part
until the Contractor has taken such action.
12.4
The Contractor shall, within one hundred twenty (120) days of the
Effective Date, cause a person or persons with special knowledge on
environmental matters, approved by the
31
Government, to carry out an environmental impact study in order:
12.5
(a)
to determine, at the time of the study, the prevailing situation
relating to the environment, human beings and local communities,
the wildlife and marine life in the Contract Area and in the
adjoining or neighbouring areas; and
(b)
to establish the likely effect on the environment, human beings
and local communities, the wildlife and marine life in the
Contract Area and in the adjoining or neighbouring areas in
consequence of the relevant phase of Petroleum Operations to be
conducted under this Contract.
The Contractor shall ensure that:
(a)
Petroleum Operations are conducted in an environmentally
acceptable and safe manner consistent with good international
petroleum industry practice and that such Petroleum Operations
are properly monitored;
(b)
the pertinent completed environmental impact studies are made
available to its employees and to its Subcontractors to develop
adequate and proper awareness of the measures and methods of
environmental protection to be used in carrying out the Petroleum
Operations; and
(c)
12.6
the contracts entered into between the Contractor and its
Subcontractors relating to its Petroleum Operations shall include
the provisions stipulated herein and any established measures and
methods for the implementation of the Contractor's obligations in
relation to the environment under this Contract.
The Contractor shall, prior to conducting any drilling activities,
prepare and submit for review by the Government contingency plans for
dealing with oil spills, fires, accidents and emergencies, designed to
achieve rapid and effective emergency response. The plans referred to
above shall be discussed with the Government and concerns expressed
shall be taken into account.
12.6.1
In the event of an emergency, accident, oil spill or fire
arising from Petroleum Operations affecting the
environment, the Contractor shall forthwith notify the
Government and shall promptly implement the relevant
contingency plan and perform such Site Restoration as may
be necessary.
12.6.2
In the event of any other emergency or accident
arising from the Petroleum Operations affecting
32
the environment, the Contractor shall take such action as
may be prudent and necessary in accordance with good
international petroleum industry practice in such
circumstances.
12.7
In the event that the Contractor fails to take necessary action to
comply with any of the terms contained in Article 12.5 and Article 12.6
within a reasonable period specified by the Government, the Government,
after giving the Contractor reasonable notice in the circumstances, may
take any action which may be necessary to ensure compliance with such
terms and recover from the Contractor, immediately after having taken
such action, all costs and expenditures incurred in connection with
such action together with such interest as may be determined in
accordance with Section 1.7 of Appendix C of this Contract.
12.8
Contractor shall notify the Government upon determination by it that
the estimated remaining recoverable reserves of any Field net of
operating costs equal two and one-half (2 1/2) times the estimated
abandonment cost whereupon the Government shall, within sixty (60)
days, take control of the Field and the abandonment obligation or,
failing which, the Contractor may then proceed to recover the
abandonment cost from the remaining production and abandon such Field.
12.9
Any and all costs incurred by Contractor pursuant to this Article shall
be cost recoverable including, but not limited to, sinking funds
established for abandonment.
12.10
The responsibility of the Contractor for the environment hereunder
shall be limited to damage to the environment which:
(a)
occurs after the date of the environmental impact
assessment ("EIA") made to establish the benchmark
condition. The EIA will be conducted as soon after the
Effective Date as is reasonably possible;
(b)
results from an act or omission of Contractor in
violation of existing law; and
(c)
notwithstanding the above, Contractor shall be responsible for
any damage to the environment because of any evidence of Oil
spill, blow-out, fire, etc., during the course of Joint
Operations from the Effective Date.
-----*****----33
ARTICLE 13
RECOVERY OF COSTS
13.1
The Contractor shall be entitled to recover Contract Costs out of the
total volume of Petroleum produced and saved from the Contract Area in
each Financial Year in accordance with the provisions of this Article,
and, in respect of sole risk or exclusive operations, Article VII of
the Operating Agreement.
13.1.1
Development Costs incurred by the Contractor in the
Contract Area shall be aggregated, and the Contractor shall
be entitled to recover out of Cost Petroleum the aggregate
of such Development Costs at the rate of one hundred
percent (100%) per annum, provided, however, that, subject
to the remaining provisions of this Article 13.1, the
Contractor shall not, for the purposes only of determining
the volume of Petroleum to which Contractor shall be
entitled under Article 13.1 as Cost Petroleum, claim as
Contract Costs Contractor's Development Costs incurred
after the Effective Date in connection with Development
Operations under the Development Plan for midand
south-Tapti Fields (as those Fields are determined in the
Development Plan first approved by the Management
Committee) which exceed Contractor's Cost Recovery Limit
(as hereinafter defined).
13.1.2
For the purposes of this Article 13.1,
Contractor's "Cost Recovery Limit" means costs
incurred after the Effective Date relating to the
construction and/or establishment of such
facilities as are necessary to produce, process,
store and transport Petroleum from within the
Existing Discoveries, in order to enable Gas
production of 4.2 million cubic metres per day in
accordance with the Development Plan for the midand south-Tapti Fields. Such costs shall include
costs incurred in relation to those items
illustrated in Appendix "G", including the 30
additional infill wells, and matters in
connection therewith. Appendix G further
describes Companies' development concept based on
an assumed project start date of July 1, 1993,
and Parties understand and agree that the
schedules and activities contained in such
assessment shall be revised, subject to
Management Committee approval, by the Contractor
in Contractor's Development Plan first submitted
pursuant to this Contract.
The Parties agree that for the purposes of this Article
13.1 the Contractor's Cost Recovery Limit shall be the sum
of Five Hundred Forty-five Million U.S. Dollars
(US$545,000,000).
34
13.1.3
The Parties acknowledge that the amount representing
Contractor's Cost Recovery Limit has been agreed by
Contractor on the basis of the following assumptions and/or
factors and/or
information:
(a) Included in calculations for the Cost Recovery Limit
are costs relating to Gas compression offshore
required for delivering Gas into GAIL's pipeline
system and an onshore pig trap; excluded from the Cost
Recovery Limit are Site Restoration and exploration or
appraisal drilling;
(b) the Cost Recovery Limit does not include any costs for
the development of any satellite Fields;
(c) the Contractor being able to obtain all necessary
approvals (including Government and state government
approvals) to enable Contractor to carry out the
Development Operations contemplated by the Development
Plan for the mid- and south-Tapti Fields in accordance
with the timing set out in such plan;
(d) the data relating to the Contract Area provided by
ONGC from time to time prior to the Effective Date
inclusive of the data package pertaining to the
Contract Area prepared by ONGC and made available for
inspection and purchase by the Companies pursuant to
the Government's "Notice Inviting Offers for Joint
Ventures to Develop Medium- Sized Oil and Gas Field in
India, 1992";
(e) international market conditions relating to the
availability and cost of materials and services in the
international petroleum industry in constant 1993
United States Dollars;
(f) the range of physical reservoir characteristics in
respect of the Oil and Gas Fields comprising the
Existing Discoveries not being materially different
from the ranges for such characteristics as revealed
in the data referred to in Article 13.1.3(d)on which
Companies based their assessment as described in Annex
G-1 to Appendix G; and
35
(g) Companies' development concept contemplated use of
existing ONGC-owned facilities for reseparation and
handling of Condensate and Gas upon it's arrival at
Hazira. ONGC and Companies will determine payment,
terms and conditions for the use of processing and
treating facilities owned by ONGC, which payment shall
be based on the principles detailed in Appendix I, or
alternatively the Contractor install the necessary
facilities, the cost of which shall be cost
recoverable and not subject to the Cost Recovery
Limit.
13.1.4
Having regard, inter alia, to the matters referred to in
Article 13.1.3, the Parties agree as follows:
(a) Included in calculations for the Cost Recovery Limit
are costs relating to Gas compression offshore
required for delivering Gas into GAIL's pipeline
system and an onshore pig trap; excluded from the Cost
Recovery Limit are Site Restoration and exploration or
appraisal drilling;
(b) the costs of developing the reserves and/or potential
reserves and/or satellite Fields referred to in
Article 13.1.3(b) shall not be subject to the Cost
Recovery Limit, notwithstanding that the development,
within the Contract Area, of such reserves and/or
potential reserves and/or satellite Fields may include
shared flowlines, injection lines, Gas-lift lines and
other facilities with those constructed as part of the
Development Plan for the mid- and south-Tapti Fields;
(c) in the event that the Contractor's Cost Recovery Limit
is exceeded as a result of:
(i)
(ii)
delays in carrying out the Development
Operations referred to in Article 13.1.3(c)
due to a delay in obtaining any necessary
approval;
material changes to the Development Plan for
the mid- and south-Tapti Fields necessitated
by Contractor's review of data provided, if
any, to the Companies by the Government
and/or ONGC after the Effective Date
36
available prior to the Effective Date then
the Companies, acting reasonably, would have
included such changes in the Development
Plan for the mid- and south-Tapti Fields;
(iii)
(iv)
(v)
a material change to the international
market conditions referred to in Article
13.1.3(e);
a variation to the Development Plan for the
mid- and south-Tapti Fields approved by the
Management Committee; or
an event of force majeure as provided in
Article 31;
then the Management Committee shall, at the request of
the Operator, in a meeting convened under Article 5.8,
promptly consider what, if any, increase should be
made to the Contractor's Cost Recovery Limit to fairly
reflect the circumstances in question PROVIDED THAT in
the case of delays referred to in Article 13.1.3(c)
the Management Committee shall not be obligated to
consider any increase where, and to the extent that,
such delay has been caused by the Companies' failure
to act in a diligent manner.
13.1.5
In the event that:
(a) there is any dispute between the Parties whether or to
what extent a circumstance referred to in Article
13.1.4(c) has arisen or resulted in the Contractor's
Cost Recovery Limit being exceeded; or
(b) the Management Committee is unable to agree whether an
increase should be made to the Contractor's Cost
Recovery Limit or is unable to agree on the amount of
any such increase;
then, at any time after thirty (30) days from the date of
the Management Committee meeting referred to in Article
13.1.4(c), any Party shall be at liberty to refer the
matter to arbitration in accordance with the provisions of
Article 33.
13.1.6
Costs incurred by the Companies prior to the Effective Date
hereof which have been approved by the Government, in
writing, shall be cost recoverable for purposes hereof
after approval of the Management Committee.
37
13.2
Exploration Costs (if any) incurred by the Contractor in respect of the
Contract Area up to the date of Commercial Production of Petroleum from
the Contract Area shall be aggregated, and the Contractor shall be
entitled to recover the aggregate of such Exploration Costs out of the
Cost Petroleum from the Contract Area at the rate of one hundred
percent (100%) per annum of such Exploration Costs beginning from the
date of such Commercial Production.
13.3
The Contractor shall be entitled to recover out of the Cost Petroleum
from the Contract Area the Exploration Costs which it has incurred in
that Contract Area in any Financial Year after the date of Commercial
Production from the Contract Area at the rate of one hundred percent
(100%) per annum of such Exploration Costs beginning from the date such
Exploration Costs are incurred.
13.4
The Contractor shall be entitled to recover Exploration Costs as
provided in Articles 13.2 and 13.3 in relation to the values of the
quantity of Petroleum produced, saved and sold from the Contract Area,
in the relevant year, provided that such Exploration Costs once
recovered shall not be allowable for recovery against any other
contract area.
13.5
Development Costs incurred by the Contractor in the Contract Area up to
the date of Commercial Production from the Contract Area shall be
aggregated, and the Contractor shall be entitled to recover out of the
Cost Petroleum from that Contract Area the aggregate of such
Development Costs at the rate of one hundred percent (100%) per annum
of such Development Costs beginning from the date of such Commercial
Production from the Contract Area.
13.6
The Contractor shall be entitled to recover out of the Cost Petroleum
produced from the Contract Area the Development Costs which it has
incurred on such Contract Area after the date of Commercial Production
from the Contract Area at the rate of one hundred percent (100%) per
annum of such Development Costs beginning from the date such
Development Costs are incurred.
13.7
The Contractor shall be entitled to recover in full during any
Financial Year the Production Costs incurred in the Contract Area out
of the Cost Petroleum.
13.8
If during any Financial Year the Cost Petroleum is not sufficient to
enable the Contractor to recover in full the Contract Costs due for
recovery in that Financial Year in accordance with the provisions of
Articles 13.1 through 13.7, then, subject to the provisions of Article
13.1:
a)
recovery shall first be made of the Production Costs; and
38
b)
recovery shall next be made of the Exploration Costs; and
c)
recovery shall then be made of the Development Costs.
The unrecovered portions of Contract Costs shall be carried forward to
the following Financial Year and the Contractor shall be entitled to
recover such Costs in such Financial Year or the subsequent Financial
Years as if such costs were due for recovery in that Financial Year, or
the succeeding Financial Years, until the unrecovered costs have been
fully recovered out of Cost Petroleum from the Contract Area.
13.9
For the purposes of this Article, as well as Article 14, costs,
receipts and income shall be converted into production unit
equivalents, and vice versa, using the relevant prices established
pursuant to Article 19 for Crude Oil and Article 21 for Natural Gas.
13.10
Pending completion of the calculations required to establish
definitively the Contractor's entitlement to Cost Petroleum from the
Contract Area in any Financial Year, the Contractor shall take
delivery, provisionally, of volumes of Crude Oil and/or Natural Gas
representing its estimated Cost Petroleum entitlement calculated with
reference to estimated production quantities, costs and prices for the
Contract Area as established by the Contractor and approved by the
Management Committee. Such provisional determination of Cost Petroleum
shall be made every quarter on a cumulative basis. Within sixty days of
the end of each Financial Year, a final calculation of the Contractor's
entitlement to Cost Petroleum, based on actual production quantities,
costs and prices for the entire Financial Year, shall be undertaken and
any necessary adjustments to the Cost Petroleum entitlement shall be
agreed upon between the Government and the Contractor and made as soon
as practicable thereafter.
13.11
Nothing herein contained shall provide for the recovery of costs by
ONGC which were incurred prior to the Effective Date.
-----*****----39
ARTICLE 14
PRODUCTION SHARING OF PETROLEUM BETWEEN
CONTRACTOR AND GOVERNMENT
14.1
The Contractor and the Government shall share in the Profit Petroleum
from the Contract Area in accordance with the provisions of this
Article. The share of Profit Petroleum, in any Financial Year, shall be
calculated for the Contract Area on the basis of the Investment
Multiple actually achieved by the Companies at the end of the preceding
Financial Year for the Contract Area as provided in Appendix D.
14.2
Profit Petroleum
14.2.1
When the Investment Multiple of the Companies at the end of
any Financial Year is less than two (2.0), the Government
shall be entitled to take and receive twenty percent (20%)
and the Contractor shall be entitled to take and receive
eighty percent (80%) of the total Profit Petroleum from the
Contract Area with effect from the start of the succeeding
Financial Year.
14.2.2
When the Investment Multiple of the Companies at the end of
any Financial Year in respect of any Contract Area is equal
to or more than two (2.0) but is less than two and one-half
(2.5), the Government shall be entitled to take and receive
forty percent (40%) and the Contractor shall be entitled to
take and receive sixty percent (60%) of the total Profit
Petroleum from the Contract Area with effect from the start
of the succeeding Financial Year.
14.2.3
When the Investment Multiple of the Companies at the end of
any Financial Year in respect of the Contract Area is equal
to or more than two and one-half (2.5) but is less than
three and one- half (3.5), the Government shall be entitled
to take and receive forty-five percent (45%) and the
Contractor shall be entitled to take and receive fifty-five
percent (55%) of the total Profit Petroleum from the
Contract Area with effect from the start of the succeeding
Financial Year.
14.2.4
When the Investment Multiple of the Companies at the end of
any Financial Year in respect of the Contract Area is equal
to or more than three and one-half (3.5), the Government
shall be entitled to take and receive fifty percent (50%)
and the Contractor shall be entitled to take and receive
fifty percent (50%) of the total Profit Petroleum from the
Contract Area with effect from the start of the succeeding
Financial Year.
40
14.3
The value of the Companies' Investment Multiple at the end of any
Financial Year in respect of the Contract Area shall be calculated in
the manner provided for, and on the basis of net cash flows specified,
in Appendix D to this Contract. However, the volume of Profit Petroleum
to be shared between the Government and the Contractor shall be
determined for each quarter on a cumulative basis. Pending finalization
of accounts, delivery of Profit Petroleum shall be taken by the
Government and the Contractor on the basis of provisional estimated
figures of Contract Costs, production, prices, receipts, income and any
other income or allowable deductions and on the basis of the value of
the Investment Multiple achieved at the end of the preceding Financial
Year. All such provisional estimates shall be approved by the
Management Committee. When it is necessary to convert monetary units
into physical units of production equivalents or vice versa, the price
or prices determined pursuant to Articles 19 and 21 for Crude Oil and
Natural Gas, respectively, shall be used. Within sixty (60) days of the
end of each Financial Year, a final calculation of Profit Petroleum
based on actual costs, quantities, prices and income for the entire
Financial Year shall be undertaken and any necessary adjustments to the
sharing of Profit Petroleum shall be agreed upon between the Government
and the Contractor and made as soon as is practicable thereafter.
14.4
The Profit Petroleum due to the Contractor in any Financial Year from
the Contract Area shall be divided between the Parties constituting the
Contractor in proportion to their respective Participating Interests.
-----*****-----
41
ARTICLE 15
TAXES, ROYALTIES, RENTALS, ETC.
15.1
The Companies and the operations under this Contract shall be subject
to all fiscal legislation of India, except where, pursuant to any
authority granted under any applicable law, they are exempt wholly or
partly from the application of the provisions of a particular law or as
otherwise provided herein.
15.2.1
15.4
15.5
For the purpose of computing profits or gains of the
business consisting of the prospecting for or extraction or
production of Petroleum, there shall be made in lieu of the
allowances admissible under the Income Tax Act, 1961, such
allowances as are specified in this Agreement pursuant to
Section 42 in relation to:
(a)
expenditure by way of infructuous or abortive
exploration expenses in respect of any area
surrendered prior to the beginning of Commercial
Production; and
(b)
after the beginning of commercial production, to
expenditure incurred, whether before or after such
Commercial Production, in respect of drilling or
exploration activities or services or in respect of
physical assets used in that connection.
15.2.2
Payments made by the Companies pursuant to Article 16 shall
be deductible for income tax purpose in the year in which
payment is made by the Companies, as permissible under
Section 42 of the Income Tax Act, 1961.
15.3.1
In respect of matters not covered above, deduction shall be
allowed in accordance with other provisions of Income Tax
Act, 1961, and the rules framed thereunder.
15.3.2
The revenue from the Business consisting of Petroleum
Operations shall be determined in accordance with Article
19 for its Participating Interest share of Crude Oil saved
and sold, or otherwise disposed of, from each Field and
from any revenue realized on the sale of ANG or NANG
referred to in Article 21 as well as any other gains or
receipts from Petroleum Operations as reduced by the
deductions as specified within this Article, and, except as
herein provided, all the provisions of the Income Tax Act,
1961, shall apply. 42
The following terms used in Section 42 of the Income Tax Act, 1961, and
Articles 15.2 and 15.3 shall have the meanings corresponding to the
terms used in this Contract and defined in Article 1 as follows:
(a)
"Previous Year" means the year as defined in Section 2(34) of the
Income Tax Act, 1961.
(b)
The other terms used herein and not defined in the Income Tax,
1961 shall have the meaning therein ascribed in Article 1.
Except for income tax as otherwise provided in this Article, the
Government covenants to the Companies that the Companies shall not be
liable for payment of:
(a)
any taxes calculated by reference to income from or
sale of Petroleum; or
(b)
any customs or excise duties, export duties or any other
statutory charge on the import or re-export of machinery, plant,
equipment, materials or supplies imported by or on behalf of
Contractor or its subcontractors solely and exclusively for use
in Petroleum Operations.
Any such payments, if the Companies are made liable shall be
reimbursed by the Government.
15.6.1
The constituents of the Contractor shall be liable to pay
royalties and cess on their Participating Interest share of
Crude Oil and Natural Gas saved and sold in accordance with
the provisions of this Agreement. The royalty on Oil saved
and sold will be paid at Rs. 481 per metric ton and cess on
Oil saved and sold will be paid at Rs. 900 per metric ton.
Royalty on Gas saved and sold will be paid at ten percent
(10%) of the value at wellhead. No cess shall be payable in
respect of Gas. Royalty and cess shall not exceed the
herein above amounts throughout the term of the Contract.
Royalty and cess shall be payable in Indian Rupees. Any
such additional payment shall be made by the Government.
15.6.2
All payments (except income tax) made by Contractor or its
constituents as applicable under appropriate law including,
but not limited to, taxes whether levied by the Central
Government or state government, or any other local or
statutory authority, royalties, cess, levies, duties,
rentals, lease rent, license fees, export duties,
43
countervailing duties, provision for sinking fund for
environmental or abandonment costs, or any other charges
whatsoever, directly attributable to Petroleum Operations.
15.8
If any change in or to any Indian law, rule or regulation by any
authority results in a material change to the economic benefits
accruing to any of the Parties to this Contract after the Effective
Date, the Parties shall consult promptly to make necessary revisions
and adjustments to the Contract in order to maintain such expected
benefits to each of the Parties.
-----*****----44
ARTICLE 16
PAYMENT
16.1
The Companies shall pay to ONGC in consideration of the right to
commence and carry out exploration and drilling activities in the
Contract Area, pursuant to and in accordance with the Notice Inviting
Offers for Joint Ventures to Develop Medium Sized Oil and Gas Fields in
India-1992 and the bid submitted in response thereto, as follows:
(a)
within two (2) days following the Effective Date,
excluding days on which the banks in India or the
United States are closed, Twenty-one Million United
States Dollars (US$21,000,000). EOGIL shall pay Ten
Million Five Hundred Thousand United States Dollars
(US$10,500,000) and RIL shall pay Ten Million Five
Hundred Thousand United States Dollars (US$10,500,000).
ONGC's bank wire transfer instructions are as follows:
ACCOUNT NUMBER: 01 00000 3054
OIL & NATURAL GAS CORPORATION LIMITED
STATE BANK OF INDIA, OVERSEAS BRANCH
VIJAYA BUILDING,
BARAKHAMBA ROAD,
NEW DELHI, INDIA 110 001
(b)
When and if the hereinafter set forth production quantities are
reached, the Companies will within fifteen (15) days following
such attainment pay ONGC in accordance with the following
schedule:
(i)
Another Six Million United States Dollars
(US$6,000,000) after achieving a cumulative
production of five billion cubic meters of
Gas;
(ii)
Another Nine Million United States Dollars
(US$9,000,000) after achieving a cumulative
production of ten billion cubic meters of
Gas; and
(iii)
Another Fifteen Million United States Dollars
(US$15,000,000) after achieving a cumulative
production of fifteen billion cubic meters of Gas.
16.2
Cumulative production shall, for purposes of this Article,
mean Gas produced, saved and sold.
16.3
Each Company shall pay its share of the payment in the
proportion that it received Petroleum.
-----*****----45
ARTICLE 17
CUSTOMS DUTIES
17.1
Machinery, plant, equipment, materials and supplies imported by a
Contractor or its Subcontractors for use in Petroleum Operations shall
be exempted from customs duties subject to compliance with procedures,
if any, as may be determined pursuant to applicable customs duty
legislation, Article 23 and the terms herein specified.
17.2
Contractor shall, from time to time and as required, submit to the
Government a list of Subcontractors who are engaged by it for the
purpose of obtaining the various categories of items pursuant to the
conduct of Petroleum Operations and who may claim exemptions hereunder.
17.3
In order to qualify for the exemption from customs duties as provided
for in Article 17.1, all imported items for which duty exemption is
being claimed shall be certified, by a representative of the
Contractor, to be imported under the terms of this Contract for use in
carrying out Petroleum Operations and shall be certified by a
representative of the Government to be eligible for such exemption
pursuant to the terms of the Contract. In order to expedite such
exemption, Contractor may submit a certified list of qualified items up
to sixty (60) days in advance of anticipated import.
17.4
The Government shall have the right to inspect the records and
documents of the physical item or items for which an exemption is or
has been provided under Article 17.1 to determine that such item or
items are being or have been imported for the purpose for which the
exemption was granted. The Government shall also be entitled to inspect
such physical items wherever located to ensure that such items are
being used or held for the purpose herein specified and any item not
being so used shall immediately become subject to payment of the
applicable customs duties.
17.5
Subject to Article 27, the Contractor and its Subcontractors may sell
or otherwise transfer in India or sell for export all imported items
which are no longer required for Petroleum Operations, subject to
applicable laws governing customs duties and sale or disposal of such
items.
-----*****----46
ARTICLE 18
DOMESTIC SUPPLY, SALE, DISPOSAL AND
EXPORT OF CRUDE OIL
18.1
Until such time as the total availability to the Government and
government companies of Crude Oil from all Petroleum production
activities in India meets the total national demand, as determined by
the Government, each constituent of Contractor shall be required to
offer to the Government or its nominee all of the Contractor's
entitlement to Crude Oil from each Field in order to assist in
satisfying the national demand, provided, however, that nothing
contained in any contract entered into by the Contractor for the
supply, sale or disposal of Petroleum, with any nominee of the
Government pursuant to this Contract shall in any manner abrogate the
obligation of the Government contained herein.
18.2
Pursuant to Article 18.1 and subject to Articles 18.4 and 18.6, each
constituent of Contractor shall offer to sell to the Government (or its
nominee) its total Participating Interest share of Crude Oil to which
it is entitled under Articles 13 and 14 at the price determined in
accordance with Article 19 for sales to Government and the Government
shall have the option to purchase the whole or any portion thereof at
the said price.
18.3
The aforementioned offer shall be made by each constituent of
Contractor, in writing, at least six (6) months preceding the Financial
Year in which the sale is to be made, specifying the estimated
quantities and grade of Crude Oil being offered (based upon estimates
which shall be adjusted within ninety (90) days of the end of each
Financial Year on the basis of actual quantities produced and saved).
The Government shall exercise its option to purchase, in writing, not
later than ninety days (90) preceding the Financial Year in respect of
which the sale is to be made, specifying the quantity and grade of
Crude Oil which it elects to take in the ensuing year. Failure by the
Government to give such notice within the period specified shall be
conclusively deemed an election to take all of the Crude Oil offered
(adjusted as provided herein) in the ensuing Financial Year.
18.4
If, during any Financial Year, India attains Self-Sufficiency, the
Government shall promptly thereafter, but in no event later than the
end of that Financial Year, so advise the Contractor by written notice.
In such event, as from the end of the first quarter of the following
Financial Year, or such earlier date as the Parties may mutually agree,
Government's option to purchase shall be suspended and each constituent
of Contractor shall have the right to lift and export its Participating
Interest share of Crude Oil until such time, if any, as
Self-Sufficiency shall have ceased to exist. If Self-Sufficiency ceases
to exist during a Financial Year, the Government shall recover its
47
option to purchase under Article 18.2 in respect of the following
Financial Year by giving notice thereof to the Contractor as provided
in Article 18.3.
18.5
All payments in respect of sales to the Government pursuant to
provisions of this Article 18 shall be made by the Government within
the period for credit applicable in the calculation of the price
pursuant to Article 19. If no time frame for credit is applicable in
such calculation, payment shall be made within forty five (45) days
from the date the invoice is delivered to the Government. Contractor
shall submit a monthly invoice to the Government for the quantity of
Crude Oil delivered. Payment shall be made in United States Dollars by
bank wire to the credit of the Foreign Company's designated account
with a bank within or outside India. All amounts unpaid by the
Government by the due date shall, from the due date, bear interest
calculated on a day-to-day basis at the LIBOR plus one percentage (1%)
point from the due date compounded daily until paid.
18.6
If full payment is not received by Contractor when due as provided in
Article 18.5, the Contractor shall, at any time thereafter, notify the
Government of the default and, unless such default is remedied within
fifteen (15) days from the date of the notice, the Contractor shall
have the right, unless otherwise agreed, upon written notice to the
Government and without prejudice to the Contractor's right to recover
all costs, charges, expenses and losses, incurred by the Contractor:
a)
to suspend the Government's option to purchase under
Article 18.2 and transport the Petroleum to any onshore
facility and sell as each constituent of Contractor may
in its absolute discretion deem fit;
b)
without prejudice to the foregoing, to freely lift, sell and
export all its Participating Interest share of Crude Oil subject
to the destination restrictions specified in Article 18.7, until
the Government has paid the due amount plus interest as provided
herein;
c)
if the payment plus interest is not received by the
Contractor within one hundred and eighty (180) days
from the date the payment was due, to receive and
export the Government's share of Profit Oil until such
time as either Government has paid all amounts due plus
interest, or the value, based on the price as determined in accordance with Article 19, of Government's
share of Profit Oil so sold is equal to all amounts due
plus interest, whichever first occurs; provided,
however, that if the Government makes a payment to the
Contractor after the Contractor has commenced sale of
Government's share of Profit Oil and such payment
together with the value of Government's share of Profit
Oil sold (based on the price determined in accordance
48
with Article 19) exceeds the amount due plus interest, necessary
adjustment shall be carried out to refund to the Government
forthwith the excess amount received by the Contractor.
18.7
The Contractor shall be entitled to freely lift, sell and export any
Crude Oil which the Government is unable to take or has elected not to
purchase pursuant to this Article 18 subject to Government's generally
applicable destination restrictions to countries with which the
Government, for policy reasons, has severed or restricted trade.
18.8
No later than sixty (60) days prior to the commencement of production
in a Field (or Fields where production is from more than one Field),
and thereafter no less than sixty (60) days before the commencement of
each Financial Year, the Contractor shall cause to be prepared and
submitted to the Parties a production forecast setting out the total
quantity of Crude Oil that it estimates can be produced from a Field
during the succeeding year, based on the maximum efficient rate of
recovery of Crude Oil from that Field in accordance with good petroleum
industry practice. No later than thirty (30) days prior to the
commencement of each Calendar Quarter, the Contractor shall advise its
estimate of production for the succeeding Calendar Quarter and shall
endeavour to produce the forecast quantity for each Calendar Quarter.
18.9
Each Party comprising the Contractor shall, throughout the term of this
Contract, have the right to separately take in kind and dispose of all
its share of Cost Petroleum and Profit Petroleum and shall have the
obligation to lift the Cost Petroleum and Profit Petroleum on a current
basis and in such quantities so as not to cause a restriction of
production or inconvenience to the other Parties.
18.10
The Government shall, throughout the term of this Contract, have the
right to separately take in kind and dispose of its share of Profit
Petroleum and of such portion of the Contractor's share of Petroleum as
is purchased by the Government pursuant to Article 18, subject to
Article 18.6 and shall have the obligation to lift all of the Oil on a
current basis and in such quantities so as not to cause a restriction
of production or inconvenience to the other Parties.
18.11
For the purpose of implementing the provisions of Articles 18.9 and
18.10, a Crude Oil lifting procedure shall be agreed upon by the
Parties as soon as practicable but no later than two (2) months after
the Effective Date of this Contract. Such lifting procedure shall
include, but not necessarily be limited to:
49
(a)
a procedure for notification by the Operator to the
Government, and to each Party comprising the
Contractor, of projected Crude Oil production;
(b)
a procedure for notification by the Government, and by each Party
comprising the Contractor, to the Operator, of its expected
offtake and the consequences of inability or failure to offtake.
-----*****----50
ARTICLE 19
VALUATION OF OIL
19.1
For the purpose of this Contract, the value of Crude Oil shall be based
on the price determined as provided herein.
19.2
A price for Crude Oil shall be determined for each Calendar Month or
such other period as the Parties may agree (hereinafter referred to as
"the Delivery Period") in terms of United States Dollars per Barrel,
FOB Delivery Point for Crude Oil produced and sold or otherwise
disposed of from each Contract Area, for each Delivery Period, in
accordance with the appropriate basis for that type of sale or disposal
specified below.
19.3
In the event that some or all of Contractor's total sales of Crude Oil
during a Delivery Period are made to third parties in Arms Length
Sales, all sales so made shall be valued at the weighted average of the
prices actually received by Contractor, calculated by dividing the
total receipts from all such sales FOB the Delivery Point by the total
number of Barrels of the Crude Oil sold in such sales.
19.4
19.3.1
In the event that a portion of such third party
Arms Length Sales are made on a basis other than
an FOB basis as herein specified, the portion
shall be valued at the prices equivalent to the
prices FOB the Delivery point for such sales
determined by deducting all costs (such as
transportation, demurrage, loss of Crude Oil in
transit and similar costs) incurred downstream of
the Delivery Point, and the prices so determined
shall be deemed to be the actual prices received
for the purpose of calculation of the weighted
average of the prices for all third party Arms
Length Sales for the Delivery Period.
19.3.2
Each constituent of Contractor shall separately
submit to the Government, within fifteen (15)
days of the end of each Delivery Period, a report
containing the actual prices obtained in their
respective Arms Length Sales to third parties of
any Crude Oil. Such reports shall distinguish
between term sales and spot sales and itemize
volumes, customers, prices received and credit
terms, and the constituent of the Contractor
shall allow the Government to examine the
relevant sales contracts.
In the event that some or all of a constituent of Contractor's total
sales of Crude Oil during a Calendar Month are made to the Government,
the price of all sales so made shall, unless otherwise agreed between
the Parties, be determined on the basis of either the FOB selling price
per Barrel of one or more crude oils which, at the time of
51
calculation, are being freely and actively traded in the international
market and are similar in characteristics and quality to the Crude Oil
and/or Condensate in respect of which the price is being determined,
such FOB selling price to be ascertained from Platt's Crude Oil Market
Wire daily publication ("Platt's"), or the spot market for the same
crude oils ascertained in the same manner, whichever price, in the
opinion of the Parties, more truly reflects the current value of such
crude oils. For any Calendar Month in which sales take place, the price
shall be the arithmetic average price per Barrel determined by
calculating the average for the preceding Calendar Month of the mean of
the high and low FOB or spot prices for each day of the crude oil(s)
selected for comparison adjusted for differences in the Crude Oil and
the crude oil(s) being compared for quality, transportation costs,
delivery time, quantity, payment terms, the market area into which the
Crude Oil is being sold, other contract terms to the extent known and
other relevant factors. In the event that Platt's ceases to be
published or is not published for a period of thirty (30) consecutive
days, the Parties shall agree on an alternative daily publication.
19.4.1
Notwithstanding anything herein otherwise provided, the
price paid for such sales shall be, in any Calendar
Month,the FOB selling price for a Marker Crude ("Marker
Crude") which shall be Brent (DTD) on a United States
Dollar per Barrel basis less US$0.10 per Barrel.
19.5
19.4.2
The Marker Crude price will be based on the
previous Calendar Month's average of the daily
low and high quotations of Marker Crude as
published by Platts' Market wire. The average is
to be calculated up to three (3) decimals to
arrive at a United States Dollar per Barrel
price, which will be applicable for the month of
supply.
19.4.3
The Government and/or its nominee shall pay any
and all sales tax payable on the sale of Oil to
the Government or its nominee.
19.4.4
The Government and/or its nominee shall enter into a Crude
Oil sales agreement with the Constituents of the Contractor
which shall contain terms and conditions normally contained
in international Crude Oil sales agreements of a similar
nature.
In the event that in any Delivery Period some but not all of a
constituent of Contractor's sales of Crude Oil from the Contract Area
are made to the Government or a Government company and some but not all
of a constituent of Contractor's sales of Crude Oil from the Contract
Area are
52
made to third parties in Arms Length Sales and the price as established
in accordance with Article 19.4 differs by more than one percent (1%)
from the price as determined in accordance with Article 19.3 for the
same Delivery Period, the Parties shall meet, upon notice from any
Party, to determine if the prices established for the relevant Delivery
Period for sales to the Government should be adjusted taking into
account third party Arms Length Sales made by a constituent of
Contractor of the same or similar Crude Oil from the relevant Field or
other fields and published information in respect of other genuine
third party Arms Length Sales of the same or similar crude oil for that
Delivery Period. Until the matter of an adjustment for the relevant
Delivery Period is finally determined , the price as established in
accordance with this Article will apply for that Delivery Period. Any
adjustment, if necessary, will be made within thirty (30) days from the
date the adjustment for that Delivery Period is finally determined.
19.6
A constituent of Contractor shall determine the relevant prices in
accordance with this Article and the calculation, basis of calculation
and the price determined shall be supplied to the Government and shall
be subject to agreement by the Government before it is finally
determined. Pending final determination, the last established price, if
any, for the Crude Oil shall be used.
19.7
In the event that the Parties fail to reach agreement on any matter
concerning selection of the crude oil(s) for comparison, the
calculation, the basis of, or mechanism for the calculation of the
prices, the prices arrived at, the adjustment of any price or generally
about the manner in which the prices are determined according to the
provisions of this Article within thirty (30) days, or such longer
period as may be mutually agreed between the parties, from the date of
commencement of Commercial Production or the end of each Delivery
Period thereafter, any Party may refer the matter or matters in issue
for final determination by a sole expert appointed as provided in
Article 33.
19.7.1
Within ten (10) days of the said appointment, the Parties
shall provide the expert with all information they deem
necessary or as the expert may reasonably require.
19.7.2
Within fifteen (15) days from the date of his
appointment, the expert shall report to the
Parties on the issue(s) referred to him for
determination, applying the criteria or mechanism
set forth herein and indicate his decision
thereon to be applicable for the relevant
Delivery Period for Crude Oil and such decision
shall be accepted as final and binding by the
Parties.
53
19.7.3
Except for the adjustment referred to in
Article 19.5, any price or pricing mechanism
agreed by the Parties pursuant to the provisions
of this Article shall not be changed
retroactively.
19.8
Any sale or disposal to Affiliates or other sale or disposal of Crude
Oil produced from a Field, other than to the Government or Government
companies or to third parties in Arms Length Sales, in any Delivery
Period, shall be valued on the same basis as sales to the Government or
a Government company. In the event of such a sale or disposal by a
Company, such Company shall submit to the Government, within fifteen
(15) days of the end of each Delivery Period, all relevant information
concerning such sales or disposals.
19.9
In the event that in any Delivery Period there is more than one type of
sales referred to in Articles 19.3, 19.4 and 19.8, then, for the
purpose of calculating Cost Petroleum and Profit Petroleum entitlement
pursuant to Articles 13 and 14, a single price per Barrel of Crude Oil
for all the sales for the relevant Delivery Period shall be used. Such
single price shall be the weighted average of the prices determined for
each type of sale, weighted by the respective volumes of Crude Oil sold
in each type of sale in the relevant Delivery Period.
19.10
In this Article the term "Government" shall include any other agency or
nominee of the Government to whom Crude Oil is to be sold.
19.11
The provisions specified above for the determination of the price of
sales of Crude Oil shall apply mutatis mutandis to Condensates.
19.12
The Parties shall meet annually, or sooner upon notice served by any
Party on the others, to review the list of selected Crude Oils or the
mechanism established pursuant to this Article 19 in light of any new
facts since the date of selection of such Crude Oils or establishment
of such mechanism and to determine what adjustment (if any) should be
made to the said selection or mechanism by mutual agreement of the
Parties.
------*****----54
ARTICLE 20
CURRENCY AND EXCHANGE CONTROL PROVISIONS
20.1
Subject to the provisions herein, and to compliance with the relevant
provisions of the laws of general application in India governing
currency and foreign exchange and related administrative instructions
and procedures issued thereunder on a non-discriminatory basis, each
Foreign Company comprising the Contractor shall, during the term of
this Contract have the right to:
(a)
repatriate funds relating to Petroleum Operations abroad, in
United States Dollars or any other freely convertible currency
acceptable to the Government and the Foreign Company;
(b)
receive, retain and use abroad the proceeds of any
export sales of Petroleum under the contract;
(c)
open, maintain and operate bank accounts with reputable banks,
both inside and outside India, for the purpose of this Contract;
(d)
freely import, through normal banking channels, funds
necessary for carrying out the Petroleum Operations;
(e)
convert into foreign exchange and repatriate sums
imported pursuant to (d) above in excess (if any) of
its requirements; and
(f)
make payments of interest and principal outside of India for
purchases, services and loans obtained abroad without the
requirement that funds used in making such payments must come
from or originate in India.
Provided however, that repatriation pursuant to sub-paragraphs (a) and
(e) and payments pursuant to sub-paragraph (f) shall be subject to the
provisions of any treaties or bilateral arrangements between the
Government and any country with respect to payments to that country.
20.2
The rates of exchange for the purchase and sale of currency by the
Contractor shall be the prevailing rates of general application
determined by the State Bank of India or such other financial body as
may be mutually agreed by the Parties and in accordance with prevailing
currency and exchange regulations and, for accounting purposes under
this Contract, these rates shall apply as provided in Section 1.6 of
Appendix C.
20.3
Domestic Companies shall be subject to the relevant provisions of the
applicable laws in India governing currency and foreign exchange and
related administrative instructions and procedures issued thereunder.
-----*****----55
ARTICLE 21
NATURAL GAS
21.1
Subject to Article 21.2, the Indian domestic market shall have the
first call on the utilisation of Natural Gas discovered pursuant to
Petroleum Operations and produced from the Contract Area. Accordingly,
any proposal by the Contractor relating to Discovery and production of
Natural Gas from the Contract Area shall be made in the context of the
Government's policy for the utilisation of Natural Gas and shall take
into account the objectives of the Government to develop its resources
in the most efficient manner and to promote conservation measures.
21.2
Contractor shall have the right to use Natural Gas produced from the
Contract Area for the purpose of Petroleum Operations including, but
not limited to, reinjection for pressure maintenance in the Oil Fields,
Gas lifting and power generation.
21.3
For the purpose of sales to the domestic market pursuant to this
Article 21, the Delivery Point shall be the Delivery Point set forth in
the Gas sales contract entered into by the Contractor.
21.4
ASSOCIATED NATURAL GAS (ANG)
21.4.1
In the event that a New Discovery of Crude Oil
contains ANG, Contractor shall declare in the
proposal for the declaration of the New Discovery
as a Commercial Discovery as specified in
Article 9, whether (and by what amount) the
estimated production of ANG is anticipated to
exceed the quantities of ANG which will be used
in accordance with Article 21.2 (hereinafter
referred to as "the Excess ANG"). In such event
the Contractor shall indicate whether, on the
basis of the available data and information, it
has reasonable grounds for believing that the
Excess ANG could be commercially exploited in
accordance with the terms of this Contract along
with the Commercial Production of the Crude Oil
from the Oil Field, and whether the Contractor
intends to so exploit the Excess ANG.
21.4.2
Based on the principle of full utilization and
minimum flaring of ANG, a proposed development
plan for an Oil Field (or Oil Fields), shall, to
the extent economically reasonable, include a
plan for utilisation of the ANG from the Existing
Discovery and New Discovery, including estimated
quantities to be flared, reinjected, and to be
used for Petroleum Operations; and, if the
Contractor proposes to commercially exploit the
Excess ANG for sale in the domestic market in
56
accordance with Government's policy, or
elsewhere, the proposed plans for such
exploitation.
21.4.3
If the Contractor wishes to exploit the Excess
ANG (whether from an Existing or New Discovery),
such ANG shall first be offered for sale to the
Government (or its nominee) in writing in
accordance with the terms of this Contract. On
receipt of such offer, the Government (or its
nominee) shall, within three (3) months of the
date of receipt thereof, notify the Contractor,
in writing, whether or not it wishes to exercise
its option to purchase the Excess ANG.
21.4.4
If the Government exercises its option to
purchase the Excess ANG as provided in
Article 21.4.3:
(a) the Government shall indicate in the notice exercising
the option, a date, within two (2) years of the date
of the Contractor's offer, for commencement of
purchase of the Excess ANG;
(b) within six (6) months of the date of notification of
the exercise of the Government's option pursuant to
Article 21.4.3., the Contractor and the Government (or
its nominee) shall agree on the terms for the sale to
Government (or its nominee) of the Excess ANG.
21.4.5
If the Government does not exercise its option to purchase
the Excess ANG the Contractor shall be free to explore
markets for the commercial exploitation of the Excess ANG.
21.4.6
Where the Contractor is of the view that Excess ANG cannot
be commercially exploited, and chooses not to exploit ANG,
or is unable to find a market for the Excess ANG pursuant
to Article 21.4.5, the Government shall be entitled to take
and utilise such Excess ANG.
21.4.7
If the Government elects to take the Excess ANG
as provided in Article 21.4.6:
(a)
the Contractor shall deliver such Excess ANG to the
Government (or its nominee) free of cost, at the downstream
flange of the Gas/Oil separation facilities;
(b)
the Government or its nominee shall bear all
costs including gathering, treating, processing
57
and transporting costs beyond the downstream
flange of the Gas/Oil separation facilities;
(c)
21.4.8
the delivery of such Excess ANG shall be subject to
procedures to be agreed between the Government or its
nominee and the Contractor prior to such delivery, such
procedures to include matters relating to timing of
off-take of such Excess ANG, which procedures shall not, in
any way, restrict Oil production.
Excess ANG which is not commercially exploited by
the Contractor, or taken by the Government or its
nominee pursuant to this Article 21, shall be
returned to the subsurface structure or flared
where such flaring is approved in the Development
Plan, which approval shall not be unreasonably
withheld, for the relevant Oil Field or where
reinjection is uneconomical or inadvisable in
accordance with good reservoir engineering prac-
tices.
21.5
21.4.9
Where the Contractor is of the view that there is
economic merit in flaring Gas in the absence of a
Gas transmission system or during such time as
the pipeline is inoperable or lacks capacity to
take all available Gas, Contractor shall have the
right to flare Gas. In any such event,
Contractor shall notify the Management Committee
within forty-eight (48) hours to obtain its
approval for continuing operations.
21.4.10
As soon as practicable after the New Discovery
referred to in Article 21.4.1 or the submission
to the Government of the proposal for the
declaration of the New Discovery as a Commercial
Discovery as therein specified, the Contractor
and the Government or its nominee shall meet to
discuss the sale and/or disposal of any ANG
discovered with a view to giving effect to the
provisions of this Article 21 in a timely manner.
NON ASSOCIATED NATURAL GAS (NANG)
21.5.1
In the event of a New Discovery of NANG, the
Contractor shall promptly report such New
Discovery to the Management Committee and the
provisions of Articles 9.1 and 9.2 shall apply.
The remaining provisions of Article 9 would apply
to the New Discovery and development of NANG only
in so far as they are not inconsistent with the
provisions of Articles 21.5.1 to 21.5.13.
21.5.2
If, pursuant to Article 9.1, the Contractor gives
notification that a New Discovery is of potential
58
commercial interest, the Contractor shall submit to the
Management Committee, within one (1) Calendar Year from the
date of notification of the above New Discovery, the
proposed Appraisal Programme, including a Work Programme
and budget to carry out an adequate and effective appraisal
of such New Discovery, to determine (i) without delay,
whether such New Discovery is a Commercial Discovery and
(ii) with reasonable precision, the boundaries of the area
to be delineated as a Field. Such programme shall be
supported by all relevant data such as Well data,
Contractor's best estimate of reserve range and production
potential and shall indicate the date of commencement of
the proposed Appraisal Programme. Where in the case of an
Existing Discovery, Contractor desires to carry out
additional appraisal work, the Contractor shall submit its
proposed Appraisal Programme with a Work Programme and
budget to the Management Committee within one hundred
twenty (120) days of the Effective Date for approval.
21.5.3
The proposed Appraisal Programme for an Existing
Discovery or a New Discovery shall be considered
by the Management Committee within sixty (60)
days of its submission by the Contractor and the
programme together with the Work Programme and
budget submitted by the Contractor revised in
accordance with any agreed amendments or
additions thereto approved by the Management
Committee, shall be adopted as the Appraisal
Programme and the Contractor shall promptly
proceed with implementation of such programme.
21.5.4.
If on the basis of the results of the Appraisal
Programme, the Contractor is of the opinion that
NANG has been discovered in commercial
quantities, it shall submit to the Management
Committee, as soon as practicable but not later
than five (5) years from the date of notification
of the aforementioned New Discovery, a proposal
for the declaration of the New Discovery as a
Commercial Discovery. Such proposal shall take
into account the Government's policies on Gas
utilisation and propose alternative options (if
any) for use or consumption of the NANG and be
supported by, inter alia, technical and economic
data, evaluations, interpretations and analyses
of such data, feasibility studies relating to the
New Discovery prepared by or on behalf of the
Contractor and other relevant information.
21.5.5
In the case of a New Discovery, simultaneously
with the Contractor's Appraisal Programme,
59
Government and the Contractor shall seek to reach an
agreement on the development, production, processing,
utilisation and sale of the NANG, in the context of Article
21.1, within thirty-six (36) months of the date of
notification of the Discovery referred to in Article 21.5.
If no proposal is submitted to the Management Committee by
the Contractor within five (5) years from the date of
notification of such New Discovery, the Contractor shall
relinquish its rights to develop such New Discovery and the
area relating to such New Discovery shall be excluded from
the Contract Area.
21.5.6
Where the Contractor has submitted a proposal for
the declaration of a New Discovery as a
Commercial Discovery, the Management Committee
shall consider the proposal of the Contractor
with reference to commercial utilisation of the
NANG in the domestic market or elsewhere and in
the context of Government's policy on Gas
utilisation and the chain of activities required
to bring the NANG from the Delivery Point to
potential consumers in the domestic market or
elsewhere. The Management Committee may, within
ninety (90) days, request that the Contractor
submit any additional information on the New
Discovery and the related Appraisal Programme
that it may reasonably require to facilitate a
decision on whether or not to declare the New
Discovery as a Commercial Discovery.
21.5.7
The Management Committee shall make a decision regarding
the declaration of a New Discovery as a Commercial
Discovery within the latter of:
(a) one hundred eighty (180) days of receipt of
such proposal; or
(b) one hundred eighty (180) days of receipt of
the additional information referred to above.
21.5.8
If the Management Committee, with the approval of
the Government, declares a New Discovery a
Commercial Discovery, such declaration shall be
accompanied by an indication of the probable
date(s) by when the market(s) would be ready to
receive the Gas and an estimate of the quantities
of Gas that could be so utilised. The
Contractor, in such an event, shall, within One
(1) Calendar Year of the declaration of the New
Discovery as a Commercial Discovery, submit a
Development Plan for the development of the Gas
Field to the Management Committee for its
approval. Such plan shall be supported by all
60
relevant information including, inter alia, the information
required in Article 9.6. In the case of an Existing
Discovery, Contractor shall within ninety (90) days of the
Effective Date propose a Development Plan following the
plan brought out in Appendix G, intended to achieve the
production profile brought out in Appendix H, containing
the detailed information required in Article 9.6, with
supporting budget and the Management Committee shall render
its decision regarding such proposal within thirty (30)
days of such submittal. Where a Development Plan is so
agreed, it shall be an approved Development Plan pursuant
to this Article.
21.5.9
If the Development Plan has not been approved by
the Management Committee within one hundred and
eighty (180) days of its submission, the
Contractor shall have the right to submit such
plan or plans directly to the Government for
approval, within sixty (60) days of the expiry of
the time provided to the Management Committee to
approve the plan or plans. The Government shall
respond to the submission within ninety (90) days
of receipt thereof. If the Government rejects
the Contractor's proposed plan or plans, the
Government shall state in writing the reasons for
such rejection and the Contractor shall have the
right to resubmit, within sixty (60) days of
written notice of such rejection, such plan or
plans duly amended to meet the Government's
objections thereto. Such right of resubmission
of each proposed plan or plans shall be
exercisable by the Contractor only once. If the
Parties are unable to agree, any Party shall have
the right to submit the matter to arbitration.
If no such plan or plans is/are submitted to the
Government within the aforesaid period, the
Contractor shall relinquish its right to develop
such Gas Field and such Gas Field shall be
excluded from the Contract Area.
21.5.10
If the Management Committee is unable to agree on
the declaration of a New Discovery as a
Commercial Discovery within the time limit
prescribed in Article 21.5.7, the Contractor, or
any of its constituents, shall be entitled to
submit such proposal directly to the Government
for approval. In such event, the Contractor, or
any of its constituents, shall also submit a
comprehensive plan or plans for development of
such New Discovery, which shall detail the
proposed Development Plan for utilisation of the
61
NANG produced in the domestic market giving, inter alia,
the data specified in Article 21.5.8. The proposal for
declaration of the New Discovery as a Commercial Discovery
as well as the proposed Development Plan shall be submitted
to the Government within one hundred and eighty (180) days
of the expiry of the time given to the Management Committee
to reach a decision on the proposal for declaration of the
New Discovery as a Commercial Discovery and Government
shall respond to the said submission within one hundred
twenty (120) days of its receipt. If the Government
disapproves the proposed plan or plans, the Government
shall state in writing the reasons for such disapproval and
the concerned Parties shall have the right to resubmit,
within sixty (60) days, such plan or plans duly amended to
meet the Government's objections thereto. Such right of
resubmission of each proposed plan or plans shall be
exercisable by the Contractor only once. In the event the
Government does not approve such plan or plans, any Party
shall have the right to submit the matter to arbitration.
If no such plan (plans) is (are) submitted to the
Government within the aforesaid period, the Contractor
shall relinquish its rights to develop such Gas Field and
such Gas Field shall be excluded from the Contract Area.
21.5.11
In the event the Management Committee , or
Government, as the case may be, approves the
Contractor's proposal for declaration of the New
Discovery as a Commercial Discovery and also the
comprehensive plan or plans for development of
such New Discovery and for the utilisation of
NANG produced in the domestic market, the Gas
Field shall be promptly developed by the
Contractor in accordance with the approved plan
which shall be the Development Plan for the
Field.
21.5.12
In the event the Contractor does not commence development
of a New Discovery within ten (10) years from the date of
completion of the first Discovery Well, the Contractor
shall relinquish its rights to develop such New Discovery
and the area relating to such New Discovery shall be
excluded from the Contract Area.
21.5.13
The price of the ANG and NANG produced from the Oil or Gas
Field for use in India shall be specified in the Gas sales
contract, which shall be in accordance with the provisions
of this Article 21.5.13, between the Contractor and the
nominee of the Government.
62
(a) Unless the context otherwise requires, the following
words and terms wherever and whenever used or
appearing in this Article 21.5.13 shall have the
following meaning:
(i)
(ii)
"British Thermal Unit" or "BTU" means the amount
of energy required to raise the temperature of
one (1) pound (avoirdupois) of pure water, at
sixty degrees (60(degree)) Fahrenheit, one
degree (1(degree)) Fahrenheit at an absolute
pressure of 14.73 pounds per square inch.
"Buyer" means the Government of India or
its nominee.
(iii)
"Deliverability" means the lesser of the maximum
aggregate rate of all wells in the Contract Area
or the maximum delivery capacity of the
processing facility, subject to generally
accepted international petroleum industry
practices.
(iv)
"Delivery Point" means a point downstream of the
Seller's onshore Gas receiving facility in the
Hazira area and at the upstream weld of the
connection to the Buyer's pipeline in the Hazira
area.
(v)
"Maximum Delivery Pressure" has the
meaning set forth in Article 21.5.13(c).
(vi)
"MMBTU" means one million (1,000,000)
BTU's on a net heating value basis.
(vii)
"Seller" means Contractor.
(b) The Seller agrees to produce and deliver, on
a daily basis, to the Buyer one hundred
percent (100%) of the Deliverability of ANG
and NANG at the Delivery Point and the Buyer,
provided the Gas is made available and
tendered for delivery by the Seller, agrees
to take and purchase, on a daily basis, one
hundred percent (100%) of the Deliverability
of ANG and NANG provided, however, that
Seller, at Seller's sole discretion, subject
to generally accepted operator practices in
the international petroleum industry, may
adjust deliveries to provide for necessary
maintenance, service and testing. Buyer may
63
request that Seller vary deliveries to accommodate
similar circumstances in the Buyer's operation and
Seller's approval shall not be unreasonably withheld.
Communications procedures shall be mutually agreed in
the Gas sales contract in accordance with
internationally accepted industry standards.
(c) The Gas sold hereunder shall be delivered at the
Delivery Point in the Hazira area at the operating
pressure of the Buyer's owned or contracted pipeline
up to a maximum pressure ("Maximum Delivery Pressure")
of one thousand
(1000) psig.
(d) Subject to the provisions hereof, the Buyer shall pay
the Seller for each MMBTU of Gas delivered hereunder,
or for each MMBTU of Gas for which the Buyer is
obligated to pay hereunder, a price calculated as
follows:
The Base Price ("Base Price") in United States Dollars
(US$) per MMBTU is fixed on the basis of ninety-nine
percent (99%) of a Low Sulfur Fuel Oil Basket ("LSFO
Basket") calculated as the average of the daily mean
value for low and high prices of fuel oil taking into
account equal parts of:
(1)
bulk residual fuel oil, containing one percent
(1%) sulfur, quoted for barges at Northwest
Europe, (Barges, FOB Rotterdam); and
(2)
bulk residual fuel oil, containing one percent
(1%) sulfur, quoted for Mediterranean, basis
Italy, (Cargoes, FOB Med, basis Italy); and
(3)
a theoretical blend of residual fuel oil
composed of Singapore Cargoes made up of
seventy-four percent (74%) of LSWR-SR 0.3%,
(three-tenths percent (0.3%) sulfur), and
twenty-six percent (26%) of HSFO 180, three and
one-half percent (3.5%) sulfur, viscosity 180
centistokes.
The Base Price is calculated on the basis of the
arithmetic average of the monthly values of the
prices of the listed products as published in
Platt's Oilgram Price Report for the eighteen
(18) months of May, 1992 through October, 1993,
inclusive. (These values
64
are derived from the mean of the daily ranges on
days the postings are published to give a
monthly value.) For the purpose of this
Contract, Base Price will be equal to
$2.32/MMBTU.
The price of Gas for each MMBTU for each Calendar
Quarter thereafter shall be determined by the
following formula:
Price = Base Price x (A/B)
Where:
A = a value calculated for the HS/LSFO Basket, defined
in this Article 21.5.13 (d), evaluated for the twelve
(12) months preceding the Calendar Quarter using the
method for averaging as described for calculating the
Base Price, and
B = A value calculated for the HS/LSFO Basket, evaluated
for the twelve (12) months April 1993 through March
1994.
The High Sulfur/Low Sulfur Fuel Oil Basket
("HS/LSFO Basket") is valued as equal parts
of:
(1)
bulk residual fuel oil, containing one
percent (1%) sulfur, quoted for
Mediterranean, basis Italy, (Cargoes,
FOB Med, basis Italy); and
(2)
bulk residual fuel oil, containing one percent
(1%) sulfur, quoted for Northwest Europe
Cargoes, CIF, basis ARA, (Cargoes CIF NWE,
Basis ARA), and
(3)
bulk residual fuel oil, Singapore Cargoes,
containing three and one-half percent (3.5%)
sulfur, viscosity 180 centistokes, (Singapore
HSFO, 180 cst), and
(4)
bulk residual fuel oil, Cargoes, FOB Arab
Gulf, viscosity 180 centistokes, (Arab Gulf,
FOB HSFO 180 cst)
using the method for averaging as described
for calculating the Base Price.
The Floor Price ("Floor Price") shall be ninety percent
(90%) of the monthly values of the prices of the LSFO
Basket as published in Platt's Oilgram Price Report for
the eighteen
65
(18) months of May, 1992 through October, 1993,
inclusive. (These values are derived from the mean of
the daily ranges on days the postings are published to
give a monthly value.) For the purpose of this Contract,
Floor Price will be equal to $2.11/MMBTU.
Notwithstanding results of the calculations for price as
shown in this Article 21.5.13 (d), the actual price
shall in no event be less than a Floor Price ("Floor
Price") which is calculated as US$2.11/MMBTU, nor more
than a Ceiling ("Ceiling") of the Floor Price plus
US$1.00/MMBTU, provided that after seven (7) years from
the Date of first delivery, the Seller shall have the
option to revise the Ceiling to one hundred fifty
percent (150%) of ninety percent (90%) of the same or
equivalent basket of fuel oils used in calculating the
Base Price averaged over the immediately preceeding
eighteen (18) months.
Parties agree to convert US$/barrel prices for fuel oil
as published in Platt's Oilgram to US$/MMBTU using a
factor of 6.28.
If Platt's Oilgram is no longer published, an alternate
publication shall be mutually agreed upon.
21.5.14
Nothing contained in any contract entered into by the
Contractor for the supply, sale or disposal of Gas, with
any nominee of the Government shall in any manner abrogate
the obligation of the Government contained herein.
21.5.15
The Government and/or its nominee shall pay any and all
sales tax payable on the sale of Gas to the Government or
its nominee.
-----*****----66
ARTICLE 22
EMPLOYMENT, TRAINING AND TRANSFER OF TECHNOLOGY
22.1
Without prejudice to the right of the Contractor to select and employ
personnel in numbers and with the qualifications as, in the opinion of
the Contractor, are required for carrying out Petroleum Operations in a
safe, cost effective and efficient manner, the Contractor shall, to the
maximum extent reasonably possible, employ, and require the Operator
and Subcontractors to employ, citizens of India having appropriate
qualifications and experience, taking into account the experience
required and the level and nature of the Petroleum Operations.
22.2
Contractor shall offer up to two (2) man months per year of on-the-job
training and practical experience in skilled, management and executive
positions of their ongoing Petroleum Operations to Indian nationals of
the Government's choice.
22.3
Contractor shall associate and involve mutually agreed numbers of
citizens of India designated by the Government, which shall in no event
exceed three (3) people at any one time, in the technological aspects
of the then ongoing Petroleum Operations for up to two man months per
year.
Such aspects shall include:
(a)
seismic data acquisition, processing and
interpretation;
(b)
computerized formation evaluation using well logs;
(c)
computerized analysis of geological data for basin
analysis;
(d)
laboratory core analysis;
(e)
reservoir simulation and modelling;
(f)
geochemistry, including analytical methods, source rock
studies, hydrocarbon generation, modelling;
(g)
measurement-while-drilling techniques;
(h)
stimulation of wells;
(i)
production engineering including, optimization methods
for surface and subsurface facilities (e.g. NODAL
analysis and implementation);
(j)
reservoir engineering and management including gas and
water injection;
(k)
enhanced oil recovery techniques;
67
(l)
gas production technology;
(m)
pipeline technology;
(n)
well design and drilling technology;
(o)
design of offshore facilities.
22.4
Except as herein provided, no Party shall be obliged to disclose by
virtue of this Article 22 any data, process or information, whether
owned by itself, any of its Affiliates or a third party, of a
proprietary nature.
22.5
At the request of the Government the Contractor shall separately
endeavour to negotiate, in good faith, technical assistance agreements
with the Government setting forth the terms by which each constituent
of the Contractor may render technical assistance and make available
commercially proven technical information of a proprietary nature for
use in India by the Government. The issues to be addressed in
negotiating such technical assistance agreements shall include, but not
be limited to, licensing issues, royalty conditions, confidentiality
restrictions, liabilities, costs and method of payment.
-----*****----68
ARTICLE 23
LOCAL GOODS AND SERVICES
23.1
In the conduct of Petroleum Operations, the Contractor
shall:
(a)
give preference to the purchase and use of goods manufactured,
produced or supplied in India provided that such goods are
available on terms equal to or better than imported goods with
respect to timing of delivery, quality and quantity required,
price and other terms;
(b)
employ Indian Subcontractors having the required skills
or expertise, to the extent reasonably possible, in so
far as their services are available on comparable
standards with those obtained elsewhere and at
competitive prices and on competitive terms; provided
that where no such Subcontractors are available,
preference shall be given to non-Indian Subcontractors
who utilise Indian goods to the maximum extent possible
subject however to the proviso in paragraph (a) above;
(c)
cooperate to the extent possible and without financial obligation
with domestic companies in India to enable them to develop skills
and technology to service the petroleum industry;
(d)
ensure that provisions in terms of paragraphs (a) to (c) above
are contained in contracts between the Operator and its
Subcontractors.
23.2
The Contractor shall establish appropriate procedures, including tender
procedures, for the acquisition of goods and services which shall
ensure that suppliers and Subcontractors in India are given adequate
opportunity to compete for the supply of goods and services. The tender
procedures shall include, inter alia, the financial amounts or value of
contracts which will be awarded on the basis of selective bidding or
open competitive bidding, the procedures for such bidding, and the
exceptions to bidding in cases of emergency.
23.3
Within one hundred and twenty (120) days after the end of each Calendar
Year, the Contractor shall provide the Government with a report
outlining its achievements in utilising Indian resources during that
Calendar Year.
23.4
In this Article "goods" means equipment, materials and
supplies.
-----*****----69
ARTICLE 24
INSURANCE AND INDEMNIFICATION
24.1
INSURANCE
24.1.1
The Contractor shall, during the term of this
Contract, obtain and maintain insurance coverage
for and in relation to Petroleum Operations for
such amount and against such risks in accordance
with generally accepted international operating
practices as are set forth herein, and shall
furnish to the Government certificates evidencing
that such coverage is in effect. Such insurance
policies shall include the Government as
additional insured and shall waive subrogation
against the Government. The insurance shall,
without prejudice to the generality of the
foregoing, cover:
(a) Loss or damage to all installations,
equipment and other assets for so long as
they are used in or in connection with
Petroleum Operations; provided, however, if
Contractor fails to insure any such
installation, equipment or assets, it shall
replace any loss thereof or repair any damage
caused thereto;
(b) Loss, damage or injury caused by pollution in
the course of or as a result of Petroleum
Operations;
(c) Loss or damage to property or bodily injury suffered
by any third party in the course of or as a result of
Petroleum Operations for which the Contractor may be
liable;
(d) With respect to Petroleum Operations offshore, the
cost of removing wrecks and cleaning up operations
following any accident in the course of or as a result
of Contractor's Petroleum Operations;
(e) The Contractor's and/or Operator's liability
to its employees engaged in Petroleum
Operations.
24.1.2
The Contractor shall require its Subcontractors to obtain
and maintain insurance against the risks referred to in
Article 24.1.1 relating mutatis mutandis to such
Subcontractors.
70
24.2
INDEMNITY
The Contractor shall indemnify, defend and hold the Government harmless
against all claims, losses and damages of any nature whatsoever,
including without limitation, claims for loss or damage to property or
injury or death to persons caused by or resulting from any Petroleum
Operations conducted by or on behalf of the Contractor.
24.3
ONGC shall indemnify and hold the Companies harmless against all
claims, losses and damages of any nature whatsoever, including, but not
by way of limitation, claims for loss or damage to property or injury
or death to persons or Environmental Damage caused by or resulting from
and attributable to any operations in the nature of Petroleum
Operations conducted by or on behalf of ONGC prior to the Effective
Date.
-----*****----71
ARTICLE 25
RECORDS, REPORTS, ACCOUNTS AND AUDIT
25.1
The Contractor shall prepare and maintain at an office in India
accurate and current books, records, reports and accounts of its
activities for and in connection with Petroleum Operations so as to
present a fair, clear and accurate record of all its activities,
expenditures and receipts. The Contractor shall also keep
representative samples of cores and cuttings.
25.2
Based on generally accepted and recognised accounting principles and
modern petroleum industry practices, records, books, accounts and
accounting procedures in respect of Petroleum Operations shall be
maintained on behalf of the Contractor by the Operator, at its business
office in India.
25.3
The annual audit of accounts shall be carried out on behalf of the
Contractor by a qualified, independent firm of internationally
recognised chartered accountants, registered in India and selected by
the Contractor.
25.4
Accounts, together with the auditor's report thereon, shall be
submitted to the Parties for approval not later than the thirtieth
(30th) September following the Financial Year.
25.5
The Government shall have the right to audit the accounting records of
the Contractor in respect of Petroleum Operations as provided in the
Accounting Procedure.
25.6
The accounting and auditing provisions and procedures specified in this
Contract are without prejudice to any other requirements imposed by any
statute in India, including, without limitation, any specific
requirements of the statues relating to taxation of companies.
25.7
For the purpose of any audit referred to in Article 25.5, the Operator
or the Contractor shall make available to the auditor all such books,
records, accounts and other documents and information as may be
reasonably required by the auditor during normal business hours.
-----*****----72
ARTICLE 26
INFORMATION, DATA, CONFIDENTIALITY, INSPECTION AND SECURITY
26.1
The Contractor shall, promptly after they become available, make
available to the Government in its offices all data obtained as a
result of Petroleum Operations under the Contract including, but not
limited to, geological, geophysical, geochemical, petrophysical,
engineering, well logs, maps, magnetic tapes, cores and production data
as well as all interpretative and derivative data, including reports,
analyses, interpretations and evaluations prepared in respect of
Petroleum Operations (hereinafter referred to as "Data"). Data shall be
the property of the Government, provided however, that the Contractor
shall have the right to make use of such Data, free of cost, for the
purpose of Petroleum Operations under this Contract as provided herein.
26.2
Contractor shall keep the Government currently advised of all
developments taking place during the course of Petroleum Operations and
shall furnish the Government with such progress reports containing full
and accurate information relating to Petroleum Operations (on a
periodic basis) as the Government may reasonably require, provided that
this obligation shall not extend to proprietary technology. Without
prejudice to the generality of the foregoing, the Contractor shall
submit regular statements and reports relating to Petroleum Operations
as provided in Appendix C. Contractor shall meet with the Government at
a mutually convenient location to present the results of all geological
and geophysical work carried out as well as the results of all
engineering and drilling operations as soon as practical after such
Data becomes available to the Contractor.
26.3
All Data, information and reports obtained or prepared by, for or on
behalf of, the Contractor pursuant to this Contract shall be treated as
confidential and, subject to the provisions hereinbelow, the Parties
shall not disclose the contents thereof to any third party without the
consent in writing of the other Parties.
26.4
The obligation specified in Article 26.3 shall not operate
so as to prevent disclosure:
(a)
to Affiliates, Contractors, or Subcontractors for the
purpose of Petroleum Operations;
(b)
to employees, professional consultants, advisers, data processing
centres and laboratories, where required, for the performance of
functions in connection with Petroleum Operations for any Party
comprising the Contractor;
(c)
to banks or other financial institutions, in connection
with Petroleum Operations;
73
(d)
to bona fide intending assignees or transferees of an interest
hereunder of a Party comprising the Contractor or in connection
with a sale of stock of a Party comprising the Contractor;
(e)
to the extent required by any applicable law or in connection
with any legal proceedings or by the regulations of any stock
exchange upon which the shares of a Party comprising Contractor
are quoted;
(f)
to Government departments for, or in connection with, the
preparation by or on behalf of the Government of statistical
reports with respect to Petroleum Operations, or in connection
with the administration of this Contract or any relevant law or
for any purpose connected with Petroleum Operations;
(g)
by a Party with respect to any Data or information which, without
disclosure by such Party, is generally known to the public.
26.5
Any Data, information or reports disclosed by the Parties comprising
the Contractor to any person other than pursuant to Article 26.4 (a),
(b) and (g) shall be disclosed on the terms that such Data, information
or reports shall be treated as confidential by the recipient. Prompt
notice of disclosures made by the Contractor pursuant to Article 26.5
shall be given to the Government.
26.6
Any Data, information and reports relating to the Contract Area, which,
in the opinion of the Government, might have significance in connection
with offers by the Government of open acreage or an exploration
programme to be conducted by a third party in another area, may be
disclosed by the Government for such purposes on conditions to be
agreed upon between the Government and the Contractor.
26.7
Where an area ceases to be part of the Contract Area, the Contractor
shall continue to treat Data and information with respect to the area
as confidential and shall deliver to the Government copies or originals
of all Data and information in its possession with respect to the area.
The Government shall, however, have the right to freely use the Data
and information thereafter.
26.8
The Government shall, at all reasonable times, through duly authorised
representatives, be entitled to observe Petroleum Operations and to
inspect all assets, books, records, reports, accounts, contracts,
samples and Data kept by the Contractor or the Operator in respect of
Petroleum Operations under the Contract, provided, however, that the
Contractor shall not be required to disclose any proprietary
technology. The duly authorised representatives shall be given
reasonable assistance by the Contractor for such functions and the
Contractor shall afford such
74
representatives all facilities and privileges afforded to its own
personnel in the field including the use of office space and housing,
free of charge. The representatives shall be entitled to make a
reasonable number of surveys, measurements, drawings, tests and copies
of documents, take samples, and make a reasonable use of the equipment
and instruments of the Contractor provided that such functions shall
not unduly interfere with the Contractor's Petroleum Operations.
26.9
Contractor shall give reasonable advance notice to the Government, or
to any other authority designated by the Government for such purpose,
of its programme of conducting surveys by aircraft or by ships,
indicating, inter alia, the name of the survey to be conducted,
approximate extent of the area to be covered, the duration of the
survey, the commencement date, and the name of the airport or port from
which the survey aircraft or ship will commence its voyage.
26.10
The Government, or the authority designated by the Government for such
purpose, shall have the right to inspect any aircraft or ship used by
the Contractor or a Subcontractor carrying out any survey or other
operations in the Contract Area and shall have the right to put on
board such aircraft or ship Government officers in such number as may
reasonably be necessary to ensure compliance by the Contractor or the
Subcontractor with the security requirements of India.
26.11
Expatriate employees and Subcontractors shall, for national security
purposes, be subject to the approval of the Government, such approval
not to be unreasonably withheld.
-----*****----75
ARTICLE 27
TITLE TO PETROLEUM, DATA AND ASSETS
27.1
The Government is the sole owner of Petroleum underlying the Contract
Area and shall remain the sole owner of Petroleum produced pursuant to
the provisions of this Contract except that part of Crude Oil or Gas
the title whereof has passed to each constituent of the Contractor or
any other person in accordance with the provisions of this Contract.
27.2
Title to Crude Oil and/or Gas to which each constituent of the
Contractor is entitled under this Contract, and title to Crude Oil
and/or Gas sold to Government or its nominee by the constituents of the
Contractor shall pass to the relevant Party, or as the case may be, to
Government or its nominee at the Delivery Point. Contractor shall be
responsible for all costs and risks prior to the Delivery Point and
each Party shall be responsible for all costs and risks associated with
such Party's share after the Delivery Point. Where the Government or
its nominee purchases all or some of the Contractor's share of Crude
Oil or Condensate, the Government or its nominee shall be responsible
for all costs and risks in respect of the amount purchased, after the
Delivery Point.
27.3
Title to all Data specified in Article 26 shall be vested in the
Government and the Contractor shall have the right of use thereof as
therein provided.
27.4
Assets in place or contracted for use in or on the Contract Area
purchased by the Contractor for use in Petroleum Operations shall be
owned by the Parties comprising Contractor in proportion to their
Participating Interest provided that the Government, or its nominee,
shall have the right to require vesting of full title and ownership
including abandonment obligations, if any, in it, free of cost, charge
and encumbrances, of any or all assets, whether fixed or movable,
acquired and owned by the Contractor for use in Petroleum Operations
inside or outside the Contract Area, except assets required by a Party
for ongoing operations in the nature of Petroleum Operations in India,
such right to be exercisable by the Government, or its nominee, upon
expiry or earlier termination of the Contract.
27.5
Contractor shall be responsible in accordance with international
petroleum standards for proper maintenance, insurance and safety of all
assets acquired for Petroleum Operations for keeping them in good
repair, order and working condition at all times, and the costs thereof
shall be recoverable as Contract Costs in accordance with Appendix C.
27.6
So long as this Contract remains in force, the Contractor shall, free
of any charge for the purpose of carrying out Petroleum Operations
hereunder, have the exclusive use of
76
the assets which have become or are the property of the Government
including, without limitation, those identified in Appendix F.
27.7
Equipment and assets no longer required for Petroleum Operations shall
first be offered free of cost, charge and encumbrance to the
Government, or its nominee, and, if not required by the Government, or
its nominee, will be so indicated in writing within thirty (30) days of
such offer. Failure to so indicate will be deemed to be a rejection of
the offer by the Government.
27.8
Assets not acquired by the Government, or its nominee, may
be sold or otherwise disposed of subject to the terms of
this Contract.
-----*****----77
ARTICLE 28
ASSIGNMENT OF INTEREST
28.1
Subject to the terms of this Article and other terms of this Contract,
any Party comprising the Contractor may assign, or transfer, a part or
all of its Participating Interest, with the prior written consent of
the Government, which consent shall not be unreasonably withheld,
provided that the Government is satisfied that:
(a)
the prospective assignee or transferee has the financial
standing, technical competence, capacity and ability to meet its
obligations hereunder, and is willing to provide an unconditional
undertaking to assume its Participating Interest share of
obligations and to provide a guarantee in respect thereof as
provided in the Contract.
(b)
the prospective assignee or transferee is not a company
incorporated in a country with which the Government, for policy
reasons, has restricted trade or business;
(c)
the prospective assignor or transferor and assignee or transferee
respectively are willing to comply with any reasonable conditions
of the Government as may be necessary in the circumstances with a
view to ensuring performance under the Contract; and
(d)
the assignment or transfer will not adversely affect the
performance or obligations under this Contract or be contrary to
the interests of India.
28.2
An application by a Company for consent to assign or transfer shall be
accompanied by all relevant information concerning the proposed
assignment or transfer including detailed information on the proposed
assignee or transferee and its shareholding and corporate structure, as
was earlier required from the Companies constituting the Contractor,
the terms of the proposed assignment or transfer and the unconditional
undertaking referred to in Article 28.1(a) above. The applicant shall
also submit such information relating to the prospective assignee or
transferee of the assignment or transfer as the Government may
reasonably require to enable proper consideration and disposal of the
application.
28.3
No assignment or transfer shall be effective until the approval of the
Government is received, which approval may be given by the Government
on such terms as it may deem fit. Upon assignment or transfer of its
interest in this Contract, the assignor or transferor shall be released
and discharged from its obligations hereunder only to the extent that
such obligations are assumed by the assignee or transferee with the
approval of the Government.
78
28.4
The assignor shall clearly state in its deed of assignment, that the
assignee shall be liable for all future obligations, under the
Contract, to the extent of assignment.
28.5
Upon prior notice to the Contractor, the Government may assign or
transfer all or any part of its rights and interest under this Contract
to any Government company wholly or partly owned by the Government and
authorised by the Government to explore for and exploit Petroleum in
the Contract Area. Upon prior notice to the Government, a Company may
assign or transfer all or any part of its rights and interest under
this Contract to an Affiliate subject to Article 6.2 and the parent
company guarantee shall apply.
28.6
An assignment or transfer shall not be made so as to reduce the
Participating Interest of a constituent of the Contractor, at any time,
to less than ten percent (10%) of the total Participating Interest of
all the constituents of the Contractor, except where the Government
may, in special circumstances, so permit.
28.7
Nothing herein contained shall prohibit a Company in the normal course
of business from pledging its Participating Interest share for purposes
of financing, such as a mortgage, charge or encumbrance on Petroleum
assets or production of Petroleum at its own risk, cost and
responsibility. The Contractor shall provide the Government with
fifteen (15) days prior written notice before entering into any such
financing arrangements
28.8
No assignment or pledge under this Article shall have the effect of
decreasing the benefits accruing to Government under this Contract in
any manner whatsoever.
-----*****----79
ARTICLE 29
GUARANTEE
29.1
Each of the Companies shall deliver to the Government on
the Effective Date of this Contract:
(a)
a financial and performance guarantee, for the performance of all
obligations under the Contract, in the case of EOGIL from a
parent company of good financial standing acceptable to the
Government, in favour of the Government, in the form and
substance set out in Appendix E;
(b)
a legal opinion from its legal advisors, in a form satisfactory
to the Government, to the effect that the aforesaid guarantee has
been duly signed and delivered on behalf of the guarantors with
due authority and is legally valid and enforceable and binding
upon them.
29.2
If any of the documents referred to in Article 29.1 are not delivered
within the period specified herein, this Contract may be cancelled by
the Government upon ninety (90) days written notice of its intention to
do so.
29.3
Notwithstanding any change in the composition or shareholding of the
parent company furnishing the guarantees herein, it shall, under no
circumstances, be absolved of its obligations contained in the
guarantees provided pursuant to this Article.
-----*****----80
ARTICLE 30
TERMINATION OF CONTRACT
30.1
This Contract may, subject to the provisions hereinbelow and Article
31, be terminated by the Government without any financial liability
upon giving ninety (90) days written notice of its intention to do so
in the following circumstances, namely, that a Company :
(a)
has knowingly submitted any false statement to the
Government in any manner which was a material
consideration in the execution of this Contract; or
(b)
has intentionally and knowingly extracted or authorised
the extraction of any mineral not authorised to be
extracted by the Contract or without the authority of
the Government except such extractions as may be
unavoidable as a result of operations conducted
hereunder in accordance with generally accepted
international petroleum industry practice which, when
so extracted, were immediately notified to the
Government; or
(c)
is adjudged bankrupt by a competent court or enters into any
agreement or scheme of composition with its creditors or takes
advantage of any law for the benefit of debtors; or
(d)
has passed a resolution to apply to a competent court for
liquidation of the Company unless the liquidation is for the
purpose of amalgamation or reconstruction of which the Government
has been given notice and the Government is satisfied that the
Company's performance under this Contract would not be adversely
affected thereby and has given its approval thereto; or
(e)
has assigned any interest in the Contract without the
prior consent of the Government as provided in
Article 28; or
(f)
fails to make any monetary payment required by law or under this
Contract by the due date or within the specified period after the
due date; or
(g)
fails to comply with or contravenes the provisions of
this Contract in a material particular; or
(h)
fails to comply with any final determination or award
made by a sole expert or arbitrators pursuant to
Article 33; or
(i)
has been served a notice of cancellation pursuant to
Article 29.2.
PROVIDED THAT
81
where the Contractor comprises two or more Companies, the Government
shall not exercise its rights of termination pursuant to Article 30.1,
on the occurrence, in relation to one or more, but not all, of the
Companies, of an event entitling the Government to terminate the
Contract, if any other Company or Companies constituting the Contractor
satisfies the Government that it, or they, is/are willing and would be
able to carry out the obligations of the Contractor.
30.2
This Contract may also be terminated by the Government on giving the
requisite notice specified above if the events specified in Article
30.1 (c) and (d) occur with respect to a company which has given a
guarantee pursuant to Article 29 subject, however, to Article 30.3.
30.3
If the circumstances that give rise to the right of termination under
Article 30.1 (f) or (g) or Article 29.2 are remedied by the Contractor
within the ninety (90) day period or such extended period as may be
granted by the Government, following the notice of the Government's
intention to terminate the Contract as aforesaid, such termination
shall not become effective.
30.4
If the circumstance or circumstances that would otherwise result in
termination are the subject matter of proceedings under Article 33,
then termination shall not take place so long as such proceedings
continue and thereafter may only take place when and if consistent with
the arbitral award.
30.5
On termination of this Contract, for any reason whatsoever, the rights
and obligations of the Contractor shall cease but such termination
shall not affect any rights of any Party which may have accrued or any
obligations undertaken, or incurred, pursuant to this Contract, by
Government or the Contractor or any Party comprising the Contractor and
not discharged by the Contractor or the Party prior to the date of
termination.
30.6
In the event of termination pursuant to Articles 30.1 or
30.2:
(a)
the Government may require the Contractor, for a period not
exceeding one hundred and eighty (180) days from the date of
termination, to continue, for the account and at the cost of the
Government, Crude Oil or Natural Gas production activities until
the right to continue such production has been transferred to
another entity;
(b)
A Foreign Company, which is a constituent of the Contractor,
shall, subject to the provisions hereof, have the right to remove
and export all its property which has not vested in the
Government provided that in the event that ownership of any
property is in doubt,
82
or disputed, such property shall not be exported unless and until
the doubt or dispute has been settled in favour of the Foreign
Company.
-----*****----83
ARTICLE 31
FORCE MAJEURE
31.1
Performance by any Party hereto of any of its obligations under this
Contract, or in fulfilling any condition of any lease granted to such
Party, or any lease issued thereunder, shall, except for the payment of
monies due under this Contract or under the Act and the Rules or any
law, be suspended or excused if, and to the extent that, such
non-performance or delay in performance is caused by Force Majeure as
defined in this Article.
31.2
For the purpose of this Contract, the term Force Majeure means any
cause or event, other than the unavailability of funds, whether similar
to or different from those enumerated herein, beyond the reasonable
control of, and unanticipated or unforeseeable by, and not brought
about at the instance of the Party claiming to be affected by such
event, or which, if anticipated or foreseeable, could not be avoided or
provided for, and which has caused the non-performance or delay in
performance. Without limitation to the generality of the foregoing, the
term Force Majeure shall include natural phenomena or calamities,
earthquakes, typhoons, fires, wars declared or undeclared, hostilities,
invasions, blockades, riots, insurrection and civil disturbances.
31.3
Where a Party is claiming suspension of its obligations on account of
Force Majeure, it shall promptly, but in no case later than seven (7)
days after the occurrence of the event of Force Majeure, notify the
other Parties in writing giving full particulars of the Force Majeure,
the estimated duration thereof, the obligations affected and the
reasons for its suspension.
31.4
A Party claiming Force Majeure shall exercise reasonable diligence to
seek to overcome the Force Majeure event and to mitigate the effects
thereof on the performance of its obligations under this Contract
provided, however, that the settlement of strikes or differences with
employees shall be within the discretion of the Party having the
difficulty. The Party affected shall promptly notify the other Parties
as soon as the Force Majeure event has been removed and no longer
prevents it from complying with the obligations which have been
suspended and shall thereafter resume compliance with such obligations
as soon as possible. The period of work commitment or this Contract may
be extended by such additional period as may be agreed by the Parties.
31.5
Notwithstanding anything contained herein, if an event of Force Majeure
occurs and is likely to continue for a period in excess of thirty (30)
days, the Parties shall meet to discuss the consequences of the Force
Majeure and the course of action to be taken to mitigate the effects
thereof or to be adopted in the circumstances.
-----*****----84
ARTICLE 32
APPLICABLE LAW AND LANGUAGE OF THE CONTRACT
32.1
Subject to the provisions of Article 33.12, this Contract
shall be governed and interpreted in accordance with the
laws of India.
32.2
Nothing in this Contract shall entitle the Government or the Contractor
to exercise the rights, privileges and powers conferred upon it by this
Contract in a manner which will contravene the laws of India.
32.3
The English language shall be the language of this Contract and shall
be used in arbitral proceedings. All communication, hearings or visual
materials or documents relating to this Contract shall be in English.
-----*****----85
ARTICLE 33
SOLE EXPERT, CONCILIATION AND ARBITRATION
33.1
The Parties shall use their best efforts to settle amicably all
disputes, differences or claims arising out of or in connection with
any of the terms and conditions of this Contract or concerning the
interpretation or performance thereof.
33.2
Except for matters which, by the terms of this Contract, the Parties
have agreed to refer to a sole expert and any other matters which the
Parties may agree to so refer, any dispute, difference or claim arising
between the Parties hereunder which cannot be settled amicably may be
submitted by any Party to arbitration pursuant to Article 33.3. Such
sole expert shall be an independent and impartial person of
international standing with relevant qualifications and experience
appointed by agreement between the Parties. Any sole expert appointed
shall be acting as an expert and not as an arbitrator and the decision
of the sole expert on matters referred to him shall be final and
binding on the Parties and not subject to arbitration. If the Parties
are unable to agree on a sole expert, the disputed subject matter may
be referred to arbitration.
33.3
Subject to the provisions herein, any unresolved dispute, difference or
claim which cannot be settled amicably within a reasonable time may,
except for those referred to in Article 33.2, be submitted to an
arbitral tribunal for final decision as hereinafter provided.
33.4
The arbitral tribunal shall consist of three arbitrators. The Party or
Parties instituting the arbitration shall appoint one arbitrator and
the Party or Parties responding shall appoint another arbitrator and
both Parties shall so advise the other Parties. The two arbitrators
appointed by the Parties shall appoint the third arbitrator.
33.5
Any Party may, after appointing an arbitrator, request the other
Party(ies) in writing to appoint the second arbitrator. If such other
Party fails to appoint an arbitrator within forty-five (45) days of
receipt of the written request to do so, such arbitrator may, at the
request of the first Party, be appointed by the Secretary General of
the Permanent Court of Arbitration at the Hague, within forty-five (45)
days of the date of receipt of such request, from amongst persons who
are not nationals of the country of any of the Parties to the
arbitration proceedings.
33.6
If the two arbitrators appointed by the Parties fail to agree on the
appointment of the third arbitrator within thirty (30) days of the
appointment of the second arbitrator and if the Parties do not
otherwise agree, the Secretary General of the Permanent Court of
Arbitration at the Hague
86
may, at the request of either Party and in consultation with both,
appoint the third arbitrator who shall not be a national of the country
of any Party.
33.7
If any of the arbitrators fails or is unable to act, his successor
shall be appointed in the manner set out in this Article as if he was
the first appointment.
33.8
The decision of the arbitration tribunal and, in the case of difference
among the arbitrators, the decision of the majority, shall be final and
binding upon the Parties.
33.9
Arbitration proceedings shall be conducted in accordance with the
arbitration rules of the United Nations Commission on International
Trade Law (UNCITRAL) of 1985 except that in the event of any conflict
between these rules and the provisions of this Article 33, the
provisions of this Article 33 shall govern.
33.10
The right to arbitrate disputes and claims under this Contract shall
survive the termination of this Contract.
33.11
Prior to submitting a dispute to arbitration, a Party may submit the
matter for conciliation under the UNCITRAL conciliation rules by mutual
agreement of the Parties. If the Parties fail to agree on a conciliator
(or conciliators) in accordance with the rules, the matter may be
submitted for arbitration. No arbitration proceedings shall be
instituted while conciliation proceedings are pending and such
proceedings shall be concluded within sixty (60) days.
33.12
The venue of conciliation or arbitration proceedings pursuant to this
Article, unless the Parties otherwise agree, shall be London, England
and shall be conducted in the English language. The arbitration
agreement contained in this Article 33 shall be governed by the laws of
England. Insofar as practicable, the Parties shall continue to
implement the terms of this Contract notwithstanding the initiation of
arbitral proceedings and any pending claim or dispute.
33.13
The fees and expenses of a sole expert or conciliator appointed by the
Parties shall be borne equally by the Parties. Assessment of the costs
of arbitration including incidental expenses and liability for the
payment thereof shall be at the discretion of the arbitrators.
-----*****----87
ARTICLE 34
ENTIRE AGREEMENT, AMENDMENTS, WAIVER AND MISCELLANEOUS
34.1
This Contract supersedes and replaces any previous agreement or
understanding between the Parties, whether oral or written, on the
subject matter hereof, prior to the Effective Date of this Contract.
34.2
This Contract shall not be amended, modified, varied or supplemented in
any respect except by an instrument in writing signed by all the
Parties, which shall state the date upon which the amendment or
modification shall become effective.
34.3
No waiver by any Party of any one or more obligations or defaults by
any other Party in the performance of this Contract shall operate or be
construed as a waiver of any other obligations or defaults whether of a
like or of a different character.
34.4
The provisions of this Contract shall inure to the benefit of and be
binding upon the Parties and their permitted assigns and successors in
interest.
34.5
In the event of any conflict between any provisions in the main body of
this Contract and any provision in the Appendices, the provision in the
main body shall prevail.
34.6
The headings of this Contract are for convenience of reference only and
shall not be taken into account in interpreting the terms of this
Contract.
-----*****----88
ARTICLE 35
CERTIFICATES
35.1
A Company shall furnish, prior to execution of this Contract, a duly
authorised copy of a resolution properly and legally passed by the
Board of Directors of the Company specifying the person authorised to
execute this Contract along with a Certificate duly signed by the
Secretary or an Assistant Secretary of the Company under its seal in
this regard and to the effect that the Company has the power and
authority to enter into this Contract and to perform its obligations
thereunder and has taken all necessary action to authorise the
execution, delivery and performance of the Contract.
-----*****----89
ARTICLE 36
NOTICES
36.1
All notices, statements, and other communications to be given,
submitted or made hereunder by any Party to another shall be
sufficiently given if given in writing in the English language and sent
by registered post, postage paid, or by telegram, telex, facsimile,
radio or cable, to the address or addresses of the other Party or
Parties as follows:
a)
To the President of India through the
Secretary to the Government of India
Ministry of Petroleum and Natural Gas
Shastri Bhavan
Dr. Rajendra Prasad Marg
New Delhi 110 001, India
Attention: Joint Secretary
Facsimile No. : 91-11-384-787
b)
The Secretary
Oil & Natural Gas Corporation Limited
Tower II, 8th Floor, Jeevan Bharati
124 Connaught Circus
New Delhi 110 001, India
Facsimile No. : 91-11-331-6413
c)
Reliance Industries Limited
Maker Chambers IV, 3rd Floor
222 Nariman Point
Bombay 400 021 INDIA
Attention: Chief Executive Officer Oil & Gas
Facsimile No. :
022-204-2268
d)
Enron Oil & Gas India Ltd.
Amiya Apartments, 1st Floor
63A Linking Road, Santa Cruz (W)
Bombay 400 054 INDIA
Attention: Managing Director
Facsimile No.:
011-91-22-604-9119
with a copy to:
Enron Oil & Gas India Ltd.
1400 Smith Street
Houston, Texas 77002, U.S.A.
Attention: Vice President, Operations
Facsimile No. :
713-646-8115
36.2
Notices when given in terms of Article 36.1 shall be effective when
delivered if offered at the address of the other Parties as under
Article 36.1 during business hours on working days and, if received
outside business hours, on the next following working day.
90
36.3
Any Party may, by reasonable notice as provided hereunder to the other
Parties, change its address and other particulars for notice purpose.
IN WITNESS WHEREOF, the representatives of the Parties to
this Contract being duly authorised have hereunto set their hands
and have executed these presents this 22nd day of December 1994.
Signed for and on
behalf of the
President of India
By /s/ NAJERB JR. 22-12-94
Najerb Jr.
In the presence of
/s/ V. RAMANI
V. Ramani
Signed for and on behalf
of Oil & Natural Gas
Corporation Limited
By /s/ S. K. MANGLIK 22-12-94
S. K. Manglik
In the presence of
/s/ R. N. DESAI 22-12-94
R. N. Desai
Signed for and on behalf
of Reliance Industries
Limited
By /s/ AKHIL GUPTA 22-12-94
Akhil Gupta
In the presence of
/s/ BA LA SAGRAMANIA
Ba La Sagramania
Signed for and on behalf
of Enron Oil & Gas India Ltd.
By /s/ J. A. KOPECKY 22-12-94
J. A. Kopecky
In the presence of
/s/ E. J. VANDERMARK
E. J. Vandermark
-----*****----91
APPENDIX A
DESCRIPTION OF CONTRACT AREA
The area comprising approximately 1471 sq. km offshore India identified
as Tapti Block described herein and shown under map attached as
Appendix B.
Longitude and Latitude measurements are as follows:
LATITUDE
A.
B.
C.
D.
E.
LONGITUDE
20(degree)50'00"N
20(degree)50'00"N
20(degree)35'00"N
20(degree)20'00"N
20(degree)20'00"N
71(degree)49'00"E
72(degree)08'00"E
72(degree)08'00"E
71(degree)53'00"E
71(degree)49'00"E
-----*****----92
APPENDIX B
MAP OF CONTRACT AREA
TAPTI BLOCK
-----*****----93
APPENDIX C
ACCOUNTING PROCEDURE
TO
PRODUCTION SHARING CONTRACT
BETWEEN
THE GOVERNMENT OF INDIA
AND
ONGC/RIL/EOGIL
94
TABLE OF CONTENTS
SECTIONS
CONTENT
SECTION 1:
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
SECTION 2:
2.1
2.2
2.3
2.4
2.5
2.6
SECTION 3:
3.1
3.2
3.3
3.4
3.5
GENERAL PROVISIONS
Purpose
Definitions
Inconsistency
Documentation and Statements to be Submitted by
the Contractor
Language and Units of Account
Currency Exchange Rates
Payments
Arms Length Transactions
Audit and Inspection Rights of the Government
Revision of Accounting Procedure
CLASSIFICATION, DEFINITION AND ALLOCATION OF
COSTS AND EXPENDITURES
Segregation of Costs
Exploration Costs
Development Costs
Production Costs
Service Costs
General and Administrative Costs
COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL
INCOME OF THE CONTRACTOR
Costs Recoverable and Allowable Without Further
Approval of the Government
3.1.1
Surface Rights
3.1.2
Labor & Associated Costs
3.1.3
Transportation Costs
3.1.4
Charges for Services
(a)
Third Party Contracts
(b)
Affiliated Company Contracts
3.1.5
Communications
3.1.6
Office, Shore Bases and Miscellaneous
Facilities
3.1.7
Environmental Studies and Protection
3.1.8
Materials and Equipment
(a)
General
(b)
Warranty
(c)
Value of Materials Charged to
the Account
3.1.9
Duties, Fees and Other Charges
3.1.10
Insurance and Losses
3.1.11
Legal Expenses
3.1.12
Training Costs
3.1.13
General and Administrative Costs
Costs Not Recoverable and Not Allowable under the
Contract
Other Costs Recoverable and Allowable
Incidental Income and Credits
Non-Duplication of Charges and Credits
95
SECTION 4:
4.1
4.2
RECORDS AND INVENTORIES OF ASSETS
Records
Inventories
SECTION 5:
PRODUCTION STATEMENT AND ROYALTY AND CESS
STATEMENT
SECTION 6:
VALUE OF PRODUCTION AND PRICING STATEMENT
SECTION 7:
STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS
SECTION 8:
COST RECOVERY STATEMENT
SECTION 9:
PRODUCTION SHARING STATEMENT
SECTION 10:
END OF YEAR STATEMENT
SECTION 11:
BUDGET STATEMENT
-----*****----96
ACCOUNTING PROCEDURE
SECTION 1
GENERAL PROVISIONS
1.1
PURPOSE
Generally, the purpose of this Accounting Procedure is to set out
principles and procedures of accounting which will enable the
Government of India to monitor effectively the Contractor's costs,
expenditures, production and income so that the Government's
entitlement to Profit Petroleum, royalty, cess, etc., as well as
Contractor's entitlement to Cost Petroleum and Profit Petroleum can be
accurately determined pursuant to the terms of the Contract. More
specifically, the purpose of the Accounting Procedure is to:
-
classify costs and expenditures and to define which
costs and expenditures shall be allowable for cost
recovery, production sharing and participation
purposes;
-
specify the manner in which the Contractor's accounts
shall be prepared and approved.
This Accounting Procedure is intended to apply to the provisions of the
Contract and is without prejudice to the computation of income tax
under applicable provisions of the Income Tax Act, 1961, as amended.
1.2
DEFINITIONS
For purposes of this Accounting Procedure, the terms used herein which
are defined in the Contract shall have the same meaning when used in
this Accounting Procedure.
1.3
INCONSISTENCY
In the event of any inconsistency or conflict between the provisions of
this Accounting Procedure and the other provisions of the Contract, the
other provisions of the Contract shall prevail.
1.4
DOCUMENTATION AND STATEMENTS TO BE SUBMITTED BY THE
CONTRACTOR
1.4.1
Within thirty (30) days of the Effective Date of
the Contract, the Contractor shall submit to and
discuss with the Government a proposed outline of
charts of accounts, operating records and
reports, which outline shall reflect each of the
categories and sub-categories of costs and income
specified in Sections 2 and 3 and shall be in
accordance with generally accepted standards and
recognized accounting systems and consistent with
97
normal petroleum industry practice and procedures
for joint venture operations.
Within ninety (90) days of receiving the above submission,
the Government shall either provide written notification of
its approval of the proposal or request, in writing,
revisions to the proposal.
Within one hundred and eighty (180) days from the Effective
Date of the Contract, the Contractor and the Government
shall agree on the outline of charts of accounts, records
and reports which shall also describe the basis of the
accounting system and procedures to be developed and used
under this Contract. Following such agreement, the
Contractor shall expeditiously prepare and provide the
Government with formal copies of the comprehensive charts
of accounts, records and reports and allow the Government
to examine the manuals and to review procedures which are,
and shall be, observed under the Contract.
1.4.2
Notwithstanding the generality of the foregoing, the
Contractor shall make regular Statements relating to the
Petroleum Operations as follows :
(i)
(ii)
(iii)
(iv)
(v)
1.4.3
Production Statement and Royalty and
Cess Statement (see Section 5 of this
Accounting Procedure)
Value of Production and Pricing
Statement (see Section 6 of this
Accounting Procedure)
Statement of Costs, Expenditures and
Receipts (see Section 7 of this
Accounting Procedure)
Cost Recovery Statement (see Section 8
of this Accounting Procedure)
Production Sharing Statement (see
Section 9 of this Accounting Procedure)
(vi)
End of Year Statement (see Section 10 of
this Accounting Procedure)
(vii)
Budget Statement (see Section 11 of this
Accounting Procedure)
All reports and statements shall be prepared in accordance
with the Contract and the laws of India and, where there
are no relevant provisions in either of these, in
accordance with generally
98
1.5
accepted practices in the international petroleum
industry.
1.4.4
Each of the entities constituting the Contractor
shall be responsible for maintaining its own
accounting records in order to comply with all
legal requirements and to support all returns or
any other accounting reports required by any
Government authority in relation to the Petroleum
Operations. However, for the purposes of giving
effect to this Accounting Procedure, the
Contractor shall appoint, and notify the
Government in writing thereof, one of the Parties
constituting Contractor who shall be responsible
for maintaining, at its business office in India,
on behalf of the Contractor, all the accounts of
the Petroleum Operations in accordance with the
provisions of the Accounting Procedure and the
Contract.
LANGUAGE AND UNITS OF ACCOUNT
All accounts, records, books, reports and statements shall be
maintained on an accrual basis and prepared in the English language.
The accounts shall be maintained in United States Dollars, which shall
be the controlling currency of account for cost recovery, production
sharing and participation purposes. Metric units and Barrels shall be
employed for measurements required under the Contract. Where necessary
for clarification, the Contractor may also maintain accounts and
records in other languages, currencies and units. Following any new
discovery of Petroleum the Parties shall meet to establish specific
principles and procedures for identifying all costs, expenditures,
receipts and income with respect to the Contract Area.
1.6
CURRENCY EXCHANGE RATES
1.6.1
For translation purposes between United States
1.6.2
Dollars and Indian Rupees or any other currency,
the previous month's average of the daily means
of the buying and selling rates of exchange as
quoted by the State Bank of India (or any other
financial body as may be mutually agreed between
the Parties) shall be used for the month in which
the revenues, costs, expenditures, receipts or
income are recorded. However, in the case of any
single non-US Dollar transaction in excess of the
equivalent of one hundred thousand US Dollars
(US$100,000), the conversion into US Dollars
shall be performed on the basis of the average of
the applicable exchange rates for the day on
which the transaction occurred.
Any realized or unrealized gains or losses from
the exchange of currency in respect of Petroleum
Operations shall be credited or charged to the
accounts. A record of the exchange rates used in
99
converting Indian Rupees or any other currencies into
United States Dollars as specified in Section 1.6.1 shall
be maintained by the Contractor and shall be identified in
the relevant statements required to be submitted by the
Contractor in accordance with Section 1.4.2.
1.7
1.8
PAYMENTS
1.7.1
Subject to the foreign exchange laws and regulations
prevailing from time to time, all payments between the
Parties shall, unless otherwise agreed, be in United States
Dollars and shall be made through a bank designated by each
receiving Party.
1.7.2
Unless otherwise specified, all sums due under the Contract
shall be paid within forty-five (45) days from the date on
which the obligation to pay was incurred.
1.7.3
Unless otherwise specified, all sums due by one Party to
the other under the Contract during any month shall, for
each day such sums are overdue during such month, bear
interest compounded daily at the applicable LIBOR plus one
percentage (1%) point.
ARMS LENGTH TRANSACTIONS
Unless otherwise specifically provided for in the Contract, all
transactions giving rise to revenues, costs or expenditures which will
be credited or charged to the accounts prepared, maintained or
submitted hereunder shall be conducted at arms length or on such a
basis as will assure that all such revenues, costs or expenditures will
be equal to or better than, as the case may be, would result from a
transaction conducted at arms length on a competitive basis with third
parties. For the purposes of clarification, this means revenues would
be equal to or higher and costs would be equal to or lower.
1.9
AUDIT AND INSPECTION RIGHTS OF THE GOVERNMENT
1.9.1
Without prejudice to statutory rights, the
Government, upon at least ninety (90) days
advance written notice to the Contractor, shall
have the right to inspect and audit, during
normal business hours , all records and documents
supporting costs, expenditures, expenses,
receipts and income, such as Contractor's
accounts, books, records, invoices, cash
vouchers, debit notes, price lists or similar
documentation with respect to the Petroleum
Operations conducted hereunder in each Financial
100
Year, within two (2) years (or such longer period as may be
required in exceptional circumstances) from the end of such
Financial Year.
1.9.2
The Government may undertake the conduct of the audit
either through its own representatives or through a
qualified firm of recognized international chartered
accountants, registered in India, appointed for the purpose
by the
Government.
1.9.3
In conducting the audit, the Government or its
auditors shall be entitled to examine and verify,
at reasonable times, all charges and credits
relating to Contractor's activities under the
Contract and all books of account, accounting
entries, material records and inventories,
vouchers, payrolls, invoices and any other
documents, correspondence and records considered
necessary by the Government to audit and verify
the charges and credits. The auditors shall also
have the right, in connection with such audit, to
visit and inspect, at reasonable times, all
sites, plants, facilities, warehouses and offices
of the Contractor directly or indirectly serving
the Petroleum Operations, and to physically
examine other property, facilities and stocks
used in Petroleum Operations, wherever located
and to question personnel associated with those
operations. Where the Government requires
verification of charges made by an Affiliate, the
Government shall have the right to obtain an
audit certificate from an internationally
recognized firm of public accountants acceptable
to both the Government and the Contractor, which
may be the Contractor's statutory auditor. Any
and all such costs shall be for the Government's
account.
1.9.4
Any audit exceptions shall be made by the Government in
writing and notified to the Contractor within one hundred
and twenty (120) days following completion of the audit in
question.
1.9.5
The Contractor shall answer any notice of exception under
Section 1.9.4 within one hundred and twenty (120) days of
the receipt of such notice. Where the Contractor has, after
the one hundred and twenty (120) days, failed to answer a
notice of exception, the exception shall prevail.
1.9.6
All agreed adjustments resulting from an audit
and all adjustments required by prevailing
exceptions shall be promptly made in the
101
Contractor's accounts and any consequential
adjustments to the Government's entitlement to
Petroleum shall be made as promptly as
practicable.
1.9.7
1.10
If the Contractor and the Government are unable
to reach final agreement on proposed audit
adjustments, either Party may refer any dispute
thereon to a sole expert as provided for in the
Contract. So long as any issues are outstanding
with respect to an audit, the Contractor shall
maintain the relevant documents and permit
inspection thereof until the issue is resolved.
REVISION OF THE ACCOUNTING PROCEDURE
1.10.1
By mutual agreement between the Government and the
Contractor, this Accounting Procedure may be revised from
time to time, in writing, signed by the Parties, stating
the date upon which the amendments shall become effective.
-----*****----102
SECTION 2
CLASSIFICATION, DEFINITION AND ALLOCATION
OF COSTS AND EXPENDITURES
2.1
SEGREGATION OF COSTS
Costs shall be segregated in accordance with the purposes for which
such expenditures are made. All costs and expenditures allowable under
Section 3, relating to Petroleum Operations, shall be classified,
defined and allocated as set out below in this Section. Expenditure
records shall be maintained in such a way as to enable proper
allocation.
2.2
EXPLORATION COSTS
Exploration Costs are all direct and allocated indirect expenditures
incurred in the search for Petroleum in an area which is, or was at the
time when such costs were incurred, part of the Contract Area,
including expenditures incurred in respect of:
2.2.1
Aerial, geophysical, geochemical, palaeontological,
geological, topographical and seismic surveys, analyses and
studies and their interpretation.
2.2.2
Core hole drilling and water well drilling.
2.2.3
Labor, materials, supplies and services used in drilling
Wells with the object of finding Petroleum or in drilling
Appraisal Wells provided that if such Wells are completed
as producing Wells, the costs of completion thereof shall
be classified as Development Costs.
2.2.4
Facilities used solely in support of the purposes described
in Sections 2.2.1, 2.2.2 and 2.2.3 above, including access
roads, all separately identified.
2.2.5
Any Service Costs and General and Administrative
Costs directly incurred on exploration activities
and identifiable as such and a portion of the
remaining Service Costs and General and
Administrative Costs allocated to Exploration
Operations determined by the proportionate share
of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Exploration Costs.
2.2.6
Geological and geophysical information purchased
or acquired in connection with Exploration
Operations.
103
2.2.7
2.3
Any other expenditure incurred in the search for
Petroleum not covered under Sections 2.3 or 2.4.
DEVELOPMENT COSTS
Development Costs are all direct and allocated indirect expenditures
incurred with respect to the development of the Contract Area including
expenditures incurred on account of:
2.3.1
Drilling Development Wells, whether these Wells are dry or
producing and drilling Wells for the injection of water or
Gas to enhance recovery of Petroleum and Recompletion or
working over of existing or service wells.
2.3.2
Purchase, installation or construction of
production, transport and storage facilities for
production of Petroleum from a Field, such as
pipelines, flow lines, production and treatment
units, wellhead equipment, subsurface equipment,
enhanced recovery systems, offshore and onshore
platforms, export terminals and piers, harbours
and related facilities and access roads for
production activities.
2.4
2.3.3
Engineering and design studies for facilities
referred to in Section 2.3.2.
2.3.4
Any Service Costs, joint Development Plans and
General and Administrative Costs directly
incurred in Development Operations and
identifiable as such and a portion of the
remaining Service Costs and General and
Administrative Costs allocated to development
activities, determined by the proportionate share
of total Contract Costs (excluding General and
Administrative Costs and Service Costs) represented by all other Development Costs.
PRODUCTION COSTS
2.4.1
Production Costs are expenditures incurred on
Production Operations in respect of the Contract
Area after the start of production from the Field
(which are other than Exploration and Development
Costs). The balance of General and Administrative Costs and Service Costs not allocated to
Exploration Costs or Development Costs shall be
allocated to Production Costs.
2.4.2
Production Costs shall include costs for completion of
Exploration Wells by way of installation of casing or
equipment or otherwise or for the purpose of bringing a
Well into use as a producing Well or as a Well for the
injection
104
of water or Gas to enhance recovery of Petroleum and
Recompletion or working over of existing or service wells.
2.5
SERVICE COSTS
Service Costs are direct and indirect expenditures incurred in support
of Petroleum Operations in the Contract Area, including expenditures on
insurance, environmental protection, warehouses, piers, marine vessels,
vehicles, motorized rolling equipment, aircraft, fire and security
stations, workshops, water and sewerage plants, power plants, housing,
community and recreational facilities and furniture and tools and
equipment used in these activities. Service Costs in any Year shall
include the costs incurred in such Year to purchase and/or construct
the facilities as well as the annual costs of maintaining and operating
the same, each to be identified separately. All Service Costs shall be
regularly allocated as specified in Sections 2.2.5, 2.3.4 and 2.4 to
Exploration Costs, Development Costs and Production Costs and shall be
separately shown under each of these categories. Where Service Costs
are made in respect of shared facilities, the basis of allocation of
costs to Petroleum Operations hereunder shall be on the basis of gross
expenditures.
2.6
GENERAL AND ADMINISTRATIVE COSTS
General and Administrative Costs are expenditures incurred on general
administration and management primarily and principally related to
Petroleum Operations in or in connection with the Contract Area, and
shall include:
2.6.1
main office, field office and general
administrative expenditures in India, including
supervisory, accounting and employee relations
services;
2.6.2
an annual overhead charge for services rendered
by the parent company or an Affiliate of the
Operator outside India to support and manage
Petroleum Operations under the Contract, and for
staff advice and assistance including financial,
legal, accounting and employee relations
services, but excluding any remuneration for
services charged separately under this Accounting
Procedure calculated on the basis of one percent
(1%) of expenditures.
2.6.3
The expenditures used to calculate the monthly indirect
charge shall not include the indirect charge (calculated
either as a percentage of expenditures or as a minimum
monthly charge), rentals on surface rights acquired and
maintained for the joint account, guarantee deposits,
105
concession acquisition costs, bonuses paid in accordance
with the Contract, royalties, value added taxes and taxes
paid under the Contract, settlement of claims, proceeds
from the sale of assets (including division in kind)
amounting to more than US$10,000 per transaction, and
similar items mutually agreed upon by the parties.
2.6.3
The expenditures used to calculate the monthly
indirect charge shall not include the indirect
charge (calculated either as a percentage of
expenditures or as a minimum monthly charge),
rentals on surface rights acquired and maintained
for the joint account, guarantee deposits,
concession acquisition costs, bonuses paid in
accordance with the Contract, royalties, value
added taxes and taxes paid under the Contract,
settlement of claims, proceeds from the sale of
assets (including division in kind) amounting to
more than US$10,000 per transaction, and similar
items mutually agreed upon by the parties.
Credits arising from any government subsidy payment and
disposition of joint account property shall not be deducted
from total expenditures in determining such charge.
2.6.4
The indirect charges provided for in this Section may be
amended periodically by mutual agreement between the
Parties if, in practice, these charges are found to be
insufficient or
excessive.
-----*****----106
SECTION 3
COSTS, EXPENSES, EXPENDITURES AND INCIDENTAL
INCOME OF THE CONTRACTOR
3.1
COSTS RECOVERABLE AND ALLOWABLE WITHOUT FURTHER APPROVAL OF
THE GOVERNMENT.
Costs incurred by the Contractor on Petroleum Operations pursuant to
the Contract as classified under the headings referred to in Section 2
shall be allowable for the purposes of the Contract except to the
extent provided in Section 3.2 or elsewhere in this Accounting
Procedure, and subject to audit as provided for herein.
3.1.1
Surface Rights
All direct costs necessary for the acquisition, renewal or
relinquishment of surface rights acquired and maintained in
force for the purposes of the Contract except as provided
in
Section 3.1.9.
3.1.2
Labor and Associated Costs
(a) Costs of all Contractor's locally recruited
employees who are directly engaged in the
conduct of Petroleum Operations under the
Contract in India. Such costs shall include
the costs of employee benefits and Government
benefits for employees and levies imposed on
the Contractor as an employer, transportation
and relocation costs within India of the
employee and such members of the employee's
family (limited to spouse and dependent
children) as required by law or customary
practice in India. If such employees are
engaged in other activities in India, in
addition to Petroleum Operations, the cost of
such employees shall be apportioned on a time
sheet basis according to sound and acceptable
accounting principles.
(b) Assigned Personnel
Costs of salaries and wages, including bonuses,
of the Contractor's employees directly and
necessarily engaged in the conduct of the
Petroleum Operations under the Contract, whether
temporarily or permanently assigned,
irrespective of the location of such employees,
it being understood that in the case of those
personnel only a portion of whose time is wholly
dedicated to Petroleum Operations under the
Contract, only that
107
pro rata portion of applicable salaries, wages
and other costs, as specified in Sections
3.1.2(c), (d), (e)and (f) shall be charged and
the basis of such pro rata allocation shall be
specified.
(c) Expenses or contributions made pursuant to assessments
or obligations imposed under the laws of India which
are applicable to the Contractor's cost of salaries
and wages.
(d) The Contractor's cost of established plans
for employees' group life insurance,
hospitalization, pension, retirement and
other benefit plans of a like nature
customarily granted to the Contractor's
employees provided, however, that such costs
are in accordance with generally accepted
standards in the international petroleum
industry, applicable to salaries and wages
chargeable to Petroleum Operations under
Section 3.1.2(b) above.
(e) Personal Income taxes where and when they are paid by
the Contractor to the Government of India for the
employee, in accordance with the Contractor's standard
personnel policies.
(f) Reasonable transportation and travel expenses
of employees of the Contractor, including
those made for travel and relocation of the
expatriate employees, including their
dependent family and personal effects,
assigned to India whose salaries and wages
are chargeable to Petroleum Operations under
Section 3.1.2(b). Actual transportation
expenses of personnel transferred to
Petroleum Operations from their country of
origin and/or relocation to their country of
origin shall be charged to the Petroleum
Operations. Where such transfer or
relocation is to or from a country other than
the country of origin there shall be no
reimbursement.
Transportation cost as used in this Section shall mean the
cost of freight and passenger service and any accountable
incidental expenditures related to transfer travel and
authorized under Contractor's standard personnel policies.
Contractor shall ensure that all expenditures related to
transportation costs are equitably allocated to the
activities which have benefited from the personnel
concerned.
108
3.1.3
Transportation Costs
The reasonable cost of transportation of equipment,
materials and supplies within India and from outside India
to India necessary for the conduct of Petroleum Operations
under the Contract, including, but not limited to, directly
related costs such as unloading charges, dock fees and
inland and ocean freight charges.
3.1.4
Charges for Services
(a) Third Party Contracts
The actual costs of contract services, services of
professional consultants, utilities and other services
necessary for the conduct of Petroleum Operations
under the Contract performed by third parties other
than an Affiliate of the Contractor, provided that the
transactions resulting in such costs are undertaken
pursuant to Section 1.8 of this Accounting Procedure.
(b) Affiliated Company Contracts
(i)
Professional and Administrative Services
and Expenses
Cost of professional and administrative services
provided by any Affiliate for the direct benefit
of Petroleum Operations, including, but not
limited to, services provided by the production,
exploration, legal, financial, insurance,
accounting and computer services divisions other
than those covered by Section 3.1.4(b)(ii) which
Contractor may use in lieu of having its own
employees. Charges shall be equal to the actual
cost of providing their services, shall not
include any element of profit and shall not be
any higher than the most favorable prices
charged by the Affiliate to third parties for
comparable services under similar terms and
conditions elsewhere and will be fair and
reasonable in the light of prevailing
international petroleum industry practice and
experience.
(ii)
Scientific or Technical Personnel
Cost of scientific or technical
personnel services provided by any
109
Affiliate of Contractor for the direct benefit
of Petroleum Operations, which cost shall be
charged on a cost of service basis. Charges
therefor shall not exceed charges for comparable
services currently provided by outside technical
service organizations of comparable
qualifications. Unless the work to be done by
such personnel is covered by an approved Work
Programme and Budget, Operator shall not
authorize work by such personnel without
approval of the Management Committee.
(c) Equipment, facilities and property owned and
furnished by the Contractor's Affiliates, at
rates commensurate with the cost of ownership
and operation provided, however, that such
rates shall not exceed those currently
prevailing for the supply of like equipment,
facilities and property on comparable terms
in the area where the Petroleum Operations
are being conducted. The equipment and
facilities referred to herein shall exclude
major investment items such as (but not
limited to) drilling rigs, producing
platforms, oil treating facilities, oil and
gas loading and transportation systems,
storage and terminal facilities and other
major facilities, rates for which shall be
subject to separate agreement with the
Government.
3.1.5
Communications
Cost of acquiring, leasing, installing,
operating, repairing and maintaining communication systems
including satellite, radio and microwave facilities between
the Contract Area and the Contractor's base facility,
offices, helicopter bases, port and railway yards.
3.1.6
Office, Shore Bases and Miscellaneous Facilities
Net cost to Contractor of establishing, maintaining and
operating any office, sub-office, shore base facility,
warehouse, housing or other facility directly serving the
Petroleum Operations. If any such facility services
contract areas other than the Contract Area, or any
business other than Petroleum Operations, the net costs
thereof shall be allocated on an equitable and consistent
basis.
110
3.1.7
Environmental Studies and Protection
Costs incurred in conducting the environmental impact
studies for the Contract Area, and in taking environmental
protection measures pursuant to the terms of the Contract.
3.1.8
Materials and Equipment
(a) General
So far as is practicable and consistent with efficient
and economical operation, only such material shall be
purchased or furnished by the Contractor for use in
the Petroleum Operations as may be required for use in
the reasonably foreseeable future and the accumulation
of surplus stocks shall be avoided to the extent
possible. Material and equipment held in inventory
shall only be charged to the accounts when such
material is removed from inventory and used in
Petroleum Operations. Contractor shall be allowed to
recover interest at the LIBOR rate plus one percent
(1%) for reasonable inventories it carries. Costs
shall be charged to the accounting records and books
based on the average cost method.
(b) Warranty
In the case of defective material or equipment, any
adjustment received by the Contractor from the
suppliers or manufacturers or their agents in respect
of any warranty on material or equipment shall be
credited to the accounts under the Contract.
(c) Value of Materials Charged to the Accounts
Under the Contract.
(i)
Except as otherwise provided in
subparagraph (b), materials purchased by
the Contractor and used in the Petroleum
Operations shall be valued to include
invoice price less trade and cash
discounts, if any, purchase and
procurement fees plus freight and
forwarding charges between point of
supply and point of shipment, freight to
port of destination, insurance, taxes,
customs duties, consular fees, other
items chargeable against imported
material and, where applicable ,
111
handling and transportation costs from point of
importation to or from warehouse or operating
site, and these costs shall not exceed those
currently prevailing in normal arms length
transactions on the open market.
(ii) Material purchased from or sold to Affiliates or
transferred to or from activities of the
Contractor other than Petroleum Operations under
the Contract:
(aa)
new material (hereinafter
referred to as condition A)
shall be valued at the current
international price which shall
not exceed the price prevailing
in normal arms length transactions on the open market;
(bb)
used material which is in sound
and serviceable condition and
is suitable for reuse without
reconditioning (hereinafter
referred to as condition B)
shall be priced at not more
than seventy-five percent (75%)
of the current price of the
above mentioned new materials;
(cc)
used material which cannot be
classified as condition B, but
which, after reconditioning,
will be further serviceable for
original function as good
second-hand condition B
material or is serviceable for
original function, but
substantially not suitable for
reconditioning (hereinafter
referred to as condition C)
shall be priced at not more
than fifty per cent (50%) of
the current price of the new
material referred to above as
condition A.
The cost of reconditioning shall be charged to the
reconditioned material, provided that the condition C
material value plus the cost of reconditioning does not
exceed the value of condition B material.
112
Material which cannot be classified as condition B or
condition C shall be priced at a value commensurate with
its use.
Material involving erection expenditure shall be charged at
the applicable condition percentage (referred to above) of
the current knocked-down price of new material referred to
above as condition A.
When the use of material is temporary and its service to
the Petroleum Operations does not justify the reduction in
price in relation to materials referred to above as
conditions B and C, such material shall be priced on a
basis that will result in a net charge to the accounts
under the Contract consistent with the value of the service
rendered.
3.1.9
Duties, Fees and Other Charges
Any duties, levies, fees, charges and any other assessments
levied by any governmental or taxing authority in
connection with the Contractor's activities under the
Contract and paid directly by the Contractor except
corporate income tax payable by the constituents of the
Contractor. If Operator or its Affiliate is subject to
income or withholding tax as a result of service performed
at cost for Petroleum Operations under the Agreement, its
charges for such services may be increased by the amount of
such taxes incurred ("grossed up"), provided such charges
have not been otherwise recovered or a tax credit received.
3.1.10
Insurance and Losses
Insurance premia and costs incurred for insurance required
by law or pursuant to Article 24 of the Contract, provided
that such insurance is customary, affords prudent
protection against risk and is at a premium no higher than
that charged on a competitive basis by insurance companies
which are not Affiliates. Actual costs and losses incurred
shall be allowable to the extent not made good by
insurance. Such costs may include, but are not limited to,
repair and replacement of property resulting from damages
or losses incurred by fire, flood, storm, theft, accident
or such other cause.
113
3.1.11
Legal Expenses
All reasonable costs and expenses resulting from the
handling, investigating, asserting, defending, or settling
of any claim or legal action necessary or expedient for the
procuring, perfecting, retention and protection of the
Contract Area and in defending or prosecuting lawsuits
involving the Contract Area or any third party claim
arising out of Petroleum Operations under the Contract, or
sums paid in respect of legal services necessary for the
protection of the joint interest of Government and the
Contractor, shall be allowable. Such expenditures shall
include attorney's fees, court costs, costs of
investigation and procurement of evidence and amounts paid
in settlement or satisfaction of any such litigation and
claims provided such costs are not covered elsewhere in the
Accounting Procedure. Where legal services are rendered in
such matters by salaried or regularly retained lawyers of
the Contractor or an Affiliate, such compensation shall be
included instead under Sections 3.1.2 or 3.1.4(b)(i) above
as applicable.
3.1.12
Training Costs
All costs and expenses incurred by the Contractor in
training as is required under Article 22 of the Contract.
3.1.13
General and Administrative Costs
The costs described in Section 2.6.1 and the charge
described in Section 2.6.2 of this Accounting Procedure.
3.2
COSTS NOT RECOVERABLE AND NOT ALLOWABLE UNDER THE CONTRACT
The following costs and expenses shall not be recoverable or allowable
(whether directly as such or indirectly as part of any other charges or
expenses) for cost recovery and production sharing purposes under the
Contract:
(i)
(ii)
costs and charges incurred before the Effective Date
including costs in respect of preparation, signature or
ratification of this Contract except as otherwise provided
in Article 13.1;
expenditures in respect of any financial transaction to
negotiate, float or otherwise obtain or secure funds for
Petroleum Operations including, but not limited to,
interest, commission, brokerage and fees related to such
114
transactions, and exchange losses on loans or
other financing;
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
expenditures incurred in obtaining, furnishing and
maintaining the guarantees required under the Contract and
any other amounts spent on indemnities with regard to
non-fulfillment of contractual obligations;
attorney's fees and other costs and charges in
connection with arbitration proceedings and sole
expert determination pursuant to the Contract;
fines and penalties imposed by courts of law of
the Republic of India;
donations and contributions;
expenditures for the creation of any partnership
or joint venture arrangement;
(ix)
amounts paid with respect to non-fulfillment of
contractual obligations;
(x)
costs incurred as a result of failure to insure
where insurance is required pursuant to the
Contract;
(xi)
(xii)
3.3
costs of marketing or transportation of Petroleum
beyond the Delivery Point;
costs and expenditures incurred as a result of
wilful misconduct or gross negligence of the
Contractor's supervisory personnel;
payments pursuant to Article 16 of the Contract.
OTHER COSTS RECOVERABLE AND ALLOWABLE.
Any other costs and expenditures not included in Section 3.1 or 3.2 of
this Accounting Procedure but which have been incurred by the
Contractor for the necessary and proper conduct of Petroleum Operations
pursuant to an approved Work Programme and Budget.
3.4
INCIDENTAL INCOME AND CREDITS
All incidental income and proceeds received from Petroleum Operations
under the Contract, including but not limited to the items listed
below, shall be credited to the accounts under the Contract and shall
be taken into account for cost recovery, production sharing and
participation purposes in the manner described in Articles 13 and 14 of
the Contract:
115
(i)
The proceeds of any insurance or claim or judicial awards
in connection with Petroleum Operations under the Contract
or any assets charged to the accounts under the Contract
where such operations or assets have been insured and the
premia charged to the accounts under the Contract;
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
3.5
Revenue received from third parties for the use
of property or assets, the cost of which has been
charged to the accounts under the Contract;
Any adjustment received by the Contractor from the
suppliers/manufacturers or their agents in connection with
defective material, the cost of which was previously
charged by the Contractor to the accounts under the
Contract;
Rentals, refunds or other credits received by the
Contractor which apply to any charge which has
been made to the accounts under the Contract;
Prices originally charged to the accounts under the
Contract for materials subsequently exported from the
Republic of India without being used in Petroleum
Operations under the Contract;
Proceeds from the sale or exchange by the Contractor of
plant or facilities from a Field, the acquisition costs of
which have been charged to the accounts under the Contract
for the relevant Field;
Legal costs charged to the accounts under Section 3.1.11 of
this Accounting Procedure and subsequently recovered by the
Contractor.
NON-DUPLICATION OF CHARGES AND CREDITS
Notwithstanding any provision to the contrary in this Accounting
Procedure, it is the intention that there shall be no duplication of
charges or credits to the accounts under the Contract.
-----*****----116
SECTION 4
RECORDS AND INVENTORIES OF ASSETS
4.1
4.2
RECORDS
4.1.1
The Contractor shall keep and maintain detailed
records of property and assets in use for or in
connection with Petroleum Operations under the
Contract in accordance with normal practices in
exploration and production activities of the
international petroleum industry. Such records
shall include information on quantities, location
and condition of such property and assets, and
whether such property or assets are leased or
owned.
4.1.2
The Contractor shall furnish annually particulars to the
Government, by notice in writing as provided in the
Contract, of all major assets acquired by the Contractor to
be used for or in connection with Petroleum Operations.
INVENTORIES
4.2.1
The Contractor shall:
(a) not less than once every twelve (12) Calendar
Months with respect to movable assets take an
inventory of the controllable assets used for
or in connection with Petroleum Operations in
terms of the Contract and address and deliver
such inventory to the Government with a
statement of the principles upon which
valuation of the assets mentioned in such
inventory has been based. Controllable
assets means those assets the Operator shall
submit to detailed record keeping.
(b) not less than once every three (3) years with
respect to immovable assets, take an
inventory of the assets used for or in
connection with Petroleum Operations in terms
of the Contract and address and deliver such
inventory to the Government together with a
written statement of the principles upon
which valuation of the assets mentioned in
such inventory has been based. Immovable
assets means those assets which are placed in
service and have an original cost in excess
of Fifty Thousand United States Dollars
(US$50,000).
4.2.2
The Contractor shall give the Government at least thirty
(30) days notice in writing in the manner provided for in
the Contract of its intention to take the inventory
referred to in Section 4.2.1
117
and the Government shall have the right to be
represented when such inventory is taken.
4.2.3
When an assignment of rights under the Contract takes
place, a special inventory shall be taken by the Contractor
at the request of the assignee provided that the cost of
such inventory is borne by the assignee and paid to the
Contractor.
4.2.4
In order to give effect to Article 27 of the Contract, the
Contractor shall provide the Government with a
comprehensive list of all relevant assets when requested by
the Government to do so.
-----*****----118
SECTION 5
PRODUCTION STATEMENT AND ROYALTY AND CESS STATEMENT
5.1
From the date of first production, after the Effective Date, of
Petroleum from the Contract Area, the Contractor shall submit a
Production Statement for each Calendar Month to Government showing the
following information separately for each producing field and in
aggregate for the Contract Area:
5.1.1
The quantity of Crude Oil produced and saved.
5.1.2
The quality and characteristics of such Crude Oil
produced and saved.
5.1.3
The quantity of Associated Natural Gas and Non
Associated Natural Gas produced and saved.
5.1.4
The quality, characteristics and composition of
such Natural Gas produced and saved.
5.1.5
The quantities of Crude Oil and Natural Gas used for the
purposes of carrying on drilling and Production Operations
and pumping to field storage, as well as quantities
reinjected.
5.1.6
The quantities of Crude Oil and Natural Gas
unavoidably lost.
5.1.7
The quantities of Natural Gas flared and vented.
5.1.8
The size of Petroleum stocks held on the first
day of the Calendar Month in question.
5.1.9
The size of Petroleum stocks held on the last day
of the Calendar Month in question.
5.1.10
The quantities of Natural Gas reinjected into the
Petroleum Reservoir.
5.1.11
The number of days in the Calendar Month during which
Petroleum was produced from each Field.
5.1.12
The Gas/Oil ratio for each Field for the relevant
Calendar Month.
5.1.13
The water/Oil ratio for each Field for the
relevant Calendar Month, if available.
5.2
All quantities shown in this Statement shall be expressed in both
volumetric terms (barrels of oil and cubic metres of gas) and in weight
(metric tonnes).
5.3
The Government may direct in writing that the Contractor
include other particulars relating to the production of
119
Petroleum in its Production Statement, and the Contractor shall to the
extent possible comply with such direction.
5.4
The Production Statement for each Calendar Month shall be submitted to
Government no later than ten (10) days after the end of such Calendar
Month for Oil and the immediately succeeding Calendar Month for Gas.
5.5
The Contractor shall, for the purposes of Article 15, submit a
statement to Government providing the calculation of the amount of
royalty and cess, separately, paid with respect to each Calendar Month
for each producing Field and in aggregate for the Contract Area. The
statement shall show the following information:
5.6
5.5.1
The quantity of Crude Oil and Condensate produced
and saved.
5.5.2
The quantity of ANG and NANG produced and saved.
5.5.3
The amount of royalty and cess, separately, paid on Crude
Oil and Condensate produced, saved and sold and the
particulars of the calculation thereof.
5.5.4
The amount of royalty paid on ANG and NANG and
the particulars of the calculation thereof.
The Royalty and Cess Statement for each Calendar Month shall be
submitted to Government no later than twenty-one (21) days after the
end of such Calendar Month for Oil and the most recently available
Calendar Month for Gas.
-----*****----120
SECTION 6
VALUE OF PRODUCTION AND PRICING STATEMENT
6.1
The Contractor shall prepare a Statement providing calculations of the
value of Crude Oil produced and saved during each Calendar Month. This
Statement shall contain the following information:
6.1.1
The quantities, prices and receipts realized by the
Contractor as a result of sales of Crude Oil to third
parties (with any sales to Government being separately
identified) made during the Calendar Month in question.
6.1.2
The quantities, prices and receipts realized therefor by
the Contractor as a result of sales of Crude Oil made
during the Calendar Month in question, other than to third
parties.
6.1.3
The quantities of Crude Oil appropriated by the Contractor
to refining or other processing without otherwise being
disposed of in the form of Crude Oil.
6.1.4
The value of stocks of Crude Oil on the first day
of the Calendar Month in question.
6.1.5
The value of stocks of Crude Oil on the last day
of the Calendar Month in question.
6.1.6
The percentage volume of total sales of Crude Oil made by
the Contractor during the Calendar Month that are Arms
Length Sales to third parties.
6.1.7
Information available to the Contractor, in so far as
required for the purposes of Article 19 of the Contract,
concerning the prices of competitive crude oils produced by
the main petroleum producing and exporting countries
including contract prices, discounts and premia, and prices
obtained on the spot markets.
6.2
The Contractor shall prepare a statement providing calculations of the
value of ANG and NANG produced and sold during each Calendar Month for
the most recently available Calendar Month. This Statement shall
contain all information of the type specified in Section 6.1 for Crude
Oil as is applicable to Gas and such other relevant information as may
be required by the Government.
6.3
The Statements required pursuant to Sections 6.1 and 6.2 shall include
a detailed breakdown of the calculation of the prices of Crude Oil,
Associated Natural Gas and Non
Associated Natural Gas.
121
6.4
The Value of Production and Pricing Statement for each Calendar Month
shall be submitted to Government not later than twenty-one (21) days
after the end of such Calendar Month for Oil and the most recently
available Calendar Month for Gas.
-----*****----122
SECTION 7
STATEMENT OF COSTS, EXPENDITURES AND RECEIPTS
7.1
7.2
The Contractor shall prepare with respect to each Calendar Quarter a
Statement of Costs, Expenditures and Receipts under the Contract. The
statement shall distinguish between Exploration costs, Development
Costs and Production Costs and shall separately identify all
significant items of costs and expenditure as itemized in Section 3 of
this Accounting Procedure within these categories. The statement of
receipts shall distinguish between income from the sale of Petroleum
and incidental income of the sort itemized in Section 3.4 of this
Accounting Procedure. If the Government is not satisfied with the
categories, it shall be entitled to request a more detailed breakdown.
The Statement shall show the following:
7.1.1
Actual costs, expenditures and receipts for the
Calendar Quarter in question.
7.1.2
Cumulative costs, expenditures and receipts for
the Year in question.
7.1.3
Latest forecast of cumulative costs, expenditures
and receipts at the Year end.
7.1.4
Variations between budget forecast and latest
forecast and explanations thereof.
The Statement of Costs, Expenditure and Receipts of each Calendar
Quarter shall be submitted to Government not later than sixty (60) days
after the end of such Calendar Quarter.
-----*****----123
SECTION 8
COST RECOVERY STATEMENT
8.1
The Contractor shall prepare with respect to each Calendar Quarter a
Cost Recovery Statement containing the following information:
8.1.1
Unrecovered Contract Costs carried forward from
the previous Calendar Quarter, if any.
8.1.2
Contract costs for the Calendar Quarter in
question.
8.1.3
Total Contract Costs for the Calendar Quarter in
question (Section 8.1.1 plus Section 8.1.2).
8.1.4
Quantity and value of Cost Petroleum taken and
disposed of by the Contractor for the Calendar
Quarter in question.
8.1.5
Contract Costs recovered during the Calendar
Quarter in question.
8.1.6
Total cumulative amount of Contract Costs
recovered up to the end of the Calendar Quarter
in question.
8.1.7
Amount of Contract Costs to be carried forward
into the next Calendar Quarter.
8.2
Where necessary and possible, the information to be provided under
Section 8.1 shall be identified separately Field by Field and also
separately for Crude Oil, Associated Natural Gas and Non Associated
Natural Gas.
8.3
The cost recovery information required pursuant to Subsection 8.1 above
shall be presented in sufficient detail so as to enable Government to
identify how the cost of assets are being recovered.
8.4
The Cost Recovery Statement for each Calendar Quarter shall be
submitted to Government not later than sixty (60) days after the end of
such Calendar Quarter.
-----*****----124
SECTION 9
PRODUCTION SHARING STATEMENT
9.1
The Contractor shall prepare with respect to each Calendar
Quarter a Production Sharing Statement containing the
following information:
9.1.1
The calculation of the applicable net cash flows
as defined in Appendix D for the Calendar Quarter
in question.
9.1.2
The Investment Multiple applicable in the
Calendar Quarter in question.
9.1.3
Based on Section 9.1.2 and Article 14, the appropriate
percentages of Profit Petroleum, if any, for the Government
and Contractor in the Calendar Quarter in question.
9.1.4
The total amount of Profit Petroleum, if any, to be shared
between the Government and Contractor in the Calendar
Quarter in question.
9.1.5
Based on Sections 9.1.3 and 9.1.4, the amount of Profit
Petroleum due to the Government and Contractor as well as
to each constituent of the Contractor in the Calendar
Quarter in question.
9.1.6
The actual amounts of Petroleum taken by the Government and
Contractor as well as by each constituent of the Contractor
during the Calendar Quarter in question to satisfy their
entitlement pursuant to Section 9.1.5.
9.1.7
Adjustments to be made, if any, in future
Calendar Quarters in the respective amounts of
Profit Petroleum due to the Government and
Contractor as well as to each constituent of the
Contractor on account of any differences between
the amounts specified in Sections 9.1.5 and
9.1.6, as well as any cumulative adjustments
outstanding from previous Calendar Quarters.
9.2
Where necessary and if possible, the information to be provided under
Section 9.1 shall be identified separately for each Field and also
separately for Crude Oil as distinct from Natural Gas.
9.3
The Production Sharing Statement shall be submitted to Government not
later than sixty (60) days after the end of such Calendar Quarter.
-----*****----125
SECTION 10
END OF FINANCIAL YEAR STATEMENT
10.1
The Contractor shall prepare a definitive End of Year Statement. The
statement shall contain aggregated information in the same format as
required in the Production Statement and Royalty and Cess Statement,
Value of Production and Pricing Statement, Statement of Costs,
Expenditure & Receipts, Cost Recovery Statement and Production Sharing
Statement, but shall be based on actual quantities of Petroleum
produced, income received and costs and expenditures incurred. Based
upon this Statement, any adjustments that are necessary shall be made
to the transactions concerned under the Contract.
10.2
The End of Year Statement for each year shall be submitted to
Government within ninety (90) days of the end of such Year.
-----*****----126
SECTION 11
BUDGET STATEMENT
11.1
11.2
The Contractor shall prepare a Budget Statement for each
Year. This statement shall distinguish between budgeted
Exploration Costs, Development Costs and Production Costs
and shall show the following:
11.1.1
Forecast costs, expenditures and receipts for the
Year in question.
11.1.2
A schedule showing the most important individual items of
total costs, expenditures and receipts for the Year.
The Budget Statement shall be submitted to Government with respect to
each Year not less than ninety (90) days before the start of the Year
provided that in the case of the Year in which the Effective Date
falls, the Budget Statement shall be submitted within ninety (90) days
of the Effective Date.
-----*****----127
APPENDIX D
CALCULATION OF THE
INVESTMENT MULTIPLE FOR PRODUCTION SHARING PURPOSES
1.
In accordance with the provisions of Article 14, the share
of the Government and the Contractor respectively of Profit
Petroleum from the Contract Area in any Financial Year shall
be determined by the Investment Multiple earned by the
Companies from the Contract Area at the end of the preceding
Financial Year. These measures of profitability shall be
calculated on the basis of the appropriate net cash flows as
specified in this Appendix D.
INVESTMENT MULTIPLE
2.
The "Net Cash Income" of the Companies from the Contract
Area in any particular Financial Year is the aggregate value
for the year of the following:
(i)
Cost Petroleum entitlement of the Companies as
provided in Article 13;
PLUS
(ii)
Profit Petroleum entitlement of the Companies as
provided in Article 14;
PLUS
(iii)
incidental income of the Companies of the type
specified in Section 3.4 of the Accounting
Procedure arising from Petroleum Operations and
apportioned to the Contract Area;
LESS
(iv)
the Companies' share of all Production Costs and
royalty/cess payments incurred on or in the
Contract Area;
LESS
(v)
3.
the notional income tax, determined in accordance with
paragraph 7 of this Appendix, payable by the Companies on
profits and gains from the Contract Area.
The "Investment" made by the Companies in the Contract Area
in any particular Financial Year is the aggregate value for
the year of:
(i)
Exploration Costs incurred by the Companies in the Contract
Area and apportioned to the Contract Area in the same
proportion that said Costs were recovered pursuant to
Articles 13.2 and 13.3.
128
PLUS
(ii)
Development Costs incurred by the Companies in
the Contract Area.
4.
For the purposes of the calculation of the Investment Multiple, Costs
or expenditures which are not allowable as provided in the Accounting
Procedure shall be excluded from Contract Costs and be disregarded.
5.
The Investment Multiple ratio earned by the Companies as at
the end of any Financial Year from the Contract Area shall
be calculated by dividing the aggregate value of the
addition of each of the annual Net Cash Incomes
(accumulated, without interest, up to and including that
Financial Year starting from the Financial Year in which
Production Costs were first incurred or production first
arose after the Effective Date on or in the Contract Area)
by the aggregate value of the addition of each of the annual
Investments (accumulated, without interest, up to and
including that Financial Year starting from the Financial
Year in which Exploration and Developments Costs were first
incurred).
6.
Profit Petroleum from the Contract Area in any Financial Year shall be
shared between the Government and the Contractor in accordance with the
value of the Investment Multiple earned by the Companies as at the end
of the previous Financial Year pursuant to Articles 14.2, 14.3 and
14.4.
GENERAL
7.
In determining the amount of notional income tax to be
deducted in the applicable cash flows specified in paragraph
2 of this Appendix, a notional income tax liability in
respect of the Contract Area shall be determined for each
Company, as if the conduct of Petroleum Operations by the
Company in the Contract Area constituted the sole business
of the Company and as if the provisions of the Income Tax
Act, 1961, with respect to the computation of income tax at
a fifty percent (50%) rate applicable to Petroleum
Operations on the basis of the income and deductions
provided for in Article 15 of this Contract were accordingly
applicable separately to the Contract Area, disregarding any
income, allowances, deductions, losses or set-off of losses
from any other Contract Area or business of the Company.
8.
Sample Calculation is attached in Appendix "D-1".
129
APPENDIX "D-1"
INVESTMENT MULTIPLE CALCULATION - EXAMPLE PROBLEM
The following example is intended to demonstrate the calculation and impact of
the Investment Multiple. The figures shown would be for the Companies and are
fictitious in this example for demonstration purposes. The investment multiple
is calculated individually for the Companies.
RIL OR EOGIL
Investment Multiple at beginning of
Financial Year 11
Profit Oil Shares at beginning of
Financial Year 11
A Cumulative Net Cash Income at
beginning of Financial Year 11
+ Cost Petroleum in Financial Year 11
+ Profit Petroleum in Financial Year 11
+ Incidental Income in Financial Year 11
- Production Costs in Financial Year 11
- Oil Royalty and Cess in Financial Year 11
- Gas Royalty in Financial Year 11
- Notional Income Tax in Financial Year 11
B = Cumulative Net Cash Income at end of
Financial Year 11
C
Cumulative Investment at beginning of
Financial Year 11
+ Exploration Costs in Financial Year 11
+ Development Costs in Financial Year 11
+ Service Costs in Financial Year 11
D = Cumulative Investment at end of
Financial Year 11
Investment Multiple at beginning of
Financial Year 12 = (B / D)
Profit Oil Shares at beginning of
Financial Year 12
1.96
24.00%
US$ MILLIONS
100.00
10.00
1.00
.00
.60
1.57
0.41
2.00
106.42
51.00
0.30
1.50
0.00
52.80
2.02
18.00%
Since the Investment Multiple is calculated to be greater than 2.0 at the
beginning of Financial Year 12, the Profit Petroleum share to be received by RIL
or EOGIL falls from 24% to 18% at the inception of Financial Year 12.
In the event that the Investment Multiple were found to exceed 2.0 during the
financial close of Financial Year 11, the Contractor may have received excess
Profit Petroleum during the first sixty (60) days of Financial Year 12. In this
case, the quantity of excess Profit Petroleum will be calculated and the
accounts will be settled by adjustment to entitlements within sixty (60) days of
the following year (year twelve).
-----*****----130
APPENDIX E
FORM OF FINANCIAL AND PERFORMANCE GUARANTEE
(to be furnished pursuant to Article 29 of the Contract)
WHEREAS ENRON EXPLORATION COMPANY, a Company duly organized and existing under
the laws of Delaware, U.S.A., having its registered office at 1400 Smith Street,
Houston, Texas, U.S.A., (hereinafter referred to as "the Guarantor" which
expression shall include its successors and assigns) is the indirect owner of
100% of the capital stock of ENRON OIL & GAS INDIA LIMITED ("Company") and
direct owner of its parent company; and
WHEREAS Company is signatory to a Production Sharing Contract of even date of
this guarantee in respect of an Offshore area identified as Tapti Block
(hereinafter referred to as "the Contract") made between the Government of India
(hereinafter referred to as "the Government"), Company, RELIANCE INDUSTRIES
LIMITED and OIL & NATURAL GAS CORPORATION LIMITED (hereinafter referred to as
"Contractor" which expression shall include its successors and permitted
assigns); and
WHEREAS the Guarantor wishes to guarantee the performance of Company or its
Affiliate Assignee under the Contract as required by the terms of the Contract;
NOW, THEREFORE, this Deed hereby provides as follows:
1.
The Guarantor hereby unconditionally and irrevocably guarantees
to the Government that it will make available, or cause to be
made available, to Company or any other directly or indirectly
owned Affiliate of Company to which any part or all of
Company's rights or interest under the Contract may
subsequently be assigned ('Affiliate Assignee'), to ensure that
Company or any Affiliate Assignee can carry out its work
commitment as set forth in the Contract.
2.
The Guarantor further unconditionally and irrevocably guarantees to the
Government reasonable compliance by Company or any Affiliate Assignee, of
any obligations of Company or any Affiliate Assignee under the Contract.
3.
The Guarantor hereby undertakes to the Government that if
Company, or any Affiliate Assignee, shall, in any respect, fail
to perform its work commitments under the Contract or commit
any material breach of such obligations, then the Guarantor
shall fulfill or cause to be fulfilled the obligations in place
of Company or any Affiliate Assignee, and will indemnify the
Government against all actual losses, damages, costs, expenses,
or otherwise which may result directly from such failure to
perform or breach on the part of Company. In no event shall
Guarantor be liable for any special consequential, indirect,
incidental or punitive damages of any kind or character,
including, but not limited to, loss of profits or revenues,
loss of product or loss of use arising out of or related to a
131
material breach by Company of its obligations under the
Contract.
4.
This guarantee shall take effect from the Effective Date and shall remain
in full force and effect for the duration of the Contract and thereafter
until no sum remains payable by Company, or its Affiliate Assignee, under
the Contract or as a result of any decision or award made by any expert or
arbitration tribunal thereunder.
5.
This guarantee shall not be affected by any change in the Articles of
Association and by-laws of Company or the Guarantor or in any instrument
establishing the Licensee.
6.
The liabilities of the Guarantor shall not be discharged or
affected by (a) any time indulgence, waiver or consent given to
Company; (b) any amendment to the Contract or to any security
or other guarantee or indemnity to which Company has agreed;
(c) the enforcement or waiver of any terms of the Contract or
of any security, other guarantee or indemnity; or (d) the
dissolution, amalgamation, reconstruction or reorganization of
Company.
7.
This guarantee shall be governed by and construed in accordance
with the laws of India.
IN WITNESS WHEREOF the Guarantor, through its duly authorized
representatives, has caused its seal to be duly affixed hereto and this
guarantee to be duly executed the __________ day of _________ 1994.
The seal of ___________ was hereto duly affixed by ___________this_____ day of
________ 1994 in accordance with its by-laws and this guarantee was duly signed
by ________________ and ______________________
as required by the said by-laws.
- -----------------------Secretary
-------------------Vice President
Witness:
- ---------------------------*****----132
APPENDIX F
EQUIPMENT
All Wells drilled by ONGC and associated equipment whether or not plugged and
abandoned except that no liabilities or obligations shall accrue to Companies
from accepting same unless such liabilities or obligations arise as a result of
actions taken after the Effective Date.
-----*****----133
APPENDIX G
DEVELOPMENT COMMITMENT SPECIFIED BY THE COMPANIES
The development plan, illustrated in Figure G-1 includes, but may not be limited
to:
-
3D reservoir simulation models
6 well platforms at South Tapti
4 well platforms at Mid-Tapti
1 common 5.1 MMm3/day (180 MMCFPD) processing
facility and living quarters at Mid-Tapti
Interfield and intrafield pipelines
1 export gas pipeline
35 Development Wells (directional from well
platforms)
Geophysical, geological and engineering studies
The final configuration of physical facilities will
result from optimization studies to which ONGC will contribute
their knowledge and information.
If drainage area of the 35 primary development wells is
inadequate, an additional 30 (infill) wells may be needed.
Infill wells are not a committed work obligation, but are
included in the Cost Recovery Limit defined in Article 13.1.2.
Annex G-1 shows Companies' development concept based on an assumed project start
date of July 1, 1993.
-----*****----134
APPENDIX - G
FIGURE G-1
Mid and South Tapti Fields
Bombay Offshore Basin
[Chart]
135
Appendix G
Annex G-1
VIIa.
TECHNICAL INFORMATION FOR THE FIELD
aA.
RESERVE ASSESSMENT
Primary objectives in assigning reserves to Mid- and South-Tapti
Fields were two fold: First, verify ONGC's reserves, and second,
assess potential for an increase and a decrease in reserve base.
1.
Verification Methodology
Verification was accomplished by adapting reservoir parameters
and various fluid boundaries utilized by ONGC in pay maps
provided in the "Review of Technological Scheme for
Development of Tapti Field" to the Bidders' revised structure
map on the H-3 Marker (Exhibit VII-1). This approach
incorporated significant effects of a complex and aerially
extensive NW-SE extensional fault system into the
interpretation of the primary gas pool geometries in Mid- and
South-Tapti. Structure maps for the various pools were made
for Pay Zones I, II, IX, and XII in Mid-Tapti and Zones I, II,
and III in South-Tapti.
Values from the ONGC pay hydrocarbon volume maps (Sgoh) were
then recontoured to reflect the new structural
interpretations. Major stratigraphic boundaries were also
incorporated in the associated zonal pay maps. At Mid-tapti,
it was necessary to place a generally E-W trending reservoir
pinchout to the north because the MT-3 and MT-4 Wells lie
below the critical structural spill point at the Pay Zone I
and XII levels. A NE-SW trending permeability barrier mapped
by ONGC that separates the MT-3 from adjacent wells in Pay
Zone XII was modified to include the MT-1 Well in the MT-3
Block.
Stratigraphic correlation methods and nomenclature established
by ONGC were utilized in this preliminary evaluation. The
erratic fluviodeltaic depositional character of the sand
bodies and relatively large distances between wells precluded
a more detailed stratigraphic correlation scheme without
additional seismic/well data. A major disagreement in
correlation with ONGC occurs at Pay Zone XII at Mid-Tapti and
will be discussed.
The Bidders are confident that the 3-D seismic survey proposed
in the pre-development work plan will prove to be an excellent
tool for delineation of porous gas-filled reservoirs through
amplitude analysis (DHI).
It will also minimize stratigraphic risk prior to field
development and improve detailed structural definition.
2.
Upside Potential
Verification of base reserves in the Tapti Block is considered
essential by the Bidders. Upside potentials is also important
but not quantifiable in this preliminary evaluation.
Hydrocarbon pay volume values calculated by ONGC are
conservative based on preliminary log analysis of the MT-1,
MT-2, MT-5, C2-5, C2-7 and C2-8 Wells. Average shale-corrected
porosity values calculated by the Bidders vary between 22
percent and 30 percent (25 percent average). Gas effect may
impart a small positive error in the Bidders' porosity
calculation.
In Mid-Tapti, average gas saturation porosity values
calculated by the Bidders were 67 to 72 percent in MT-1, 64 to
71 percent in MT-2 and 73 to 76 percent in MT-5. These higher
gas saturations were calculated utilizing a Waxman-Smit log
analysis model assuming cation exchange capacity (CEC) values
between 5 to 10 meq/100gms. Petrographic analyses suggested to
the Bidders that pervasive clay coating of the sands by a
chlorite mineral (chamosite) could cause relatively high CEC's
of 10 to 40 meq/100gms. This CEC effect could result in
preferential conductivity along the clay linings. This
phenomena would increase calculated gas saturations if taken
into account. For this reason, the attached contoured Sgoh
values are considered to be conservative. Proposed
pre-development work will entail a detailed petrophysical
analysis of existing rock/log data to derive zone-specific
formation evaluation models to determine effective porosity,
permeability, and gas saturation parameters.
Aside from log analysis, the fluid contacts and stratigraphic
limits placed on various Pay Zones have a significant margin
for error. Of the seven pools mapped and discussed below by
the Bidders, four have a structurally defined limit based on a
gas/shale contact (GSC) or lowest known gas (LKG) as defined
by the Bidders. The water contact in Pay Zone I at
South-Tapti, the largest pool in the block, is based on a
water test from a same 20 meters stratigraphically lower than
the proven gas productive zone lying immediately below the H-3
marker. Arbitrary stratigraphic limits were required to
explain the trapping mechanism of Zone I and Zone XII pools at
Mid-Tapti. The pools' actual limits on the north side of the
field have yet to be defined.
aB.
PAY ZONE STRUCTURE AND (Sgoh) MAPS
The zones mapped by the Bidders include the following:
ZONE
---I
I
II
II
III
III
IX
IX
XII
XII
MAP
--------Structure
Sgoh
Structure
Sgoh
Structure
Sgoh
Structure
Sgoh
Structure
Sgoh
FIGURE
-----VII-2
VII-3
VII-4
VII-5
VII-6
VII-7
VII-8
VII-9
VII-10
VII-11
FIELD
--------------Mid/South-Tapti
Mid/South-Tapti
Mid/South-Tapti
Mid/South-Tapti
South-Tapti
South-Tapti
Mid-Tapti
Mid-Tapti
Mid-Tapti
Mid-Tapti
In the following discussion of the various Pay Zones, stratigraphic
correlation is based on the distance the pay sand in question lies
below the H-3 marker. Zones in different wells with overlapping
stratigraphic depth ranges are considered to be equivalent.
Zone I is the most aerially extensive pay in the Tapti area
occurring in both field areas. At South-Tapti, ONGC placed a
gas/water contact at 1807 meters subsea although none of the
observed tests of this interval in the C2-2, C2-4, C2-5, C2-6, and
C2-7 had water recoveries reported. The C2-6 did test a sand at
1843- 52 meters (1820-1829 meters subsea) which produced water. It
occurs 22 meters below the gas bearing Zone I sand at 1820-1825
meters (1797-1802 meters subsea). This provides the only evidence of
significant water production in the gross Zone I interval at
South-Tapti. The Sgoh map honors this water contact. The numerous
cross-cutting faults at South-Tapti were generally not considered to
separate the accumulation except to the south at the C2-7 Well and
in the north where the high Sgoh values in C2-1, C2-4, and C2-6 are
interpreted to be in a separate fault block.
At Mid-Tapti the gas/shale contact or lowest known gas (LKG) was
placed at a -1650 meters subsea based on the MT-3 Well. Successful
tests were reported from MT-1, MT-3, MT-4, and MT-5 Wells. An
arbitrary stratigraphic pinchout was placed on the north side of the
field because structural spill as mapped occurs at -1610 meters.
This limits the productive area to roughly the same size as that
mapped by ONGC. An untested fault trap on the west side of the field
was contoured using Sgoh values similar to those observed in
adjacent wells. Reserves for the untested fault block were risk
discounted at 50 percent probability of success (POS) in this and
subsequently mapped intervals.
Zone II occurs in both field areas but is aerially limited to the
south end of South- Tapti with successful tests in the C2-2 and C2-7
Wells. The pool is interpreted to be stratigraphically limited to
the north and structurally defined by LKG at -1847 meters in the
C2-7 Well. At Mid-Tapti, successful tests were reported in MT-1 and
MT-5. The gas/water contact at -1650 meters is thought to be occurs
at 1676-1679 meters. The base of the sand is at 1650 meters subsea.
MT-2 contains two untested sands at the Zone II stratigraphic level
that appear potentially productive (1656-1670, 1672-1676). This was
apparently considered by ONGC when assigning a relatively high Sgoh
value of 1.47 to the well.
Zone III is restricted to the northern half of South-Tapti Field. A
stratigraphic limit was placed south of the C2-5 Well and LKG at
-1876 meters subsea corresponding to the base of the productive sand
at 1896-1903.5 meters in C2-5. Successful tests include the C2-1 and
C2-5.
Successfully tested zones that were not quantified at South-Tapti in
this preliminary study include Zones IV and V in C2-8, Zone VIII in
C2-1, Zone IX in C2-5, Zone X in C2-6 and C2-8, and Zone XI in C2-2.
At Mid-Tapti, Pay Zone IX had a successful test in the MT-5 Well
with LKG at -1896 meters subsea. An untested apparent log pay zone
occurs in the MT-1 at 1920-1925 meters that is stratigraphically
equivalent to the MT-5 producer and was assigned an Sgoh value of
0.168 by ONGC.
Zone XII at Mid-Tapti is interpreted to consist of two separate sand
bodies that include a mix of ONGC Zones X and XII. In their map of
Zone XII, ONGC separates a prolific test (498,273 m(3)/day) at
2046-2055 meters in the MT-3 Well with a permeability barrier from
the MT-1, MT-2, MT-4, and MT-5 Wells. The Bidders interpret Zone X
in MT-1, which tested at a rate of 446,355 m(3)/day from 1976-1979
and 1984-1987, to be the stratigraphic equivalent of the prolific
MT-3 Zone XII. This prolific sand body, informally called Zone XII A
is not present in the other Mid-Tapti wells. Approximately 60 meters
stratigraphically lower than Zone XII A is another productive sand
body called Zone XII B. It has successful tests in the MT-2 and MT-5
Wells but with lower rates of 107,000 and 85,535 m(3)/day,
respectively. A significant water recovery in the MT-2 test of 1085
bbl/day caused the Bidders to place a gas/water contact at -2040
meters subsea in Zone XII B. The Sgoh map reflects the difference in
pay quality between the two sand bodies and shows a northern
stratigraphic limit which is required because of structural spill.
Zones not mapped and quantified at Mid-Tapti include Zones XIV and
XV in MT- 1.
aC.
ADDITIONAL PAY ZONES NOT MAPPED BY ONGC
In the Bidders' preliminary log analysis, a number of untested
potential pay zones were identified. Future work will integrate all
log defined potential pay zones with 3-D seismic amplitude analysis
and stratigraphic interpretation to provide detailed pay maps.
aD.
RESERVE PARAMETERS
The parameters used for estimating reserves for each interval are
believed to be the same parameters employed by ONGC in reserve
estimates available in one of the documents in the data room.
Preliminary log analysis suggests the possibility for variation,
perhaps towards the positive side. This is a high priority item for
further investigation during the pre-development study phase.
FIELD HORIZON
---------------Mid-Tapti
I
Mid-Tapti
II
Mid-Tapti
IX
Mid-Tapti
XII
South-Tapti I
South-Tapti II
South-Tapti III
aE.
NET PAY
(m)
------6.1
15.6
2.6
8.6
6.0
17.2
8.7
POROSITY
(%)
-------18.0
18.0
18.6
21.8
18.5
19.0
21.0
WATER SATURATION
(%)
---------------65
69
60
57
60
45
40
RESERVES
Figure VII-12 is a reserve uncertainty distribution plot on log
probability scale for Mid and South Tapti fields combined. It shows
the expected reserve range of gas in place in English units for
unrisked and risked reserves. For each pay zone, individual
fault-defined gas accumulations were risk weighted according to the
degree and proximity of well penetrations as described in section B.
Calculated reserves were placed at the P 50% or most likely
position. Based on alternative log analysis models, the maximum (P
10%) value was determined by increasing porosity 40% (i.e. porosity
value of 10% would change to 14%) and decreasing water saturation
40% as well (i.e. Sw of 60% would change to 36%). A summary of the
distribution in metric units is listed below:
Probability
> or =
Minimum
Most Likely
Mean
Maximum
----------90
50
42.5
10
Unrisked
Gas in Place
(MMMm3)
-----------28.32
48.15
50.98
80.71
Risked
Gas in Place
(MMMm3)
-----------20.39
36.82
39.65
62.31
Risked mean gas-in-place reserves of 39.65 MMMm3 calculated from the
reserve uncertainty distribution, are utilized in the current bid
proposal yielding mean recoverable reserves of 31.72 MMMm3.
Detailed evaluation of unrisked most-likely reserves by field and
pay horizon were risk weighted and assessed an 80% recovery factor
to derive recoverable most-likely reserves of 29.46 MMMm3.
These were submitted in the March 30,1993 bid proposal as follows:
FIELD
----------Mid-Tapti
Mid-Tapti
Mid-Tapti
Mid-Tapti
South-Tapti
South-Tapti
South-Tapti
SAND
---I
II
IX
XII
I
II
III
ORIGINAL
RECOVERABLE
GAS IN PLACE GAS RESERVES
MMMm3
MMMm3
-----------------5.607
3.490
7.240
4.682
0.583
0.359
11.828
6.694
7.518
4.939
11.005
6.742
4.563
3.009
The above volumes are before shrinkage from expected condensate
liquids recovered during normal production operations. Furthermore,
potential reserves exist that cannot be evaluated with the
information available. In particular, those associated with
successful well tests at levels IV, V, VIII, IX, X and XI in
South-Tapti and levels XI and XV in Mid-Tapti. The Bidders expect to
quantify this potential during the initial study phase.
The cited pay zones that were not quantified by RIL/EEC amount to 20
to 30% of ONGC's total gas in place. Should ONGC's estimate be
correct, a success "upside case is included in this proposal to
reflect the potential impact of these reserves on the production
profile with the addition of up to 10.57 MMMm3 of gas reserves to
the base case of 31.72 MMMm3 for a total of 42.29 MMMm3.
VIIb.
TECHNICAL INFORMATION FOR GREATER TAPTI EXPLORATION CASE
b1.
Concept
Early in the evaluation of the Tapti fields, RIL/EEC became aware of
ONGC's continuing efforts to explore and appraise additional gas
accumulations in the surrounding gas-prone region of the Surat
Depression. At RIL/EEC's request, ONGC provided an excellent
overview of their efforts and results in the area through a series
of meetings in Bombay. This gracious exchange of ideas provided the
basis for the proposed exploration case.
b2.
Location
Figure VII-13 is a regional map of the Greater Tapti area. The
boundaries of the proposed exploration area were set up to encompass
the known limits of the Early Miocene to Early Oligocene reservoir
interval proven gas productive at Tapti (Figure VII-14). The
proposed coordinates for the Greater Tapti Exploration area are as
follows:
Corner
-----A
B
C
D
E
A
b3.
Latitude
-------------N20(degree)50'
N19(degree)50'
N19(degree)50'
N21(degree)20'
N21(degree)10'
N20(degree)50'
Longitude
-------------E71(degree)30'
E71(degree)30'
E72(degree)50'
E72(degree)50'
E72(degree)10'
E72(degree)10'
Proposed Area Status
It is the intent of RIL/EEC that the Greater Tapti area be considered
under the same terms, conditions and contractual obligations agreed
for the Tapti block proper.
b4.
Stratigraphy and Reservoir Characterization
Figure VII-15 is a sketch map of the net sand isopach for the Early
Miocene-Early Oligocene reservoir interval and associated gas
discoveries and prospects. The map is an attempt to demonstrate the
interpretation shown to RIL/EEC by ONGC. It exhibits a northerly point
source of sand supply that was distributed to the south and southwest
in a large lobate delta-like geometry.
Examination of over 15 Tapti cores in Bombay by RIL/EEC gave
conclusive evidence of a robust tidally-influenced deltaic environment
of deposition similar to the modern Irrawady delta (Figure VII-16).
Reservoirs occur in three major depositional environments (Figure
VII-17).
1.
The highest quality reservoirs with good visualorosity and
permeability are large distributary channel sands up to 25
meters thick. Modern analogs in the Irrawady delta are 2-6 km
wide and 10's of km long.
2.
The second most significant reservoirs are aerially extensive
delta front/chenier-ridge sands that form Pay Zone I at Mid and
South Tapti. They appear to have moderate to
fair visual porosity and permeability with significant amounts
of entrained clay introduced by burrowing organisms.
3.
b5.
Fair to poor quality reservoirs consisting of tidal channels,
tidal creeks and sandy tidal- delta-plain sands comprise the
third and most volumetrically significant portion of the
sedimentary section. They lack reservoir properties necessary
for commercial completion but may provide significant
gas-storage volume to source adjacent channel and delta-front
sands.
Exploration Activity
Exploration activity by ONGC has been focussed on the eastern and
southern portions of the sand system shown in Figure VII-15 playing
structural and combination structural-stratigraphic traps. Identified
structurally-controlled gas discoveries include North Tapti, C-24,
C-22 and B-12. Reserves of approximately 6.0 MMMm3 have been reported
by ONGC for C-24 and C-22. RIL/EEC understand the broad low-relief
B-12 feature has been tested by two wells to date with moderate flow
rates of gas in the 100,000 to 200,000 m3 range. Like the cited C-24
and C-22 discoveries, total net sand thickness at B-12 is
approximately 30% of that observed in the Tapti fields. The more
poorly defined combination traps with tested gas consist of SD-4,
CA-1, SD-1 and CD-1.
An untested high amplitude structure set up by compressional
reverse-fault movement is informally called the NE prospect. The
feature is located in transitional shallow waters with mudbanks that
are emergent at low tide. It requires seismic coverage on it northeast
side through expensive non-conventional acquisition methods to
establish critical dip. The structure appears to lie in a favorable
position within the sand-rich axis of the reservoir system with
upwards of 160 meters of possible net sand not unlike that seen in the
Tapti field area.
b6.
Exploration Results
Aside from the NE prospect which appears to have risky but high
reserve potential, the remaining discoveries were presented by ONGC as
somewhat marginal with smaller reserves and generally thinner and
poorer reservoir quality sands than Tapti. It appears to RIL/EEC that
timely and economic development of these relatively small and
scattered accumulations, outboard of the Tapti block, is not feasible
without linkage to Tapti infrastructure. RIL/EEC are prepared to
design the capacity of the Tapti facilities and pipelines to meet the
additional reserve potential of 15 to 35 MMMm3 envisioned for the
Greater Tapti area.
To insure that rapid exploitation of these discoveries and prospects
can occur, RIL/EEC is prepared to offer an immediate three year work
commitment entailing an estimated $38 million dollars (U.S.) of
expenditure. The plan is detailed in section VIII. To demonstrate the
benefits afforded GOI, an Exploration Case reserve is estimated at 25
MMMm3 for existing prospects and discoveries to provide the basis for
a production profile that can be layered on the Tapti Base and Success
Case Scenarios.
F.
PLAN FOR UTILIZATION OF GAS
The purpose of this application is to exploit the non-associated
natural gas reserves in the block. Therefore, except for gas
consumption required for operations, all the gas produced and
associated condensate fluids will be sold.
The Indian Government gas supply/consumption projections include gas
from this block.
The Bidders desire to produce the natural gas to fulfill the
government plan in the anticipated volumes.
G.
MONITORING SYSTEMS AND RESERVOIR MANAGEMENT
1.
Production Monitoring
Production will be monitored on an individual well basis and on
an aggregate basis consistent with normal good oil field
practices. For effective operational control, production rates
will be monitored frequently and recorded daily; for fiscal
purposes, production will be summarized and reported monthly. We
currently envision installation of a well-test system at each
well platform; however, full well stream "wet" meters may prove
to be a more attractive approach upon further study. Where well
tests are used, individual well production will be ascertained
by allocation on the basis of actual well producing time at a
given choke setting. Key data (e.g., flowing tubing pressure
and, if available, wet meter rate) may be radio transmitted to
the process platform.
2.
Reservoir Management
Reservoir management will be carried out through conventional
surface and down hole monitoring systems such as bottom hole
pressure surveys, production testing and well deliverability
testing on a periodic basis.
This data will be analyzed at least once a year to establish a
record of reservoir performance from which the reservoir drive
mechanisms will be established and the operations adjusted
accordingly to maximize recovery.
It is anticipated that a suitable mathematical reservoir model
will be established early in the exploitation stage and that the
reservoir performance would be monitored by periodically
updating the model with the production and pressure data
gathered.
The model would also be utilized for the purpose of reporting
gas reserves and deliverability projections.
A relatively simple single phase, three-dimensional,
multi-layered reservoir model is planned.
VIIIa. WORK PROGRAM - TAPTI BLOCK
A.
Base Case Development (30 billion cubic meters recoverable reserves)
1.
Seismic Commitment
Mid Tapti 3D Survey
320 km2
4500 km Inline
50 m Crossline Interval
South Tapti 3D Survey
530 km2
11000 km Inline
50 m Crossline Interval
The Mid-Tapti 3D survey acquisition would begin in October
1993, assuming execution of the Letter Agreement in July 1993.
Acquisition, processing and interpretation will require 6-8
months. The South Tapti 3D acquisition would commence in 1994.
2.
Development Commitment
The development plan & schedule are illustrated on Figures
VIII-1, -2, -3 and include:
- 3D reservoir simulation models
- 6 well platforms at South Tapti
- 4 well platforms at Mid-Tapti
- 1 common 5.1 MM3/day processing facility and living
quarters at Mid-Tapti
- Interfield & intrafield pipelines
- 1 export gas pipeline
- 35 Development wells(directional from well platforms)
- Geophysical, geological and engineering studies
- The final configuration of physical facilities will result
from optimization studies to which ONGC will contribute
their knowledge and information.
- If drainage area of the 35 primary development wells is
inadequate, an additional 30 (infill) wells may be needed.
Infill wells are not a committed work obligation
3.
Gas Sales Profiles
RIL/EEC expect (but cannot guarantee) that the Base Case
development plan will result in the gas sales shown in Figure
VIII-4. If the Success Case discussed in Section VII
materializes, the sales volumes should range between those
indicated in Figure VIII-4 and Figure VIII-5. If volumes
available for sale exceed those shown in Figure VIII-4, the
modular Base Case development plan will be augmented to
accommodate the excess gas production over that contemplated
in the Base Case.
VIIIb. WORK PROGRAM - GREATER TAPTI AREA
A.
The RIL/EEC proposal to expand the Tapti block to include the
Greater Tapti area defined above under Addendum Section VIIb is
advantageous to GOI, ONGC and RIL/EEC for reasons shown on Figure
VIII-6.
Seismic and Drilling Commitments shown below are in addition to or
commitments for the Tapti block (Section VIIIa).
Year
------1993-94
1995
1996
Activities
-----------------------1000 km 2D seismic
(primarily in shallow
water "transition zonell
on "NE" and "North Tapti"
prospects.
5 wells
2 wells
Est. Cost
---------5 MM US $
25 MM US $
8 MM US $
In addition, all usable existing seismic data will be reprocessed
and interpreted.
The commitment to spend a minimum 38 MM US Dollars in the Greater
Tapti Area (outside the currently defined block) during 1993 through
1996 shall be borne by ONGC, RIL and EEC in proportion to their
working interest in the Area (currently 40%, 30% and 30%
respectively). These and all subsequent expenditures shall be cost
recoverable. The project including Tapti block containing Mid and
South Tapti plus the area identified in Section VIIb-B shall be
considered as one.
Given success in the Greater Tapti Area outside the current Tapti
block, the Bidders' expectation for addition recoverable reserves is
25 billion cubic meters. Assuming that level of success in the
expanded area and the maximum success Case reserves in the current
Tapti block, the total Greater Tapti Area production profile is
shown on Figure VIII-7. These total reserves, 65 billion cubic
meters, represent a maximum and are neither guaranteed nor expected.
B.
PRODUCTION BUILD UP PHASE (INITIAL FIELD DEVELOPMENT TO REACH A
PRODUCTION PLATEAU)
The Bidder plans to tailor development work to the gas market. No
capital will be expended unless backed by a firm gas purchase
commitment. This is true not only for the initial plateau currently
contemplated in gas consumption projections, but for production
beyond the original plateau if warranted by the results of the study
phase.
It is anticipated that development will be originally concentrated
in the Mid-Tapti area. The development of the second field, or any
other field, will follow to the extent required to satisfy the
market. Deliverability capacity in excess of the market,
approximately 25 percent, will be built into the development plan.
Development is anticipated to consist of directional wells drilled
form several wellhead platforms. The wells will be drilled with a
jack-up rig. Because of sand production, well completions will be
designed to maximize flow rates yet minimize sand production. To
that extent, gravel pack through several extended perforations is
anticipated. Nevertheless, the final design will be consistent with
the results of the study phase.
The well-head platforms will have testing facilities; they will be
unmanned and controlled (monitored) from a central processing
platform via a communication/control system.
Submarine line network (8" - 12" in diameter) will connect the
platforms to the central processing platform.
The central processing platform will have gas processing facilities
of adequate capacity to handle all the anticipated volumes.
Expansion capabilities will be provided for during the initial
design of the processing platform.
Ability to handle and process condensate fluids and water will be
part of the processing package. Water will be disposed of after
appropriate treatment to insure that it is environmentally safe and
meets any existing specifications in this regard.
No gas will be flared except for technical reasons and then only in
minimum quantities.
After measurement using state-of-the-art gas/liquid metering
systems, which independently measures gas and condensate, the gas
and condensate products will be transported via a submarine line to
a connecting point with the existing Bassein-Hazira pipeline, or the
new planned parallel pipeline.
The Bidders believe that with early award of the block, with proper
planning and with the necessary mechanisms built-in to expedite
approvals (single clearance window concept) first production can be
achieved early in 1995 and that the first plateau could be achieved
in 1996.
C.
PLATEAU PRODUCTION AND DECLINE PHASE
Maintenance of the plateau phase for a period of 15 years is
expected to be accomplished by further development drilling and well
recompletions into other sands/reservoirs not originally exposed to
production. These activities will, as explained earlier for the
initial development phase, be tailored to the market demands and
contractual obligations. Depending on future market and provided
enough reserves are proven to safely back-up additional
deliverability, incremental volumes will be added to the original
base plateau. The duration of the incremental volumes will depend
upon reserves and markets.
D.
ABANDONMENT PHASE
At the termination of the PSC period, the wells and facilities will
be fully transferred without cost to the designated government
agency for further operations.
Abandonment of wells for mechanical reasons may occur. Those wells
will be abandoned following accepted industry practices.
Appendix - 5
COMMITTED DEVELOPMENT WORK PROGRAMME
FOR TAPTI BLOCK
1.
2.
SEISMIC COMMITMENT
Mid Tapti 3D Survey
320 km2
4500 km Inline
50 m Crossline Interval
South Tapti 3D Survey
530 km2
22000 km Inline
50 m Crossline Interval
DEVELOPMENT COMMITMENT
- 3D reservoir simulation models
- 6 well platforms at South Tapti
- 4 well platforms at Mid-Tapti
- 1 common 5.1 MM3/day processing facility and living quarters at
Mid-Tapti
- Interfield and intrafield pipelines
- 1 export gas pipeline to Hazira and onshore reseparation facility
- 35 development wells (directional from well platforms)
- Geophysical, geological and engineering studies
- The final configuration of physical facilities will result from
optimization studies to which ONGC will contribute their knowledge
and information; work programme may be adjusted accordingly to, for
example, reroute the export pipe line to the existing 36" line and
possibly eliminate the reseparation facility
If drainage area of the 35 primary development wells proves
inadequate, an additional 30 (infill) wells may be needed. Infill
wells are not a committed work obligation.
Appendix - 6
TAPTI ESTIMATED EXPENDITURE
YEAR
---1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
CAPEX
$MM
----19.5
122.3
75.3
76.4
67.2
0
34
18
0
20
18
22
42.4
0
0
16
4.5
6
0
0
0
0
0
0
0
OPEX
$MM
----1.1
2.75
8.8
11
12.1
12.1
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
13.2
541.6
298.7
Appendix - 7 (Contd.)
TAPTI PRODUCTION PROFILE
(4.2 MM m3/day)
YEAR
---1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
CONDENSATE SALES
MBbL
---------------0
0
526
658
658
658
658
658
658
658
658
658
658
658
658
658
658
572
546
472
350
259
191
152
79
12359
APPENDIX H
PRODUCTION PROFILE OF THE
GAS SALES
MM m3
--------0
0
1240
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1355
1287
1111
825
611
449
360
187
29134
MID AND SOUTH TAPTI FIELDS
YEAR
CONDENSATE SALES
(Thousands Barrels)
1993
1994
1995
1996
1997
1997
1998
1999
2000
2001
2001
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
GAS SALES
(Millions Cubic Meters)
0
0
0
165
658
658
658
658
658
658
658
658
658
658
658
658
658
658
658
658
572
546
472
350
259
191
152
79
0
0
0
388
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1551
1355
1287
1111
825
611
449
360
187
-----*****----APPENDIX I
PAYMENT FOR USE OF ONSHORE PLANT
Parties acknowledge that Gas is to be received by GAIL at Hazira downstream of
receiving and separation facilities owned and operated by ONGC. In order to
compensate ONGC for the cost of ownership and operations of these facilities,
Contractor shall make payments to ONGC on the basis of the costs fixed on an
incremental basis by an internationally recognised expert who shall be selected
by two members of the Operating Committee from a panel of three internationally
recognised experts selected by ONGC. In case there is no agreement between the
Companies and ONGC on the advice tendered, the matter shall be referred to
Government. The decision of Government shall be final and binding on all the
Parties.
GRAPHICAL CONTENT APPENDIX
Appendix - B
Appendix G
Figure G-1
Figure VII-1
Map of Contract Area - Tapti Block
Figure VII-2
Figure VII-3
Figure VII-4
Figure VII-5
Figure VII-6
Figure VII-7
Figure VII-8
Figure VII-9
Figure VII-10
Figure VII-11
Figure VIII-2
Figure VIII-4
Figure VIII-3
Mid and South Tapti Fields Bombay Offshore Basin
Mid and South Tapti Fields Structure Map H-3
Seismic Marker
Structure Map on Top Pay I Sand
Sg0h Map Pay I
Structure Contour Map on Top of Pay II Sand
Sg0h Map Pay II
Structure Map Pay Level III
Sg0h Map Pay Level III
Structure May on Pay IX
Sg0h May Pay IX
Structure Map Pay XII
Sg0h Map Pay XII
Enron Exploration Project Schedule Details
Tapti Production Profile
Development Schedule Base Case
Appendix-3
Enron Exploration Project Schedule Details