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PETROLEUM AGREEMENT

BY AND AMONG

GOVERNMENT OF THE R E P U B L I C OF GHANA



GHANA NATIONAL PETROLEUM CORPORATION



GNPC EXPLORATION AND PRODUCTION COMPANY LIMITED


ENI GHANA EXPLORATION AND PRODUCTION LIMITED



VITOL UPSTREAM TANO LIMITED


WOODFIELDS UPSTREAM LIMITED



IN R E S P E C T OF

C A P E T H R E E POINTS B L O C K 4



DATED:



2015



TABLE OF CONTENTS



ARTICLE



PAGE



1.



DEFINITIONS



3



2.



S C O P E O F THE A G R E E M E N T , I N T E R E S T S

OF T H E P A R T I E S AND C O N T R A C T A R E A



12



3.



EXPLORATION PERIOD



15



4.



MINIMUM EXPLORATION PROGRAMME



18



5.



RELINQUISHMENT



22



6.

7.



JOINT MANAGEMENT COMMITTEE

RIGHTS AND OBLIGATIONS O F C O N T R A C T O R AND G N P C



23

28



8.



COMMERCIALITY



33



9.



S O L E RISK ACCOUNT



41



10.



SHARING O F C R U D E OIL



44



11.



MEASUREMENT AND PRICING O F C R U D E OIL



51



12.



TAXATION AND O T H E R IMPOSTS



54



13.



FOREIGN E X C H A N G E TRANSACTIONS



57



14.



S P E C I A L PROVISIONS F O R NATURAL G A S



59



15.



DOMESTIC S U P P L Y R E Q U I R E M E N T (CRUDE OIL)



66



16.



INFORMATION AND R E P O R T S : CONFIDENTIALITY



67



17.



INSPECTION, S A F E T Y AND

PROTECTION



72



ENVIRONMENTAL



18.



ACCOUNTING AND AUDITING



74



19.



TITLE TO AND C O N T R O L O F G O O D S AND EQUIPMENT



76



20.



PURCHASING AND P R O C U R E M E N T



78



21.



EMPLOYMENT AND TRAINING



79



ARTICLE



PAGE



22.



F O R C E MAJEURE



81



23.



TERM AND TERMINATION



83



24.



CONSULTATION, ARBITRATION AND

INDEPENDENT E X P E R T



87



25.



ASSIGNMENT



90



26.



MISCELLANEOUS



93



27.



NOTICE



98



ANNEX 1



CONTRACT A R E A



ANNEX 2



ACCOUNTING GUIDE



ANNEX 3



FORM O F CONFIDENTIALITY A G R E E M E N T



ANNEX 4



SAMPLE A O E CALCULATION



ANNEX 5



PRINCIPLES O F THE P R O J E C T OPERATINGzyxwvutsrqponmlkjihgfedcbaZYXWV

n

STRUCTURE



THIS P E T R O L E U M A G R E E M E N T 

made this

day of

by and among

the Government of the Republic of Ghana (hereinafter referred to as the "State"),

represented by the Minister for Petroleum (hereinafter referred to as the

"Minister"),

the Ghana National Petroleum Corporation, a public corporation established by the

Ghana National Petroleum Corporation Act, 1983 Provisional National Defence

Council Law 64 (hereinafter referred to as "GNPC"), on the one hand, and

GNPC Exploration and Production Company Limited, a company incorporated in

Ghana and having its registered office at Petroleum House, Harbour Road, Tema

(hereinafter referred to as "Explorco"), and

Eni Ghana Exploration and Production Ltd., a company incorporated in Ghana and

having its registered office at UNA Home, 1st Floor 12 Airport By-pass Road,

Airport City Area, PMB KA 185, Accra, Ghana (hereinafter referred to as "eni

Ghana"), and

Vitol Upstream Tano Ltd., a company incorporated in Ghana and having its

registered office at 5th Floor, Grand Oyeeman, South Liberation Link Road, Accra,

Ghana (hereinafter referred to as "Vitol"), and

Woodfields Upstream Limited, a company incorporated in Ghana and having its

registered office at Y21B Agostino Neto road Airport, Accra. Box KIA 30414

Airport, Accra Ghana (hereinafter referred to as "Woodfields") on the other hand.



WITNESSES THAT;

1.



All Petroleum existing in its natural state within Ghana is the property of the

Republic of Ghana and held in trust by the State on behalf of the people of

Ghana.



2.



In accordance with the Petroleum Law, the Minister has prepared a reference

map showing areas of potential petroleum fields within the jurisdiction of

Ghana, divided into numbered areas and each of which is described as a

"Block".



3.



GNPC has by virtue of the Petroleum Law the right to undertake Exploration,

Development and Production of Petroleum over all Blocks declared by the

Minister to be open for Petroleum Operations.



4.



GNPC is further authorised to enter into association by means of a Petroleum

Agreement wdth a contractor for the purpose of Exploration, Development and

Production of Petroleum.



5.



The Contract Area that is the subject matter of this Petroleum Agreement has

been declared open for Petroleum Operations by the Minister and the State |

1



desires to encourage and promote Exploration, Development and Production

within the said area. The State assures Contractor that all of said area is within

the jurisdiction of Ghana.

6.



Contractor, having the financial ability, technical competence and professional

skills necessary for carrying out the Petroleum Operations herein described,

desires to associate with GNPC in the Exploration for, and Development and

Production of, the Petroleum resources of the said area.



7.



The Parties are committed to providing qualified Ghanaian nationals

employment at all levels in the Petroleum industry, including technical,

administrative and managerial positions, and Contractor accordingly commits

to providing and supporting a programme of training for Ghanaian nationals as

an integral part and on the terms of this Agreement.



8.



Without prejudice to the rights of the Parties under this Agreement, Contractor

is committed to supporting GNPC either directly or through Explorco to

develop its operating capacity based on the principles contained in this

Agreement.



9.



The Parties are committed to providing an armual local content plan in line

with the applicable laws of Ghana, including Local Content Regulations, for

fulfilling the applicable Ghanaian content requirements with respect to the

provision of goods and services.



NOW T H E R E F O R E , in consideration of the mutual covenants herein contained, it is

hereby agreed and declared as follows:



ARTICLE 1

DEFINITIONS

1.



In this Agreement:



1.1



"Accounting Guide" means the accounting guide which is attached hereto as

Annex 2 and made a part hereof;



1.2



"Additional Interest" means the additional interest of GNPC provided in Article

2.5;



1.3



"Affiliate" means any person, whether a natural person, corporation, partnership,

unincorporated association or other entity which directly, or indirectly through

one or more intermediaries, controls, or is controlled by, or is under common

control with a Party. For this purpose control means the direct or indirect

ownership of more than fifty percent (50%) of voting capital or voting rights of

the entitlement (directly or indirectly) to appoint a majority of the directors or

equivalent management body of, or to direct the policies or operations of the

other entity;



1.4



"Agreement" means this Agreement between the State, GNPC and Contractor,

and includes the Annexes attached hereto in each case as may be amended from

time to time;



1.5



"Appraisal" means operations or activities carried out pursuant to an Appraisal

Programme following a Discovery of Petroleum for the purpose of delineating

the accumulations of Petroleum to which that Discovery relates in terms of

thickness and lateral extent and estimating the quantity of recoverable Petroleum

therein and all operations or activities, to resolve uncertainties required for

determination of a Commercial Discovery;



1.6



"Appraisal Programme" means a programme approved by the Petroleum

Commission pursuant to Article 8.5 for the conduct of Appraisal;



1.7



"Appraisal Well" means a well drilled pursuant to an Appraisal Programme;



1.8



"Associated Gas" means Natural Gas produced from a well in association with

Crude Oil;



1.9



"Barrel" means a quantity or unit of Crude Oil equal to forty-two (42) United

States gallons at a temperature of sixty (60) degrees Fahrenheit and at fourteen

and sixty-five one-hundredths per square inch at atmospheric (14.65 psia)

pressure;



1.10



"Block" means an area of approximately 1127 square kilometres depicted on the

reference map prepared by the Minister in accordance with the provisions of the

Petroleum Law;

3



(

1.11zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"Business Day" means a day on which banks are open for business in London,

New York and Accra;

1.12



"Calendar Year" means the period of twelve (12) Months of the Gregorian

calendar, commencing on January 1 and ending on the succeeding December 31;



1.13



"Carried Interest" means an interest held by GNPC, pursuant to this Agreement

in respect of which Contractor pays for the conduct of Petroleum Operations as

set out in this Agreement, without any entitlement to reimbursement from GNPC;



1.14



"Commercial Discovery" means a Discovery which is determined to be

commercial in accordance with the provisions of Article 8 of this Agreement;



1.15



"Commercial Production Period" means in respect of each Development and

Production Area the period from the Date of Commencement of Commercial

Production until the termination of this Agreement or earlier relinquishment of

such Development and Production Area;



1.16



"Contract Area" means the area of approximately one-thousand one-hundred

and twenty-seven thousand kilometers squared (1127 km^) covered by this

Agreement in which Contractor is authorised in association with GNPC to

explore for, develop and produce Petroleum, which is described in Annex 1

attached hereto and made a part of this Agreement, but excluding any portions of

such area in respect of which Contractor's rights hereunder are from time to time

relinquished or surrendered pursuant to this Agreement;



1.17



"Contractor" means, collectively Explorco, Eni Ghana, Vitol and Woodfields and

their respective permitted successors and assignees and each of Explorco, Eni

Ghana, Vitol and Woodfields, individually a "Contractor Party" as the context

may require;



1.18



"Contract Year" means a period of twelve (12) calendar Months, commencing

on the Effective Date or any anniversary thereof;



1.19



"Crude Oil" means hydrocarbons which are liquid at fourteen and sixty-five onehundredths per square inch at atmospheric pressure (14.65 psia) and sixty (60)

degrees Fahrenheit and includes condensates and distillates obtained from

Natural Gas;



1.20



"Date of Commencement of Commercial Production" means, in respect of

each Development and Production Area, the date on which production of

Petroleum under a programme of regular production, lifting and sale commences

as defined in a Development Plan;



1.21



"Date of Commercial Discovery" means the date referred to in Article 8.16;



1.22



"Development" or "Development Operations" means the following activities

carried out in cormection with a Development Plan: the building and installation

of facilities for Production, including drilling of Development Wells, construction

and installation of equipment, pipelines, facilities, plants and systems, in and ^^T^



outside the Contract Area, which are required for achieving Production,

treatment, transport, storage and lifting of Petroleum, and preliminary Production

activities carried out prior to the Date of Commencement of Commercial

Production, including all related planning and administrative work, and may also

include the construction and installation of approved secondary and tertiary

recovery systems, and abandonment, decommissioning and replacement of

facilities;

1.23zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"Development Costs" means allowable Petroleum Costs incurred in

Development Operations, including costs incurred in respect of lease, purchase,

or rental of fixed assets;

1.24



"Development and Production Area" means that portion of the Contract Area

reasonably determined by the JMC (or by GNPC i f of a Sole Risk Operation

pursuant to Article 9) on the basis of the available seismic and well data to cover

the areal extent of an accumulation or accumulations of Petroleum constituting a

Commercial Discovery, enlarged in area by ten percent (10%), such enlargement

to extend uniformly around the perimeter of such accumulation;



1.25



"Development Period" means in respect of each Development and Production

Area, the period from the Date of Commercial Discovery until the Date of

Commencement of Commercial Production;



1.26



"Development Plan" means the plan for development of a Commercial

Discovery prepared by Contractor in consultation with the JMC and approved by

the Minister pursuant to Article 8;



1.27



"Development Well" means a well drilled in accordance with a Development

Plan for producing Petroleum including wells for pressure maintenance or for

increasing the Production rate;



1.28



"Discovery" means finding within a well at the end of drilling under Exploration

Operations (an) accumulation(s) of Petroleum whose existence until that finding

was unproved by drilling, which is or can be recovered at the surface in a flow

measurable by conventional international petroleum industry testing methods

(and in the case of water depths greater than four hundred (400) metres, including

Modular Formation Dynamics Testing (also referred to as " M D T " by

Schlumberger));



1.29



"Discovery Area" means that portion of the Contract Area, reasonably

determined by the JMC (or by GNPC i f such area occurs as a result of a Sole

Risk Operation pursuant to Article 9) on the basis of the available seismic and

well data, that covers the areal extent of the geological structure in which a

Discovery is made. A Discovery Area may be modified at any time by the JMC

(or by GNPC to the extent permitted by Article 9, i f applicable), i f justified on the

basis of new information;



1.30



"Discovery Date" means the date on which a Discovery Notice is issued by

Contractor;



1.31



"Discovery Notice" means a written notification of Discovery to the Minister,

Petroleum Commission and GNPC pursuant to Article 8 providing information

which shall include the name and location of the well from which the

accumulation(s) have been found, the depth interval(s), estimates of gross and net

pay thickness, stratigraphy, and type of reservoir and fluids encountered;



1.32



"Effective Date" shall have the meaning ascribed to it in Article 26.12;



1.33



"Exploration" or "Exploration Operations" means the search for Petroleum by

geological, geophysical and other methods and the drilling of Exploration Well(s)

and includes any activity in connection therewith or in preparation thereof and

any relevant processing and Appraisal work, including technical and economic

feasibility studies, that may be carried out to determine whether a Discovery of

Petroleum constitutes a Commercial Discovery;



1.34



"Exploration Costs" means allowable Petroleum Costs incurred, both within and

outside Ghana, in conducting Exploration Operations hereunder determined in

accordance with the Accounting Guide attached hereto as AnnexzyxwvutsrqponmlkjihgfedcbaZYX

2;



1.35



"Exploration Period" means the period commencing on the Effective Date and

continuing during the time provided for in Article 3.1 within which Contractor is

authorised to carry out Exploration Operations and shall include any periods of

extensions provided for in this Agreement. The Exploration Period shall

terminate with respect to any Discovery Area on the Date of Commercial

Discovery in respect of such Discovery Area;



1.36



"Exploration Phase" means any one of the Initial Exploration Period, the First

Extension Period or the Second Extension Period;



1.37



"Exploration Well" means a well drilled in the course of Exploration Operations

conducted hereunder during the Exploration Period;



1.38



"Extension Period" means either of the First Extension Period or Second

Extension Period, as applicable;



1.39



"Force Majeure" means any event beyond the reasonable control of the Party

claiming to be affected by such event which has not been brought about directly

or indirectly at its own instance or which has not been brought about directly or

indirectly at the instance of an Affiliate. Force Majeure events may include, but

are not limited to, acts of God, accidents, fires, explosions, earthquake, storm,

flood, hurricanes, tidal waves, cyclones, tornados, lightning or other adverse

weather conditions or any other natural disasters, war, acts of war, acts of

terrorism, embargo, blockade, riot, civil disorder, or strikes;



1.40



"Foreign Exchange Act" means the Foreign Exchange Act, 2006 (Act 723) as

same may be amended from time to time;



1.41



"Foreign National Employee" means an expatriate employee of Contractor, its

Affiliates, or its Subcontractors who is not a citizen of Ghana;

^

6



1.42zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"Ghana" means the territory of the Republic o f Ghana and includes rivers,

streams, water courses, the territorial sea, seabed and subsoil, the contiguous

zone, the exclusive economic zone, continental shelf, the airspace and all other

areas within the jurisdiction of the Republic of Ghana;

1.43



"Gross Negligence" or "Wilful Misconduct" means any act, failure to act or

failure to exercise such minimum degree of care and prudence by a Party which

was in reckless disregard of, or wanton indifference to, the harmful consequences

that the person knew, or should reasonably have known, could result;



1.44



"Gross Production" means the total amount of Petroleum produced and saved

from a Development and Production Area during Production Operations which is

not used by Contractor in Petroleum Operations and is available for distribution

to the Parties in accordance with Article 10;



1.45



Income Tax Law means the Income Tax Act, 2015 (Act 896) as same may be

amended from time to time;



1.46



"Indigenous Ghanaian company" means a company incorporated under the

Companies Act, 1963 (Act 179) of Ghana:

a)



that has at least fifty-one percent (51%) of its equity owned by a

citizen or citizens of Ghana; and



b)



that has Ghanaian citizens holding at least eighty percent (80%) of

senior management positions and one hundred percent (100%) of

non-managerial and other positions;



1.47



"Initial Interest" means the interest of GNPC in all Petroleum Operations

provided for in Article 2.4;



1.48



"Intellectual Property Rights": all patents, rights to inventions, copyright and

related rights, rights in designs, confidential information (including know-how

and trade secrets), in each case whether registered or unregistered and including

all applications and rights to apply for and be granted, renewals or extensions of

such rights, and all similar or equivalent rights of forms of protection which

subsist or will subsist now or in the future in any part of the world.



1.49



"International Best Oil Field Practice" means uses and practices that are

generally accepted in the international petroleum industry as good, safe,

economical and efficient in exploring for, developing, producing, processing and

transporting Petroleum;



1.50



"Joint Management Committee" or "JMC" means the committee established

pursuant to Article 2.2 and 6.1 hereof;



1.51



"Joint Operating Agreement" or "JOA" means an agreement or contract

among all of the Contractor Parties with respect to the Contract Area and their

respective rights or obligations under this Agreement, as such agreement or

contract may be amended or supplemented from time to time; rv^^^o*7



1.52zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"LIBOR" means the rate per annum equal to the British Bankers Assocition

Interbank Offered Rate for one (1) month U.S. dollar deposits, as published in

London by thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Financial Times. In the event that the Financial Times is not

published, then as publishe by The Wall Street Journal;

1.53



"LNG" means liquefied Natural Gas;



1.54



"Local Content Regulations" means the Petroleum (Local Content and Local

Participation) Regulations, 2013, L.I. 2204 as the same may be amended from

time to time;



1.55



"Market Price" means the market price for Crude Oil realized by Contractor

under this Agreement as determined in accordance with Article 11.7 hereof;



1.56



"Minister" means Minister for Petroleum;



1.57



"Minimum Work Obligation" means the Contractor's obligations set forth in

Article 4,3(a) with respect to the Initial Exploration Period, Article 4.3(b) with

respect to the First Extension Period and Article 4.3(c) with respect to the Second

Extension Period, as the case may be;



1.58



"Month" means a month of the Calendar Year;



1.59



"Natural Gas" means all hydrocarbons which are gaseous at fourteen and sixtyfive one-hundredths per square inch at atmospheric pressure and sixty (60)

degrees Fahrenheit temperature and includes wet gas, dry gas and residue gas

remaining after the extraction of liquid hydrocarbons from wet gas;



1.60



"Non-Associated Gas" means Natural Gas produced from a well other than in

association with Crude Oil;



1.61



"Operator" means eni Ghana or such other Contractor Party as may be jointly

proposed by all the Parties and approved by the Minister, which approval shall

not be unreasonably withheld, to conduct Petroleum Operations hereunder on

behalf of the Parties;



1.62



"Participating Interest" means the interest held by Contractor in accordance

with the provisions of Article 2.10;



. 1.63



"Party" means each of the State, GNPC, Explorco, eni Ghana, Vitol and or

Woodfields, as the case may be;



1.64



"Paying Interest" means an interest held by GNPC in respect of which GNPC

pays for the conduct of Petroleum Operations as expressly provided for in Article



1.65



"Petroleum" means Crude Oil or Natural Gas or a combination of both;



1.66



"Petroleum Commission" means a body established by an Act of Parliament

(Petroleum Commission Act, 2011, (Act .821 for the regulation and the

management of the utilization of petroleum resources in the upstream sector;

J-



1.67zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"Petroleum Costs" means all expenditures made and costs incurred in

conducting Petroleum Operations hereunder determined in accordance with the

Accounting Guide attached hereto as Annex 2;

1.68



"Petroleum Law" means the Petroleum (Exploration and Production) Law, 1984

(PNDCL 84) as the same may be amended from time to time;



1.69



"Petroleum Operations" means all activities, both in and outside Ghana,

relating to the Exploration for. Appraisal of. Development, Production, handling,

storage, processing and transportation to the Delivery Point, of Petroleum

contemplated under this Agreement and includes Exploration Operations,

Development Operations and Production Operations and all activities in

cormection therewith;



1.70



"Petroleum Product" means any product derived from Petroleum by any

refining or other process;



1.71



"Pre-Award Attachment" means any order, decree, injunction or other decision

(however designated) of any court, arbitral body or other competent authority

requested by a Party and issued prior to a final arbitral award issued pursuant to

Article 24 of this Agreement that attaches, seizes, freezes or otherwise restricts

the use or alienation of the any property (whether tangible or intangible) of the

other Party pending issuance of the final arbitral award, whether such property is

in the possession or control of a Party or of a third party;



1.72zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"Production" or "Production Operations" means activities, other than

Exploration Operations or Development Operations, undertaken in order to

extract, save, treat, measure, handle, store and transport (to the Delivery Point)

Petroleum to storage and/or loading points and to carry out any type of primary,

secondary or tertiary recovery operations, including recycling, recompression,

injection for maintenance of pressure and water flooding and all related activities

such as plarming and administrative work and shall also include maintenance,

repair, and well workovers, conducted after the Date of Commencement of

Commercial Production of the respective Development and Production Area;

1.73



"Production Costs" means Petroleum Costs incurred in Production Operations;



1.74



"Proposed Appraisal Programme" means a draft of a programme for the

conduct of an Appraisal to be presented to the Petroleum Commission for

approval;



1.75



"Protected Assets" means (a) property used for diplomatic or consular missions

wherever located, (b) property of a military character and under the control of a

military authority or defence agency of the State wherever located, (c) assets of

the Petroleum Funds (as defined in the Petroleum Revenue Management Act,

2011 (Act 815) as amended by Petroleum Revenue Management (Amendment)

Act, 2015 (Act 893) and (d) property located in Ghana and dedicated to a public

or governmental use (as distinct from property dedicated to a commercial use), to

the extent such property and assets are protected under the laws of Ghana.zyxwvutsrqponmlkjihgfedcbaZ

Y\r^

M



Q



1.76zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"Quarter" means a period of three (3) Months, commencing January 1, April 1,

July 1 or October 1 and ending March 31, June 30, September 30, or

December 31, respectively;

1.77



"Sole Expert" means the person appointed to resolve a dispute pursuant to

Article 24 hereof;



1.78



"Sole Risk" means an operation conducted at the sole cost, risk, expense and

liability of GNPC referred to in Article 9;



1.79



"Specified Rate" means LIBOR plus two percent (2%);



1.80



"Standard Cubic Foot" or "SCF" means the quantity of gas that occupies one

(1) cubic foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit

temperature;



1.81



"State" means the Government of the Republic of Ghana represented by the

Minister;



1.82



"Subcontractor" means a third party with whom GNPC or the Contractor has

entered into a contract for provisions of goods or services for or in cormection

with Petroleum Operations;



1.83



"Termination" means termination of this Agreement pursuant to Article 23

hereof;



1.84



"Work Programme" means the annual plan for the conduct of Petroleum

Operations prepared pursuant to Articles 6.4 and 6.5; and



1.85



"Year" means a continuous twelve (12) Month period.



10



ARTICLE 2

SCOPE OF THE AGREEMENT. INTERESTS O F T H E PARTIES

AND C O N T R A C T A R E A

2.1



This Agreement provides for the Exploration and Development and Production of

Petroleum in the Contract Area by GNPC in association with Contractor.



2.2



Subject to the provisions of this Agreement, Contractor shall be responsible for

the execution of such Petroleum Operations as are required by the provisions of

this Agreement and, subject to Article 9, is hereby appointed the exclusive entity

to conduct Petroleum Operations in the Contract Area. In order that the Parties

may cooperate in the implementation of Petroleum Operations, GNPC and

Contractor shall establish a Joint Management Committee to conduct and manage

Petroleum Operations.



2.3



In the event that no Commercial Discovery is made in the Contract Area or that

Gross Production achieved from the Contract Area is insufficient to fully

reimburse Contractor in accordance with the terms of this Agreement, then

Contractor shall bear its own loss; GNPC and the State shall have no obligations

whatsoever to Contractor in respect of such loss.



2.4



GNPC shall have a ten percent (10%) Initial Interest in all Petroleum Operations

under this Agreement.

With respect to all Exploration Operations and

Development Operations, the Initial Interest shall be a Carried Interest. With

respect to all Production Operations GNPC's Initial Interest shall be a Paying

Interest.



2.5



In addition to the Initial Interest provided for in Article 2.4, GNPC shall have the

option in respect of each Development and Production Area to acquire an

Additional Interest of up to nine percent (9%) in the Petroleum Operations in

such Development and Production Area, by contributing the corresponding

proportionate share to all the Petroleum Costs incurred after the Date of

Commercial Discovery, in respect of such Development and Production Area (or

make arrangements satisfactory to the Contractor to that effect). With respect to

all Development Operations and Production Operations, the Additional Interest

shall be a Paying Interest. GNPC shall notify the Contractor of the exercise of its

intention to acquire the Additional Interest within ninety (90) days of the Date of

Commercial Discovery. GNPC and Contractor shall agree on the mode of

financing such Additional Interest.



2.6



I f GNPC opts to take an Additional Interest as provided for in Article 2.5 then

within six (6) Months of the date of its election, GNPC shall reimburse the

Contractor for all expenditures attributable to GNPC's Additional Interest

incurred from the Date of Commercial Discovery to the date GNPC notifies

Contractor of its election to acquire the Additional Interest.



2.7



For the avoidance of doubt GNPC shall only contribute to Petroleum Costs:zyxwvutsrqponmlkjihgfedcba

\.^.J~

11



a)



incurred in respect of Development Operations in any Development

and Production Area to the extent only of any Additional Interest

acquired in such Development and Production Area under

Article 2.5; and



b)



incurred in respect of Production Operations in any Development and

Production Area both to the extent of:

i)



its ten percent (10%) Initial Interest; and



ii)



any Additional Interest acquired under Article 2.5.



GNPC may during the Exploration Period contribute to Petroleum Operations

by providing such relevant services as may be specified by the JMC from time to

time. Prior to the provision of such services, and subject to JMC approval,

Contractor must specify in writing whether GNPC is either to (i) be paid in cash

for such services by Contractor upon receipt of invoice from GNPC, or (ii) earn

credit for the costs of providing such services against GNPC's share, i f any, of

future Development and/or Production Costs. The amount of costs to be

invoiced or credit earned by GNPC pursuant to this paragraph must be

approved by the JMC prior to provision of the relevant services, and shall be at

fair market rates at which such services could be obtained under freely

competitive conditions at the time of such approval. Likewise, i f the Contractor

provides services, it shall earn credit for the costs of providing such services In

accordance with the Accounting Guide.

Upon notifying Contractor of its decision to acquire an Additional Interest

pursuant to Article 2.5, GNPC may specify in the notification one or more of the

following:

a)



that notwithstanding the provisions in Article 2.6 GNPC elects to have

Contractor fund GNPC's total proportionate share of Development Costs

incurred in respect of the Additional Interest. Such funds shall be reimbursed

to Contractor with interest at the Specified Rate from the proceeds of the sales

of GNPC's petroleum entitlement; and



b) where during the production phase it is anticipated that GNPC's petroleum

entitlement would not be sufficient to repay Contractor for GNPC's share of

Development Costs funded by Contractor in accordance with Article 2.8 (a),

GNPC shall notify the Contractor of arrangements satisfactory to the

Contractor for the repayment of any outstanding balance.

Contractor's Participating Interest in all Petroleum Operations and in all rights

under this Agreement shall be ninety percent (90%), reduced proportionately on

each Contractor Party pro rata to its Participating Interest, at any given time and

in any given part of the Contract Area by the exercise of the option of Additional

Interest of GNPC pursuant to Article 2.5 or the exercise of the Sole Risk interest

of GNPC pursuant to Article 9.



2.10



2.11



For the avoidance of doubt, the Participating Interest shall be divided as at the

Effective Date as follows:

a)



Eni Ghana shall have a forty-two point four six nine one percent

(42.4691%) interest in all Petroleum Operations and in all rights

under this Agreement and will be required to pay for the conduct of

Petroleum Operations as set out in the Petroleum Agreement pro-rata

to its interest;



b)



Vitol shall have a thirty-three point nine seven five three percent

(33.9753%) interest in all Petroleum Operations and in all rights

under this Agreement and will be required to pay for the conduct of

Petroleum Operations as set out in this Agreement pro-rata to its'

interest;



c)



Woodfields shall have a nine point five five five six percent

(9.5556%) interest in all Petroleum Operations and in all rights under

this Agreement and will be required to pay for the conduct of

Petroleum Operations as set out in this Agreement pro-rata to its'

interest; and



d)



Explorco shall have four percent (4%) interest in all Petroleum

Operations and in all rights under this Agreement and will be

required to pay for the conduct of Petroleum Operations as set out in

this Agreement pro-rata to its' interest.



As of the Effective Date, the Contract Area shall cover a total of one-thousand

one-hundred and twenty-seven kilometers squared (1127 km^) as depicted by

Annex 1 and shall from time to time during the term of this Agreement be

reduced according to the terms herein. During the term of the Agreement,

Contractor shall pay rentals to the State for the area included within the Contract

Area at the beginning of each Contract Year according to the provisions of

Article 12.4 below.



13



ARTICLE 3

EXPLORATION PERIOD

3.1zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

The Exploration Period shall begin on the Effective Date and, subject to

Article 22.8, shall not extend beyond six (6) years except as provided for in

accordance with this Agreement and the Petroleum Law.

a)



The Exploration Period shall be divided into an Initial Exploration

Period of three (3) years ("Initial Exploration Period") and two (2)

extension periods, the first of two (2) years and the second of one (1)

year (respectively, "First Extension Period" and "Second

Extension Period") and where applicable the further periods for

which provision is made hereafter.



b)



Where Contractor has fulfilled its obligations set out in Article 4.3

before the end of the Initial Exploration Period or, as the case may

be, the First Extension Period, and has exercised its option by

applying to the Minister in writing for an extension, the Minister will

be deemed to have granted an extension into the First Extension

Period or, as the case may be, into the Second Extension Period.



c)



For each well drilled by Contractor or with Contractor's participation

during the Initial Exploration Period beyond those referred to in

Article 4.3, the Initial Exploration Period shall be extended by three

(3) Months and the commencement and the ending of subsequent

periods shall be postponed in their entirety accordingly.



3.1.1



3.2



Where, at the end of the Initial Exploration Period or the First

Extension Period, Contractor is drilling or testing any well.

Contractor shall be entitled to continue its drilling or testing activities

for a further period as may be reasonably required to enable

Contractor to complete such work and, in the event that Contractor

notifies the Minister that the results from any such well show a

Discovery, Contractor shall be entitled further to assess the results

and determine whether such Discovery merits Appraisal, before

having either to elect to enter into the subsequent phase, or relinquish

the Contract Area. The completion of the drilling and testing

activities and decision to elect to enter into the subsequent phase or

relinquish the Contract Area, save for the Discovery Area, as the case

may be, shall be made within ninety (90) days from the expiration of

the Initial Exploration Period or the First Extension Period as

applicable. The commencement and the ending of subsequent periods

shall be postponed in their entirety accordingly.



Where at the end of the Second Extension Period Contractor

a)



is drilling or testing any well. Contractor shall be entitled to continue

its activities for a further period as may be reasonably required to

14



enable Contractor to complete such work and assess the results and,

in the event that Contractor notifies the Minister that the results from

any such well show a Discovery which merits Appraisal, Contractor

shall be entitled to retain the relevant Discovery Area for such period

as may be reasonably required to carry out an Appraisal Programme

and determine whether the Discovery constitutes a Commercial

Discovery;

b)



is engaged in the conduct of an Appraisal Programme in respect of a

Discovery which has not been completed. Contractor shall be entitled

to retain the Discovery Area for such period as may be reasonably

required to complete that Appraisal Programme and determine

whether the Discovery constitutes a Commercial Discovery;



c)



has undertaken work not falling under paragraphs (a) or (b) which is

not completed. Contractor shall be entitled to continue its activities

for such period as the Minister considers reasonable for the purpose

of enabling such work to be completed;



d)



given to the Minister a notice of Commercial Discovery pursuant to

Article 8, Contractor shall be entitled to retain the Discovery Area for

such additional period as may be required to prepare the

Development Plan in respect of the Commercial Discovery until

either:

i)



the Minister has approved the Development Plan as set out in

Article 8; or



ii)



in the event that the Development Plan is not approved by the

Minister as set out in Article 8 and the matter or matters in

issue between the Minister and Contractor have been referred

for resolution under Article 24, one (1) Month after the date

on which the final decision thereunder has been given.



3.3



Subject to Article 3.1.1, where by the end of the Initial Exploration Period or, as

the case may be, by the end of the First Extension Period, Contractor has failed to

complete its Minimum Work Obligations as specified in Article 4.3(a) or Article

4.3(b) in respect of that period (including in the circumstances contemplated in

Article 4.7(b) but has made reasonable arrangements during the Initial

Exploration Period or the First Extension Period, as applicable, to remedy its

default. Contractor shall be entitled to apply to the Minister for further extension.

The Minister may grant in his discretion an extension on the then current

applicable period subject to such reasonable terms and conditions as the Minister

may stipulate to assure performance of the work.



3.4



Save in respect of a Discovery Area:

a)



in the circumstances and subject to the limitations set forth in Section

12(3) of the Petroleum Law;

15



b)



in a case falling within the provisions of Article 3.2 (d); or



c)



in circumstances where Article 22.8 applies;



subject to Article 3.5 and Article 8, nothing in Article 3.2 shall be read or

construed as requiring the extension of the Exploration Period beyond seven (7)

years from the Effective Date.

The provisions of Articles 3.2 (a), (b) and (c) and Article 3.3 so far as they relate

to the duration of the relevant Extension Period to which Contractor will be

entitled shall be read and construed as requiring the Minister to give effect to the

provisions of Article 8 relating to the time within which Contractor must meet the'

requirements of that Article.

'



ARTICLE 4

MINIMUM E X P L O R A T I O N P R O G R A M M E

4.1



Exploration Operations shall begin as soon as practicable and in any case

not later than sixty (60) days after the Effective Date.



4.2



GNPC shall, at the request of Contractor, make available to Contractor such

records and information relating to the Contract Area as are relevant to the

performance of Exploration Operations by Contractor and are in GNPC's

possession, provided that Contractor shall reimburse GNPC for licensing the

data and for other costs reasonably incurred in procuring or otherwise

making such records and information available to Contractor.



4.3



Subject to the provisions of this Article 4, in discharge of its obligations to

carry out Exploration Operations in the Contract Area, Contractor shall

during the several phases into which the Exploration Period is divided carry

out the obligations specified hereinafter:

a)



Initial Exploration Period: Commencing on the Effective Date and

terminating three (3) years from the Effective Date.

Dy?Cnpti9P 9f C9ntR«^^pr's Minimum Wprk Qbligatipn:

(i) Acquire, process and interpret 1,000 sq. km of new 3D seismic; and

(ii) Drill one (1) Exploration Well in the Contract Area



Minimum Expenditure: Contractor's minimum expenditure for the work in

the Initial Exploration Period shall under (1) Article 4.3(a)(i) be Ten Million

United States Dollars (US$ 10,000,000) and (2) Article 4.3 (a)(ii) be ThirtyFive million United States Dollars (US$ 35,000,000) amounting to a total of

Forty-Five Million United States Dollars (US$ 45,000,000).

b)



First Extension Period: Commencing at the end of the Initial

Exploration Period and terminating two (2) years from the

expiration of the Initial Exploration Period.

Descrintion of Contractor's Minimum Work Obligation:

(i)



G&G studies; and



(ii)



Drill one (1) Exploration Well in the Contract Area.



Minimum Expenditure: Contractor's minimum expenditure for the work in

the First Extension Period shall be Forty Million United States Dollars (US$\

40,000,000).



c)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Second Extension Period: Commencing at the end of the First

Extension Period and terminating one (1) year from the expiration of the

First Extension Period or as may be extended under this Agreement.

Desyriptipn Qf Cpntr^ctpr's Minimum Wqrlt Qblig^t'pn:

(i)



G&G studies; and



(ii)



Drill one (1) Exploration Well in the Contract Area.



Minimum Expenditure: Contractor's minimum expenditure for the work in

the Second Extension Period shall be Forty Million United States Dollars

(US$ 40,000,000).

Work accomplished in any period in excess of the above obligations may

be applied as credit in satisfaction of work obligations called for in any

other Exploration Phase. Without prejudice to Article 23.3(e), should

Contractor fail to complete its Minimum Work Obligations for the

corresponding Exploration Phase under Article 4.3(a), (b) or (c) as

applicable. Contractor shall, without prejudice to any other obligation of

Contractor under this Agreement, pay to GNPC as a sole remedy an

amount equal to the unspent amount of the Minimum Expenditure

obligation for the relevant Exploration Phase. .

The seismic programme in Article 4.3(a), when combined with existing

data, shall be such as will enable a study of the regional geology of the

Contract Area and the preparation of a report thereon with appropriate

maps, cross sections and illustrations, as well as a geophysical survey of the

Contract Area which, when combined with existing data, shall provide:

a)



A minimum seismic grid adequate to define prospective drill sites over

prospective closures as interpreted from data available to Contractor;

and



b)



A seismic evaluation of structural and stratigraphic conditions over the

remaining portions of the Contract Area.



Each Exploration Well shall be drilled at a location and to an objective

depth determined by Contractor in consultation with GNPC. Except as

otherwise provided in Article 4.6 and 4.7 below, the minimum depth of

each obligatory Exploration Well in Articles 4.3 (b) and (c) shall be

whichever of the following is first encountered:

a)



the depth of four thousand five hundred (4,500) metres measured

from the Rotary Table Kelly Bushing (RTKB);



b)



one hundred (100) metres into the primary target; or



c)



the depth at which Contractor encounters geologic basement.



unless GNPC consents otherwise, which consent shall not be unreasonably

withheld or delayed

4.6



4.7



The minimum depth of one (1) of the obligatory Exploration Wells in

Article 4.3 shall be whichever of the following is first encountered:

a)



the depth of four thousand five hundred (4,500) metres measured

from the Rotary Table Kelly Bushing (RTKB);



b)



the depth sufficient to penetrate the shallower of (i) three hundred

fifty (350) metres into the Cenomanian or (ii) top of the Albian; and



c)



the depth at which Contractor encounters geological basement;



I f in the course of drilling an Exploration Well the Contractor concludes that

drilling to the minimum depth specified in Article 4.5 or 4.6 above is

impossible, impracticable or imprudent in accordance with International

Best Oil Field Practice, then Contractor may plug and abandon the

Exploration Well and GNPC shall have the option of either:

a)



waiving the minimum depth requirement, in which case Contractor

will be deemed to have satisfied the obligation to drill such Exploration

Well; or



b)



requiring Contractor to drill a substitute Exploration Well at a

location determined by Contractor in consultation with GNPC and to

the minimum depth set forth in Article 4.5 or 4.6 except that i f in the

course of drilling such substitute Exploration Well Contractor

establishes that drilling to the minimum depth specified in Article

4.5 or 4.6 above is impossible, impracticable or imprudent in

accordance with Intemational Best Oil Field Practice, then Contractor

may plug and abandon the substitute Exploration Well and will be

deemed to have satisfied the obligation to drill one ( I ) Exploration

Well.



The above option shall be exercised by GNPC within sixty (60) days from

the notice given by Contractor to GNPC of the completion of the plugging

and abandonment of the Exploration Well, and failure to exercise such

option shall constitute a waiver of the minimum depth requirement pursuant

to (a) above.

4.8



During the Exploration Period, Contractor shall have the right to perform

additional Exploration Operations, including without limitation performing

gravity and magnetic surveys, drilling stratigraphic wells and performing

additional geological and geophysical studies, provided the Minimum Work

Obligations are completed within the applicable period.



During the Exploration Period, Contractor shall deliver to GNPC and the

Minister reports on Exploration Operations conducted during each Quarter

within thirty(30) days following the end of that Quarter. Further requests for

information by the Minister under Section 9(1) of the Petroleum Law shall

be complied with within a reasonable time and copies of documents and

other material containing such information shall be provided to GNPC. ,



20



ARTICLE 5

RELINQUISHMENT

5.1



Except as provided in Article 5.2, 8.3, 8.6, 8.12, 8.19, 8.20, 8.21, 8.22, 8.23, 9.2,

9.10 and 14.10, Contractor shall relinquish portions of the Contract Area in the

manner provided hereafter:

a)



I f on or before the expiration of the Initial Exploration Period,

Contractor elects to enter into the First Extension Period pursuant to

Article 3.1(b) then subject to Article 5.2 at the commencement of the

First Extension Period the area retained shall not exceed seventy

percent (70%) of the Contract Area as at the Effective Date;



b)



I f on or before the expiration of the First Extension Period,

Contractor elects to enter into the Second Extension Period pursuant

to Article 3.1(b) then subject to Article 5.2 at the commencement of

the Second Extension Period the area retained shall not exceed forty

percent (40%) of the Contract Area as at the Effective Date;



c)



On the expiration of the Second Extension Period, Contractor shall

subject to Article 5.2 relinquish the remainder of the retained

Contract Area.



5.2



The provisions of Article 5.1 shall not be read or construed as requiring

Contractor to relinquish any portion of the Contract Area which constitutes or

forms part of either a Discovery Area (excluding a Discovery Area determined

by the terms of this Agreement to neither merit Appraisal nor to be a

Commercial Discovery) or a Development and Production Area; provided,

however, that i f at the end of the Initial Exploration Period or the First

Extension Period, as the case may be. Contractor elects not to enter into the First

or Second Extension Period Contractor shall relinquish the entire Contract Area,

except a Discovery Area or a Development and Production Area.



5.3



Each area to be relinquished pursuant to this Article shall be selected by

Contractor and shall be measured as far as possible in terms of continuous and

compact units of a size and shape which will permit the carrying out of

Petroleum Operations in the relinquished portions.



5.4



Contractor may voluntarily relinquish all or part of the Contract Area at any time

during the term of this Agreement on not less than ninety (90) calendar days'

notice to the State, provided Contractor has satisfied its Minimum Work

Obligations, subject to any remaining obligations with respect to abandonment,

decommissioning and replacement of facilities.



21



ARTICLE 6

JOINT MANAGEMENT C O M M I T T E E

6.1



In order that the Parties may at all times cooperate in the implementation

of Petroleum Operations, GNPC and Contractor shall not later than thirty

(30) days after the Effective Date establish a Joint Management

Committee (JMC). Without prejudice to the rights and obligations of

Contractor for day-to-day management of the operations, the JMC shall

oversee, supervise and approve the Petroleum Operations and ensure that

all approved Work Programmes and Development Plans are complied with

and also that accounting for costs and expenses and the maintenance of

records and reports concerning the Petroleum Operations are carried out in

accordance with this Agreement and the accounting principles and

procedures generally accepted as Intemational Best Oil Field Practice.



6.2



The composition of and distribution of functions within the JMC shall be

as provided hereinafter:



6.3



a)



The JMC shall be composed of two (2) representatives of GNPC and

two (2) representatives of the Contractor. Any Contractor Party not

represented on the JMC may appoint an observer to attend all JMC

meetings and shall receive copies of all notices and materials

distributed to the members of the JMC concurrently with the

distribution of such notices and materials to the JMC members.

GNPC and Contractor shall also designate a substitute or alternate for

each member. In the case of absence or incapacity of a member of the

JMC, such alternate shall automatically assume the rights and

obligations of the absent or incapacitated member;



b)



The Chairperson of the JMC shall be designated by GNPC from

amongst the members of the JMC;



c)



Contractor shall be responsible, in consultation with GNPC, for the

preparation of an agenda and supporting documents for each meeting

of the JMC and for keeping records of the meetings and decisions of

the JMC. GNPC shall have the right to inspect all records of the JMC

at any time. Contractor shall circulate the agenda and supporting

documents for each meeting to all members and the substitutes or

alternates designated pursuant to Article 6.2(a); and



d)



At any meeting of the JMC any three (3) representatives shall form a

quorum.



Meetings of the JMC shall be held and decisions taken as follows:

a)



All meetings of the JMC shall be held in Accra or such other place as"^

may be agreed upon by members of the JMC;

22



b)



The JMC shall meet at least twice per Calendar Year and at such

times as the members may agree;



c)



A meeting of the JMC may be convened by GNPC or the Contractor

giving not less than twenty (20) days' notice to the other or, in a case

requiring urgent action, notice of such lesser duration as the members

may agree upon;



d)



Decisions of the JMC shall require unanimity;



e)



Any member of the JMC may vote by written and signed proxy held

by another member;



f)



Decisions of the JMC may be made without holding a meeting i f all

representatives of GNPC and the Contractor notify their consent

thereto in the manner provided in ArticlezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPON

27;



g)



GNPC and Contractor shall have the right to bring expert advisors to

any JMC meetings to assist in the discussions of technical and other

matters requiring expert advice;



h)



The JMC may also establish such subcommittees as it deems

appropriate for carrying out its functions including:

i)



a technical subcommittee;



ii)



an audit subcommittee;



iii)



an accounting subcommittee;



iv)



a contract/procurement subcommittee; and



Subject to JMC approved compliance policies, reasonable costs and

expenses as evidenced by invoices and/or receipts related to

attendance by GNPC in or outside Accra (e.g. travel, transportation,

lodging, per diem and insurance), in accordance with applicable laws,

regulations and GNPC policies and procedures shall be borne by

Contractor and treated as Petroleum Costs.

JMC shall oversee Exploration Operations as follows:

Not later than sixty (60) days after the Effective Date and thereafter

at least ninety (90) days before the commencement of each Calendar

Year, Contractor shall prepare and submit to the JMC for its review

and approval a detailed Work Programme and budget covering all

Exploration Operations which Contractor proposes to carry out in

that Calendar Year and shall also give an indication of Contractor's

tentative preliminary exploration plans for the succeeding Calendar

Year. Where the Effective Date occurs later than June 30 in any

Calendar Year Contractor shall have the option of submitting a single



detailed Work Programme and budget covering the remaining

Months of the Calendar Year in which the Effective Date occurs and

the succeeding Calendar Year;

b)



Upon notice to GNPC, Contractor may amend any Work Programme

and budget submitted to the JMC pursuant to this Article 6.4 which

notice will state why in Contractor's opinion the amendment is

necessary or desirable. Any such amendment which increases the

total expenditure under an approved Work Programme and budget by

more than ten per cent (10%) shall require the approval of the JMC;



c)



Every Work Programme and budget submitted to the JMC pursuant

to this Article 6.4 and every revision or amendment thereof shall be

consistent with the requirements set out in Article 4.3 relating to the

minimum work and expenditure for the period of the Exploration

Period in which such Work Programme and budget fails;



d)



Contractor shall report any Discovery to GNPC promptly after such

Discovery is made and shall submit to the JMC for review its

Proposed Appraisal Programme. Within thirty (30) days of

completion of the Appraisal Programme the JMC shall meet to

discuss the results of the Appraisal Programme before submission of

the detailed Appraisal report provided for in Article 8.10;



e)



The JMC will timely review and approve Work Programmes and

budgets and, where applicable, any amendments or revisions thereto,

and Proposed Appraisal Programmes and any amendments or

revisions thereto, submitted to it by Contractor pursuant to this

Article 6, and timely give such advice as it deems appropriate which

Contractor shall consider before submitting Work Programmes and

budgets and any amendments or revisions thereto for approvals

required by law or this Agreement; and



f)



After the date of the first Commercial Discovery, Contractor shall

seek the approval of GNPC's JMC representatives, which approval

shall not be unreasonably wdthheld, on any proposal for the drilling

of any further Exploration Well or Wells not associated with the

Commercial Discovery and not otherwise required to be drilled under

Article 4.3. I f approval is not secured by Contractor, Contractor may

nevertheless elect to drill the Exploration Well or Wells at its sole

risk and the costs of such Exploration Operations shall not be

considered allowable Petroleum Costs. However, such costs shall

only be allowable Petroleum Costs for purposes of AOE i f there

arises a subsequent Commercial Discovery associated with such

additional Exploration Operations. Any such subsequent Commercial

Discovery shall be treated hereunder in the same manner as i f such

Commercial Discovery had been made in connection with operations

that were not performed as sole risk operations, including, without

limitation, participation by GNPC in such Commercial Discovery, fy^o



6.5



From the Date of Commercial Discovery, the JMC shall have supervision

of Petroleum Operations as follows:

a)



Within sixty (60) days after the Date of Commercial Discovery,

Contractor shall prepare and submit to the JMC for approval any

revisions to its aimual Work Programme and budget that may be

necessary in order to implement the Development Plan for the

remainder of that Calendar Year and, with respect to the Contract

Area (excluding the Discovery Area) for the rest of the Exploration

Period;



b)



At least ninety (90) days before the commencement of each

subsequent Calendar Year Contractor shall submit to the JMC for

review and approval a detailed Work Programme and budget setting

forth all Development and Production Operations which Contractor

proposes to carry out in that Calendar Year and the estimated cost

thereof and shall also give an indication of Contractor's plans for the

succeeding Calendar Year; and



c)



Within sixty (60) days of the Date of commencement of Commercial

Production and thereafter not later than one hundred and twenty

(120) days before the commencement of each Calendar Year

Contractor shall submit to the JMC for its approval an annual

production schedule which shall be in accordance with Intemational

Best Oil Field Practice, and shallzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIH

he designed to provide the most

efficient, beneficial and timely production of the Petroleum

resources.



6.6



Lifting schedules for Development and Production Areas and other

supplementary agreements provided for under Article 10.7 shall be subject

to JMC approval.



6.7



The JMC shall review all of Contractor's reports on the conduct of

Petroleum Operations.



6.8



Contractor's insurance programme and the programmes for training and

technology transfer submitted by Contractor and the accompanying

budgets for such schemes and programmes made for the purposes of

Article 21 shall be subject to JMC approval.



6.9



Any contract to be entered into or awarded by Contractor for the provision

of services for Petroleum Operations must comply with the provisions of

Article 20 and the JMC approved relevant tendering procedures and,

where applicable, shall be subject to approval by the JMC or its

subcommittee. At the first meeting the JMC shall approve the applicable

contract monetary value above which the award of the contracts shall be

subject to approval by the JMC or its subcommittee. Where such

applicable contract monetary value should be such as would allow the

25



operator to conduct the Petroleum Operations in a timely and efficient

manner.

6.10



I f during any meeting of the JMC the Parties are unable to reach

agreement concerning any of the matters provided for in Articles 6.4, 6.5,

6.6, 6.8 and 6.9 the matter shall be deferred for reconsideration at a further

meeting to be held not later than fifteen (15) days following the original

meeting. I f after such further meeting the Parties are still unable to reach

agreement, the matter in dispute shall be referred to the Parties' executive

management forthwith.

Failing agreement within fifteen (15) days

thereafter, the matter in dispute shall, at the request of any Party, be

referred for resolution under Article 24.



6.11



For the avoidance of doubt, the concurrence or approval of JMC

representatives shall not be unreasonably withheld or delayed with respect

to any proposal submitted to the JMC.



I



ARTICLE 7

R I G H T S AND O B L I G A T I O N S O F C O N T R A C T O R AND G N P C

7.1



Subject to the provisions of this Agreement, Contractor shall be responsible for

the conduct of Petroleum Operations and shall perform its obligations in a

workmanlike manner, with due care and expedition and in accordance with

Intemational Best Oil Field Practice, including without prejudice to the

generality of the foregoing:

a)



conduct Petroleum Operations with utmost diligence, efficiency and

economy in accordance with Intemational Best Oil Field Practice

observing sound technical and engineering practices using

appropriate advanced technology and effective equipment,

machinery, materials and methods;



b)



take all practicable steps to ensure compliance with Section 3 of the

Petroleum Law; including ensuring the recovery and prevention of

waste of Petroleum in the Contract Area in accordance with

Intemational Best Oil Field Practice;



c)



prepare and maintain in Ghana full and accurate records of all

Petroleum Operations performed under this Agreement;



d)



prepare and maintain accounts of all Petroleum Operations under this

Agreement in such a manner as to present a full and accurate record

of the costs of such Petroleum Operations, in accordance with the

Accounting Guide;



e)



disclose to GNPC and the Minister any operating or other agreement

among the Parties that constitute Contractor relating to the Petroleum

Operations hereunder, which agreement shall not be inconsistent with

the provisions of this Agreement;



f)



develop a project operating stmcture enabling GNPC either directiy

or through Explorco to develop its operating capabilities by

seconding its or Explorco's personnel to the organization of the

Operator engaged in the Petroleum Operations. Such stmcture shall

be based on the principles attached hereto as Annex 5;



g)



provide and be solely responsible for the payment of all costs related

or incidental to all services, equipment and supplies necessary for the

execution of the activities to be conducted by the Contractor under

this Agreement except as otherwise provided hereunder and the

related documents;



h)



prepare and submit in accordance with this Agreement for approval

by the JMC (i) the Development Plan and (ii) such other matters as'



are specified in tliis Agreement and tlie related documents as subject

to approval by the JMC;

i)



take all measures consistent with Intemational Best Oil Field Practice

(i) to control the flow and prevent loss or waste of Petroleum, (ii) to

prevent any injurious ingress of water and damage to Petroleum

bearing strata and (iii) to manage reservoir pressure;



j)



not to flare any Natural Gas except to the extent necessary to mitigate

or prevent an emergency for safe operations as provided in the

Development Plan, or as otherwise permitted in Article 14.2;



k)



keep the Minister, Petroleum Commission and GNPC promptly

advised in writing of all material developments which occur, or the

occurrence of which is reasonably foreseeable, affecting or highly

likely to affect Petroleum Operations;



1)



to take such steps in case of emergency, and make such immediate

expenditures as are necessary in accordance with Intemational Best

Oil Field Practice, environmental, industrial hygiene and safety

legislation and/or this Agreement and the related documents for the

protection of health, life, the envirormient and property, and to report

in reasonable detail all such steps taken and expenditures made

promptly to the Minister, Petroleum Commission and JMC;



m)



notify promptly the Minister, Petroleum Commission and GNPC i f

the Contractor becomes aware of any unustial event or circumstance

occurring in the Contract Area or such other areas where Contractor

is undertaking activities contemplated under this Agreement or the

related documents that could reasonably be expected to adversely

affect the environment;



n)



implement and administer contracts related to Petroleum Operations

entered into with Affiliates on an arm's-length basis;



o)



maintain or decommission, as appropriate, all existing facilities and

assets and all other assets used or held for use in connection with

Petroleum Operations in accordance with Intemational Best Oil Field

Practice, applicable law and this Agreement; and



p)



perform and observe each other term, covenant and agreement of the

Contractor contained in this Agreement.



In connection with its performance of Petroleum Operations, Contractor shall

have the right within the terms of and pursuant to applicable law and regulations

in effect from time to time:

a)



to establish offices in Ghana and to assign to those offices such

representatives as it shall consider necessary for the purposes of this

Agreement;



b)



to use public lands for installation and operation of shore bases, and

terminals, harbours and related facilities, petroleum storage and

processing, pipelines from fields to terminals and delivery facilities,

camps and other housing;



c)



to receive licenses and permission to install and operate such

communications. Petroleum production, processing, storage facilities,

transportation facilities (to the Delivery Point) and other facilities as

shall be necessary for the efficiency of its operations;



d)



to bring to Ghana such number of Foreign National Employees as

shall be necessary for its operations, including employees assigned

on permanent or resident status, with or without families, as well as

those assigned on temporary basis such as rotational employees and

having first given reasonable consideration to qualified Ghanaians, in

compliance with the Local Content Regulations;



e)



to provide or arrange for reasonable housing, schooling and other

amenities, permanent and temporary, for its employees and to import

personal and household effects, furniture and vehicles, for the use of

its persoimel in Ghana;



f)



to be solely responsible for provision of health, accident, pension and

life insurance benefit plans of its Foreign National Employees and

their families; and such employees shall not be required to participate

in any insurance, compensation or other employee or social benefit

programs established in Ghana;



g)



to have, together with its personnel, at all times the right of ingress to

and egress from its offices in Ghana, the Contract Area, and the

facilities associated with Petroleum Operations hereunder in Ghana

including the offshore waters, using its owned or chartered means of

land, sea and air transportation; and



h)



to engage such Subcontractors, expatriate and national, including also

consultants, and to bring such Subcontractors and their persormel to

Ghana as are necessary in order to carry out the Petroleum

Operations in a skilful, economic, safe and expeditious manner; and

said Subcontractors shall have the same rights as Contractor specified

in this Article 7.2 to the extent they are engaged by Contractor for the

Petroleum Operations hereunder.



GNPC shall use its best efforts to assist Contractor in carrying out Contractor's

obligations expeditiously and efficiently as stipulated in this Agreement, as long

as Contractor and its Subcontractors use their reasonable efforts to appropriately

complete applicable procedures and other requirements prescribed by relevant

authorities, to:



a)



establish supply bases and obtain necessary

facilities, equipment and supplies;



communications



b)



obtain necessary approvals to open bank accounts in Ghana;



c)



subject to Article 21 hereof, obtain entry visas and work permits or

any other documentation that may be required from time to time for

such number of Foreign National Employees of Contractor and its

Subcontractors engaged in Petroleum Operations and members of

their families who will be resident in Ghana, and make arrangements

for their travel, arrival, medical services and other necessary

amenities;



d)



comply with Ghana customs procedures and obtain permits for the

importation of necessary materials;



e)



obtain the necessary permits to transport documents, samples or other

forms of data to foreign countries for the purpose of analysis or

processing i f such is deemed necessary for the purposes of Petroleum

Operations;



f)



assist with the acquisition of any approvals or waivers required from

any State agencies or other ministerial or regulatory bodies under the

direct or indirect control of the State (each azyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQP

"State Agency") dealing

with

fishing,

meteorology,

navigation, environment

and

communications as required;



g)



identify through a structured and transparent process the qualified

Ghanaian personnel as candidates for employment by Contractor in

Petroleum Operations; and



h)



procure access, on competitive commercial terms to infrastructure

owned by the State, or GNPC (or its Affiliates) or any third party,

including facilities ovraed or used by contractors on oil and gas

blocks adjacent to the Contract Area.



7.4



All reasonable and documented expenses incurred by GNPC in connection with

any of the matters set out in Article 7.3 shall be borne by Contractor and be

eligible Petroleum Costs in accordance with this Agreement.



7.5



GNPC shall use its best efforts to render assistance to Contractor in emergencies

and major accidents and such other assistance as may be requested by

Contractor, provided that any reasonable expenses involved in such assistance

shall be borne by Contractor and be eligible Petroleum Costs in accordance with

this Agreement.



7.6



Subject to the provisions of this Agreement and save for Petroleum Operations

undertaken by GNPC pursuant to Article 9, Contractor shall, during the term of

this Contract, maintain and obtain insurance coverage for and in relation to

Petroleum Operations, for such amounts and against such risks as are

30



customarily or prudently insured in the intemational petroleum industry in

accordance with Intemational Best Oil Field Practice, and shall within two

months of the date of policy or renewal furnish to the Minister and the

Petroleum Commission, certificates evidencing that such coverage is in effect.

Such insurance policies shall cover the interest of GNPC as additional insured

and shall waive subrogation against GNPC. The said 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, that i f for any reason the 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 of property or damage 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)



any claim for which the State may be liable relating to the loss of

property or damage or bodily injury suffered by any third party in the

course of or as a result of Petroleum Operations for which the

Contractor is liable to indemnify the State;



e)



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 Petroleum Operations; and



f)



the Contractor's and/or the Operator's liability to its employees

engaged in Petroleum Operations.



7.7



The Contractor shall require its Subcontractors to obtain and maintain insurance

against the risks referred to above in Article 7.6 relating mutatis mutandis to

such Subcontractors.



7.8



Contractor shall indemnify, defend and hold the State and GNPC harmless

against all claims, losses and damages, including, without limitation, claims for

loss or damage to property or injury or death which are directly caused by or

resulting from any Petroleum Operations conducted by or on behalf of the

Contractor, derive from Contractor's Gross Negligence and Willful Misconduct,

and do not qualify as either of indirect or consequential damages, pool

formation or stmcture damage, loss of reservoir, loss of production or loss ofzyxwvutsrqponmlkji

VJ*^

profits.



ARTICLE 8

COMMERCIALITY

8zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

.1

Contractor shall submit a Discovery Notice to the Minister, the Petroleum

Commission and GNPC as soon as possible after any Discovery is made, but in

any event not later than thirty (30) days after the date any such Discovery is

made.

8.2



As soon as possible after the analysis of the test results of such Discovery is

complete and in any event not later than one hundred (100) days from the date

of such Discovery, Contractor shall by a further notice in writing to the

Minister, the Petroleum Commission and GNPC, indicate whether in the

opinion of Contractor the Discovery merits Appraisal.



8.3



Where the Contractor does not make the indication required by Article 8.2 within

the period indicated or indicates that the Discovery does not merit Appraisal,

Contractor shall, subject to Article 8.19, relinquish the Discovery Area

associated with the Discovery.



8.4



Where Contractor indicates that the Discovery merits Appraisal, Contractor shall

within one hundred and eighty (180) days from the date of such Discovery

notify the Minister and submit to the Petroleum Commission for approval and

to the Minister for information purposes a Proposed Appraisal Programme to be

carried out by Contractor in respect of such Discovery. For the avoidance of

doubt, unless otherwise instructed by the Petroleum Commission, Contractor

shall conduct a separate Appraisal for each Discovery where Contractor

indicates that such Discovery merits Appraisal.



8.5



In the absence of regulations otherwise governing the process, the Petroleum

Commission and Contractor shall adhere to the procedure set forth in this

Article 8.5 in cormection with the submission of a Proposed Appraisal

Programme. The Petroleum Commission shall within sixty (60) days of

submission of the Proposed Appraisal Programme, give the Contractor a notice

in writing stating:

a)



whether the Proposed Appraisal Programme has been approved

(outright or conditionally) or not;



b)



i f not approved, any revisions or improvements required by the

Petroleum Commission to be made to the Proposed Appraisal

Programme, and the reasons therefor; or



c)



i f conditionally approved, the conditions to the approval of the

Proposed Appraisal Programme, and the reasons therefor.



I f the Petroleum Commission fails to provide such notice after such sixty (60)

day period, such Proposed Appraisal Programme shall be deemed to be approved.

v

32



If the Petroleum Commission notifies the Contractor that the Proposed Appraisal

Programme is not approved, or the Contractor notifies the Petroleum Commission

that it does not accept the revisions or conditions required for any approval

pursuant to this Article 8.5, the Petroleum Commission and the Contractor shall

consult within thirty (30) days of the earlier of the date of the notice by the

Petroleum Commission and with a view to amending the Proposed Appraisal

Programme to be acceptable to both. Should the Petroleum Commission not

agree to so consult or should the Petroleum Commission and the Contractor fail

to agree changes required for such approval within fourteen (14) days following

said consultation. Contractor may notify the Minister and request resolution. I f

the Minister is unable to resolve the matter in a manner agreeable to all relevant

Parties within thirty (30) days from the date such notification was lodged, any

Party may request the resulting dispute arising out of this Article 8.5 shall be

resolved in accordance with Article 24.

If the Petroleum Commission has given a notice in writing pursuant to this

Article, and the Parties cannot agree on the revisions or conditions, then the

arbitration panel shall determine whether the Petroleum Commission's revisions

or conditions proposed are reasonable.In each case, the arbitration panel shall

also determine the appropriate damages and/or other award flowing from any

such unreasonableness.

8.6



Where the issue in dispute referred for resolution purstiant to Article 24 is finally

decided in favour of Contractor, the Petroleum Commission shall forthwith give

the requisite approval to the Proposed Appraisal Programme submitted by

Contractor, and where the issue in dispute referred for resolution pursuant to

Article 24 is finally decided in favour of the Petroleum Commission, Contractor

shall forthwith:

a)



amend the Proposed Appraisal Programme to give effect to the final

decision rendered under Article 24, and the Petroleum Commission

shall give the requisite approval to such revised Proposed Appraisal

Programme; or



b)



relinquish the Discovery Area.



8.7



Where Contractor seeks to amend an Appraisal Programme, it shall submit such

amendment to the JMC for review pursuant to Article 6.4(e) before submission

to the Petroleum Commission for approval.



8.8



Unless Contractor and the Petroleum Commission otherwise agree in any

particular case. Contractor shall have a period of two (2) years from the date of

Discovery to complete the Appraisal Programme. In the event Contractor

requires a period of more than the two (2) years to complete the Appraisal

Programme, Contractor shall submit a request to the Petroleum Commission for

an extension with a firm programme with timelines to justify the request.



8.9



Contractor shall commence Appraisal within one hundred and fifty (150) days

from the date of approval of the Appraisal Programme. Where the Contractor is I



unable to commence or otherwise fails to commence Appraisal within one

hundred and fifty (150) days from the date of approval of the Appraisal

Programme, GNPC shall be entitled to exercise the option provided for in

Article 9.1 to enable prompt Appraisal unless Contractor has commenced

Appraisal or obtained an extension of time for such Appraisal, provided that i f

Contractor obtains an extension of time for such Appraisal and has not

commenced Appraisal prior to the end of such extension, GNPC shall be

entitled to exercise the option provided for in Article 9.1 to enable prompt

Appraisal.

8.10



Not later than one-hundred and twenty (120) days from the date on which said

Appraisal Programme relating to the Discovery is completed, Contractor will

submit to the Minister and the Petroleum Commission a report containing the

resuhs of the Appraisal Programme. Such report shall include all available

technical and economic data relevant to a determination of commerciality,

including, but not limited to, geological and geophysical conditions, such as

structural configuration, physical properties and the extent of reservoir rocks,

areas, thickness and depth of pay zones, pressure, volume and temperature

analysis of the reservoir fluids, preliminary estimates of Crude Oil and/or

Natural Gas reserves, recovery drive characteristics, anticipated production

performance per reservoir and per well, fluid characteristics, including gravity,

sulphur percentage, sediment and water percentage and refinery assay pattern.



8.11



Not later than one-hundred and twenty (120) days from the date on which said

Appraisal Programme is completed Contractor shall, by a further notice in

writing, inform the Petroleum Commission and Minister whether the Discovery

in the opinion of Contractor is or is not a Commercial Discovery.



8.12



I f Contractor fails to notify the Minister and the Petroleum Commission as

provided in Article 8.11 or informs the Minister that the Discovery is not a

Commercial Discovery, then subject to Article 8.20, Contractor shall relinquish

such Discovery Area; provided, however, that before declaring that a

Discovery is not a Commercial Discovery, Contractor may, i f it deems

appropriate, consult with the other Parties, and may propose minor changes in

the fiscal and other provisions of this Agreement which may, in the opinion of

Contractor, affect the determination of commerciality. The other Parties may,

where feasible, and in the best interests of the Parties agree to make such

changes or modifications in the existing arrangements.



8.13



If Contractor pursuant to Article 8.11 informs the Minister that the Discovery is a

Commercial Discovery, Contractor shall not later than one hundred and eighty

(180) days thereafter, prepare and submit to the JMC, and upon approval by the

JMC, the Minister, a Development Plan.



8.14



The Development Plan referred to in Article 8.13 shall be based on detailed

engineering studies and shall include:

a)



Contractor's proposals on the delineation of the proposed

Development and Production Area and for the development of any I



reservoir(s), including the method for the disposal of Associated Gas

in accordance with the provisions of Article 14 ;

the way in which the Development and Production of the reservoir is

planned to be financed;

Contractor's proposals relating to the spacing, drilling and

completion of wells, the production, storage, processing,

transportation, gas utilization, delivery facilities and necessary

infrastructure developments required for the production, storage and

transportation (to the Delivery Point) of the Petroleum, including

without limitation:

i)



the estimated number, size and production capacity of

production facilities if any;



ii)



the estimated number of Production wells;



iii)



the particulars of feasible alternatives for transportation of the

Petroleum, including pipelines;



iv)



the particulars of onshore installations required, including the

type and specifications or size thereof; and



v)



the particulars of other technical equipment required for the

operations;



the estimate of the reserves together with the estimated annual

production profiles throughout the life of the field to be developed

pursuant to the Development Plan for Crude Oil and Natural Gas

from the Petroleum reservoirs;

tie-ins with other petroleum fields where applicable;

information on operation and maintenance;

a description of technical solutions including enhanced recovery

methods;

estimates of capital and operating expenditures;

the economic feasibility studies carried out by or for Contractor in

respect of altemative methods for Development of the Discovery,

taking into account:

i)

ii)

iii)

iv)

v)



location;

water depth (where applicable);

meteorological conditions;

estimates of capital and operating expenditures; and

any other relevant data and evaluation thereof;

Y^^^^

35



j)



the safety measures to be adopted in the course of the Development

and Production Operations, including measures to deal with

emergencies;



k)



environmental health and safety considerations arising out of the plan

of development;



1)



measures to protect the envirormient and a contingency plan for

handling of emergencies (including the provision and maintenance of

equipment stockpiles to respond to an emergency);



m)



Contractor's proposals with respect to the procurement of goods and

services obtainable in Ghana;



n)



Contractor's technology transfer plan;



o)



Contractor's

nationals;



p)



the timetable for effecting Development Operations; and



q)



a preliminary plan for decommissioning and abandoimient.



plan for training and employment of Ghanaian



8.15



The Contractor shall submit the Development Plan together with a form of parent

company guarantee as security covering all Contractor's obligations under this

Agreement, as specified in Article 8.16.



8.16



The date of the Minister's approval of the Development Plan shall be the Date of

Commercial Discovery. Within sixty (60) days from the Date of Commercial

Discovery, each Contractor Party shall provide the Minister the parent company

guarantee referred to in Article 8.15, in satisfactory form mutually agreed, for

the performance of each such Contractor Party's participating interest share of

all Contractor's obligations under this Agreement.



8.17



The Minister shall within the ninety (90) days following submission of the

Development Plan give Contractor a notice in writing stating:

a)



whether or not the Development Plan as submitted has been approved

(conditional to the submission by the Contractor of a parent company

guarantee pursuant to Article 8.16); and



b)



i f not approved, any revisions proposed by the Minister to the

Development Plan as submitted, and the reasons thereof.



If the Minister fails to approve the Development Plan within the ninety (90) day

time period described above, then the Development Plan shall be deemed to be

approved.

Where the Minister notifies the Contractor that the Development Plan is not

approved the Parties shall within a period of thirty (30) days from the date of

such notice by the Minister consult (and shall include GNPC in such

36



consultations) with a view to amending the Development Plan to be acceptable to

both. Should the Minister not agree to so consult or should the Minister and the

Contractor fail to agree changes required for such approval within fourteen (14)

days following said thirty (30) day period, any Party may refer the resulting

dispute arising out of this Article 8.17 for resolution in accordance with

Article 24.

If the Minister has given a notice in writing pursuant to clause (b) above, and the

Parties cannot agree on the revisions or conditions, then the arbitration panel shall

determine whether the Minister's revisions or conditions proposed are

reasonable.

8.18



Where the issue in dispute referred for resolution pursuant to Article 24 is finally

decided in favour of Contractor, the Minister shall forthwith give the requisite

approval to the Development Plan submitted by Contractor.



8.19



Where the issue in question referred for resolution pursuant to Article 24 is

finally decided in favour of the Minister in whole or in part, Contractor shall

forthwith:



8.20



8.21



a)



amend the proposed Development Plan to give effect to the final

decision rendered under Article 24, and the Minister shall give the

requisite approval to such revised Development Plan; or



b)



subject to Article 8.21 below relinquish the Discovery Area.



Notwithstanding the relinquishment provisions of Articles 8.3 and 8.12 above, i f

Contractor indicates that a Discovery does not at the time merit Appraisal, or

after Appraisal does not appear to be a Commercial Discovery but may merit

Appraisal or potentially become a Commercial Discovery at a later date during

the Exploration Period, then Contractor need not relinquish the Discovery Area

and may continue its Exploration Operations in the Contract Area during the

Exploration Period; provided that the Contractor shall explain to the Minister

and Petroleum Commission what additional evaluations, including Exploration

work or studies, are or may be plaimed in order to determine whether

subsequent Appraisal is warranted or that the Discovery is a Commercial

Discovery and the Minister shall approve of any such non relinquishment. Such

evaluations shall be performed by Contractor according to a specific time table

(which shall not exceed the time frame specified under Article 8.21) to be

approved by the JMC and Petroleum Commission, subject to Contractor's right

of earlier relinquishment of the Discovery Area. After completion of the

evaluations. Contractor shall make the indications called for under Article 8.3 or

8.12 and either proceed with Appraisal, confirm the Discovery is a Commercial

Discovery or relinquish the Discovery Area.

In any case, i f a Discovery is made in the Initial Exploration Period or First

Extension Period, the Contractor shall by the end of the subsequent phase (that

is the First Extension Period or Second Extension Period as the case may be),

take a decision to Appraise the Discovery or relinquish such Discovery.

Likewise, i f the Contractor has completed the Appraisal of a Discovery in the



Initial Exploration Period or First Extension Period, the Contractor shall by the

end of the subsequent phase (that is, the First Extension Period or Second

Extension Period as the case may be), take a decision to determine i f such

Discovery is a Commercial Discovery or relinquish such Discovery. In any

event, i f at the end of the Exploration Period the Contractor has neither

indicated its intent to proceed with an Appraisal Programme nor declared the

Discovery to be a Commercial Discovery, then the Discovery Area shall be

relinquished.

8.22



Upon completion of an Appraisal Programme and before Contractor makes a

determination that any Discovery is not a Commercial Discovery, Contractor

may consult with the other Parties and may make appropriate representations

proposing minor changes in the fiscal and other provisions of this Agreement

which may, in the opinion of Contractor, affect the determination of a

Commercial Discovery. The other Parties may agree to make such changes or

modifications in the existing arrangements. In the event the Parties do not agree

on such changes or modifications, then subject to Articles 8.20 and 8.21,

Contractor shall relinquish the Discovery Area.



8.23



Nothing in Articles 8.3, 8.12, 8.20 or 8.21 above shall be read or construed as

requiring Contractor to relinquish:

a)



any area which constitutes or forms part of another Discovery Area

in respect of which:

i)



ii)

b)



Contractor has given the Minister, the Petroleum Commission

and GNPC a separate notice stating that such Discovery merits

Appraisal; or

Contractor has given the Minister a separate notice indicating

that such Discovery is a Commercial Discovery; or



any area which constitutes or forms part of a Development and

Production Area.



8.24



For the avoidance of doubt, where Contractor makes a Discovery in any retained

Discovery Area or Development Area after the expiration of the Exploration

Period, Contractor shall notify the Minister of such Discovery pursuant to

Article 8.1 and, subject to its rights under Article 3, transfer such Discovery to

GNPC.



8.25



In the event a field extends beyond the boundaries of the Contract Area, the

Minister may require the Contractor to exploit said field in association with the

third party holding the rights and obligations under a petroleum agreement

covering the said field (or GNPC as the case may be). The exploitation in

association with said third party or GNPC shall be pursuant to good unitization

and engineering principles and in accordance with Intemational Best Oil Field

Practice. In the event Contractor and said third party are unable to agree to the

terms of unitization. Contractor shall notify the Minister in writing and the

Minister shall give appropriate directions to Contractor and the third party or

38



GNPC to resolve the matter in accordance with Intemational Best Oil Field

Practice.

8.26



All notices required to be submitted to the Minister under this Article 8 shall be

copied to the Petroleum Commission.



ARTICLE 9

SOLE RISK ACCOUNT

9.1



Subject to Contractors rights under Article 8, GNPC may notify Contractor that it

will, at its Sole Risk, commence to appraise a Discovery pursuant to Article 8.9,

provided that within thirty (30) days of such notification from GNPC, Contractor

may elect to commence to appraise that Discovery within its own Work'

Programme.



9.2



Where an Appraisal undertaken under Article 9.1 at the Sole Risk of GNPC

results in a determination that a Discovery is a Commercial Discovery,

Contractor may develop the Commercial Discovery upon reimbursement to

GNPC of all expenses incurred in undertaking the Appraisal and after arranging

with GNPC satisfactory terms for the payment of a premium equivalent to five

hundred percent (500%) of such expenses. Such premium shall not be counted as

cost of Petroleum Operations for the purpose of the Accounting Guide. In the

event that Contractor declines to develop said Discovery, Contractor shall

relinquish the Development and Production Area established by the Appraisal

Programme conducted by GNPC under Article 9.1.



9.3



During the Exploration Period GNPC may, at its Sole Risk, require Contractor to

continue drilling to penetrate and test horizons deeper than those contained in the

Work Programme of Contractor or required under Article 4. GNPC may also at

its Sole Risk ask the Contractor to test a zone or zones which Contractor has not

included in Contractor's test programme. Notice of this shall be given to

Contractor in writing as early as possible prior to or during the drilling of the

well, but in any case not after Contractor has begun work to complete or abandon

the well. The exercise by GNPC of this right shall be in an agreed manner (such

agreement not to be unreasonably withheld or delayed by Contractor) which does

not prevent Contractor from complying with its work obligations under Article

4.3 and is subject to health, safety and environmental considerations in

accordance with Intemational Best Oil Field Practice.



9.4



At any time before commencing such deeper drilling under Article 9.3 above

Contractor may elect to incorporate the required deeper drilling in its own

Exploration Operation, in which case any resulting Discovery shall not be

affected by the provisions of this Article 9.



9.5



Where any Sole Risk deeper drilling results in a Discovery, GNPC shall have the

right, at its Sole Risk, to appraise, develop, produce and dispose of all Petroleum

resulting from such Sole Risk deeper drilling and shall conduct such Sole Risk

operations unless GNPC proposes otherwise and Contractor agrees. Provided

however that i f at the time such Petroleum is tested from the producing horizon in

a well. Contractor's Work Programme includes a well or wells to be drilled to the

same producing horizon, and provided that the well or wells drilled by Contractor

result(s) in a Petroleum producing well producing from the same horizon.

Contractor shall, after reimbursing GNPC for all costs associated with its Sole'



Risk deeper drilling and testing in said well, have the right to include production

from that well in its total production for the purposes of establishing a

Commercial Discovery, and, i f a Commercial Discovery is subsequently

established, to develop, produce and dispose of the Petroleum in accordance with

the provisions of this Agreement.

9.6



Alternatively, i f at the time such Petroleum is tested from a producing horizon in

a well pursuant to a Sole Risk operation. Contractor's Work Programme does not

include a well to be drilled to said horizon. Contractor has the option to appraise

and /or develop, as the case may be, the Discovery for its account under the terms

of this Agreement i f it so elects within a period of sixty (60) days after such

Discovery. In such case. Contractor shall reimburse GNPC for all expenses

incurred by GNPC in connection with such Sole Risk operations, and shall make

satisfactory arrangements with GNPC for the payment of a premium equivalent

to five hundred percent (500%) of such expenses. Such premium shall not be

considered as Petroleum Costs for the purposes of the Accounting Guide.



9.7



During the term of this Agreement, GNPC shall have the right to submit a Work

Programme to the JMC to drill, at its Sole Risk, a well(s) in the Contract Area

provided that the work intended to be done by GNPC had not been scheduled for

a Work Programme to be performed by Contractor and the exercise of such right

by GNPC and the arrangements made by GNPC for undertaking such drilling do

not prevent Contractor carrying out Petroleum Operations. Within thirty (30)

days after receipt of such notice. Contractor may elect to drill the proposed

well(s) as part of Contractor's Exploration Operations or may elect to participate

in the well to be drilled by GNPC.



9.8



In the event that a well drilled at the Sole Risk of GNPC in accordance with

Article 9.7 above results in a Discovery, GNPC shall notify Contractor in writing,

and GNPC shall have the right to appraise such Discovery and develop or require

Contractor to develop, after GNPC declares a Commercial Discovery, such

Discovery for a mutually agreed reasonable service fee, so long as Contractor has

an interest in the Contract Area, GNPC taking all the interest, risk and costs and

hence having the right to all Petroleum produced from the Commercial

Discovery; provided however that Contractor has the option to appraise and/or

develop, as the case may be, the Discovery for its account under the terms of this

Agreement i f it so elects within a period of sixty (60) days after receipt of

GNPC's written notice of such Discovery.



9.9



Contractor shall reimburse GNPC for all expenses incurred by GNPC in

cormection with such Sole Risk operations, and shall make satisfactory

arrangements with GNPC for the payment of a premium equivalent to five

hundred percent (500%) of such expenses before exercising the option under

Article 9.8. Such premium shall not be considered as Petroleum Costs for the

purposes of the Accounting Guide.



9.10 In the event that Contractor declines to exercise its option in Article 9.8 or no

agreement is reached on the service fee arrangement as provided for in Article



9.8, Contractor shall relinquish the Development and Production Area associated

with such Commercial Discovery.

9.11 Sole Risk operations under this Article 9 shall not extend the Exploration Period

nor the term of this Agreement and Contractor shall complete any agreed

programme of work commenced by it under this Article at GNPC's Sole Risk,

and subject to such provisions hereof as the Parties shall then agree, even though

the Exploration Period as defined in Article 3 or the term of this Agreement may

have expired.

9.12 GNPC shall indemnify and hold harmless Contractor against all damages, losses,

actions, claims, demands and proceedings whatsoever, including, but not limited

to, actions, claims, demands and proceedings brought by any third party or the

State against the Contractor, and arising out of or in connection with Sole Risk

operations under this Article 9 unless such damages, losses, actions, claims,

demands and proceedings are directly caused by Contractor's Gross Negligence

or Wilful Misconduct.



A R T I C L E 10

SHARING O F CRUDE O I L

10.1



10.2



Gross Production of Crude Oil from each Development and Production Area

shall (subject to a Calendar Year adjustment developed under the provisions of

Article 10.7) be distributed amongst the Parties in the following sequence and

proportions:

a)



ten percent (10%) of the Gross Production of Crude Oil shall be

delivered to the State as R O Y A L T Y , pursuant to the provisions of

the Petroleum Law. Upon notice to Contractor, the State shall have

the right to elect to receive cash in lieu of its royalty share of such

Crude Oil. The State's notice shall be given to Contractor at least

ninety (90) days in advance of each lifting period, such periods to be

established pursuant to the provisions of Article 10.7. In such case,

said share of Crude Oil shall be delivered to Contractor and it shall

pay to the State the value of said share in cash at the relevant

weighted average Market Price for the relevant period as determined

in accordance with Article 11.7;



b)



After distribution of such amounts of Crude Oil as are required

pursuant to Article 10.1(a), the amount of Crude Oil, i f any, shall be

delivered to GNPC to the extent it is entitled for Sole Risk operations

under Article 9;



c)



After distribution of such amounts of Petroleum as are required

pursuant to Articles 10.1(a) and 10.1(b), the remaining Crude Oil

produced from each Development and Production Area shall be

distributed to Contractor and, subject to Article 10, to GNPC on the

basis of their respective interests pursuant to Article 2;



d)



The State's AOE (as defined under Article 10.2), i f any, shall be

distributed to the State out of the Contractor's share of Crude Oil

determined under Article 10.1(c). The State shall also have the right

to elect to receive cash in lieu of the AOE share of Crude Oil

accorded to it pursuant to Article 10.2. Notification of said election

shall be given in the same notice in which the State notifies

Contractor of its election to receive cash in lieu of Crude Oil under

Article 10.1(a). In such case, said share shall be delivered to

Contractor and it shall pay to the State the value of said share in cash

at the relevant weighted average Market Price for the relevant period

as determined in accordance with Article 11.7;



At any time the State shall be entitled to a portion of Contractor's share of Crude

Oil then being produced from each separate Development and Production Area

(hereinafter referred to as "Additional Oil Entitlements" or "AOE") on the

basis of the after-tax post-inflation-adjusted rate of return ("ROR") which

Contractor has achieved with respect to such Development and Production Area



as of that time. Contractor's ROR shall be calculated on its NCF and shall be

determined separately for each Development and Production Area at the end of

each Month in accordance with the following computation:

a)



Definitions:



"NCF" means Contractor's net cash flow for the Month for which the

calculation is being made, and shall be computed in accordance with the

following formula:

NCF = X - y - z

where

"x"

equals all revenues received during such Month by Contractor from

the Development and Production Area, including an amount computed by

multiplying the amount of Crude Oil taken by Contractor during such

Month in accordance with Articles 10,1(c), excluding such Crude Oil

taken by Contractor for payment of interest in respect of Petroleum Costs

incurred by Contractor on GNPC's behalf, by the Market Price applicable

to such Crude Oil during the Month when lifted, plus any other proceeds

specified in the Accounting Guide received by Contractor, including,

without limitation, the proceeds from the sale of any assets to which

Contractor continues to have title. For the avoidance of doubt, "x" shall

not include revenues from Crude Oil lifted by Contractor which is part of

another Party's entitlement (e.g. Royalty, Crude Oil relating to the State's

AOE delivered to Contractor because the State has elected to receive cash

in lieu of Crude Oil, Crude Oil purchased by Contractor from GNPC or

the State) but shall include revenues from Crude Oil owned by Contractor

but lifted by another Party (e.g. Crude Oil purchased by GNPC or the State

from Contractor).

"y" equals one-twelfth (V12) of the income tax paid by the Contractor to

the State with respect to the Calendar Year in respect of the Development

and Production Area. I f there are two (2) or more Development and

Production Areas, the total income tax paid by

Contractor in accordance with the Income Tax Law shall for purposes of

this calculation be allocated to the Development and Production Area on

the basis of hypothetical tax calculations for the separate Development and

Production Areas. The hypothetical tax calculation for each Development

and Production Area shall be determined by allocating the total amount of

tax incurred for each Calendar Year by Contractor under the Income Tax

Law to each Development and Production Area based on the ratio that the

chargeable income from a given Development and Production Area bears

to the total chargeable income of Contractor. The chargeable income of

Contractor is determined under the Income Tax Law and the chargeable

income of a Development and Production Area shall be calculated by

deducting from the gross income derived from or allocated to that Area



those expenses deductible under the Income Tax Law which are

reasonably allocable to that Area and with respect to the Development and

Production Area with the earliest date of Commercial Production, those

expenses deductible under section 3 of the Income Tax Law which are not

attributable to any Development and Production Area. A negative

chargeable income for an Area shall be treated as zero for purposes of this

allocation and not more (or less) than the total income tax paid by

Contractor shall be allocated between the Areas.

"z" equals all Petroleum Costs specified in the Accounting Guide and

expended by Contractor during such Month or with respect to

abandonment costs, those calculated in accordance with Article 12.11 or

actually incurred, as the case may be, with respect to the Development and

Production Area, including any Petroleum Costs paid by Contractor on

GNPC's behalf, and not reimbursed by GNPC within the Month, provided

that all Petroleum Costs for Exploration Operations not directly

attributable to a specific Development and Production Area shall for

purposes of this calculation be allocated to the Development and

Production Area having the earliest date of Commencement of

Commercial Production.

Where Petroleum Costs for Exploration

Operations are not directly attributable to a specific Development and

Production Area during a Month, but are directly attributable to a

subsequently delineated Development and Production Area, then

Contractor may elect either to maintain the original allocation or reallocate

such Petroleum Costs to the newly delineated Development and

Production Area to which they are directly attributable and provided

further that for the purpose of the ROR calculation Petroleum Costs shall

not include any amounts in respect of interest on loans obtained for the

purposes of carrying out Petroleum Operations.

"FA„", "SA„", "TA„", "YA„" and "ZA„" means First Account, Second

Account, Third Account, Fourth Account and Fifth Account, respectively,

and represent amounts as of the last day of the Month in question as

determined by the formulae in (b) below.

"FA„.i", "SA„.i", "TA„.r', "YA„.i", and "ZA„.i", respectively, mean the

lesser of (i) the FAn, SAn, TAn, YAn or ZAn, as the case may be, as of the

last day of the Month immediately preceding the Month in question, or (ii)

zero. Stated otherwise, FAn.i shall equal FAn as of the last day of the

Month immediately preceding the Month in question i f such FAn was a

negative number, but shall equal zero i f such FAn was a positive number.

Likewise, SAn-i shall equal SAn as of the last day of the Month

immediately preceding the Month in question i f such SAn was a negative

number, but shall equal zero i f such SAn was a positive number. Likewise

TAn-i shall equal TAn as of the last day of the Month immediately

preceding the Month in question i f such TAn was a negative number, but

shall equal zero i f such TAn was a positive number. Likewise YAn.i shall

equal YAn as of the last day of the Month immediately preceding the



Month in question i f such YAp was a negative number but shall equal zero

if such TAn was a positive number. Likewise, ZAn.i shall equal ZAn as of

the last day of the Month immediately preceding the Month in question i f

such ZAn was a negative number, but shall equal zero i f such ZAn was a

positive number. In the ROR calculation for the first Month of Petroleum

Operations, FAn.i, SAn-i, TAn-i, YAn-i and ZAn-i shall be zero.

"i" for the Month in question equals one (1) subtracted from the quotient

of the United States Industrial Goods Wholesale Price Index

("USIGWPI") for the second Month preceding the Month in question

(e.g. use August data for October's computation) as first reported in the

Intemational Financial statistics of the Intemational Monetary Fund,

divided by the USIGWPI for the same second preceding Month of the

immediately preceding Calendar Year as first reported in the International

Financial Statistics of the Intemational Monetary Fund. I f the USIGWPI

ceases to be published, a substitute U.S. Dollar-based price index shall be

used.

"n" refers to the nth Month in question.

"n-1" refers to the Month immediately preceding the nth Month

b)



Formulae:

FA



FA _ f i , ( 0 . 1 2 5 . O i l ' , „ C F

12



SA



SA



\5 + i

1 +



)

12



+ NCF



In the calculation of SAn an amount shall be subtracted from NCF

identical to the value of any AOE which would be due to the State i f

reference were made hereunder only to the FAn.



TA



TA



1+



(0.225 +

12



+ NCF



In the calculation of TAn an amount shall be subtracted from NCF

identical to the value of any AOE which would be due to the State i f

reference were made hereunder only to the FAn and SAn.

YA „ =



YA



1+



(0.275 + / )

12



+ NCF



46



In the calculation of YA^ an amount shall be subtracted from NCF

identical to the value of any AOE which would be due to the State i f

reference were made hereunder only to the FAn, SAn and TAn

TA



^ (0.275 + / ) ^

12



+ NCF



In the calculation of ZAn an amount shall be subtracted from NCF

identical to the value of any AOE which would be due to the State i f

reference were made hereunder only to the FAn, SAn, TAn and YAn.

c)



Prospective Application:



The State's AOE measured in Barrels of oil will be as follows:

i)



I f FAn, SAn, TAn, YAn and ZAn are all negative, the State's

AOE for the Month in question shall be zero;



ii)



I f FAn is positive and SAn, TAn, YAn and ZAn are all negative,

the State's AOE for the Month in question shall be equal to

the absolute amount resulting from the following monetary

calculation:



ten (10%) of the FAn for that Month divided by the weighted

average Market Price as determined in accordance with Article

11.7.

iii)



I f both FAn and SAn are positive, but TAn, YAn and ZAn are

negative, the State's AOE for the Month in question shall be

equal to an absolute amount resulting from the following

monetary calculation:



the aggregate of ten (10%>) of FAn for that Month plus fifteen

percent (15%) of the SAn for that Month all divided by the

weighted average Market Price as determined in accordance with

Article 11.7.

iv)



I f FAn, SAn and TAn are all positive but YAn and ZAn is

negative, the State's AOE for the Month in question shall be

equal to the absolute amount resulting from the following

monetary calculation: the aggregate of ten (10%) percent of

the FAn for that Month plus fifteen (15%) percent of the SAn

for that Month plus twenty two point five (22.5%) percent of

the TAn for that Month all divided by the weighted average

Market Price as determined in accordance with Article 11.7.



v)



I f FAn, SAn, TAn and YAn are all positive but ZAn is negative,

the State's AOE for the Month in question shall be equal to



the absolute amount resulting from the following monetary

calculation:

the aggregate of ten (10%) percent of the FAn for that Month plus

fifteen (15%) percent of the SAn for that Month plus twenty two

point five (22.5%) percent of the TAn for that Month plus twenty

seven point five (27.5%) percent of the YAn for that Month all

divided by the weighted average Market Price as determined in

accordance with Article 11.7.

vi)



I f FAn, SAn, TAn, YAn and ZAn are all positive, the State's

AOE for the Month in question shall be equal to the absolute

amount resulting from the following monetary calculation:



the aggregate of ten (10%) percent of the FAn for that Month plus

fifteen (15%) percent of the SAn for that Month plus twenty two

point five (22.5%) percent of the TAn for that Month plus plus

twenty seven point five (27.5%) percent of the YAn for that Month,

plus plus twenty seven point five (27.5%) percentof the ZAn for that

Month all divided by the weighted average Market Price as

determined in accordance with Article 11.7.

The AOE calculations shall be made in U.S. Dollars with all nondollar expenditures converted to U.S. Dollars in accordance with

Section 1.3.5 of Annex 2. When the AOE calculation cannot be

definitively made because of disagreement on the Market Price or

any other factor in the formulae, then a provisional AOE calculation

shall be made on the basis of Contractor's good faith estimates of

such factors and such provisional calculation shall be subject to

correction and revision upon the conclusive determination of such

factors, and appropriate retroactive adjustments shall be made.

The AOE shall be calculated on a monthly basis, with the AOE to be

paid commencing with the first Month following the Month in which

the FAn, SAn, TAn, YAn or ZAn, (as applicable) becomes positive.

Because the precise amount of the AOE for a Calendar Year czinnot

be determined with certainty until after the end of that Calendar Year,

deliveries (or payments in lieu) of the AOE with respect to a Month

shall be made during such Calendar Year based upon the

Contractor's good faith estimates of the amounts owing, with any

adjustments foUovsdng the end of the Calendar Year to be settled

pursuant to the procedures agreed to pursuant to Article 10.7. Final

calculations of the AOE shall be made within thirty (30) days

following the filing by the Contractor of the armual tax return for

such Calendar Year pursuant to the Petroleum Income Tax Law and

this Agreement, and the amount of the AOE shall be appropriately

adjusted in the event of a subsequent adjustment of the amount of tax

owing on such term.



10.3



GNPC shall act as agent for the State in the collection of all Petroleum accruing

to the State under this Article 10 and delivery to GNPC by Contractor shall

discharge Contractor's liability to deliver the share of the State.



10.4



The State or GNPC, having met the requirements of Article 15.1, may elect, in

accordance with terms and conditions to be mutually agreed by the Parties, that

all or part of the Crude Oil to be distributed to the State or to GNPC pursuant to

this Article shall be sold and delivered by the State or GNPC to Contractor or its

Affiliate for use and disposal and in such case Contractor or its Affiliate shall pay

to the State or to GNPC, as the case may be, the Market Price for any Crude Oil

so sold and delivered. Market Price for purposes of this Article 10.4 shall be the

amounts actually realized by Contractor or said Affiliate on hs resales of said

Crude Oil in arm's length commercial transactions, or for its other resales or

dispositions of said Crude Oil, based upon Market Price determined in the

manner specified in Article 11.7(b).



10.5



Ownership and risk of loss of all Crude Oil produced from the Contract Area

which is purchased, and all of its percentage Participating Interest or other Crude

Oil lifted, by Contractor shall pass to Contractor at the outlet flange the zyxwvutsrqponml

("Delivery Point") of the marine terminal or other storage facility for loading

into tankers or other transportation equipment referred to in Article 11.1.



10.6



Subject to the provisions of Article 15 hereof. Contractor shall have the right

freely to export and dispose of all the Petroleum allocated and/or delivered to it

pursuant to this Article.



10.7



The Parties shall through consultation enter into supplementary agreements

concerning Crude Oil lifting procedures, lifting and tanker schedules, loading

conditions. Crude Oil metering, and the settlement of lifting imbalances, i f any,

among the Parties at the end of each Calendar Year. The Crude Oil to be

distributed or otherwise made available to the Parties in each Calendar Year in ,

accordance with the preceding provisions of this Article shall insofar as possible

be in reasonably equal monthly quantities.



10.8



To assist in the making of the AOE calculation in accordance with Article 10.2,

there is attached as Annex 4 to this Agreement a worked example of the

calculation using hypothetical figures, rates and thresholds, for the purpose of |)^

illustration only.



49



r



A R T I C L E 11

M E A S U R E M E N T AND P R I C I N G O F C R U D E O I L

11.1



Crude Oil shall be delivered by Contractor to storage tanks or other suitable

holding facility constructed, maintained and operated in accordance with

applicable laws and Intemational Best Oil Field Practice. Cmde Oil shall be

metered or otherwise measured for quantity and tested for quality in such storage

tanks for all purposes of this Agreement. Any Party may request that

measurements and tests be done by an internationally recognized inspection

company. Contractor shall arrange and pay for the conduct of any measurement

or test so requested provided, however, that in the case of (1) a test requested for

quality purposes and/or (2) a test requested on metering (or measurement)

devices, or where the test results demonstrate that such devices are accurate

within acceptable tolerances agreed to by the Parties or i f not established by the

Parties, then in accordance with Intemational Best Oil Field Practice, the Party

requesting the test shall reimburse Contractor for the costs associated with the

test or tests.



11.2



GNPC or its authorized agents shall have the right:

a)



to be present at and to observe such measurement of Crude Oil;



b)



to examine and test whatever appliances are used by Contractor

therefore; and



c)



to install a device or equipment, at GNPC's sole risk, expense and

liability, for the purpose of determining the quantity and quality of

Cmde Oil.



11.3



In the event that GNPC considers Contractor's methods of measurement to be ,

inaccurate, GNPC shall notify Contractor to this effect and the Parties shall meet

within ten (10) days of such notification to discuss the matter. Where after thirty

(30) days the Parties cannot agree over the issue, they shall refer for resolution

under Article 24 the sole question of whether Contractor's method of measuring

Cmde Oil is accurate and reasonable.

Retrospective adjustments to

measurements shall be made where necessary to give effect to the decision

rendered under Article 24.



11.4



I f upon the examination or testing of appliances provided for in Article 11.2 any

such appliances shall be discovered to be defective:

a)



Contractor shall take immediate steps to repair or replace such

appliance; and



b)



subject to the establishment of the contrary, such error shall be

deemed to have existed for three (3) Months or since the date of the

last examination and testing, whichever occurred more recently.



11.5



In the event that Contractor desires to adjust, repair or replace any measuring

appliance, it shall give GNPC reasonable notice to enable GNPC or its authorized

agent to be present.



11.6



Contractor shall keep full and accurate accounts concerning all Petroleum

measured as aforesaid and provide GNPC with copies thereof on a monthly basis,

not later than ten (10) days after the end of each Month.



11.7



The Market Price for Crude Oil delivered to Contractor hereunder shall be

established with respect to each lifting or other period as provided elsewhere in

this Agreement as follows:

a)



on Crude Oil sold by Contractor in arm's length commercial

transactions (defined in Article 11.7(c) below), the Market Price shall

be the price actually realized by Contractor on such sales;



b)



on sales of Crude Oil by Contractor not in an "arm's length

commercial transaction" (defined by Article 11.7(c) below), on

exports by Contractor without sale or on sales under Article 15.2, the

Market Price shall be the price determined by reference to world

market prices of comparable Crude Oils sold in arm's length

transactions for export in the major world petroleum markets, and

adjusted for oil quality, location, timing and conditions of pricing,

delivery and payment provided that in the case of sales under Article

15.2 where such sales relate to part only of Contractor's entitlement,

prices actually realized by Contractor in sales of the balance of its

proportionate share falling within Article 11.7(a) above shall be taken

into account in determining Market Price. For purposes of this

Article 11.7(b), "comparable Crude Oils" shall mean Crude Oils of

similar API gravity, sulphur content, and acidity, and i f Contractor

carmot identify comparable Crude Oils for the purposes of this

Article, the Parties may agree on an altemative method for

establishing a comparable Crude Oil;



c)



sales in "arm's length commercial transactions" shall mean sales

to purchasers independent of the seller, which do not involve Crude

Oil exchange or barter transactions, government to govenmient

transaction, sales directly or indirectly to Affiliates, or sales

involving consideration other than payment in U.S. Dollars or

currencies convertible thereto, or affected in whole or in part by

considerations other than the usual economic incentives for

commercial arm's length Crude Oil sales;



d)



the price of Crude Oil shall be expressed in U.S. Dollars per Barrel,

F.O.B. the point of delivery by Contractor; and



e)



i f Cmde Oils of various qualities are produced from the Contract

Area, the Market Price shall be determined separately for each type

sold and/or exported by Contractor, only to the extent that the^

51



different quality grades remain segregated through to the point where

they are sold, and i f grades of different quality are commingled into a

common stream. Contractor and GNPC shall agree on an equitable

methodology for assessing relative value for each grade of Crude Oil

comprising the blend and shall implement the agreed methodology

for having the producer(s) of higher quality Crude Oil(s) be

reimbursed by the producer(s) of lower quality Crude Oil(s).

11.8



Contractor shall provide to GNPC information in accordance with Section 7 of

the Accounting Guide on each lifting which shall include the buyer of the cargo,

sales basis with respect to benchmark Crude Oil, the pricing basis, the

differential, any deductions and the Market Price determined by it for each lifting

not later than thirty five (35) days after the end of such lifting. For the purposes

of this Article 11.8 the obligations of Parties comprising Contractor shall be

several.



11.9



If GNPC considers that the Market Price notified by Contractor was not correctly

determined in accordance with the provisions of Article 11.7, it shall so notify

Contractor not later than thirty (30) days after notification by Contractor of such

price, and GNPC and Contractor shall meet not later than twenty (20) days

thereafter to agree on the correct Market Price.



11.10 In the event that GNPC and Contractor fail to agree upon the commencement of

meetings for the purpose described in Article 11.9 above, the Market Price shall

be referred for determination in accordance with Article 24 of this Agreement.

11.11 Pending a determination under Article 11.10, the Market Price will be deemed to

be the last Market Price agreed or determined, as the case may be, or if there has

been no such previous agreement or determination, the price notified by

Contractor for the lifting in question under Article 11.7. Should the determined

price be different from that used in accordance with the foregoing then the

difference plus interest at the Specified Rate shall be paid in cash by or to

Contractor, as the case may be, within thirty (30) days of such determination. >



52



A R T I C L E 12



T A X A T I O N AND O T H E R I M P O S T S

12.1



Subject to applicable laws and regulations in effect from time to time, the taxes, duties,

fees and other imposts that shall be imposed by the State or any political subdivision or

any entity on Contractor, its Subcontractors, Affiliates and Shareholders in respect of

Petroleum Operations as of the Effective Date shall be the following:

(i)



Royalty as provided for in Article 10 and 14.16 (a)



(ii)



Petroleum income tax in accordance with the provisions of the

Income Tax Law and shall be levied at the rate of thirty five

percent (35%);



(iii)



Additional Oil Entitlement as provided for in Article 10



(iv)



Withholding tax at a rate of fifteen per cent (15%) shall be

deducted from payments by Contractor to a Subcontractor or

Affiliate in respect of works and services for or in connection

with this Agreement;



(v)



Withholding tax at a rate of 8% shall be deducted from

dividends paid to Shareholders;



(vi)



Gain/profit arising from the sale, transfer, disposal or

assignment of any interest in this Agreement and sale of assets

shall be subject to tax in accordance with the provisions of the

Income Tax Law;



12.2



The Ghana income tax law applicable generally to individuals who are not

employed in the petroleum industry shall apply in the same fashion and at the

same rates to employees of Contractor, its Affiliates, and its Subcontractors;

provided, however, that Foreign National Employees of Contractor, its

Affiliates, and its Subcontractors, shall be exempted from income tax and

withholding tax liabilities unless they are resident in Ghana for more than thirty

(30) continuous days or sixty (60) days in aggregate in any Calendar Year.



12.3



Payments for rental of State property, public lands, or for the provisions of

specific services requested by Contractor from public enterprises; provided,

however, that the rates charged Contractor for such rentals or services shall not

exceed the prevailing rates charged to other members of the public who receive

similar services or rentals;



12.4



Surface rentals payable to the State pursuant to Section 18 of the Petroleum Law

per square kilometre of the area remaining at the beginning of each Contract

Year as part of the Contract Area, in the amounts as set forth below.



Phase of Operation



Surface Rentals Per Annum



Initial Exploration Period



US $50 per sq. km.



First Extension Period



US$100 persq.km.



Second Extension Period



US$100 persq.km.



Development & Production Area



US $200 per sq. km.



These rentals shall be pro-rated where the beginning of a period and the end of a

period, or the creation of a Development and Production Area occurs during the

course of a Calendar Year.

12.5



Taxes, duties, fees or other imposts of a minor nature.



12.6



Contractor shall not be liable for any export tax on Petroleum exported from

Ghana, and no duty or other charge shall be levied on such exports. Vessels or

other means of transport used in the export of Contractor's Petroleum from

Ghana shall not be liable for any tax, duty, or other charge by reason of their use

for that purpose.



12.7



Subject to the local purchase obligations hereunder. Contractor and

Subcontractors may import into Ghana all plant, equipment and materials to be

used solely and exclusively in the conduct of Petroleum Operations without

payment of customs and other duties and taxes on imports save minor

administrative charges;

PROVIDED THAT:

a)



GNPC shall have the right of first refusal for any item imported duty

free under this Article which is later sold in Ghana; and



b)



where GNPC does not exercise its right of purchase. Contractor,

Affiliates, and Subcontractors may sell to any other person subject to

the relevant law in effect and as amended from time to time;



12.8



Contractor shall not be liable to pay VAT in respect of plant, equipment, and

materials, and related services supplied in Ghana, to be used solely and

exclusively in the conduct of Petroleum Operations;



12.9



Foreign National Employees of Contractor or its Affiliates, and of its

Subcontractors, shall be permitted to import into Ghana fi-ee of import duty,

their personal and household effects in accordance with Section 22.7 of the

Ghana National Petroleum Corporation Law 1983 (PNDCL 64); provided,

however, that no property imported by such employee shall be resold by such

employee in Ghana except in accordance with Article 12.7;



12.10 Subject to GNPC's rights under Article 19, Contractor, Subcontractors, and

Foreign National Employees shall have the right to export fi-om Ghana all items

54



imported duty free. Such exports shall be exempt from all customs and other

duties, taxes, fees, and charges on exports save minor administrative charges;

12.11 Subject to guidelines to be issued by the Minister, the Contractor shall make

contributions to a decommission fund based on the estimated costs of

abandormient in proportion to its Participating Interest. Such contribution shall

be allowed as deduction from assessable income from the year of assessment the

contributions commenced. In the year of assessment in respect of which

decommission has been completed in accordance with an approved

decommission plan, the surplus fund shall be treated as chargeable income and

subject to tax. The amount left after tax shall be subject to Additional Oil

Entitlement (AOE) at the highest rate at which the Contractor paid AOE during

the period of contributions to the relevant decommission fund. Any surplus after

payment of the tax and AOE shall revert to the Contractor;

12.12 It is the intent of the Parties that payments by Contractor of tax levied by the

Income Tax Law or any other tax imposed on Contractor qualify as creditable

against the income tax liability of each company comprising Contractor in its

jurisdiction. Should the fiscal authority involved determine that the Income Tax

Law does not impose a creditable tax, the Parties agree to negotiate in good faith

with a view to establishing a creditable tax on the precondition that no adverse

effect should occur to the economic rights of GNPC or the State.

12.13 All tax returns prepared and payments made by Contractor and its Affiliates or

Subconuactors, and Foreign National Employees thereof, shall be in United

States Dollars.



A R T I C L E 13

FOREIGN EXCHANGE TRANSACTIONS

13.1



Foreign currency obtained from or relating to any transaction in Petroleum

under this Agreement shall be governed by the Foreign Exchange Act.



13.2



Contractor shall, for the purpose of this Agreement, be entitled to receive, remit

with notice to the Bank of Ghana, keep and utilise freely abroad all the foreign

currency obtained from the sales of the Petroleum assigned to it by this

own

Agreement or purchased hereunder, or from transfers, as well as itszyxwvutsrqponmlkjihgfedcbaZ

capital, receipts from loans and in general all assets thereby acquired abroad.

Upon making adequate arrangements with regard to its commitment to conduct

Petroleum Operations, Contractor shall be free to dispose of this foreign

currency or assets as it deems fit.



13.3



Contractor shall have the right to open and maintain in Ghana, bank accounts in

foreign currency and Ghanaian currency. No restriction shall be made on the

import by Contractor in an authorised manner of funds assigned to the

performance of the Petroleum Operations and Contractor shall be entitled to

purchase Ghanaian currency, US dollars or other foreign currencies, through

authorised means, without discrimination, at the prevailing rate of exchange.



13.4



Contractor shall be entitled to convert into foreign currencies of its choice

funds imported by Contractor for the Petroleum Operations and held in Ghana

which exceeds its local requirements at the prevailing rate of exchange referred

to in Article 13.3 and remit and retain such foreign currencies outside Ghana.



13.5



In the event of resale by Contractor or its Affiliate of Crude Oil purchased from

the State or GNPC, the State or GNPC shall have the right to request payment

for such sales of its share of production to Contractor or its Affiliate to be held

in the foreign currency in which the resale transaction took place or in United

States Dollars.



13.6



Contractor shall have the right to make direct payments outside of Ghana from

its home offices abroad, and elsewhere, to its Foreign National Employees, and

to those of its Subcontractors and suppliers 'not resident in Ghana' (as defined

in the Income Tax Law) for wages, salaries, purchases of goods and

performance of services, whether imported into Ghana or supplied or

performed therein for Petroleum Operations carried out hereunder, in

accordance with the provisions of this Agreement, in respect of services

performed within the framework of this Agreement, and such payments shall

be considered as part of the costs incurred in Petroleum Operations. In the

event of any changes in the location of Contractor's home or other offices.

Contractor shall so notify GNPC and the State.



r



13.7



All payments which this Agreement obligates Contractor to make to GNPC or

the State, including income taxes, shall be made in United States Dollars,

except as requested otherwise pursuant to Article 13.5 above. A l l payments

shall be made by appropriate means of wire transfer in immediately available

funds to a bank account in Ghana open in the name and to the benefit of GNPC

or the Stateand reasonably accessible to Contractor by way of it being able to

receive payments made by Contractor and give a confirmation of receipt

thereof, or in such other manner as may be mutually agreed.



13.8



All payments which this Agreement obligates GNPC or the State to make to

Contractor shall be made in United States Dollars. All payments shall be made

by electronic transfer (or in such other maimer as may be mutually agreed) in

immediately available funds to a bank to be designated by Contractor, and

GNPC or the State and give confirmation of receipt

reasonably accessible tozyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

thereof.



r



A R T I C L E 14

S P E C I A L PROVISIONS F O R NATURAL GAS

PART I - G E N E R A L

All Natural Gas produced by Contractor in association with GNPC under this

Agreement shall be subject to the terms of Article 14 of this Agreement.

14.1 Contractor shall have the right to use Natural Gas produced from any

Development and Production Area for Petroleum Operations within the

Contract Area such as reinjection for pressure maintenance and/or power

generation at no cost.

14.2 Contractor shall not flare nor vent Natural Gas except:

a)



to the extent provided for in an approved Development Plan;



b)



during production testing operations;



c)



when required for operational safety and the safety of persons

engaged in Petroleum Operations in accordance with Intemational

Best Oil Field Practice; or



d)



as otherwise authorised by the Minister.



14.3 Contractor shall have the right to extract and dispose of liquid hydrocarbons

pursuant to the provisions of this Agreement relating to Crude Oil. Residual

Natural Gas remaining after the extraction of liquid hydrocarbons is subject to

the provisions of this Article 14.



PART II - ASSOCIATED GAS

14.4 The Development Plan of each Development and Production Area shall include

a plan of utilization for Associated Gas.

14.5 I f Contractor considers that production, processing and utilisation of

Associated Gas from any Development and Production Area is not required for

Petroleum Operations and/or non-economic for sale, GNPC or any State

appointed agency, body or Subcontractor shall have the option to offtake

Contractor's share of such Associated Gas at the outlet flange of the gas-oil

separator on the Crude Oil production facility, at its sole risk and expense for

its own use by paying to Contractor a nominal price of US$0.0001 per MMbtu.

GNPC and Contractor shall work together to develop the appropriate interface

between Gas infrastructure owned by the State and/or GNPC and Contractor's .

proposed Development Plan and to that end shall include:

( r ^

58



< ^



a)



a statement of the facilities necessary for the delivery to GNPC (or

any State appointed agency, body, or Subcontractor) of such

Associated Gas;



b)



a plan for the reinjection of Associated Gas into the reservoir i f

needed for pressure support;



c)



a plan for any other utilization; and



d)



a plan for power-generation.



14.6



The decision of GNPC as to whether or not to exercise the option provided for

in Article 14.5 shall be made in a timely maimer. In making such decision

and in its subsequent conduct, GNPC shall avoid the prevention of or delay to

the orderly start up or continuation of the production of Crude Oil as

envisaged in the approved Development Plan.



14.7



[NOT USED]



14.8



I f GNPC (or any State appointed agency, body, or Subcontractor) elects to

offtake Associated Gas under Article 14.5 above, GNPC shall be responsible

for any additional facilities needed for the delivery of the Associated Gas to

GNPC, provided that:

a)



i f Contractor subsequently wishes to participate in GNPC's gas

utilisation programme, it shall reimburse GNPC for the costs of such

facilities plus a premium of three hundred percent (300%) of costs; or



b)



i f Contractor subsequently develops a gas utilisation programme and

requires the use of GNPC's gas facilities, Contractor shall pay GNPC

an agreed fee for such use.



I f Contractor considers that it may be economic to produce Associated Gas for

sale, the provision of Article 14.14, and Part IV below shall apply as to such

Associated Gas.

PART III - NON-ASSOCIATED GAS

14.9 Contractor shall have the right to commercialize a Discovery of NonAssociated Gas in the Contract Area in accordance with the provisions of this

Agreement. Except as otherwise provided in this Agreement, the terms

applicable to a Discovery as provided under Article 8 of this Agreement shall

apply to a Discovery of Non-Associated Gas.

14.10 Where Contractor submits notice pursuant to Article 8.2 or Article 8.20

indicating that the Discovery does not at that time merit Appraisal but may

merit Appraisal or additional evaluation at a later date during the Exploration

Period or during the initial period under a new Agreement made pursuant to



Article 14.17 below, then Contractor need not submit a Proposed Appraisal

Programme at that time but instead shall indicate to the Petroleum Commission

what other studies or evaluations (in accordance with a definite time-table) may

be warranted before an Appraisal Programme is undertaken.

Where

Contractor's Notice indicates that the Discovery will not merit Appraisal at any

time during the Exploration Period or during the initial period under a new

Agreement made pursuant to Article 14.17, then Contractor shall relinquish the

rights to the Non-Associated Gas within that Discovery Area.

14.11 Not later than one hundred twenty (120) days from the date on which the

Appraisal Programme relating to a Discovery is concluded. Contractor shall

submit to the Minister and Petroleum Commission a report containing the

results of the Appraisal Programme (the ("Appraisal Report"). The Appraisal

Report may conclude that the Discovery merits commercial assessment. I f the

Appraisal Report concludes that the Discovery merits commercial assessment.

Contractor shall submit to the Minister and Petroleum Commission within

thirty (30) days from the date of submission of the Appraisal Report, a

programme incorporating a specific timetable for conducting such commercial

assessment for approval by the Minister for a period of up to three (3) years, as

the Contractor deems appropriate. I f the Minister approves this programme,

such commercial assessment shall be conducted within the Exploration Period

and, i f applicable, during the initial period under a new petroleum agreement

made pursuant to Article 14.17 on terms not less favourable to Contractor than

this Agreement. Notwithstanding the above, the Minister may approve the

conduct of other studies or evaluation, in accordance with a specific timetable,

which may be warranted before a commercial assessment is undertaken.

Notwithstanding the above. Contractor may also notify the Minister that

commercial assessment of the Discovery is not warranted at that time but the

Discovery may merit such assessment at a later date during the Exploration

Period or during the initial period under a new petroleum agreement made

pursuant to Article 14.17 as referred to herein.

14.12 The purpose of the commercial assessment shall be to study the uses to which

production fi-om the Discovery Area separately can be devoted and to what

extent such uses involve exports or domestic utilization. As part of the

assessment, the Parties shall also pursue discussions on the required contractual

arrangements for marketing and sale of the Natural Gas to potential purchasers,

consumers, infrastructure owners and GNPC. Contactor may undertake the Gas

commercialization project at a level that will facilitate the achievement of the

Contractor's rate of return, and shall use the State's gas infi-astructure i f

available.

14.13 Contractor may consult with the Minister and GNPC and may make

appropriate representations proposing changes in the fiscal and other provisions

of this Agreement which may, in the opinion of Contractor, affect the above

determinations made pursuant to Articles 14.10 and 8.3. The Minister and



GNPC may, where feasible and in the best interests of the Parties, agree to

make such changes or modifications in the existing arrangements.

PART IV-NATURAL GAS PROJECTS

14.14 I f at any time during the commercial assessment Contractor informs the

Minister in writing that the Discovery can be produced commercially, it shall

within one hundred eighty (180) days submit to the Minister and to GNPC its

proposals for an agreement relating to the Development of the Discovery on

the principles set forth in this Part IV of Article 14. The State and GNPC

undertake on receipt of such notice to negotiate in good faith with Contractor

with a view to reaching agreement on terms for such production. Any such

agreement will be based on terms and fiscal requirements which shall be no

less favourable to Contractor than those provided for in Article 10 and

Article 11 and which take full account of the legitimate interest of the State as

the resource owner.

14.15 I f at any time during the commercial assessment Contractor has identified a

domestic market for the reserves of Non-Associated Gas or any part thereof,

the Parties shall proceed in good faith to negotiate the appropriate contractual

arrangements for the sale of the Natural Gas.

14.16 In the event of a Discovery of Natural Gas in the Contract Area which is to be

developed and commercially produced, the provisions of this Agreement in

respect to interests, rights and obligations of the Parties regarding Crude Oil

shall apply to Natural Gas, with the necessary changes in points of detail,

except with respect to specific provisions in this Agreement concerning

Natural Gas and different or additional provisions concerning Natural Gas

which may be agreed by the Parties in the future.

a)



The system for the allocation of Natural Gas among the Parties

shall follow the same general format as Article 10.1 provides for

Crude Oil, with the exception that the royalty to be delivered to the

State on Natural Gas shall be at the rate of seven point five percent

(7.5%) of the annual Gross Production of Natural Gas.



b)



The Parties recognise that projects for the Development and

Production of Natural Gas are generally long-term in nature for

both the project developers and the customers who purchase the

Natural Gas. Substantial investments and dedication of facilities

require long-term commitments on both sides. This Agreement,

being for a specific term of years, may not cover the length of time

for which customers in given cases will require commitments on

the part of the Parties to this Agreement to deliver their respective

shares of the output. Accordingly the Parties agree to consider

undertaking such commitments where reasonably required for the

efficient and viable development of a Natural Gas project. It is



recognised that, unless otherwise agreed by the Parties hereto.

Contractor will have no right or interest in the project or the

Natural Gas produced and delivered after the term of this

Agreement has expired.

In the event that Contractor or an Affiliate, by mutual agreement

with GNPC and the State, constructs facilities to receive Natural

Gas fi-om the Development and Production Area for further

processing or for use as a feedstock or fiiel in order to convert such

a Natural Gas into one or more commercially marketable products,

the Contractor shall be entitled to pay GNPC or the State for such

gas the price, i f any, paid by the State or GNPC under Article

14.15

The Parties will consider collaboration in obtaining any common

external financing available for Natural Gas production

possibilities, including project financing; however, each Party shall

remain free to finance externally its share of such facilities to the

extent it prefers to do so.



Where Contractor has, during the continuance of the Exploration

DiKcovery of Non-Associated Gas but has not,

Period, made azyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

before the end of the Exploration Period, declared that Discovery

to be a Commercial Discovery, the State and GNPC will, i f

Contractor so requests, enter into a new petroleum agreement with

Contractor in respect of the Discovery Area to which that

Discovery relates.

The State and GNPC shall not be under any obligation to enter into

an a new petroleum agreement pursuant to Article 14.17(a) unless

before the end of the Exploration Period, Contractor has carried out

an Appraisal Programme in respect of that Discovery pursuant to

Article 14.9 and submitted to the Petroleum Commission a report

thereon pursuant to Article 14.11, or has commenced an Appraisal

Programme and has notified the Petroleum Commission of

reasonable arrangements to undertake and complete such an

Appraisal Programme during the period provided for in 14.17(c)(i)

below:

A new petroleum agreement entered into pursuant to Article

14.17(a):

i)



shall, unless the Discovery in respect of which the

Agreement has been made is declared by Contractor to be a

Commercial Discovery, continue in force for an initial

period not exceeding three (3) years;



ii)



shall in the event that the Discovery is declared by

Contractor to be a Commercial Discovery:

1.



continue in force for an aggregate period not

exceeding twenty-five (25) years;



2.



include, or be deemed to include, all the provisions

which, mutatis mutandis, would have applied to a

Commercial Discovery of Non-Associated Gas

pursuant to Article 14.16 i f Contractor had declared

such Discovery to be a Commercial Discovery under

this Agreement;



iii)



shall contain in respect of the initial period

renewal period, details of the evaluations or

accordance with a specific timetable) which

proposes to undertake in order to determine or

review the commerciality of the Discovery.



or of any

studies (in

Contractor

keep under



iv)



Shall confer on GNPC pre-emptive rights in respect of the

Gas contained in the reservoir to which the Discovery

relates substantially in the form of the provisions hereinafter

set out in Article 14.17(e).



Where Contractor has not, before the end of the Initial Exploration

Period declared the Discovery to be commercial and the Minister

has, in his discretion, determined that further evaluation or studies

may be required before the Discovery can be declared a

Commercial Discovery, the right of Contractor to retain the

Discovery Area shall continue for a further period not exceeding,

in the aggregate, three (3) years. The right of Contractor to retain

the Discovery Area aforesaid shall be secured by the renewal of the

new petroleum agreement referred to in Article 14.17(a) or where

necessary by a new Agreement entered into by the Parties for that

purpose.

Where Contractor has not declared the Discovery to be a

Commercial Discovery, i f GNPC has identified a market for the

Gas contained in the reservoir to which the Discovery relates, or

any part thereof, it may at any time during the initial period or the

aggregate period referred to in 14.17(d) above, serve on Contractor

a notice giving particulars of the quantities of Gas required to serve

that market and the price offered; and on the basis of the procedure

detailed in Article 9, exercise the right referred to in Article

14.17(c)(iv) above.

i)



Within three (3) Months from the receipt of a notice as

aforesaid, Contractor may declare the Discovery to be a



Commercial Discovery and in accordance with the

Agreement and the Petroleum Law prepare and submit to

the Minister a Development Plan for the production of the

Gas in association with GNPC.

ii)



I f Contractor has not, within the period of three (3) Months

aforesaid, declared the Discovery to be a Commercial

Discovery, GNPC may at its sole risk and expense, develop

the Discovery and in that event the Contractor shall cease to

have any rights in respect of the Gas in the reservoir

required for that purpose.



14.18 For the purpose of calculating the State's seven point five percent (7.5%)

royalty share on Natural Gas, i f the State elects to take its royalty on Natural

Gas in cash, the value of such Natural Gas shall be the actual realized price

received by the Contractor, less transportation, compression, and marketing

costs which shall be in accordance with the principles indicated in Article 11. \



64



A R T I C L E 15

DOMESTIC SUPPLY R E Q U I R E M E N T S (CRUDE OIL)

15.1



Crude Oil for Consumption (as defined in Article 15.4) in Ghana called the

"Domestic Supply Requirement" shall be supplied, to the extent possible, by

the State and GNPC from their respective entitlements under this Agreement

and under any other contract for the production of Crude Oil in Ghana.



15.2



Contractor shall be obliged together with any third parties which produce

Crude Oil in Ghana, to supply a volume of Crude Oil to be used for Domestic

Supply Requirements, calculated on the basis of the ratio of Contractor's

entitlement to Crude Oil tmder Article 10.1(c) to the sum of the similar

entitlements of all such third parties. For the purposes of meeting this

obligation, the State shall provide three (3) Months'notice to the Contractor,

except that where Contractor has entered into pre-existing contractual

obligations the State shall provide twelve (12) Months' notice. The Domestic

Supply Requirement shall not exceed the total of Contractor's said entitlement

under this Agreement.



15.3



The State shall purchase any Crude Oil supplied by Contractor pursuant to this

Article 15 at the Market Price determined under Article 11.7 for the Month of

delivery, and the State shall pay such prices in accordance with Article 13.18

within thirty (30) days after receipt of invoice, failing which Contractor's

obligations in respect of the Domestic Supply Requirement under this

Article 15 shall be suspended until payment is made good, at which time

deliveries shall be resumed subject to (i) any altemative commitments that

may have been reasonably entered into by Contractor to dispose of the

Domestic Supply Requirement Crude Oil during the period of default in

payment, and (ii) the provision by GNPC of such security as may be

reasonably acceptable to the Contractor in order to cover GNPC's payment

obligations under this Article 15.3 as well as any already existing outstanding

balance.



15.4



The calculation of the Domestic Supply Requirement shall be done on a

Calendar Year basis, broken down by Month. The calculation shall begin

with the determination of the quantities of Cmde Oil required for

Consumption in Ghana in each relevant Month (the "Monthly Domestic

Consumption") during the applicable Calendar Year. "Consumption" shall

consist of the total Cmde Oil consumed in Ghana, Cmde Oil processed in

Ghana, and the Cmde Oil equivalent of Cmde Oil derived Products imported

for consumption in Ghana.



A R T I C L E 16

INFORMATION AND R E P O R T S : C O N F I D E N T I A L I T Y

16.1



Contractor shall keep the Petroleum Commission and GNPC regularly and

fully informed of operations being carried out by Contractor under this

Agreement and provide the Petroleum Commission and GNPC with all

information, data (film, paper and digital forms), samples, interpretations and

reports (including progress and completion reports) including but not limited

to the following:

a)



processed seismic data and interpretations thereof;



b)



well data, including but not limited to electric logs and other

wireline surveys, and mud logging reports and logs, oil or

hydrocarbon samples, samples of cuttings and cores and analyses

made therefrom;



c)



any reports prepared from drilling data or geological or

geophysical data, including maps or illustrations derived

therefrom;



d)



well testing and well completion reports;



e)



reports dealing with location surveys, seabed conditions and

seafloor hazards and any other reports dealing with well, platform

or pipeline locations;



f)



reservoir investigations and estimates regarding reserves, field

limits and economic evaluations relating to future operations;



g)



daily, weekly, monthly and other regular reports on Petroleum

Operations;



h)



comprehensive final reports upon the completion of each specific

project or operation;



i)



contingency programmes and reports on safety and accidents;



j)



procurement plans, subcontracts and contracts for the provision of

services to Contractor; and



k)



for such subcontracts and contracts for the provision of services to

Contractor:

i)



bid documents and their evaluation reports; and



ii)



a statement showing the values, executing companies, award

and completion dates.



Data shall be provided on film, paper and in digital format as available in an

acceptable format to the Petroleum Commission and GNPC. In respect of the

reports, including text and graphics, paper and digital copies shall be submitted.

16.2



Contractor shall have the right to retain for its own use in connection with the

conduct of Petroleum Operations under this Agreement copies of data, well

logs, maps, magnetic tapes, other geological and geophysical information,

portions of core samples and copies of reports, studies and analyses, referred

to in Article 16.1.



16.3



Not later than ninety (90) days following the end of each Calendar Year,

Contractor shall submit to the Petroleum Commission and GNPC a report

covering Petroleum Operations performed in the Contract Area during such

Calendar Year. Such report shall include, but not be limited to:

a)



a statement of the number of Exploration Wells, Appraisal Wells

and Development Wells drilled, the depth of each such well, and a

map on which drilling locations are indicated;



b)



a statement of any Petroleum encountered during Petroleum

Operations, as well as a statement of any fresh water layers

encountered and of any other minerals discovered;



c)



a statement of the quantity of Petroleum produced and of all other

minerals produced therewith from the same reservoir or deposit;



d)



a summary of the nature and extent of all Exploration activities in

the Contract Area;



e)



a general summary of all Petroleum Operations in the Contract

Area; and



f)



a statement of the number of employees engaged in Petroleum

Operations in Ghana, identified as Ghanaian or non-Ghanaian.

Contractor will inform the latter that details as to nationality are

required by GNPC and that Contractor is available to assist them to

supply that information.



16.4



All data, information and reports including interpretation and analysis supplied

by Contractor pursuant to this Agreement ("Data") shall be treated as

confidential by the Parties and shall not be disclosed by Contractor to any

other person without the express written consent of GNPC, such consent not

to be unreasonably withheld. However, subject to Article 16.6 and prior

written notice to Contractor, GNPC may disclose Data to any other person



16.5



Data may be disclosed by :

a)



the State:



i)



to any agency of the State or to any advisor or consultant to

GNPC or the State;



ii)



to applicants seeking to obtain a petroleum agreement in

respect of any open acreage adjacent to the Contract Area;

provided, in each case. Contractor receives reasonable prior

notice of such disclosure;



Contractor:

i)



to its Affiliates, advisers or consultants;



ii)



to a bona fide potential assignee of all or part of

Contractor's interest provided that with respect to a bona

fide assignee of Contractor's interest, GNPC is given prior

notice of such potential assignee, and subject to approval of

the State and GNPC for the disclosure (not to be

unreasonably denied or delayed);



iii)



to banks or other lending institutions for the purpose of

seeking external financing of costs of the Petroleum

Operations;



iv)



to non-Affiliates who shall provide services for the

Petroleum Operations, including Subcontractors, vendors

and other service contractors, where this is essential for their

provision of such services, and provided GNPC is notified

about such disclosure;



v)



to governmental agencies for obtaining necessary rulings,

permits, licenses and approvals, or as may be required by

applicable law or stock exchange, accounting or reporting

practices, and provided GNPC is given prior notice of such

disclosure;



any Party:

i)



to the extent necessary in any Arbitration Proceedings or

proceedings before a Sole Expert or in proceedings before

any court;



ii)



with respect to Data, which already through, no fault of the.

disclosing Party is in the public domain.



16.6



Any Party disclosing information or providing Data to any third party under

this Article shall require such persons to observe the confidentiality of such

Data by executing a confidentiality agreement in the form attached hereto as

Annex 3.



16.7



Public statements and press releases regarding the Petroleum Operations

undertaken under this Agreement ("Releases") shall be issued jointly by the

Contractor and GNPC, and the Parties shall agree on the timing and wording

of such Releases to the public, except where a Party is required to make a

Release under the applicable laws, rules or regulations of any government,

legal proceedings or a stock exchange having jurisdiction over such Party or

any of its Affiliates; in which event, such Party shall inform the other Party

with a reasonably prior notice of such requirement and submit the text of the

proposed Release for comments to be agreed by the Contractor and GNPC

within timeframe allowing to make a Release as may be required.



16.8



Subject in all cases to the terms of any technical services agreements, all

Intellectual Property Rights made, developed or conceived directly in

a Contractor

connection with conducting Petroleum Operations either throughzyxwvutsrqponmlkjihgfedcbaZYX

Party's employees, contractors (including the Contractor Parties),

Subcontractors, secondees, GNPC's employees or otherwise to which such

Contractor Party or GNPC, as the case may be, would otherwise have

ownership rights and entitlements, shall be jointly owned in equal and

undivided shares by GNPC and Contractor ("Joint Intellectual Property

Rights").



16.9



GNPC grants to the Contractor a sole, irrevocable, royalty-free, worldwide

licence (including the right to sub-licence) in any Joint Intellectual Property

Rights, including the right to use and exploit such Joint Intellectual Property

Rights for the purposes of the exploration and production of petroleum,

including for fulfilling the terms of this Agreement.



16.10 Contractor grants to the GNPC a sole, irrevocable, royalty-free, worldwide

licence (including the right to sub-licence) in any Joint Intellectual Property

Rights, including the right to use and exploit such Joint Intellectual Property

Rights for the purposes of exploration and production of petroleum, including

for fulfilling the terms of this Agreement.

16.11 Any revenue generated from the sub-licensing of Joint Intellectual Property

Rights by either GNPC or Contractor to a third party (non-Affiliate) under this

Article 16.8 shall be shared equally between GNPC and Contractor.

16.12 Notwithstanding any provision to the contrary in this Agreement, i f a

Contractor Party or an Affiliate of a Contractor Party has used its own

confidential information, proprietary intellectual property or technology in

Petroleum Operations then, subject to GNPC (or its successors or permitted

assignees) entering into a usual and customary non-disclosure and licensing



agreement (which such agreement shall be on terms that are commercially

reasonable under the circumstances), such Contractor Party or its Affiliate

shall provide GNPC (or its successors or permitted assignees) with rights to

use such confidential information, proprietary intellectual property or

technology in other operations of GNPC (or its successors or permitted

assignees) in Ghana; provided that GNPC's use of such confidential

information, proprietary intellectual property or technology (a) within the

Contract Area shall be free of charge, and (b) outside of the Contract Area

shall be subject to a licensing fee in an amount mutually agreed between

GNPC and such Contractor Party. The terms and conditions of the foregoing

rights will be provided for in separate agreements to be agreed between

GNPC (or its successors or permitted assignees) and such Contractor Party or

its relevant Affiliate.

Further, GNPC (or its successors or permitted

assignees) and such Contractor Party or its relevant Affiliate will enter into a

ustial and customary confidentiality agreement relating to confidential

information disclosed to GNPC (or its successors or permitted assignees)

pursuant to any such licensing agreements, which confidentiality agreement

shall restrict, inter alia, GNPC (or its successors or permitted assignees) from

making disclosure of such information to such Contractor Party's oil and g

industry competitors.



r



A R T I C L E 17

I N S P E C T I O N , S A F E T Y AND E N V I R O N M E N T A L P R O T E C T I O N

17.1



GNPC shall have the right of access to all sites and offices of Contractor and

the right to inspect all buildings and installations used by Contractor relating

to Petroleum Operations. Such inspections and audits shall take place in

consultation with Contractor and at such times and in such maimer as to not

unduly interfere with the normal operations of Contractor.



17.2



Contractor shall take all necessary steps, in accordance with Intemational Best

Oil Field Practice, to perform activities pursuant to the Agreement in a safe

manner and shall comply with all requirements of applicable law, including

labour, health, safety and environmental laws and regulations issued by the

Environmental Protection Agency of Ghana and other relevant State agencies.



17.3



Contractor shall provide an effective and safe system for disposal of water and

waste oil, oil based mud and cuttings in accordance with applicable laws and

Intemational Best Oil Field Practice, and shall provide for the safe completion

or abandonment of all boreholes and wells.



17.4



Contractor shall exercise its rights and carry out its responsibilities under this

Agreement in accordance Intemational Best Oil Field Practice, and shall take

steps in such maimer as to:



17.5



a)



result in minimum ecological damage or destruction;



b)



control the flow and prevent the escape or the avoidable waste of

Petroleum discovered in or produced from the Contract Area;



c)



prevent damage to Petroleum-bearing strata;



d)



prevent the entrance of water through boreholes and wells to

Petroleum-bearing strata, except for the purpose of secondary

recovery;



e)



prevent damage to onshore lands and to trees, crops, buildings or

other structures; and



f)



avoid any actions which would endanger the health or safety of

persons.



In the event of a release of Petroleum or other materials on the seabed, in the

sea, on land or in fresh water, or i f Contractor's operations result in any other

form of pollution or otherwise cause harm to fresh water, marine, plant or

animal life. Contractor shall, in accordance with applicable laws and

Intemational Best Oil Field Practice, promptly take all necessary measures, in

accordance with Intemational Best Oil Field Practice to control the pollution.



to clean up Petroleum or other released material, or to repair, to the maximum

extent feasible, damage resulting from any such circumstances. If such release

or pollution results from the Gross Negligence of: (i) Contractor; (ii) any of

Contractor's Affiliates; or (iii) a Subcontractor, the cost of subcontract cleanup and repair activities shall be borne by Contractor and shall not be included

as Petroleum Cost under this Agreement.

17.6



Contractor shall notify GNPC immediately in the event of any emergency or

major accident or major release of materials into the environment (and

promptly in the event of any other accident or release of materials into the

envirormient) and shall take such action as may be prescribed by GNPC's

emergency procedures and by Intemational Best Oil Field Practice.



17.7



If Contractor does not act promptly so as to control, clean up or repair any

pollution or damage, GNPC may, after giving Contractor reasonable notice in

the circumstances, take any actions which are necessary, in accordance with

applicable laws and Intemational Best Oil Field Practice and the reasonable

costs and expenses of such actions shall be borne by Contractor and shall,

subject to Article 17.5 be included as Petroleum Costs.



A R T I C L E 18

A C C O U N T I N G AND A U D I T I N G

18.1



Contractor shall maintain, at its office in Ghana, books of account and

supporting records in the manner required by applicable law and accepted

accounting principles generally used in the intemational petroleum industry

and shall file reports, tax retums and any other documents and any other

financial retums which are required by applicable law.



18.2



In addition to the books and reports required by Article 18.1 Contractor shall

maintain, at its office in Ghana, a set of accounts and records relating to

Petroleum Operations under this Agreement. Such accounts shall be kept in

accordance with the requirements of the applicable law and accepted

accounting principles generally used in the intemational Petroleum industry.



18.3



The accounts required by Articles 18.1 and 18.2 shall be kept in United States

Dollars or such other currency as GNPC and Contractor may agree.



18.4



Contractor will provide GNPC with quarterly and annual financial statements

and summaries of the Petroleum Costs incurred under this Agreement.



18.5



GNPC shall review all financial statements submitted by the Contractor as

required by this Agreement, and shall signify its provisional approval or

disapproval of such statements in writing within a hundred and twenty (120)

days of receipt, failing which the financial statements as submitted by

Contractor shall be deemed approved by GNPC; in the event that GNPC

indicates disapproval of any such statement, the Parties shall meet within

fifteen (15) days of Contractor's receipt of the notice of disapproval to review

the matter.



18.6



Notwithstanding any provisional approval pursuant to Article 18.5, GNPC shall

have the right and upon giving reasonable notice in writing to Contractor to

audit, at its sole expense the books and accounts of Contractor relating to

Petroleum Operations. GNPC shall not, in carrying out such audit, interfere

unreasonably with the conduct of Petroleum Operations. Any such audit shall

be undertaken by an independent auditing firm and shall be completed not

later than nine (9) Months after commencement, provided that GNPC shall

submit the final audit report (and relevant exceptions) to Contractor not later

than 30 days following the completion of the audit. Contractor shall provide

all necessary facilities for auditors appointed hereunder by GNPC including

working space and timely access to all relevant personnel, records, files and

other materials.

I f GNPC desires verification of charges from an Affiliate, Contractor shall, at

GNPC's sole expense, obtain for GNPC or its representatives, an audit

certificate for this purpose from the statutory auditors of the Affiliate >



concerned. Copies of audit reports shall be provided to the Contractor and

GNPC. Any unresolved audit claim resulting from such audit, upon which

Contractor and GNPC are unable to agree shall be submitted to the JMC for

decision which must be unanimous. In the event that a unanimous decision is

not reached in respect of any audit claim, then such unresolved audit claim

shall be submitted for resolution in accordance with Article 24. Subject to

any adjustments resulting from such audits. Contractor's accounts and

financial statements shall be considered to be correct on expiry of a period of

two (2) years from the date of their submission unless before the expiry of

such two (2) year period GNPC has notified Contractor of any exceptions to

such accounts and statements.

18.7



Nothing in this Article shall be read or construed as placing a limit on GNPC's

access to Contractor's books and accounts in respect of matters arising under

Article 23.3(a).



18.8



In the event of any changes in location of Operator's home office, Operator

shall so notify GNPC and the State.



18.9



Petroleum Costs incurred with respect to the Contract Area shall have no

bearing on allowable or non-allowable costs under any other confract area or

Contractor's eligibility or otherwise for deductions in computing Contractor's

net income from Petroleum Operations for income tax purposes in any other

contract area. Similarly, Petroleum Costs incurred in any other contract area

shall have no bearing on allowable Of non-allowable costs in respect of the

Contract Area or Contractor's eligibility or otherwise for deductions in

computing Contractor's net income from Petroleum Operations for income

tax purposes in respect of the Contract Area.



A R T I C L E 19

T I T L E T O AND C O N T R O L O F G O O D S AND E Q U I P M E N T

19.1



GNPC shall be the sole and unconditional owner of:

a)



Petroleum produced and recovered as a result of Petroleum

Operations, except for such Petroleum as is distributed to the State

and to Contractor pursuant to Article 10 or Article 14 hereof;



b)



all physical assets other than those to which Article 19.3 or 19.4

apply, which are purchased, installed, constructed or used by

Contractor in Petroleum Operations as from the time that:

i)



the full cost thereof has been depreciated and/or recovered

in accordance with the provisions of the Accounting Guide

in Annex 2; or



ii)



this Agreement is terminated and Contractor has not

disposed of such assets prior to such termination, whichever

occurs first.



19.2



Contractor shall have the use of the assets referred to in Article 19.1(b) for

purposes of its operations under this Agreement without payment provided that

Contractor shall remain liable for maintenance, insurance and other costs

associated with such use. The Contractor shall use its best efforts to keep any

such asset in good working condition (subject to normal wear and tear.

Contractor shall indemnify GNPC against all losses, damages, claims or legal

action directly resulting from Contractor's use of such assets, if and in as far as

such losses, damages, claims or legal actions were directly caused by

Contractor's Gross Negligence or Wilful Misconduct.



19.3



Equipment or any other assets rented or leased by Contractor which is imported

into Ghana for use in Petroleum Operations and subsequently re-exported

therefrom, which is of the type customarily leased for such use in accordance

with Intemational Best Oil Field Practice or which is otherwise not owned by

Contractor shall not be transferred to GNPC. No equipment or assets owned or

leased by a Subcontractor shall by reason of the provisions of this Article 19 be

deemed to be transferred to GNPC.



19.4



All assets acquired by Contractor which are not affected by the provisions of

Article 19.1(b) above may, where required for further Petroleum Operations, be

retained by GNPC for such operations provided that GNPC shall thereby be

liable to pay a reasonable and mutually agreed fee for such use, and shall bear

the cost of repair or replacement upon failure to keep such assets in good'



working condition (normal wear and tear excepted), and further provided that

Contractor does not require such assets for its Petroleum Operations.

19.5



Subject to Article 19.3, upon the termination of Petroleum Operations in any

area. Contractor shall give GNPC the option to acquire any movable and

immovable assets used for such Petroleum Operations and not affected by the

provisions of Article 19.1(b) at a reasonable and mutually agreed price, always

provided that Contractor does not require such assets for Contractor's

Petroleum Operations in the Contract Area.



19.6



All assets which are not affected by Article 19.1(b) nor subject to Article 19.4

or 19.5 above, and all Subcontractor equipment, may be freely exported by

Contractor or its Subcontractor, respectively, at its discretion.



76



A R T I C L E 20

PURCHASING AND P R O C U R E M E N T

20.1



20.2



Subject to all applicable laws, the Contractor, its Sub contractors or other

entities which cooperate with them shall:

a)



acquire materials, equipment, machinery and consumer goods

produced or provided in Ghana by an Indigenous Ghanaian

company satisfying agreed criteria and requirements, and at

prices which are no more than ten percent (10%) higher than

the imported items including transportation and insurance

costs and customs charges due;



b)



contract local services provided by Indigenous Ghanaian

company satisfying agreed criteria and requirements, and

their prices, when subject to the same tax charges, are no

more than ten percent (10%) higher than the prices charged

by foreign contractors for similar services.



For the purposes of Article 20.1, price comparisons shall be made on a c.i.f v

Accra delivered basis.

'



r



A R T I C L E 21

E M P L O Y M E N T AND T R A I N I N G

21.1



In order to contribute to State programmes to train Ghanaian persoimel for

work in Petroleum Operations and to promote the development of local

management and technical skills in the petroleum sector Contractor shall pay

to Petroleum Commission:

a)



an amount of US$ two Million United States Dollars

(US$2,000,000) per Calendar Year from the Effective Date to be

used for training programmes. The amounts shall be payable within

thirty (30) days after the beginning of each Calendar Year,

provided that the sum payable shall be pro rata for any period of

less than a full Calendar Year; and



b)



an amount of US$ five Million United States Dollars (US$

5,000,000) to be used for technology support payable once within

thirty (30) days of the Effective Date.



All payments made pursuant to Article 21.1 (a) and (b) abov

Contractor by wire transfer to a designated Petroleum ComnnssitHTaccbunt iwaccordance with this Agreement.

21.2



All payments tmder Article 21.1 above, shall be considered Petroleum Costs.



21.3



Where qualified Ghanaian personnel are available for employment in the

conduct of Petroleum Operations, Contractor shall ensure that in the

engagement of personnel it shall as far as reasonably possible provide

opportunities for the employment of such personnel. For this purpose,

Contractor shall from time to time submit to GNPC an employment plan

stating the reasonably foreseeable number of persons and the required

professions and technical capabilities prior to and during the conduct of

Petroleum Operations. GNPC shall be given the opportunity to provide the

qualified personnel for engagement according to the said plan for

Contractor's consideration and approval.



21.4



Contractor shall, if so requested by GNPC, provide opportunities for a mutually

agreed number of personnel nominated by GNPC to be seconded for on-thejob training or attachment in all phases of its Petroleum Operations under a

secondment contract to be mutually agreed prior to such secondment. Such

secondment contract shall include continuing education and short industry

courses mutually identified as beneficial to the secondee. Costs and other

expenses connected with such assignment of GNPC personnel shall be borne

by the Contractor and considered Petroleum Costs.



21.5



Contractor shall regularly provide to GNPC information and data relating to

worldwide Petroleum science and technology, Petroleum economics and



engineering information available to Contractor regarding Petroleum

Operations, other than Contractor's proprietary or trade secrets or information,

data or technology subject to third party license, and shall assist GNPC

personnel to acquire knowledge and skills in all aspects of the Petroleum

industry.

21.6



Except as otherwise provided in Articles 21.5 and subject in all respects to

Articles 16.4 - 16.6, it is agreed that there will be no disclosure or transfer of

any documents, data, know-how, technology or other information owned or

supplied by Contractor, its Affiliates, or non-Affiliates, to third parties

without Contractor's prior written consent (such consent not to be

unreasonably withheld), and then only upon written agreement substantiallyTv^

in the form attached hereto as Annex 3.

\



79



A R T I C L E 22

FORCE MAJEURE

22.1



The failure of GNPC or a Contractor Party to fulfil any term or condition of

this Agreement, except for the payment of monies, shall be excused i f and to

the extent that such failure arises from Force Majeure, provided that, i f the

event is reasonably foreseeable such Party shall have prior thereto taken all

reasonably appropriate precautions and all reasonable altemative measures with

the objective of carrying out the terms and conditions of this Agreement. Such

Party affected by an event of Force Majeure shall promptly give the other

Parties notice of such event and also of the restoration of normal conditions.



22.2



In the event that GNPC or a Contractor Party is unable wholly or in part to

perform its obligations provided for in the Agreement as a result of such event

of Force Majeure, the Party whose performance of obligations are prevented by

the event of Force Majeure shall immediately but not later than fourteen (14)

days from when such an occurrence becomes evident give written notice to the

other Parties, including details of such event of Force Majeure and such Party's

best estimate of the duration of the event of Force Majeure.



22.3



Throughout the duration of the event of Force Majeure, the affected Party shall

report to the other Parties any changes to its best estimate of the duration of the

delay and any significant developments with respect to the event of Force

Majeure.



22.4



A Party unable by an event of Force Majeure to perform any obligation

hereunder shall take all reasonable measures to remove its inability to fulfill the

terms and conditions of this Agreement with a minimum of delay, and the

Parties shall take all reasonable measures to minimise the consequences of any

event of Force Majeure.



22.5



During the duration of an event of Force Majeure, each Party shall bear its own

w u . . ^ ^ ^ . ^



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^ ^ A ^ j



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i.fcii>.iwi



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implementation of the recovery plan described in Article 22.6 below, all such

reasonably incurred costs as wall have been previously approved by the JMC as

are required in order to maintain safe and necessary Petroleum Operations shall

be considered Petroleum Costs.

22.6



Should the event of Force Majeure continue or once it has occurred be

reasonably expected to last longer than six (6) Months, the Parties agree to

enter into discussion to review and assess the situation with the aim to identify

a proper recovery plan for the future implementation of this Agreement,

including an extension in accordance with Article 22.8 or a modification of the

applicable contractual terms. When a recovery plan is identified and agreed,

any affected Party's commitment schedule will be considered revised

accordingly.



22.7



The affected Party shall notify the other Parties of the termination of an event

of Force Majeure in writing within seven (7) days of such termination.



22.8



Any period set herein for the completion by a Party of any act required or

permitted to be done or rights or benefits to be enjoyed under the terms of this

Agreement, shall be extended for a period of time equal to that during which

such Party was unable to perform such actions or enjoy such rights or benefits

as a result of Force Majeure, together with such time as may be required for the

resumption of Petroleum Operations.



22.9



Unless otherwise specified herein, GNPC may not claim Force Majeure in

respect of any action or provision of the State or any agency of the State, other

than a law, decree or similar act either of a general application or made to

address a specific emergency. In the case that Contractor declares Force

Majeure in respect of an action, omission or provision of the State,zyxwvutsrqponmlkjihgfedcbaZY

GNPC shall

be entitled to elect for the duration of such declaration by Contractor to also be

relieved of substantially the same obligations that Contractor has been relieved

of by its declaration of Force Majeure in respect of such State action, omission

or provision (but only to the extent that GNPC is unable to perform such

obligations as a result of such Force Majeure in respect of such State action'

omission or provision).



A R T I C L E 23

T E R M AND T E R M I N A T I O N

23.1



Subject to this Article 23, the term of this Agreement shall be twenty five (25)

years commencing from the Effective Date.



23.2



Subject to Article 22, Termination of this Agreement shall result upon the

occurrence of any of the following:

a)



23.3



the relinquishment or surrender by Contractor of the entire

Contract Area;



b)



the termination of the Exploration Period including extensions

pursuant to Article 3 without notification by Contractor of a

Commercial Discovery pursuant to Article 8 or Article 14, Part III

in respect of a Discovery of Petroleum in the Contract Area,

provided however Termination shall not occur while Contractor

has the right to complete the drilling of the well, and, in case of a

Discovery, evaluate such Discovery for Appraisal or determination

of a Commercial Discovery and/or propose a Development Plan

pursuant to Articles 3.2(a), 3.2(b) 3.2(c) 3.2(d), Article 8 or

Article 14, or once a Development Plan has been approved, nor

when the provisions of Articles 8.11 through 8.22 are applicable;



c)



if, following a notice that a Discovery is a Commercial Discovery

the Exploration Period terminates under Article 3 without a

Development Plan being approved, provided however that

Termination shall not occur when the provisions of Articles 8.11

through 8.22 are applicable; or



d)



the failure of Contractor through any cause other than Force

Majeure, to commence preparations with respect to Development

Operations pursuant to Article 8.13.



Subject to Article 22 and pursuant to procedures described in Article 23.4

below, GNPC and/or the State may terminate this Agreement (where

applicable with respect to a specific Contractor Party only) upon the

uncorrected occurrence of any of the events (or failures to act listed) below:

a)



the submission by a Contractor, to GNPC of a written statement

which Contractor knows or reasonably should have known to be

false in a material particular, or the release by a Contractor to any

print or electronic media or to a stock exchange of a written

statement regarding the Petroleum Operations in Ghana in breach

of Article 16.7 and in a form which Contractor knows or should

reasonably have knovra to be false in a material particular,

provided that in the event of intent on the part of such Contractor^



to cause serious damage to GNPC or the State, a period for remedy

of such false statement shall not be given;

b)



the assignment or purported assignment by Contractor of this

Agreement contrary to the provisions of Article 25 hereof;



c)



the insolvency or bankruptcy of a Contractor Party, the entry by a

Contractor Party into any agreements or composition with its

creditors, taking advantage of any law for the benefit of debtors or

a Contractor Party's entry into liquidation, or receivership, whether

compulsory or voluntary, which in itself provides evidence that the

obligations of such Contractor Party hereunder will not be

performed. Provided that the insolvency or bankruptcy of one

Contractor Party shall not lead to a termination of the Agreement i f

the other Contractor Parties will assume all of the rights and

obligations of the defauUing Contractor Party under this Petroleum

Agreement. In such a case, GNPC shall have the right to acquire a

share of the interest of the defaulting Contractor Party

proportionate to the total of GNPC's Initial Interest and Additional

Interest. GNPC may exercise this right by notice to all Contractor

Parties within thirty (30) days following notification of the

insolvency or bankruptcy of the defaulting Contractor Party.

GNPC's written notice shall state the percentage share of the

interest of the defaulting Contractor Party which GNPC proposes

to acquire. Upon exercise by GNPC of its rights pursuant to this

Article 23.3(c), GNPC or its representative entity shall execute all

appropriate transfers, assignments, novations and joint operating

agreements which were in place as between or among the Parties,

provided further that, i f the other Contractor Parties in assuming

the interest of the defaulting Contractor Party elects to assign, the

whole or part of the assumed interest to a third party such

assignment shall be subject to GNPC's pre-emptive right under

Article 25.5. For clarity, the interest so acquired by GNPC pursuant

to this Article 23.3(c) shall be a Paying Interest and not receive the

benefits of a GNPC Carried Interest or Additional Interest.



d)



the intentional extraction by Contractor of any material of potential

economic value other than as authorised under this Agreement, or

any applicable law. Where, however, in the course of Petroleum

Operations conducted in accordance with Intemational Best Oil

Field Practice, Contractor unavoidably extracts any mineral,

Contractor shall immediately notify the Minister and surrender!'

such mineral to the State;



e)



failure by the Contractor:



r

83



i)



to fulfil the Minimum Work Obligations pursuant to Article

4.3; save where the Minister has waived the default;



ii)



to carry out an Appraisal Programme undertaken by

Contractor pursuant to Article 8, unless the Contractor

notifies GNPC and the Petroleum Commission that the

Appraisal Programme should be amended and submit said

amendment to the Petroleum Commission for its approval;

or



iii)



to carry out the terms of an approved Development Plan;



f)



failure by Contractor to comply with any of its obligations pursuant

to Articles 7.1(a) - (p) inclusive;



g)



failure by Contractor Party to make any payment of any sum due to

GNPC or the State pursuant to this Agreement within thirty (30)

days after receiving notice that such payment is due;



h)



failure by Contractor to comply with any decisions reached as a

result of any arbitration proceedings conducted pursuant to

Article 24 hereof;



i)



failure by Contractor to comply with any applicable regulation

and/or the laws of the Republic of Ghana.



23.4



I f GNPC and/or the State believe an event or failure to act as described in

Article 23.3 above has occurred, a written notice shall be given to Contractor

describing the event or failure. Contractor shall have thirty (30) days from

receipt of said notice to commence and pursue remedy of the event or failure

cited in the notice. I f after said thirty (30) days Contractor has failed to

commence appropriate remedial action or to take other appropriate action

where such breach is technically not capable of remedy, GNPC and/or the State

may then issue a written Notice of Termination to Contractor which shall

become effective thirty (30) days from receipt of said Notice by Contractor

unless Contractor has referred the matter to arbitration in accordance wdth

Article 24. In the event that Contractor disputes whether an event specified in

Article 23.2 or Article 23.3 has occurred or been remedied. Contractor may,

any time up to the effective date of any Notice of Termination, refer the dispute

to arbitration pursuant to Article 24 hereof. I f so referred, GNPC and/or the

State may not terminate this Agreement in respect of such event except in

accordance with the terms of any resulting arbitration award as provided for in

Article 24.



23.5



Upon Termination of this Agreement, all rights and obligations of Contractor

hereunder shall cease, except for such rights as may at such time have accrued

and without prejudice to any obligation or liability imposed or incurred under



this Agreement prior to Termination and to such rights and obligations as the

Parties may have under applicable law.

23.6



Notwithstanding Termination of this Agreement, Article 1, Article 2,

Article 12, Article 16, Article 18, Article 24 and Article 26.1 to 26.5 and

Article 26.9 |(i) shall survive such Termination. Moreover, any such

Termination shall be without prejudice to rights, duties and obligations of any

Party that have accrued prior to Termination and notwithstanding such

Termination, such provisions of this Agreement as are reasonably necessary for

the full enjoyment and enforcement of such accrued rights, duties and

obligations shall survive such Termination for the period necessary.



23.7



Upon Termination of this Agreement or in the event of an assignment of all the

rights of Contractor, all wells and associated facilities shall be left in a state of

good repair in accordance with applicable laws and International Best Oil Field

Practice.



A R T I C L E 24

CONSULTATION, A R B I T R A T I O N AND INDEPENDENT E X P E R T

24.1



Subject to the prior fulfillment of any procedures specified in this Agreement to

resolve disputes arising hereunder, any dispute arising between the State and

GNPC or either of them on one hand and Contractor on the other hand in

• relation to or in connection with or arising out of this Agreement, shall be

resolved by consultation and negotiation among senior personnel authorized by

each. In the event that no agreement is reached within thirty (30) days after the

date when the State and/or GNPC on the one hand and the Contractor on the

other hand notifies the other that a dispute exists within the meaning of this

Article or such longer period specifically agreed to by the Parties or provided

elsewhere in this Agreement, any Party shall have the right subject to Article

24.10 to have such dispute settled exclusively through international arbitration

under the auspices of the International Chamber of Commerce (the "ICC") and

adopting the Rules of Arbitration of the Intemational Chamber of Commerce

(the "ICC Rules") in force on the date on which the proceedings are instituted,

which ICC Rules are deemed incorporated by reference into this Article 24,

save as otherwise provided herein.



24.2



The failure or refusal to submit to arbitration in accordance with this Article 24

and/or the seeking of any Pre-Award Attachment by any Party shall be deemed

a breach of this Agreement by such Party. In the event of a breach under this

Article by a Party (the "Breaching Party"), each non-breaching Party shall,

without prejudice to any other remedies, be entitled to recover fi"om each

Breaching Party all costs and expenses, including reasonable attomeys' fees,

that such non-breaching Party was thereby required to incur



24.3



The tribunal shall consist of three (3) arbitrators. The State and/or GNPC on

the one hand and the Contractor on the other hand shall each be entitled to

appoint one (1) arbitrator and those so appointed shall designate a chairman

arbitrator. I f a Party's arbitrator and/or the chairman arbitrator is/are not

appointed within the periods provided in the mies referred to in Article 24.1

above, such Party's arbitrator and/or the chairman arbitrator shall at the request

of any Party to the dispute be appointed by the ICC Intemational Court of

Arbitration in accordance with the ICC Rules.



24.4



No arbitrator shall be a citizen of the home country of any Party hereto, and

shall have no economic interest in or relationship with any Party hereto or any

such Party's ultimate parent company.



24.5



The seat of the arbitration proceedings shall be in London, England or at such

other location as the Parties may agree in writing. The proceedings shall be

conducted in the English language.



24.6zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

I f the opinions of the arbitrators are divided on issues put before the tribunal,

the decision of the majority of the arbitrators shall be determinative. The

award of the tribunal shall be final and binding upon the Parties. The Parties

undertake to carry out any award without delay and waive their right to any

form of recourse based on grounds other than those contained in the United

Nations Convention on the Recognition and Enforcement or Arbitral Awards of

1958 insofar as such waiver can be validly made. Judgement upon the award

may be entered by any court having jurisdiction thereof or having jurisdiction

over the relevant Party or its assets.

24.7



The right to arbitrate disputes arising out of this Agreement shall survive the

termination of this Agreement.



24.8



Each of the State, GNPC and Contractor agree that, to the extent such party has

any right of state sovereign or similar immunity from legal proceedings in

Ghana, London or elsewhere arising firom the terms and conditions of this

Agreement, including immunity from service of process documents, immunity

from the jurisdiction, suit, judgment or award of any arbitral tribunal, or

immunity from execution of judgment, to the extent that in any jurisdiction

there may be attributed to it or to any of its properties or assets such immunity

(whether or not claimed),such Party hereby expressly and irrevocably waives

any such immunity to the ftillest extent permitted by law and agrees not to

claim, assert or invoke any such rights or claims in any proceeding provided,

however, that the provisions hereof shall not constitute a waiver by any Party

of any right that it now or hereafter has under applicable law to claim state

sovereign immunity or any other immunity over Protected Assets .



24.9



Notwithstanding any provision on the contrary the Parties hereby agree that the

Protected Assets shall not be subject to any proceedings in connection wdth this

Agreement or any transaction contemplated by this Agreement.



24.10 The Parties to a dispute arising under this Agreement, including the Accounting

Guide, may in lieu of arbitration, mutually agree in writing to refer the dispute

for determination by a sole expert to be appointed by agreement of the Parties

who is a recognised specialist with respect to the subject matter of the dispute

(a "Sole Expert"). In such case, the Parties shall agree on the terms of

reference for such proceeding, the schedule of presentation of evidence and

testimony of witnesses, and other procedural matters. The decision of the Sole

Expert shall be final and binding upon the Parties. The Sole Expert shall have

ninety (90) days after his appointment to decide the case, subject to any

extensions mutually agreed to by the Parties to the dispute. Upon failure of the

Sole Expert to decide the matter within such time, any Party shall have the

right to have such dispute or difference settled through arbitration under the

foregoing provisions of this Article 24.

24.11 Each Party to a dispute shall pay its own counsel and other costs; however,

costs of the arbitration tribunal shall be allocated in accordance with the



decision of tlie tribunal. The costs and fees of the Sole Expert shall be borne

equally by the Parties to the dispute.

24.12 In the event of a matter being referred for resolution under this Article 24, any

obligations of the Parties relating specifically and directly to such matter,

including a dispute relating to Termination, shall (unless otherwise provided by

this Agreement) be suspended without liability to any Party, until said matter

has been resolved pursuant to this Article 24 and a final arbitration award is

made by the arbitral tribunal. All time periods applicable to such obligations in

the Agreement shall be extended by the period of the arbitration proceedings;

provided that any Petroleum Operations not specifically and directly related to

any obligations referred to above shall not be suspended unless the Parties

mutually agree otherwise.

24.13 Neither the State and/or GNPC, on the one hand, and Contractor, on the other

hand, shall be held liable to the other for any consequential, special, indirect,

punitive or exemplary damages (including loss of profit or loss of production)

arising directly or indirectly out of or in relation or in cormection to this

Agreement, regardless of cause or fault. However, this Article 24.13 shall not

be construed as a waiver of a Party's right and remedies under Article 26.2. v»



88



A R T I C L E 25

ASSIGNMENT



25.1



This Agreement shall not be assigned by Contractor directly or indirectly, in

whole or in part, without the prior written consent of GNPC and the Minister.

GNPC and/or the Minister may impose reasonable conditions upon the giving

of consent under this Article, other than any condition imposing any burden in

cash or in kind as a condition to approve the assignment, except as provided

for in Article 12.1(vi) or any applicable law.



25.2



Any assignment of this Agreement shall bind the assignee as a Party to this

Agreement to all the terms and conditions hereof unless otherwise agreed by

the non-assigning Parties and as a condition to any assignment. Contractor

shall provide an unconditional undertaking by the assignee to assume all

obligations assigned by Contractor under this Agreement.



25.3



Where in consequence of an assignment hereunder Contractor is more than one

person:

a)



any operating or other agreement made between the persons who

constitute Contractor and relating to the Petroleum Operations

hereunder shall be disclosed to GNPC and the Minister and shall

not be inconsistent with the provisions of this Agreement;



b)



an operating agreement shall be established by the JMC to regulate

the conduct of Petroleum Operations thereafter, including cashcalls and the limits of authority; and



c)



no change in the scope of the operations may take place without the

prior approval in writing of GNPC which approval shall not be

unreasonably delayed or withheld;



d)



the duties and obligations of the Contractor hereunder shall be joint

and several except those relating to the payment of income tax

levied on each such person individually pursuant to Article 12

which shall be the several obligation of each such person.



25.4



GNPC's acquisition of Additional Interest under Article 2.5 or a Sole Risk

interest pursuant to Article 9 shall not be deemed to be an assigiunent within

the meaning of this Article 25.



25.5



For as long as GNPC remains to be wholly owned by the State, the transfer or

disposal by a Contractor Party (the "Selling Party") of all or part of its

Participating Interest, whether directly or indirectly by assigrmient, merger,

consolidation or sale of stock or other conveyance, other than (a) with or to

a wholly-owned Affiliate of such Contractor Party's ultimate parent entity or



(b) upon a transfer of shares by the ultimate parent entity of a Contractor

Peirty, including in connection with a takeover of such ultimate parent, or (c)

to the other Contractor Parties as the result of the insolvency or bankruptcy of

a Contractor Party leading to other Contractor Parties assuming all of the

rights and obligations of the insolvent or bankrupt Contractor Party as

specified in Article 23.3 c) of this Agreement, shall be subject to the

following procedure:

a)



Once the Selling Party and a proposed transferee have fully negotiated

the final terms and conditions of a transfer, such final terms and

conditions shall be promptly disclosed in full detail to GNPC and

the State in a notice from the Selling Party. GNPC shall have the

right to nominate its wholly owned affiliate acquire the Participating

Interest from the Selling Party on the same terms and conditions

agreed to by the proposed transferee if, within thirty (30) Days of

Selling Party's notice, GNPC delivers to the Selling Party a counternotice that it accepts the agreed terms and conditions of the transfer

without reservations or conditions. I f GNPC does not deliver such

counter-notice, the transfer to the proposed transferee may be

made, subject to the other provisions of this Agreement, the laws

and regulations, under terms and conditions no more favourable to the

transferee than those set forth in the notice to GNPC and the State,

provided that the transfer shall be concluded within one hundred and

eighty (180) Days from the date of the notice plus such reasonable

additional period as may be required to secure requisite approvals.

An entity nominated by GNPC shall not have any right to acquire,

and the Selling Party shall not have any right to transfer, the relevant

Participating Interest under the terms of this Article 25.3, unless such

entity demonstrates to the reasonable satisfaction of the Contractor:

its financial capability to perform its obligations under the Agreement

and the joint operating agreement between the Contractor Parties,

including to fund its interest share.



b)



25.6



In the event that a Selling Party's proposed transfer of all or part of

its Participating Interest involves consideration other than cash or

involves other properties included in a wider transaction, then the

Participating Interest (or part thereof) shall be allocated a reasonable

and justifiable cash value by the transferor in any notification to

GNPC and the State. GNPC may satisfy the requirements of this

Article 25.5 by agreeing to pay such cash value in lieu of the

consideration payable in the said proposed transfer.



Subject to applicable law in effect from time to time, GNPC may assign all or

any undivided part of its rights and obligations under this Agreement to any

governmental agency or instrumentality of the State, or to any corporate entity

controlled by the State that has been duly authorized by appropriate^



governmental action to hold such right or perform such obligation; provided

that such assignment shall not affect any of the rights of the Contractor under

this Agreement; provided, further, that any such assignment shall bind the

assignee as a Party to this Agreement to all the terms and conditions hereof

unless otherwise agreed by Contractor, GNPC shall provide an unconditional

undertaking by the assignee to assume all obligations assigned by GNPC

under this Agreement.

25.7



Nothing contained in this Article 25 shall prevent a Party from assigning,

mortgaging, pledging, charging or otherwise encumbering all or part of its

interest in the Contract Area and in and under this Agreement for the purpose

of security relating to finance provided that:

(a)

(b)



(c)



such Party shall remain liable for all obligations relating to such

interest;

the encumbrance shall be subject to any necessary approval of the

State and/or GNPCand be without prejudice to the rights of the other

Parties under this Agreement; and

such Party shall ensure that any such assigimient, mortgage, pledge,

charge or encumbrance shall be expressed to be without prejudice to \

the provisions of this Agreement.



r



91



A R T I C L E 26

MISCELLANEOUS

26.1



This Agreement shall be governed by and construed in accordance with the

laws of the Republic of Ghana in effect from time to time unless this

Agreement provides otherwise.



26.2



In the event that after the Effective Date any applicable law, rule, decree, or

regulation of Ghana is made or amended (or there are changes in interpretation

or application of any applicable law, rule, decree, or regulation effective as of

the Effective Date) that makes further observance of the original terms and

conditions of this Agreement impossible or has a material adverse effect on

the rights, obligations, and benefits of Contractor under this Agreement, or

otherwise materially affects the economic, fiscal, and financial balance of this

Agreement, the Parties shall, i f Contractor so requests, meet as soon as

possible to negotiate, in good faith, possible modifications to the Agreement

as may be appropriate to restore the economic, fiscal, and financial balance of

this Agreement; provided that, at a minimum, to the extent Contractor's rights,

obligations, or benefits (including the economic, fiscal, and financial balance)

which existed at the time the Agreement was executed by all Parties, cannot be

restored, even though the Parties have agreed to modify the Agreement, the

State shall indemnify Contractor for the adverse effect on Contractor's rights,

obligations, or benefits (including the economic, fiscal, and financial balance)

through financial compensation or other means acceptable to Contractor.



26.3



In the event Contractor considers that the economic, fiscal, and financial balance

of the Agreement is affected by a significant change in circumstances prevailing

on or after the Effective Date, the Parties shall, i f Contractor so requests,

promptly meet to negotiate, in good faith, such changes to the Agreement as may

be appropriate to restore the economic, fiscal, and financial balance of the

Agreement.



26.4



Should the Parties be unable to agree on a mechanism to restore the economic,

fiscal, and financial balance of this Agreement pursuant to Articles 26.2 or

26.3 within thirty (30) days from the date on which the notice above was

received (or such longer period as may be agreed by the Parties), then any

Party may refer the matter to arbitration pursuant to Article 24 of this

Agreement. The arbitration panel shall determine (a) whether the claimed

change or material adverse effect has occurred and (b) i f so, what remedy, i f

any, is appropriate to restore the economic, fiscal and financial balance of this^

Agreement as at the date of execution.

I



92



Notwithstanding Articles 26.2 and 26.3, Contractor shall not be entitled to

claim stabilisation protection in respect of changes to the Agreement which

are mutually agreed.

26.5



This Agreement may not be modified, amended, altered or supplemented

except upon the execution and delivery of a written agreement executed by

the Parties. No waiver by any Party of any of its rights hereunder shall be

construed or implied, but shall be binding on such Party only i f made

specifically, expressly and in writing.



26.6



Except for payment obligations arising under the Income Tax Law, any Party

failing to pay any amounts payable by it under this Agreement (including the

provisions of Annex 2) on the respective dates on which such amounts are

payable by such Party hereunder shall be obligated to pay interest on such

unpaid amoimts to the Party to which such amounts are payable. The rate of

such interest with respect to each day of delay during the period of such nonpayment shall be LIBOR plus four percent (4%). Such interest shall accrue

from the respective dates such amounts are payable until the amounts are duly

paid. The Party to whom any such amount is payable may give notice of nonpayment to the Party in defauh and i f such amount is not paid within fifteen

(15) days after such notice, the Party to which the amount is owed may, in

addition to the interest referred to above, seek remedies available pursuant to

Article 24.



26.7

a)



The rights and obligations under this Agreement of the State and GNPC

on the one hand and Contractor on the other shall be separate and

proportional and not joint. This Agreement shall not be construed as

creating a partnership or joint venture, nor an association or trust (under

any law other than the Petroleum Law), or as authorising any Party to

act as agent, servant or employee for any other Party for any purpose

whatsoever except as provided in Article 10.3.



b)



The duties and obligations of each Party constituting Contractor

hereunder shall be joint and several and it is recognised that each such

Party shall own and be responsible for its undivided Participating

Interest in the rights and obligations of Contractor hereunder; provided,

however, that the following payments shall be the separate obligation of

and shall be made by each Party which constitutes the Contractor:



iii)



i)



Payments under the Income Tax Law pursuant to Article 12;



ii)



Payments of royalty taken in cash under the provisions of Article

10.1(a); and



AOE share under the provisions of Article 10.1(d).



V.^^



26.8



Each Party agrees and warrants that, in relation to this Agreement and the

subject matter hereof, neither: (a) it or any of its Affiliates or employees; nor

(b) to the best of its knowledge or belief, any of its consultants, agents,

representatives or other persons retained or otherwise engaged by it, has made,

offered or authorized and will make, offer, or authorize any payment, gift,

promise, benefit, advantage or anything of value whether directly or indirectly

to, or for the use or benefit of, (a) any public official (i.e. any person holding a

legislative, administrative or judicial office, including any person employed by

or acting on behalf of a public agency, a public enterprise or a public

international organization), or any, political party or political official or

candidate for political office (or to any member of their respective families) Or

(b) any private individual, where such payment, gift, promise, benefit,

advantage or anything of value would violate the applicable laws of Ghana or

the principles of the United Nations Convention against Corruption.

If a Party is investigated pursuant to any relevant legislation, guidelines or

regulations of any other government having jurisdiction over a Party hereto,

which are designed and implemented to deter, prevent and combat bribery or

corruption in relation to international business transactions, the other Parties

agree in good faith to give all reasonable assistance to the Party being

investigated in relation to any reasonable requests (whether general or specific)

for information or documentation regarding the subject transaction(s).

Each Party shall defend, indemnify and hold the other Parties harmless from

and against any and all claims, damages, losses, liabilities, penalties, fines,

costs and other expenses (including legal costs and expenses) resulting from

any breach of its foregoing warranty. Each Party agrees that it shall

incorporate terms similar to those set out above into all or any contract entered

into pursuant to this Agreement and the subject matter thereof.



26.9



In construing this Agreement:

a)



no consideration shall be given to the captions of the Articles, Sections,

or Subsections which are inserted for convenience in locating the

provisions of this Agreement and not as an aid in its construction;



b)



the word "includes" and its derivatives means "includes, but is not

limited to" and corresponding derivative expressions;



c)



a defined term has its defined meaning throughout this Agreement and

each annex, and attachment to this Agreement, regardless of whether it

appears before or after the place where it is defined;



d)



the plural shall be deemed to include the singular, and vice versa;



e)



each gender shall be deemed to include the other genders;



each annex and attachment to this Agreement is a part of this

Agreement, but i f there is any conflict or inconsistency between the

main body of this Agreement and any annex or attachment, the

provisions of the main body of this Agreement shall prevail;

g)



i f any term is held by a court of competent jurisdiction to be invalid or

unenforceable, then this Agreement, including all of the remaining

terms, will remain in full force and effect as i f such invalid or

unenforceable term had never been included;



h)



each reference to an Article, Section or Subsection refers to an Article,

Section or Subsection of this Agreement unless expressly otherwise

provided; and



i)



no reference herein to any law, rule, decree or regulation that

contemplates that such law, rule, decree or regulation may be amended,

from time to time, shall be construed so as to derogate from the rights of

any Party pursuant to Articles 26.2 and 26.3.



26.10



This Agreement comprises the full and complete agreement of the Parties

hereto with respect to the subject matter hereof and supersedes and cancels all

prior communications, understandings and agreements between the Parties

hereto, whether written or oral, expressed or implied.



26.11



Without prejudice to the rights, benefits, liabilities and obligations of the

Parties in Articles 26.2, 26.3, 26.5 and 26.6, Contractor shall at all times

comply, and shall ensure that its agents. Subcontractors and Affiliates while in

Ghana carrying out activities contemplated by this Agreement and related

documents comply, with the laws of the Republic of Ghana during the term of

this Agreement to the extent that the Contractor has notice of or, with the

exercise of reasonable inquiry, would have knowledge of, such laws. Nothing

in this Agreement or any related document shall require the Contractor or any

of its agents. Subcontractors or Affiliates to violate the laws of the Republic

of Ghana. To the extent any conflict exists between the terms of this

Agreement and the laws of the Republic of Ghana, the Contractor shall not be

found to be in breach of this Agreement to the extent the Contractor complies

with the terms of this Agreement.



26.12



This Agreement shall not take effect unless and until the date on which (a) it

has been ratified by the Parliament of Ghana and (b) each Contractor Party

providing the GNPC with a parent company guarantee to the reasonable

satisfaction of GNPC to cover its obligations for each Contractor Party's

interest share of the minimum expenditure obligations imder Article 4.3 of

this Agreement (thezyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

"Effective Date"). Provided that i f Contractor fails to

provide such parent company guarantee within three (3) months after the

Agreement is ratified by Parliament the Minister may declare the Contract

Area open.



A R T I C L E 27

NOTICE

Any Notice, application, request, agreement, consent, approval, instruction,

delegation, waiver or other communication required or permitted to be given

hereunder shall be in writing and shall be deemed to have been properly given when

delivered in person to an authorised representative of the Party to whom such notice

is directed or when actually received l5y such Party through registered mail, fax or

commercial courier at the following address or at such other address as the Party

shall specify in writing fifteen (15) days in advance:

FOR THE STATE:

MINISTER FOR

PETROLEUM

MINISTRY OF

PETROLEUM

PRIVATE MAIL BAG

MINISTRY POST

OFFICE

ACCRA, GHANA

Telephone:

Telex:

Facsimile:



233 (0)302 667I5I - 3

2436 ENERGY GH

233 (0)302 668262



FOR GHANA NATIONAL PETROLEUM

THE CHIEF

EXECUTIVE

GHANA NATIONAL PETROLEUM

PETROLEUM

HOUSE

HARBOUR ROAD

PRIVATE MAIL BAG

TEMA

GHANA

Telephone:

Facsimile:



CORPORATION:



CORPORATION



233-(0)303-204726

233-(0)303-202854



FOR CONTRACTOR:

GNPC EXPLORATION

HOUSE NO.



AND PRODUCTION



73,NMELANE



KA PMB 15

AIRPORT RESIDENTIAL



AREA



-ACCRA



COMPANY



LIMITED



Attention: Michael Aryeetey

Telephone : +233 244825604

Facsimile :+2323 303 -202854



ENLGHANA



EXPLORATION



1st FLOOR UNA HOME

12 AIRPORT



BYPASS



AND PRODUCTION



LIMITED.



BUILDING



ROAD



AIRPORT CITY - PMB KA 185 - ACCRA

Attention: Managing Director

Telephone: 233 (0) 302761882

Facsimile: 233 (0) 302761786



VrrOL UPSTREAM

5th FLOOR, GRAND



TANO LIMITED

OYEEMAN



SOUTH LIBERA TION LINK, =

AIRPORT-



P.O. BOXKA



9448 - ACCRA



Attention: Vitol Country Manager

Telephone:



233 24 111 1118



WOODFIELDS



UPSTREAM



LIMITED



21 A VIATION ROAD AIRPORT RESIDENTIAL

P. O. Box KA304I4



KIA-ACCRA



Attention: Joseph Mbrokoh-Ewoal

Telephone: 233 302781124 /5

Facsimile:



233 302781126



AREA



IN WITNESS WHEREOF the parties have caused this Agreement to be executed by

their duly authorized representatives as of the date first written above.

F O R THE GOVERNMENT OJ

R E P U B L I C S GHANA



Witnessed:



By



Its



fzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

-TT?! ^. I^?^.. . T ^ f r . .zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

[ {^.'tf^^^ Its

Mh^i

.

r^TVr.. .'V'riV^ '^'^^



F O R GHANA NATIONAL



Witnessed:



F O R GNPC E X P L O R A T I O N AND

PRODUCTION COMPANY



Witnessed:



ilS:^.^.!?^.



It,zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Its ^ ^ ^ ^



oPe^z^KiGr Officef^



98



FOR ENI GHANA EXPLORATION

AND PRODUCTION L I M I T E D



Witnessed:



Its



Its



FOR V I T O L UPSTREAM TANO

LIMITED



Witnessed:



Its ...^Wif^{i^...<


Its



FOR WOODFIELDS UPSTREAM

LIMITED



Witnessed:



By .^S^feuCi,.^.zyxwvutsrqponmlkjihgfedcbaZYXWVUTSR

.US.^



Its



99



ANNEX 1

CONTRACT A R E A



COORDINATES F O R T H E CONTRACT A R E A



Block_naine Id



ET_X



ET_Y



A 541383.69770 518111.44620

B 583298.50950 518111.44620

C 583212.40588 488226.02617

Block 4

D 573966.15675 488217.22287

E



573968.05672 486092.30103



F



541606.38506 486069.74449



MAP OF CONTRACT A R E A AS D E P I C T E D (shaded green)



From the above Contract Area the OCTP Development Areas (1 NAG and 2 Oil) must

be deducted and as follows:

1) OCTP Non Associated Gas Development and Production Areas (Sankofa

Main/East and Gye Nyame) XY Coordinates

X

1

2

3

4

5

6

7

8

9



542180

542180

542750

542750

543780

543780

544210

544210

544750



10 544750

11 545495

12 545495

13 545925

14 545925

15 547245

16 547245

17 548210

18 548210

19 549280

20 549280

21 549995

22 549995

23 551780

24 551780

25 552705

26 552705

27 553275

28 553275

29 553810

30 553810

31 553310

32 553310

33 552240

34 552240

35 551740

36 551740

37 550815

38 550815

39 550350



Sankofa M ain-East Gas

Lat

486150

487260

487260

488290

488290



491330

491330

492250

492250

494075

494075

496790

496790

497320

497320

500855

500855

501855

501855

502460

502460

500820

500820

499390

499390

498355

498355

495360

495360

492860

492860

491825

491825

491395

491395

490400

490400



23



53



24



30



24



30



25

26

26



53

42

42



27



12



27

28

28



12

11

11



29

29

29

29

31

31



40

40

57

57

52

52



44 548315

45 547280

4S 547280

47 546280

48 546280

49 545280

50 545280



487900

4879X

487365

487365

486900

486900

486150



36

36

36

36



53

53

19

19

5



36

35

35



5

48

48



W

W

W



35



24



W



35

35

35



24

7

7



W



W



34



27

27



33



56



33

33



55

21



32



44



31



31



51



31



60



31



51



31

31

31

31



30

30

11

11



30



54



30

31

31

31

31



54

10

10

45

45



30

28

28



31

S3

53



27

27



32

32



21

58

57

60



VI



58

58



26

26



44

44



26



12



32



31



26



12



32



46



W



32



46



W



25 21

24 SO

24

24



50

33



24



33



24

24



18

18



23



53



31



33

33

33

33



20

20

52

52



W

W

W

W



34

34

34



26

26

58



W

W

W



34

35

35



c

I



B

k



i

J

k

I

m

n

o



55843S

Ssn40

S58W

SS»S

55964S

S601S0

560150

SKITO



491580

491580

492360

492360

492765

492765

493115

493115



sem



5611S0

561180

561985

561985

562415

562415



493870

493870

494400

494400



Ljit

26 50

26 50

27 15

27 15

27 28

27 28

27 40

27 40

27 55

27 55

28 4

28 4

28 22

28 22



2

2

2

2



W



26

26



32



a

b

c

d



long

28 24

28 7

28 7

27 45

27 45

27 28

27 28

27 10

27 10

26 55

26 55

26 29

26 29

26 15

26 15

25 59

25 59

25 42

25 42

25 33

25 33

17

17

3

3

37

37

U

12

48

23 48

23 25

23 25

23 0

23 0



Y



W

w

W

W

W

W

W

w

W

w

W

W

W

W

W

W

W

W

W

W

W

w

W

W

W

w

W

W

W

W

W

W

W

.W

W



bf

bj

bh

bi

bj

bk

bl

bm

bn

bo

bp

bq

br

b!

bt

bu

bv



bi

by

bl

ta

cb

cd

ce

d



573470

573470

572715

572715

572210

572210

571580

571680

571225

571225

570675

570675

569995

569995

569465

569465

568935

568935

568485

568485

567930

567930

567475

567475

566920

566920

Cf 566495

ch 566495

ci 565460

cj 565460

ck 564730

d 564730

cm 564200

cn 564200

to 563700

CP 563700

cq 563195

a 563195

cs 562715

ct 562715

cu 562215

cv 562215

cw 561685

a 561685

cy 561180

a 561180

da 560730

db 560730

dc 559950

dd 559950

de 559470

dl 559470

dj 558965

dh 558965

dl 558690

dj 558690

dk 558435



Lonj



Lat



499385



4



31



4



N



2



20



438880



4



30



47



N



2



20



16



W



498880



4



30



47



H



2



20



40



w



498125



4



30



23



H



2



20



40



w



498125



4



30



23



H



2



20



57



w



497900



4



30



15



N



2



20



57



w



497900



4



30



15



N



2



21



14



w



497370



4



29



58



H



2



21



14



497370



4



29



58



2



21



29



w



497120



4



29



50



N

N



2



21



29



w



497120



A



29



SO



H



2



21



47



w



49Gg7D



4



29



42



H



2



21



47



w



496870



4



29



42



H



2



22



9



w



16



W



w



zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA



44



31



W

W

W



36



32



30



W

W



W

W



33

32

32



40 550350

41 549315

42 549315

43 548315



Gye Nyame Gas



Long

37 11

37 11



58

31

31



W

W

W



r

s

t

n

V

w

X

<

1

"

ab

ac

ad

K

af

IC

ah

ai

Ij

ak

al

am

an

ao

ap

aq

•r

as

at

au

av





av

ai

bi

bb

be

bd

be



5634»

563420

56370)

563700

564175

564175

564630

564630

565435

565435

566190

566190

566920

56G920

567650

567E50

568405

568405

568910

568910

569715

569715

569970

569970

570625

570625

571405

571405

571930

571990

572210

572210

572990

572990

573215

573215

573445

573445

573745

573745



495155

495155

495385

495385

495635



497370

497370

497900

497900



498630

498630

499385

499385

499640

499640

499890

499890

500115

500115

500345

S0Q345

500645

500645

501150

501150

500920



SXB70



500370



29

29

29

29

29

29

29

29

29

30

30

30

30

30

30

31

31

3]

31

31

31

31

31

31

31



2

12

12

26

26

44

44

58

58

16

15

31

31

39

39

4

4

12

12

20

20

28

28

35

35



N

N

N

N

N

N

N

N



21

21

21

21

21

20

20

20

20

20

20

20

20

20

20



48

23

23

6

6

57

57

31

31

24

24

17

17

7



W

W

W

W

W

w

W

W

W

W

W

W

W

w

W



496365



4



29



25



N



2



22



9



w



4963S



4



29



25



N



2



22



26



w



496115



4



29



17



N



2



22



26



496115



4



29



17



H



2



22



43



w



4956BS



4



29



3



H



2



22



43



w



495685



4



29



3



N



2



22



58



w



495130



4



2S



45



H



2



22



58



w



495130



4



28



45



H



2



23



16



w



494625



4



28



29



N



2



23



16



w



494625



4



28



29



H



2



23



30



w



494125



4



28



13



H



2



23



30



w



494125



4



28



13



H



2



23



48



w



493895



4



28



5



H



2



23



48



w



493S95



w



4



28



5



H



2



24



2



w



493670



4



27



58



H



2



24



2



w



493670



4



27



58



H



2



24



36



w



493140



4



27



41



H



2



24



36



w



493140



4



27



41



24



60



w



4



27



32



2



24



60



w



492865



4



27



32



N

N

N



2



492865



2



25



17



w



492435



4



27



18



N



2



25



17



w



49243S



4



27



18



N



2



25



33



w



4918SS



4



26



GO



N



2



25



33



w



491885



4



26



60



H



2



25



49



w



491655



4



26



52



H



2



25



49



w



491655



4



26



52



N



2



26



5



w



491405



4



26



44



N



2



26



5



w



491405



4



26



44



2



26



21



w



491205



4



26



38



2



26



21



w



491205



4



26



38



N

N

N



2



26



38



w



490625



4



26



19



H



2



26



38



w



490625



4



26



19



H



2



26



55



w



49CS95



4



26



11



H



3



26



55



w



491895



4



26



11



H



2



27



9



w



490145



4



26



3



N



2



27



9



w



490145



4



26



3



H



2



27



35



w



489640



4



25



47



H



2



27



35



w



4S9640



4



25



47



H



2



27



50



w



489895



4



25



55



H



2



27



50



w



489895



4



25



55



H



2



28



7



w



490425



4



26



9



H



2



28



7



w



490425



4



26



12



N



2



28



16



w



490900



4



26



28



N



2



28



15



w



490900



4



26



28



N



2



28



24



w



102



2) OCTP Oil (Cenomanian & Campanian) Development & Production Area XY

Coordinates

X

A 541610

B 541610

C 542250

D 542250

E 542890

F S42890

G 543960

H 543960

1 544430

J 544430

K S44E80

L 544680

M 545210

N 545210

O 546030

P 546030

Q 547820

R 547820

S 551030

T 551030

U 551960

V 551960

W SS2740

X 5S2740

Y 5S3780

Z 553780

AA 555200

AB 555200

AC 556740

AD 556740

AE 558270

AF 558270

AG 556810

AH 556810

AI 555350

AJ 555350

AK 552850

AL 552850

AM 551850

AN 551850

AO 550815

AP 550815

AQ 550280

AR 550280

AS 549280

AT 549280

AU 546745

AV 546745

AW 545925

AX 545925

AY 545925

AZ 544850

BA 544850

BB 544320

BC 544320

BD 543780

BE 543780

BF 543210

BG 543210



Y

496640

4S8S6S

488865

487860

487860

487040

487040

488290

488290

489930

489930

491330

491330

490900

490900

490360

490360

489790

489790

490255

490255

491330

491330

492250

492250

494360

494360

493860

493860

493290

493290

496360

496360

496820

496820

497390

497390

496360

496360

495360

495360

494895

494895

494395

494395

493540

493540

494075

494075

496750

499890

499890

499390

499390

498430

498430

497360

497360

496640



4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4

4



Lat

29 35

25 22

25 22

24 49

24 49

24 22

24 22

25

3

25

3

25 56

25 56

26 42

26 42

26 28

26 28

26 10

26 10

25 52

25 52

7

26

26

7

26 42

26 42

27 12

27 12

28 21

28 21

28

4

4

28

27 46

27 46

29 26

29 26

29 41

29 41

29 59

29 59

29 26

29 26

28 53

28 53

28 38

28 38

28 22

28 22

27 54

27 54

28 11

28 11

29 39

31

21

31 21

31

5

31

5

30 33

30 33

29 58

29 58

29 35



N

N

N

N

N

N

N



N

N

N

N



N

N

N

N



N

N

N

N

N



N

N



N

N

N

N

N



N

N

N

N

N

N

N

N

N

N



N

N



N

N

N



N

N



N

N

N

N

N

N

N

N

N

N

N



N

N



N

N



2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2

2



Long

37 30 W

37 30

W

37

9

W

37

9

W

36 48

W

36 48

W

36 14

W

36 14

W

35 58

W

35 58

W

35 50 W

35 50 W

35 33

W

35 33

W

35

6

W

35

6

W

34

8

w

34

8

w

32 24

w

32 24

w

31 54 w

31 54

w

31 29 w

31 29

w

30 55 w

30 55

w

w

30

9

30

9

w

29 19

w

29 19 w

28 29

w

28 29

w

29 16 w

16 w

29

30

4

w

4

30

w

31 25

w

31 25 w

31 57 w

31 57 w

32 31

w

w

32 31

w

32 48

32 48

w

33 21

w

33 21

w

34 43

w

34 43

w

35

10 w

35 10 w

35 10 w

35 45

w

35 45

w

36

2

w

36

2

w

36 19

w

36 19 w

36 38

w

36 38

w



ANNEX 2

ACCOUNTING GUIDE

The purpose of this Accounting Guide is to establish equitable methods as between

the Parties for determining charges and credits applicable to operations under the

Agreement. Principles established by this Accounting Guide shall truly reflect the

Contractor's actual cost.

SECTION 1.

1.1



G E N E R A L PROVISIONS

1.1.1 Words and terms appearing in this Annex shall have the same meaning

as in the Agreement and to that end shall be defined in accordance with

Article 1 of the Agreement.

1.1.2 This Annex may be amended by unanimous decision of the JMC.

1.1.3



1.2



In the event of a conflict between the provisions of the Accounting

Guide and the provisions of the Agreement, the provisions of the

Agreement shall prevail.



STATEMENTS R E Q U I R E D TO B E SUBMITTED B Y C O N T R A C T O R

1.2.1 Within sixty (60) days fi-om the Effective Date, Contractor shall propose

to GNPC an outline of the chart of accounts, operating records and

reports to be prepared and maintained, which shall describe the basis of

the accounting principles and procedures to be used during the term of

the Agreement, and shall be consistent with applicable law as in effect

and with accepted accounting principles generally used in the

international petroleum industry.

1.2.2 Within sixty (60) days of the receipt of such proposal GNPC shall either

accept it or request such revisions as GNPC deems necessary. Failure to

notify Contractor of any requested revisions within a sixty (60) day

period shall be deemed acceptance of such proposal.

1.2.3



Within one hundred and eighty (180) days from the Effective Date, the

Parties shall either agree on such outline or submit any outstanding issue

for determination by a Sole Expert pursuant to the provisions of

Article 24 of the Agreement.



1.2.4 Following agreement over the outline. Contractor shall, within sixty (60)

days thereafter, submit to GNPC formal copies of the accounting

systems and procedures manual to be followed for the Petroleum

Operations. This manual shall detail the accounting, recording, and

reporting functions listed in the agreed outline. GNPC shall be

104



permitted to propose modifications to such manual. GNPC shall be

permitted to audit on site Contractor's records that evidence any of the

reports issued by Contractor under the Agreement in accordance with

the procedures set forth in Article 18 of the Agreement.

1.2.5



Without prejudice to the generality of the foregoing, Contractor shall

make separate statements relating to Petroleum Operations for each

Development and Production Area as follows:

(a)



Cash Call Statement (see Section 5)



(b)



Production Statement (see Section 6)



(c)



Value of Production Statement (see Section 7)



(d)



Allowable Cost Statement (see Section 8)



(e)



Statement of Expenditures and Receipts (see Section 9)



(f)



Final End-of-Year Statement (see Section 10)



(g)



Budget Statement (see Section 11)



(h)



Long Range Plan and Forecast (see Section 12)



LANGUAGE, MEASUREMENT, AND UNITS OF ACCOUNTS

1.3.1 The U.S. Dollar being the currency unit for investments and

compensation hereunder shall therefore be the unit of currency for all

bookkeeping and reporting under the Agreement. When transactions for

an asset or liability are in Ghana Cedis or currency other than the U.S.

Dollar, the respective accounts shall be kept in such other currency as

well as the U.S. Dollar.

1.3.2 Measurement required under this Annex shall be in the metric system

£ind Barrels.

1.3.3



The English language shall be employed.



1.3.4 Where necessary for purposes of clarification. Contractor may also

prepare financial reports in other languages, units of measurement and

currencies.

1.3.5



It is the intent of the Parties that no Party shall experience any gain or

loss at the expense of or to the benefit of the other as a result of

exchange of currency. Where any such gain or loss arises it shall be

charged or credited to the accounts under the Agreement.



105



1.3.6 The rate of exchange for the conversion of currency shall be the rate

actually incurred (which shall be at the prevailing rate at the date of

acquisition). Where actual rates are not known, the arithmetic average

of buying and selling rates quoted by the Bank of Ghana at a close of

business on the date of such currency conversion shall be used.

1.3.7 Current Assets and Liabilities shall be converted at the rate prevailing

on the date of settlement of the account.

1.3.8 To translate transactions in Ghana cedis into dollars or vice versa at the

year-end for revenue and expenditure the rates of the transactions or

average monthly rates where reasonable will be used.

1.3.9 To translate transactions in Ghana cedis into dollars or vice versa at the

year-end for assets, liabilities and capital items the year end rate will be

used.

SECTION 2.

2.1



CLASSIFICATION AND A L L O C A T I O N OF COSTS AND

EXPENDITURE

2.1.1 All expenditure relating to Petroleum Operations shall be classified, as

follows:

(a)



Exploration Expenditure;



(b)



Development Expenditure;



(c)



Production Expenditure;



(d)



Service Costs; and



(e)



General and Administrative expenses



and shall be defined and allocated as herein below provided.

2.2



EXPLORATION EXPENDITURE

2.2.1 Exploration Expenditure shall consist of all direct, indirect and allocated

costs incurred in the search for Petroleum in the Contract Area,

including but not limited to expenditure on or in relation to:

(a)



aerial, geographical, geophysical, geochemical, paleontological,

geological, topographical and seismic surveys, and studies and

their interpretation, and purchased geological and geophysical

information;



(b)



borehole drilling and water drilling;

106



(c)



labour, materials and services used in drilling wells with the

objective of finding new Petroleum reservoirs or for the purpose

of appraising of Petroleum reservoirs already discovered,

provided such wells are not completed as producing wells;



(d)



facilities used solely for Exploration Operations, including access

roads, where applicable;



(e)



all service costs allocated to Exploration Operations on the basis

of procedures proposed by the Contractor on an equitable basis ;



(f)



all General and Administrative Expenses directly attributable to

Exploration Operations or allocated thereto on a consistent and

equitable basis; and



(g)



any other expenditures incurred in the search for and appraisal of

Petroleum in the Contract Area after the Effective Date and not

otherwise covered under this paragraph 2.2.1.



2.2.2 Exploration cost shall be tied to resultant commercial discoveries.

Where exploration activity is undertaken after a commercial discovery

that exploration cost shall be regarded as capital work-in-progress. I f

the exploratory activity results in commercial discovery it shall be

regarded as cost of the new discovery and resulting field. Where there is

no commercial discovery it shall be charged to the previous discovery

field.

DEVELOPMENT EXPENDITURE

2.3.1 Development Expenditure shall consist of all direct and allocated

indirect costs and expenditure incurred in Development Operations,

including but not limited to expenditure on:

(a)



drilling wells which are completed as producing wells and

drilling wells for purposes of producing a Petroleum reservoir

already discovered, whether these wells are dry or producing and

drilling wells for the injection of water or gas to enhance

recovery of Petroleum;



(b)



tangible drilling costs for completing wells by way of installation

of casing or equipment or otherwise after a well has been drilled

for the purpose of bringing such well into use as a producing well

or as a well for the injection of water or gas to enhance recovery

of Petroleum;



(c)



intangible drilling costs such as labour, consumable material and

services having no salvage value which are incurred in drilling,

and deepening of wells for producing purposes;

107



(d)



field facilities such as pipelines, flow lines, production and

treatment units, wellhead equipment, subsurface equipment,

enhanced recovery systems, offshore platforms. Petroleum

storage facilities and access roads for production activities;



(e)



engineering and design studies for the wells and field facilities;



(f)



all service costs allocated to Development Operations on

equitable basis;



(g)



all General and Administrative Expenses directly attributable to

Development Operations or allocated thereto on a consistent and

equitable basis;



2.3.2 Capital allowance for development expenses shall be granted under the

following conditions:

(a)



Development activity has been approved by the Minister;



(b)



Development activity has been completed; and



(c)



Production activity has started after the completion of the

development activity.



PRODUCTION E X P E N D I T U R E

Production Expenditure shall consist of but not limited to all direct and

allocated indirect costs and expenditure incurred in Petroleum Operations

including appropriate abandonment charges, after the Date of Commencement

of Commercial Production, such expenditure being other than Exploration

Expenditure, Development Expenditure, General and Administrative Expenses

and Service Costs. The balance of General and Administrative Expenses and

Service Costs not allocated to Exploration Operations or to Development

Operations under Section 2.2 and 2.3 shall be allocated to Production

Expenditure.

S E R V I C E COSTS

2.5.1 Service Costs shall consist of but not be limited to all direct and indirect

expenditure incurred in support of Petroleum Operations, including the

construction or installation of Warehouses, piers, marine vessels,

vehicles, motorised rolling equipment, aircraft, fire and security stations,

workshops, water and sewerage plants, power plants, housing

community and recreational facilities and furniture, tools land,

equipment used in these activities.

Service Costs in any Calendar Year shall include the total costs incurred

in such year to purchase and construct or install such facilities as well as

the annual costs of maintaining and operating such facilities.

108



2.5.2 A l l Service Costs will be regularly allocated on an equitable basis to

Exploration Expenditure, Development Expenditure and Production

Expenditure.

2.6



G E N E R A L AND ADMINISTRATIVE EXPENSES

General and Administrative Expenses shall consist of:

2.6.1 A l l main office, field and general administrative costs, in the Republic

of Ghana, including but not limited to supervisory, accounting,

procurement and employee relations services;

2.6.2 An overhead charge for the actual cost of services rendered outside the

Republic of Ghana by Contractor and its Affiliates for managing

Petroleum Operations and for staff advice and assistance, including but

not limited to financial, legal, accounting and employee relations

services in the following amounts:

(a)



For the Exploration Phase: One point two five percent (1.25%) to

a cap of US$200,000 per annum



(b)



For Development Phase: One point two five percent (1.25%) to a

cap of US$500,000 per armum per aimum



(c)



For Production Phase: One percent (1.0%) per annum to a cap of

US$200,000 per annum



2.6.3 All General and administrative Expenses will be regularly allocated as

specified in subsections 2.2.1(f), 2.3.1(g) and 2.4 to Exploration

Expenditure, Development Expenditure and Production Expenditure.

SECTION 3.

3.1



COSTS, EXPENSES, E X P E N D I T U R E S AND C R E D I T S O F

CONTRACTOR



A L L O W A B L E COSTS

3.1.1 Contractor for the purpose of this Agreement shall charge the following

allowable costs to the accounts:

(a)



costs of acquiring surface rights;



(b)



labour and associated costs;



(c)



transportation costs;



(d)



charges for services;



(c)



material and equipment costs;

109



(0



rentals, duties and other assessments;



(g)



insurance and losses (including deductibles/excesses);



(h)



legal expenses;



(i)



training expenses;



0)



general and administrative expenses;



(k)



utility costs;



(1)



office facility charges;



(m)



communication charges;



(n)



ecological and environmental charges;



(0)



abandonment and site restoration costs; and



(P)



such other costs necessary for the Petroleum Operations;



(q)



pre-Agreement costs of up to US$ 100,000.



COST OF ACQUIRING S U R F A C E RIGHTS AND RELINQUISHMENT

Cost of acquiring surface rights shall consist of all direct costs attributable to

the acquisition, renewal or relinquishment of surface rights acquired and

maintained in force over the Contract Area.

LABOUR AND ASSOCIATED LABOUR COSTS

3.3.1



Labour and associated labour costs shall include but not be limited to:

(a)



gross salaries and wages including bonuses of those employees of

Contractor and of its Affiliates engaged in Petroleum Operations

who are permanently or temporarily assigned to Ghana;



(b)



costs regarding holidays, vacation, sickness and disability

payments applicable to the salaries and wages chargeable under

(a);



(c)



expenses or contributions made pursuant to assessments or

obligations imposed under the laws of the Republic of Ghana

which are applicable to cost of salaries and wages chargeable

under (a);



(d)



cost of established plans for employees' life insurance,

hospitalisation, pensions and other benefits of a like nature

customarily granted to employees; and

110



(e)



reasonable travel and personal expenses of employees and

families, including those made for travel and relocation of the

personnel.



TRANSPORTATION COSTS

Transportation costs and other related costs of transportation of employees or

secondees of the Contractor or its affiliates, equipment, materials and supplies

necessary for the conduct of Petroleum Operations.

CHARGES F O R S E R V I C E S

3.5.1 Charges for services shall include:

(a)



the costs of third party contracts which are the actual costs of

contracts for technical and other services entered into by

Contractor or its Affiliates for Petroleum Operations made with

third parties other than Contractor or Affiliates of Contractor,

provided that the prices paid by Contractor are no higher than the

prevailing rates for such services in the regional market;



(b)



cost of technical and other services of personnel assigned by the

Contractor and its Affiliates when performing management,

engineering, geological, geophysical, administrative, legal,

accounting, treasury, tax, employee relations, computer services,

purchasing, and all other functions for the direct benefit of

Petroleum Operations. Provided that charges for such services

shall be at actual cost. All Services furnished by Contractor and

its Affiliates (other than the Operator) shall be performed based

on and pursuant to a form services agreement to be approved, a

copy of which shall be provided to the JMC after the Effective

Date.



(c)



cost of general services, including, but not without limitation,

professional consultants and others who perform services for the

direct benefits of Petroleum Operations.



(d)



costs associated with the use of equipment and facilities owned

and fiimished 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 and facilities

on comparable terms in the area where the Petroleum Operations

are being conducted and shall be on an arm's length basis. On

the request of the GNPC, the Contractor shall provide the GNPC

with evidence of such rates being on an arm's length basis. ( I f

the GNPC considers that any such rate is not on an arm's length

basis, then the GNPC has the right to refer the matter to an expert

111



pursuant to Article 24.10 of the Agreement). 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 GNPC.

3.6



RENTALS, DUTIES AND O T H E R ASSESSMENTS

All rentals, taxes, duties, levies, charges, fees, contributions and any other

assessments and charges levied by the State in connection with Petroleum

Operations or paid for the benefit of Petroleum Operations, with the exception

of the income tax specified in the Article 12 of the Agreement.

If the Contractor or any of its Affiliates is subject to income or withholding tax

as a result of services performed at cost for the Petroleum Operations under the

Agreement, its charges for such services may be increased by the amount

required to cover such taxes (grossed up) including taxes on such gross up.



3.7



3.8



INSURANCE AND LOSSES

(a)



Insurance premium and costs incurred for insurance, provided

that i f such insurance is wholly or partly placed with an Affiliate

of Contractor, such premium and costs shall be recoverable only

to the extent not in excess of those generally charged by

competitive insurance companies other than Affiliate; and;



(b)



costs and losses incurred as a consequence of events, which are,

insofar as not made good by insurance, allowable under

Article 17 of the Agreement.



(c)



Costs or expenses necessary for the repair or replacement of

property resulting fi-om damage or losses incurred.



L E G A L EXPENSES

All costs and expenses of litigation and legal or related services necessary or

expedient for the procuring, perfecting, retaining and protecting the rights

hereunder and in defending or prosecuting lawsuits involving the Contract Area

or any third party claim arising out of activities under the Agreement, or sums

paid in respect of legal services necessary or expedient for the protection of the

joint interest of GNPC and Contractor, provided that where legal services are

rendered in such matters by salaried or regularly retained lawyers of Contractor

or an Affiliate of Contractor, such compensation will be included instead under

either Section 3.3 or 3.5, as applicable. The preceding costs and expenses shall

not include costs of any nature (including attorneys' fees and the fees of the

ICC, arbitrators, the Sole Expert, other experts, professionals and translators)

incurred in connection with any consultation, arbitration or Sole Expert process

112



under Article 24 of the Agreement which shall be borne in accordance with

Article 24.11 of the Agreement.

3.9



TRAINING COSTS

All costs and expenses incurred by Contractor in training of its employees and

nominees of GNPC to the extent that such training is attributable to Petroleum

Operations under the Agreement.



3.10



G E N E R A L AND ADMINISTRATIVE EXPENSES

General and Administrative Expenses shall consist of the costs described in

Subsection 2.6.1 and the charge described in Subsection 2.6.2.



3.11



U T I L I T Y COSTS

Any water, electricity, heating, fuel or other energy and utility costs used and

consumed for the Petroleum Operations.



3.12



OFFICE FACILITY CHARGES

The cost and expenses of constructing, establishing, maintaining and operating

offices, camps, housing and any other facilities in Ghana necessary to the

conduct of Petroleum Operations. The cost of constructing or otherwise

establishing any operating facility which may be used at any time in operations

of more than one field shall be charged initially to the field or fields for which

the facility is first used. Costs incurred, thereafter shall be allocated in a

reasonable manner, consistent with international accounting practice, to the

fields for which the facility is used.



3.13



COMMUNICATION C H A R G E S

The costs of acquiring, leasing, installing, operating, repairing and maintaining

communication systems, including radio and microwave facilities.



3.14



E C O L O G I C A L AND ENVIRONMENTAL C H A R G E S

All charges for environmental protection and safety measures conducted in the

Contract Area in accordance with Article 17 of the Agreement.



3.15



ABANDONMENT COST

Cost relating to the decommissioning and abandonment of operations and

facilities, site restoration and other associated operations accrued from a

reasonable date in advance based on estimate of such cost (with subsequent

adjustments to actuals) as provided in Article 12.11 of the Agreement

^j^^



113



3.16



OTHER COSTS

Any other costs not covered or deah with in the foregoing provisions which are

incurred and not mentioned in this Section 3.16 for the necessary and proper

conduct of Petroleum Operations.



3.17



COSTS NOT A L L O W A B L E UNDER T H E A G R E E M E N T

3.17.1 The following costs shall not be allowable under the Agreement:

(a)



commission paid to intermediaries by Contractor;



(b)



charitable donations and contributions, except where prior

approval has been obtained from GNPC;



(c)



costs (including duties) arising from the marketing or processing

Petroleum or transportation of Petroleum beyond the Delivery

Point;



(d)



the costs of any Bank Guarantee under the Agreement and any

other amounts spent on indemnities with regard to non-fulfilment

of contractual obligations;



(e)



premium paid as a resuh of GNPC exercising a Sole Risk option

under Article 9 of this Agreement;



(f)



costs of any nature (including attorneys' fees and the fees of the

ICC, arbitrators, the Sole Expert, other experts, professionals and

translators) incurred in connection with any consultation,

arbitration or Sole Expert process under Article 24 of the

Agreement;



(g)



fines, penalties and interest due pursuant to any applicable law or

regulation and/or imposed by a competent administrative or

judicial body;



(h)



costs, damages and other liabilities incurred as a result of (1) a

breach of any provision of the Agreement other than a contractual

standard of care as decided by an arbitration panel or Sole Expert

or acknowledged by Contractor, (2) Gross Negligence with

respect to any contractual standard of care set forth in this

Agreement, and/or (3) wilful misconduct, in each case by the

Contractor, the Operator, their respective Affiliates and/or

subcontractors, and/or any other entities or persons for whom the

Contractor is responsible under the Agreement;



(i)



(1) income taxes (including any taxes on the net income of

permanent establishments in Ghana and any capital gains taxes or

taxes on assignment of interest), withholding taxes and/or royalty

114



shares or other Petroleum entitlements, in each case paid to

authorities in Ghana in connection with or related to the

Agreement, (2) any taxes paid to authorities outside Ghana,

except any foreign value added taxes or other foreign taxes paid

with respect to products or services imported into Ghana, (3) any

taxes subject to reimbursement or refund and; (4) any other taxes

that should be deemed non-allowable costs;



3.18



0)



costs incurred by the Contractor under contracts or amendments

thereto that were subject to approval by the JMC or GNPC and

were not so approved,



(k)



costs that are not documented in accordance with applicable law

or this Agreement; and



(1)



any bonus payments payable by the Contractor under the

Agreement to the State, any other governmental body in Ghana,

GNPC or any Affiliates of GNPC.



A L L O W A B L E AND D E D U C T I B I L I T Y

The costs and expenses set forth herein shall be for the purpose of determining

allowable or non-allowable costs and expenses only and shall have no bearing

on Contractor's eligibility or otherwise for deductions in computing

Contractor's net income from Petroleum Operations for income tax purposes

under the Agreement.



3.19



CREDITS UNDER T H E A G R E E M E N T

3.19.1 The net proceeds of the following transactions will be credited to the

accounts under the Agreement:

(a)



the net proceeds of any insurance or claim in connection with

Petroleum Operations or any assets charged to the accounts under

the Agreements when such operations or assets were insured and

the premium charged to the accounts under the Agreement;



(b)



revenue received from third parties for the use of property or

assets charged to the accounts under this Agreement;



(c)



any adjustment from the suppliers or manufacturers or their

agents in connection with a defective equipment or material the

cost of which was previously charged to the account under the

Agreement;



(d)



the proceeds received for inventory materials previously charged

to the account under the Agreement and subsequently exported

from the Republic of Ghana or transferred or sold to third parties;^

115



3.20



(e)



rentals, refunds or other credits received which apply to any

charge which has been made to the account under the Agreement

but excluding any award granted under arbitration or Sole Expert

proceedings.;



(f)



the proceeds from the sale or exchange of plant or facilities from

the Development and Production Area or plant or facilities the

acquisition costs and the cost of sale



(g)



the proceeds derived from the sale or issue of any intellectual

property the development costs of which were incurred pursuant

to this Agreement;



(h)



the proceeds from the sale of any petroleum information derived

from Petroleum Operations under this Agreement; and



(i)



any General and Administrative Expenses or Service Expenses

that benefit any operation or activity other than Petroleum

Operations.



DUPLICATION OF C H A R G E S AND C R E D I T S

Notwithstanding any provision to the contrary in this Annex, it is the intention

that there shall be no duplication of charges or credits in the accounts under the

Agreement.



SECTION 4.

4.1



V A L U E OF M A T E R I A L AND EQUIPMENT C H A R G E D T O T H E

ACCOUNTS UNDER T H E A G R E E M E N T

Material and equipment purchased, leased or rented by Contractor for use in

Petroleum Operations shall be valued at the actual net cost incurred by

Contractor. The net cost shall include invoice price less trade and cash

discounts, i f 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 any other related costs actually paid.



4.2



V A L U E OF M A T E R I A L PURCHASED F R O M AN A F F I L I A T E

4.2.1



Contractor shall notify GNPC of any goods supplied by an Affiliate of

Contractor. Materials purchased from Affiliate of Contractor shall be

charged at the prices specified in Sections 4.2.1, 4.2.2 and 4.2.3 below.



4.2.2 New Material (Condition "A") New material shall be classified as

Condition "A". Such material shall be valued at the prevailing market

price, plus expenses incurred in procuring such new materials, and in

moving such materials to the locations where the material shall be used.

116



4.2.3zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Used Material (Condition "B") Used material shall be classified as

Condition " B " provided that it is in sound and serviceable condition and

is suitable for reuse without reconditioning. Such material shall be

valued at not more than seventy five percent (75%) of the current price

of new material valued according to Section 4.2.1 above.

4.2.4 Used Material (Condition "C") Used material which is serviceable for

original function as good second hand material after reconditioning and

cannot be classified as Condition " B " shall be classified as Condition

"C". Such material shall be valued at not more than fifty percent (50%)

of the current price of new material valued according to Section 4.2.1

above. The cost of reconditioning shall be charged to the reconditioned

material provided that that the value of such Condition "C" material plus

the cost of reconditioning does not exceed the value of Condition " B "

material.

CLASSIFICATION OF M A T E R I A L S

Material and equipment costs shall be charged to the respective Exploration

Expenditure, Development Expenditure, Operating Expenditure accounts at the

time the material and equipment is acquired and on the basis of the intended

use of the material and equipment. Should such material and equipment

subsequently be used other than as intended, the relevant charge will be

transferred to the appropriate account.

DISPOSAL OF M A T E R I A L S

Sales of property shall be recorded at the net amount collected by the

Contractor from the purchaser.

WARRANTY OF M A T E R I A L S

In the case of defective material or equipment, any adjustment received by

Contractor from the suppliers or manufacturers of such materials or their agents

will be credited to the accounts under the Agreement.

CONTROLLABLE MATERIALS

4.6.1 The Contractor shall control the acquisition, location, storage and

; disposition of materials which are subject to accounting record control,

physical inventory and adjustment for averages and shortages

(hereinafter referred to as Controllable Material).

4.6.2 Unless additional inventories are scheduled by the JMC, Contractor

shall conduct one physical inventory of the Controllable Material each

Calendar Year which shall be completed prior to the end of the year.

The Contractor shall conduct said inventory on a date to be approved by

the JMC. Failure on the part of GNPC to participate in a JMC schedule

117



or approved physical inventory shall be regarded as approval of the

results of the physical inventory as conducted by the Contractor.

4.6.3 The gain or loss resulting from the physical inventory shall be reflected

in the stock records of Controllable Materials. The Contractor shall

compile a reconciliation of the inventory with a reasonable explanation

for such gains or losses. Failure on the part of GNPC to object to

Contractor's reconciliation within thirty (30) days of compilation of said

reconciliation shall be regarded as approval by GNPC.

SECTION 5.

5.1



CASH C A L L STATEMENT

5.1.1 In respect of any Exploration Costs to which GNPC is contributing or

any Development and Production Area in which GNPC elects to take a

participating interest, and in any case where Contractor conducts Sole

Risk Operations for GNPC's account. Contractor shall at least fifteen

(15) days prior to the commencement of any Month submit a Cash Call

Statement to GNPC. Such Cash Call Statement shall include the

following information:

(a)



Due Date;



(b)



Payment Instructions;



(c)



The balance prior to the Cash Call being issued;



(d)



The cash call being issued



(e)



Amount of US Dollars due; and



(f)



An estimation of the amounts of US Dollars required from GNPC

for the following month.



5.1.2 Following a Cash Call GNPC shall make payments to the appropriate

bank account maintained by the Operator for the Joint Account as

specified on the Cash Call. A l l such payments shall be made in

sufficient time to ensure that they will each be credited to the

appropriate bank account on the due date specified in the Cash Call and

without the deduction of any bank charges.

5.2



Not later than the thirtieth (30*) day of each Month, Contractor will furnish

GNPC a statement reflecting for the previous month:

(a)



Payments;



(b)



The nature of such payments by appropriate classifications; and



118



(c)

5.3



The balance due to or from GNPC.



Contractor may in the case where a large unforeseen expenditure becomes

necessary issue a special Cash Call Statement requiring GNPC to meet such

Cash Call within ten (10) days of receipt of such Statement.



SECTION 6.

6.1



PRODUCTION STATEMENT

6.1.1 Subsequent to the Date of Commencement of Commercial Production

from the Contract Area, Contractor shall submit a monthly Production

Statement to GNPC showing the following information for each

Development and Production Area as appropriate:



6.2



(a)



the quantity of Crude Oil produced and saved;



(b)



the quantity of Natural Gas produced and saved;



(c)



the quantities of Petroleum used for the purpose of conducting

drilling and Production Operations, pumping to field storage and

re-injections;



(d)



the quantities of Natural Gas flared;



(e)



the size of Petroleum stocks held at the beginning of the Month;

and



(f)



the size of Petroleum stocks held at the end of the Month.



The Production Statement of each Calendar Month shall be submitted to GNPC

not later than ten (10) days after the end of such month.



SECTION 7.

7.1



V A L U E OF PRODUCTION STATEMENT

During each Quarter Contractor shall prepare a statement providing

calculations of the value of Crude Oil produced and saved based on the Market

Price established under Article 11 of this Agreement, the amounts of Crude Oil

allocated to each of the Parties during that Quarter, the buyer of the cargo, sales

basis with respect to Benchmark crude oil, the pricing basis, the differential,

and any deductions. Each Production Statement shall be submitted to the

Minister and GNPC not later than thirty (30) days following the determination,

notification and acceptance of the World Market Price to GNPC according to

Article 11 of this Agreement.



119



SECTION 8.

8.1



A L L O W A B L E COST STATEMENT

8.L 1 Contractor shall prepare with respect to each Quarter, an Allowable Cost

Statement containing the following information with respect to costs

that are allowable under Section 3.17 of this Accounting Guide:

(a)



Total Petroleum Costs in previous Quarters, i f any;



(b)



Petroleum Costs for the Quarter in question;



(c)



Total Petroleum Costs as of the end of the Quarter in question

(subsection 8.1.1(a) plus subsection 8.1.1(b) above);



(d)



Petroleum Costs for Development Operations advanced in the

Quarter in respect of GNPC's Participating Interest pursuant to

Article 2 of this Agreement; and



(e)



Costs as specified in (d) above which have been recovered during

the Quarter pursuant to Article 10.2(e) of the Agreement and the

balance, if any, of such costs unrecovered and carried forward for

recovery in a later period.



8.1.2 Petroleum Costs for Exploration, Development and Production

Operations as detailed above shall be separately identified for each

Development and Production Area. Petroleum Costs for Exploration

Operations not directly attributable to a specific Development Area shall

be shown separately.

8.2



The Allowable Cost Statement of each Quarter shall be submitted to GNPC no

later than forty-five (45) days after the end of such Quarter.



SECTION 9.

9.1



STATEMENT OF EXPENDITURES AND R E C E I P T S

9.1.1 Subsequent to the Date of Commencement of Commercial Production

from the Contract Area, Contractor shall prepare with respect to each

Quarter a Statement of Expenditures and Receipts. The Statement will

distinguish between Exploration Expenditure and Development

Expenditure and Production Expenditure and will identify major items

of expenditure within these categories. The statement will show the

following:

(a)



actual expenditures and receipts for the Quarter in question;



(b)



cumulative expenditure and receipts for the budget year in

question;

120



9.2



(c)



latest forecast of cumulative expenditures at the year end;



(d)



variations between budget forecast and latest forecast and

explanations therefore;



(e)



Price per barrel of crude oil sold; and



(f)



Price per barrel of oil equivalent of Gas sold.



The Statement of Expenditures and Receipts of each Calendar Quarter shall be

submitted to GNPC not later than forty-five (45) days after the end of such

Quarter for provisional approval by GNPC.



SECTION 10.

10.1



FINAL

END-OF-YEAR

STATEMENT



STATEMENT/AUDITED



FINANCIAL



The Contractor will prepare a Final End-of-Year Statement. The Statement

will contain information as provided in the Production Statement, Value of

Production Statements, Allowable Cost Statement and Statements of

Expenditures and Receipts, as appropriate. The Final End-of-year Statement of

each Calendar Year shall be submitted to GNPC within one hundred and

twenty (120) days of the end of such Calendar Year. Any necessary

subsequent adjustments shall be reported promptly to GNPC.

In addition to the Final End-of-Year Statement, an audited financial statement

of each Contractor Party shall be submitted to GNPC and Petroleum

Commission by 30'*' April of the year following.

SECTION 11.

11.1



BUDGET STATEMENT

11.1.1 The Contractor shall prepare an annual budget statement. This will

distinguish

between

Exploration Expenditures,

Development

Expenditures and Production Expenditures and will show the following;

(a)



forecast Expenditures and Receipts for the budget year under the

Agreement;



(b)



cumulative Expenditures and Receipts to the end of said budget

year; and



(c)



the most important individual items of Exploration, Development

and Production Expenditures for said budget year.



121



11.1.2 The budget may include a budget line or lines for unforeseen

expenditures which, however, shall not exceed ten percent (10%) of the

total budgetary expenditure.

11.2



The Budget Statement shall be submitted to GNPC and JMC with respect to

each budget year no less than ninety (90) days before the start of such year

except in the case of the first year of the Agreement when the Budget

Statement shall be submitted within sixty (60) days of the Effective Date.



11.3



Where Contractor foresees that during the budget period expenditures have to

be made in excess of the ten percent (10%) pursuant to section 11.1.1 hereof,

contractor shall submit a revision of the budget to GNPC and JMC.



SECTION 12.

12.1



LONG RANGE PLAN AND F O R E C A S T

12.1.1 Contractor shall prepare and submit to GNPC the following:

(a)



During Exploration Period, an Exploration Plan for each year

commencing as of the Effective Date which shall contain the

following information:

(i)



Estimated Exploration Costs showing outlays for each of

the years or the number of years agreed and covered by the

Plan;



(ii)



Details of seismic operations for each such year;



(iii)



Details of drilling activities planned for each such year;

and



(iv)



Details of infrastructure utilisation and requirements.



The Exploration Plan shall be revised on each anniversary of the

Effiective Date. Contractor shall prepare and submit to GNPC the

first Exploration Plan for the Initial Exploration Period of three

(3) years within sixty (60) days of the Effective Date and

thereafter shall prepare and submit to GNPC no later than forty

five (45) days before each anniversary of the Effective Date a

revised Exploration Plan.

(b)



In the event of a Development Plan being approved, the

Contractor shall prepare a Development Forecast for each

calendar year of the Development Period, which shall contain the

following information:



122



(c)



(i)



forecast of capital expenditure portions of Development

and Production expenditures for each Calendar Year of the

Development Period;



(ii)



forecast of operating costs for each Calendar Year;



(iii)



forecast of Petroleum production for each Calendar year;



(iv)



forecast of number and types of personnel employed in the

Petroleum Operations in the Republic of Ghana;



(V)



description

of

arrangements;



(vi)



description of main technologies employed; and



(vii)



description of the working relationship of Contractor to

GNPC.



proposed



Petroleum



marketing



The Development forecast shall be revised at the beginning of

each Calendar Year commencing as of the second year of the first

Development forecast Contractor shall prepare and submit to

GNPC the first Development forecast within one hundred and

twenty (120) days of the date when the first Development Plan is

approved by the Minister and Contractor commences the

implementation of such plan and thereafter shall prepare and

submit a revised Development Forecast to GNPC no later than

forty five (45) days before each Calendar Year commencing as of

the second year of the first Development forecast.



CHANGES OF PLAN AND F O R E C A S T

It is recognised by Contractor and GNPC that the details of the Exploration

Plan and Development forecast may require changes in the light of existing

circumstances and nothing herein contained shall limit the flexibility to make

such changes. Consistent with the foregoing the said Plan and Forecast may be

revised annually.



123



ANNEX 3

FORM OF CONFIDENTIALITY AGREEMENT

\ Contract Area

THIS AGREEMENT is entered into this

day of

, (the "Effective

Date") by and between [

] , a company organized and existing under

] (hereinafter referred to as the "Disclosing Party"); and

the laws of [

, a company organized and existing under the laws

of.

(hereinafter referred to as the "Receiving Party").

The companies named above may collectively be referred to as the "Parties" or

individually as "Party".

WHEREAS in cormection with the Possible Transaction (as defined below) by the

Receiving Party, the Disclosing Party is willing, in accordance with the terms and

conditions of this Agreement, to disclose certain Confidential Information (as defined

below) relating to the Cape Three Points Block 4 Offshore (the "Area") shown in

Exhibits A to D attached hereto; and

WHEREAS the Petroleum Agreement covering the said Contract Area requires that

the Disclosing Party require the execution of a confidentiality agreement by Receiving

Party prior to the disclosure of Confidential Information in order to govern such

disclosure and that a copy of all such signed confidentiality agreements be provided to

GNPC.

NOW THEREFORE, in consideration for the mutual undertakings of the Disclosing

Party and the Receiving Party under this Agreement, the Parties agree as follows:

1.



Definitions



As used in this Agreement the following words and terms shall have the meaning

ascribed to them below:

1.1



1.2



"Affiliated Company" means any Person which:



^



a.



Controls directly or indirectly a Party, or



b.



Is Controlled directly or indirectly by such Party, or



c.



Is directly or indirectly Controlled by a Person which directly or

indirectly Controls such a Party.



"Confidential Information" means individually or collectively:



1.2.1



any and all data and information obtained as a result of

petroleum operations in the Area, including without limitation

well data and seismic information together with all other data

and information obtained by or on behalf of the Disclosing

Party in connection with the Disclosing Party's petroleum

operations in the Area, as well as geological and economic

reports, studies, interpretations and analyses prepared by or on

behalf of the Disclosing Party in connection with its petroleum

operations in the Area. Confidential Information includes

certain proprietary data and information that is the property of

GNPC (hereinafterzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHG

"GNPC Information") as described in

Exhibit B attached hereto.



Provided that, the following shall not constitute Confidential Information:

1.2.2



information that can be reasonably demonstrated by the

Receiving Party as being already lawfully known to Receiving

Party as of the Effective Date;



1.2.3



information that is or becomes available to the public other than

through the act or omission of Receiving Party or of any other

Person to whom Confidential Information is disclosed by the

Receiving Party pursuant to Article 4.2 unless public disclosure

was made pursuant to Article 4.1;



1.2.4



information that is acquired independently from a third party

that has a right to disseminate such information at the time it is

acquired by the Receiving Party; or



1.2.5



information that can be reasonably demonstrated Jjy the

Receiving Party to have been developed by Receiving Farty

independently of the Confidential Information received from "

Disclosing Party.



1.3



"Control" means the ownership directly or indirectly of 50% or more of

the voting rights in a Person or the ability to direct, directly or indirectly,

the management or policies of a Person, whether through the

appointment of the directors, the ownership of voting shares or other

voting rights, pursuant to written contract or otherwise. "Controls",

"Controlled by" and other derivatives shall be construed accordingly.



1.4



"Evaluation Material" means information derived in whole or in part

from Confidential Information, and generated by or on behalf of the

Receiving Party. For purposes of this Agreement, Evaluation Material

may include without limitation models, technical, financial and

economic reports, studies, interpretations, analyses, estimates of

reserves, and evaluations and notes of documents or meetings. V

125



2.



1.5



"GNPC"zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

means Ghana National Petroleum Corporation, a Statutory

Corporation established by Provisional National Defence Council Law

64 of 1984 with its Head Office at Petroleum House, Harbour Road,

Tema.



1.6



"Person" means an individual, joint venture, corporation, company,

firm, partnership, limited partnership, limited liability company, trust,

estate, government agency or any other entity, including unincorporated

business associations.



1.7



"Petroleum Agreement" means the Petroleum Agreement dated [ ]

between the Government of the Republic of Ghana, Ghana National

Petroleum Corporation, [

] in respect of the Cape Three Points

Block 4 Offshore Ghana (and all amendments and supplements thereto).



1.8



"Possible Transaction" means any possible business arrangement with

the Disclosing Party under which Receiving Party would acquire

directly or indirectly all or part of the rights and interests owned by

Disclosing Party and/or Disclosing Party Affiliates in one or more

offshore hydrocarbon exploration, development or production assets

located within the Area.



Disclosure



In connection with the Possible Transaction, Disclosing Party is willing to disclose to

Receiving Party certain Confidential Information.

The Parties agree that the

disclosure by the Disclosing Party and the receipt by the Receiving Party of the

Confidential Information is subject to the terms of this Agreement.

3.



Undertaking of Confidentiality, Restriction on Use and Damages

3.1



In consideration of the disclosure referred to in Article 2 above, the

Receiving Party agrees that the Confidential Information and the

Evaluation Material shall be held and treated strictly in confidence and

may not be disclosed, licensed, traded, published or otherwise revealed

in any manner whatsoever, without the prior written consent of the

Disclosing Party except as provided in Article 4 below.



3.2



The Receiving Party shall (and shall procure that any Affiliated

Company shall) not use or permit the use of the Confidential

Information and/or the Evaluation Material other than for the purpose of

evalviating the Area and determining whether to enter into negotiations

in connection with the Possible Transaction with the Receiving Party.



3.3



The Receiving Party shall (and shall procure that any Person that

receives Confidential Information and/or Evaluation Material pursuant

to and in accordance with Article 4.2 hereof shall) keep any Confidential

Information it receives and any copies thereof and any Evaluation^

126



Material secure and confidential (in a manner no less secure and

confidential than Receiving Party and such Persons keep their respective

confidential information) and to prevent the Confidential Information

and any Evaluation Material from being disclosed in breach of this

Agreement.

3.4



The Receiving Party agrees not to disclose to anyone, except as

provided for by Article 4 below, the fact that the Confidential

Information has been made available or that discussions or negotiations

are taking place or have taken place between Disclosing Party and

Receiving Party or any Party's Affiliated Companies.



3.5



The obligations of the Receiving Party for confidentiality and non-use as

set forth in this Agreement shall commence from receipt of the

Confidential Information by the Receiving Party. Further, the obligation

not to disclose shall not be affected by bankruptcy, receivership,

assignment, attachment or seizure procedures, whether initiated by or

against the Receiving Party, nor by the rejection of any agreement

between GNPC and Disclosing Party and/or Receiving Party, by a

trustee of Receiving Party in bankruptcy, or by the Receiving Party as a

debtor-in-possession or the equivalent of any of the foregoing.



3.6



The Receiving Party agrees to indemnify Disclosing Party against direct

damages (including, losses, damages, claims, expenses and reasonable

attorney's fees) incurred or suffered as a result of a breach of this

Agreement by Receiving Party or its Affiliated Companies. Such direct

damages shall be the sole exclusive remedy, and all other remedies or

damages at law or in equity are waived except such equitable relief as

may be granted under Article 11. In no event shall the Parties be liable

to each other for any other damages, including incidental, consequential,

special, or punitive damages, regardless of negligence or fault.



Permitted Disclosure and Obligation of Receiving Party for Permitted

Disclosures

The Receiving Party may disclose Confidential Information and/or Evaluation

Material without the prior written consent of the Disclosing Party:

4.1



To the extent the Confidential Information and/or Evaluation Material is

required to be disclosed under applicable law, order, decree, regulation

or rule of any governmental entity having jurisdiction over the

Receiving Party, or any regulatory entity, securities commission or stock

exchange on which the securities of the Receiving Party or any of its

Affiliated Companies are listed or are to be listed, provided that the

Receiving Party shall make all reasonable efforts to give written notice

to the Disclosing Party prior to such disclosure (including full details of

the circumstances of such disclosure); or

) ^

127



4.2zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

To the following persons on a need to know basis and only for the

purpose described in Article 3.2:

4.2.1



employees, officers and directors of the Receiving Party;



4.2.2



employees, officers and directors of an Affiliated Company of

the Receiving Party;



4.2.3



any professional consultant or agent retained by the Receiving

Party or its Affiliated Company; or



4.2.4



any bank, financial institution or entity financing or proposing

to finance the Possible Transaction, including any professional

consultant retained by such bank, financial institution or entity

for the purpose of evaluating the Confidential Information

and/or Evaluation Material.



Prior to making any such disclosure to Persons under Articles 4.2.3 and

4.2.4 above, however, the Receiving Party shall obtain an undertaking of

confidentiality, on terms no less stringent than contained in this

Agreement, from each such Person; provided, however, that in the case

of outside legal counsel, the Receiving Party shall only be required to

procure that such legal counsel is bound by an obligation of

confidentiality.

4.3



The Receiving Party shall be responsible to the Disclosing Party for any

act or omission of the entities and Persons described in Article 4.2 that

would constitute breach of this Agreement as i f the action or omission

had been perpetrated by the Receiving Party and shall immediately

notify the Disclosing Party upon becoming aware that Confidential

Information has been disclosed in breach of this Agreement.



Ownership of Confidential Information

5.1



Receiving Party acknowledges the Confidential Information, excluding

the GNPC Information, remains the property of the Disclosing Party and

the Disclosing Party may use such Confidential Information for any

purpose without obligation to the Receiving Party.



5.2



Receiving Party acknowledges that the GNPC Information is and

remains the property of GNPC and GNPC may use such GNPC

Information for any purpose without obligation to the Disclosing Party

or Receiving Party. In addition. Receiving Party acknowledges that in

the event that it acquires, directly or indirectly an interest in the Area,

that it may be required to enter into a data licensing agreement with

GNPC with respect to the GNPC Information on terms to be agreed

between GNPC and the Receiving Party.



128



5.3zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

The Receiving Party shall acquire no proprietary interest in or title or

right to the Confidential Information.

Return of Confidential Information

6.1



Disclosing Party may demand the return of the Confidential Information

at any time upon giving written notice to Receiving Party.



6.2



Within thirty (30) days of receipt of the notice referred to in Article 6.1

or upon completion of the Receiving Party's review and/or evaluation of

the Confidential Information, the Receiving Party shall retain no copies

of the Confidential Information, but shall:



6.3



6.2.1



Return all of the original Confidential Information to the

Disclosing Party;



6.2.2



Destroy or delete or cause to be destroyed or deleted all copies

and reproductions (both written and electronic) of Confidential

Information and any Evaluation Material in its possession

and/or in the possession of persons to whom it was disclosed by

the Receiving Party. Confidential Information or Evaluation

Material that is in electronic format (including all electronic

back-up files ± subject to Art 6.3.1) shall also be deleted; and



6.2.3



Provide a written certification, signed by an authorized officer

of the Receiving Party, that Receiving Party has fully complied

with its obligations under this Clause 6.2.



The provisions of Article 6.1 and 6.2 do not apply to the following:

6.3.1



Confidential Information or Evaluation Material that is retained

in the computer backup system of Receiving Party or a Person

to whom it was disclosed under Article 4.2 i f the Confidential

Information or Evaluation Material will be destroyed in

accordance with the regular ongoing records retention process

of Receiving Party or such Person and i f the Confidential

Information is not used prior to its destruction;



6.3.2



Confidential Information or Evaluation material that must be

retained under applicable law or regulation, including by stock

exchange regulations or by governmental order, decree,

regulation or rule; and



6.3.3



any corporate documents or reports of the Receiving Party

which contain data derived from the Confidential Information

or Evaluation Material which were presented to its executive

board (or the equivalent thereof) and are required in accordance



129



with applicable law or its document retention policy to be

retained;

provided that any Confidential Information and/or Evaluation Material

that is so retained shall remain subject to the terms of this Agreement.

Remedies

The Receiving Party understands and acknowledges that any breach of the

terms of this Agreement may cause the Disclosing Party irreparable harm, and

damages may not be an adequate remedy, and therefore agrees that the

Disclosing Party, an Affiliated Company of Disclosing Party shall have the

right to apply, ex parte without the need to post any type of bond or security, to

a court of competent jurisdiction for specific performance and/or an order

restraining and enjoining any such breach or fiirther disclosure and for such

other relief as may be deemed appropriate. Such right is to be in addition to the

remedies otherwise available to the Disclosing Party, an Affiliated Company of

Disclosing Party at law or in equity.

Term

This Agreement shall terminate on the later of five (5) years fi-om the Effective

Date or the date on which disclosure by Disclosing Party is no longer restricted

by the terms of the Petroleum Agreement(s) currently covering the Area.

Representations and Warranties

The Disclosing Party represents and warrants that it has the right and authority

to disclose the Confidential Information to the Receiving Party. However the

Disclosing Party, its Affiliated Companies and their respective principals,

officers, directors and employees make no representation or warranties, express

or implied as to the quality, accuracy and completeness of the Confidential

Information disclosed hereunder, and the Receiving Party expressly

acknowledges the inherent risk of error in the acquisition, processing, and

interpretation of geological and geophysical data. The Disclosing Party, its

Affiliated Companies and their respective principals, officers, directors and

employees shall have no liability whatsoever with respect to the use of or

reliance upon the Confidential Information by the Receiving Party or its

Affiliated Companies or Persons to whom the Receiving Party discloses

Confidential Information under Article 4.2.

Assignment

The rights and obligations of the Receiving Party under this Agreement may

not be assigned in whole or in part by the Receiving Party without the prior

written consent of the Disclosing Party. Any attempted assignment by

Receiving Party without the prior written approval of Disclosing Party shall be

void. Without limiting the prior provisions of this Article 10, this Agreement

130



shall bind and inure to the benefit of the Parties and their respective successors

and permitted assigns.

11.



Governing Law and Dispute Resolution

11.1



This Agreement shall be governed by and interpreted in accordance with

the laws of England and Wales.



11.2



Subject to Article 7 of this Agreement, any dispute arising out of,

relating to, or in connection with this Agreement, including any question

regarding its existence, validity or termination, shall be settled under the

Rules of Arbitration of the International Chamber of Commerce by three

arbitrators appointed in accordance with said rules. The place of

arbitration shall be London, England. The proceedings shall be in the

English language.



11.3



The resulting arbitral award shall be final and binding without right of

appeal, and judgment upon such award may be entered by any court

having jurisdiction thereof A dispute shall be deemed to have arisen

when either Party notifies the other Party in writing to that effect.

Receiving Party understands and acknowledges that any breach of the

terms of this Agreement may cause the Disclosing Party irreparable

harm for which damages may not be an adequate remedy. Accordingly,

the arbitrator may award both monetary and equitable relief, including

injunctive relief and specific performance or other such relief as may be

deemed appropriate. The Disclosing Party may apply to any competent

judicial authority for interim or conservatory relief; an application for

such measures or an application for the enforcement of such measures

ordered by the arbitrator shall not be deemed an infringement or waiver

of the Agreement to arbitrate and shall not affect the powers of the

arbitrator. Any monetary award issued by the arbitrator shall be payable

in U.S. dollars. Each Party waives any right to damages other than those

provided in Article 3.6.



11.4



Unless the Parties expressly agree in writing to the contrary, the Parties

undertake as a general principle to keep confidential all awards in their

arbitration, together with all materials in the proceedings created for the

purpose of the arbitration and all other documents produced by another

party in the proceedings not otherwise in the public domain - save and to

the extent that disclosure may be required of a Party by legal duty, to

protect or pursue a legal right or to enforce or challenge an award in

bona fide legal proceedings before a state court or other judicial

authority.



11.5



Any Party that now or hereafter has a right to claim immunity for itself

or any of its assets hereby waives such immunity and agrees not to claim

such immunity, in connection with this Agreement, including any

131



dispute hereunder. This waiver includes immunity from (A) legal

process of any sort whatsoever, (B) jurisdiction or judgment, award,

determination, order or decision of any court, arbitrator, tribunal or

Expert, (C) inconvenient forum, and (D) any effort to confirm, enforce,

or execute any decision, settlement, award, judgment, service of process,

execution order, attachment (including pre-judgment attachment) or

other remedy that results from an expert determination, arbitration or

any judicial or administrative proceedings commenced pursuant to this

Agreement.

12.



Non-exclusivity

The disclosure of Confidential Information to Receiving Party is non-exclusive,

and Disclosing Party may disclose the Confidential Information to others at any

time pursuant to the terms and conditions of the Petroleum Agreements.



13.



No Rights in the Area

Unless otherwise expressly stated in writing, any prior or fiiture proposals or

offers made in the course of the discussions of the Parties are subject to all

necessary management and government approvals and may be withdrawn by

either Party for any reason or for no reason at any time. Nothing contained

herein is intended to confer upon Receiving Party any right whatsoever to the

interest of Disclosing Party in the Area.



14.



No Waiver

No waiver by either Party of any one or more breaches of this Agreement by

the other Party shall operate or be construed as a waiver of any future breach or

breaches by the same or other Party, whether of like or of different character.

Except as may be expressly provided in this Agreement no Party shall be

deemed to have waived, released or modified any of its rights under this

Agreement unless such Party has expressly stated in writing, that it does waive,

release or modify such right.



15.



Modifications

No amendments, changes or modifications to this Agreement shall be valid

except i f the same are in writing and signed by a duly authorized representative

of each of the Parties hereto.



16.



Severability

If any term of this Agreement is held by a court of competent jurisdiction to be

invalid or unenforceable, then this Agreement, including all of the remaining

terms, will remain in full force and effect as i f such invalid or unenforceableterm had never been included.



132



Interpretation

17.1zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

Headings. The topical headings used in this Agreement are for

convenience only and shall not be construed as having any substantive

significance or as indicating that all of the provisions of this Agreement

relating to any topic are to be found in any particular Article.

17.2



Singular and Plural. Reference to the singular includes a reference to

the plural and vice versa.



17.3



Include. The words "include" and "including" have an inclusive

meaning, are used in an illustrative sense and not a limiting sense, and

are not intended to limit the generality of the description preceding or

following such term.



Counterpart Execution

This Agreement may be executed in counterparts and each counterpart shall be

deemed an original Agreement for all purposes; provided that neither Party

shall be bound to this Agreement until both parties have executed a

counterpart. For purposes of assembling the counterparts into one document,

Disclosing Party is authorized to detach the signature page from one

counterpart and, after signature thereof by Receiving Party, attach each signed

signature page to a counterpart.

Entirety

This Agreement comprises the fiiU and complete agreement of the Parties

hereto with respect to the disclosure of the Confidential Information and

supersedes and cancels all prior communications, understandings and

agreements among the Parties with respect to disclosure of the Confidential

Information to the Receiving Party by the Disclosing Party, whether written or

oral, expressed or implied.

No Third Party Beneficiaries

20.1



This Agreement is made for the benefit of the Parties, any Affiliated

Company of the Disclosing Party and their respective successors and

permitted assigns.



20.2



It is the intention of the Parties that:

(a)

any person who is an Affiliated Company of the Disclosing

Party;

and

(b)

GNPC in respect of any GNPC Information,

has a right under the U.K. Contract (Rights of Third Parties) Act 1999 to

enforce or enjoy the benefit of any term of this Agreement. Except as

aforesaid, a person who is not a party to this Agreement has no right

133



under such Act to enforce or enjoy the benefit of any term of this

Agreement.

20.3



Notwithstanding any provisions of this Agreement, the Parties to this

Agreement do not require the consent of any third party to vary this

Agreement at any time provided that the consent of GNPC will be

required for any variation which relates to any provision as it applies to

GNPC Information.



21. Anti-Bribery/Anti-Corruption

The Parties hereby agree that, in relation to this Agreement and the subject

matter hereof, they shall at all times comply with all applicable law, regulations

and codes relating to anti-bribery and anti-corruption, including but not limited

to ensuring that each of the Parties and their respective representatives shall not

engage in any activity, practice or conduct which would constitute an offence

under any such laws, regulations or codes (as may be amended from time to

time).

22.



Notices

All notices authorized or required between the Parties by any of the provisions

of this Agreement shall be in writing, in English and delivered in person or by

courier service or by facsimile which provides written confirmation of

complete transmission, and properly addressed to such Parties as shown below.

Oral communication and email do not constitute notice for purposes of this

Agreement and email addresses and telephone numbers for the Parties are

listed below as a matter of convenience only. A notice given under any

provision of this Agreement shall be deemed delivered only when received by

the Party to whom such notice is directed, and the time for such Party to deliver

any notice in response to such originating notice shall run from the date the

originating notice is received. "Received" for purposes of this Article 21 shall

mean actual delivery of the notice to the address or facsimile address of the

Party specified hereunder. Each Party shall have the right to change its address

at any time and/or designate that copies of all such notices be directed to

V^^>^

another person, by giving written notice thereof to all other Parties.

Disclosing Party Name

Address:

r

Attention:

Facsimile:

Email:

Telephone

Receiving Party Name

Address:

134



Attention:

Facsimile:

Email:

Telephone:



IN WITNESS WHEREOF the duly authorized representatives of the Parties have

caused this Agreement to be executed on the date first written above.

DISCLOSING P A R T Y



Signature:

Name:

Title:

Date:



RECEIVING PARTY



Signature:

Name:

Title:

Date:



ANNEX 4

SAMPLE AOE CALCULATION

r ni



Attount F»

YCMS



I'S

y*'



y»ll

y*M



13.000]

tlO,000)

(w.oool

{i<»,ooo)

(100.000)

(Se.ooo)

100,000

MO! 000



100.000

Mcooc

mooo

300,000

300,000

350,000

soo.ooo

MO. 000

too.ooc

too. 000

M. m



y*)l



NCf



X.O0O

10.000

(S.0O0)

(10.000)

(100,000)



I.OOW



(3,000)

(ll.«M|

(• S.303

)

(1W .SM1



(300,21*)

2. aa% (J13.7S1)

(3».»«J

(2S1,717)

2. mt

(M.ilt)

2.00*

W.W3

2.00%

1O0.000

2.0OH.

MO.OOO

Z.00%

300.000

2.00%

300.000

2.00%

3M,eoo

2 00%

1.00%

»0.000



M!ODD



10.000

30.000

30.000

34,000

M,00<1

20,000



(3,000)

(10,000)

{M,O00)

(T0o,ooo)

[100.000)

(»,000)

100,000

IM,000

»o.ooo

IKI.lOl

1M.0OO

110.000

IT0.OO0

2«1,000



200%



)'.(»%

1.00%

2-00%

2-00%



loiooo

10,000

siooo

1,000



(3.000)

(11,SW)

(17*.1S0J

!3l*,0t<)

1*2S.1»)

(400.I70)

(3".»«)

(M3,TM)

(U.*V.)

iM.ooe

iTO,ooo

370.000

31S.00O

270.000

iM,ooa

W,000

to.ooo

10.000



4s!ooo

uiooo

tiooo

(S.0OO)

(10.000)

(100.000)



(s!ooo

(ii.ws)

(lH.OiO)



Foonr



NCF

iso^



i . om



IDO.OOO

100.000

w.ooo

30.000

(siooo)

(1S,JJS)

(111,005)



TKS



Account SA



10 0«



*o[soo



• C«22J%



(J.0O0)

(10.000)

(S0.0001

(1O0.OO0)

(100.000)

[».ooo)

100.000

iso.ooo

200.000

1«0,101



0.000)

(13.'«)

(«,100)

[1W,S40)

(3II,S07)

{"M,M1)

{.J1.4M)

(*»,M7)

{3M.0O0)

(2J«.17*

(133.**0)



15l!oOO

221.SOO



21J.H4

m. w



*0,S00

*o'. KO



(3.000)

(10,000)

(so.ooo)

(100,000)

(100.000)

IMOOo'

ioo^ooo

1M.IB1

tsi'eoD

Sl!t3t



»7.7S0

iM.ioo



i n , MO

7*!soo

7t,S00

7«.S00



"'soo

la^soo

«.»0



IDt27



Tiisoc

3«;2S«

(S.000

(10.000



(1«,»S

(IM,»0



Sl!«3i



17T,t»3



i7:2ia



M.IM

M.2M

M.ZM

M,**4

17,M«



\;»o*



(S',000

(10.000

(100.000



(3,000)

(13, OH)

(t7.«il)

{lf«,03S)

O41,S0*)

(4«,M0)

[S«0,ill)

(SS0.3M)

(S13,71S)

(473.l«)

[M1.0H)

(«31,1S3)

{37*,i21)

(30»,l*l)

(1M,7*4)

(7J,0U)

J3,»M

S»,1M

*l.2»«



—TJH; —



27 J*



• f tf U l IT*



(3,000)

(10.000)

(M.SOO)

(100.BOO)

(100.000)

(M.OOO)

100.000

ioo!ooo

113,000



islw

1*,30«

lt,30*



177,M3

1I1,1M

«I,N3

*2,M3



*ccauni2A



(3,000)

(13,tlS)

(S7.M1)

(lii.OJS)

(MJ.SOt)

{«*I.1«0)

(MO.Ill)

(IM.3M1

(S12.71S1

(«73,»64:



NCF



(iO,D0O)

200,000

ls3!~0



S,MS

13,S70



ij3;»*3

]C7,S0t

lotim



«.*t3

13] 470



t '. it t



(S.000

(10,000

(100.000



*,2*t

(S,000

(16,<7S

(111.335)



TOTAL

AOE Q 75Vllbl



(3,000)

(10,000)

(S0.0OO)

(100,000)

(100,000)



{«i'in

{37(.HI)

(30*,M1)

(in.7M)

(73.0*2



21. W



(IMO

^[IMTI



*0tO2»

32,5%



14^507

1.704

1,»01

(5.000

(10,000

(100,000)



4t»

llt^IT?

m.iH

112|l31

ToitM

70,*M

70.»0t

3S,4S3

31.2W



l.W*

1,*00

l,i3*

I.34«

M4



136



ANNEX 5

PRINCIPLES OF THE PROJECT OPERATING STRUCTURE







Eni will build a competent team that includes personnel of Explorco within eni

Ghana's established organization and in accordance with eni's defined corporate

policies, procedures and processes to operate Block 4







Explorco would be required to second technical and managerial personnel

within the eni Ghana organization in respect of Block 4

There shall be an agreed professional training and mentoring plan tailored to

the specific needs of Explorco secondees. However this should not exclude

Explorco personnel from partaking in training programs organized for eni

employees.











Explorco would second an agreed number of personnel from different

disciplines (technical, commercial, etc) for an agreed period of time and during

the different phases of project activities: Exploration, Development,

Construction, Production.







Number of secondees shall increase in accordance with associated

responsibilities in the following manner:

1. Exploration Phase: up to five (5) personnel

2. Development/Construction Phase: up to ten (10) personnel

including

Commercial,

Drilling,

Reservoir,

Facilities/Construction Engineers, legal. Project Management,

Human Resource, HSE etc., but excluding G&G personnel.

3. Production Phase: up to fifteen (15) personnel for all relevant

disciplines.



Other relevant details such as secondment period and remuneration and benefits for

such secondees will be discussed and captured in Secondment Agreements.



137