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 DRAFT





PRODUCTION SHARING CONTRACT


BETWEEN


THE REPUBLIC OF LIBERIA


REPRESENTED BY THE NATIONAL OIL


COMPANY OF LIBERIA


AND


HONGKONG TONGTAI PETROLEUM INTERNATIONAL


CORPORATION LTD


FOR


OFFSHORE BLOCK LB 6


AND FOR BLOCK LB 7


Two (2) pSjCWwith identicalconditions, will be negotiated andsigned














-0-


 Table of Contents








DEFINITIONS...................................................................................................................... 2


SCOPE OF THE CONTRACT.................................................................................................................................................5


DURATION OF EXPLORATION PERIODS AND SURRENDERS................................................................................................6


EXPLORATION WORK COMMITMENTS..............................................................................................................................1


ESTABLISHMENT AND APPROVAL OF ANNUAL WORK PROGRAMS AND BUDGETS............................................................9


CONTRACTOR'S OBLIGATIONS IN RESPECT OF THE EXPLORATION PERIODS AND ENVIRONMENTAL MANAGEMENT.......10


CONTRACTOR'S RIGHTS IN RESPECT OF THE EXPLORATION PERIODS..............................................................................11


ACTIVITY REPORTS DURING THE EXPLORATION PERIODS AND SUPERVISION OF PETROLEUM OPERATIONS...................12


OCCUPATION OF LAND....................................................................................................................................................14


USE OF FACILITIES...........................................................................................................................................................15


APPRAISAL OF A PETROLEUM DISCOVERY.......................................................................................................................16


GRANT OF AN EXLUSIVE EXPLOITATION AUTHORIZATION IN RESPECT OF A COMMERCIAL DISCOVERY...........................10


DURATION OF THE EXPLOITATION PERIOD......................................................................................................................20


EXPLOITATION OBLIGATION............................................................................................................................................21


CONTRACTOR'S OBLIGATIONS AND RIGHTS IN RESPECT OF EXCLUSIVE EXPLOITATION AUTHORIZATIONS......................21


RECOVERY OF PETROLEUM COSTS AND PRODUCTION SHARING.....................................................................................23


TAXATION.......................................................................................................................................................................Z5


VALUATION OF PETROLEUM...........................................................................................................................................31


BONUSES AND HYDROCARBON.......................................................................................................................................33


DEVELOPMENT FUND................................................ 33


OWNERSHIP AND ABANDONMENT OF ASSETS.............................. 35


NATURAL GAS................................................................................................................................... 35


FOREIGN EXCHANGE CONTROL.......................................................................................................................................39


APPLICABLE LAW..........................................................................................................................................................._40


MONETARY UNIT............................................................................................................................................................40


ACCOUNTING METHOD AND AUDITS..............................................................................................................................40


IMPORT AND EXPORT.....................................................................................................................................................41


DISPOSAL OF PRODUCTION.............................................................................................................................................42


PROTECTION OF RIGHTS..................................................................................................................................................43


PERSONNEL AND TRAINING............................................................................................................................................44


ACTIVITY REPORTS IN RESPECT OF EXCLUSIVE EXPLOITATION AUTHORIZATIONS................................................. 46


ARBITRATION..................................................................................................................................................................46


TERMINATION.................................................................................................................................................................47


FORCE MAJEURE ........................ 49


JOINT ANO SEVERAL OBLIGATIONS AND GUARANTEES...................................................................................................49


RIGHTS OF ASSIGNMENT................................................................................................................................................50


STABILITY OF CONDITIONS..............................................................................................................................................50


IMPLEMTAT1ON OF THE CONTRACT...............................................................................................................................51


EFFECTIVE DATE..............................................................................................................................................................52


APPENDIX 1............................................................................................................................................................55


APPENDIX 2............................................................................................................._.....................................................56











































































































ii


 PRODUCTION SHARING CONTRACT








BETWEEN


The Republic of Liberia, (STATE) represented for the purposes of this Contract by the National Oil


Company of Liberia (NOCAL), a company incorporated under the laws of Liberia, the Minister of


Finance, the Minister of Lands, Mines & Energy and the Chairman of the National Investment


Commission


AND


Hong Kong TongTai Petroleum International Corporation Ltd, a company incorporated in the


jurisdiction of , hereinafter referred to as “the Contractor"


WHEREAS


• the discovery and exploitation of petroleum are important for the interest and the economic


development of the country and its people;


• NOCAL wishes to undertake operations for exploration and development for exploitation,


transportation, storage, processing and marketing of petroleum;


• NOCAL has the rights in respect of Petroleum Exploration and Exploitation over the entirety of


available areas in Liberia including the Delimited Area defined hereinafter;


• NOCAL wishes to promote the development of the Delimited Area, and the Contractor wishes to


cooperate with NOCAL by assisting it in the exploration for and production of the potential


resources within the Delimited Area, and thereby encouraging the economic growth of the country;


• The Contractor represents that it has the financial resources, the technical competence and the


organization capacity necessary to carry out in the Delimited Area, the Petroleum Operations


specified hereinafter.


 NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:








ARTICLE 1


DEFINITIONS


The following terms used in this contract shall have the following meaning:


1.1 ASSOCIATED NATURAL GAS means Natural Gas, which exists in the reservoir with Crude


OH, which is or could be produced in association with Crude Oil.


1.2 APPRAISAL PREIMETER means any part of the Delimited Area where one or more Petroleum


discoveries have been made, and in respect of which NOCAL has granted to the Contractor an


exclusrveappraisalauthorization for the purpose of appraising the extent of said discoveries.


1.3 ANNUAL WORK PROGRAM means the document describing, item by item, the Petroleum


Operations to be carried out during a Calendar Year within the Delimited Area and in each


Exploration Perimeter, if any, established in accordance with the Contract.


1.4 ARMS LENGTH SALES For the purpose of determining arms length sales, the price of Crude


Oil will generally be based n a per barrel basis of one or more Crude Oil blends which at the


time of calculation are being freely and actively traded in the international oil market and have


similar characteristics and quality to t he Crude Oil being marketed. The price for such Crude


Oil will be ascertained from Platt’s Crude Oil Market Wire daily publication or the spot market


for the same Crude Oil ascertained in a similar manner.


1.5 AFFILIATED COMPANY means:


• a company or any other entity which directly or indirectly controls or is controlled by any


entity constituting the Contractor; or


• a company or any other entity which directly or indirectly controls or is controlled by a


company or entity which itself directly or indirectly controls any entity constituting the


Contractor.


Such '‘control" means direct or indirect ownership by a company or any other entity or more


than fifty percent (50%) of the shares, conferring voting rights, forming the stock or another


company.


1.6 BARREL means U.S. barrel, i.e., 42 U.S. gallons measured at a temperature of 60° F and


under an atmospheric pressure.


1.7 BUDGET means the itemized cost estimates of the Petroleum Operations described in an


Annual Work Program.


1.8 CALENDAR YEAR means a period of twelve (12) consecutive months beginning on January


first (1sl) and ending on the following December thirty-first (31st), according to the Gregorian


calendar.


1.9 CONTRACT YEAR means a period of twelve (12) consecutive months beginning on the


Effective Date or on the anniversary thereof.


1.10 CAPITAL GOODS means-


fa) Plant or equipment (but not motor vehicles of any kind), and spare parts for these


goods, for use exclusively and directly in manufacturing, agriculture, or forestry.


(b) The following goods for a producer’s use exclusively and directly in a mining or


petroleum project or in mining or petroleum exploration or development---


(c) Plant or equipment (including four-wheel-drive motor vehicles but not motorcycles,


sedans or luxury vehicles as defined by regulation) and spare parts for these goods;


and,


(d) From the inception of exploration until the date commercial production begins,


intermediate inputs (including but not limited to explosives, drilling mud, grinding balls,


tires for trucks used in operations, and similar items specified in regulations).


1.11 CRUDE OIL means crude mineral oil, asphalt, ozokerite, and al) kinds of Petroleum and


bitumen, either solid or liquid in their natural condition or obtained from Natural Gas by


condensation or extraction, including condensates and Natural Gas liquids.


1.12 CONTRACTOR means HONGKONG TONGTAI PETROLEUM


INTERNATIONAL CORPORATION LTD


and any of its successors and permitted assigns that shall act as operator and shall conduct


Petroleum Operations.


1.13 CONTRACT means this Production Sharing Contract and its appendices forming an integral


part hereof, together with any extension, renewal, replacement or modification hereto, which


may be mutually agreed between the Parties.


1.14 COMMERCIAL PRODUCTION


(a) “commercial production’ begins on the date of the first shipment of petroleum or


natural gas extracted from the area covered under this Agreement as part of a regular


program of profit-seeking activity.


(b) Commercial production ends on the last day of a tax period in which the number of


shipments is less than one-tenth of the average shipments during the first three years


of commercial production.











3


1.15 DELIVERY POINT means the F. 0. B. point connection the loading facilities to the vessel when


loading Crude Oil in the Republic of Liberia or any other transfer point mutually agreed between


the Parties.


1.16 FISCAL YEAR means a period of twelve (12) consecutive months beginning on January first


(1st) and ending on the following December thirty-first (31s').


1.17 EFFECTIVE DATE means the date on which this Contract comes into force and effect, as


defined in Article 37.


1.18 PETROLEUM COSTS means all expenditures actually incurred and paid by the Contract for


the purposes of the Petroleum Operations under this Contract, and determined in accordance


with the Accounting Procedure attached hereto as Appendix 2.


1.19 DOLLAR means dollar of the United States of America.


1.20 DELIMITED AREA means the area in respect of which NOCAL under this Contract, grants to


the Contractor an exclusive exploration right. The areas surrendered by the Contractor in


accordance with the provisions of Articles 3.5 and 3.6 shall be deemed as excluded from the


Delimited Area, which shall be reduced accordingly. Conversely, the Exploration Perimeter(s)


shall be an Integral part of the Delimited Area during the term of the relevant exclusive


exploration authorization.


1.21 EXPLOITATION PERIMETER means any part of the Delimited Area in respect of which


NOCAL has granted to the Contractor an exclusive exploitation authorization.


1.22 FIELD means a commercial accumulation of Petroleum in one or several overlaying horizons,


which has been appraised in accordance with the provisions of Article 11,


123 NATURAL GAS means methane, ethane, propane, butane and dry or wet gaseous


hydrocarbons, whether or not associated with Crude Oii, as well as gaseous products extracted


in association with Petroleum, such as without limitation, nitrogen, hydrogen sulfide, carbon


dioxide, helium and water vapor.


124 NON-ASSOCIATED NATRURAL GAS means Natural Gas other than Associated Natural Gas.


125 PETROLEUM OPERATIONS means ali activities undertaking by the Contractor, including but


not limited to exploration, development, drilling, production, exploitation, processing, storage,


transport, distribution, sale, etc of Crude Oil and Natural Gas.


126 PARTIES means NOCAL and the Contractor; and PARTY means either NOCAL or the


Contractor.


127 REVENUE CODE means the Revenue Code of Liberia Act of 2000, as such may be amended


from time to time, or any succession code.


128 TOTAL PRODUCTION means the total production of Crude Oil or the total production or


Natural Gas obtained from the whole Delimited Area less the quantities used tor the


requirements of the Petroleum Operations and any unavoidable losses.








4


 1.29 THRID PARTY means a company or any other entity, other than the Contractor, which does


not come within the foregoing definition.





1.30 TRUST means any testamentary or inter vivos arrangement under which property is placed in


the hands of a trustee for management or distribution. A trustee is:











(a) An executor, administrator, tutor, or curator,


(b) A liquidator or judicial manager,


(c) A person having or taking on the administration or control of property subject to


another person having a beneficial interest in the property,


(d) A person acting in a fiduciary capacity,


(e) A person having the possession, control, or management of the property of a person


under a legal disability, or


(9 A person who manages property under a private foundation or other similar


arrangement.


ARTICLE 2


SCOPE OF THE CONTRACT


2.1 The Contract is a Production Sharing Contract and includes all the provisions of the agreement


between NOCAL and the Contractor.


2.2 NOCAL authorizes the Contractor to be the Operator pursuant to the terms set forth herein


and to'carry out the useful and necessary Petroleum Operations in the Delimited Area, on an


exclusive basis.


2.3 The Contractor under takes, for all the work necessary for carrying out the Petroleum


Operations provided for hereunder, to comply with good international petroleum industry


practice and to be subject to the laws and regulations in force in Liberia unless otherwise


provided under this Contract.


2.4 The Contractor shall supply all financial and technical means necessary for the proper


performance of the Petroleum Operations.


2.5 The Contractor shall bear alone lhe financial risk associated with the performance of the


Petroleum Operations. The Petroleum Costs related thereto shall be recoverable by the


Contractor in accordance with the provisions or Article 16.2.


2.6 During the term hereof, in the event of production, the Total Production arising from the


Petroleum Operations shall be shared between the Parties according to the terms set forth in


Articles 16.2 and 16.3.


2.7 On the Effective Date, the Delimited Area shall be the area as defined in Appendix 1.





5


2.8 The Contractor shall furnish NOCAL with all reports, information and data referred to


hereunder, including without limitation any agreement, for the provision of goods and services


in respect of Petroleum Operations in excess of $100,000, binding on the entities constituting


the Contractor.


ARTICLE 3


DURATION OF EXPLORATION PERIODS AND SURRENDERS


3.1 The exclusive exploration authorization is hereby granted to the Contractor for a period of


seven (7) consecutive years defined by three consecutive periods.


A first Exploration Period of three (3) Contract Years, a second Exploration Period of two (2)


Contact Years and the third Exploration Period of two (2) Contract Years in respect of the entire


Delimited Area.


3.2 If during the first exploration period set forth above the Contractor has fulfilled the exploration


work commitments defined in Article 4, as ascertained by the Government, the exclusive


exploration authorization shall, at the Contractor’s request, be renewed for a second


exploration period of two (2) Contract Years.


3.3 If, at the end of such second exploration period and provided that is has fulfilled its work


commitments as set forth above, and the Contractor so requests, a third exploration period


shall be authorized for two (2) Contractual Years.


3.4 The applications referred to in Articles 3.2 and 3.3 shall be made at least sixty (60) days prior to


the expiration of the current exploration period.


3.5 The Contractor shall surrender at least the following surfaces:


a. twenty-five percent (25%) of the initial surface of the Delimited Area at the expiration of


the first exploration period.


b. Twenty-five percent (25%) of the initial surface of the Delimited Area at the expiration


of the second exploration period.


Such surrenders shall be constituted of one area cr a limited number of areas of simple


geometrical shape delimited by north-south, east-west lines or by natural boundaries of the


area concerned.


For the purpose of computing the surface to be surrendered, the surface in respect to any


Exploration Perimeter shall be deducted form the initial surface of the Delimited Area.


The surfaces previously surrendered pursuant to the provisions of Article 3.6 shall be deducted


for the surfaces to be surrendered.


Subject to its compliance with the above-mentioned requirements, the Contractor shall have


the right to determine the size, shape and location of areas to be surrendered.








6


j The Contractor undertakes to furnish NOCAL with a precise description and a map showing the


details of the surrendered areas and those retained, together with a report specifying the work


| carried out in the surrendered areas from the Effective Date and the results obtained.


3.6 During any exploration period, the contractor may, at any time, notify NOCAL that it surrenders


j the whole or any part of the Delimited Area and the rights granted to it by giving sixty (60) day’s


| notice to that effect.


! No surrender during or at the expiration of any exploration period shall reduce the work


i commitments and the investment obligations set forth in Article 4 for the current exploration


period.


In the event of surrender, the Contractor shall have the exclusive right to retain, for their


respective term, the surfaces in respect of respect of Appraisal Perimeters and Exploitation


Perimeters which would have been granted and to carryout the Petroleum Operations therein.


3.7 At the expiration of the third exploration period set forth in Article 3.3, the Contractor shall


surrender the whole remaining surface of the Delimited Area expect as to any Appraisal


Perimeters and Exploitation Perimeters which would have then been granted.


3.8 If at the expiration of all the exploration periods the Contractor has not obtained an exclusive


appraisal authorization or an exclusive exploitation authorization, this Contractor shall


terminate.


If an exploratory well is operating at the expiry of an exploration period, then NOCAL shall grant


Contractor an extension of lhe exclusive exploration authorization of 60 days (after the


exploration well is terminated and the rig released) in order to evaluate the results of the well.


3.9 The termination of this Contract, whatever the reason thereof, shall not relieve the Contractor of


any obligations under this Contracts incurred prior to, or arising from, said termination and


which shall be fulfilled.








ARTICLE 4


EXPLORATION WORK COMMITMENTS


The Contractor shall commence the geological and seismic work within three months from the Effective


Date.


The Contractor, during the first exploration period defined in Article 3.1, shall carry out a minimum work


programme at a cost of no less than 100 million Dollars which includes the following:





(a) 3D Seismic Survey of 1,600 sq. km.


(b) 2D Seismic Survey of 600 km


(c) Marine, geological and geophysical studies, and


(d) drilling of one (1) exploration well.











7


The Contractor, during the second exploration period defined in Article 3.1, shall carry out a minimum


work programme at a cost of no less than 150 million Dollars, including acquisition of 800 sq. km of 3D


Seismic Data and commitment to drill a minimum of one (1) exploration well.


The Contractor, during the third exploration period defined in Article 3.1, shall carry out a minimum work


programme at a cost no less than 200 million Dollars, including acquisition of 800 sq. km. of 3D Seismic


Data and commitment to drill a minimum of one (1) exploration well.


Each of the exploratory wells shall be drilled to a minimum depth of two thousand (2,000) meters, after


deduction of the water depth, or to a lesser depth if the continuation of drilling performed in accordance


with good international petroleum industry practice is prevented for any of the following reasons;


(a) The basement is encountered at a lesser depth than the minimum contractual depth;


(b) Continuation of drilling presents an obvious danger due to the existence of abnormal formation


pressure;


(c) Rock formations are encountered the hardness of which prevents, in practice, the continuation


of drilling by the use of appropriate equipment;


(d) Petroleum formations are encountered the crossing of which requires, for their protection, the


laying of casing preventing the minimum contractual depth from being reached.


In the event that any of the above reasons occurs, the exploratory vrell shall be deemed to have been


drilled to the minimum contractual depth.


Notwithstanding any provision in this Article to the contrary, NOCAL and the Contractor may, at any


time, agree to abandon the drilling of a well at a lesser depth than the minimum contractual depth


In order to carry out the exploration drilling defined in Article 4.3 and 4.4 in the best technical conditions


in accordance with good international petroleum industry practice, the Contractor undertakes to make


the expenditure required to meet the objectives of the well work programme which will include drilling


and as appropriate, testing.


If during the exploration period the Contractor has performed its work commitments for an amount


lesser than the amount specified above, it shall be deemed to have fulfilled its investment obligations


relating to that period. Conversely, the Contractor shall perform the entirety of its work commitments set


forth in respect of an exploration period even if it results in exceeding the amount specified above for


that period.


If at the expiration of any of the three (3) exploration periods defined in Articles 3.1, 3.2 and 3.3 or upon


the date of surrender of the whole Delimited Area, or upon the date of termination of this Contract, the


Contractor has not fulfilled its applicable work commitments set forth in this Article, it shall pay as


compensation to NOCAL, within thirty (30) days after that date of expiration, surrender or termination,


the unspent balance of exploration work commitments above-defined for the current exploration period.




















8


 ARTICLES 5





ESTABLISHMENT AND APPROVAL OF ANNUAL WORK PROGRAMS AND BUDGETS








5.1 At least three (3) months before the beginning of each Calendar Year, or for the first year,


within one (1) month from the Effective Date, the Contractor shall prepare and submit for


approval to NOCAL, an Annual Work Program together with the related Budget for the entire


Delimited Area, specifying the Petroleum Operations that the Contractor proposes to perform


during the Calendar Year and their cost.


5.2 If NOCAL wishes to propose any revisions or modifications to the Petroleum Operations


specified in said Annual Work Program, it shall, within thirty (30) days after receipt of the


program, so notify the Contractor, presenting all justifications deemed useful. In that event,


NOCAL and the Contractor shall meet as soon as possible to consider the proposed revisions


or modifications and to mutually establish the Annual Work Program and the related Budget in


its final form, in accordance with good international petroleum industry practice. However,


during the Exploration Period, the Annual Work Program and the related Budget established by


the Contractor after the above mentioned meeting shall be deemed to be approved provided


that they comply with the obligations set forth in Article 4 and provided that any increase in


expenditure is mutually agreed by NOCAL and the Contractor in the forum of a Joint


Operations Committee according to the terms of Article 5.5.


Each part of the Annual Work Program and Budget in respect of which NOCAL has not


proposed any revision or modification within the period of thirty (30) days above-mentioned,


shall be carried out by the Contractor within the stated time.


5.3 Should NOCAL fail to notify the Contractor of its wish for revision or modification within the


period of thirty (30) days above-mentioned, such Annual Work Program and the related Budget


submitted by the Contractor shall be deemed to be approved by NOCAL. It is agreed by


NOCAL and the Contractor that the Contractor may acquired knowledge as and when the work


is implemented, or certain events may justify changes to the details of the Annual Work


Program. In that event, after notification to NOCAL, the Contractor may make such changes


provided that the basic objectives of said Annual Work Program are not modified.


5.4 Whenever NOCAL is required to exercise its discretion or its approval is required under this


Agreement, it shall exercise its discretion or grant its approval on the basis of the efficient and


economic conduct of Petroleum Operations in respect of the Delimited Area and in accordance


with good international oil industry practice.


5.5 At the commencement of the first Exploration Period NOCAL and the Contractor shall form a


Joint Operations Committee (JOC) consisting of not more than three (3) members appointed by


NOCAL and not more than three (3) members appointed by the Contractor The purpose of this








9


 JOC will be to review present and future Petroleum Operations and report jointly to NOCAL and


the Contractor.


5.6 The JOC shall meet twice every calendar year or as otherwise agreed by the members. No


meeting of the JOC shall be held unless two (2) members each appointed by the Contractor


and NOCAL are present.


5.7 The Contractor shall appoint the first Chairman of the JOC who shall hold office until the


second anniversary following the Effective Date. Thereafter, NOCAL and the Contractor shall


have the alternating right to nominate a Chairman of the JOC who shall hold office for a period


of two (2) years.


5.8 All costs of the meeting of the JOC shall be borne by the Contractor and these costs will be


regarded as recoverable costs. Members of the JOC shall be entitled to sitting fees for


attendance at the JOC (payable by the Contractor) in such amounts as are agreed by NOCAL


and the Contractor.





ARTICLE 6


CONTRACTOR’S OBLIGATIONS IN RESPECT OF THE EXPLORATION PERIODS AND














ENVIRONMENTAL MANAGEMENT


6.1 The Contractor shall provide all the necessary funds and purchase or hire all the equipment,


facilities and materials required to carry out the Petroleum Operations.


6.2 The Contractor shall provide all technical assistance, including Hie personnel required to carry


out the Petroleum Operations.


6.3 The Contractor shall be responsible for the preparation and performance of the Annual Work


Programs which shall be carried out in the most appropriate manner in observance of good


international petroleum industry practice.


6.4 The Contractor undertakes to take all the reasonable and practical steps to:


(a) Ensure the protection of water-bearing strata encountered during its work;


(b) Carry out the tests necessary for determining the value of any show encountered


during drilling and the exploitability of any possible Petroleum discoveries and;


(c) Avoid losses and discharges of Petroleum produced as well as losses and discharges


of mud or any other product used in the Petroleum Operations.


6.5 The Contractor further undertakes to cany out all petroleum operations in accordance with the


Environmental Protection and Management Laws of Liberia and all international environmental


protocols. In this respect, the Contractor shall'


(a) Submit to the Government and Environmental Impact Statement (EIS) prior to the


commencement of exploration and production.








10


(b) Take reasonable preventative, corrective and restorative measures to protect from


pollution, contamination or damage resulting Petroleum Operations water bodies, land


surfaces and the atmosphere, and that any pollution, contamination and damage of


such water bodies, land surface and atmosphere hereunder the rectified.


Subject to tiie foregoing, and at the conclusion of Petroleum Operations in the


Delimited Area, the Contractor will undertake reasonable efforts to restore the


Delimited Area to a state in which it was before the Petroleum Operations.


6.6 All works and facilities erected by the Contractor hereunder shall, according to their nature and


to the circumstances, be built, placed, signaled, marked, fitted and preserved so as to allow at


any time and in safety free passage to navigation within the Delimited Area, and without


prejudice to the forgoing, the Contractor shall, in order to facilitate navigation, install the sound


and optical devices approved or required by the competent authorities and maintain them in a


manner satisfactory to said authorities.


6.7 In the exercise of its right to build, carry out work and maintain all facilities necessary for the


purposes hereof, the Contractor shall not disturb and existing graveyard or building used for


religious purposes, nor cause a nuisance to any government or public building, except with the


prior consent of NOCAL, and shall make good the damage caused by it in that event.


6.8 In its conduct of Petroleum Operations, the Contractor undertakes to take all necessary


precautions to prevent marine pollution.


6.9 In order to prevent pollution, NOCAL and Contractor agree that Contractor shall observe all


existing international environmental protocols, regulations and rules as may be applicable to


prevent pollution and preserve the environment. NOCAL and the Contractor shall meet and


consider any measure, which may be necessary to preserve the environment.


6.10 NOCAL and the Contractor shall commission periodic environmental audits as required to


ensure compliance with EIS.


6.11 The Contractor and its subcontractors shall be obligated to give preference to enterprises and


goods from Liberia, if conditions of proven experience, price, quality, delivery time and terms of


payment are similar to those from other countries or from non-Liberian sources. If the above


conditions are met, the Contractor commits itself to award to only Liberians, supply,


construction or service contracts, the estimated value of which is under Two Hundred


Thousand United States Dollars (US$200,000.00). In the event that the contract for supply,


construction or service is above Two Hundred Thousand United States Dollars


(US$200,000.00), and is awarded to a Non-Liberian contractor, then and in that event, such


Non-Liberian contractor shall enter into a partnership arrangement with a Liberian


company(ies).


ARTICLE 7


CONTRACTOR’S RIGHTS IN RESPECT OF THE EXPLORATION PERIODS


7.1 Without prejudice to the provisions hereof, the Contractor shall have the right to carry out the


Petroleum Operations within the Delimited area. Such rights includes, inter alia;








11


 (a) full responsibility for, management of and control over all the Petroleum Operations;


(b) authority to exercise any of the right of the rights conferred hereby through agents and




















independent contractors, and to pay accordingly any of their expenses and costs in the


place and in the currency chosen by the Contractor.


7.2 The Contractor shall have the right to clear the ground, dig, perforate, drill, build, erect, place,


supply, operate, manage and maintain ditches, pools, wells, trenches, excavations, dams,


canals, water conduits, plants, tanks, basins, maritime and other storage facilities, primary


distillation units, first extraction gasoline separator units, sulfur plants, and other facilities for


Petroleum production, together with the pipelines,, pumping stations, generator units, power


plants, high voltage lines, telephone, telegraph, radio and other communication facilities,


factories, warehouses, offices, employees' housing, hospitals, premises, orts, docks, harbors,


dikes, jetties, dredges, sea wails, under water piers and other facilities, ships, vehicles,


railways, warehouses, workshops, foundries, repair shops and ail the auxiliary services which


are necessary for or useful to the Petroleum Operations or in connection therewith; and all


additional facilities which are or may become necessary for or reasonably subsidiary Io the


carrying out of the Petroleum Operations.


7.3 The agents, employees and representatives of the Contractor or its subcontractors shall have


the right, for the purposes of the Petroleum Operations to enter into or leave the Delimited Area


and shall have free access to all the facilities set up by the Contractor.


7.4 The Contractor shall have the right, subject to the payment of fees applicable in Liberia, to


remove and use the surface soil, mature timber, clay, sand, limestone, gypsum, stones and


other similar materials, which may be necessary for the performance of the Petroleum


Operations.


With the consent of the competent administrative services, the Contractor may make


reasonable use of such materials for the performance of the Petroleum Operations, subject to


payment of fees applicable in Liberia, when they are located on land owned by the STATE and


placed in the vicinity of foe land where said Operations are taking place.


The Contractor may take or use foe water necessary for the Petroleum Operations, provided that


existing irrigation or navigation are not impaired and that land, house or watering places for


livestock are not deprived or a reasonable quantity of water.


ARTICLES


ACTIVITY REPORTS DURING THE EXPLORATION PERIODS AND SUPERVISION OF


PETROLEUM OPERATIONS








8.1 Subject to the terms of Articles 8.5 and 8.6, NOCAL shall own and may freely use all the


original data and documents relating to the Petroleum Operations such as, but without





limitation, records, samples, geological, petrophysical, drilling and operating reports.


8.2 The Contractor undertakes to furnish NOCAL with the following periodic reports:








I2


(a) daily reports on drilling operations;


(b) weekly reports on seismic operations;


(c) within thirty (30) days after each Calendar quarter, a report on the Petroleum


Operations carried out together with a detailed statement on Petroleum Costs in


respect of the preceding quarter;


(d) prior to the end of February of each Calendar Year, an annual report on the Petroleum


Operations carried out together with a detailed statement on Petroleum Costs in


respect of the preceding Calendar Year.


8.3 In addition, the following reports or documents shall be furnished to NOCAL as soon as they


are prepared or obtained:


(a) a copy of all geological surveys and syntheses together with the related maps;


(b) a copy of all geophysical surveys, measurement and interpretation reports, map


profiles, sections or other documents related thereto, as well as, at NOCAL’s request,


the originals of ail recorded seismic magnetic tapes;


(c) a copy of the drilling location and completion report for each well together with a


complete set of recorded logs;


(d) a copy of all drill tests or production tests together with any study related to the flow or


production of a well;


(e) a copy of all reports relating to core analyses.


All maps; sections, profiles, logs and all other geological or geophysical documents shall be


supplied on an appropriate transparent support in view of subsequent reproduction.


A representative portion of the cores and cuttings removed from each well, as well as samples


of fluids produced during drill tests or production tests shall also be supplies to NOCAL within a


reasonable period.


Upon expiration or in the event of surrender or termination of this Contract, the original


documents and samples relating to the Petroleum Operations shall be provided to NOCAL.


8.4 The Contractor shall keep NOCAL informed of its activities through the duly designated


representative of the latter. In particular, the contractor shall notify NOCAL as soon as possible


and in any event at least fifteen (15) days in advance of all projected Petroleum Operations,


such as any geological survey, seismic surveys, and commencement of drilling and installation


of a platform. In the event the Contractor decides to abandon a drilling it shall notify NOCAL


thereof within at least seventy-two (72) hours prior to such abandonment, unless operational


safety demands a faster response.


8.5 All data, information, documents, reports and statistics including interpretation and analysis


supplied by the Contractor pursuant to this Contract shall be treated as confidential and shall





I3


 not be disclosed by any Party to any other person without the express written consent of the


other Parties within the life f the Exploration, Appraisal or Exploration authorization period.








8.6 The provision of Article 8.5 shall not prevent disclosure:


8.6.1 By NOCAL or the State


(a) To any agency of the State or to any advisor or consultant to NOCAL


(b) For the purpose of complying with the State's international obligations for the


submission of statistic and related data.


8.6.2 By the Contractor


(a) To its affiliates, advisors or consultants


(b) To a bona fide potential assignee or all or part or the contractor’s interest


hereunder


(c) To banks or other lending institutions for the purpose of seeking external


financing of costs of the Petroleum Operations


(d) To Non-Affiliates who shall provide services for the Petroleum Operations,


including sub-contractors, vendors, and other service contractors, where this is


essential for their provision of services.


(e) Io government agencies for obtaining necessary rulings, permits, licenses and


approvals, or as may be required by applicable law or financial stock


exchange, accounting or reporting practices.


8.6.3 Any Party disclosing information or providing data Io a Third Party under the terms or


this Article shall require such persons to undertake the confidentiality of such data.


ARTICLE 9


OCCUPATION OF LAND


The STATE shall make available to carry the Contractor, and only for the purposes of the Petroleum


Operation, any land, which it owns and which is necessary for said operations. The Contractor shall


have the right to build and the obligation to maintain, above and below the ground, the facilities


necessary for the Petroleum Operations.


The Contractor shall indemnify the STATE for any damage caused to the land by the construction, use


and maintenance of its facilities on such land


The STATE shall authorize the Contractor to build, use and maintain telephone, telegraph and piping


systems above and below the ground and alone the land not belonging to the STATE, provided that the


contractor pays to the land-owners, a reasonable compensation mutually agreed upon.





14


The rights on land owned by private persons, which would be necessary for the carrying out of the


Petroleum Operations, shall be acquired by direct agreement between the Contractor and the private


person concerned.


In event of disagreement, the Contractor shall notify the STATE thereof, and the later shall proceed to


expropriation for a public purpose, at Contractor’s expenses. When determining the value of those


property rights, no consideration shall be given to the Contractor’s purpose for acquiring them and the


STATE agrees that no law or procedure for said acquisition shall have the effect of giving them an


excessive value or a confiscation value. Those rights acquired by the STATE shall be registered in its


name, but the Contractor shall be entitled to benefit therefrom for the purposes of the Petroleum


Operations. During the entire term of this contract, the STATE guarantees that the Contractor shall be


protected in the use and occupation of such land just as if it owns the property rights thereto.


ARTICLE 10


USE OF FACILITIES


10.1 For the purpose of the Petroleum Operations, the Contractor shall have the right to use, in


accordance with the applicable laws, any railroad, tramway, road, airport, landing strip, canal,


river, bridge, waterway and any telephone or telegraph network in Liberia whether owned by


the STATE or by any private enterprise, subject to the payment of fees then in effect or


mutually agreed upon which will not be in excess of the prices and tariffs charged to Third


Parties for similar ser vices.


The Contractor shall have the right to use for the purposes of the Petroleum Operations any


land, sea or air transportation means for the transportation of its employees or equipment,


subject to compliance with the laws and regulations which generally govern the use of such


means'of transportation.


10.2 The STATE shall have the right to use for exceptional matters any transportation and


communication facility installed by the Contractor, subject to a fair compensation mutually


agreed upon which will not be in excess of the prices and tariffs charged to Third Parties for


similar services provided that such use does interfere with Petroleum Operations.


10.3 Nothing in this Contract shall limit the STATE'S right to build, operate and maintain on, under


and along the land made available to the Contractor for the purposes of the Petroleum


Operators, roads, railroads, airports, landing strips, canals, bridges, pipelines, useful telephone


and telegraph lines, provided that such rights is not exercised in a manner which restricts or


hinders the Contractor’s rights hereunder, or the Petroleum Operations.





























15


 ARTICLE 11





APPRAISAL OF A PETROLEUM DISCOVERY


11.1 In the event the Contractor discovers Petroleum, it shall, as promptly as possible,


notify NOCAL thereof and submit to it, within thirty (30) days after the date ol the temporary


plugging or abandonment of the discovery well, a report including ail information relating to said


discovery.


11.2 If the Contractor wishes to undertake appraisal work relating to the


abovementioned Petroleum discovery, it shall submit for approval to NOCAL, within sis (6)


months after the date of notification of said discovery, the appraisal work program and the


estimate of the related Budget.


The Provisions of Article 5 shall be applicable, mutates mutandis, to said program as regards


its approval and performance, it being understood that the submitted program shall comply with


good international petroleum industry practice.


11.3 If the Contractor meets the conditions referred to in Article 11.2 and on request to NOCAL,


the letter shall grant to it an exclusive appraisal authorization for a duration of two (2) years


from the date of approval of the appraisal work program and the related Budget, in respect of


the Appraisal Perimeter specified in said program. Except otherwise provided by this Article,


the Contractor shall, during the term of said exclusive appraisal authorization, be subject to the


same regime as that applicable to the exclusive exploration authorization.


11.3.1 The Contractor shall then diligently cany out the appraisal work program for the


discovery in question; in particular it shall drill the appraisal wells and carry out


the production tests specified in said program.


At the Contractor’s request at least thirty (30) days prior to the expiration of the


appraisal period above-defined, the duration of said period may be extended


by a maximum of six (6) months, provided that such extension is justified by


the continuation of the drilling and production tests specified in the appraisal


program.


Further extensions of the appraisal period may be requested by the Contractor


and granted by NOCAL in the event that further geological, geophysical,


subsurface, facilities or commercial work is considered justified by the


Contractor in order to establish whether the field corresponding to the


Petroleum discovery is commercial.


11.3.2 Within three (3) months after the completion of appraisal work, and no later than thirty


(30) days prior to the expiration of the appraisal period, the Contractor shall








16


provide NOCAL with a detailed report giving ail the information relating to the


discovery and the appraisal thereof.







































































































































































17


11.3.3 If, after having carried out the appraisal work, the Contractor considers that the Field


corresponding to the Petroleum discovery is commercial, it shall submit to


NOCAL, together with the previous report, an application for an exclusive


exploitation authorization accompanied by a detailed development and


production plan for said Field, specifying inter alia;


(a) the planned delimitation of the Exploitation Perimeter applied for by


the Contractor, so that it covers the areas defined by the seismic


closure of the field concerned, together with all the technical


justifications vw'th respect to the extent of said Field;


(b) an estimate of the reserve in place; the proven and probable


recoverable reserves and the corresponding annual productions,


together with a study on the methods of recovery and the possible


valorization of the products associated with Crude Oil, such as any


Associated Natural Gas,


(c) item by item, the description of equipment and work necessary for


production, such as the number of development wells, the number


platforms, pipelines, production, processing, storage and loading


facilities together with their specifications;


(d) the estimated schedule for its implementation and the projected date


of production start-up;


(e) the estimates of investments and exploitation costs together with an


economic evaluation demonstrating the commercial nature of the


discovery in question.


11.3.4 The commercial nature of one or more Petroleum Fields shall be determined


by the Contractor, provided that it shall, at the end of appraisal work, submit to


NOCAL the economic study referred to in Article 11.3.3 (e) demonstrating the


commercial nature of said Field or Fields.


A Field may be declared commercial by the Contractor if, after taking into


account the provisions of this Contract and the submitted development and


production plan, the projected incomes and expenses determined in


accordance with good international petroleum industry practice confirm the


commercial nature of said Field.


11.3.5 For the purposes of evaluating the commercial nature of said Field or Field,


NOCAL and the Contractor shall meet within thirty (3) days after the


submission of the development and production plan accompanied by the


economic evaluation.

















18


 11.3.6 The development and production plan submitted by the Contractor shall be


subject Io the approval of NOCAL. Within nine (90) days after the submission


of said plan, NOCAL may propose revisions or modifications hereto by


notifying the Contractor thereof with all the useful justifications. In that event,


the Parties shall meet as soon as possible in order to consider the proposed


revisions or modifications and establish by mutual agreement the plan in its


final form; the plan shall be deemed to be approved by NOCAL upon the date


of such agreement.


Should NOCAL fail to notify the Contractor of its wish for revision or


modification within the above-mentioned nine (90) day period, the plan


submitted by the Contractor shall be deemed to be approved by NOCAL at the


expiration of said period.


11.4 If for reasons not technically justified, the Contractor, within twelve (12) months after notification


to NOCAL of a Petroleum discovery, has nol applied for an exclusive appraisal authorization or


if, after its granting, it has not commenced the appraisal work in respect of said discovery, or if


the Contractor, within eighteen (18) months after completion of the appraisal work, does not


declare the discovery as commercial NOCAL may require that the Contractor surrenders all its


rights in respect of the area deemed to encompass said discovery without any compensation


for the Contractor. If, within sixty (60) days after NOCAL's request, the Contractor has not


notified its decision, it shall surrender said area and will forfeit all its rights on Petroleum which


could be produced from said discovery, and any area so surrendered shall be deducted from


the surfaces to be surrendered under Article 3.5.











ARTICLE 12


GRANT OF AN EXLUSIVE EXPLOITATION AUTHORIZATION IN RESPECT OF A COMMERCIAL











DISCOVERY


12.1 A commercial Petroleum discovery shall entitle the Contractor to an exclusive right, if it so


requests pursuant to the conditions set forth in Article 11.3.3, to obtain, in respect of the field


concerned, an exclusive exploitation authorization covering the related Exploitation Perimeters


with the Delimited Area shall not be limited.


12.2 If the Contractor makes several commercial discoveries in the Delimited Area, each such


discovery shall, in accordance with provisions of Article 12.1 give rise to an exclusive


exploitation authorization each corresponding to an Exploitation Perimeter. The number of


exclusive exploitation authorizations and related Exploitation Perimeters within the Delimited


Area shall not be limited.





























]9


12.3 If in the course of work carried out after the grant of an exclusive exploitation authorization, it


appears that the area defined by the seismic closure of the Held concerned is larger than


originally estimated pursuant to Article 11.3.3, NOCAL shall grant to the Contractor, as part of


the exclusive exploitation authorization already granted, an additional area so that the entirety


of said field is included in the Exploitation Perimeter, provided, however, that the Contractor


supplies NOCAL, together with its application with the technical evidence of the extension so


required and provided, further, that the above mentioned extension is an integral part of the


Delimited Area as defined at the time of said application.


12.4 Where a field extends beyond the boundaries of the Delimited Area, NOCAL may require the


Contractor to exploit said Field in association with the right holder of the adjacent area under


the provisions of a unitization agreement.


Within six (6) months after NOCAL has notified its request, the Contractor shall submit to its


approval the development and production plan of the Field concerned which shall be prepared


in agreement with the right holder of the adjacent area.


ARTICLE 13


DURATION OF THE EXPLOITATION PERIOD


13.1 The duration of an exclusive exploitation authorization during which the Contractor is


authorized to carry out the exploitation of a Field declared commercial is set at twenty-five (25)


years from its date of issue.


If upon expiration of the exploitation period of twenty-five years above-delined, a commercial


exploitation of a Field remains possible NOCAL may authorize the Contractor, al Hie latter’s


request submitted at least twelve (12) months prior to said expiration, to continue under this


Contract the exploitation of said Field during an additional period of no more than ten (10 years,


provided that the Contractor has fulfilled all its obligations during the current exploitation period.


If, upon expiration of that additional exploitation period, a commercial exploitation of said Field


remains possible, the Contractor may request NOCAL at least twelve (12) months prior to said


expiration that it be authorized to continue the exploitation of said Field under this Contract,


during the current exploitation.


13.2 The Contractor may, at any time, fully or partially surrender any exclusive exploitation


authorization by giving at least twelve (12) months’ prior notices which may be reduced with


NOCAL’s consent.


That notice shall be accompanied by the lisl of steps which the surrendering Contractor


undertakes to lake, in accordance with good international petroleum industry practices arising


out of its surrender.


13.3 Interruption of development work or production of a Field declared commercial, for a


consecutive period of at least six (6) months, decided by the Conlractor without NOCAL’s


consent or abandonment of the exploitation of Field, may give rise to the withdrawal of the


exclusive exploitation authorization concerned. In the event of any disagreement between


NOCAL and the Contractor regarding the circumstances of the interruption then the JOC shall


meet to resolve the disagreement.








20


 13.4 Upon expiration surrender or withdrawal of the last exclusive exploitation authorization granted


to the Contractor, this Contract shall terminate.








13.5 The termination of this Contract, whatever the reason thereof, shall not relieve the Contractor of


any obligations incurred prior to, or arising from, said expiration or termination and which shall


be fulfilled.


ARTICLE 14


EXPLOITATION OBLIGATION


14.1 For any field in respect of which an exclusive exploitation authorization has been granted, the


Contractor undertakes to perform, at its sole cost and its own financial risk, all the Petroleum


Operations useful and necessary for the exploitation of said Field.


14.2 However, if the Contractor can provide accounting evidence, during either the development


period or the production period, that the exploitation of a field cannot be commercially profitable


notwithstanding that an exclusive exploitation authorization has been granted in accordance


with the provisions of Article 12.1, NOCAL agrees not to force the Contractor to continue the


exploitation of such Field.


In that event, NOCAL, in its discretion, may withdraw the exclusive exploitation authorization


concerned from the Contractor without any compensation for the latter, by giving a sixty (60)


days' prior notice.





ARTICLE 15


CONTRACTOR’S OBLIGATIONS AND RIGHTS IN RESPECT OF EXCLUSIVE EXPLOITATION





AUTHORIZATIONS





15.1 The Contractor shall commence development work not later than (6) months after approval of


the development and production plan referred to in Article 11.3.6 and shall continue it with the


maximum diligence.


15.2 The provisions of Articles 5, 6, 7, 8, 9 and 10 are also applicable, mutatis mutandis, in respect


of any exclusive exploitation authorization.


15.3 the Contractor shall have the right to build, use, operate and maintain all the Petroleum storage


and transportation facilities which are necessary for the production transportation and sale of


Petroleum produced, pursuant to the conditions specified in this Contract.




















2i


The Contractor may determine the route and location of any pipeline inside Liberia which is on


the surface land of Liberia or under the waters that lie within the jurisdiction of the State which


is necessary for the Petroleum Operations, provided that it shall submit plans to NOCAL for


approval prior to the commencement of work; any pipeline crossing or running alongside roads


or passageways (other than those used exclusively by the Contractor) shall be built so as not to


hinder the passage on those roads or passageways.


15.4 The contractor may, to the extent and for the duration of the excess capacity of a pipeline or


processing, transportation or storage facility built for the purses erf the Petroleum Operations,


be obligated to accept the flow of Petroleum coming from exploitations other than that of the


Contractor, provided that such flow shall not cause prejudice to the Petroleum Operations, and


provided, further, that a reasonable tariff covering a normal remuneration for capital invested in


respect of the pipeline or facility concerned shall be paid by the user.


15.5 Following the grant of an exclusive exploitation authorization, the Contractor undertakes to


proceed diligently with the carrying out of development wells, spacing them in a manner so as


to ensure, in accordance with good international petroleum industry practice, the maximum


economic recovery of the Petroleum contained in the Field in question.


15.6 The Contractor shall, in the conduct of development and production operations, comply with all


good international petroleum industry practice which in particular ensures Use good


conservation of fields and maximum economic recovery ot Petroleum.


The Contractor shall, inter alia, carry out enhanced recovery studies and use such recovery


processes if they may lead to an increase in Petroleum recovery rate under economic


conditions.


157 The Contractor shall provide NOCAL with all the reports, studies, measurement results, tests


and documents enabling the monitoring of the proper exploitation of each Field.


The Contractor shall, in particular, carry out the following measures on each producing well:


(a) monthly testing of production and gas/oil ratio;


(b) half-yearly measurement of the field reservoirs pressure.


15.8 The Contractor undertakes to produce every year from each Field quantities of Petroleum in


accordance with the provisions of Article 15.6.


The annual production rates of each field shall be submitted by the Contractor together with the


Annual Work Programs for the approval of NOCAL which shall not be withheld provided that


the Contractor gives proper technical and economic grounds.


15.9 The Contractor shall measure, in a point mutually agreed between the Parties, all Petroleum


produced and not used for the requirements of the Petroleum Operations, and excluding


unavoidable losses, after extraction of water and sediments, by using the measurement


appliances and procedures customarily used in the international petroleum industry.








22


The authorized NOCAL’s representatives shall have the right to examine those measurements


and inspect or cause to be inspected the appliances or procedures used. If the contractor


wishes to change said measurement appliances or procedures, it shall obtain prior approval


from NOCAL. Where the appliances and procedures used therefore have caused an


overstatement or understatement of measured quantities, the error shall be deemed to have


existed since the date of the last calibration of the appliances, unless the contrary can be


justified, and the proper adjustment shall be made for the period of existence of such error.


ARTICLE 16


RECOVERY OF PETROLEUM COSTS AND PRODUCTION SHARING


16.1 From the commencement of regular production of Crude Oil, the contractor shall market all the


production of Crude Oil obtained from the Delimited Area, in accordance with the provisions


hereinafter defined.


16.2 For file purposes of recovery of the Petroleum Costs, the Contractor may freely take each


Calendar Year a portion of the Production in no event greater than fifty percent (50%) of the


total Production of Crude Oil or gas from the Delimited Area, or only any lesser percentage


which would be necessary and sufficient to recover remaining cost.


The Value of such portion of total Production allocated to the recovery of the. Petroleum Costs


by the Contractor, as defined in the preceding paragraph, shall be calculated in accordance


with the provisions of Arttote 18.


If during a Calendar Year the Petroleum Costs not yet recovered by the Contractor under the


provisions of this Article 16 2 exceed the equivalent in value of fifty percent (50%) of the Total


Production of Crude Oil or Total Production of Gas from the Delimited Area, as calculated


above, the balance of the Petroleum Costs which cannot be recovered in that Calendar Year


shall be carried forward in the following Calendar Year or Years until full recovery of the


Petroleum Costs or until the expiration of this Contract.


16.3 The quantity of Crude Oil from the Delimited Area remaining during each Calendar Year after


the Contractor has taken from the Total Production the portion necessary for the recovery of


the Petroleum Costs, hereinafter referred to as “Remaining Oil Production,’1 shall be shared


between NOCAL and the Contractor as follows:



































23


 The Remaining Oil Production shall be shared according to the daily Total Production from the


Delimited Area:








Increments of daily oil Total ■


Production (in Barrels per NOCAL’s Share Contractor’s Share


day)


From 0 to 50.000 45% 55%


From 50,000 to 100,000 50% 50%


Over 100,000 60% 40%





16.4 In case of natural gas, the following production sharing shall apply:


Increments of daily Gas NOCAL’s Share Contractor’s Share





Total Production 50% 50%


For the purpose of this Article, the daily total Production shall be the average rate of Total


Production during the calendar quarter in question.


16.5 For the purposes of consistency with the tax laws of the Republic of Liberia, the Contractor


shall be liable to pay Its own Income Tax to the Government of Liberia.


16.6 NOCAL may receive its share of production defined in Article 16.3 and 16.4 either in kind or in


cash.


16.7 If NOCAL wishes to receive in kind all or part of its share of production defined in Article 16.3 or


16.4 it shall so notify in writing the Contractor at least ninety (90) days prior to the beginning of


the calendar quarter concerned specifying the precise quantity that it wishes to receive in kind


during said quarter.


16.8 If NOCAL wishes to receive in cash all or part of its share of production defined in Article 16.3


or 16.4 or if NOCAL has not notified the Contractor if its decision to receive its share of


production in kind pursuant to Article 16.7, the Contactor shall


market NOCAL’s share, of production to be taken in cash for the quarter concerned, lift said


Share during such quarter and pay to NOCAL within thirty (30) days following the date of each


lifting, an amount equal to the quantity corresponding to NOCAL’s share of production


multiplied by the sale price defined in Article 18.


NOCAL may require payment, for sales of its share of production sold by the Contractor, in


Dollars or in the foreign currency in which the sale has been made.























24


 ARTICLE 17





TAXATION


17.1 Unless otherwise provided for in this Contract the Contractor shall, in respect of its Petroleum





Operations, be subject to the laws generally applicable and the regulations in force in Liberia


concerning taxes which are or may be levied on incomes, or determined thereto.


17.2 Surface Rent.


(a) Annual surface rentals shall be payable to the Government of Liberia consolidated


account per square kilometer of the area remaining of the Delimited Area, in the


amounts as set out below:





Phase of Operation Surface Rentals Per Annum





First Exploration Period $40 per sq.km.





Second Exploration Period $75 per sq.km.


Third Exploration Period $ 100 per sq. km.


Development & Exploitation Area $150 per sq. km





(b) The first payment shall be made within thirty (30) days of the Effective Date and


subsequent payments within thirty (30) days of subsequent anniversaries of the





Effective Date.


(c) Surface rent amounts stated in this section shall be subject to inflationary adjustment in


accordance with the GDP Implicit Price Deflator as published and revised from time to


time by the U.S. Department of Commerce, Bureau of Economic Analysis (“the


deflator’’). The inflation-adjusted rent shall be effective January 1 of each calendar year


based on the ratio of the value of the revised deflator for the second quarter ot the


immediately preceding calendar year to the value of the revised deflator for the second


quarter of 2008.


17.3 Income Tax


(a) Rate. The rate of tax on taxable income shall be 30 percent.


(b) It is specifically acknowledged that the provisions of this Article shaH apply individually


to any entity comprising the Contractor under this Contract and the Contractor is legally


responsible for paying tax with respect to income of the project.


(c) Regardless of the legal form of organization adopted by the Contractor, the


Contractor's taxable income shall be determined separately for each Production


Sharing Contract or other project engaged in by the Contractor in Liberia, and the











25


Contractor shall not be permitted to consolidate income or loss of this Production


Sharing Contract or other project with that of any other.


(d) The filing and advance payment rules for the regular income tax under the Revenue


Code apply to Contractor.


17.4 Determination of Taxable Income


(a) For purposes of determining income tax, income derived under this contract is


considered to be income of a resident legal person or of a permanent establishment


taxable according to rules applicable to a resident legal person under the Revenue


Code. Taxable income and income tax liability are determined under provisions of the


regular income tax provisions of the Revenue Code subject to special rules under this


Article.


(b) The Contractor's gross income includes---


(1) The Contractor's cost share and profit share of income from a petroleum


project as specified in the Petroleum Law;


(2) Any other income that the Contractor receives from business activity or


investment accruing in, derived from, brought into or received In Liberia,


including currency gains when realized, less the deductions set forth in


subsection (b).


(c) Deductions Allowed from Gross Income. In accordance with the regular income tax


provisions of the Revenue Code, al! expenditures incurred during the tax period wholly,


exclusively and necessarily in connection with project operations (including non-capital


operating costs but excluding capital costs except to the extent of the annual allowance


1 for depreciation), are allowed as deductions, including but not limited to the following


items:


(1) An allowance for depreciation of plant and equipment in accordance with the


depreciation rules of the regular income tax provisions of the Revenue Code,


subject to the special rule of Article 17.5.


(2) A carryforward of net operating loss from a prior year to the extent permitted


under the regular income tax provisions of the Revenue Code as modified by


Article 17.6.


(3) Interest on any indebtedness of the project, and other financing costs incurred


in connection with operations and paid to an affiliate or to a third party, for the


tax period incurred, subject to the special rule of Article 17.7.


(4) Exploration expenditures incurred that are attributable to the project, to the


extent allowed by Article 17.8


(5) Payments to a Government-approved trust fund for reclamation and


decommissioning, subject to the specific limitations set out in Article 17.9.











26


(6) Subject to the regular income tax provisions of the Revenue Code,


management fees paid, whether to an affiliate or to a third party, but not the


amount in excess of 2 percent of other operating expenses incurred for the tax


period.


(7) Subject to the regular income tax provisions of the Revenue Code, the amount


of bad debt incurred, so long as that amount was subject to income taxation in


a prior tax period.


(8) Charitable contributions made in Liberia to a qualifying organization within the


meaning of the regular income tax provisions of the Revenue Code for


educational or community development projects, social welfare, or medical


purposes or for the provision of other social services.


(9) Expenses related directly to the project’s “other income’’ under subsection


(b)(2), to the extent otherwise allowable as a deduction the regular income tax


provisions of the Revenue Code and this Article.


(c) The following expenses are not allowed as a deduction from gross income:


(1) A payment to an expatriate employee as reimbursement for taxes and duties


paid by the employee to the Government.


(2) A ioss from a hedging transaction.


(3) Any incentive deduction allowed under the Revenue Code.


17.5 Special Rule for Depreciation


(a) For property placed in service before the start of commercial production, the period for


depreciation of property described the regular income tax provisions of the Revenue


Code shall begin in the first tax period in which commercial production begins.


(b) The cost of tangible moveable property shall be recovered over the period and by the


method described in the regular income tax provisions of the Revenue Code.


(c) In place of the 15-year period set out in the regular income tax provisions of the


Revenue Code for recovering the cost of tangible fixed property and intangible


property, Contractor shall be entitled to recover the cost of this property on an asset-


by-asset basis over a five-year period at the rate of 20 percent per year.


(d) Contractor's tangible fixed property outside the project’s production area (or beginning


inside and extending outside) shall be depreciated over a 15-year period or the


expected period of commercial production (whichever is shorter) using the straight-line


method.


(d) If a project is terminated before the end of the cost recovery period, the remaining


unrecovered cost is treated as an expense deduction in determining taxable income for


the tax period in which toe project is terminated.











27


17.6 Special Rule for Net Operating Loss Carryforward. For the purposes of determining


Contractor's taxable income, the for carryforward of net operating loss under the regular


income tax provisions of the Revenue Code shall begin with the first tax period in which


commercial production begins and shall be seven years rather than five.


17.7 Special Rule for Interest Deduction


(a) Interest incurred in a tax period and subject to the limitations of the regular income tax


provisions of die Revenue Code may be carried forward to the next tax period.


fb) The amount of the carryforward is treated as interest incurred in the subsequent


period, and is deductible to the extent permitted under the regular income tax


provisions of the Revenue Code.


(c) The interest carryforward allowed by this section does not expire.


17.8 Special Rule for Exploration Costs. Exploration costs are deductible in the first tax period in


which commercial production begins.


17.9 Special Rule for Decommissioning Expenses


(a) Payment for decommissioning expenses Is deductible from gross income under Article


17.4(c) only in the amount paid during the tax period-


fl) To defray reclamation or decommissioning expenses upon cessation of


commercial production, and remedying damage caused to land used by the


project or environmental damage the project may have caused (including


damage that extends beyond the contract area), but not if drawn from a trust


fund described in paragraph (2).


(2) To a trust fund established to defray future expenses of the type specified in


paragraph (1), but only if the fund has been approved by the Minister in


regulations and subject to any limitations or requirements provided in


regulations.


(b) An amount taken as a deduction under subsection (a) but not used for the specified


purpose-


fl) If remaining after the tax period in which commercial production ends, shall be


included in income for the following tax period; or


(2) If used for another purpose, shall be included in income in the tax period within


which the amount is so used.


17.10 Attribution of Expenditures. Exploration, development, and capital goods expenditures incurred


prior to a project’s first tax period are attributable to it for income tax purposes as follows---


(a) exploration expenditures incurred prior to the identification of a site for development


are attributable to the first development site established under this Agreement and


leading to commercial production.





28


 (b) Subsequent exploration expenditures within the Delimited Area are attributed in the


same fashion to any subsequent development site leading to commercial production.





(c) Exploration, development, and capital goods expenditures not attributable to a project


as described in this paragraph are not deductible in determining taxable income.


17.11 Treatment of Property Transfers


(a) Unless an exception applies under this Article, Contractor's gain or loss on the transfer


of depreciable property used by the project is treated in accordance with the Revenue


Code. Transfer of non-depreciabie property used in the business, or transfer of


property other than property connected with petroleum, is determined in accordance


with the property transfer rules of the Revenue Code.


(b) Special Cases.


(1) Hedging. Hedging transactions are taxable as a separate business activity,


and hedging gains and losses incurred are not includible or deductible in


determining taxable income of the project.


(2) Investment Gain. Gain on property the Contractor holds for investment is


determined under the Revenue Code and is includible in income of a project,


except to the extent reduced by any deductions permitted under file Revenue


Code for loss incurred on the disposition of property other than property used


in a business if the property is held for investment.


17.12 Successor Agreement. If this agreement is terminated and a new agreement is entered into


with Contractor for the same contract area, the project's loss carryforward existing at the


termination date of the development agreement is deductible in the first tax period of file


successor project under the successor agreement, provided---


(a) The whole of the geographic area covered by the contract area of the successor


agreement is within the contract area of the original agreement; and


(b) The successor agreement entered into force within one month following the termination


of the original agreement.


17.13 Assignment of Rights and Interest. If Contract assigns its rights and interest pursuant to Article


35-


(a) The taxable income of the project shall continue to be determined using the tax cost


and other tax attributes applicable at the date of the interest transfer; and


(b) Contractor shall determine gain or loss under the regular income tax provisions of the


Revenue Code, which also applies to determine the transferee's tax cost in the


interest.





17.14 Transactions Between Related Persons











29


(a) General Rule. A project’s gain, toss, and other tax consequences in transactions with


related persons are subject to in Article 1.30 and regular income tax provision of the


Revenue Code concerning related persons.


(b) Transfer Pricing. A transaction with respect to production between Contractor and a


related person shall be on the basis of competitive International prices and such other


terms and conditions as would be fair and reasonable had the transaction taken place


between unrelated parties dealing at arms’ length.


(c) Disclosure. Contractor must---


(1) Disclose related-party transactions and contemporaneously document the


manner in which prices are set in transfers to related persons.


(2) Notarize an agreement governing a related-party transaction in accordance


with the law of the related person’s country of residence.


(d) Guidelines. The Minister shall follow OECD transfer pricing guidelines in evaluating the


validity of the price set in a related party transfer.


17.15. Partnerships and Joint Ventures


(a) Pass-Through of Tax Attributes. If Contractor is organized as a partnership or similar


form of unincorporated joint venture, the project's income, expenses, loss, credits, and


character of income or loss shall be attributed to the partners in accordance with their


interests (including toe items specified in Article 17.4, for toe purpose of determining


taxable income, loss, credits, and tax liability separately for each partner.


(b) Application of Other Rules. If subsection (a) applies- -


(1) The provisions of this Article shall apply separately to each partner;


(2) Each partner shall be considered a taxpayer and a producer and shall be liable


for income tax as determined under this Article.


17.16 Withholding Taxes. Contractor shall withhold taxes in accordance with toe general provisions


of the Revenue Code, except that it shall withhold tax on payments made to nonresidents at


the following rates---


(a) Dividends, 5 percent.


(b) Interest, 10 percent.


(cj Payments for services, 6 percent.


17.17 GoodsTax. Contractor is exempt from the payment of Goods Tax on---


(a) raw materials or other inputs for use directly in manufacturing, or raw materials for use


directly in agriculture or forestry, or in a mining or petroleum project or in natural


resource exploration and development;


(b) capital goods.








30


 ARTICLE 18





VALUATION OF PETROLEUM


18.1 For the purposes of this Contract, the Crude Oil price shall be the F.O.B. ’Market Price’ at the


Delivery Point, expressed in Dollars per barrel and payable within thirty (30) days after the date


of the bill of lading, as determined hereinafter for each quarter.


A market Price shall be determined for each type of Crude Oil or Crude Oil mix.


18.2 The Market Price applicable to lifting of Crude Oil made during a calendar quarter shaft De


calculated at the end of said quarter and shall be equal to the weighted average of the process


obtained for Crude Oil from the Delimited Area during said quarter by the Contractor and by


NOCAL from independent purchasers, as adjusted to take into account the differences in


quality and gravity as well as in F.O.B. delivery terms and payment conditions.


18.3 In the event such sales are not made, he Market Price shall be determined on the basis of the


prices obtained on the international market during said quarter between independent buyers


and sellers for sales of crude oils of quality similar to the Crude Oil from the Delimited Area in


the same markets as those in which the Liberian Crude Oil would normally be sold, as adjusted


to take into account the differences in quality, gravity, transportation as well as in sates and


payment conditions. For the avoidance of doubt, oil sales into the Liberian market shall be


valued according to the terms of this Article 18.3.







































































31


For the purposes of Article 16 of the Contract, Petroleum Costs shall be recovered In the


following sequence:


(a) exploitation expenses in respect of a Field incurred and paid


from the date of commencement of regular production;


(b) financial costs;


(c) other Petroleum Costs.


In addition, within each of the foregoing categories, the costs shall be recovered in the sequence in


which they are incurred.


Unless otherwise provided for In this Accounting Procedure the intent of the Parties is not to duplicate


any item of the creditor debit of the accounts maintained under the Contract.


II.2 Rems debited to the Petroleum Costs Account


The following expenses and costs shall be debited to the Petroleum Costs Account:


11.2.1 Personnel Expenses


All payments in respect of the salaries and wages of the Contractor’s employees will


be those costs directly assigned to the Petroleum Operations carried out under this


Contract. The precise amounts of expenses will be reviewed in the future and will be


in agreement with accepted human resource procedures adopted by the Contractor


that are generally applicable in the international oil and gas industry. The expenses


allowed will be the actual expenses incurred as permitted by such Human Resource


' Procedures.


11.2.2 Overhead Costs In Liberia


Wages and salaries of the Contractor's personnel directly engaged in the Petroleum


Operations in the Republic of Liberia, whose work time is not directly allocated to the


programs, as well as costs of maintaining and operating in Liberia a main and


administrative office and sub-offices necessary for the Petroleum Operations.


11.2.3 Overhead Costs Abroad


The Contractor shall charge costs paid abroad, connected to the


carrying out of the Petroleum Operations by the Contractor or its Affiliated Companies.


The amounts charged shall be the actual costs borne by the Contractor. These costs,


including a detailed breakdown of the costs, will be provided to the JOC for its review


and agreement




















58


11.2.4 Buildings


Construction, maintenance expenses, we well as rents paid for


All offices, houses, warehouses and buildings of other types,


Including housing for employees, and cost of equipment, furniture, and fittings


necessary for the operation of those buildings directly required for the performance of


die Petroleum Operations.


11.2.5 Materials, Equipment and Rentals


Costs of equipment, materials, machinery, and facilities


Purchased or provided for use in the Petroleum Operations, as well as rentals or


compensations paid or incurred for file use of any equipment of facilities required


directly for the performance of the Petroleum Operations.


11.2.6 Services


Costs of services directly related to Petroleum operations


Rendered by subcontractors and consultants, as well as any costs directly related to


services rendered by the STATE or NOCAL or any other authorities of the Republic of


Liberia.


Costs of services directly elated to Petroleum Operations rendered by Affiliated


Companies, provided that such costs shall not exceed those normally charged by


independent companies for an identical or similar service.


11.2.7' Insurance Premiums


Premiums paid for insurances customarily taken out for the Petroleum Operations to


be carried out by the Contractor.


11.2.8 Legal Expenses


AH expenses of handling, investigation and settlement of litigation or claims directly


arising from the Petroleum Operations.


(1.2.9. Financial Costs


AD interests paid by the Contractor in respect of the loans from Third parties and


advances obtained from Affiliated Companies, provided that those loans and advances


shall be for the purpose of the financing of Petroleum Costs related only to the


development of Petroleum Operations in respect of a field. In the event such financing


is provided by Affiliated Companies, the allowable interest rates shall not exceed the


rates customarily used in the international financial market for loans of a similar nature.














59


 112.10 Other Expenses





Any other expenses incurred and paid by the Contractor for the purposes of the


necessary and proper conduct of toe Petroieum


Operations under toe approved annual Work Programs and Budgets, other than toe


expenses covered and dealt with by toe


Foregoing provisions of this Article and other than toe expenses excluded from the


Petroleum Costs.


11.3 Expenses not chargeable to the Petroleum Costs Account


The expenses which are not directly necessary for the performance of toe Petroleum


Operations, and the expenses excluded by toe provisions of toe Contract or this Accounting


Procedure as well as by toe regulations in force in Liberia, are not chargeable to the Petroleum


Costs Account and shall therefore not be recoverable.


Such expenses shall include, without limitation:


(a) expenses relating to the period before the Effective Date;


(b) any expenses relating to the operations carried out beyond the Delivery Point, such as


transportation and marketing costs;


(c) financial costs relating to the financing of exploration Petroleum Operations, and those


relating to the share of financing of development Petroleum Operations;


(d) bonuses defined in Article 19 of toe Contract;


(e) exchange losses.








II.4 Items credited to the Petroleum Costs Account


The following Incomes and proceeds shall, inter alia, be credited to the Petroleum Costs


Account:


(a) income arising from the marketing of the quantity of Crude Oil to which toe Contractor


is entitled under Article 16 of the Contract for the purpose of recovery of the Petroleum


Costs;


(b) any other incomes or proceeds related to toe Petroleum Operations specifically those


arising from:


• Sales of related substances;


• Any services rendered to Third Parties using toe facilities dedicated to the


Petroleum Operations, including, but not limited to, processing, transportation


and storage of products for Third Parties in those facilities.








60


 Article III ~ Cost Evaluation Basis For Services, Materials and Equipment Used in the Petroleum


Operations





111,1 Technical Services


A reasonable rate shall be charged for the technical services rendered by the Contractor or its


Affiliated Companies for the direct benefit of the Petroleum Operations carried out under the


Contract, such as gas, water, core analyses and any other analyses and tests, provided that


such charges shall not exceed those normally charged by independent technical service


companies and laboratories for similar services.


II 1.2 Purchase of Materials and Equipment


Materials and equipment purchase from third Parties and directly necessary for the


performance of the petroleum Operations carried out under the Contract shall be charged to


the Petroleum Costs Account at ‘Net Cost* incurred by the Contractor.


‘Net Cost” shall Include such items as taxes, shipping agent fees, transportation, loading and


unloading costs, license fees, related to the supply of materials and equipment, as well as


transit losses not recovered through insurance.


111.3 Use of Equipment and Facilities Exclusively by the Contractor


Equipment and facilities owned by the Contractor and used directly for the petroleum


Operations shall be charged to the Petroleum Costs Account at a rental rate which shall be


sufficient to cover maintenance, repairs, depreciation and services required for the


performance of the Petroleum Operations.


111.4 Valuation of Materials


All materials transferred to Liberia from the Contractor’s warehouses, or from those of any


entity constituting the Contractor or their Affiliated Companies, shall be valued as follows:


(a) New Material


New material (condition ‘A’) means new material which Has never been used; one


hundred percent (100%) of the current market price, which corresponds to the price


normally charged for similar supplies in arm's length transactions between buyer and


seller.


Material in good condition (condition “B") means material in good condition which is still


usable for its original purpose without repair, at a maximum of seventy-five percent


(75%) of the price of new material.


(b) Other Used Material














61


 Other used material (condition 'C') means material still usable for Its original purpose,


but only after repairs and Reconditioning: at a maximum of fifty percent (50%) of the








price of new material.


(c) Material In Poor Condition


Material in poor condition (condition *D’) means material no longer usable for its


original purpose but still usable for other purposes: at a maximum of twenty-five


percent (25%) of the price of new material.


(d) Scrap Material


Scrap material (condition *E") means material beyond usage and repair prevaUiag


price of scrap material.


IN .5 Materials and Equipment Disposed By the Contractor


Material and equipment purchased by aft the entities constituting the Contractor shall be valued


in accordance with the principles defined in. Article 111.4 above.


Materials and equipment purchased by any entity constituting the Contractor or by Third Partes


shall be valued at the received sale price, which shall in no event be less than the price


determined in accordance with the principles defined in Article 111.4 above.


The corresponding amounts shall be credited to the Petroleum Costs Account.








Article IV - Inventories





W.1 Period





The Contractor shall keep a permanent inventory both in quantity and value of all normally


controllable materials used for the Petroleum Operations and shall proceed at reasonable





intervals with the physical inventories as required by the Parties.


W.2 Notice


A written notice of intention to take an inventory shall be send by the Contractor at least ninety


(90) days prior to toe commencement of said Inventory so that the STATE and the entities


constituting the Contractor may be represented at their own expenses during the inventory


operations.


IV. 3 Information





In the event the STATE or any entity constituting the Contractor shall not be represented at an


inventory, such Party or Parties shall be bound to accept toe inventory taken by the Contractor


which shall furnish to such Party or Parties a copy of said inventory.


Article V - Financial and Accounting Statements














62


18.4 The following transactions shall, inter alia, be excluded from the calculation of the market Price


of Crude Oil;


(a) sales in which the buyer is an Affiliated Company of the seller as well as sales between


entities constituting the Contractor;


(b) sales in exchange for other than payment in freely convertible currencies and sales


fully or partially made for reasons other then the usual economic incentives involved in


Crude Oil sales on the international market (such as exchange contracts, sales from


government to government or to government agencies).


18.5 Within ten (10) days following the end of each quarter, the Parties shall advise each other of


the prices obtained for their share of production of Crude Oil from the Delimited Area sold to


independent purchasers during the quarter in question, indicating for each sale the identity of


the purchaser, the quantities sold, the delivery and payment terms.


Within twenty (20) days following the end of each quarter, the Contractor shall determine in


accordance with the provisions of Article 18.2 or Article 18.3, as the case may be, the market


Price applicable for the quarter concerned, and shall notify NOCAL of that market Price,


Indicating foe method of calculation and all data used in the calculation of that Market Price.


With in thirty (30) days following receipt of the notice referred to in foe preceding paragraph,


NOCAL shall verify that foe calculation of Market Price complies with the provisions hereof and


shall notify the Contractor of its acceptance or objections. Failing notification from NOCAL


within that thirty (30) day period the market Price provided for in the Contractor’s notice referred


to in the preceding paragraph shaii be deemed to have been accepted by NOCAL.


In the event that NOCAL has notified objections to the market Price, the parties shall meet


within fifteen (15) days following NOCAL's notification to mutually agree on the market Price. If


the parties fail to agree on the market Price applicable to a given quarter within seventy-five


(75) days after foe end of that quarter, NOCAL or foe Contractor may immediately submit to an


expert, appointed to accordance with the following paragraph, foe determination of foe Market


Price (including foe determination of reference crude oils if foe parties have not determined


them).


The expert shall determine foe price within thirty (30) days after his appointment and his


conclusions shall be final and binding on foe Parties. The expert shall decide in accordance


with the provisions of this Article.


The expert shall be selected by agreement between the parties or, if no agreement is reached,


by the International Center of Expertise of the International Chamber of Commerce in


accordance with its rules on Technical Expertise, at the request of the most diligent party. The


expertise costs shall be charged to foe Contractor and included in the Petroleum Costs.




















32


18.6 In the event it would be necessary to calculate on a provisional basis during a quarter the


Crude Oil price applicable to the lifting made during said quarter, that price shall be established


as follows:


(a) For any sale to independent buyers, the price applicable to that sale shall be the price


obtained for the Crude Oil for said sale, as adjusted to take into account the F.O.B.


delivery terms and thirty (30) days payment terms.


(b) For any lifting other than those which are the subject of a sale to independent buyers,


the price applicable to that lifting shall be the Market Price determined for the


preceding quarter or, if that Market Price has not been determined a price set up by


agreement between the Parties or, failing agreement, toe last known Market Price.


Once the market Price for a quarter has been determined on a final basis, adjustments, if


required, shall be made within thirty (30) days.


PAYMENT OF ROYALTY


The contractor shall pay directly to toe Government of Liberia, a royalty of twelve (12%) and toe


total production of liquid and gaseous hydrocarbon from the petroleum operation.


EQUITY PARTICIPATION OF THE GOVERNMENT


The Government of Liberia, through NOCAL, in addition to other right, interest, fees, benefit


contained herein, shall receive fees, of charge, equity interest of twenty percent (20%) of the


authorized, issued and outstanding capital share of toe contractor in the petroleum operations


at any time without dilution.


STOCK PURCHASE BY LIBERIAN CITIZENS


Not later than one hundred eighty (180) days of the Effective Date of this agreement, the


contractor shall notify NACOL, that shares equivalent to ten percent (10%) of its stocks are


available for purchase by Liberian citizens.


ARTICLE 19


BONUSES AND HYDROCARBON DEVELOPMENT FUND


19,1 The Contractor shall pay to NOCAL the following bonuses:


(a) 4 million dollars when the total Production of Crude Oil from the Delimited Area first


reaches the average rate of thirty thousand (30,000) barrels per day during a period of


thirty (30) consecutive days.











33


(b) 5 million dollars when the total Production of Crude Oil from the Delimited Area first


reaches the average rate of fifty thousand (50,000) barrels per day during a period of


thirty (30) consecutive days.


(c) 7 million dollars when the Total Production of Crude Oil form the Delimited Area first


reaches the average rate of one hundred thousand (100,000) barrels per day during a


period of thirty (30) consecutive days.


Each of the amounts referred to in (a), (b), and (c) above shall be


paid with thirty (30) days following the expiration of the reference


period of thirty (30) consecutive days.


19.2 These bonuses shall not be recoverable and shall therefore not


be treated as Petroleum Costs.


19.3 HYDROCARBON DEVELOPMENT FUND


19.3.1 To stimulate research in the field of hydrocarbon, most especially in


continental areas, and to assist the Government in its overall goal of achieving


energy sustainability, a Hydrocarbon Development Fund, to be managed by


NOCAL, has been established.


The Contractor shall make an annual contribution of $300,000.00 during


exploration and $600,000.00 during production to this Fund. The first payment


shall be made within thirty (30) days of the Effective Date of this Agreement


and thirty days after each subsequent anniversary.


19.3.2 The contribution to the Hydrocarbon Development Fund referred to in Article


19.3.1 will be recoverable and therefore, shall be considered as Petroleum


Costs.


19.4 RURAL ENERGY FUND


19.4.1 In accordance with the National Energy Policy, a Rural Energy Fund


(REFUND) has been established, inter alia, to integrate renewable energy


technologies into rural development Considering that oil is a finite resource, it


is the policy of the Government that oil resources be used to support the


development of renewable energy resources in order to ensure energy


security and sustainability upon cessation of petroleum production.


The contractor shall therefore make an annual contribution of $200,000.00


during exploration and $400,000.00 during production through the Ministry of


Finance to the REFUND. The first payment shall be made within thirty (30)


days of the Effective Date of this Agreement and thirty (30) days after


subsequent anniversary.











ARTICLE 20








34


 OWNERSHIP ANO ABANDONMENT OF ASSETS


20.1 Upon expiration, surrender or termination of this Contract, whatever the reason thereof, in


respect of all or part of the Delimited Area, or at the end of exploitation of a Field, the


Contractor shall transfer at no cost to NOCAL the ownership of assets, movables and


immovables, used for the requirements of the Petroleum Operations carried out in the area so


surrendered, located whether inside or outside the Delimited Area, such as wells and their


equipment, building, warehouses, docks, lands, offices, plants, machinery and equipment,


bases, harbors, wharfs, jetties, buoys, platforms, pipelines, roads, bridges, railroads and other


facilities.


Such transfer of ownership shall cause the automatic cancellation of any security or surety


concerning those assets, or which those assets constitute.


However, the Contractor may continue to use those assets beyond the date referred to in the


first paragraph, for the requirements of its Petroleum Operations in Liberia governed by other


contracts.


20.2 If NOCAL decides not to accept, for all or part of the assets, the transfer of ownership provided


for in Article 20.1, it may, not later than ninety (90) days following the date specified in said


Article, require the Contractor in accordance with good international petroleum industry


practice, to perform abandonment operations and to remove, at the cost of the Contractor, the


facilities relating to the surrendered area.


ARTICLE 21


NATURAL GAS


21.1 Non-Assoclated Natural Gas


21.1.1 In the event of a Non-Associated Natural Gas discovery, the Contractor shall


engage in discussions with NOCAL with a view to determining whether the


appraisal and exploitation of said discovery have a potentially commercial


nature.


21.1.2 If the Contractor, after the above-mentioned discussions, considers that the


appraisal of such Non-Associated Natural Gas discovery is justified, it shall


undertake the appraisal work program for said discovery.


The Contractor shall have the right, for the purposes of evaluating the


commerciality of the Non-Associated Natural Gas discovery, if ft so requests at


least thirty (30) days prior to the expiration of the third exploration period set


forth in Article 3.3 to be granted an exclusive appraisal authorization


concerning the Appraisal Perimeter of the abovementioned discovery, for a


term of two (2) years.


In addition, the Parties shall jointly evaluate the possible outlets for the Natural


Gas, both on the local market and for export, together with the necessary








35


means for its marketing, and they shall consider the possibility of a joint


marketing of their shares of production in the event the Natural Gas discovery


would not otherwise be commercially exploitable. For that purpose, a


Consultative Committee for Natural Gas shall be established by the Parties to


ensure the coordination of the upstream and downstream components of the


Natural Gas project and facilitate its evaluation and implementation.


















































































































































36


21.1.3 Following completion of appraisal work, in the event the Parties should jointly


decide that the exploitation of that discovery is justified to supply the local


market, or In the event the Contractor should undertake to develop and


produce that Natural Gas for export, the Contractor shall submit prior to the


expiration of the appraisal period an application for and exclusive exploitation


authorization which NOCAL will grant under the terms provided by Article 12.1.


The Contractor shall then have the right and obligation to proceed with the


development and production of that Natural Gas in accordance with the


approved development plan referred to in Article 11.3 and the provisions of


this Contract applicable to Crude Oil shall apply, mutatis mutandis, to Natural


Gas, unless otherwise specifically provided under Article 21.3.


21.1.4 If the Contractor considers that the appraisal of the Non-Associated natural


Gas discovery concerned Is not justified, NOCAL may. by giving twelve (12)


months prior notice which may be reduced either with NOCAL's consent or


automatically in the event the exclusive exploration authorization expires


earlier, require foe Contractor surrender its rights in respect of the area


encompassing said discovery.


In the same manner, if the Contractor, after completion of appraisal works,


considers that foe Non-Associated Natural Gas discovery is not commercial,


NOCAL may, by giving three (3) months prior notice, unless the exclusive


exploration authorization expires earlier, require the Contractor to surrender its


rights on the area encompassing said discovery.


In both cases, foe Contractor shall forfeit its rights to all Non-Associated


natural Gas which could be produced from said discovery, and NOCAL may


then cany out, or cause to be carried out, all foe appraisal, development,


production, processing, transportation and marketing work relating to that


discovery, without any compensation for foe Contractor,


21.1.5 Notwithstanding the terms of Article 21.1.4, if foe Operator Is of foe view that


foe Non-Associated Gas discovery in question is non-economic as a


standalone development but can demonstrate that there is sufficient


prospectivity in foe region to support a combined development of current


discovered reserves and future exploration prospects as a combined economic


development, then NOCAL will provide foe Contractor a period of thirty-six (36)


months before exercising its rights pursuant to Article 21.1.4.
































37


21.2 ASSOCIATED NATURAL GAS





21.2.1 In the event of a commercial discovery of Crude Oil, the Contractor shall state


if it considers that the production of Associated Natural Gas is likely to exceed


the quantities necessary for the requirements of the Petroleum Operations








related to the production of Crude Oil (including re-injection operations), and if


it considers that such excess is capable of being produced in commercial


quantities. In the event the Contractor shall have informed NOCAL of such as


excess, the Parties shall jointly evaluate the possible outlets for that excess of


Natural Gas, both on the local market and for export (including the possibility


of joint marketing of their shares of production of that excess of Natural Gas in


the event such excess would not other wise be commercially exploitable),


together with the means necessary for its marketing.


In the event the Parties should decide that the development of the excess of


Natural Gas is justified, or in the event the Contractor would wish to develop


and produce that excess for export, the Contractor shall indicate in the


development and production program referred to in Article 11.3.3 the


additional facilities necessary for the development and exploitation of that


excess and its estimate of the costs related thereto.


The Contractor shall then have the right to proceed with the development and


exploitation of that excess in accordance with the development and production


program approved by NOCAL under the terms provided by Article 11.3.6, and


the provisions of the Contraci applicable to Crude Oil shall apply, mutatis


mutandis, to the excess of Natural Gas, unless otherwise specifically provided


by Article 21.3.


A similar procedure shall be applicable if the sale of marketing of Associated


Natural Gas is decided during the exploitation of a Field.


21.2.2 In event the Contractor should not consider the exploitation of the excess of


Natural Gas as justified and if NOCAL, at any time, would wish to utilize it,


NOCAL shall notify the Contractor thereof, in which event





(a) the Contractor shall make available to NOCAL free of charge at the


Crude Oil and Natural Gas separation facilities all or part of the excess


that NOCAL wishes to lift


(b) NOCAL shall be responsible for the gathering, processing,


compressing and transporting of that excess from the


abovementioned separation facilities, and shall bear any additional


costs related thereto;


(c) the construction of the facilities necessary for the operations referred


to in paragraph (b) above, together with the lifting of that excess by


NOCAL, shall be carried out in accordance with good international











38


 petroleum industry practice and in such a manner as not Io hinder the


production, lifting and transportation of Crude Oil by the Contractor.





21.2.3 Any excess of Associated Natural Gas which would not be


utilized under Articles 21.2.1 and 21.2.2, shall be re-injected by the Contractor.


However, the Contractor shall have the right to flare said gas in accordance


with good international petroleum industry practice, provided that the


Contractor furnishes NOCAL with a report demonstrating that said gas cannot


be economically utilized to improve the rate of recovery of Crude Oil by means


of re-injection pursuant to the provisions of Article 15.6, and provided, further,


that NOCAL approves said flaring, which approval shall not be unreasonably


withheld.


1.3 Provisions common to Associated and Non-Associated Gas


21.3.1 In order to encourage the exploitation of Natural Gas,


NOCAL may grant to the Contractor specific benefits when they are duly


justified concerning, inter alia, the recovery of the Petroleum Costs relating to


Natural Gas.


21.3.2 The Contractor shall have the right to dispose of its share of production of


Natural Gas, in accordance with the provisions of this Contract, it shall also


have toe right to proceed with the separation of liquids from all Natural Gas


Produced, and to transport, store as well as sell on the local market or for


export its share of liquid petroleum so separated which will be considered as


Crude Oil for the purposes of their sharing between the Parties under Article


16.


21.3:3 For toe purposes of this Contract, toe Natural Gas price, expressed in Dollars


per million BTU, shall be equal to:


(a) with respect to Natural Gas export sales to Third Parties, toe price


obtained from purchasers;


(b) with respect to sales on the local market of Natural Gas as a fuel, such


price as NOCAL and the Contractor shall mutually agree upon.


ARTICLE 22


FOREIGN EXCHANGE CONTROL


22.1 The Contractor shall comply with toe foreign exchange control regulations, subject to the


provisions of this Article.


22.2 The Contractor shall have the right to retain abroad all the foreign currencies arising from


export sales of all Petroleum to which it is entitled under this Contract, or from assignment, as


well as equity, incomes from loan and more generally, all assets acquired abroad by It, and to








39


 freely dispose of such foreign currencies or assets to the extent that they may exceed its


requirements for its operations in Liberia.





22.3 No restriction shall be exercised on importation by (he Contractor of funds intended for the


performance of the Petroleum Operations.


22.4 The Contractor shall have the right to purchase currencies of Liberia with foreign currencies,


and freely exchange into foreign currencies of its election any funds held by it in Liberia in


excess of its local requirements at exchange rates which shall not be less favorable than those


generally applicable to any other buyer or seller of foreign currencies.





ARTICLE 23


APPLICABLE LAW





The laws and regulations in force in the Republic of Liberia and the provisions of international law as


may be applicable to international oil and gas activities shall apply to the Contractor, to this Contract


and to the Operations which are the purpose thereof, unless otherwise provided by the Contract.








ARTICLE 24





MONETARY UNIT





24.1 The registers and accounting books relating to this Contract shall be maintained and recorded


in Dollars. Said registers and accounting books shall be used to determine (tie Petroleum











Costs, gross income, exploitation costs and net profits for the purpose of the preparation of the


Contractor's tax return; they shall contain, inter alia, Contractor's accounts showing the sates of


Petroleum under this Contract


24.2 Whenever it is necessary to convert into Dollars expenses and


incomes expressed in another currency, the exchange rates to be used shall be equal to the


arithmetic average of the daily closing rates for the purchase and sale of said currency during


the month when the expenses were paid and the income received.


24.3 The originals of the registers and accounting books referred to in


Article 24.1 shall be kept in Liberia.


The registers and accounting books shall be supported by detailed


Documents with respect to receipts and Petroleum Costs.


ARTICLE 25


ACCOUNTING METHOD AND AUDITS


25.1 The Contractor shall maintain its accounts in accordance with the


regulations in force and with the provisions of the Accounting Procedure set out in Appendix 2


attached hereto forming an integral part of this Contract.








40


25.2 After giving the Contractor notice thereof in writing, the STATE shall have the right cause the


registers and accounting books relating to the Petroleum Operations to be inspected and


audited by its own agents or by experts of its election, and shall have a period of four (4) years


following the end of each Calendar Year to carry out those inspections or audits relating to said


year and may submit its objections to the Contractor for any contradictions or errors found


during such inspection or audits.


Should the STATE fail to make any claim within the abovementioned period of four (4) years,


no farther objection or claim shall be made by the Liberian administration for the Calendar Year


concerned.








ARTICLE 26


IMPORT AND EXPORT











26.1 (a) The Contractor shall have the right to import into Liberia, in


its own name or on behalf of its contractors and subcontractors, all the


technical equipment, materials, machinery and tools, goods and supplies


necessary in the Contractor's opinion for the proper conduct and


achievements of the Petroleum Operations; such imports include but are not


limited to, drilling exploration, development, production, transportation, sales


and marketing, equipment pipelines, tanks, geological and geophysical tools,


boats, ships, launches, drilling barges, ships and platforms, production


platforms, civil engineering and telecommunication equipment, power plants


and all related equipment, aircraft automotive equipment and other vehicles,


instruments, tools, spare parts, alloys and additives, camping equipment,


protective clothing and equipment, medical surgical and sanitary equipment,


supplies and instruments necessary for the installation and operation of


hospitals and dispensaries, documentation equipment, construction materials


of all types, lumber, office furniture and equipment, automobiles, explosives,


chemicals, fuels, ship supplies, pharmaceutical products, medicines.


(b) The Contractor shall have the right to import into Liberia, in its own name or on behalf


of its contractors or subcontractors, the furniture, clothing, household appliances and


all personal effects for all the foreign employees and their families assigned to work in


Liberia for the Contractor or its contractors or subcontractors.


(c) However, the Contractor, its agents, contractors and subcontractors undertake not to


proceed with the imports mentioned in Article 26.1 (a) insofar as such items are


available in Liberia under equivalent conditions of quantity, quality, price, delivery and


terms of payment unless specific requirements or technical emergencies are presented


by the Contractor.


(d) The Contractor, its agents, contractors and subcontractors shall have the right to re-


export from Liberia, free of all duties and taxes and at any time, all the items imported


under Article 26.1 (a) and (b) which are no longer necessary for the Petroleum


Operations except the items which have become the property of the State under the


provisions of Article 20.








41


26.2 During the period from the inception of exploration until the date commercial production begins,


the following goods are exempt from import duties---


(a) Plant or equipment (including four-wheel-drive motor vehicles but not motorcycles,


sedans or luxury vehicles as defined by regulation) and spare pads for these goods;


(b) Intermediate inputs (including but not limited to explosives, drilling mud, grinding balls,


tires for trucks used in operations, and similar items specified in regulations); and


(c) Raw materials.


26.3 The Contractor, its agents, contractors and subcontractors shall provided that they inform the


STATE in advance of their intent to sell and subject to the provisions of Article 20, have the


right to sell in Liberia, all equipment, materials, machinery and tools, goods and supplies which


they have imported when they are considered as surplus and no longer necessary for the


Petroleum Operations. In that event, the seller shall be responsible for paying all duties and


taxes applicable on the date of the transaction and for filing all the formalities prescribed by the


regulations in force.


26.4 During the term of fols Contract the Contractor, its customers and


their carriers shall have the right to export freely at the export point selected for that purpose,


free of all duties and taxes and at any time, the portion of Petroleum to which the Contractor is


entitled in accordance with the provisions of this Contract, after deduction of all deliveries made


to the STATE, provided however that fees for unprocessed exportables shall be paid.


26.5 Contractor is not exempt from customs service fees imposed under the Revenue Code,


including fees for the inspection or pre-shipment inspection of goods.




















ARTICLE 27





DISPOSAL OF PRODUCTION


27.1 Each Calendar Year, up to a total of ten percent (10%) of the share


of Crude Oil Production to which the Contractor is entitled, shall be sold to NOCAL by the


Contractor for the purpose of satisfying the needs, of the domestic market of Liberia. Such


contribution of the Contractor shall be in proportion to its share of production, in toe total Crude


Oil Production in Liberia.





The quantity of Crude Oil the Contractor shall be obligated to sell to NOCAL shall be notified to


it by NOCAL at least three (3) months prior to the beginning of each calendar quarter.











42


27.2 The price of the Crude Oil sold to NOCAL under Article 28.1 for the needs of the domestic


market shall be the Market Price defined in Article 18.


That Crude Oil price shall be payable to the Contractor in Dollars two (2) months after receipt


of the invoice unless otherwise agreed between the Parties.


27.3 The transfer of title, to, and risk of, the share of Petroleum production to which each party is


entitled shall be made at the Delivery Point, or at any other transfer point agreed between the


Parties.


27.4 Each of toe Parties shall have toe right and obligation, to dispose of and lift the share of


Petroleum to which It is entitled under this Contract. Such share shall be lifted on as regular a


basis as possible, it being understood that each of the Parties, within reasonable limits, will be


authorized to lift more (overllft) or less (underlift) that its share of Petroleum produced and


unlifted by toe lifting day to the extent that such overiift or underlift does not infringe on the


rights of the other Party and is compatible with the production rate and the storage capacity.


In the establishment of the sequence of liftings, priority will be given to the Party with the


largest share of produced and unlifted quantity of Petroleum at a given time. The Parties shall


periodically meet to establish a provisional lifting program on the basis of toe principles above-


described and taking into account the wishes of toe Parties as regards the dates and quantities


of their liftings, provided that those wishes are compatible with said principles.


ARTICLE 28


PROTECTION OF RIGHTS


28.1 The Contractor shall take all necessary steps to achieve toe objectives of this Contract in its


conduct of Petroleum Operations.


28.2 NOCAL shall take all necessary steps to facilitate the implementation by the Contractor of toe


objectives of this Contract, and the STATE shall protect the property and operations of toe


Corftractor, its employees and agents in toe territory of Liberia.


28.3 At the request of toe Contractor, the STATE shall prohibit the construction of dwelling or


business buildings in the vicinity of installation which the Contractor may deciare dangerous as


a result of its operations. It shall take all necessary precautions to prohibit anchoring in the


vicinity of submerged pipelines at river passages, and to prohibit any hindrance to the use of


any other installation necessary for the Petroleum Operations whether on land or offshore.


28.4 The Contractor shall take out and cause to be taken out by its contractors and subcontractors,


in respect of toe Petroleum Operations all insurances of the type and for such amounts


customarily used in toe International petroleum industry, including without limitation, third party


liability insurance and insurances to cover damage to property, facilities, equipment and


materials, without prejudice to such insurances with would be required under Liberian


legislation.














43


 ARTICLE 29





PERSONNEL AND TRAINING


29.1 The Contractor shall, for foe purposes of the Petroleum Operations, employ Liberian personnel


whenever qualified for requirements of the employment.


Managers, technicians, engineers, accountants, geologists, geophysicists, scientists, chemists,


drillers, foremen, mechanics, skilled workers, secretaries and executive employees may be


hired outside Liberia if similarly qualified specialists cannot be hired in Liberia.


29.2 Upon commencement of the Petroleum Operations, the Contractor shall provide funding for


Training Programmes and for the purpose the Contractor shall devote an annua! Training


Budget of:


(a) $300,000 Dollars during each year of foe exploration period;


(b) $500,000 Dollars during each year of the exploitation period.


Additionally, foe Contractor shall make an annual contribution of One Hundred Thousand


Dollars ($100,000) to foe University of Liberia for foe enhancement of programmes in Geology,


Mining Engineering and Environmental Studies.



























































44


29.3 Upon commencement of the petroleum Operations, the Contractor shall provide funding for


Social and Welfare programmes in Liberia and for that purpose the Contractor shall devote an


annual Social and Welfare Budget


(a) $500,000.00 Dollars during each year of the exploration period;


(b) $1,000,000.00 Dollars during each year of the exploitation period.


An escrow account shall be established by both Parties for the purposes of receiving money


and paying for the programmes detailed in Articles29.2.1 and 29.2.2 and they shall both be


signatories to such account, except for he contribution to the University of Liberia which shall


be paid to the institution through NOCAL.


The training requirements shall be developed by both Parties with the Understanding that


NOCAL shall provide 70% of the training candidates and the Contractor shall provide 30% of


the candidates.


The Training and Social and Welfare Programmes shall be mutually agreed by the Parties.


The Training and Social and Welfare expenses borne by the Contractor shall be included in


recoverable Petroleum Costs. Funding for the Training and Social and Welfare Programmes


shall be paid within thirty (30) days of the Effective Date. Thereafter, payments shall be made


within thirty days of each subsequent anniversary of the agreement.


29.4 The Entry into Liberia of all foreign personnel shall be authorized and the STATE shall issue


the documents necessary for that entry to all members of the foreign personnel, such as entry


visas, wbridng permits and exit visas, in compliance with the immigration regulations in force in


Liberia.


At the request of the Contractor, the STATE shall facilitate any immigration formalities with the


Immigration Bureau, at the points of entry into and exit from Liberia, in respect of toe


Contractor's employees, contractors, subcontractors and agents, and their families, all without


undue delays.


29.5 All the employees required for the conduct of the Petroleum Operations shall be under the


Contractor’s authority or that of Its contractors, subcontractors and agents, in their capacity as


employers. Their work, number of working hours, salaries and any other matters relating to


their employment conditions shall be determined by the Contractor or its contractors,


subcontractors and agents.


























45


 ARTICLE 30





ACTIVITY REPORTS IN RESPECT OF EXCLUSIVE EXPLOITATION AUTHORIZATIONS


30.1 The provision of Article 12 shall apply, mutatis mutandis, to any exclusive exploitation


authorizations. In addition, the following periodic activity reports shall, inter alia, be furnished in


respect of each Field:


(a) daily production reports:


(b) monthly reports stating the quantities of Petroleum produced and those sold during the


previous month together with information on such sales.


Unless the Contractor gives its written consent, the information relating to a Field under


exploitation, except statistical data about activity, shall be considered as confidential by the


Parties during toe term of this Contract.


30.2 The Contractor shall forthwith notify toe STATE of any material damage whatsoever caused to


the petroleum fields of facilities, and shall take all necessary steps to terminate it and carry out


the necessary repairs.


30.3 From toe year of granting an exclusive exploitation authorization, the annual report referred to


in Article 8.2 shall also include toe following:


(a) information on all development and production operations carried out during the


previous Calendar Year, including the quantities of Petroleum produced and those


sold, if any;


(b) information on all transportation and sales operations together with the location of the


main facilities built by the Contractor, if any;


(c) a statement specifying the number of employees and workers, their qualification and


their nationality, together with a report on the medical care and training provided to


them.








ARTICLE 31


ARBITRATION


31,1 In toe event of any dispute between the STATE or NOCAL and the Contractor relating to, or


arising out of, the interpretation or execution of the provisions of this Contract, the parties shall


make their best efforts to settle such dispute amicably.


If within three (3) months from the date of notice of such dispute by either Party to the other,


the Parties have not reached settlement, the dispute shall, at the request of the most diligent


Party, be referred for arbitration to the International Chamber of Commerce in accordance with


its rules and regulations.








46


 31.2 The arbitration shall be held in the United States of America. The language used during the


procedure shall be the English language. The arbitration shall be determined by three (3)








arbitrators. The arbitrators shall not have the same nationality as the Parties.


The arbitration tribunal’s award shall be final; it shall be binding on the Parties and shall be


enforceable in any court of appropriate jurisdiction.


31.3 The expenses of any arbitration shall be borne equally by the Parties, that is to say, each party


shall pay the expenses of its own arbitrator and the expenses of the third arbitrator in equal


shares, and any expenses imposed by the International Chamber of Commerce shall be


shared equally by the Parties.


The performance by the Parties of their obligations under this Contract shall not be suspended


during the course of the arbitration.











ARATICLE32


TERMINATION


32.1 Termination by the Contractor. During the Exploration and Exploitation Periods, the


Contractor may surrender, by not less than sixty day notice to NOCAL, all of its rights and


obligations hereunder in respect of all or any part of the Delimited Area, and the operator shall


be relieved of all obligations to NOCAL in respect of the area so surrendered except those


obligations rising out of a related to toe surrender.


32.2 Termination by NOCAL. Subject to the provisions of Article 31, NOCAL shall have the right to


terminate this Agreement if any of the following events (hereinafter called 'Events of Default*)


shall occur and be continuing:


(a) Where the Contractor shall fail to make any of the payments described in this


Agreement on the due payment date, and such default is not cured within thirty (30)


days after notice by NOCAL or within such longer periods as may be specified in said


notice;


(b) Where the Contractor shall materially foil to comply with its work commitments and


other conditions in this Agreement and such failure is not cured within ninety (90) days


after notice by NOCAL of within such longer period as may be specified in the notice;
































47


(c) Where the Contractor shall (I) voluntarily dissolve, liquidate or wind up its affairs, or


make an assignment of all of substantially all of its assets for the benefit of creditors


other than an assignment made to secure indebtedness incurred in the ordinary course


of business; (ii) fie a petition or application to any tribunal for the appointment of a


trustee or receiver for all or any substantial part of the Contractor's assets; (iii)


commence any proceedings for its bankruptcy, reorganization, arrangement,


insolvency or readjustment of debt under the laws of any jurisdiction, whettier now or


hereafter in effect, or if any such petition or application is filed, or any such


proceedings are commenced against it, shall indicate Its approval thereof, consent


thereto or acquiescence therein, or (iv) if any order is entered appointing any such


trustee or receiver, or adjudicating the Contractor bankrupt or insolvent, or approving


the petition in any such proceedings, and provided that the Contractor shall fail to take


corrective measure(s) to have such order removed or lifted within sixty (60) days;


(d) Where the Contractor shall fail to carry out Exploration as


required by Article 4, or cease Exploration for a period of twelve (12) consecutive


months or cease production with respect to all Production Areas for a period of twenty-


four (24) consecutive months, unless such failure or cessation is consented to by


NOCAL or is caused by a state of force majeure.


32.3 Opportunity to cure. In the case of an alleged Event of Default described above, NOCAL,


before taking any further action, shall provide Notice to the Contractor of the alleged


occurrence of such Event of Default and of NOCAL’s views in that regard and shall offer the


Operator a fair opportunity to consult with NOCAL to resolve the matter. If, after a reasonable


period of time of consultation, NOCAL is of the reasonable opinion that the matter cannot be


resolved by further consultation, NOCAL may they send to the Contractor Notice of NOCAL’s


intention to terminate this Agreement. If the Event of Default is not cured within sixty (60) days


after said Notice, or within such longer period as may be necessary to allow a reasonable


period of time to effect such cure, then this Agreement shall be terminated, subject to Article


31.


32.4 Disputes Regarding Events of Default. Notwithstanding the provision of Article 32.2 if the


Contractor disputes whether there has been an Event of Default described above and, within


sixty (60) days after receipt by the Contractor of NOCAL’s Notice of its Intention to terminate


this Agreement, refers such dispute to arbitration in accordance with Article 31, then


termination of this Agreement shall not take effect until the finality of, and in accordance with,


an arbitration award upholding NOCAL’s right to terminate the Agreement.






































48


 ARTICLE 33





FORCE MAJEURE


33.1 No delay or default of a party in performing any of the obligations resulting from this Contract














shall be considered a breach of this Contract if such delay or default is caused by a case of


Force Majeure.


If in the event of Force Majeure the performance of any of the obligations under this Contract is


delayed, that delay extended by the period of time required to repair the damage caused during


such delay and to resume the Petroleum Operations shall be added to the period provided by


this Contract tor the performance of said obligation, and the exclusive exploration or


exploitation authorizations shall be extended by that period as regards the area concerned by


Force Majeure.


33.2 Force Majeure means any event unforeseeable and beyond the control of a Party, such as:


earthquake, flood, accident, strike, lockout, riot, delay in obtaining the rights-of-way,


insurrection, civil disturbances, sabotages, acts of war or conditions attributable to war, or any


other cause beyond its control, similar to or different from those already mentioned.


33.3 Where a Party considers it is prevented from performing any of its obligations by the


occurrence of Force Majeure, it shall forthwith notify the other party thereof by specifying the


grounds for establishing Force Majeure, and take all necessary and usefol steps to ensure the


normal resumption of the performance of the concerned obligations upon termination of the


event constituting the Force Majeure.


Obligations other than those affected by Force Majeure shall continue to be performed in


accordance with the provisions of this Contract.


ARTICLE 34


JOINT AND SEVERAL OBLIGATIONS AND GUARANTEES





34.1 All the clauses, conditions and provisions of this Contract shall be binding on the Parties and


their respective successors and assignees. This Contract constitutes the only agreement





between the Parties and no previous communication, promise or agreement, whether oral or


written, between the Parties, related to the purpose of this Contract may be asserted to amend


the clauses hereof.


The STATE certifies and guarantees that there is no other applicable agreement with respect to


the petroleum rights within the Delimited Area, that it will perform its obligation in fairness and


good faith and that this Contract will not be cancelled, amended or modified except by


agreement between the Parties.


34.2 Where the Contractor is constituted by several entities, the obligations and liabilities of those


entities under this Contract shall be point and several.








49


 ARTICLE 35





RIGHTS OF ASSIGNMENT


35.1 All or part of the rights and obligations arising from this Contract may be assigned by any of the


entities constituting the Contractor to Third Parties whose technical and financial reputation is


well established; the assignees with the other entities constituting the Contractor shall


thereafter be Jointly and severally liable for the obligations arising from this Contract.


The terms of any assignment shall be subject to the prior approval of NOCAL, which approval


shall not be unreasonably withheld.


If within thirty (30) days following notification to NOCAL of a projected assignment


accompanied by ail the related information and the draft assignment deed, NOCAL has not


given its decision, that assignment shall be deemed to be approved by NOCAL.


From the date of approval of an assignment, the assignee shall comply with the terms and


conditions of this Contract.


35.2 All or part of the joint and several rights and obligations arising from this Contract may be freely


assigned at any time by any of the entities constituting the Contractor to one or more Affiliated


Companies or other entities constituting the Contractor.


ARTICLE 36


STABILITY OF CONDITIONS


36.1 This Contract is executed between the Parties in accordance with the laws and regulations in


force at the date of its signing and on the basis of the provisions of said laws and regulations,


as regards, inter alia, the economic, fiscal and financial provisions of this Contract.


36.2 This Agreement may not be amended or modified by virtue of the adoption or amendment of


Law or regulation by the State of Liberia after the Effective Date of this Agreement. This


Agreement may only be amended or modified by written agreement of all parties.


36.3 Periodic Review: In the event of changes in circumstances from those existing at the Effective


Date, that have a material effect on the terms of this Agreement, either NOCAL or the


Contractor shall at the request of the other consult together. If it is established that such


Profound Changes in Circumstances have occurred, then the Parties shall effect such changes


in or clarifications to this Agreement that they agree are necessary. The Parties shall meet in


good faith to make the necessary revisions and adjustments to the Agreement in order to


maintain such expected economic benefits to each of the Parties, provided that the economic


benefits to the Parties shall not be reduced as a result of exercising the terms of this article.

















50


For the purposes of this Agreement the term 'Profound Changes in Circumstances’ shall mean


such changes in the economic conditions of the petroleum industry world wide or in Liberia or


such changes that result in such a material and fundamental alteration of the conditions and


assumptions relied upon by the Parties at the Effective Date of this Agreement (or the time


after any subsequent review under this Article) to the effect that the overall balance of equities


and benefits reasonably anticipated by the Parties will no longer be achievable. Additionally,


tire Parties also agree to review the agreement every five years to consider the concerns of


any of the Parties.


ARTICLE 37


IMPLEMTATION OF THE CONTRACT


37.1 The Parties agree to cooperate in every possible manner to achieve the objectives of this


Contract.


NOCAL shall facilitate the Contractor's performance of its activities by granting it any permits,


licenses, access rights necessary for foe performance of the Petroleum Operations and by


making available to it any appropriate services and facilities, so that the Parties can obtain the


best benefit from a sincere cooperation. However, the Contractor shall observe the applicable


procedures and formalities, and shall apply to the competent Ministries and/or Agencies of the


Administration.


The Parties agree to respect the terms of this Agreement and not to unilaterally abrogate any


part of foe terms and conditions contained herein.


37.2 Any notices or other communication under this Contract shall be deemed to have been made


when they are delivered to an authorized representative of the Party concerned at the location


of Said Party’s principal office in Liberia, or sent by telegram, cable or facsimile with all


expenses paid, or deposited as registered letters with the Postal administration of Liberia with


postage prepaid.


Notifications shall be deemed to have been made on the date when foe addressee shall


receive them.


37.3 If NOCAL considers that foe Contractor has committed a breach in foe performance of any of


its obligations, it shall so notify the Contractor in writing and foe Contractor shall have sixty (60)


days to remedy the breach or refer foe matter to arbitration in accordance with this Contract.


37.4 The terms and conditions of fols Contract may be modified only in writing and by mutual


agreement between foe Parties.


37.5 Unless otherwise specified in writing, foe Ministry and NOCAL shall represent foe STATE


under this Contract and is empowered to grant, in foe name and on behalf of foe STATE, any


consent necessary or useful for the implementation of this Contract.














51


 37.6 Heading in this Contract are inserted for purposes of convenience and reference and in no


event shall define, restrict or describe the scope of object of the Contract or of any of its





clauses.


37.7 Appendices 1 and 2 attached hereto shall form and integral part of this Contract.


37.8 Any waiver of the STATE or NOCAL concerning the performance of any obligation of the


Contractor shall be in writing and signed by the representative of the STATE or NOCAL, and no


waiver shall be implied if the STATE or NOCAL does not exercise any of its rights to which it is


entitled under this Contract.








ARTICLE 38


EFFECTIVE DATE





Upon execution by the parties and when promulgated as the law of the Republic of Liberia, this


Contract shall become effective, the date of execution being referred to as the Effective Date, and said


Contract shall become binding on the Partes.


Counterparts. This Agreement may be executed in multiple counterparts, and by different Parties in


separate counterparts, and each such counterpart shall be deemed an original Agreement for all


purposes, provided that no Party shall be bound by this Agreement unless and until all parties have


executed a counterpart.







































































52


 IN WITNESS WHEREOF, the Parties have signed this Contract on the date as set forth below.


ON BEHALF OF THE GOVERNMENT OF LIBERIA:





Dr. Fodee Kromah Date


PRESIDENT/CEO

















NATIONAL OIL COMPANY OF LIBERIA Date


Hon. Clemenceau B. Urey


CHAIRMAN, BOARD OF DIRECTORS


NATIONAL OIL COMPANY OF LIBERIA Date


Hon. Dr. Eugene Shannon


MINISTER OF LANDS, MINES & ENERGY


REPUBLIC OF LIBERIA Date


Hon.Augustine K. Ngafuan


MINISTER OF FINANCE


REPUBLIC OF LIBERIA Date


Hon. Richard Tolbert


CHAIRMAN, NATIONAL INVESTMENT COM.


REPUBLIC OF LIBERIA











ON BEHALF OF BID WINNER






































53


Attested: Date


Hon. Philip A.Z. Banks








MINISTER OF JUSTICE


REPUBLIC OF LIBERIA Date


Approved:


Her Excellency


Ellen Johnson Sirieaf


PRESIDENT


REPUBLIC OF LIBERIA Date


Ratified:


National Legislature of the Republic of Liberia







































































54


 APPENDIX 1





Attached to and made part of this Contract between the Republic of Liberia And lhe Contractor.


DELIMITED AREA


On the Effective Date, the Delimited Area, designated as Block 13, is Formed by the area included


inside lhe perimeter constituted by the points indicated on the map attached thereto.


The geographical coordinates of those points are lhe following, with Reference to the Greenwich


meridian:





Point Latitude Longitude








Those coordinates are only given for purposes of defining the Delimited Area and shall not be


considered as the boundaries of the national jurisdiction of Liberia.





The surface of the Delimited Area above-defined is deemed to be equal to about sq.


km.













































































55


 APPENDIX 2





Attached to and made part of this Contract between the Republic of Liberia


and the Contractor.








ACCOUNTING PROCEDURE


Article 1 - Genera) Provisions


1.1 Object


This Accounting Procedure shall be followed and observed in the performance of the


obligations under the Contract to which this Appendix is attached.


The purpose of this Accounting Procedure is to establish the principles of accounting which


shall reflect the Operators actual costs relating to Joint Operations to the end that the Operator


shall subject to the processes of the Agreement neither gain nor lose by reason of toe feet that


it acts as Operator.


1.2 Accounts and Statements


The registers and accounting books of the Contractor shall be in conformity with accounting


rules and regulations for business applicable in Liberia. However, the Contractor may apply


the accounting rules and procedures customarily used in the petroleum industry, insofar as


none of these are contrary to the rules and regulations referred to above.


In accordance with the provisions of Article 25 of the Contract, accounts, books and registers


shall be maintained and recorded in Dollars. These accounts shall be used, inter alia, to


determine toe amount of Petroleum Costs, the recovery of said Costs, the production sharing,


as well as for the purposes of Contractor’s tax return.


The Contractor shall record all operations connected with the Petroleum Operations in


accounts separate from those relating to any other activities which it may carry out in the


Republic of Liberia.


All accounts, books, records and statements, together with documents supporting expenses


incurred, such as invoices and service contracts, shall be kept In the Republic of Liberia in


order to be provided at the request of the competent authorities of Liberia.


1.3 Interpretation


The definitions of the terms used in this appendix 2 shall be the same as those of the same


terms set forth in the Contract. In the event of any conflict between the provisions of this


Accounting Procedure and the Contract, the provisions of the Contract shall prevail.

















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1.4 Modifications


The provisions of this Accounting Procedure may be modified by mutual agreement between


the Parties.


The Parties agree that if any provision of the Accounting Procedure proves inequitable to either


Party, such provision shall be modified in good faith by the Parties.


Article II** Petroleum Costs


U.1 Petroleum Costs Account


The Contractor shall maintain a ‘Petroleum Costs Account" which will record in detail the


expenses Incurred by toe Contractor directly relating to the Petroleum Operations carried out


under this Contract, and which will be recoverable in accordance with the provisions of Article


16 of the Contract.


Hie is petroleum Costs Account shall, inter alia, record separately, by Appraisal Perimeter of


Exploitation Perimeter if any, the following expenses:


(a) exploration expenditures;


(b) appraisal expenditures;


c) development expenditures;


(d) ' exploitation expenses;


(e) financial costs;


(f) overhead costs in Liberia;


(g) overhead costs abroad.


The Petroleum Costs Account shall enable, inter alia, to identify at any time:


(a) the total amount of Petroleum Costs since the Effective;


(b) toe total amount of Petroleum Costs recovered;


(c) the total amount credited to toe Petroleum Costs Account pursuant to Article 11.4(b)


below:


(d) the total amount of Petroleum Costs which remain to be recovered.


(e) toe calculation of taxable income.





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For tie purposes of Article 16 of the Contact, Petroleum Costs shall be recovered in the


following sequence:


(a) exploitation expenses in respect of a Field incurred and paid


from the date of commencement of regular production;


(b) financial costs;


(c) other Petroleum Costs.


In addition, within each of the foregoing categories, the costs shall be recovered in the sequence in


which they are incurred.


Unless otherwise provided for in fols Accounting Procedure the intent of the Parties is not to duplicate


any item of the credit or debit of the accounts maintained under the Contract


II.2 Items debited to the Petroleum Costs Account


The following expenses and costs shall be debited to the Petroleum Costs Account:


11.2.1 Personnel Expenses


All payments in respect of the salaries and wages of the Contractor's employees will


be those costs directly assigned to the Petroleum Operations carried out under this


Contract. The precise amounts of expenses will be reviewed in the future and will be


in agreement with accepted human resource procedures adopted by the Contractor


that are generally applicable in the international oil and gas industry. The expenses


allowed will be the actual expenses incurred as permitted by such Human Resource


'Procedures.


11.2.2 Overhead Costs In Liberia


Wages and salaries of the Contractor's personnel directly engaged in the Petroleum


Operations in the Republic of Liberia, whose work time is not directly allocated to the


programs, as well as costs of maintaining and operating in Liberia a main and


administrative office and sub-offices necessary for the Petroleum Operations.


11.2.3 Overhead Costs Abroad


The Contractor shall charge costs paid abroad, connected to the


carrying out of the Petroleum Operations by foe Contractor or its Affiliated Companies.


The amounts charged shall be foe actual costs borne by the Contractor. These costs,


including a detailed breakdown of the costs, will be provided to the JOC for its review


and agreement.




















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11.2.4 Buildings


Construction, maintenance expenses, we well as rents paid for


Ail offices, houses, warehouses and buildings of other types,


Including housing for employees, and cost of equipment, furniture, and fittings


necessary for the operation of those buildings directly required for the performance of


the Petroleum Operations.


11.2.5 Materials, Equipment and Rentals


Costs of equipment, materials, machinery, and facilities


Purchased or provided for use in the Petroleum Operations, as weB as rentals or


compensations paid or incurred for the use of any equipment of facilities required


directly for the performance of the Petroleum Operations.


11.2.6 Services


Costs of services directly related to Petroleum operations


Rendered by subcontractors and consultants, as well as any costs directly related to


services rendered by the STATE or NOCAL or any other authorities of the Republic of


Liberia.


Costs of services directly elated to Petroleum Operations rendered by Affiliated


Companies, provided that such costs shall not exceed those normally charged by


independent companies for an identical or similar service.


11.2.7' Insurance Premiums


Premiums paid for insurances customarily taken out for the Petroleum Operations to


be carried out by the Contractor.


11.2.8 Legal Expenses


All expenses of handling, investigation and settlement of litigation or claims directly


arising from the Petroleum Operations.


11.2.9. Financial Costs


All interests paid by the Contractor in respect of the loans from Third parties and


advances obtained from Affiliated Companies, provided that those loans and advances


shall be for the purpose of the financing of Petroleum Costs related only to the


development of Petroleum Operations in respect of a field. In the event such financing


is provided by Affiliated Companies, the allowable interest rates shall not exceed the


rates customarily used in the international financial market for loans of a similar nature.














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 Other used material (condition *C") means material still usable for its original purpose,


but only after repairs and Reconditioning: at a maximum of fifty percent (50%) of the








price of new material.


(c) Material In Poor Condition


Material in poor condition (condition *D") means material no longer usable for its


original purpose but still usable for other purposes: at a maximum of twenty-five


percent (25%) of the price of new material.


(d) Scrap Material


Scrap material (condition ’E’) means material beyond usage and repair: prevailing


price of scrap material.


111.5 Materials and Equipment Disposed By the Contractor


Material and equipment purchased by att the entities constituting the Contractor shall be valued


in accordance with the principles defined inArticle III.4 above.


Materials and equipment purchased by any entity constituting the Contractor or by Third Parties


shall be valued at the received sale price, which shall in no event be less than foe price


determined in accordance with the principles defined in Article 111.4 above.


The corresponding amounts shall be credited to the Petroleum Costs Account.








Article fV --- Inventories





IV.1 Period


The Contractor shall keep a permanent inventory both in quantity and value of all normally








controllable materials used for the Petroleum Operations and shall proceed at reasonable


intervals with the physical inventories as required by the Parties.


IV.2 Notice


A written notice of intention to take an inventory shall be send by the Contractor at least ninety


(90) days prior to foe commencement of said Inventory so that foe STATE and the entities


constituting foe Contractor may be represented at their own expenses during the inventory


operations.


IV. 3 Information


In foe event the STATE or any entity constituting the Contractor shall not be represented at an


inventory, such Party or Parties shall be bound to accept the inventory taken by the Contractor


which shall furnish to such Party or Parties a copy of said inventory.


Article V - Financial and Accounting Statements














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 The Contractor shall furnish the STATE and NOCAL with all the reports, records and


statements provided by the provisions of the Contract and the applicable regulations and, inter


alia, the following financial and accounting statements:





V.1 State of Exploration Work Obligations


Such annual statement shall be submitted not later than one (1) month after the end of each





Contractual Year in respect of the exploration periods.


It shall present with details the exploration work and expenditures carried out by the Contractor


to folfill its obligations set forth Article 4 of the Contract, excluding specifically appraisal wells


and related appraisal expenditures as wen as development expenditures, exploitation


expenses, overhead costs and bonuses.


V.2 Statement of Recovery of Petroleum Cotts


A quarterly statement shall be submitted not later than one (1) month after the end of each


Calendar Quarter. It shall present foe following items of the Petroleum Costs Account:


(a) the amount of Petroleum Costs which remain to be recovered at foe beginning of the


quarter


(b) foe amount of Petroleum Costs in respect of that quarter and recoverable under foe


provisions of the Contract;


(c) foe quantify and the value of fee production of Petroleum taken by the Contract of


during the quarter for the purpose of recovery of the Petroleum Costs:


(d) foe amount of incomes or Proceeds credited for the purpose of Article II.5 (b) above


’ during the quarter;


(e) foe amount of Petroleum Costs which remain to be recovered at


foe end of foe quarter.


In addition, an annual statement of the recovery of Petroleum Costs


Shall be submitted prior to foe end of February of each Calendar Year.


V.3 Statement of Production


After commencement of production, such monthly statement shall be submitted not later than


fifteen (15) days after the end of each month.


It shall present for each month the detailed production of each Exploitation Perimeter and, inter


alia, the quantities of Petroteum;


(a) stored at foe beginning of the month;


(b) lifted during the month;


(c) lost and used for the requirements of foe Petroleum Operations;








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(d) stored at the end of the month.






















































































































































































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