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 GNPC











GIMPC/CE/42/MOEP/Vol. 17/94 28th April, 2014














THE HONOURABLE MINISTER


MINISTRY OF ENERGY AND PETROLEUM --


P.O. BOX SD 40


STADIUM POST OFFICE


ACCRA


ATTENTION: HON. E. ARMAH-KOFI BUAH


Dear Sir,


RE: CENTRAL TANO BLOCK. OFFSHORE GHANA


We forward herewith, four (4) copies of Petroleum Agreement among Government


of Ghana, Ghana National Petroleum Corporation and Amni International Petroleum


Development Company Limited in respect of the Central Tano Block, offshore Ghana.


We would be grateful if you could kindly append your signature for onward


submission to Amni International for their execution.


Yours faithfully,












EDWARD APPIAH-BRAFOH


CHIEF HUMAN RESOURCES OFFICER


For: AG. CHIEF EXECUTIVE





























GHANA NATIONAL PETROLEUM CORPORATION


PRIVATE MAIL BAG, TEMA, GHANA. TEL: (233-303) 206020, 204654


Fax: (233-303) 206592, 202854 E-mail: info@gnpcghana.com


Website: www.gnpcghana.com


I


 PETROLEUM AGREEMENT


AMONG





GOVERNMENT OF THE REPUBLIC OF GHANA





























GHANA NATIONAL PETROLEUM CORPORATION























AND








Amni International Petroleum


Development Company Limited

















In respect of








CENTRAL TANO BLOCK, OFFSHORE OF THE REPUBLIC OF GHANA


 TABLE OF CONTENT


ARTICLE 1 DEFINITIONS......................................................................................................................4


ARTICLE 2 SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT


AREA...................................................................................................................................................11


ARTICLE 3 EXPLORATION PERIOD.............. 14


ARTICLE 4 MINIMUM EXPLORATION PROGRAMME.........................................................................16


ARTICLE 5 RELINQUISHMENT...........................................................................................................19


ARTICLE 6 JOINT MANAGEMENT COMMITTEE................................................................................20


ARTICLE 7 RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC..........................................23


ARTICLE 8 COMMERCIALLY.............................................................................................................26


ARTICLE 9 SOLE RISK ACCOUNT......................................................................................................32


ARTICLE 10 SHARING OF CRUDE OIL...............................................................................................35


ARTICLE 11 MEASUREMENT AND PRICING OF CRUDE OIL............................................................40


ARTICLE 12 TAXATION AND OTHER IMPOSTS.................................................................................42


ARTICLE 13 FOREIGN EXCHANGE TRANSACTIONS........................................................................45


ARTICLE 14 SPECIAL PROVISIONS FOR NATURAL GAS.................................................................47


ARTICLE 15 DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)....................................................52


ARTICLE 16 INFORMATION AND REPORTS - CONFIDENTIALITY....................................................53


ARTICLE 17 INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION....................................56


ARTICLE 18 ACCOUNTING AND AUDITING.......................................................................................57


ARTICLE 19 TITLE TO AND CONTROL OF GOODS AND EQUIPMENT.............................................59


ARTICLE 20 PURCHASING AND PROCUREMENT.............................................................................60


ARTICLE 21 EMPLOYMENT AND TRAINING......................................................................................61


ARTICLE 22 FORCE MAJEURE...........................................................................................................62


ARTICLE 23 TERM AND TERMINATION.............................................................................................63


ARTICLE 24 CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT...................................66


ARTICLE 25 ASSIGNMENT.................................................................................................................68


ARTICLE 26 MISCELLANEOUS...........................................................................................................69


ARTICLE 27 NOTICE...........................................................................................................................72


ANNEX 1 - CONTRACT AREA


ANNEX 2 - ACCOUNTING GUIDE


ANNEX 3 - SAMPLE OF AOE CALCULATION


ANNEX 4 - FORM OF CONFIDENTIALITY AGREEMENT


Petroleum Agreement GOG/GNPC & Amni


 o i


THIS PETROLEUM AGREEMENT, made this tl......day of.! by and among;





Government of the Republic of Ghana (hereinafter referred to as “The State”), represented by the Minister


for Energy and Petroleum (hereinafter referred to as the “Minister”),


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


Petroleum Corporation Act, 1983 PNDCL 64 (hereinafter referred to as “GNPC”); and


Amni International Petroleum Development Company (Ghana) Limited, a company existing under the





Laws of Ghana (hereinafter referred to as “AIPDCGL”) and having its registered at No. 14 School Road,


Kpehe Accra (The companies named above, and their respective successors and assignees (if any), may


sometimes individually be referred to as “Party" and collectively as “Parties”.


WITNESSES THAT:





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


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


2. In accordance with the Petroleum Law, the Minister has prepared a reference map showing areas


of potential petroleum fields within the jurisdiction of Ghana, divided into numbered areas and


each of which is described as a “block”.


3. GNPC has by virtue of the Petroleum Law the right to undertake Exploration, Development and


Production of Petroleum over all blocks declared by the Minister to be open for Petroleum


Operations.


4. GNPC is further authorized to enter into association by means of a Petroleum Agreement with a


contractor for the purpose of Exploration, Development and Production of Petroleum.


a 5. The Contract Area that is the subject matter of this Petroleum Agreement has been declared


open for Petroleum Operations by the Minister and the State desires to encourage and promote


Exploration, Development and Production within the Area.


6. Contractor, having the financial ability, technical competence and professional skills necessary for I





carrying out the Petroleum Operations herein described, desires to associate with GNPC in the


Exploration for, and Development and Production of, the Petroleum resources of the Area.


7. Contractor shall comply with all applicable laws of Ghana as in effect from time to time including


without limitation any regulations or directives issued by or other acts of the Petroleum


Commission pursuant to the Petroleum Commission Act, 2011 (Act 821) as required by


applicable law from time to time.


i 8. GNPC has aspirations of building operatorship capacity within a period of fifteen (15) years from


the Effective Date of this Agreement. Without prejudice to the rights of Operator under this


Agreement, Contractor is committed to supporting GNPC to develop its institutional capacity to


i i enable GNPC to fulfill its aspirations.


9. The Parties are committed to providing Ghanaian nationals employment at all levels in the


Petroleum industry, including technical, administrative and managerial positions, and Contractor


accordingly commits to providing and supporting an adequate programme of training for


Ghanaian nationals as an integral part of this Agreement.


10. The Parties are committed to providing an annual local content plan for fulfilling the applicable


Ghanaian content requirements with respect to the provision of goods and services.


NOW THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agreed and


declared as follows:


 ARTICLE 1





DEFINITIONS





In this Agreement:


1.1 “Accounting Guide” means the accounting guide which is attached hereto as Annex 2 and


made a part hereof;


1.2 “Additional Interest” means the additional interest of GNPC provided in Article 2.5;


1.3 “Affiliate” means any person, whether a natural person, corporation, partnership, unincorporated


association or other entity:


a) in which one of the Parties hereto or one of the companies comprising Contractor directly or


indirectly hold more than fifty percent (50%) of the share capital or voting rights;


b) which holds directly or indirectly more than fifty percent (50%) of the share capital or voting rights


in a Party hereto or of the companies comprising Contractor;


c) in which the share capital or voting rights are directly or indirectly and to an extent more than fifty


percent (50%) held by a company or companies holding directly or indirectly more than fifty


percent (50%) of the share capital or voting rights in a Party hereto;, or


d) which holds directly five percent (5%) or more of the share capital or voting rights in Contractor;


1.4 “Agreement” means this Agreement between the State, GNPC and Contractor, and includes the


Annexes attached hereto in each case, as amended from time to time;


1.5 “Appraisal” means operations or activities carried out following a Discovery of Petroleum for the


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


thickness and lateral extent and estimating the quantity of recoverable Petroleum therein and all


operations or activities to resolve all uncertainties required for determination of commerciality of a


Discovery;


1.6 “Appraisal Programme” means a programme submitted to the Petroleum Commission for the


conduct of Appraisal;


1.7 “Appraisal Well” means a well drilled pursuant to an Appraisal Programme;


1.8 “Associated Gas” means Natural Gas produced from a well in association with Crude Oil;


1.9 “Barrel” means a quantity or unit of Crude Oil equal to forty-two (42) United States gallons at a


temperature of sixty (60) degrees Fahrenheit and at fourteen and sixty-five one-hundredths per square


inch at atmospheric (14.65 psia) pressure;


1.10 “Block” means an area of approximately 685 square kilometres as depicted on the reference


map prepared by the Minister in accordance with the provisions of the Petroleum Law;


1.11 "Budget" means a statement prepared in accordance with the Accounting Guide indicating


expenditures to be made in accordance with an accompanying Work Programme;


1.12 “bopd” means barrels of oil per Day;











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1.13 “Carried Interest” means an interest held by GNPC pursuant to this Agreement in respect of


which Contractor pays for the conduct of Petroleum Operations without any entitlement to reimbursement


from GNPC in accordance with Article 2.5;


1.14 “Commercial Discovery” means a Discovery which is determined to be commercial in


accordance with the provisions of Article 8 of this Agreement;


1.15 “Commercial Production Period” means in respect of each Development and Production Area


the period from the Date of Commencement of Commercial Production until the termination of this


Agreement or earlier relinquishment of such Development and Production Area;


i


1.16 “Consideration” means aggregate cash consideration, plus the fair market price of any other


consideration, payable by any party;1


1.17 “Contract Area” means the' area covered by this Agreement in which Contractor is authorized in


association with GNPC to explore fpr, develop and produce Petroleum, which is described in Annex 1


attached hereto (which Annex is made a part of this Agreement), but excluding any portions of such area


in respect of which Contractor’s rights hereunder are from time to time relinquished or surrendered


pursuant to this Agreement;


1.18 “Contract Year” means a period of twelve (12) calendar months, commencing on the Effective


Date or any anniversary thereof; 1





1.19 “Contractor” means Amni International Petroleum Development Company (Ghana) Limited


and/or their respective successors and assignees;


1.20 “Crude Oil” means hydrocarbons which are liquid at fourteen and sixty-five one-hundredths per


square inch at atmospheric (14.65 psia) pressure and sixty (60) degrees Fahrenheit and includes


condensates and distillates obtained from Natural Gas;


1.21 “Date of Commencement of Commercial Production” means, in respect of each Development


and Production Area, the date on which production of Petroleum under a programme of regular


production, lifting and sale commences as defined in a Development Plan;








1.22 “Date of Commercial Discovery” means the date referred to in Article 8.14;


1.23 “Day” means a day in the Gregorian calendar;





1.24 “Delivery Point” has the it eaning as per Article 10.5;





1.25 “Development” or “Development Operations” means the following activities carried out in


connection with a Development Plan: the building and installation of facilities for Production, and includes


drilling of Development Wells, construction and installation of equipment, pipelines, facilities, plants and


systems, in and outside the Contract Area, which are required for achieving Production, treatment,


transport, storage and lifting of Petroleum, and preliminary Production activities carried out prior to the


Date of Commencement of Commercial Production, and includes all related planning and administrative


work, and may also include the construction and installation of approved secondary and tertiary recovery


systems;





1.26 “Development Costs” means Petroleum Costs incurred in Development Operations;








5














Y


1.27 “Development and Production Area” means that portion of the Contract Area reasonably


determined by Contractor in consultation with the JMC (or by GNPC if a Sole Risk Operation pursuant to


Article 9) on the basis of the available seismic and well data to cover the areal extent of an accumulation


or accumulations of Petroleum constituting a Commercial Discovery, enlarged in area by ten percent


(10%), such enlargement to extend uniformly around the perimeter of such accumulation;


1.28 “Development Period" means in respect of each Development and Production Area, the period


from the Date of Commercial Discovery until the Date of Commencement of Commercial Production;


1.29 “Development Plan” means the plan for development of a Commercial Discovery prepared by


Contractor in consultation with the Joint Management Committee and approved by the Minister pursuant


to Article 8;


1.30 “Development Well” means a well drilled in accordance with a Development Plan for producing


Petroleum including wells for pressure maintenance or for increasing the Production rate;


1.31 “Discovery” means finding within a well at the end of drilling during Exploration Operations, one


or more accumulations of Petroleum the existence of which, until that finding, was unproved by drilling,


and which can be or is recovered at the surface in a flow measurable by conventional international


petroleum industry testing methods (and in the case of water depths greater than four hundred (400)


metres including Modular Formation Dynamics Testing (also referred to as "MDT" by Schlumberger);


1.32 “Discovery Area” means that portion of the Contract Area, determined by JMC (or by GNPC if a


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


areal extent of the geological structure in which a Discovery is made. A Discovery Area may be modified


at any time by JMC (or by GNPC if applicable), if justified on the basis of new information, but may not be


modified after the date of completion of the Appraisal Programme and submission of a report as provided


under Article 8.8;


1.33 “Discovery Date” means the date on which a Discovery Notice is issued;


1.34 “Discovery Notice” means a notification to the Minister, Petroleum Commission and GNPC,


providing information which shall include, the name and location of the well from which the


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


stratigraphy, and type of reservoir and fluids encountered;


1.35 "Effective Date” shall have the meaning ascribed to it in Article 26.6;


1.36 “Exploration” or “Exploration Operations” means the search for Petroleum by geological,


geophysical and other methods and the drilling of Exploration Well(s) and includes any activity in


connection therewith or in preparation thereof and any relevant processing and Appraisal work, including


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


Petroleum constitutes a Commercial Discovery;


1.37 "Exploration Costs” means all expenditures made and costs incurred both within and outside


Ghana, in conducting Exploration Operations hereunder determined in accordance with the Accounting


Guide attached hereto as Annex 2;


1.38 “Exploration Period” means the period commencing on the Effective Date and continuing


during the time provided for in Article 3.1 within which Contractor is authorized to carry out Exploration


Operations and shall include any periods of extensions provided for in this Agreement. The period shall





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


Discovery Area;


1.39 “Exploration Well” means a well drilled in the course of Exploration Operations conducted


hereunder during the Exploration Period, but does not include an Appraisal Well;


1.40 “Extension Period” means any of the First Extension Period or Second Extension Period;


1.41 “First Extension Period” has the meaning given to such term in Article 3.1(a);


1.42 “Force Majeure” means any event beyond the reasonable control of the Party claiming to be


affected by such event which has not been brought about directly or indirectly at its own instance, or


which has not been brought about directly or indirectly at the instance of an Affiliate, provided that the


State shall not be considered for this purpose an Affiliate of GNPC. Force Majeure events may include,


but are not limited to, earthquake, storm, flood, lightning or other adverse weather conditions, war,


terrorism, embargo, blockade, riot or civil disorder;


1.43 “Foreign National Employee” means an expatriate employee of Contractor, its Affiliates, or its


Sub-contractors who is not a citizen of Ghana;


1.44 “Ghana” means the territory of the Republic of Ghana and includes rivers, streams, water


courses, the territorial sea, seabed and subsoil, the contiguous zone; the exclusive economic zone,


continental shelf, the airspace and all other areas within the jurisdiction of Ghana;


1.45 “Gross Production” means the total amount of Petroleum produced and saved from a


Development and Production Area during Production Operations which is not used by Contractor in


Petroleum Operations and is available for distribution to the Parties in accordance with Article 10;


1.46 “Gross Negligence” means any wilful act or failure to act (whether sole, joint or concurrent)


which was in reckless disregard to, grave harmful consequences such person or entity knew or should


have known, such act or failure would have on another person or entity;


1.47 “Indigenous Ghanaian company” means a company incorporated under the Companies Act


(Act 179) of Ghana;


a) that has at least fifty-one percent of its equity owned by a citizen or citizens of Ghana; and


b) that has Ghanaian citizens holding at least eighty percent of senior management positions and


one hundred percent of non-managerial and other positions;


1.48 “Initial Exploration Period” has the meaning given to such term in Article 3.1(a);


1.49 “Initial Interest” means the interest of GNPC in ail Petroleum Operations provided for in Article


2.4;


1.50 “International Best Oilfield Practice" means all those uses and practices that are generally


accepted in the international petroleum industry as good, safe, economical and efficient in exploring for,


developing, producing, processing and transporting Petroleum;


1.51 “Joint Management Committee” or “JMC" means the committee established pursuant to


Article 6.1 hereof;











7


1.52 “LIBOR” means the rate published in the Financial Times certifies to be the London Interbank


offered rate (LIBOR) in the London Interbank Eurodollar market on thirty (30) day deposits, in effect on


the last Business Day of the last respective preceding Month,. In the event that neither the Financial


Times nor the Wall Street Journal are published, the Parties shall endeavour to agree on a source of


certification for LIBOR in reference to market practice. If the Parties are unable to agree on a source of


certification for LIBOR, any Party may refer the matter to a Sole Expert for certification. If the aforesaid


rate is contrary to any applicable usury law, the rate of interest to be charged shall be the maximum rate


permitted by such applicable law;


1.53 “Local Content Regulations” means the Petroleum (Local Content and Local Participation)


Regulations, 2013 (L.l 2204) as the same may be amended from time to time;


1.54 “Market Price” means the market price for Crude Oil realized by Contractor under this


Agreement as determined in accordance with Article 11.7 hereof;


1.55 “Minister” means Minister for Energy and Petroleum;


1.56 “Month” means a month of the Calendar Year;


1.57 “Natural Gas” means all hydrocarbons which are gaseous at fourteen and sixty-five one-


hundredths per square inch at atmospheric (14.65 psia) pressure and sixty (60)-degrees Fahrenheit


temperature and includes wet gas, dry gas and residue gas remaining after the extraction of liquid-


hydrocarbons from wet gas;


1.58 “Non-Associated Gas” means Natural Gas other than in association with Crude Oil;


1.59 “Operator” means Amni International Petroleum Development Company (Ghana) Limited or the


person as may be jointly proposed by the Parties and approved by the Minister, being either GNPC or a


Contractor Party to conduct Petroleum Operations on behalf of the Parties;


1.60 “Participating Interest” of the Contractor means the interest held by Contractor as per Article


2.11;


1.61 “Party" means the State, GNPC or Contractor, as the case may be;


1.62 “Paying Interest” means an interest held by GNPC in respect of which GNPC pays for the


conduct of Petroleum Operations as expressly provided for in Article 2.4;


1.63 “Petroleum” means Crude Oil or Natural Gas or a combination of both;


1.64 “Petroleum Commission” means a body established by an Act of Parliament (Petroleum


Commission Act, 2011) for the regulation and the management of the utilization of petroleum resources in


the upstream sector;


1.65 “Petroleum Commission Act” means the Petroleum Commission Act, 2011 (Act 821) as the


same may be amended from time to time;


1.66 “Petroleum Costs” means ail expenditures made and costs incurred in conducting Petroleum


Operations hereunder determined in accordance with the Accounting Guide attached hereto as Annex 2;


1.67 “Petroleum Income Tax Law” means the Petroleum Income Tax Law, 1987 (PNDCL 188), as


the same may be amended from time to time;





8


1.68 “Petroleum Law” means the Petroleum (Exploration and Production) Law, 1984 (PNDCL 84), as


the same may be amended from time to time;


1.69 “Petroleum Operations” means all activities, both in and outside Ghana, relating to the


Exploration for, Appraisal of, Development, Production, handling, storage, processing and transportation


of Petroleum contemplated under this Agreement and includes Exploration Operations, Appraisal


Programme, Development Operations and Production Operations and all activities in connection


therewith;


1.70 “Petroleum Product” means any product derived from Petroleum by any refining or other


process;


1.71 “Pre-Award Attachment” means any order, decree, injunction or other decision (however


denominated) of any court, arbitral body or other competent authority requested by a Party and issued


prior to a final arbitral award issued pursuant to Article 24 of this Agreement that attaches, seizes, freezes


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


Party pending issuance of the final arbitral award, whether such property is in the possession or control of


a Party or of a third party;


1.72 “Production” or “Production Operations” means activities other than Exploration Operations


or Development Operations undertaken in order to%xtract, save, treat, measure, handle, store and


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


tertiary operations, including recycling, recompression, injection for maintenance of pressure and water


flooding and all related activities such as planning and administrative work and shall also include


maintenance, repair, abandonment or decommissioning and replacement of facilities, and well workovers,


in every case, conducted after the Date of Commencement of Commercial Production of the respective


Development and Production Area;


1.73 “Production Costs” means Petroleum Costs incurred in Production Operations;


1.74 “Quarter” means a period of three (3) Months, commencing January 1, April 1, July 1 or


October 1 and ending March 31, June 30, September 30, or December 31, respectively;


1.75 “Rate of Return” has the meaning given in Article 10.2;


1.76 “Second Extension Period” has the meaning given to such term in Article 3.1(a);


1.77 “Sole Expert” means the person appointed to resolve a dispute pursuant to Article 24 hereof;


1.78 “Sole Risk” means an operation conducted at the sole cost, risk and expense of GNPC referred


to in Article 9;


1.79 “Specific/Specified Rate” means LIBOR plus 1 percent (1%);


“Standard Cubic Foot” or “SCF” means the quantity of gas that occupies one (1) cubic foot at 14.65


psia pressure and sixty (60) degrees Fahrenheit temperature;


1.80 “State” means the Government of the Republic of Ghana;


1.81 “Subcontractor” means a third party with whom GNPC or the Contractor has entered into a


contract for the provision of goods or services for or in connection with Petroleum Operations;








9


1.82 “Termination” means termination of this Agreement pursuant to Article 23 hereof; and


1.83 “Work Programme” means the annual plan for the conduct of Petroleum Operations prepared


pursuant to Articles 4.3, 6.4 and 6.5 herein.


1.84 “Year” means a continuous twelve (12) Month period.


1.10 “Block” means an area of approximately 685 square kilometres as depicted on the reference


map prepared by the Minister in accordance with the provisions of the Petroleum Law;


1.11 “Budget” means a statement prepared in accordance with the Accounting Guide indicating


expenditures to be made in accordance with an accompanying Work Programme;


1.12 “bopd” means barrels of oil per Day;
















































































10


 ARTICLE 2





SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT AREA








2.1 This Agreement provides for the Exploration for and Development and Production of Petroleum in


the Contract Area by GNPC in association with Contractor.


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


such Petroleum Operations as are required by the provisions of this Agreement and subject to Article 9, is


hereby appointed the exclusive entity to conduct Petroleum Operations in the Contract Area. GNPC shall


at all times participate in the management of Petroleum Operations and in order that the Parties may


cooperate in the implementation of Petroleum Operations, GNPC and Contractor shall establish a Joint


Management Committee, to conduct and manage Petroleum Operations.


2.3 In the event that no Commercial Discovery is made in the Contract Area, or that Gross Production


achieved from the Contract Area is insufficient fully to reimburse Contractor in accordance with the terms


of this Agreement, then Contractor shall bear its own loss; GNPC and the State shall have no obligations


whatsoever to Contractor in respect of such loss.


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


Agreement. With respect to all Exploration Operations GNPC’s Initial Interest shall be a Carried Interest.


With respect to all Development and Production Operations GNPC’s Initial Interest shall be a Paying


Interest.


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


respect of each Development and Production Area to acquire an Additional Interest of up to 20% in the


Petroleum Operations in such Development and Production Area. In the event that GNPC exercises such


option, GNPC shall contribute the corresponding proportionate share to all the Development and


Production Costs incurred from the Date of Commercial Discovery, in respect of such Development and


Production Area, (or make arrangements satisfactory to Contractor to that effect). GNPC shall notify


Contractor of the exercise of its option to acquire an Additional Interest within ninety (90) days of the Date


of Commercial Discovery. If GNPC opts to take an Additional Interest as provided for in this Article 2.5


then within six (6) Months of the date of its election, GNPC shall reimburse Contractor for all Development


Costs and Production Costs attributable to GNPC’s Additional Interest and incurred from the Date of


Commercial Discovery to the date GNPC notifies Contractor of its election. If GNPC opts to take an


Additional Interest as provided for in Article 2.5 then within six (6) Months of the date of its election,


GNPC shall reimburse Contractor for all expenditures attributable to GNPC’s Additional Interest and


incurred from the Date of Commercial Discovery up to the date GNPC notifies Contractor of its election.


2.6 For the avoidance of doubt GNPC shall only be liable to contribute to Petroleum Costs:


a) incurred in respect of Development Operations in any Development and Production Area and to


the extent only of any Additional Interest acquired in such Development and Production Area


under Article 2.5 above; and


b) incurred in respect of Production Operations in any Development and Production Area both to the


extent of:


i. its ten per cent (10%) Initial Interest; and


ii. any Additional Interest acquired in such Development and Production Area under Article 2.5


above.


2.7 GNPC may during the Exploration Period contribute to the seismic and exploratory drilling


programmes as specified in Article 4.3 by providing relevant services to be approved within the JMC.


Upon completion of the work associated with said contribution, GNPC shall earn credit for the costs


incurred toward its share; if any, of Development Costs, should it elect to hold an Additional Interest


pursuant to Article 2.5 above. Such credit shall incur interest at the Specified Rate annually from the


respective dates such contributed costs were incurred until they are paid or utilized as credits toward


GNPC’s share of Development Costs. If during the Exploration Period, GNPC has earned such credit


and GNPC elects not to hold an Additional Interest or no Commercial Discovery is made in the Contract


Area Contractor shall reimburse GNPC in an amount equivalent to the credit within sixty (60) days


following the end of the Exploration Period or Contractor’s relinquishment of the entire Contract Area,


whichever occurs first. The actual amount of any credit earned by GNPC shall be the fair market rates as


approved by the JMC at which such services could be obtained under freely competitive conditions.


2.8 Upon notifying Contractor of its decision to acquire an Additional Interest pursuant to Article 2.5


above, GNPC may at the same time:


a) elect to have Contractor advance part or all of GNPC’s total proportionate share of Development


Costs as they are incurred, including such Costs as will already have been incurred from the Date


of Commercial Discovery and which are reimbursable under Articlp 2.5-above; Such advances


shall be reimbursed with interest at the Specified Rate as applicable in accordance with Article


2.7 above from the proceeds of the sales of GNPC’s entitlement after recovery of Production


Costs as provided in Article Article 10;


b) notify the Contractor and mutually agree in good faith the arrangements for the payment of the


balance of GNPC’s total proportionate share of Development Costs on terms (i.e., period of


payment and interest rate) no worse than the Specified Rate as applicable in accordance with this


Article 2.8.


c) If reimbursement of GNPC’s proportionate share of Development Costs from the applicable


Development and Production Area is not achieved before Termination of Petroleum Operations


for that Development and Production Area, then Contractor shall notify GNPC of such event and


GNPC shall make payment to the Contractor in US Dollars of the outstanding amount of such


advances to be reimbursed by GNPC together with interest at the Specified Rate as applicable


within the 180 days of such notice from Contractor.


2.9 Contractor’s Participating Interest in all Petroleum Operations and in all rights under this


Agreement shall be reduced proportionately at any given time and in any given part of the Contract Area


by the exercise of the option of Additional Interest of GNPC pursuant to Article 2.5 or the Sole Risk


Interest of GNPC pursuant to Article 9.


2.10 Subject to Article 25 the transfer or disposal of all or part of the Contractor’s Participating Interest,


whether directly or indirectly by assignment, merger, consolidation or sale of stock or other conveyance,


other than with or to an Affiliate shall be subject to the following procedure:


a) Once the Contractor and a proposed transferee (a third party or a Party) have fully negotiated the


final terms and conditions of a transfer, such final terms and conditions shall be promptly


disclosed in full detail to GNPC and the State in a notice from the transferor. GNPC shall have the


right to acquire the Participating Interest from the transferor on the same terms and conditions


agreed to by the proposed transferee if, within thirty (30) Days of transferor’s notice, GNPC


delivers to the transferor a counter- notice that it accepts the agreed terms and conditions of the


transfer without reservations or conditions. If GNPC does not deliver such counter-notice, the


transfer to the proposed transferee may be made, subject to the other provisions of this





12


Agreement and the laws and regulations, under terms and conditions no more favourable to the


transferee than those set forth in the notice to GNPC and the State, provided that the transfer


shall be concluded within one hundred and eighty (180) Days from the date of the notice plus


such reasonable additional period as may be required to secure requisite approvals.


b) In the event that a Contractor’s proposed transfer of part or all of its Participating Interest involves


consideration other than cash or involves other properties included in a wider transaction then the


Participating Interest (or part thereof) shall be allocated at a reasonable and justifiable cash value


by the transferor in any notification to the State and GNPC. The State and/or GNPC may satisfy


the requirements of this Article 2.10(b) by agreeing to pay such cash value in lieu of the


consideration payable in the said proposed transfer, provided that such cash value may be


disputed by the State or GNPC. In the event of any dispute between the transferor and the State


or GNPC as to the cash value of any consideration paid, the Parties shall meet at a mutually


convenient time and place to attempt to resolve the dispute and to agree upon a cash valuation.


In the event the Parties fail to reach agreement within ninety (90) calendar days from the date on


which such notification is received by GNPC or the State from the transferor, Article 24 of this


Agreement shall apply.


2,11 As of the Effective Date, the Contract Area shall cover a total of approximately 277.9 sq km as’


depicted by Annex 1 and shall from time to time during the Term of this Agreement be reduced according


to the terms herein. During the term of the Agreement, Contractor shall pay rentals to the State for that


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


of Article 12.1(c) below.













































































13


 ARTICLE 3





EXPLORATION PERIOD


3.1 The Exploration Period shall begin on the Effective Date and shall not extend beyond seven (7)


years except as provided for in accordance with the Petroleum Law.


a) The Exploration Period shall be divided into an Initial Exploration Period of Three (3) years (“Initial


Exploration Period”) and two (2) optional Extension Periods of one and a half (1 Vz) years each


(respectively “First Extension Period” and “Second Extension Period”) and where applicable


the further periods for which provision is made hereafter.


b) Where Contractor has fulfilled its obligations set out in Article 4.3 before the end of the Initial


Exploration Period or, as the case may be, the First Extension Period, and has exercised its


option by applying to the Minister in writing for an extension, the Minister will be deemed to have


granted an extension into the First or, as the case may be, into the Second Extension Period.


c) For each well drilled by Contractor or with Contractor’s participation during the Initial Exploration


Period beyond those referred to in Article 4.3, the Initial Exploration Period shall be extended by


three (3) Months and the commencement of subsequent periods shall be postponed in their


' entirety accordingly.


3.2 Following the end of the Second Extension Period, subject to the provisions of Article 3.4,


Contractor will be entitled to an extension or extensions, by reference to 3.1, of the Exploration Period as


follows:


a) Where at the end of the Second Extension Period Contractor is drilling or testing any well,


Contractor shall be entitled to an extension for such further period as may be reasonably required


to enable Contractor to complete such work and assess the results and, in the event that


Contractor notifies the Minister that the results from any such well show a Discovery which merits


Appraisal, Contractor shall be entitled to a further extension for such period as may be


reasonably required to carry out an Appraisal Programme and determine whether the Discovery


constitutes a Commercial Discovery;


b) Where at the end of the Second Extension Period Contractor is engaged in the conduct of an


Appraisal Programme in respect of a Discovery which has not been completed, Contractor shall


be entitled to a further extension following the end of the Second Extension for such period as


may be reasonably required to complete that Appraisal Programme and determine whether the


Discovery constitutes a Commercial Discovery;


c) Where at the end of the Second Extension Period Contractor has undertaken work not falling


under paragraphs (a) or (b) which is not completed, Contractor will be entitled to a further


extension following the end of the Second Extension Period for such period as the Minister


considers reasonable for the purpose of enabling such work to be completed.


d) Where pursuant to Article 8 Contractor has before the end of the Second Extension Period,


including extensions under (a), (b) and (c) above, given to the Minister a notice of Commercial


Discovery, Contractor shall, if the Exploration Period would otherwise have been terminated, be


entitled to a further extension of the Exploration Period in respect of the Discovery Area during


which it must prepare the Development Plan in respect of the Commercial Discovery until either:


i. the Minister has approved the Development Plan as set out in Article 8; or


ii. in the event that the Development Plan is not approved by the Minister as set out in Article 8 and


the matter or matters in issue between the Minister and Contractor have been referred for








14


resolution under Article 24, one (1) Month after the date on which the final decision thereunder


has been given.


3.3 Where at the end of the Initial Exploration Period or, as the case may be, at the end of the First


Extension Period Contractor has failed to complete its Minimum Work obligations as specified in Article 4


in respect of that period but has made reasonable arrangements to remedy its default during the First or,


as the case may be, the Second Extension Period, Contractor shall be entitled to an extension subject to


such reasonable terms and conditions as the Minister may stipulate to assure performance of the work.


3.4 Save in respect of a Discovery Area:


a) in the circumstances and subject to the limitations set forth in Section 12 (3) of the Petroleum


Law; or


b) in a case falling within the provisions of Article 3.2(d) above,


nothing in Article 3.2 above shall be read or construed as requiring or permitting the extension of the


Exploration Period beyond seven (7) years from the Effective Date except for reasons of Force Majeure.


3.5 The provisions of Articles 3.2(a), (b), (c) and (d) so far-as they relate to the duration of the


relevant extension period to which Contractor will be entitled shall be read and. construed as requiring the


Minister to give effect to the provisions of Article 8 relating to the time Within which Contractor must meet


the requirements of said Article. ’ '










































































15


 ARTICLE 4





MINIMUM EXPLORATION PROGRAMME


4.1 Exploration Operations shall begin as soon as practicable and in any case not later than sixty (60)


days after the Effective Date.


4.2 At the request of Contractor after the Effective Date, GNPC shall make available to Contractor


such records and information relating to the Contract Area as are relevant to the performance of


Exploration Operations by Contractor and are in GNPC’s possession, provided that Contractor shall


reimburse GNPC for licensing the data and for other costs reasonably incurred in procuring or otherwise


making such records and information available to Contractor.


4.3 Subject to the provisions of this Article, in discharge of its obligations to carry out Exploration


Operations in the Contract Area, Contractor shall during the several phases into which the Exploration


Period is divided carry out the obligations specified hereinafter:


a) Initial Exploration Period: Commencing on the Effective Date and terminating at the end of the


~ third (3) Contract Year.


Description of Contractor’s Minimum Work Obligations:


i. License existing 3D seismic data over Contract Area (about 277.9 sq.km);


ii. Drill two (2) exploration wells.


Minimum Expenditure Obligation: Contractor's minimum expenditure for the Work in the Initial


Exploration Period shall be One Hundred and fifty Million US Dollars (US$.150,000,000).


b) First Extension Period: Commencing at the end of the Initial Exploration Period and terminating


eighteen (18) months later.


Description of Contractor’s Minimum Work Obligation:


I. Drill One (1) exploration well.


Minimum Expenditure Obligation: Contractor’s minimum Expenditure for the Work in the First


Extension Period shall be Seventy-Five Million US Dollars (US$75,000,000).


c) Second Extension Period: Commencing at the end of the First Extension Period and terminating


eighteen (18) months later.


Description of Contractor’s Minimum Work Obligations:


i. Drill one 1) exploration well.


Minimum Expenditure Obligation: Contractor’s Minimum Expenditure for Work in the Second


Extension Period shall be Seventy-Five Million US Dollars (US$75,000,000).


d) Work accomplished in any period in excess of the above obligations may be applied as credit in


satisfaction of obligations called for in any other Period. The fulfillment of any Minimum Work


Obligation shall relieve Contractor of the corresponding Minimum Expenditure Obligation, but the


fulfillment of any Minimum Expenditure Obligation shall not relieve Contractor of the


corresponding Minimum Work Obligation. Without prejudice to Article 23.5(f), should Contractor





16


fail to perform its Minimum Work Obligations under Article 4.3(a), (b) or (c) as applicable,


Contractor shall pay to GNPC, any unspent amount of the Minimum Expenditure Obligation under


Article 4.3(a-c) above for the Initial Exploration Period, the First Extension Period or the Second


Extension Period as applicable.


4.4 No Appraisal Wells drilled or seismic surveys carried out by Contractor as part of an Appraisal


Programme undertaken pursuant to Article 8 and no expenditure incurred by Contractor in carrying out


such Appraisal Programme shall be treated as discharging the Minimum Work Obligations under Article


4.3 above.


4.5 The seismic programme in Article 4.3(a), when combined with existing data, shall be such as will


enable a study of the regional geology of the Contract Area and the preparation of a report thereon with


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


which, when combined with existing data, shall provide:


a) a minimum seismic grid adequate to define prospective drill sites over prospective closures as


interpreted from data available to Contractor; and


b) a seismic evaluation of structural and stratigraphic conditions over the remaining portions of the


Contract Area.


4.6 Each Exploration Well shall be drilled at a location and to an objective depth determined by


Contractor in consultation with GNPC. Except as otherwise provided in Articles 4.7 and 4.8 below, the


minimum depth of each obligatory Exploration Well shall be whichever of the following is first


encountered:


a) the depth of 4,000 metres measured from the Rotary Table Kelly Bushing (RTKB);


b) the depth sufficient to penetrate150metres into the primary target;


c) the depth at which Contractor encounters geologic basement.


4.7 The minimum depth of one (1) of the obligatory Exploration Wells in Article 4.3 shall be whichever


of the following is first encountered:


a) the depth of 3,500 meters measured from the Rotary Table Kelly Bushing (RTKB);


b) the depth sufficient to penetrate 300 meters into the lower Cretaceous (Aptian or Albian); or


c) the depth at which Contractor encounters geological basement


4.8 If in the course of drilling an Exploration Well the Contractor concludes that drilling to the


minimum depth specified in Article 4.6 or 4.7 above is impossible, impracticable or imprudent in


accordance with accepted international Petroleum industry drilling and engineering practice, then


Contractor may plug and abandon the Exploration Well and GNPC shall have the option of either:


a) waiving the minimum depth requirement, in which case Contractor will be deemed to have


satisfied the obligation to drill such Exploration Well; or


b) requiring Contractor to drill a substitute Exploration Well at a location determined by Contractor in


consultation with GNPC and to the minimum depth set forth in Article 4.6 or 4.7 above, except


that if in the course of drilling such substitute Exploration Well Contractor establishes that drilling


to the minimum depth specified in Article 4.6 or 4.7 above is impossible, impracticable or


imprudent in accordance with accepted Petroleum industry drilling and engineering practice, then


Contractor may plug and abandon the substitute Exploration Well and will be deemed to have


satisfied the obligation to drill one (1) Exploration Well.








17


The above option shall be exercised by GNPC within thirty (30) days from the notice given by Contractor


to GNPC of the completion of the plugging and abandonment of the Exploration Well, and failure to


exercise such option shall constitute a waiver of the minimum depth requirement pursuant to (a) above.


Should option b) be exercised by GNPC then the Initial Exploration Period, First Extension Period and


Second Extension Period as applicable shall be extended by the Minister for such period of time


reasonably required by Contractor to drill the substitute Exploration Well including the time necessary for


consultation and preparation with GNPC.


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


Operations subject to the terms of this Agreement, applicable law and approval by the JMC, including


without limitation performing gravity and magnetic surveys, drilling stratigraphic wells and performing


additional geological and geophysical studies, provided the Minimum Work Obligations are completed


within the applicable period and provided further that Contractor may elect to perform such additional


Exploration Operations in the absence of approval by the JMC but only in the event of a subsequent


Commercial Discovery associated with such additional Exploration Operations shall the costs of such


Exploration Operations be considered allowable Petroleum Costs for AOE purposes. Any such


subsequent Commercial Discovery shall be treated hereunder in the same manner as if such Commercial


Discovery had been made in connection with operations that were not performed as sole risk operations,


including, without limitation, participation by GNPC in such Commercial Discovery.


4.10 During the Exploration Period, Contractor shall deliver to GNPC the Minister and the Petroleum


Commission reports on Exploration Operations conducted during each Quarter within thirty (30) days


following the end of that Quarter. Further requests for information by the Minister under Section 9(1) of


the Petroleum Law shall be complied with within a reasonable time and copies of documents and other


material containing such information shall be provided to GNPC and Petroleum Commission.


4.11 Upon Contractor decision not to exercise its option for a First Extension Period or Second


Extension Period, Contractor is relieved from any further Work Obligation relevant to any subsequent


Period as established under Article 4.3 above.



























































18


 ARTICLE 5





RELINQUISHMENT


5.1 Subject to Article 3.2 and except as provided in Articles 5.2, 8.3, 8.18, 8.19, 8.20, 8.21,8.22 14.7


and 14.11, there will be no relinquishment of the Contract Area during the Exploration Period.


5.2 The provisions of Article 5.1 shall not be read or construed as requiring Contractor to relinquish


any portion of the Contract Area which constitutes or forms part of either a Discovery Area (excluding a


Discovery Area determined by the terms of this Agreement to neither merit Appraisal nor to be


commercial) or a Development and Production Area; provided, however, that if at the end of the Initial


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


the First or Second Extension Period Contractor shall relinquish the entire Contract Area except for any


Discovery Area; provided, further, that provision shall have been made for the decommissioning,


abandoning, removing or eliminating movable and immovable assets acquired or used by the Contractor


in such relinquished part of the Contract Area.


5.3 Each area to be relinquished pursuant to this Article shall be selected by Contractor and shall be


measured as far as possible in terms of continuous and compact units of a size and shape which will


permit the carrying out of Petroleum Operations in the relinquished portions.


 ARTICLE 6





JOINT MANAGEMENT COMMITTEE





6.1 In order that the Parties may at all times cooperate in the implementation of Petroleum j


Operations, GNPC and Contractor shall not later than thirty (30) days after the Effective Date establish a ^


Joint Management Committee (JMC). Without prejudice to the rights and obligations of Contractor for |


day-to-day management of the operations, the JMC shall oversee and supervise the Petroleum 1


Operations and ensure that all approved Work Programmes and Development Plans are complied with


and also that accounting for costs and expenses and the maintenance of records and reports concerning


the Petroleum Operations are carried out in accordance with this Agreement and the accounting J


principles and procedures generally accepted in the international Petroleum industry.


6.2 The composition of and distribution of functions within the JMC shall be as provided hereinafter. I


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


, Contractor. GNPC and Contractor shall also designate a substitute or alternate for each member.


In the ca$e of absence or incapacity of a member of the JMC, such alternate shall automatically :


assume the rights and obligations of the absent or incapacitated member.


b) The Chairperson of the JMC shall be designated by GNPC from amongst the members of the


JMC.


c) Contractor shall be responsible in consultation with GNPC for the preparation of agenda and


supporting documents for each meeting of the JMC and for keeping records of the meetings and f


decisions of the JMC. GNPC shall have the right to inspect all records of the JMC at any time. i


Contractor shall circulate the agenda and supporting documents for each meeting to all members


and the substitutes or alternates designated pursuant to Article 6.2(a) above. n


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


f


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


a) All meetings of the JMC shall be held in Accra or such other place as may be agreed upon by


members of the JMC.


b) The JMC shall meet at least twice yearly and at such times as the members may agree. f


c) A meeting of the JMC may be convened by either Party giving not less than twenty (20) days’ , *


notice to the other or, in a case requiring urgent action, notice of such lesser duration as the j


members may agree upon.


d) Decisions of the JMC shall require unanimity.


e) Any member of the JMC may vote by written and signed proxy held by another member;


f) Decisions of the JMC may be made without holding a meeting if all representatives of both 1 \


Parties notify their consent thereto in the manner provided in Article 27.


g) GNPC and Contractor shall have the right to bring expert advisors to any JMC meetings to assist


in the discussions of technical and other matters requiring expert advice.


h) The JMC may also establish such subcommittees as it deems appropriate for carrying out its


functions including:


i. a technical subcommittee;


ii. an audit subcommittee;


iii. an accounting subcommittee; and ;


iv. a contract and procurement subcommittee.








20


i) Costs and expenses related to attendance by GNPC in or outside Accra, (e.g. travel,


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


and GNPC policies and procedures shall be borne by Contractor and treated as Petroleum Cost.


GNPC shall provide documentary evidence of such costs and expenses.


6.4 The JMC shall oversee Exploration Operations as follows:


a) Not later than ninety (90) days before the commencement of each Calendar Year, Contractor


shall prepare and submit to the JMC for its review and approval a detailed Work Programme and


Budget covering all Exploration Operations which Contractor proposes to carry out in that


Calendar Year and shall also give an indication of Contractor's tentative preliminary exploration


plans for the succeeding Calendar Year. Where the Effective Date occurs later than 30 June in


any Calendar Year Contractor shall have the option of submitting a single detailed Work


Programme and Budget covering the remaining months of the Calendar Year in which the


Effective Date occurs and the succeeding Calendar Year.


b) Upon notice to GNPC, Contractor may amend any Work Programme or Budget submitted to the


JMC pursuant to this Article which notice will state why in Contractor's opinion the amendment is


necessary or desirable. Any such amendment shall be submitted to the JMC for review and


approval. ,


c) (Every Work Programme submitted to the JMC pursuant to this Article 6.4 and every revision or


amendment thereof shall be consistent with the requirements set out in Article 4.3 relating to


Minimum Work and Expenditure for the period of the Exploration Period in which such Work


Programme or Budget falls.


d) Contractor shall report any Discovery to GNPC immediately following such Discovery and the


Contractor shall place before the JMC for review its Appraisal Programme prior to submission


thereof to the Petroleum Commission, a copy of which submission shall also be sent to the


Minister for informational purposes. Within thirty (30) days of completion of the Appraisal


Programme a JMC meeting to discuss the results of the Appraisal Programme shall be convened


to take place before submission of the detailed Appraisal report provided for in Article 8.9.


e) The JMC will review and approve Work Programmes and Budgets and any amendments or


revisions thereto, and Appraisal Programmes and any amendments or revisions thereto,


submitted to it by Contractor pursuant to this Article 6, and timely give such advice as it deems


appropriate which Contractor shall consider before submitting the Work Programmes and


Budgets or Appraisal Programmes, as applicable, for approvals required by law or pursuant to


this Agreement.


f) After the date of the first Commercial Discovery, Contractor shall seek the concurrence of


GNPC’s JMC representatives, which concurrence shall not be unreasonably withheld, on any


proposal for the drilling of an Exploration Well or Wells not associated with the Commercial


Discovery and not otherwise required to be drilled under Article 4.3. If concurrence is not secured


by Contractor, Contractor may nevertheless elect to drill the Exploration Well or Wells but only in


the event of a subsequent Commercial Discovery associated with the Well or Wells shall the


costs of such Well or Wells be considered Petroleum Costs for AOE purposes. Any such


subsequent Commercial Discovery shall be treated hereunder in the same manner as if such


Commercial Discovery had been made in connection with operations that were not performed as


sole risk operations, including, without limitation, participation by GNPC in such Commercial


Discovery.


6.5 From the Date of Commercial Discovery the JMC shall have supervision of Petroleum Operations


as follows:








21


a) Within sixty (60) days after the Date of Commercial Discovery Contractor shall prepare and


submit to the JMC for approval any revisions to its annual Work Programme and Budget that may


be necessary for the remainder of that Calendar Year and for the rest of the Exploration Period.


b) At least ninety (90) days before the Commencement of each subsequent Calendar Year


Contractor shall submit to the JMC for review and approval a detailed Work Programme and


Budget setting forth all Development and Production Operations which Contractor proposes to


carry out in that Calendar Year and the estimated cost thereof and shall also give an indication of


Contractor’s plans for the succeeding Calendar Year.


c) Within sixty (60) days of the Date of Commencement of Commercial Production and thereafter


not later than one hundred and twenty (120) days before the commencement of each Calendar


Year Contractor shall submit to the JMC for its approval an annual production schedule which


shall be in accordance with International Good Oilfield Practice, and shall be designed to provide


the most efficient, beneficial and timely production of the Petroleum resources.


6.6 Lifting schedules for Development and Production Areas shall be subject to JMC approval.


6.7 The JMC shall review all of Contractor's reports on the conduct of the Petroleum Operations.


6.8 Contractor's insurance programme and the programmes for training and technology transfer


submitted by Contractor and the accompanying budgets for such schemes and programmes shall be


subject to JMC approval.


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


Petroleum Operations must comply with the provisions of Article 20 and JMC tendering procedures and


shall be subject to approval by the JMC or the contract/procurement subcommittee.


6.10 If during any meeting of the JMC the Parties are unable to reach agreement concerning any of


the matters provided for in Article 6.5, 6.6, 6.7, 6.8 and 6.9, the matter shall be deferred for


reconsideration at a further meeting to be held not later than fifteen (15) days following the original


meeting. If after such further meeting the Parties are still unable to reach agreement, the matter in dispute


shall be referred to the Parties forthwith. Failing agreement within fifteen (15) days thereafter, the matter


in dispute shall, at the request of any Party, be referred for resolution under Article 24 and the relevant


exploration period shall be extended for the duration of the dispute resolution process if the dispute is


resolved in favour of Contractor.


6.11 Except as otherwise agreed in writing by the parties, the JMC shall have exclusive authority and


discretion to:


a) review and approve tender procedures, including without limitation determining the terms and


conditions of competitive tender procedures, reasonable pre-qualification criteria for bidders and


the forms of contract therefor and certifying the winner of such tenders;


b) where required in accordance with such approved tender procedures:


6.12 For the avoidance of doubt, the concurrence or approval of JMC representatives shall not be


unreasonably withheld or delayed with respect to any proposal and/or program submitted by Contractor in


accordance with this Article 6.

















22


 ARTICLE 7





RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC


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


Petroleum Operations and shall perform its obligations in a workmanlike manner, with due care and


expedition and in accordance with International Best Oilfield Practice, including without prejudice to the


generality of the foregoing:


a) conduct Petroleum Operations with utmost diligence, efficiency and economy, in accordance with


International Best Oilfield Practice, observing sound technical and engineering practices using


appropriate advanced technology and effective equipment, machinery, materials and methods;


b) take all practicable steps to ensure compliance with Section 3 of the Petroleum Law; including


ensuring the recovery and prevention of waste of Petroleum in the Contract Area in accordance


with best international Petroleum industry practices;


c) prepare and maintain in Ghana full and accurate records of all Petroleum Operations performed


under this Agreement;


d) : prepare and maintain accounts of all operations under this Agreement in such a manner as to


present a full and accurate record of the costs of such Petroleum Operations, in, accordance with


the Accounting Guide; and


e) disclose to GNPC and the Minister any operating or other agreement among the Parties that


constitute Contractor relating to the Petroleum Operations hereunder, which agreement shall not


be inconsistent with the provisions of this Agreement.


f) prepare and implement a programme (to be approved by the JMC) to develop GNPC’s


institutional capacity to become a competent operator;


g) provide and be solely responsible for the payment of all costs related or incidental to all services,


equipment and supplies necessary for the execution of the activities to be conducted by the


Contractor under this Agreement and the related documents;


h) prepare and submit in accordance with this Agreement for approval by the JMC (i) the


Development Plan and (ii) such other matters as are specified in this Agreement and the related


documents as subject to approval by the JMC;


i) take all measures consistent with International Best Oilfield Practice (i) to control the flow and


prevent loss or waste of Petroleum, (ii) to prevent any injurious ingress of water and damage to


Petroleum bearing strata and (iii) to manage reservoir pressure;


j) not to flare any Natural Gas except to the extent necessary to mitigate or prevent an emergency


or for safe operations as provided in the Development Plan;


k) keep the Minister and GNPC promptly advised in writing of all material developments which


occur, or the occurrence of which is reasonably foreseeable, affecting or likely to affect Petroleum


Operations;


l) to take such reasonable steps in case of emergency, and make such immediate expenditures as


are necessary in accordance with International Best Oilfield practice, Ghanaian Environmental,


Industrial Hygiene and Safety Legislation and/or this Agreement and the related documents for


the protection of health, life, the environment and property, and to report in reasonable detail all


such steps taken and expenditures made promptly to the JMC;


m) notify promptly the Minister and GNPC if the Contractor becomes aware of any unusual event or


circumstance occurring in the Contract Area or such other areas where Contractor is undertaking


activities contemplated under this Agreement or the related documents that could reasonably be


expected to adversely affect the environment;








23


n) implement and administer contracts entered into with Affiliates in the same fashion as it would


contracts entered into with non-Affiliate third parties in comparable transactions negotiated,


implemented and administered on an arm's-length basis;


o) maintain or decommission, as appropriate, all existing facilities and assets and all other assets


used or held for use in connection with Petroleum Operations, in accordance with International


Best Oilfield Practice, applicable law and this Agreement; and


p) perform and observe each other term, covenant and agreement of the Contractor contained in


this Agreement and the related documents


7.2 In connection with its performance of Petroleum Operations, Contractor shall have the right within


the terms of and pursuant to applicable law and regulations:


a) to establish offices in Ghana and to assign to those offices such representatives as it shall


consider necessary for the purposes of this Agreement;


b) to use public lands for installation and operation of shore bases, and terminals, harbours and


related facilities, petroleum storage and processing, pipelines from fields to terminals and delivery


facilities, camps and other housing;


c) to receive licenses and permission to install and operate such communications and transportation


facilities as shall be necessary for the efficiency of its operations;


d) to bring to Ghana, provided there are no Ghanaian citizens withtfie requisite skill and experience,


such number of Foreign National Employees as shall be necessary for its operations, including


employees assigned on permanent or resident status, with or without families, as well as those


assigned on temporary basis such as rotational (rota) employees;


e) to provide or arrange for reasonable housing, schooling and other amenities, permanent and


temporary, for its employees and to import personal and household effects, furniture and


vehicles, for the use of its personnel in Ghana;


f) to be solely responsible for provision of health, accident, pension and life insurance benefit plans


on its Foreign National Employees and their families; and such employees shall not be required


to participate in any insurance, compensation or other employee or social benefit programs


established in Ghana;


g) to have, together with its personnel, at all times the right of ingress to and egress from its offices


in Ghana, the Contract Area, and the facilities associated with Petroleum Operations hereunder in


Ghana including the offshore waters, using its owned or chartered means of land, sea and air


transportation; and


h) to engage such Subcontractors, expatriate and national, including also consultants, and to bring


such Subcontractors and their personnel to Ghana as are necessary in order to carry out the


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


Subcontractors shall have the same rights as Contractor specified in this Article 7.2 to the extent


they are engaged by Contractor for the Petroleum Operations hereunder.


7.3 Provided that Contractor has complied with all of its obligations under this Agreement, and as


long as they appropriately complete applicable procedures and other requirements prescribed by relevant


Ghanaian authorities, GNPC shall assist Contractor in carrying out Contractor’s obligations expeditiously


and efficiently as stipulated in this Agreement, and in particular GNPC shall assist the Contractor Parties,


and the relevant Subcontractors as long as they appropriately complete applicable procedures and other


requirements prescribed by relevant authorities to:


a) establish supply bases and obtain necessary communications facilities, equipment and supplies;


b) obtain necessary approvals to open bank accounts in Ghana;








24


c) subject to Article 21 hereof, obtain entry visas and work permits or any other documentation that


may be required from time to time for such number of Foreign National Employees of Contractor


and its Subcontractors engaged in Petroleum Operations and members of their families who will


be resident in Ghana, and make arrangements for their travel, arrival, medical services and other


necessary amenities;


d) obtain permits for the importation of necessary materials;


e) obtain the necessary permits to transport documents, samples or other forms of data to foreign


countries for the purpose of analysis or processing if such is deemed necessary for the purposes


of Petroleum Operations;


f) contact Government agencies dealing with fishing, meteorology, navigation and communications


as required; and


g) identify qualified Ghanaian personnel as candidates for employment by Contractor in Petroleum


Operations; and procure access on competitive commercial terms for the storage, processing,


transportation and/or marketing of Petroleum produced under this Agreement through facilities


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


h) procure access on competitive commercial terms for the storage, processing, transportation


and/or marketing of Petroleum produced under this Agreement through facilities owned by the


State, GNPC (or its Affiliates) or any third party.


7.4 All reasonable and documented expenses incurred by GNPC in connection with any of the


matters set out in Article 7.3 above shall be borne by Contractor and charged as Petroleum Costs.


7.5 GNPC shall grant assistance to the Contractor in emergencies and major accidents, and such


other assistance as may be requested by Contractor, provided that any reasonable expenses involved in


such assistance shall be borne by Contractor.


 ARTICLE 8





COMMERCIALITY


8.1 Contractor shall submit a Discovery Notice to the Minister, Petroleum Commission and GNPC as


soon as possible after any Discovery is made, but in any event not later than thirty (30) days after the


date any such Discovery is made. As soon as possible after the analysis of the test results of such


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


Discovery, Contractor shall by a further notice in writing to the Minister and Petroleum Commission


indicate whether in the opinion of Contractor the Discovery merits Appraisal.


8.2 Where the Contractor does not, without reasonable grounds, make the indication required by


Article 8.1 above within the period indicated or indicates that the Discovery does not merit Appraisal,


Contractor shall, subject to Article 8.17 and 8.22 below, relinquish the Discovery Area associated with the


Discovery.


8.3 Where Contractor indicates that the Discovery merits Appraisal, Contractor shall within one


hundred and eighty (180) days from the date of such Discovery submit to the Petroleum Commission for


approval and to the Minister for information purposes an Appraisal Programme to be carried out by


Contractor in respect of such Discovery. For the avoidance of doubt unless otherwise instructed by the


Minister, Contractor shall conduct a separate Appraisal for each Discovery where Contractor indicates


that such Discovery merits Appraisal.


8.4 In the absence of regulations of general application otherwise governing the process, the


Petroleum Commission and the Contractor shall adhere to the following procedure in connection with the


submission for approval of an Appraisal Programme. The Petroleum Commission shall within Sixty (60)


days of submission of the Appraisal Programme, give the Contractor a notice in writing stating:


a) whether or not the Appraisal Programme has been approved or conditionally approved;


b) any revisions or improvements required by the Petroleum Commission to be made to the


proposed Appraisal Programme, and the reasons thereof; or


c) if conditionally approved, the conditions for approval of the proposed Appraisal Programme.


If the Petroleum Commission does not provide such notice after the sixty (60) day time period described


above then the Appraisal Programme shall be deemed not approved.


If the Petroleum Commission notifies the Contractor that the Appraisal Programme is not approved or fails


to satisfy such obligation to notify the Contractor within the timeframe provided or the Contractor notifies


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


pursuant to this Article, the Petroleum Commission and the Contractor shall consult within thirty (30) Days


of the earlier of (x) the date of the notice by the Petroleum Commission and (y) the date such notice was


due with a view to amending the Appraisal Programme to be acceptable to both. Should the Petroleum


Commission not agree to so consult or should the Petroleum Commission and the Contractor fail to agree


changes required for such approval within fourteen (14) Days following said consultation, Contractor may


lodge a complaint with the Minister and request resolution.


If such dispute is not resolved by the Minister within thirty (30) Days from the date such complaint was


lodged, such dispute shall be resolved in accordance with Article 24.


1








If the Petroleum Commission has not given a notice in writing pursuant to this Article, then the arbitration


panel shall determine whether the Petroleum Commission’s failure to give such notice was reasonable


and lawful.


If the Petroleum Commission has given a notice in writing pursuant to Article 8.4(b) or 8.4(c), and the


revisions or conditions cannot be agreed on, then the arbitration panel shall determine whether the


Petroleum Commission’s giving such revisions or conditions proposed was lawful. In each case, the


arbitration panel shall also determine the appropriate damages and/or other award flowing from any such


unreasonableness or unlawfulness.


1 8.5 Where the issue in dispute referred for resolution pursuant to Article 24 is finally decided in favour


of Contractor, the Petroleum Commission shall forthwith give the requisite approval to the Appraisal


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


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


a) amend the proposed Appraisal Programme to give effect to the final decision rendered under





Article 24, and the Petroleum Commission shall give the requisite approval to such revised


Appraisal Programme; or


b) relinquish the Discovery Area.


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





amendment to the JMC for review and approval pursuant to Article 6.4(b) before submission to the


Petroleum Commission for approval. :





8.7 Unless Contractor and the Petroleum Commission otherwise agree in any particular case,


Contractor shall have a period of two (2) years from the date of Discovery to complete the Appraisal


Programme. In the event Contractor requires a period of more than the two (2) years to complete the


Appraisal Programme, Contractor shall submit a request to the Minister for an extension with a firm


programme with timelines to justify the request.





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


from the date of approval of the Appraisal Programme by the Petroleum Commission. Where the


Contractor is unable to commence Appraisal within one hundred and fifty (150) days from the date of


approval of the Appraisal Programme by the Petroleum Commission, GNPC shall be entitled to exercise


the option provided for in Article 9.1 to enable prompt Appraisal, provided however that after Contractor


actually embarks on Appraisal work or obtains an extension of time for such work this option may not be


exercised.


8.9 Not later than ninety (90) days from the date on which said Appraisal Programme relating to the





Discovery is completed Contractor will submit to the Minister and the Petroleum Commission a report


containing the results of the Appraisal Programme. Such report shall include all available technical and


economic data relevant to a determination of commerciality, including, but not limited to, geological and


geophysical conditions, such as structural configuration, physical properties and the extent of reservoir


rocks, areas, thickness and depth of pay zones, pressure, volume and temperature analysis of the


reservoir fluids; preliminary estimates of Crude Oil and/or Natural Gas reserves; recovery drive


characteristics; anticipated production performance per reservoir and per well; fluid characteristics,


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


8.10 Not later than ninety (90) days from the date on which said Appraisal Programme is completed


Contractor shall, by a further notice in writing, inform the Minister whether the Discovery in the opinion of








27

















I


Contractor is or is not a Commercial Discovery.








8.11 If Contractor fails, without reasonable grounds, to notify the Minister as provided in Article 8.1 or


informs the Minister that the Discovery is not commercial, then subject to Article 8.20, Contractor shall


relinquish such Discovery Area; provided, however, that in appropriate cases, before declaring that a


Discovery is not commercial, Contractor shall consult with the other Parties and may make appropriate


representations proposing minor changes in the fiscal and other provisions of this Agreement which may,


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


feasible, and in the best interests of the Parties agree to make such changes or modifications in the


existing arrangements.


8.12 If Contractor pursuant to Article 8.10 informs the Minister that the Discovery is a Commercial


Discovery, Contractor shall not later than one hundred and eighty (180) days thereafter, prepare and


submit to the Minister a Development Plan.


8.13 The Development Plan referred to in Article 8.12 above shall be based on detailed engineering


studies and shall include:


a) Contractor’s proposals for the delineation of the proposed Development and Production Area and


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


in accordaijce with the provisions of Article 14.4; ..


b) the way in which the Development and Production of the’reservoir is planned to be financed;


c) Contractor’s proposals relating to the spacing, drilling and completion of wells, the production,


storage, processing, transportation and delivery facilities required for the production, storage and


transportation of the Petroleum, including without limitation:


i. the estimated number, size and production capacity of production platforms if any;


ii. the estimated number of Production Wells;


iii. the particulars of feasible alternatives for transportation of the Petroleum, including pipelines;


iv. the particulars of onshore installations required, including the type and specifications or size


thereof; and


v. the particulars of other technical equipment required for the operations;


d) the estimate of the reserves together with the estimated production profiles for Crude Oil and


Natural Gas from the Petroleum reservoirs throughout the life of the field to be developed


pursuant to the Development Plan.


e) tie-ins with other petroleum fields where applicable;


f) information on operation and maintenance;


g) a description of technical solutions including enhanced recovery methods;


h) estimates of capital and operating expenditures;


i) the economic feasibility studies carried out by or for Contractor in respect of alternative methods


for Development of the Discovery, taking into account:


i. location;


ii. water depth (where applicable);


iii. meteorological conditions;


iv. estimates of capital and operating expenditures; and


v. any other relevant data and evaluation thereof;








28


j) the safety measures to be adopted in the course of the Development and Production Operations,


including measures to deal with emergencies;


k) environmental impact assessments as required by the applicable laws of the Republic of Ghana


in effect and as amended from time to time;


l) the necessary measures to be taken for the protection of the environment and a contingency plan


for handling of emergencies (including the provision and maintenance of equipment stockpiles to


respond to an emergency;


m) Contractor's proposals with respect to the procurement of goods and services obtainable in


Ghana;


n) Contractor's technology transfer plan


o) Contractor's plan for training and employment of Ghanaian nationals;


p) the timetable for effecting Development Operations; and


q) a plan for decommissioning and abandonment.


8.14 The date of the Minister’s approval of the Development Plan shall be the Date of Commercial


Discovery.


8.15 The Minister shall within Ninety (90) Days following submission of the Development Plan give


Contractor a notice in writing stating:


a) whether or not the Development Plan as submitted has been approved or conditionally approved;


b) any revisions proposed by the Minister to the Development Plan as submitted, and the reasons


thereof; or


c) if conditionally approved, any conditions pursuant to which the Development Plan is approved.


If the Minister does not provide such notice within ninety (90) Days following the submission of the


Development Plan by the Contractor and thirty (30) days following a second notice from Contractor


requesting the Minister’s approval, such Development Plan shall be deemed not approved.


8.16 Where the Development Plan is not approved by the Minister as provided under Article 8.16


above, the Parties shall within a period of thirty (30) days from the date of the notice by the Minister as


referred to under Article 8.15 above meet to agree on the revisions or conditions proposed by the Minister


to the Development Plan. In the event of failure to agree to the proposed revisions or conditions, within


fourteen (14) days following said meeting any matters in dispute between the Minister and the Contractor


shall be referred for resolution in accordance with Article 24.8. If the Minister has not given a notice in


writing pursuant to Article 8.15, then the arbitration panel shall determine whether the Minister's failure to


give such notice was reasonable and lawful. If the Minister has given a notice in writing pursuant to Article


8.15 (b) or 8.15 (c), and the Parties cannot agree on the revisions or conditions, then the arbitration panel


shall determine whether the Minister's giving such revisions or conditions proposed was reasonable and


lawful.


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


of Contractor the Minister shall forthwith give the requisite approval to the Development Plan submitted by


Contractor.


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


favour of the Minister, Contractor shall forthwith:


a) amend the proposed Development Plan to give effect to the final decision rendered under Article


24, and the Minister shall give the requisite approval to such revised Development Plan; or


b) subject to Article 8.22 below relinquish the Discovery Area.





29


8.19 Notwithstanding the relinquishment provisions of Articles 8.2 and 8.11 above, if Contractor :is


indicates that a Discovery does not at the time merit Appraisal, or after Appraisal does not appear to be a


Commercial Discovery but may merit Appraisal or potentially become a Commercial Discovery at a later


date during the Exploration Period, then Contractor need not relinquish the Discovery Area and may


continue its Exploration Operations in the Contract Area during the Exploration Period; provided that the


Contractor shall explain to the Minister what additional evaluations, including Exploration work or studies


or marketing studies, are or may be planned in order to determine whether subsequent Appraisal is


warranted or that the Discovery is commercial. Such evaluations shall be performed by Contractor


according to a specific time table approved by the JMC, subject to its right of earlier relinquishment of the


Discovery Area. After completion of the evaluations, Contractor shall make the indications called for


under Article 8.3 or 8.9 and either proceed with Appraisal, confirm commerciality or relinquish the


Discovery Area. I


8.20 In any case, if a Discovery is made in the Initial Exploration Period or First Extension Period, the I


Contractor shall by the end of the subsequent phase (that is the First Extension Period or Second


Extension Period as the case may be), take a decision to appraise the Discovery or relinquish such Kl


1


Discovery. Likewise, if the Contractor has completed the Appraisal of a Discovery in the Initial Exploration >1


Period or First Extension Period, the Contractor sfiall by the end of-the subsequent phase (that is, the


First Extension Period or Second Extension Period as the case may be), take a decision to determine w


commerciality or relinquish such Discovery. If at the end of the Exploration Period the Contractor has /in


neither indicated its intent to proceed with an Appraisal Programme nor declared the Discovery to be a


Commercial Discovery, then the Discovery Area shall be relinquished. |


8.21 Upon completion of an Appraisal Programme and before Contractor makes a determination of


non-commerciality, Contractor may consult with the other Parties and may make appropriate


representations proposing minor changes in the fiscal and other provisions of this Agreement which may, II


in the opinion of Contractor, affect the determination of commerciality. The other Parties may, agree to m


make such changes or modifications in the existing arrangements. In the event the Parties do not agree


on such changes or modifications, then subject to Articles 8.18 and 8.22, Contractor shall relinquish the


Discovery Area.


8.22 Nothing in Articles 8.3, 8.11, 8.19 or 8.20 above shall be read or construed as requiring


Contractor to relinquish:


a) any area which constitutes or forms part of another Discovery Area in respect of which:





i. Contractor has given the Minister a separate notice stating that such Discovery merits Appraisal;


or


ii. Contractor has given the Minister a separate notice indicating that such Discovery is a


Commercial Discovery; or


b) any area which constitutes or forms part of a Development and Production Area.





8.23 In the event a field extends beyond the boundaries of the Contract Area, the Minister may require


the Contractor to exploit said field in association with the third party holding the rights and obligations


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


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


and in accordance with best International Best Oil Field Practice


8.24 For the avoidance of doubt, where Contractor makes a Discovery after the expiration of the


Exploration Period Contractor shall notify the Minister of such Discovery pursuant to Article 8.1 and


surrender such Discovery to GNPC.





30


8.25 All notices, reports or other documents required to be submitted to the Minister under this Article


8 shall be copied to the Petroleum Commission










































































































































































31


 ARTICLE





SOLE RISK ACCOUNT





9.1


a) The exercise by GNPC of its Sole Risk rights under this Article 9 shall be performed in a manner


which does not prevent Contractor from complying with its Minimum Work Obligations under


Article 4.3, an Appraisal Programme or a Development Plan and, in the event that GNPC has


nominated Contractor and Contractor has agreed to perform the Sole Risk operations on behalf


of GNPC, shall include a financing plan satisfactory to Contractor.


b) GNPC shall not conduct any Sole Risk Operations within the boundaries of a Development and


Production Area or a Discovery Area (except as contemplated in Article 8.7), provided that GNPC


may conduct the drilling of a well on a Sole Risk basis to:


i. a deeper formation than the formation(s) from which production is expected to occur from a


Development and Production Area or a Discovery Area, or


ii. a shallower formation than the formation's) from which production is expected to occur from a


Development and Production Area or a Discovery Area and to a reservoir which has not been


penetrated by a non-Sole Risk welif ' "


in either case without affecting rights of the Parties to the formation(s) from which production is expected


to occur from a Development and Production Area or a Discovery Area.


9.2 Where an Appraisal undertaken under Article 9.1 above at the Sole Risk of GNPC results in a


determination that a Discovery is a Commercial Discovery, Contractor may develop the Commercial


Discovery upon reimbursement to GNPC of all expenses incurred in undertaking the Appraisal and after


arranging with GNPC satisfactory terms for the payment of a premium equivalent to five hundred per cent


(500%) of such expenses. Such premium shall not be reckoned as cost of Petroleum Operations for the


purpose of the Accounting Guide. In the event that Contractor declines to develop said Discovery,


Contractor shall relinquish the Development and Production Area established by the Appraisal


Programme conducted by GNPC under Article 9.1.


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


to penetrate and test horizons deeper than those contained in the Work Programme of Contractor or


required under Article 4. GNPC may also at its Sole Risk ask the Contractor to test a zone or zones which


Contractor has not included in Contractor's test programme. Notice of this shall be given to Contractor in


writing as early as possible prior to or during the drilling of the well, but in any case not after Contractor


has begun work to complete or abandon the well. The exercise by GNPC of this right shall be in an


agreed manner which does not prevent Contractor from complying with its work obligations under Article


4.3.


9.4 At any time before commencing such deeper drilling Contractor may elect to embody the required


drilling in its own Exploration Operation, in which case any resulting Discovery shall not be affected by the


provisions of this Article.


9.5 Where any Sole Risk deeper drilling results in a Discovery, GNPC shall have the right, at its Sole


Risk, to appraise, develop, produce and dispose of all Petroleum from that deeper horizon and shall


conduct such Sole Risk operations unless GNPC proposes otherwise and Contractor agrees. Provided


however that if at the time such Petroleum is tested from the producing horizon in a well, Contractor's








32


Work Programme includes a well or wells to be drilled to the same producing horizon, and provided that


the well or wells drilled by Contractor result(s) in a Petroleum producing well producing from the same


horizon, Contractor shall, after reimbursing GNPC for all costs associated with its Sole Risk deeper


drilling in said well, have the right to include production from that well in its total production for the


purposes of establishing a Commercial Discovery, and, if a Commercial Discovery is subsequently


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


Agreement.


9.6 Alternatively, if at the time such Petroleum is tested from a producing horizon in a well pursuant to


a Sole Risk operation Contractor’s Work Programme does not include a well to be drilled to said horizon,


Contractor has the option to appraise and /or develop, as the case may be, the Discovery for its account


under the terms of this Agreement if it so elects within a period of sixty (60) days after such Discovery. In


such case, Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection with such


Sole Risk operations, and shall make satisfactory arrangements with GNPC for the payment of a premium


equivalent to five hundred percent (500% of such expenses).


9.7 During the term of this Agreement, GNPC shall have the right, at its Sole Risk, and upon six (6)


months prior notice to Contractor, to drill one (1) or two (2) wells per Calendar Year within the Contract


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


Programme to be performed by Contractor and the1 exercise of such right by GNPC and the arrangement


made by GNPC for undertaking such .drilling do not prevent Contractor from satisfying its work


obligations. Within thirty (30) days after receipt of such notice Contractor may elect to drill the required


well or wells as part of Contractor’s Exploration Operations.


9.8 In the event that a well drilled at the Sole Risk of GNPC in accordance with Article 9.7 above


results in a Discovery, GNPC shall have the right to appraise and develop as the case may be or require


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


mutually agreed service fee, so long as Contractor has an interest in the Contract Area, GNPC taking all


the interest risk and costs and hence having the right to all Petroleum produced from the Commercial


Discovery, provided however that Contractor has the option to appraise and/or develop, as the case may


be, the Discovery for its account under the terms of this Agreement if it so elects within a period of sixty


(60) days after receipt of GNPC’s written notice of such Discovery.


9.9 Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection with such


Sole Risk operations, and shall make satisfactory arrangements with GNPC for the payment of a premium


equivalent to five hundred percent (500%) of such expenses before exercising the option under Article 9.7


above. Such premium shall not be reckoned as Petroleum Costs for the purposes of the Accounting


Guide.


9.10 In the event that Contractor declines to develop the Commercial Discovery or no agreement is


reached on the service fee arrangement as provided for in Article 9.8 above, Contractor shall relinquish


the Development and Production Area associated with such Commercial Discovery.


9.11 Sole Risk operations under this Article 9 shall not extend the Exploration Period nor the term of


this Agreement and Contractor shall complete any agreed programme of work commenced by it under


this Article at GNPC’s Sole Risk, and subject to such provisions hereof as the Parties shall then agree,


even though the Exploration Period as defined in Article 3 or the term of this Agreement may have


expired.











33


9.12 GNPC shall indemnify and hold harmless Contractor against all actions, claims, demands and


proceedings whatsoever brought by any third party or the State, arising out of or in connection with Sole


Risk operations under this Article 9, unless such actions, claims, demands and proceedings are caused


by Contractor’s negligence or wilful misconduct.





















































































































































34


 ARTICLE 10








SHARING OF CRUDE OIL





10.1 Gross Production of Crude Oil from each Development and Production Area shall (subject to a


Calendar Year adjustment developed under the provisions of Article 10.7) be distributed amongst the


Parties in the following sequence and proportions:


a) Twelve and a half percent (12.5%) of the Gross Production of Crude Oil shall be delivered to the


State as ROYALTY, pursuant to the provisions of the Petroleum Law. Upon notice to Contractor,


the State shall have the right to elect to receive cash in lieu of its royalty share of such Crude Oil.


The State’s notice shall be given to Contractor at least ninety (90) days in advance of each lifting


period, such periods to be established pursuant to the provisions of Article 10.7 below. In such


case, said share of Crude Oil shall be delivered to Contractor and it shall pay to the State the


value of said share in cash at the relevant weighted average Market Price for the relevant period


as determined in accordance with Article 11.7;


b) After distribution of such Royalty as required pursuant to Article 10.1(a), an amount of Crude Oil,


shall be delivered to GNPC to the extent it is entitled for Sole Risk operations, if any, under Article


9;


c) After distribution of such-amounts of Crude Oil as are required pursuant to Articles 10.1(a) and


10.1(b) and the remaining Crude Oil produced from each Development and Production Are#tshall


be distributed to Contractor and, subject to Article 10.1(e) below, to GNPC on the basis of their


respective Participating Interests pursuant to Article 2;


d) The State's AOE (as hereinafter defined), if any, shall be distributed to the State out of the


Contractor’s share of Crude Oil determined under Article 10.1(d). The State shall also have the


right to elect to receive cash in lieu of the AOE share of Crude Oil accorded to it pursuant to


Article 10.2 below. Notification of said election shall be given in the same notice in which the


State notifies Contractor of its election to receive cash in lieu of Crude Oil under Article 10.1(a)


above. In such case, said Crude Oil share shall be delivered to Contractor and it shall pay to the


State the value of said share in cash at the relevant weighted average Market Price for the


relevant period as determined in accordance with Article 11.7; and


e) In the event that GNPC has failed to pay any amounts due to Contractor pursuant to Article 15.2


of this Agreement (such amounts with interest thereon in accordance with Article 26.4 being


hereinafter called “Default Amounts”) and for so long as any such advances and interest


thereon remain unrecovered by Contractor, a volume of Crude Oil shall be delivered to Contractor


equivalent in value to the outstanding amounts of the aforesaid Default Amounts until such


Default Amounts are fully recovered by Contractor after which an amount of Crude Oil shall be


delivered to GNPC sufficient in value to reimburse for its share of Production Costs paid by it to


that date, if any, until such share of Production Costs has been fully reimbursed to it. The value of


the Crude Oil for the purpose of this Article 10 shall be the Market Price determined pursuant to


Article 11.7.


10.2 At any time the State shall be entitled to a portion of Contractor’s share of Crude Oil then being


produced from each separate Development and Production Area (hereinafter referred to as “Additional


Oil Entitlements” or “AOE”) on the basis of the after-tax inflation-adjusted rate of return (“ROR”)


which Contractor has achieved with respect to such Development and Production Area as of that time.


Contractor's ROR shall be calculated on its NCF and shall be determined separately for each


Development and Production Area at the end of each Month in accordance with the following


computation:





35


 (a) Definitions:





“NCF” means Contractor's net cash flow for the Month for which the calculation is being made, and shall


be computed in accordance with the following formula:





NCF = x-y-z





where





“x" equals all revenues received during such Month by Contractor through the Operator from the


Development and Production Area, including an amount computed by multiplying the amount of Crude Oil


taken by Contractor during such Month in accordance with Articles 10.1(d) and 10.1(e); excluding such


Crude Oil taken by Contractor for payment advances and of interest in respect of Petroleum Costs


incurred by Contractor on GNPC’s behalf as well as the Default Amount (if any), by the Market Price


applicable to such Crude Oil during the Month when lifted, plus any other proceeds specified in the


Accounting Guide received by Contractor, including, without limitation, the proceeds from the sale of any


assets to which Contractor continues to have title. For the avoidance of doubt, "x” shall not include


revenues from Crude Oil lifted by Contractor which is part of another Party's entitlement (e.g. Royalty,


AOE Oil delivered to Contractor because the State has elected to receive cash in lieu of Crude Oil, Crude


Oil purchased by Contractor from GNPC or the State) but shall include revenues from Crude Oil owned


by Contractor'but lifted by another Party (e.g. Crude Oil purchased by GNPC or the State from


Contractor), “y” equals one-twelfth (1/4) of the income tax paid by the Contractor to the State with respect


to the Calendar Year in respect of the Development and Production Area. If there are two (2) or more


Development and Production Areas, the total income tax paid by Contractor in accordance with the


Petroleum fncome Tax Law 1987 shall for purposes of this calculation be allocated to the Development


and Production Area on the basis of hypothetical tax calculations for the separate Development and


Production Areas. The hypothetical tax calculation for each Development and Production Area shall be


determined by allocating the total amount of tax incurred for each Calendar Year by Contractor under the


Petroleum Income Tax Law to each Development and Production Area based on the ratio that the


chargeable income from a given Development and Production Area bears to the total chargeable income


of Contractor. The chargeable income of Contractor is determined under section 2 of the Petroleum


Income Tax Law and the chargeable Income of a Development and Production Area shall be calculated


by deducting from the gross income derived from or allocated to that Area those expenses deductible


under section 3 of the Petroleum Income Tax Law which are reasonably allocable to that Area. A


negative chargeable income for an Area shall be treated as zero for purposes of this allocation and not


more (or less) than the total income tax paid by Contractor shall be allocated between the Areas.


“z" equals all Petroleum Costs specified in the Accounting Guide and expended by Contractor during


such Month with respect to the Development and Production Area, including any Petroleum Costs paid by


Contractor on GNPC’s behalf, and not reimbursed by GNPC within the Month, provided that all Petroleum


Costs for Exploration Operations not directly attributable to a specific Development and Production Area


shall for purposes of this calculation be allocated to the Development and Production Area having the


earliest date of Commencement of Commercial Production; and provided further that for the purpose of


the ROR calculation Petroleum Costs shall not include any amounts in respect of interest on loans


obtained for the purposes of carrying out Petroleum Operations.


“FAn”, “SAn", “TAn" , “YAn” and “ZAn” means First Account, Second Account, Third Account, Fourth


Account and Fifth Account, respectively, and represent amounts as of the last day of the Month in


question as determined by the formulae in (b) below.








36


“FAn-1”, "SAn-1”. "TAn-1”, “YAn-1" and “ZAn-1”, respectively, mean the lesser of (i) the FAn, SAn, TAn,


Yan or ZAn, as the case may be, as of the last day of the Month immediately preceding the Month in


question, or (ii) zero. Stated otherwise, FAn-1 shall equal FAn as of the last day of the Month


immediately preceding the Month in question if such FAn was a negative number, but shall equal zero if


such FAn was a positive number. Likewise, SAn-1 shall equal SAn as of the last day of the Month


immediately preceding the Month in question if such SAn was a negative number, but shall equal zero if


such SAn was a positive number. Likewise TAn-1 shall equal TAn as of the last day of the Month


immediately preceding the Month in question if such TAn was a negative number, but shall equal zero if


such TAn was a positive number. Likewise YAn-1 shall equal YAn as of the last day of the Month


immediately preceding the Month in question if such YAn was a positive number. Likewise, ZAn-1 shall


equal ZAn as of the last day of the Month immediately preceding the Month in question if such ZAn was a


negative number, but shall equal zero if such ZAn was a positive number. In the ROR calculation for the


first Month of Petroleum Operations, FAn-1, SAn-1, TAn-1, YAn-1 and ZAn-1 shall be zero.


“i” for the Month in question equals one (1) subtracted from the quotient of the United States Industrial


Goods Wholesale Price Index (“USIGWPl") for the Month second preceding the Month in question as first


reported in the International Financial statistics of the International Monetary Fund, divided by the


.USIGWPl for the same second preceding Month of the immediately preceding Calendar Year as first


reported in the International Financial Statistics of the International Monetary Fund. If the USIGWPl


ceases to be published, a substitute U.S. Dollar-based price index shall be used.


“n” refers to the nth Month in question.


“n-1" refers to the Month immediately preceding the nth Month


(b) Formulae:
































In the calculation of SAn an amount shall be subtracted from NCF identical to the value of any AOE which


would be due to the State if reference were made hereunder only to the FAn.














In the calculation of TAn an amount shall be subtracted from NCF identical to the value of any AOE which


would be due to the State if reference were made hereunder only to the FAn and SAn.




















37


In the calculation of YAn an amount shall be subtracted from NCF identical to the value of any AOE which


would be due to the State if reference were made hereunder only to the FAn, SAn and TAn.














In the calculation of ZAn an amount shall be subtracted from NCF identical to the value of any AOE which


would be due to the State if reference were made hereunder only to FAn, SAn, TAn and YAn..


(c) Prospective Application:


The State’s AOE measured in barrels of oil will be as follows:


i. If FAn, SAn, TAn , YAn and ZAn are all negative, the State’s AOE for the Month in question shall


be zero;


ii. If FAn is positive and SAn, TAn, YAn and ZAn are all negative, the State’s AOE for the Month in


question shall be equal to the absolute amount resulting from the following monetary calculation:


12.5% of the FAn for that Month divided by the weighted average Market Price as determined in


accordance with Article 11.7.


iii. If both FAn and SAn are positive, but TAn, YAn and ZAn are negative, the State’s AOE for the


Month in question shall be equal to an absolute amount resulting from the following monetary


calculation: the aggregate of 12.5% of FAn for that Month plus 15.0% of the SAn for that Month


all divided by the weighted average Market Price as determined in accordance with Article 11.7.


iv. If FAn, SAn and TAn are all positive but both YAn and ZAn is negative, the State's AOE for the


Month in question shall be equal to the absolute amount resulting from the following monetary


calculation:


the aggregate of 12..5% of the FAn for that Month plus 15.0% of the SAn for that Month plus 17.5% of


the TAn for that Month all divided by the weighted average Market Price as determined in accordance


with Article 11.7.


v. If FAn, SAn, TAn, YAn and ZAn are all positive but ZAn is negative, the State’s AOE for the


Month in question shall be equal to the absolute amount resulting from the following monetary


calculation:


the aggregate of 12.5%. of the FAn for that Month plus 15.0%. of the SAn for that Month plus


17.5%. of the TAn for that Month plus 22.5%. of the YAn for that Month all divided by the


weighted average Market Price as determined in accordance with Article 11.7.


vi. If FAn, SAn, TAn, YAn and ZAn are all positive, the State’s AOE for the Month in question shall


be equal to the absolute amount resulting from the following monetary calculation:


the aggregate of 12.5% of the FAn for that Month plus 15.0% of the SAn for that Month plus 17.5% of the


TAn for that Month plus 22.5% of the ZAn for that Month plus 27.5% of ZAn for that Month all divided by


the weighted average Market Price as determined in accordance with Article 11.7.


d) The AOE calculations shall be made in U.S. Dollars with all non-dollar expenditures converted to


U.S. Dollars in accordance with Section 1.3.5 of Annex 2. When the AOE calculation cannot be


definitively made because of disagreement on the World Market Price or any other factor in the


formulae, then a provisional AOE calculation shall be made on the basis of best estimates of such








38


factors, and such provisional calculation shall be subject to correction and revision upon the


conclusive determination of such factors, and appropriate retroactive adjustments shall be made,


e) The AOE shall be calculated on a Monthly basis, with the AOE to be paid commencing with the


first Month following the Month in which the FAn, SAn, TAn, YAn or ZAn, (as applicable) becomes


positive. Because the precise amount of the AOE for a Calendar Year cannot be determined with


certainty until after the end of that Calendar year, deliveries (or payments in lieu) of the AOE with


respect to a Month shall be made during such Calendar Year based upon the Contractor’s good


faith estimates of the amounts owing, with any adjustments following the end of the Calendar


Year to be settled pursuant to the procedures agreed to pursuant to Article 10.7 below. Final


calculations of the AOE shall be made within thirty (30) days following the filing by the Contractor


of the annual tax return for such Calendar year pursuant to the Petroleum Income Tax Law, and


the amount of the AOE shall be appropriately adjusted in the event of a subsequent adjustment of


the amount of tax owing on such term. In case of excess payment by the Contractor of the


relevant AOE applicable to said Calendar Year said difference shall be made good in the next


following Month either through Crude Oil or cash.


10.3 GNPC shall act as agent for the State in the collection of all Petroleum accruing to the State


under this Article and delivery to GNPC by Contractor shall discharge Contractor’s liability to deliver the


share of the State.


10.4 The State or GNPC, having met the requirements of Article 15.1, may elect, in accordance with


terms and conditions to be mutually agreed by the Parties, that all or part of the Crude Oil to be


distributed to the State or to GNPC pursuant to this Article shall be sold and delivered by the State or


GNPC to Contractor or its Affiliate for use and disposal and in such case Contractor or its Affiliate shall


pay to the State or to GNPC, as the case may be, the Market Price for any Crude Oil so sold and


delivered. Market Price for purposes of this Article 10.4 shall be the amounts actually realized by


Contractor or said Affiliate on its resales of said Crude Oil in arm’s length commercial transactions, or for


its other resales or dispositions of said Crude Oil, based upon world market prices determined in the


manner specified in Article 11.7(b).


10.5 Ownership and risk of loss of all Crude Oil produced from the Contract Area, allocated to


Contractor shall pass to Contractor at the outlet flange (“Delivery Point”) of the marine terminal or other


storage facility for loading into tankers or other transportation equipment referred to in Article 11.1.


10.6 Subject to the provisions of Article 15 hereof, Contractor shall have the right freely to export and


dispose of all the Crude Oil allocated and/or delivered to it pursuant to this Article 10.


10.7 The Parties shall through consultation enter into supplementary agreements concerning Crude


Oil lifting procedures, lifting and tanker schedules, loading conditions, Crude Oil metering, and the


settlement of lifting imbalances, if any, among the Parties at the end of each Month. The Crude Oil to be


distributed or otherwise made available to the Parties in each Calendar Year in accordance with the


preceding provisions of this Article shall insofar as possible be in reasonably equal monthly quantities.


10.8 To assist in the making of the AOE calculation in accordance with Article 10.2, there is attached


as Annex 3 to this Agreement a worked example of the calculation using hypothetical figures, rates and


thresholds, for the purpose of illustration only

















39


 ARTICLE 11





MEASUREMENT AND PRICING OF CRUDE OIL


11.1 Crude Oil shall be delivered by Contractor to storage tanks or other suitable holding facilities


constructed, maintained and operated in accordance with applicable laws and Best International Oilfield


Practice. Crude Oil shall be metered or otherwise measured for quantity and tested for quality in such


storage tanks for all purposes of this Agreement. Any Party may request that measurements and tests be


done by an internationally recognized inspection company. Contractor shall arrange and pay for the


conduct of any measurement, or test so requested provided, however, that in the case of (1) a test


requested for quality purposes and/or (2) a test requested on metering (or measurement) devices, or


where the test demonstrates that such devices are accurate within acceptable tolerances agreed to by


the Parties or if not established by the Parties, then in accordance with Best International Oilfield


Practice, the Party requesting the test shall reimburse Contractor for the costs associated with the test or


tests.


11.2 GNPC or its authorized agents shall have the right:


a) to be present at and to observe such measurement of Crude Oil;


b) to examine and test whatever appliances are used by Contractor therefore; and


c) to install or require Contractor to install devices or equipment,for the purpose of determining the


quantity and quality of Crude Oil.


d) to appoint an independent Surveyor to inspect, measure and determine the quality of Crude Oil.


11.3 In the event that GNPC considers Contractor’s methods of measurement to be inaccurate GNPC


shall notify Contractor to this effect and the Parties shall meet within ten (10) days of such notification to


discuss the matter. Where after thirty (30) days the Parties cannot agree over the issue they shall refer for


resolution under Article 24 the sole question of whether Contractor’s method of measuring Crude Oil is


accurate and reasonable. Retrospective adjustments to measurements shall be made where necessary


to give effect to the decision rendered under Article 24.


11.4 If upon the examination or testing of appliances provided for in Article 11.2 above any such


appliances shall be discovered to be defective:


a) Contractor shall take immediate steps to repair or replace such appliance; and


b) subject to the establishment of the contrary, such error shall be deemed to have existed for three


(3) Months or since the date of the last examination and testing, whichever occurred more


recently.


11.5 In the event that Contractor desires to adjust, repair or replace any measuring appliance, it shall


give GNPC 5 Days’ Notice to enable GNPC or its authorized agent to be present.


11.6 Contractor shall keep full and accurate accounts concerning all Petroleum measured as aforesaid


and provide GNPC with copies thereof on a monthly basis, not later than ten (10) days after the end of


each Month.


11.7 The Market Price for Crude Oil delivered to Contractor hereunder shall be established with


respect to each lifting or other period as provided elsewhere in this Agreement as follows:


a) on Crude Oil sold by Contractor in “arm’s length commercial transactions” (defined in Article


11.7(c) below), the Market Price shall be the price actually realized by Contractor on such sales;








40


b) other sales of Crude Oil by Contractor not in an arm’s length commercial transaction, on exports


by Contractor without sale or on sales under Article 15.2, the Market Price shall be determined by


reference to world market prices of comparable Crude Oils sold in arm’s length transactions for


export in the major world petroleum markets, and adjusted for oil quality, location, timing and


conditions of pricing, delivery and payment; provided that in the case of sales under Article 15.2


where such sales relate to part only of Contractor’s entitlement, prices actually realized by


Contractor in sales of the balance of its proportionate share falling within Article 11.7(a) above


shall be taken into account in determining Market Price. For purposes of this Article 11.7(b),


“comparable Crude Oils” shall mean Crude Oils of similar API gravity, sulphur content and acidity,


and if Contractor cannot identify comparable Crude Oils for the purposes of this Article, the


Parties may agree on an alternative method for establishing a comparable Crude Oil.


c) sales in “arm’s length commercial transactions” shall mean sales to purchasers independent of


the seller, which do not involve Crude Oil exchange or barter transactions, government to


government transaction, sales directly or indirectly to Affiliates, or sales involving consideration


other than payment in U.S. Dollars or currencies convertible thereto, or affected in whole or in


part by considerations other than the usual economic incentives for commercial arm’s length


Crude Oil sales;


d) the price of Crude Oil shall be expressed in U.S. Dollars per barrel, F.O.B. the Delivery Point by


Contractor;


e) if Crude Oils of various qualities are produced from the Contract Area, the Market Price shall .be


determined separately for each type sold and/or exported by Contractor only to the extent that the


different quality grades remain segregated through to the point where they are sold, and if grades


of different quality are commingled into a common stream, Contractor and GNPC shall agree on


an equitable methodology for assessing relative value for each grade of Crude Oil comprising the


blend and shall implement the agreed methodology for having the producer(s) of higher quality


Crude Oil(s) be reimbursed by the producer(s) of lower quality Crude Oil(s);.


11.8 Contractor shall provide to GNPC (for use by the State and GNPC) information in accordance


with Section 7 of the Accounting Guide on each lifting which shall include the buyer of the cargo, sales


basis with respect to Benchmark crude oil, the pricing basis, the differential, any deductions and the


Market Price determined by it for each lifting not later than thirty five (35) days after the end of such lifting.


For the purposes of this Article 11.8 the obligation of Contractor shall be joint and several. Where


Contractor comprises more than one person, each such person shall provide to GNPC the information


required by this Article 11.8.


11.9 If GNPC considers that the Market Price notified by Contractor was not correctly determined in


accordance with the provisions of Article 11.7 above, it shall so notify Contractor not later than thirty (30)


days after notification by Contractor of such price, and GNPC and Contractor shall meet not later than


twenty (20) days thereafter to agree on the correct Market Price.


11.10 In the event that GNPC and Contractor fail to agree upon the commencement of meetings for the


purpose described in Article 11.9 above, the Market Price shall be referred for determination in


accordance with Article 24 of this Agreement.


11.11 Pending a determination under Article 11.10, the Market Price will be deemed to be the last


Market Price agreed or determined, as the case may be, or if there has been no such previous agreement


or determination, the price notified by Contractor for the lifting in question under Article 11.8. Should the


determined price be different from that used in accordance with the foregoing then the difference plus


interest at the Specific Rate as stated in Article 26.5 shall be paid in cash by or to Contractor, as the case


may be, within thirty (30) days of such determination.





41


 ARTICLE 12





TAXATION AND OTHER IMPOSTS


12.1 Subject to applicable laws and regulations as the same may be amended from time to time, the


tax, duty, fee and other imposts that shall be imposed by the State on Contractor, its Subcontractors or its


Affiliates in respect of works and services related to Petroleum Operations and the sale and export of


Petroleum shall include but not limited to the following:


a) Taxes in accordance with the Petroleum Income Ta| Law 1987 (PNDC L188) and income tax


shall be levied at the rate of thirty-five percent (35%); ;


b) Notwithstanding Article 12.1(a), tax in respect of income and/or gain (in either case, calculated in


accordance with Ghanaian law) resulting from the direct or indirect sale, transfer or assignment


of:


i. a partial or the entire interest in this Agreement;


ii. assets acquired or used in Petroleum Operations under this Agreement; or


iii. shares of Contractor,


at the rate determined by Ghanaian law in. effect at the tipie of the sale, transfer or assignment;


c) Payments for rental of Government property, public lands or for the provisions of specific services


requested by Contractor from public enterprises; provided, however, that the rates charged


Contractor for such rentals or services shall not exceed the prevailing rates charged to other


members of the public who receive similar services or rentals;


d) Surface rentals payable to the State pursuant to Section 18 of the Petroleum Law per square


kilometre of the Contract Area remaining at the beginning of each Contract Year as part of the


Contract Area, in the amounts as set forth below.


Phase of Operation Surface Rentals Per Annum


Initial Exploration Period US $50 per sq. km.


1st Extension Period US $100 per sq. km.


2nd Extension Period US $.100 per sq. km.


Development & Production Area US $.200 per sq. km.


These rentals shall be pro-rated where the beginning of a Period and the end of a Period or the creation


of a Development and Production Area occurs during the course of a Calendar Year.


12.2 Subject to applicable laws and regulations, as may be in force and amended from time to time,


and save for withholding tax at the rate provided for under applicable law from the aggregate amount due


to a resident Subcontractor or non-resident Subcontractor, Contractor shall not be obliged to withhold any


amount in respect of tax from any sum due from Contractor to any Subcontractor in respect of work and


services for or in connection with this Agreement.


12.3 Contractor shall not be liable for any export tax on Petroleum exported from Ghana and no duty


or other charge shall be levied on such exports. Vessels or other means of transport used in the export of


Contractors Petroleum from Ghana shall not be liable for any tax, duty or other charge by reason of their


use for that purpose.








42


12.4 Subject to the local purchase obligations hereunder, Contractor and Subcontractors may import


into Ghana all plant, equipment and materials to be used solely and exclusively in the conduct of


Petroleum Operations without payment of customs and other duties and taxes on imports save


administrative fees and charges;


PROVIDED THAT:


a) GNPC shall have the right of first refusal for any item imported duty free under this Article which


is eventually later sold in Ghana; and


b) where GNPC does not exercise its right of purchase Contractor may sell to any other person


subject to the relevant law.


12.5 Contractor shall not be liable to pay VAT in respect of plant, equipment and materials, and related


services supplied in Ghana, to be used solely and exclusively in the conduct of Petroleum Operations.


12.6 Foreign National Employees of Contractor or its Affiliates, and of its Subcontractors, shall be


permitted to import into Ghana free of import duty their personal and household effects in accordance


with Section 22.7 of PNDCL 64; provided, however, that no property imported by such employee shall be


resold by such employee in Ghana except in accordance with Article 12.2.


12.7 Subject to GNPC's rights under Article 19, Contractor, Subcontractors and Foreign National


Employees shall have the right to export from Ghana all items imported duty free pursuant to Article 12.4.-


Such exports shall be exempt from all customs and other duties, taxes, fees and charges on exports save


minor administrative charges.


12.8 Parties will negotiate in good faith to ensure that Contractor is afforded tax credits for corporate


taxes paid in Ghana. However no adverse effect should occur to the economic rights of GNPC or the


State.


12.9 The Ghana Income Tax law applicable generally to individuals who are not employed in the


Petroleum industry shall apply in the same fashion and at the same rates to employees, of Contractor, its


Affiliates and its Subcontractors provided, however, that Foreign National Employees of Contractor, its


Affiliates and its Subcontractors shall be exempted from the income tax and withholding tax liabilities


unless they are resident in Ghana for more than thirty (30) continuous days or sixty (60) days in


aggregate in any Calendar Year.


12.10 Subject to guidelines to be issued by the Minister, Contractor shall make contributions to a


decommission fund based on estimated costs of abandonment in proportion to its Participating Interest.


Such contributions shall be allowed as deduction from assessable income from the year of assessment


the contributions commenced. In the year of assessment in respect of which decommission has been


completed in accordance with an approved decommission plan, the surplus funds shall be treated as


chargeable income and subject to tax. The amount left after the tax shall be subject to Additional Oil


Entitlement at the highest rate at which the Contractor paid AOE during the period of contributions to the


relevant decommission fund. Any surplus after payment of the tax and AOE shall revert to the Contractor.


12.11 It is the intent of the Parties that payments by Contractor of tax levied by the Petroleum Income


Tax Law or any other tax imposed on Contractor qualify as creditable against the income tax liability of


each company comprising Contractor in its jurisdiction. Should the fiscal authority involved determine that


the Petroleum Income Tax Law does not impose a creditable tax, the Parties agree to negotiate in good


faith with a view to establishing a creditable tax on the precondition that no adverse effect should occur to


the economic rights of GNPC or the State.]





43


12.12 All tax return prepared and payments made by Contractor and its Affiliates or Subcontractors, and


Foreign National Employees thereof shall be made in U.S. Dollars.













































































































































































44


 ARTICLE 13





FOREIGN EXCHANGE TRANSACTIONS





The provisions of this Article 13 shall be subject to applicable legislation governing foreign exchange


transactions in Ghana


13.1 Contractor shall for the purpose of this Agreement be entitled to receive, remit, keep and utilise


freely abroad all the foreign currency obtained from the sales of the Petroleum assigned to it by this


Agreement or purchased hereunder, or from transfers, as well as its own capital, receipts from loans and


in general all assets thereby acquired abroad. Upon making adequate arrangements with regard to its


commitment to conduct Petroleum Operations, Contractor shall be free to dispose of this foreign currency


or assets as it deems fit.


13.2 Contractor shall have the right to open and maintain in Ghana, bank accounts in foreign currency


and Ghanaian currency. No restriction shall be made on the import by Contractor in an authorized


manner of funds assigned to the performance of the Petroleum Operations and Contractor shall be


entitled to purchase Ghanaian currency through authorized means, without discrimination, at the


prevailing rate of exchange; provided, however, that such prevailing rate applicable to Contractor


hereunder for all transactions for converting Ghanaian currency into U.S. Dollars, and vice versa, shall be


at a buying or selling, as the case may be, rate of exchange not less favourable to. Contractor than that


quoted by the State or its foreign exchange control authority to any person or entity on the dates of such


conversion (excepting those special rates provided by the State to discretely defined groups for special,


limited purposes).


13.3 Contractor shall be entitled to convert in an authorized manner into foreign currencies of its


choice funds imported by Contractor for the Petroleum Operations and held in Ghana which exceeds its


local requirements at the prevailing rate of exchange referred to in Article 13.2 and remit and retain such


foreign currencies outside Ghana.


13.4 In the event of resale by Contractor or its Affiliate of Crude Oil purchased from the State or


GNPC, the State or GNPC shall have the right to request payment for such sales of its share of


production to Contractor or its Affiliate to be held in the foreign currency in which the resale transaction


took place or in U.S. Dollars.


13.5 Contractor shall have the right to make direct payments outside of Ghana from its offices in


Nigeria and elsewhere, to its Foreign National Employees, and to those of its Subcontractors and


suppliers 'not resident in Ghana' (as that term is defined in Section 160 of the Internal Revenue Act 2000


(Act 592)) for wages, salaries, purchases of goods and performance of services, whether imported into


Ghana or supplied or performed therein for Petroleum Operations carried out hereunder, in accordance


with the provisions of this Agreement, in respect of services performed within the framework of this


Agreement, and such payments shall be considered as part of the costs incurred in Petroleum


Operations. In the event of any changes in the location of Operator’s home or other offices, Operator


shall so notify GNPC and the State.


13.6 All payments which this Agreement obligates Contractor to make to GNPC or the State, including


income taxes, shall be made in United States Dollars, except as requested otherwise pursuant to Article


13.4 above. All payments shall be made by telex transfer in immediately available funds to a bank to be


designated by GNPC or the State, and reasonably accessible to Contractor by way of its being able to


receive payments made by Contractor and give a confirmation of receipt thereof, or in such other manner


as may be mutually agreed.





45


13.7 All payments which this Agreement obligates GNPC or the State to make to Contractor shall be


made in United States Dollars. All payments shall be made by electronic transfer ( or in such other


manner as may be mutually agreed) in immediately available funds to a bank to be designated by


Contractor, and reasonably accessible to GNPC or the State by way of its being able to receive payments


made by GNPC or the State and give confirmation of receipt thereof.


















































































































































46


 ARTICLE 14


SPECIAL PROVISIONS FOR NATURAL GAS


PART I - GENERAL


All Natural Gas produced by Contractor in association with GNPC under this Agreement shall be the


property of GNPC in accordance with the provisions of Section 16.2 of the Petroleum Law, subject to


Parts III and IV of this Article.


14.1 Contractor shall have the right to use Natural Gas produced from any Development and


Production Area for Petroleum Operations within the Contract Area such as reinjection for pressure


maintenance and/or power generation at no cost.


14.2 Contractor shall not flare nor vent Natural Gas except:


a) to the extent provided for in an approved Development Plan;


b) during production testing operations;


c) when required for operational safety and the safety of persons engaged in Petroleum Operations


in accordance with international Petroleum industry practice;


d) as otherwise authorised by the Minister.


14.3 Contractor shall have the right to extract and dispose of liquid hydrocarbons pursuant to the


provisions of this Agreement relating to Crude Oil. Residual Natural Gas remaining after the extraction of


liquid hydrocarbons is subject to the provisions of this Article 14.


PART II -ASSOCIATED GAS


14.4 All gas produced in association with Crude Oil is the property of GNPC. The Development Plan of


each Development and Production Area shall include a plan, if any, of utilization for the Associated Gas.


14.5 If Contractor considers that production, processing and utilization of Associated Gas from any


Development and Production Area is non-economic, GNPC or any State appointed agency, body or


subcontractor shall have the option to offtake all Associated Gas not used as reinjection for pressure


maintenance and/or power generation pursuant to Article 14.2 and/or not utilized otherwise as per Article


14.4 at the outlet flange of the gas-oil separator on the crude oil production facility at its sole risk for its


own use. GNPC and Contractor shall work together to develop the appropriate interface between


Associated Gas infrastructure owned by the State and/or GNPC and Contractor’s proposed Development


Plan to that end shall include:


a) an assessment of the facilities necessary for the delivery to GNPC of such Associated Gas; and


b) a plan for the reinjection of Associated Gas into the reservoir if needed for pressure support; and


c) a plan for power generation; and


d) a plan for any other utilization.


14.6 The decision of GNPC as to whether or not to exercise the option provided for in Article 14.5


above shall be made in a timely manner. In making such decision and in its subsequent conduct GNPC


shall avoid the prevention of or delay by the Operator to the orderly start up or continuation of the


production of Crude Oil as envisaged in the approved Development Plan.


14.7 If GNPC or any State appointed agency, body or subcontractor elects to offtake Associated Gas


under Article 14.5 above, GNPC shall be responsible for any additional facilities, other than those as per


Article 14.5 above, needed for the delivery of the Associated Gas to GNPC, provided that:


a) if Contractor subsequently wishes to participate in GNPC's gas utilization programme, it shall


reimburse GNPC for the costs of such facilities plus a premium of three hundred percent (300%)


of costs; or


b) if Contractor subsequently develops a gas utilization programme and requires the use of GNPC’s


gas facilities, Contractor shall pay GNPC an agreed fee for such use. Provided there is excess


capacity, GNPC shall allow access to such gas facilities on a non-discriminatory basis, at a


reasonable market-based fee. In the absence of a market-based fee, the fee shall reflect levels


that are calculated to yield a return on invested capital comparable to similar circumstances in the


upstream gas industry.


If Contractor considers that it may be economic to produce Associated Gas for sale, the provision of


Articles 14.11, 14.12 and Part IV below shall apply to such Associated Gas


PART III - NON-ASSOCIATED GAS


*


14.8 Contractor shall have the right to commercialize a Discovery of Non-Associated Gas’in the


Contract Area in accordance with the provisions of this Agreement. Except as otherwise provided in this


Agreement, the terms applicable to a Discovery as provided under Article 8 of this Agreement shall apply


to a Discovery of Non-Associated Gas.


14.9 Where Contractor submits notice pursuant to Article 8.1 indicates that the Discovery does not at


that time merit Appraisal but may merit Appraisal or additional evaluation at a later date during the


Exploration Period or during the initial period under a new Agreement made pursuant to Article 14.16


below, then Contractor need not submit a proposed Appraisal Programme at that time but instead shall


indicate what other studies or evaluations (in accordance with a, definite time-table) may be warranted


before an Appraisal Programme is undertaken. Where Contractor’s Notice indicates that the Discovery


will not merit Appraisal at any time during the Exploration Period or during the initial period under a new


Agreement made pursuant to Article 14.16, then Contractor shall relinquish the rights to the Non-


Associated Gas within that Discovery Area.


14.10 Not later than ninety (90) days from the date on which the Appraisal Programme relating to a


Discovery is concluded, Contractor shall submit to the Minister a report containing the results of the


Appraisal Programme (the 'Appraisal Report”). The Appraisal Report may conclude that the Discovery


merits commercial assessment. If the Appraisal Report concludes that the Discovery merits commercial


assessment, Contractor shall submit to the Minister within thirty (30) days from the date of submission of


the Appraisal Report, a programme incorporating a specific timetable for conducting such commercial


assessment for approval by the Minister. If the Minister approves this programme, such commercial


assessment shall be conducted within the Exploration Period, provided that a minimum residual period of


at least 2 years is available or, if applicable, during the initial period under a new Agreement made


pursuant to Article 14.16. Notwithstanding the above, the Minister may approve the conduct of other


studies or evaluation, in accordance with a specific timetable, which may be warranted before a


commercial assessment is undertaken, if Contractor notifies the Minister that commercial assessment of


the Discovery is not warranted at that time but the Discovery may merit such assessment at a later date


during the Exploration Period or during the initial period under a new Agreement.











48


14.11 The purpose of the commercial assessment shall be to study the uses to which production from


the Discovery Area separately, can be devoted and whether involving exports or domestic utilization. As


part of the assessment, the Parties shall also pursue discussions on the required contractual


arrangements for disposition of the Natural Gas to GNPC. Contactor may undertake the Gas


commercialization project at a level that will facilitate the achievement of the Contractor’s rate of return,


and shall use the State's gas infrastructure if available.


14.12 Contractor may consult with the Minister and GNPC and may make appropriate representations


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


Contractor, affect the above determinations made pursuant to Articles 14.9 and 8.4. The Minister and


GNPC may, where feasible and in the best interests of the Parties, agree to make such changes or


modifications in the existing arrangements/Agreements.


PART IV - NATURAL GAS PROJECTS


14.13 If at any time during the commercial assessment Contractor informs the Minister in writing that


the Discovery can be produced commercially, it shall within 180 days (one hundred and eighty) submit to


the Minister and to GNPC its proposals for an agreement relating to the development of the Discovery on


the principles set forth in this Part IV of Article 14. The State and GNPC undertake on receipt of such


notice to negotiate in good faith with Contractor with a view to reaching agreement on terms for such


production. Any such agreement will be based on terms and fiscal requirements which shall be no less


favorable to Contractor than those provided for in Article 10 and Article 11, as applicable, and which take


full account of the legitimate interest of the State as the resource owner.


14.14 If at any time during the commercial assessment Contractor has identified a market for the Non-


Associated Gas or any part thereof that can be saved without prejudice to an LNG export project, the


Parties shall proceed in good faith to negotiate the appropriate contractual arrangements for the


disposition of the Natural Gas. In the event of said market for such Gas, Contractor shall receive for


delivery its share of the Natural Gas at a price to be agreed in good faith between GNPC and Contractor,


taking into account among other things, the cost of finding and developing the Natural Gas, a reasonable


return on exploration and development investment and the uses which will be made of the Natural Gas.


14.15 In the event of a Discovery of Natural Gas in the Contract Area which is to be developed and


commercially produced, the provisions of this Agreement in respect to interests, rights and obligations of


the Parties regarding Crude Oil shall apply to Natural Gas, with the necessary changes in points of detail,


except with respect to specific provisions in this Agreement concerning Natural Gas and different or


additional provisions concerning Natural Gas which may be agreed by the Parties in the future.


a) The system for the allocation of Natural Gas among the Parties shall follow the same general


format as Article 10.1 provides for Crude Oil, with the exception that the royalty to be delivered to


the State on Natural Gas shall be at the rate of five (5%) for the Natural Gas destined to the


domestic market and 10% for Natural Gas to be exported as LNG.


b) The Parties recognize that projects for the Development and Production of Natural Gas are


generally long-term in nature for both the project developers and the customers who purchase the


Natural Gas. Substantial investments and dedication of facilities require long-term commitments


on both sides. This Agreement, being for a specific term of years, may not cover the length of


time for which customers in given cases will require commitments on the part of the Parties to this


Agreement to deliver their respective shares of the output. Accordingly the Parties agree to


consider undertaking such commitments where reasonably required for the efficient and viable


development of a Natural Gas project. It is recognized that, unless otherwise agreed or a new








49


Petroleum Agreement pursuant to Article 14.16 has been entered into by the Parties hereto,


Contractor will have no right or interest in the project or the Natural Gas produced and delivered


after the term of this Agreement has expired.


c) In the event that Contractor or an Affiliate by mutual agreement with GNPC and the State


constructs facilities to receive Natural Gas from the Development and Production Area for further


processing or for use as a feedstock or fuel in order to convert such a Natural Gas into one or


more commercially marketable products, the Contractor shall be entitled to pay GNPC or the


State for such gas the price, if any, paid by the State or GNPC under Article 14.15.


d) The Parties will consider collaboration in obtaining any common external financing available for


Natural Gas production possibilities, including project financing; however, each Party shall remain


free to finance externally its share of such facilities to the extent it prefers to do so.


14.16 (a) Where Contractor has during the continuance of the Exploration Period made a


Discovery of Non-Associated Gas but has not before the end of the Exploration Period declared that


Discovery to be commercial, the State and GNPC will, if Contractor so requests, enter into a new


Petroleum Agreement with Contractor in respect of the Discovery Area to which that Discovery relates.


b) The State and GNPC shall not be under any obligation to enter into an Agreement pursuant to


Article 14.15(a) above unless before the end of the Exploration Period Contractor has carried out


an Appraisal Programme in respect of that Discovery pursuant to Article 14.10 and submitted to


the Petroleum Commission with a copy to the Minister for information purposes a report thereon


pursuant to Article 14.10, or has commenced an Appraisal Programme and has notified the


Minister of reasonable arrangements to undertake and complete such an Appraisal Programme


during the period provided for in (c) (i) below.


c) A Petroleum Agreement entered into pursuant to Article 14.16:


i. shall, unless the Discovery in respect of which the Agreement has been made is declared by


Contractor to be a Commercial Discovery, continue in force for an initial period not exceeding


three (3) years;


ii. shall, in the event that the Discovery is declared by Contractor to be a Commercial Discovery;


A. continue in force for an aggregate period not exceeding 25 (twenty-five) years


B. include, or be deemed to include, all the provisions which, mutatis mutandis, would have applied


to a Commercial Discovery of Non-Associated Gas pursuant to Article 14.15 if Contractor had


declared such Discovery to be a Commercial Discovery under this Agreement;


iii. shall contain in respect of the initial period or of any renewal period details of the evaluations or


studies (in accordance with a specific timetable) which Contractor proposes to undertake in order


to determine or keep under review the commerciality of the Discovery; and


iv. shall confer on GNPC pre-emptive rights in respect of the Gas contained in the reservoir to which


the Discovery relates substantially in the form of the provisions hereinafter set out in this Article


14.16(e) below.


d) Where Contractor has not, before the end of the initial period of a new Petroleum Agreement,


declared the Discovery to be commercial and the Minister has in his discretion determined that


further evaluation or studies may be required before the Discovery can be declared commercial,


the right of Contractor to retain the Discovery Area shall continue for a further period not


exceeding in the aggregate three (3) years. The right of Contractor to retain the Discovery Area


aforesaid shall be secured by the renewal of the Agreement referred to in Article 14.16 or where


necessary by a new Agreement entered into by the Parties for that purpose.











50


e) (i) Where Contractor has not declared the Discovery to be a Commercial Discovery, if GNPC


has identified a domestic market for the Gas contained in the reservoir to which the Discovery


relates, or any part thereof, it may at any time during the initial period or the aggregate period


referred to in 14.16(d) above serve on Contractor a notice giving particulars of the quantities of


Gas required to serve that market and the price offered; and on the basis of the procedure


detailed in Article 14.9, exercise the right referred to in this Article 14.16(c)(iv) above,


ii. Within three (3) months from the receipt of a notice as aforesaid Contractor may declare the


Discovery to be commercial and in accordance with the Petroleum Agreement and the Petroleum


Law prepare and submit to the Minister a Development Plan for the production of the Gas in


association with GNPC;


Hi. If Contractor has not, within the period of three (3) months aforesaid, declared the Discovery to


be commercial, GNPC may at its Sole Risk develop the Discovery and in that event the


Contractor shall cease to have any rights in respect of the Gas in the reservoir required for that


purpose.


14.17 For the purpose of calculating the State's royalty share on Natural Gas (either for the domestic


market 5.0% or 10% for export); if the State elects to take its royalty on Natural Gas in cash, the value


of such Natural Gas shall be the actual price realized by the Contractor, less transportation, processing,


compression and marketing costs which shall be in accordance with the principles indicated in Article 11.


14.18 “All notices, reports or other documents required to be submitted to the Minister under this Article


14 shall be copied to the Petroleum Commission.



















































































51


 ARTICLE 15





DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)


15.1 Crude Oil for Consumption in Ghana (in this Article called the “Domestic Supply Requirement")


shall be supplied, to the extent possible, by the State and GNPC from their respective entitlements under


this Agreement and under any other contract for the production of Crude Oil in Ghana.


15.2 Contractor, subject to Article 15.1 shall be obliged together with any third parties which produce


Crude Oil in Ghana within 3 months' notice from the State, to supply a volume of Crude Oil to be used for


such Domestic Supply Requirements, calculated on the basis of the ratio of Contractor’s entitlement to


Crude Oil under Article 10.1(d) to the sum of the similar entitlements of all such third parties and provided


that Contractor's obligation to supply Crude Oil for purposes of meeting the Domestic Supply


Requirement shall not exceed the total of Contractor’s said entitlement under this Agreement.


15.3 The State shall purchase any Crude Oil supplied by Contractor pursuant to this Article at the


weighted average Market Price determined under. Article 11.7 for the Month of delivery, and the State


shall pay such jarices in accordance with Article 13.7 within thirty (30) days after receipt of invoice, failing


which Contractor’s obligations in respect of the Domestic Supply Requirement under this Article 15 shall


be suspended until payment is made good, at which time deliveries shall be resumed subject to any


alternative commitments that may have been reasonably entered into by Contractor to dispose of the


Domestic Supply Requirement Crude Oil during the period of default in payment.


15.4 The calculation of the Domestic Supply Requirement shall be done on a Calendar Year basis,


broken down by Month. The calculation shall begin with the determination of the quantities of Crude Oil


required for Consumption in Ghana in each relevant Month (the “Monthly Domestic Consumption") during


the applicable Calendar Year.


15.5 “Consumption” shall for purposes of this Article consist of the total Crude Oil consumed in Ghana,


Crude Oil processed in Ghana and the Crude Oil equivalent of Crude Oil derived products imported for


consumption in Ghana.


 ARTICLE 16





INFORMATION AND REPORTS - CONFIDENTIALITY


16.1 Contractor shall keep the Petroleum Commission and GNPC regularly and fully informed of


operations being carried out by Contractor under this Agreement and provide the Petroleum Commission


and GNPC with all information, data, (film, paper and digital forms), samples, interpretations and reports,


(including progress and completion reports) including but not limited to the following:


a) processed seismic data and interpretations thereof;


b) well data, including but not limited to electric logs and other wireline surveys, and mud logging


reports and logs, oil or hydrocarbon samples, samples of cuttings and cores and analyses made


therefrom;


c) any reports prepared from drilling data or geological or geophysical data, including maps or


illustrations derived therefrom;


d) well testing and well completion reports;


e) reports dealing with location surveys, seabed conditions and seafloor hazards and any other


reports dealing with well, platform or pipeline locations;


f) reservoir investigations and estimates regarding reserves, field limits and economic evaluations


relating to future operations; ■


g) ^daily, weekly, monthly and other regular reports on Petroleum Operations;


h) comprehensive final reports upon the completion of each specific project or operation;


i) contingency programmes and reports on safety and accidents;


j) procurement plans, subcontracts and contracts for the provision of services to Contractor;


k) for such subcontracts and contracts for the provision of services to Contractor


l) bid documents and their evaluation reports


m) a statement showing the values, executing companies, award and completion dates


Data shall be provided to the Petroleum Commission and GNPC on film, paper and in digital format as


available in an acceptable format to the Petroleum Commission and GNPC. In respect of the reports,


including text and graphics, paper and digital copies shall be submitted.


16.2 Contractor shall have the right to retain for its own use in connection with the conduct of


Petroleum Operations under this Agreement copies of data, well logs, maps, magnetic tapes, other


geological and geophysical information, portions of core samples and copies of reports, studies and


analyses, referred to in Article 16.1.


16.3 Not later than ninety (90) days following the end of each Calendar Year, Contractor shall submit


to the Petroleum Commission and GNPC a report covering Petroleum Operations performed in the


Contract Area during such Calendar Year. Such report shall include, but not be limited to:


a) a statement of the number of Exploration Wells, Appraisal Wells and Development Wells drilled,


the depth of each such well, and a map on which drilling locations are indicated;


b) a statement of any Petroleum encountered during Petroleum Operations, as well as a statement


of any fresh water layers encountered and of any other minerals discovered;


c) a statement of the quantity of Petroleum produced and of all other minerals produced therewith


from the same reservoir or deposit;


d) a summary of the nature and extent of all exploration activities in the Contract Area;


e) a general summary of all Petroleum Operations in the Contract Area; and








53


f) a statement of the number of employees engaged in Petroleum Operations in Ghana, identified


as Ghanaian or non-Ghanaian. Contractor will inform the latter that details as to nationality are


required by GNPC and that Contractor is available to assist them to supply that information.


16.4 All data, information and reports including interpretation and analysis supplied by Contractor


pursuant to this Agreement shall be treated as confidential and shall not be disclosed by Contractor to


any other person without the express written consent of the other Parties. However subject to Article 16.6,


below the Petroleum Commission and GNPC shall have the right to disclose data, information and


reports including interpretation and analysis in respect of Petroleum Operations to any other person.


16.5 The provisions of Article 16.4 above shall not prevent disclosure by Contractor:


a) to its Affiliates, advisers or consultants;


b) to a Bona Fide Potential Assignee (i.e. a company in respect of which Contractor’s reputable and


international financial advisor has written a letter addressed to Contractor and copied to the


Petroleum Commission and GNPC confirming that in the opinion of said financial advisor, that


company has the financial wherewithal and technical competence to meet the obligations


associated with the interest being offered/sought; and has considered the potential acquisition at


a sufficiently senior level within its organisation in order for it to be regarded as a genuine


potential purchaser of such interest)of all or part of Contractor’s Interest hereunder provided the


Petroleum Commission and GNPC is given prior notice of such potential assignee, and subject to


approval of the State and GNPC for the disclosure (not to be unreasonably withheld);


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


Subcontractors, vendors and other service contractors, where this is essential for their provision


of such services, and provided the Petroleum Commission and GNPC are notified about such


disclosure;


e) to governmental 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,


and provided the Petroleum Commission and GNPC are given prior notice of such disclosure; or


i. to the extent necessary in any Arbitration Proceedings or proceedings before a Sole Expert or in


proceedings before any Court;


ii. with respect to data, etc., which already through no fault of the disclosing Party, is in the public


domain.


16.6 Any Party disclosing information or providing data to any third party under this Article 16 shall


require such persons to observe the confidentiality of such data by executing a confidentiality agreement


in the form attached hereto as Annex 4. Disclosure under Article 16.5 shall not be made unless before


such disclosure the disclosing Party has obtained a written undertaking from the recipient party to keep


the information strictly confidential and to use the information for the sole purpose described in Article


16.5 whichever applies with respect to the disclosing Party.


16.7 Public statements and press releases regarding the Petroleum Operations undertaken under this


Agreement shall be issued jointly by the Contractor and GNPC, and the Parties shall agree on the timing


and wording of such statements and releases to the public. Where, however, a Party is required to make


a public announcement or statement under the applicable laws, rules or regulations of any government,


legal proceedings or a stock exchange having jurisdiction over such Party or any of its Affiliates, to the


extent permitted by law, that Party shall inform the other Party of such requirement and submit the text of





54


the proposed announcement or statement for comment and/or approval. Should a Party fail to respond


for more than five (5) days (or such shorter period as may be reasonable in the event of an emergency or


disaster or required to enable the disclosing party to comply with applicable law or regulation) to request


for the approval of a public statement or announcement for such purposes, such failure shall be deemed


approval of the request.


16.8 Subject in all cases to the terms of any technical services agreements, all intellectual property


rights to any and all inventions, discoveries or improvements made or conceived in connection with


Petroleum Operations either through a Contractor Party’s employees, contractors (including the


Contractor Parties), sub-contractors, secondees, GNPC’s employees or otherwise, shall be jointly owned


by GNPC and Contractor.


16.9 Notwithstanding any provision to the contrary in this Agreement, if a Contractor Party or an


Affiliate of a Contractor Party has used its own confidential information, proprietary intellectual property or


technology in Petroleum Operations then, subject to GNPC (or its successors or permitted assignees)


entering into a usual and customary non-disclosure and licensing agreement (which such agreement shall


be on terms that are commercially reasonable under the circumstances), such Contractor Party or its


Affiliate shall provide GNPC (or its successors or permitted assignees) with rights to use such confidential


information, proprietary intellectual property or technology in other operations of GNPC (or its successors


or permitted assignees) outside of the Contract Area. The terms and conditions of the foregoing rights


will be provided for in separate agreements to be agreed between GNPC (or its successors or permitted


assignees) and such Contractor Party or its relevant Affiliate. Further, GNPC (or its successors or


permitted assignees) and such Contractor Party or its relevant Affiliate will enter into a usual and


customary confidentiality agreement relating to confidential information disclosed to GNPC (or its


successors or permitted assignees) pursuant to any such licensing agreements, which confidentiality


agreement shall restrict, inter alia, GNPC (or its successors or permitted assignees) from making


disclosure of such information to such Contractor Party’s oil and gas industry competitors.

































































55


 ARTICLE 17





INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION


17.1 GNPC shall have the right of access to all sites and offices of Contractor and the right to inspect


all buildings and installations used by Contractor relating to Petroleum Operations. Such inspections and


audits shall take place in consultation with Contractor and at such times and in such manner as not


unduly to interfere with the normal operations of Contractor.


17.2 Contractor shall take all necessary steps, in accordance with International Best Oilfield Practice,


to perform activities pursuant to the Agreement in a safe manner and shall comply with all requirements


of applicable law, including labour, health safety and environmental laws and regulations issued by the


Environmental Protection Agency of Ghana and other relevant Government agencies.


17.3 Contractor shall provide an effective and safe system for disposal of water and waste oil, oil base


mud and cuttings in accordance with applicable laws and International Best Oilfield Practice, and shall


provide for the safe completion or abandonment of all boreholes and wells.


17.4 Contractor shall exercise its rights and carry out its responsibilities under this Agreement in


accordance with International Best Oilfield Practice, and shall take steps in such manner as to:


a) result in minimum ecological damage or destruction;


b) control the flow and prevent the escape or the avoidable waste of Petroleum discovered in or


produced from the Contract Area;


c) prevent damage to Petroleum-bearing strata;


d) prevent the entrance of water through boreholes and wells to Petroleum-bearing strata, except for


the purpose of secondary recovery;


e) prevent damage to onshore lands and to trees, crops, buildings or other structures; and


f) avoid any actions which would endanger the health or safety of persons.


17.5 In the event of a release of Petroleum or other materials on the seabed, in the sea, on land or in


fresh water, or if Contractor’s operations result in any other form of pollution or otherwise cause harm to


fresh water, marine, plant or animal life, Contractor shall, in accordance with applicable laws and best


international Petroleum industry practice, promptly take all necessary measures, in accordance with


International Best Oilfield Practice, to control the pollution, to clean up Petroleum or other released


material, or to repair, to the maximum extent feasible, damage resulting from any such circumstances. If


such release or pollution results from the negligence or wilful misconduct of Contractor, the cost of


subcontract clean-up and repair activities shall be borne by Contractor and shall not be included as


Petroleum Cost under this Agreement.


17.6 Contractor shall notify GNPC immediately in the event of any emergency or major accident or


major release of materials into the environment (and promptly in the event of any other accident or


release of materials into the environment) and shall take such action as may be prescribed by GNPC’s


emergency procedures and by International Best Oil Field Practice


17.7 If Contractor does not act promptly so as to control, clean up or repair any pollution or damage,


GNPC may, after giving Contractor reasonable notice in the circumstances, take any actions which are


necessary, in accordance with applicable laws and International Best Oilfield Practice, and the


reasonable costs and expenses of such actions shall be borne by Contractor and shall, subject to Article


17.5 be included as Petroleum Costs.








56


 ARTICLE 18


ACCOUNTING AND AUDITING


18.1 Contractor shall maintain, at its offices in Ghana, books of account and supporting records in the


manner required by applicable law and accepted accounting principles generally used in the international


Petroleum industry and shall file reports, tax returns and any other documents and any other financial


returns which are required by applicable law.


18.2 In addition to the books and reports required by Article 18.1 Contractor shall maintain, at its office


in Ghana, a set of accounts and records relating to Petroleum Operations under this Agreement. Such


accounts shall be kept in accordance with the requirements of the applicable law and accepted


accounting principles generally used in the international Petroleum industry.


18.3 The accounts required by Articles 18.1 and 18.2 shall be kept in United States Dollars or such


other currency as GNPC and Contractor may agree.


18.4 Contractor will provide GNPC with quarterly and annual financial statements and summaries of


the Petroleum Costs incurred under this Agreement.


18.5 GNPC shall review all financial statements submitted by the Contractor as required by this


Agreement, and shall signify its provisional approval or disapproval of such statements in writing within


ninety (90) days of receipt failing which the financial statements as submitted by Contractor shall be


deemed approved by GNPC; in the event that GNPC indicates disapproval of any such statement, the


Parties shall meet within fifteen (15) days of Contractor's receipt of the notice of disapproval to review the


matter.


18.6 Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall have the right at its


own expense and upon giving reasonable notice in writing to Contractor to audit the books and accounts


of Contractor relating to Petroleum Operations within two (2) years from the submission by Contractor of


any report of financial statement. GNPC shall not, in carrying out such audit, interfere unreasonably with


the conduct of Petroleum Operations. Any such audit shall be undertaken by an independent auditing firm


and shall be completed within nine (9) months after commencement. Contractor shall provide all


necessary facilities for auditors appointed hereunder by GNPC including working space and timely


access to all relevant personnel, records, files and other materials. If GNPC desires verification of


charges from an Affiliate, Contractor shall obtain for GNPC or its representatives an audit certificate to


this purpose from the statutory auditors of the Affiliate concerned. Copies of audit reports shall be


provided to the Contractor and GNPC. Any unresolved audit claim resulting from such audit, upon which


Contractor and GNPC are unable to agree shall be submitted to the JMC for decision which must be


unanimous. In the event that a unanimous decision is not reached in respect of any audit claim, then such


unresolved audit claim shall be submitted for resolution in accordance with Article 24. Subject to any


adjustments resulting from such audits, Contractor’s accounts and financial statements shall be


considered to be correct on expiry of a period of two (2) years from the date of their submission unless


before the expiry of such two year period GNPC has notified Contractor of any exceptions to such


accounts and statements.


18.7 Nothing in this Article shall be read or construed as placing a limit on GNPC’s access to


Contractor’s books and accounts in respect of matters arising under Article 23.5(a).


18.8 In the event of any changes in location of Operator’s home office, Operator shall so notify GNPC


and the State.


18.9 Petroleum Costs incurred with respect to the Contract Area shall have no bearing on allowable or


non-allowable costs under any other contract area or Contractor’s eligibility or otherwise for deductions in


computing Contractor’s net income from Petroleum Operations for income tax purposes in any other


contract area. Similarly, Petroleum Costs incurred in any other contract area shall have no bearing on


allowable or non-allowable costs in respect of the Contract Area or Contractor's eligibility or otherwise for


deductions in computing Contractor’s net income from Petroleum Operations for income tax purposes in


respect of the Contract Area.









































































































































58


 ARTICLE 19





TITLE TO AND CONTROL OF GOODS AND EQUIPMENT


19.1 GNPC shall be the sole and unconditional owner of:


a) Petroleum produced and recovered as a result of Petroleum Operations, except for such


Petroleum as is distributed to the State and to Contractor pursuant to Article 10 or Article 14


hereof;


b) all physical assets other than those to which Article 19.3 or 19.4 apply, which are purchased,


installed, constructed or used by Contractor in Petroleum Operations as from the time that:


i. the full cost thereof has been recovered in accordance with the provisions of the Accounting


Guide; or


ii. this Agreement is terminated and Contractor has not disposed of such assets prior to such


termination, whichever occurs first.


19.2 Contractor shall have the use of the assets referred to in Article 19.1(b) for purposes of its


operations under this Agreement without payment provided that Contractor shall remain liable for


maintenance, insurance and other costs associated with such use. Where Contractor has failed to keep


any such asset in good working condition (normal wear and tear excepted), GNPC shall have the right to


recover the cost of repair or replacement of such assets from Contractor. Contractor shall indemnify


GNPC against all losses, damages, claims or legal action resulting from Contractor’s use of such assets,


if and in as far as such losses, damages, claims or legal actions were directly caused by Contractor’s


Gross Negligence or willful misconduct.


19.3 Equipment or any other assets rented or leased by Contractor which is imported into Ghana for


use in Petroleum Operations and subsequently re-exported therefrom, which is of the type customarily


leased for such use in accordance with international petroleum industry practice or which is otherwise not


owned by Contractor shall not be transferred to GNPC. No equipment or assets owned or leased by a


Subcontractor shall by reason of the provisions of this Article 19 be deemed to be transferred to GNPC.


19.4 All assets acquired by Contractor which are not affected by the provisions of Article 19.1(b) above


may, where required for further Petroleum Operations, be retained by GNPC for such operations provided


that GNPC shall thereby be liable to pay a reasonable and mutually agreed fee for such use, and shall


bear the cost of repair or replacement upon failure to keep such assets in good working condition (normal


wear and tear excepted), and further provided that Contractor does not require such assets for its


Petroleum Operations.


19.5 Upon the termination of Petroleum Operations in any Area, Contractor shall give GNPC the


option to acquire any movable and immovable assets used for such Petroleum Operations and not


affected by the provisions of Article 19.1(b) at a reasonable and mutually agreed price, always provided


that Contractor does not require such assets for Contractor’s Petroleum Operations in the Contract Area.


19.6 All assets which are not affected by Article 19.1(b) nor subject to Article 19.4 or 19.5 above, and


all subcontractor equipment, may be freely exported by Contractor or its Subcontractor, respectively, at its


discretion.

















59


 ARTICLE 20





PURCHASING AND PROCUREMENT


20.1 Subject to all applicable laws the Contractor, its subcontractors or other entities which cooperate


with them shall:


a) acquire materials, equipment, machinery and consumer goods produced or provided in Ghana by


an Indigenous Ghanaian company in Ghana which are of the same or approximately the same


quality as foreign materials, equipment, machinery and consumer goods and which are available


for sale and delivery in due time at prices which are no more than ten percent higher than the


imported items including transportation and insurance costs and custom charges due;


b) contract local Ghanaian service provided by Indigenous Ghanaian company to the extent to


which the services they provide are similar to those available on the international market and their


prices when subject to the same tax charges are no more than ten percent higher than the prices


charged by foreign contractors for similar services.


20.2 For the purposes of Article 20.1, price comparisons shall be made on a c.i.f. Accra delivered


basis.



















































































60


 ARTICLE 21





EMPLOYMENT AND TRAINING


21.1 In order to establish programmes to train Ghanaian personnel for work in Petroleum Operations


and for the transfer of management and technical skills required for the efficient conduct of Petroleum


Operations, Contractor shall make the following payments to GNPC:


a) Training Allowance of US$1,000,000 (one million US Dollars) per Contract Year within six months


following the first declaration of Commercial Discovery;


b) Technical Support of US$1,500,000 (one million five hundred US Dollars) within thirty (30) days


following the Effective Date of this Agreement,


21.2 All payments pursuant to Articles 21.1(a) and (b) above shall be paid by Contractor by wire


transfer to a designated GNPC account within thirty (30) days of receiving an invoice from the GNPC.


The invoice shall state the amount due and purpose for such payment, All payments under Articles


21.1(a) and (b) above shall qualify for deduction against income tax under the Income Tax law and shall


be considered Petroleum Costs.


21.3 Where qualified Ghanaian personnel are available for employment in the conduct of Petroleum"


Operations, Contractor shall ensure that as far as reasonably possible opportunities, for the employment.


of such personnel shall be provided. For this purpose, Contractor shall from time to time submit to GNPC


an employment plan stating the foreseeable number of persons (and the required professions and


technical capabilities) prior to and during the conduct of Petroleum Operations. GNPC shall be given the


opportunity to provide the qualified personnel for engagement according to the said plan.


21.4 Contractor shall, if so requested by GNPC, provide opportunities for a mutually agreed number of


personnel nominated by GNPC to be seconded to the Contractor, as applicable, for on the job training or


attachment in all phases of its Petroleum Operations under a mutually agreed secondment contract.


Such secondment contract shall include continuing education and short industry courses mutually


identified as beneficial to the secondee. Cost and other expenses connected with such assignment of


GNPC personnel shall be paid by the Contractor and considered as Petroleum Costs.


21.5 Contractor shall regularly provide to GNPC information and data relating to worldwide Petroleum


science and technology, Petroleum economics and engineering available to Contractor, and shall assist


GNPC personnel in every way to acquire knowledge and skills in all aspects of the Petroleum industry.


21.6 It is agreed that there will be no disclosure or transfer of any documents, data, know-how,


technology or other information owned or supplied by Contractor, its Affiliates, or non-Affiliates, to third


parties without Contractor’s prior written consent, and then only upon agreement by the recipients to


retain such information in strict confidence.





























61


 ARTICLE 22





FORCE MAJEURE


22.1 The failure of a Party to fulfill any term or condition of this Agreement, except for the payment of


monies, shall be excused if and to the extent that such failure arises from Force Majeure, provided that, if


the event is reasonably foreseeable such party shall have prior thereto taken all appropriate precautions


and all reasonable alternative measures with the objective of carrying out the terms and conditions of this


Agreement. A Party affected by an event of Force Majeure shall promptly give the other Parties notice of


such event and also of the restoration of normal conditions.


22.2 In the event that either Party is unable wholly or in part to perform its obligations provided for in


the Agreement as a result of such Force Majeure Event, the Party whose performance of obligations are


prevented by the Force Majeure Event shall immediately but not later than seven (7) days from when


such an occurrence becomes evident give written notice to the other Parties, including details of such


Force Majeure Event and such party's best estimate of the duration of the Force Majeure Event.


22.3 Throughout the duration of the Force Majeure Event, the affected Party shall report to the other


Parties any changes to its best estimate of the duration of the delay and any significant developments


with respect to the Force Majeure Event.


.


22.4 A Party unable by an event of Force Majeure to perform any obligation hereunder shall take all


reasonable measures to remove its inability to fulfill the terms and conditions of this Agreement with a


minimum of delay, and the Parties shall take all reasonable measures to minimise the consequences of


any event of Force Majeure.


22.5 During the duration of a Force Majeure Event, each Party shall bear its own costs arising from the


delay in performance under the Agreement.


22.6 Provided the Force Majeure Event does not prevail, or is reasonably expected not to prevail, for


longer than six (6) months, the Parties shall remain under the obligation to perform this Agreement.


However, should the Force Majeure Event continue or once it has occurred be reasonable expected to


last longer than six (6) months, the Parties agree to enter into discussion to review and assess the


situation with the aim to identify a proper recovery plan for the future implementation of this Agreement,


including an extension or a modification of the applicable contractual terms. When a recovery plan is


identified and agreed, any affected Party’s commitment schedule will be considered revised accordingly.


22.7 If a Force Majeure Event, continues or once it has occurred can be reasonably expected to last


for a period longer than six (6) months, and if the Parties do not agree on a recovery plan including an


extension or a modification of the applicable contractual terms, either Party shall be entitled to terminate


this Agreement, by giving the other Party a written notice. In such a case Articles 23.6 and 23.7 shall


apply.


22.8 The affected Party shall notify the other Parties in writing within seven (7) days from the


termination of the Force Majeure Event.


22.9 Any period set herein for the completion by a Party of any act required or permitted to be done


under the terms of this Agreement, shall be extended for a period of time equal to that during which such


Party was unable to perform such actions as a result of Force Majeure, together with such time as may be


required for the resumption of Petroleum Operations.











62


 ARTICLE 23





TERM AND TERMINATION





23.1 Subject to this Article 23 the term of this Agreement shall be twenty five (25) years commencing


from the Effective Date.


23.2 Unless this Agreement has been earlier terminated, all rights and obligations of the Parties shall


cease and this Agreement shall terminate at the end of the term provided for in Article 23.1, above,


23.3 At the end of the term provided for in Article 23.1, provided that this Agreement has not earlier


been terminated, the Parties may negotiate concerning the terms and conditions of a further agreement


with respect to the Contract Area or any part thereof.


23.4 Termination of this Agreement shall result upon the occurrence of any of the following:


a) the relinquishment or surrender of the entire Contract Area;


b) the termination of the Exploration Period including extensions pursuant to Article 3 without


notification by Contractor of commerciality pursuant to Article 8 in respect of a Discovery of


Petroleum in the Contract Area, provided however Termination shall not occur while Contractor


has the right to evaluate a Discovery for Appraisal or commerciality and/or propose a


Development Plan pursuant to Article 8 or Article 14, or once a Development Plan has been


approved, nor when the provisions of Articles 8.16 through 8.21 are applicable;


c) if, following a notice that a Discovery is a Commercial Discovery the Exploration Period


terminates under Article 3 without a Development Plan being approved, provided however that


Termination shall not occur when the provisions of Articles 8.14 through 8.21 are applicable; or


d) the failure of Contractor through any cause other than Force Majeure, to commence preparations


with respect to Development Operations pursuant to Article 8.12


e) Failure to provide Security within ninety (90) days of the Effective Date.


23.5 Pursuant to procedures described in Article 23.6 below GNPC and/or the State may terminate


this Agreement upon the uncorrected occurrence of any of the events (or failures to act listed) below:


a) the submission by Contractor to GNPC of a written statement which Contractor knows or should


have known to be false, in a material particular; or the release by Contractor to any print or


electronic media or to a stock exchange of a written statement regarding the Petroleum


Operations in Ghana in breach of Article 16.7 and in a form which Contractor knows or should


have known to be false in a material particular provided that in the event of intent on the part of


Contractor to cause serious damage to GNPC or the State, a period for remedy of such false


statement shall not be given;


b) the assignment or purported assignment by Contractor of this Agreement contrary to the


provisions of Article 25 hereof;


c) the insolvency or bankruptcy of Contractor, the entry by Contractor into any agreements or


composition with its creditors, taking advantage of any law for the benefit of debtors or


Contractor’s entry into liquidation, or receivership, whether compulsory or voluntary, which in itself


provides evidence that the obligations of Contractor hereunder will not be performed. Provided


that if Contractor is more than one Party, then the insolvency or bankruptcy of one Contractor


Party shall not lead to a termination of the Agreement if the other Contractor Party will assume all


of the interest and the corresponding rights and obligations of the defaulting Contractor Party


under this Petroleum Agreement. In such a case, GNPC shall have the right to acquire a share of


the interest of the defaulting Contractor Party proportionate to the total of GNPC’s Initial Interest





63


and Additional Interest (if it has been exercised by GNPC prior to the bankruptcy or insolvency of


the Contractor Party), provided that such proportionate share shall not be carried or financed by


Contractor. GNPC may exercise this right by notice to all Contractor Parties within thirty (30) days


following insolvency or bankruptcy of the defaulting Contractor Party. GNPC’s written notice shall


state the percentage share of the interest of the defaulting Contractor Party which GNPC


proposes to acquire, which shall not exceed a percentage share which is the product of the


defaulting Contractor Party's share and the total of GNPC’s Initial Interest and Additional Interest


(if it has been exercised or is exercisable by GNPC) prior to bankruptcy or insolvency of the


defaulting Contractor Party). Upon exercise by GNPC of its rights pursuant to this Article 23.5(c),


GNPC shall execute all appropriate transfers, assignments, novations and joint operating


agreements which were in place as between or among the Parties, provided further that, if the


other Contractor Party in assuming the interest of the defaulting Contractor elects to assign, the


whole or part of, the assumed interest to a third party such assignment shall be subject to


GNPC’s pre-emptive right under Article 2.10.


d) If the other Contractor Party in assuming the interest of the defaulting Contractor elects to assign,


the whole or part of, the assumed interest to a third party such assignment shall be subject to


GNPC’s pre-emptive right under Article 2.10;


e) the intentional extraction by Contractor of any material of potential economic value other than as


authorized under this Agreement, or any applicable law. Where, however, in the course of


Petroleum Operations conducted in accordance with International Best Oilfield Practice,


Contractor unavoidably extracts any mineral, Contractor shall immediately notify the Minister and


surrender such mineral to the State;


f) failure by Contractor


i. to fulfill its Minimum Work Obligations pursuant to Article 4.3; save where the Minister has waived


the default;


ii. to carry out an approved Appraisal Programme undertaken by Contractor pursuant to Article 8,


unless Contractor notifies GNPC and the Petroleum Commission that the Appraisal Programme


should be amended and submits said amendment to the Petroleum Commission for its approval;


or


iii. to carry out the terms of an approved Development Plan.


g) failure by Contractor to comply with any of its material obligations pursuant to Article 7.1 and any


other material obligation under this Agreement;


h) failure by Contractor to make any payment of any sum due to GNPC or the State pursuant to this


Agreement within thirty (30) days after receiving notice that such payment is due; or


i) failure by Contractor to comply with any decisions reached as a result of any arbitration


proceedings conducted pursuant to Article 24 hereof.


23.6 If GNPC and/or the State believe an event or failure to act as described in Article 23.5 above has


occurred, a written notice shall be given to Contractor describing the event or failure. Contractor shall


have thirty (30) days from receipt of said notice to commence and pursue remedy of the event or failure


cited in the notice. If after said thirty (30) days Contractor has failed to commence appropriate remedial


action, GNPC and/or the State may then issue a written Notice of Termination to Contractor which shall


become effective thirty (30) days from receipt of said Notice by Contractor unless Contractor has referred


the matter to arbitration. In the event that Contractor disputes whether an event specified in Article 23.4


or Article 23.5 has occurred or been remedied, Contractor may, any time up to the effective date of any


Notice of Termination refer the dispute to arbitration pursuant to Article 24 hereof. If so referred, GNPC








64


and/or the State may not terminate this Agreement in respect of such event except in accordance with the


terms of any resulting arbitration award as provided for in Article 24.


23.7 Upon Termination of this Agreement, all rights of Contractor hereunder shall cease, except for


such rights as may at such time have accrued, and without prejudice to any obligation or liability imposed


or incurred under this Agreement prior to Termination and to such rights and obligations as the Parties


may have under applicable law.


23.8 Upon Termination of this Agreement or in the event of an assignment of all the rights of


Contractor, all wells and associated facilities shall be left in a state of good repair in accordance with


applicable laws and International Best Oilfield Practice,.








































































































65


 ARTICLE 24





CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT


24.1 Except in the cases specified in Article 26.2(d) any dispute arising between the State and GNPC


or either of them on one hand and Contractor on the other hand in relation to or in connection with or


arising out of any terms and conditions of this Agreement shall be resolved by consultation and


negotiation among senior personnel authorized by each.


24.2 In the event that no agreement is reached within thirty (30) days after the date when either Party


notifies the other that a dispute or difference exists within the meaning of this Article or such longer period


specifically agreed to by the Parties or provided elsewhere in this Agreement, any Party shall have the


right subject to Article 24.8 to have such dispute or difference finally settled through international


arbitration under the auspices of the International Chamber of Commerce (the “ICC”) and adopting the


Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”) in effect on the date on


which the proceeding is instituted, which ICC Rules are deemed incorporated by reference into this Article


24, save as otherwise provided herein. The failure or refusal to submit to arbitration in accordance with


this Article 24.2 and/or the seeking of any Pre-Award Attachment by any Party shall be deemed a breach


of this Agreement by such Party. In the event of a breach of this Article, each non-breaching Party shall,


without prejudice to any other remedies, be entitled to recover from each breaching Party all costs and


expenses, including reasonable attorneys' fees, that such non-breaching Party was thereby required to


incur.


24.3 The tribunal shall consist of three (3) arbitrators. Each Party to the dispute shall appoint one (1)


arbitrator and those so appointed shall designate a chairman arbitrator. If a Party’s arbitrator and/or the


chairman arbitrator is/are not appointed within the periods provided in the rules referred to in Article 24.1


above, such Party’s arbitrator and/or the chairman arbitrator shall at the request of any Party to the


dispute be appointed by the ICC International Court of Arbitration in accordance with the ICC Rules.


24.4 No arbitrator shall be a citizen of the home country of any Party hereto, and shall not have any


economic interest or relationship with any such Party.


24.5 The arbitration proceedings shall be conducted in London, England or at such other location as


selected by the Parties unanimously. The proceedings shall be conducted in the English language.


24.6 If the opinions of the arbitrators are divided on issues put before the tribunal, the decision of the


majority of the arbitrators shall be determinative. The award of the tribunal shall be final and binding upon


the Parties and enforceable by the Parties in whose favour the award is made. Each of the Republic of


Ghana and GNPC hereby irrevocably agree that to the extent that such party, has any right of immunity


from any legal proceedings whether in Ghana, England or elsewhere in connection with or arising from


terms and conditions of this Agreement, including immunity from service of process, immunity from


jurisdiction or judgment or any arbitration tribunal, immunity from execution of judgment or tribunal award,


such party hereby expressly and irrevocably waives any such immunity and agrees not to assert or


invoke any such rights or claim in any such proceedings whether in Ghana, England or elsewhere;


provided, however, that the provisions hereof shall not constitute a waiver by any Party of any right that it


now or hereafter has to claim sovereign immunity for itself or any of its assets in respect of any effort to


confirm, enforce, or execute any Pre-Award Attachment.


24.7 The right to arbitrate disputes arising out of this Agreement shall survive the termination of this


Agreement.








66


24.8 In lieu of resorting to arbitration, the Parties to a dispute arising under this Agreement, including


the Accounting Guide, which such Parties by mutual written agreement consider appropriate, may be


referred for determination, by a sole expert to be appointed by agreement of the Parties who is a


recognized specialist with respect to the subject of the dispute (a “Sole Expert”). In such case, the Parties


shall agree on the terms of reference for such proceeding, the schedule of presentation of evidence and


testimony of witnesses, and other procedural matters. When establishing the terms of reference of the


sole expert, the Parties may assess whether ‘pendulum arbitration’ would be appropriate in the


circumstances. The decision of the Sole Expert shall be final and binding upon the Parties. The Sole


Expert shall have ninety (90) days after receipt of all submissions to decide the case, subject to any


extensions mutually agreed to by the Parties to the dispute. Upon failure of the Sole Expert to decide the


matter within such time, any Party shall have the right to have such dispute or difference settled through


arbitration under the foregoing provisions of this Article 24.


24.9 Except as set forth in Article 24.1, each Party to a dispute shall pay its own counsel and other


costs; however, costs of the arbitration tribunal shall be allocated in accordance with the decision of the


tribunal. The costs and fees of the Sole Expert shall be borne equally by the Parties to the dispute.


24.10 Any arbitration or Sole Expert proceeding pursuant to this Agreement shall be conducted in


accordance with the ICC Rules or the ICC Rules for Expertise (as applicable) in effect on the date on


which the proceeding is instituted..


24.11 In the event of a matter being referred for resolution under this Article 24; any obligations of the


Parties relating specifically and directly to such matter shall (unless otherwise mutually agreed by the


Parties) be suspended, without liability to any Party until said matter has been resolved pursuant to this


Article 24.


24.12 Neither the State and/or GNPC, on the one hand, and the Contractor, on the other hand, shall be


held liable to the other for any consequential, special, indirect or punitive damages (including loss of profit


or loss of production) arising directly or indirectly out of or in relation or in connection to this Agreement,


regardless of cause or fault.


 ARTICLE 25


ASSIGNMENT


25.1 No interest in this Agreement shall be assigned by a Contractor Party directly or indirectly in


whole or in part, without the prior written consent of GNPC, and the Minister which consent shall not be


unreasonably withheld or delayed. GNPC and/or the Minister may impose such reasonable conditions


upon the giving of consent under this Article as may be deemed by GNPC or the Minister appropriate in


the circumstances.


25.2 Any assignment of this Agreement shall bind the assignee as a Party to this Agreement to all the


terms and conditions hereof unless otherwise agreed and as a condition to any assignment Contractor


shall provide an unconditional undertaking by the assignee to assume all obligations assigned by


Contractor under this Agreement.


25.3 Where in consequence of an assignment hereunder Contractor is more than one person:


a) any operating or other Agreement made among Contractor Parties and relating to the Petroleum


Operations hereunder shall be disclosed to GNPC and the Minister and shall not be inconsistent


with the provisions of this Agreement;


b) an operating agreement shall be established by the JMC to regulate the conduct of Petroleum


Operations thereafter, including cash-calls and the limits of authority;


c) no change in the scope of the operations may take place without the prior approval in writing of


GNPC which approval shall not be unreasonably delayed or withheld; and


d) the duties and obligations of Contractor hereunder shall be joint and several except those relating


to the payment of income tax pursuant to Article 12 which shall be the several obligation of each


such person.


25.4 GNPC’s acquisition of an Additional Interest under Article 2 or a Sole Risk Interest pursuant to


Article 9 shall not be deemed to be an assignment within the meaning of this Article 25.


 ARTICLE 26





MISCELLANEOUS


26.1 This Agreement and the relationship between the State and GNPC on one hand and Contractor


on the other shall be governed by and construed in accordance with the laws of the Republic of Ghana in


effect from time to time.


26.2


a) The State confirms that it will accord to the Contractor treatment consistent with the standard of


treatment required to be accorded to foreign investors under principles of international law


including rules and principles as applied by international tribunals.


b) Without prejudice to the rights and obligations of the parties under the Agreement, in the event


that after the Effective Date any applicable Law, Rule, Decree, or Regulation of the Republic of


Ghana is made or amended, that makes further observance of the original terms and conditions


of the contract impossible or that has a material adverse effect on the rights, obligations and


benefits hereunder, the Parties shall, if the Contractor so requests, meet as soon as possible to


negotiate possible modifications to the Agreement as provided under clauses (c) and (d).


c) Where a Party considers that a significant change in the circumstances prevailing at the time the


. Agreement was entered into, has occurred affecting the economic balance of the Agreement, the


Party affected hereby shall notify the other Parties in writing of the claimed change with a


statement of how the claimed change has affected the relations between the Parties.


d) The other Parties shall indicate in writing their reaction to such representation within a period of


three (3) Months of receipt of such notification and if such significant changes are established by


the Parties to have occurred, the Parties shall meet to engage in negotiations and shall effect


such changes in, or rectification of, these provisions as they may agree are necessary to restore


the relative economic balance of the Parties.


26.3 This Agreement may not be modified, amended, altered or supplemented except upon the


execution and delivery of a written agreement executed by the Parties. No waiver by any Party of any of


its rights hereunder shall be construed or implied, but shall be binding on such Party only if made


specifically, expressly and in writing.


26.4 Except for payment obligations arising under the Petroleum Income Tax Law, any Party failing to


pay any amounts payable by it under this Agreement (including the provisions of Annex 2) on the


respective dates on which such amounts are payable by such Party hereunder shall be obligated to pay


interest on such unpaid amounts to the Party to which such amounts are payable. The rate of such


interest with respect to each day of delay during the period of such nonpayment shall be the Default Rate


Such interest shall accrue from the respective dates such amounts are payable until the amounts are duly


paid. The Party to whom any such amount is payable may give notice of nonpayment to the Party in


default and if such amount is not paid within fifteen (15) days after such notice, the Party to which the


amount is owed may, in addition to the interest referred to above, seek remedies available pursuant to


Article 24.


26.5 (a) The rights and obligations under this Agreement of the State and GNPC on the one hand and


Contractor on the other shall be separate and proportional and not joint. This Agreement shall not be


construed as creating a partnership or joint venture, nor an association or trust (under any law other than


the Petroleum Law), or as authorizing any Party to act as agent, servant or employee for any other Party


for any purpose whatsoever except as provided in Article 10.3.








69


a) The duties and obligations of each Party constituting Contractor hereunder shall be joint and


several and it is recognised that each such Party shall own and be responsible for its undivided


Interest in the rights and obligations of Contractor hereunder; provided, however, that the


following payments shall be the separate obligation of and shall be made by each Party which


constitutes the Contractor:


i. Payments under the Petroleum Income Tax Law;


ii. Payments of royalty taken in cash under the provisions of Article 10.2(a); and


iii. AOE share under the provisions of Article 10.2(b).


26.6 This Agreement shall not take effect unless and until it has been ratified by the Parliament of


Ghana, (the “Effective Date”).


26.7 In construing this Agreement:


a) no consideration shall be given to the captions of the Articles, Sections, or Subsections which are


inserted for convenience in locating the provisions of this Agreement and not as an aid in its


construction;


b) the word "includes” and its derivatives means "includes, but is not limited to” and corresponding


derivative expressions;


c) a defined term has its defined meaning throughout this Agreement and each annex, and


attachment to this Agreement, regardless of whether it appears before or after the place where it


is defined;


d) the plural shall be deemed to include the singular, and vice versa;


e) each gender shall be deemed to include the other genders;


f) Each annex and attachment to this Agreement is a part of this Agreement, but if there is any


conflict or inconsistency between the main body of this Agreement and any annex or attachment,


the provisions of the main body of this Agreement shall prevail; and


g) each reference to an Article, Section or Subsection refers to an Article, Section or Subsection of


this Agreement unless expressly otherwise provided.


26.8 This Agreement comprises the full and complete agreement of the Parties hereto with respect to


the subject matter hereof and supersedes and cancels all prior communications, understandings and


agreements between the Parties hereto, whether written or oral, expressed.


26.9 Each contractor Party warrants that neither it nor any of its Affiliates or any of its or their officers,


directors or employers has made, offered, or authorized and will not make, offer, or authorize with respect


to the matters which are the subject of this Agreement, any payment, gift, promise or other advantage,


whether directly or through any other person or entity, to or for the use or benefit of any public official (i.e.,


any person holding a legislative, administrative or judicial office, including any person employed by or


acting on behalf of a public agency, a public enterprise or a public international organization) or any


political party or political party official or candidate for office, where such payment, gift, promise or


advantage would violate to the extent applicable to such Party (i) the applicable laws of Ghana; (ii) the


laws of the country of incorporation of such Party or such Party’s ultimate parent company and of the


principal place of business of such ultimate parent company; (iii) the principles described in the


Convention on Combating Bribery of Foreign Public Officials in International Business Transactions,


signed in Paris on December 17, 1997, which entered into force on February 15, 1999, and the


Convention’s Commentaries; (iv) the United States of America Foreign Corrupt Practices Act 1977; and


(v) the United Kingdom Bribery Act 2010. Each Party shall defend, indemnify and hold the other Parties


harmless from and against any and all claims, damages, losses, penalties, costs and expenses arising


from or related to, any breach by such first Party of such warranty. Such indemnity obligation shall survive


termination or expiration of this Agreement. Each Party shall in good time (i) respond in reasonable detail


to any notice from any other Party reasonably connected with the above-stated warranty; and (ii) furnish


applicable documentary support for such response upon request from such other Party.


26.10 Contractor shall at all times comply, and shall ensure that its agents, subcontractors and Affiliates


while in Ghana carrying out activities contemplated by this Agreement and related documents comply,


with the laws of the Republic of Ghana in effect from time to time during the term of this Agreement to the


extent that the Contractor has notice of or, with the exercise of reasonable inquiry, would have knowledge


of, such laws. Nothing in this Agreement or any related document shall require the Contractor or any of its


agents, subcontractors or Affiliates to violate the laws of the Republic of Ghana in effect from time to time.


To the extent any conflict exists between the terms of this Agreement and the laws of the Republic of


Ghana, the Contractor shall not be found to be in breach of this Agreement to the extent the Contractor


complies with the terms of this Agreement; provided, however, that where this Agreement specifically


refers to the law of the Republic of Ghana, a breach of such law shall constitute a breach of this


Agreement.








































































































71


 ARTICLE 27





NOTICE


27.1 Any Notice, Application, Requests, Agreements, Consent, Approval, Instruction, Delegation,


Waiver or other communication required or permitted to be given hereunder shall be in writing and shall


be deemed to have been properly given when delivered in person to an authorised representative of the


Party to whom such notice is directed or when actually received by such Party through registered mail,


telex or telegram at the following address or at such other address as the Party shall specify in writing


fifteen (15) days in advance:














































































































72


 FOR THE STATE:


MINISTER FOR ENERGY


MINISTRY OF ENERGY


PRIVATE MAIL BAG


MINISTRY POST OFFICE


ACCRA, GHANA


Telephone: 233 (0)302 667151 - 3


Telex: 2436 ENERGY GH ' : M


■"{ . ? j ,:A


Telefax:233 (0)302 668262


FOR GHANA NATIONAL PETROLEUM CORPORATION:


THE CHIEF EXECUTIVE


GHANA NATIONAL PETROLEUM CORPORATION


PETROLEUM HOUSE


HARBOUR ROAD


PRIVATE MAIL BAG


TEMA


GHANA


Telephone: 233-(0)303-204726


Telefax: 233-(0)303-202854


FOR CONTRACTOR:


THE MANAGING DIRECTOR


AMNI INTERNATIONAL PETROLEUM DEVELOPMENT COMPANY (GHANA) LIMITED


NO 14 SCHOOL ROAD





KPEHE ACCRA, GHANA


IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized


representatives as of the date first written above.











Witnesse














MINISTRY OF ENERGY





PETROLEUM ACCRA


CORPORATION ^ Witnessed:


---<


By; Jjxj al^(V CkiHo^





Its: CVV(, ■0~4Hc







FOR CONTI





Witnessed:


tC- j-J f l--- fof O f By; KjJJUV'


Its; MfiTyK, f











Witnessed:





By. /^s.wfe L t __


Its: £w^t-lLSL?S



































74


II


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!


 COORDINATES FOR THE CONTRACT AREA





X Y


0 491197.105 524886.870


1 509207.635 515837.874


2 509248.002 505685.506


3 507404,563 505685.506


4 507404.563 506607.225


5 501860.792 506607.225


6 501847.336 503438.395


7 490987.420 503441.385


8 490987.420 509015.058


9 490269.779 509015.058


10 490269.779 510199.165


11 489659.785 510175.243


12 489671.746 514732.259


13 488332.150 514732.259


14 488344.111 514899.709


15 491226.633 514899.709


16 491226.633 516741.652


17. 492602.110 516777.534


18 492602.110 517232.040


19 493068.577 517232.040


20 493068.577 517662.624


21 495197.576 517674.585


22 495209.537 517901.838


23 495843.452 517901.838


24 495843.452 519038.101


25 495376.986 519038.101


26 495376.986 519815.545


27 494886.599 519815.545


28 494898.559 519971.034


29 494420.132 519959.073


30 494420.132 520437.500


31 492590.150 520437.500


32 492578.189 520712.595


33 491764.863 520700.635


34 491764.863 520868.084


35 491214.672 520856.124


'1


i


!












































j=1B


!3























:1


k\



































5 ^














!{























!




























































































f


 d) Allowable Cost Statement (see Section 8)





e) Statement of Expenditures and Receipts (see Section 9)


f) Final End-of-Year Statement (see Section 10)


g) Budget Statement (see Section 11)





h) Long Range Plan and Forecast (see Section 12)


i) Audited annual financial statement





1.3 LANGUAGE, MEASUREMENT, AND UNITS OF ACCOUNTS


1.3.1 The U.S. Dollar being the currency unit for investments and compensation hereunder


shall therefore be the unit of currency for all bookkeeping and reporting under the Agreement. When


transactions for an asset or liability are in Ghana Cedis or currency other than the U.S. Dollar, the


respective accounts shall be kept in such other currency as well as the U.S. Dollar equivalent..


1.3.2 Measurement required under this Annex shall be in the metric system and Barrels.


1.3.3 The English language shall be employed.


1.3.4 Where necessary for purposes of clarification, Contractor may also prepare financial


reports in other languages, units of measurement and currencies.


1.3.5 It is the intent of the Parties that no Party shall experience any gain or loss at the


expense of or to the benefit of the other as a result of exchange of currency. Where any such


gain or loss arises it shall be charged or credited to the accounts under the Agreement.


1.3.6 The rate of exchange for the conversion of currency shall be the rate actually incurred


(which shall be at the prevailing rate at the date of acquisition). Where actual rates are not known,


the arithmetic average of buying and selling rate quoted by the Bank of Ghana, at a close of


business on the date of such currency conversion shall be used.


1.3.7 Current Assets and Liabilities shall be converted at the rate prevailing on the date of


settlement of the account.


1.3.8 To translate transactions in Ghana cedis into dollars or vice versa at the year end for


revenue and expenditure the rates of the transactions or average monthly rates where


reasonable will be used.


1.3.9 To translate transactions in Ghana cedis into dollars or vice versa at the year end for


assets, liabilities and capital items the year end rate will be used


SECTION 2


2.1 CLASSIFICATION AND ALLOTMENT OF COSTS AND EXPENDITURE


2.1.2 All expenditure relating to Petroleum Operations shall be classified, as follows:


a) Exploration Expenditure;


b) Development Expenditure;





77


c) Production Expenditure;


d) Service Costs; and


e) General and Administrative expenses


and shall be defined and allotted as herein below provided.


2.2 EXPLORATION EXPENDITURE


2.2.1 Exploration Expenditure shall consist of all direct, indirect and allotted costs incurred in


the search for Petroleum in the Contract Area, including but not limited to expenditure on:


a) aerial, geographical, geochemical, paleontological, geological, topographical and seismic


surveys, and studies and their interpretation;


b) borehole drilling and water drilling;


c) labour, materials and services used in drilling wells with the objective of finding new Petroleum


reservoirs or for the purpose of appraising of Petroleum reservoirs already discovered, provided


such wells are not completed as producing Wells; •


;f-


d) facilities used solely for Exploration Operations, including access roads,- where .applicable, and


purchased geological and geophysical information;


e) all service costs allotted to Exploration Operations on the basis of procedures proposed by the


Contractor on an equitable basis ; and


f) all General and Administrative Expenses allotted to Exploration Operations based on the


percentage share of projected budget expenditure which will be adjusted to actual expenditure at


the end of each year.


2.2.1 Exploration cost shall be tied to resultant commercial discoveries. Where exploration


activity is undertaken after a commercial discovery that exploration cost shall be regarded


as capital work-in-progress. If the exploratory activity results in commercial discovery it


shall be regarded as cost of the discovery and subsequent field Development. Where


there is no commercial discovery it shall be charged to the previous field.


2.3 DEVELOPMENT EXPENDITURE


2.3.1 Development Expenditure shall consist of all expenditure incurred in Development


Operations, including but not limited to expenditure on:


a) drilling wells which are completed as producing wells and drilling wells for purposes of producing


a Petroleum reservoir already discovered, whether these wells are dry or producing;


b) tangible drilling costs for completing wells by way of installation of casing or equipment or


otherwise after a well has been drilled for the purpose of bringing such well into use as a


producing well;


c) intangible drilling costs such as labour, consumable material and services having no salvage


value which are incurred in drilling and deepening of wells for producing purposes;











78


d) field facilities such as pipelines, flow lines, production and treatment units, wellhead equipment,


subsurface equipment, enhanced recovery systems, offshore platforms, Petroleum storage


facilities and access roads for production activities;


e) engineering and design studies for field facilities;


f) all service costs allotted to Development Operations on equitable basis;


g) all General and Administrative Expenses allotted to Development Operations based on the


percentage projected budget expenditure which will be adjusted to actual expenditure as the end


of the year.


h) Capital allowance for development expenses shall be granted under the following conditions:


i. Development activity has been approved by the Minister;


ii. Development activity has been completed; and


iii. Production activity has started after the completion of the development activity.


2.4 PRODUCTION EXPENDITURE


Production Expenditure shall consist of but not limited to all expenditure incurred in Petroleum Operations


including appropriate abandonment charges, after the Date of Commencement of Commercial


Production, such expenditure being other than Exploration Expenditure, Development Expenditure,


General and Administrative Expenses and Service Costs. The balance of General and Administrative


Expenses and Service Costs not allotted to Exploration Operations or to Development Operations under


Section 2.2 and 2.3 shall be allotted to Production Expenditure.


2.5 SERVICE COSTS


2.5.1 Service Costs shall consist of but not be limited to all direct and indirect expenditure


incurred in support of Petroleum Operations, including the construction or installation of


Warehouses, piers, marine vessels, vehicles, motorised rolling equipment, aircraft, fire security


stations, workshops, water and sewerage plants, power plants, housing community and


recreational facilities and furniture, tools land, equipment used in such construction or installation.


Service Costs in any Calendar Year shall include the total costs incurred in such year to purchase


and construct or install such facilities as well as the annual costs of maintaining and operating


such facilities.


2.5.2 All Service Costs will be regularly allotted on an equitable basis to Exploration


Expenditure, Development Expenditure and Production Expenditure.


2.6 GENERAL AND ADMINISTRATIVE EXPENSES


General and Administrative Expenses shall consist of:


2.6.1 All main office, field and general administrative costs, in the Republic of Ghana, including


but not limited to supervisory, accounting and employee relations services;


2.6.2 An overhead charge for the actual cost of services rendered outside the Republic of


Ghana by Contractor and its Affiliates for managing Petroleum Operations and for staff advice


and assistance, including but not limited to financial, legal, accounting and employee relations


services in the following amounts:








79


a) For the Exploration Phase - One point two five percent (1.25%) of expenditure to a cap of


US$200,000.00 per annum.


b) For Development Phase;- One point two five percent (1.25%) to a cap of US$300,OOO.OOper


annum.


c) For Production Phase; US- 1 percent (1%) to a cap of US$200,000.00 per annum.


2.6.3 All General and administrative Expenses will be regularly allotted as specified in


subsections 2.2(f), 2.3(g) and 2.4 to Exploration Expenditure, Development Expenditure and


Production Expenditure.


SECTION 3


3.1 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF CONTRACTOR


3.1.1 Contractor for the purpose of this Agreement shall charge the following allowable costs to the


accounts:


a) costs of acquiring surface rights;


b) labour and associated costs;


c) transportation costs;


d) charges for services;


e) material costs;


f) rentals, duties and other assessments;


g) insurance and losses;


h) legal expenses;


i) training expenses;


j) general and administrative expenses;


k) utility costs;


i) office facility charges;


m) communication charges;


n) ecological and environmental charges;


o) abandonment cost; and


p) such other costs necessary for the Petroleum Operations.


3.2 COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT


Cost of acquiring surface rights shall consist of all direct costs attributable to the acquisition, renewal or


relinquishment of surface rights acquired and maintained in force over the Contract Area.





80


3.3 LABOUR AND ASSOCIATED LABOUR COSTS





a) Training Payments to GNPC


b) Technology development payment to GNPC


3.3.1 Labour and associated labour costs shall include but not be limited to:


a) gross salaries and wages including bonuses of those employees of Contractor and of its Affiliates


engaged in Petroleum Operations who are permanently or temporarily assigned to Ghana;


b) Costs regarding holidays, vacation, sickness and disability payments applicable to the salaries


and wages chargeable under (a);


c) expenses or contributions made pursuant to assessments or obligations imposed under the laws


of the Republic of Ghana which are applicable to cost of salaries and wages chargeable under


(a);


d) cost of established plans for employees' life insurance, hospitalisation, pensions and other


benefits of a like nature customarily granted to employees; and -*


e) reasonable travel and personal expenses of employees and families, including those made for


travel and relocation of the personnel. - ^


3.4 TRANSPORTATION COSTS


Transportation costs and other related costs of transportation of employees, equipment, materials and


supplies necessary for the conduct of Petroleum Operations.


3.5 CHARGES FOR SERVICES


3.5.1 Charges for services shall include:


a) the costs of third party contracts which are the actual costs of contracts for technical and other


services entered into by Contractor for Petroleum Operations made with third parties other than


Affiliates of Contractor, provided that the prices paid by Contractor are no higher than the


prevailing rates for such services in the global oil and gas industry;


b) cost of technical and other services of personnel assigned by the Contractor and its Affiliates


when performing management, engineering, geological, geophysical, administrative, legal,


accounting, treasury, tax, employee relations, computer services, purchasing, and all other


functions for the direct benefit of Petroleum Operations; provided that charges for such services


shall be at actual cost;


c) cost of general services, including, but not without limitation, professional consultants and others


who perform services for the direct benefits of Petroleum Operations.


3.5.2 All Services furnished by Contractor and its Affiliates (other than the Operator) shall be


performed based on a form Services Agreement to be approved by the JMC and at actual cost, on a


no gain no loss basis, without element of profit and with no allocation of fixed costs in the


determination of the service fees.














81


3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS


All rentals, taxes, duties, levies, charges, fees, contributions and any other assessments and charges


levied by the Government in connection with Petroleum Operations or paid for the benefit of Petroleum


Operations, with the exception of the income tax specified in the Article 12 of the Agreement


3.7 INSURANCE AND LOSSES


a) Insurance premium and costs incurred for insurance, provided that if such insurance is wholly or


partly placed with an Affiliate of Contractor, such premium and costs shall be recoverable only to


the extent not in excess of those generally charged by competitive insurance companies other


than Affiliate; and;


b) costs and losses incurred as a consequence of events, which are, insofar as not made good by


insurance, allowable under Article 17 of the Agreement.


c) Costs or expenses necessary for the repair or replacement of property resulting from damage or


losses incurred.


3.8 LEGAL EXPENSES


All costs and expenses of litigation and legal or related service's necessary, or expedient for the procuring,


perfecting, retaining and protecting the rights hereunder and in defending or prosecuting lawsuits


involving the Contract Area or any third party claim arising out of activities under the Agreement, or sums


paid in respect of legal services necessary or expedient for the protection of the joint interest of GNPC


and Contractor, provided that where legal services are rendered in such matters by salaried or regularly


retained lawyers of Contractor or an Affiliate of Contractor, such compensation will be included instead


under either Section 3.3 or 3.5, as applicable. The. preceding costs and expenses shall not include costs


of any nature (including attorneys' fees and the fees of the ICC, arbitrators, the Sole Expert, other


experts, professionals and translators) incurred in connection with any consultation, arbitration or Sole


Expert process under Article 24 of the Agreement.


3.9 TRAINING COSTS


All costs and expenses incurred by Contractor in training of its employees and nominees of GNPC to the


extent that such training is attributable to Petroleum Operations under the Agreement.


3.10 GENERAL AND ADMINISTRATIVE EXPENSES


General and Administrative Expenses shall consist of the costs described in Subsection 2.6.1 and the


charge described in Subsection 2.6.2.


3.11 UTILITY COSTS


Any water, electricity, heating, fuel or other energy and utility costs used and consumed for the Petroleum


Operations.


3.12 OFFICE FACILITY CHARGES


The cost and expenses of constructing, establishing, maintaining and operating offices, camps, housing


and any other facilities in Ghana necessary to the conduct of Petroleum Operations. The cost of


constructing or otherwise establishing any operating facility which may be used at any time in operations


of more than one field shall be charged initially to the field or fields for which the facility is first used.


Costs incurred, thereafter shall be allocated in a reasonable manner, consistent with international


accounting practice, to the fields for which the facility is used.





82


3.13 COMMUNICATION CHARGES


The costs of acquiring, leading, installing, operating, repairing and maintaining communication systems,


including radio and microwave facilities


3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES


All charges for environmental protection and safety measures conducted in the Contract Area in


accordance with Article17 of the Agreement.


3.15 ABANDONMENT COST


Cost relating to the decommissioning and abandonment of operations and facilities, site restoration and


other associated operations accrued from a reasonable date in advance based on estimate of such cost


(with subsequent adjustments to actuals) as provided in Article 12.10 of the Agreement


3.16 OTHER COSTS


Any other costs not covered or dealt with in the foregoing provisions which are incurred and not


mentioned in this Section 3.16 for the necessary and proper conduct of Petroleum Operations.


3.17 COSTS NOT RELEVANT FOR AOE ALLOWABLE UNDER THE AGREEMENT


For the purposes of AOE, the following costs shall not be taken into account allowable under the


Agreement:


a) commission paid to intermediaries by Contractor;


b) charitable donations and contributions, except where prior approval has been obtained from


GNPC;





c) interest incurred on loans raised by the Contractor as well as any other borrowing costs or costs


to secure finance (including professional and advisory fees and expenses) provided that it shall


be deductible for income tax purposes;


d) costs (including duties) arising from the marketing or processing Petroleum or transportation of


Petroleum beyond the Delivery Point;


e) the costs of any Bank Guarantee under the Agreement and any other amounts spent on


indemnities with regard to non-fulfilment of contractual obligations, provided it shall be deductible


for income tax purposes;


f) premium paid as a result of either party exercising a Sole Risk option under Article 9 of this


Agreement;





g) costs of any nature (including attorneys’ fees and the fees of the ICC, arbitrators, the Sole Expert,


other experts, professionals and translators) incurred in connection with any consultation,


arbitration or Sole Expert process under Article 24 of the Agreement;


h) fines, penalties and interest due pursuant to any applicable law or regulation and/or imposed by a


competent administrative or judicial body;


i) costs, damages and other liabilities incurred as a result of (1) a breach of any provision of the


Agreement other than a contractual standard of care, (2) Gross Negligence with respect to any


contractual standard of care set forth in this Agreement, and/or (3) Wilful Misconduct, in each





83


case by the Contractor, the Operator, their respective Affiliates and/or subcontractors, and/or any


other entities or persons for whom the Contractor is responsible under the Agreement;


j) income taxes (including any taxes on the net income of permanent establishments in Ghana and


any capital gains taxes or taxes on assignment of interest), withholding taxes and/or royalty


shares or other Petroleum entitlements, in each case paid to authorities in Ghana in connection


with or related to the Agreement, (2) any taxes paid to authorities outside Ghana, except any


foreign value added taxes or other foreign taxes paid with respect to products or services


imported into Ghana, (3) any taxes subject to reimbursement or refund, and (4) any other taxes


that should be deemed non-allowable costs;


k) costs incurred by the Contractor under contracts or amendments thereto that were subject to (1)


approval by the JMC or GNPC and were not so approved, or (2) award or approval in accordance


with tender procedures and were not awarded or approved in accordance with the applicable


tender procedures;


l) costs that (1) are not incurred in accordance with a Budget in force at the time the cost was


incurred, or (2) exceed by more than 10%, except when necessary, any budget line item set forth


in the Budget in force at the time the cost was incurred, except for costs that are incurred in


accordance with the Agreement in response to an emergency;


m) costs that are not documented in accordance with applicable law or this Agreement; and


n) any bonus payments payable by the Contractor to the State, any other governmental body in


Ghana, GNPC or any Affiliates of GNPC under the Agreement.


3.17 ALLOWABLE AND DEDUCTIBILITY


The costs and expenses set forth herein shall be for the purpose of determining allowable or non¬


allowable costs and expenses only and shall have no bearing on Contractor's eligibility or otherwise for


deductions in computing Contractor's net income from Petroleum Operations for income tax purposes


under the Agreement.


3.18 CREDITS UNDER THE AGREEMENT


3.18.1 The net proceeds of the following transactions will be credited to the accounts under the


Agreement:


a) the net proceeds of any insurance or claim in connection with Petroleum Operations or any


assets charged to the accounts under the Agreements when such operations or assets were


insured and the premium charged to the accounts under the Agreement;


b) revenue received from third parties for the use of property or assets charged to the accounts


under this Agreement;


c) any adjustment from the suppliers or manufacturers or their agents in connection with a defective


equipment or material the cost of which was previously charged to the account under the


Agreement;


d) the proceeds received for inventory materials previously charged to the account under the


Agreement and subsequently exported from the Republic of Ghana or transferred or sold to third


parties;











84


e) rentals, refunds or other credits received which apply to any charge which has been made to the


account under the Agreement but excluding any award granted under arbitration or Sole Expert


proceedings;


f) the proceeds from the sale or exchange of plant or facilities from the Development and


Production Area or plant or facilities the acquisition costs and the cost of sale;


g) the proceeds derived from the sale or issue of any intellectual property the development costs of


which were incurred pursuant to this Agreement;


h) the proceeds from the sale of any petroleum information derived from Petroleum Operations


under this Agreement; and


i) any Service Expenses that benefit any operation or activity other than Petroleum Operations.


3.19 DUPLICATION OF CHARGES AND CREDITS


Notwithstanding any provision to the contrary in this Annex, it is the intention that there shall be no


duplication of charges or credits in the accounts under the Agreement.


SECTION 4


*


4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER THE AGREEMENT


Material purchased, leased or rented by Contractor for use in Petroleum Operations shall be valued at the


actual net cost incurred by Contractor. The net cost shall include invoice price less trade and cash


discounts, if any, purchase and procurement fees plus freight and forwarding charges between point of


supply and point of shipment, freight to port of destination, insurance, taxes, customs duties, consular


fees, other items chargeable against imported material, and any other related costs actually paid.


4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE


4.2.1 Contractor shall notify GNPC of any goods supplied by an Affiliate of Contractor.


Materials purchased from Affiliate of Contractor shall be charged at the prices specified in


Sections 4.2.1, 4.2.2 and 4.2.3 below.


4.2.2 New Material (Condition "A") New material shall be classified as Condition "A". Such


material shall be valued at the prevailing market price, plus expenses incurred in procuring such


new materials, and in moving such materials to the locations where the material shall be used.


4.2.3 Used Material (Condition "B") Used material shall be classified as Condition "B"


provided that it is in sound and serviceable condition and is suitable for reuse without


reconditioning. Such material shall be valued at not more than seventy five percent (75%) of the


current price of new material valued according to Section 4.2.1 above.


4.2.4 Used Material (Condition "C") Used material which is serviceable for original function


as good second hand material after reconditioning and cannot be classified as Condition "B" shall


be classified as Condition "C". Such material shall be valued at not more than fifty percent (50%)


of the current price of new material valued according to Section 4.2.1 above. The cost of


reconditioning shall be charged to the reconditioned material provided that that the value of such


Condition "C" material plus the cost of reconditioning does not exceed the value of Condition "B"


material.














85


4.3 CLASSIFICATION OF MATERIALS





Material costs shall be charged to the respective Exploration Expenditure, Development Expenditure,


Operating Expenditure accounts at the time the material is acquired and on the basis of the intended use


of the material. Should such material subsequently be used other than as intended, the relevant charge


will be transferred to the appropriate account.


4.4 DISPOSAL OF MATERIALS


Sales of property shall be recorded at the net amount collected by the Contractor from the purchaser.


4.5 WARRANTY OF MATERIALS


In the case of defective material or equipment, any adjustment received by Contractor from the suppliers


or manufacturers of such materials or their agents will be credited to the accounts under the Agreement.


4.6 CONTROLLABLE MATERIALS


4.6.1 The Contractor shall control the acquisition, location, storage and disposition of materials


which are subject to accounting record control, physical inventory and adjustment for averages and


shortages (hereinafter referred to as Controllable Material).


4.6.2 Unless additional inventories are scheduled by the JMC, Contractor shall conduct one


physical inventory of the Controllable Material each Calendar Year which shall be completed prior to the


end of the year. The Contractor shall conduct said inventory on a date to be approved by the JMC.


Failure on the part of GNPC to participate in a JMC schedule or approved physical inventory shall be


regarded as approval of the results of the physical inventory as conducted by the Contractor.


4.6.3 The gain or loss resulting from the physical inventory shall be reflected in the stock


records of Controllable Materials. The Contractor shall compile a reconciliation of the inventory with a


reasonable explanation for such gains or losses. Failure on the part of GNPC to object to Contractor's


reconciliation within thirty (30) days of compilation of said reconciliation shall be regarded as approval by


GNPC.


SECTION 5


5.1 CASH CALL STATEMENT


In respect of any Exploration Costs to which GNPC is contributing or any Development and Production


Area in which GNPC elects to take a participating interest, and in any case where Contractor conducts


Sole Risk Operations for GNPC's account, Contractor shall at least fifteen (15) days prior to the


commencement of any Month submit a Cash Call Statement to GNPC. Such Cash Call Statement shall


include the following information:


a) Due Date;


b) Payment Instructions;


c) The balance prior to the Cash Call being issued;


d) The cash call being issued


e) Amount of US Dollars due; and


f) An estimation of the amounts of US Dollars required from GNPC for the following month.





86


5.2 Not later than the twenty fifth day of each Month, Contractor will furnish GNPC a


statement reflecting for the previous month:


a) Payments;


b) The nature of such payments by appropriate classifications; and


c) The balance due to or from GNPC.


5.3 Contractor may in the case where a large unforeseen expenditure becomes necessary


issue a special Cash Call Statement requiring GNPC to meet such Cash Call within ten (10) days of


receipt of such Statement.


6.1 PRODUCTION STATEMENT


6.1.1 Subsequent to the Date of Commencement of Commercial Production from the Contract


Area, Contractor shall submit a monthly Production Statement to GNPC showing the


following information for each Development and Production Area as appropriate:


a) the quantity of Crude Oil produced and saved;


b) the quantitypf Natural Gas produced and saved;


c) the quantities of Petroleum used for the purpose of conducting drilling and Production Operations,


pumping to field storage and re-injections;


d) the quantities of Natural Gas flared;


e) the size of Petroleum stocks held at the beginning of the Month;


f) the size of Petroleum stocks held at the end of the Month.


6.1.2 The Production Statement of each Calendar Month shall be submitted to GNPC not later


than ten (10) days after the end of such month.


SECTION 7


7.1 VALUE OF PRODUCTION STATEMENT


During each Quarter Contractor shall prepare a statement providing calculations of the value of Crude Oil


produced and saved based on the Market Price established under Article 11 of this Agreement, the


amounts of Crude Oil allocated to each of the Parties during that Quarter, the buyer of the cargo, sales


basis with respect to Benchmark crude oil, the pricing basis, the differential, and any deductions. Each


Production Statement shall be submitted to the Minister and GNPC not later than thirty (30) days


following the determination, notification and acceptance of the World Market Price to GNPC according to


Article 11 of this Agreement.


SECTION 8


8.1 ALLOWABLE COST STATEMENT


8.1.1 Contractor shall prepare with respect to each Quarter, an Allowable Cost Statement containing


the following information with respect to costs that are allowable under Section 3.17 of this Accounting


Guide:








87


a) Total Petroleum Costs in previous Quarter, if any;


b) Petroleum Costs for the Quarter in question;


c) Total Petroleum Costs as of the end of the Quarter in question (subsection 8.1.1 (a) plus


subsection 8.1.1(b) above;


d) Petroleum Costs for Development Operations advanced in the Quarter in respect of GNPC's


participating Interest pursuant to Article 2.8 of the Agreement;


e) Costs as specified in (d) above which have been recovered during the Quarter pursuant to Article


10.2.e of the Agreement and the balance, if any, of such costs unrecovered and carried forward


for recovery in a later period.


8.1.2 Petroleum Costs for Exploration, Development and Production Operations as detailed above


shall be separately identified for each Development and Production Area. Petroleum Costs for


Exploration Operations not directly attributable to a specific Development Area shall be shown


separately.


8.1.3 The Allowable Cost Statement of each Quarter shall be'submitted to GNPC no later than thirty


(30) days after the end of such Quarter.


SECTION 9


9.1 STATEMENT OF EXPENDITURES AND RECEIPTS


9.1.1 Subsequent to the Date of Commencement of Commercial Production from the Contract


Area, Contractor shall prepare with respect to each Quarter a Statement of Expenditures and Receipts.


The Statement will distinguish between Exploration Expenditure and Development Expenditure and


Production Expenditure and will identify major items of expenditure within these categories. The


statement will show the following:


a) actual expenditures and receipts for the Quarter in question;


b) cumulative expenditure and receipts for the budget year in question;


c) latest forecast of cumulative expenditures at the year-end;


d) variations between budget forecast and latest forecast and explanations therefor;


e) Price per barrel of crude oil sold; and


f) Price per barrel of oil equivalent of Gas sold.


9.1.2 The Statement of Expenditures and Receipts of each Calendar Quarter shall be


submitted to GNPC not later than thirty (30) days after the end of such Quarter for provisional agreement


by GNPC.


SECTION 10


10.1 FINAL END-OF-YEAR STATEMENT


The Contractor will prepare a Final End-of-Year Statement. The Statement will contain information as


provided in the Production Statement, Value of Production Statements, Allowable Cost Statement and


Statements of Expenditures and Receipts, as appropriate. The Final End-of-year Statement of each





88


Calendar Year shall be submitted to GNPC within ninety (90) days of the end of such Calendar Year.


Any necessary subsequent adjustments shall be reported promptly to GNPC.


SECTION 11


11.1 BUDGET STATEMENT


11.1.1 The Contractor shall prepare an annual budget statement. This will distinguish between


Exploration Expenditures, Development Expenditures and Production Expenditures and will show the


following;


a) forecast Expenditures and Receipts to the end of the budget year under the Agreement;


b) cumulative Expenditures and Receipts at the end of said budget year; and


c) the most important individual items of Exploration, Development and Production Expenditures for


said budget year.


11.1.2 The budget may include a budget line or lines for unforeseen expenditures which,


however, shall not exceed ten percent (10%) of the total budgetary expenditure.


11.2 The Budget Statement shall be submitted to GNPC and JMC with respect to each budget year no


less than ninety (90) days before the start of such year except in the case of the first year of the


Agreement when the Budget Statement shall be submitted within sixty (60) days of the Effective Date.


11.3 Where Contractor foresees that during the budget period expenditures have to be made in


excess of the ten percent (10%) pursuant to section 11.1.1 hereof, contractor shall submit a revision of


the budget to GNPC.


SECTION 12


12.1 LONG RANGE PLAN AND FORECAST


12.1.1 Contractor shall prepare and submit to GNPC the following:


a) During Exploration Period, an Exploration Plan for each year commencing as of the Effective


Date which shall contain the following information:


i. Estimated Exploration Costs showing outlays for each of the years or the number of years agreed


and covered by the Plan;


ii. Details of seismic operations for each such year;


iii. Details of drilling activities planned for each such year;


iv. Details of infrastructure utilisation and requirements.


The Exploration Plan shall be revised on each anniversary of the Effective Date. Contractor shall


prepare and submit to GNPC the first Exploration Plan for the Initial Exploration Period of two (2)


years within sixty (60) days of the Effective Date and thereafter shall prepare and submit to GNPC no


later than forty five (45) days before each anniversary of the Effective Date a revised Exploration


Plan.


b) In the event of a Development Plan being approved, the Contractor shall prepare a Development


Forecast for each calendar year of the Development Period, which shall contain the following


information:


i. forecast of capital expenditure portions of Development and Production expenditures for each


Calendar Year of the Development Period;


ii. forecast of operating costs for each Calendar Year;


iii. forecast of Petroleum production for each Calendar year;


iv. forecast of number and types of personnel employed in the Petroleum Operations in the Republic


of Ghana;


v. description of proposed Petroleum marketing arrangements;


vi. description of main technologies employed; and


vii. description of the working relationship of Contractor GNPC.


c) The Development forecast shall be revised at the beginning of each Calendar Year commencing


as of the second year of the first Development forecast. Contractor shall prepare and submit to


GNPC the first Development forecast within one hundred and twenty (120) days of the.date when


the first Development Plan is approved by the Minister and Contractor commences the


implementation of such plan and thereafter shall prepare and submit a revised Development


Forecast to GNPC no later than forty five (45) days before each Calendar Year commencing as of


the second year of the first Development forecast.


12.2 CHANGES OF PLAN AND FORECAST


It is recognised by Contractor and GNPC that the details of the Exploration Plan and Development


forecast may require changes in the light of existing circumstances and nothing herein contained shall


limit the flexibility to make such changes. Consistent with the foregoing the said Plan and Forecast may


be revised annually.


















































90


Sample AOE calculation using Amni AOE thresholds





SAM F>LE jftOE *





i ■: ROR i AOJE


< FA 0_2;-S-9*&


■SjA, n.^..-519*6. .09*6,





TjA. 3L2L_S-5ft& n.^ - S-9*6,


VA 2.7.59«6 | 2L2L_S.-3^&


3 ZA 3 3 2L _ S.-5HS. ' I 27. 5 9*6.








Disclaimer : AOEs are calculated on a monthly basis but for ease of analysis the


sample calculations were based on annual figures.





Inflation Rate 3%


{Amounts in million of US$)


Year NCF FAn@12.5 AOE 1 @123% SAnfffil7.5% AOE 2 TAn®223% AOE 3 YAn®273 AOE 4 @223% ZAn@323% AOE 5 Total AOE


% Da @15% P-a @173% % Da pa @273% Payments





12.5% 12.5% 17.5% 15.0% 22.5% 17.5% 27.5% 223% 32.5% 27.5%





1 (150.00) (150.00) 0.00 (150.00) 0.00 (150.00) 0.00 (150.00) 0.00 (150.00) 0.00 0.00


2 (240.00) (413.25) 0.00 (420.75) 0.00 (428.25) 0.00 (435.75) 0.00 (443.25) 0.00 0.00





3 (310.00) (787.30) 0.00 (817.00) 0.00 (847.45) 0.00 (878.65) 0.00 (910.60) 0.00 0.00


4 (550.00) (1,45934) 0.00 (1,534.49) 0.00 (1,613.55) 0.00 (1,696.64) 0.00 (1,78337) 0.00 0.00


5 (280.00) (1,965.53) 0.00 (2,129.06) 0.00 (2,305.01) 0.00 (2,494.12) 0.00 (2,697.14) 0.00 0.00


6 (80.00) (2,350.19) 0.00 (2,645.52) 0.00 (2,972.79) 0.00 (3,334.83) 0.00 (3,734.63) 0.00 0.00





7 (65.00) (2,779.47) 0.00 (3,25235) 0.00 (3,79535) 0.00 (4,41635) 0.00 (5,125.42) 0.00 0.00


8 990.00 (2,220.29) 0.00 (2329.68) 0.00 (3,773.79) 0.00 (4,774.12) 0.00 (5,95434) 0.00 0.00


9 1,470.00 (1,094.43) 0.00 (2,060.27) 0.00 (3,266.11) 0.00 (4,760.22) 0.00 (6,59835) 0.00 0.00


10 1,630.00 36533 45.74 (898.36) 0.00 (2,514.71) 0.00 (4,627.83) 0.00 (7,357.31) 0.00 45.74


11 970.00 970.00 121.25 (233.78) 0.00 (2307.21) 0.00 (5,190.57) 0.00 (9,120.41) 0.00 121.25





12 750.00 750.00 93.75 374.55 56.18 (2,295.48) 0.00 (6,173.63) 0.00 (11,758.09) 0.00 14933


13 680.00 680.00 85.00 595.00 89.25 (2,375.07) 0.00 (7,550.83) 0.00 (15,426.46) 0.00 174.25


14 410.00 410.00 5135 358.75 53.81 (2,675.78) 0.00 (9,54830) 0.00 (20,59732) 0.00 105.06


15 220.00 220.00 27.50 192.50 28.88 (3,194.48) 0.00 (12,297.69) 0.00 (27,746.55) 0.00 56.38





Total 5/445.00 424/49 228.12 0.00 0.00 0.00 652.61





 - •

















ANNEX 4





CONFIDENTIALITY AGREEMENT





Offshore Ghana:


THIS AGREEMENT is entered into this [_ ] day of [ _], 20_(the “Effective Date”) by and


between [Contractor Party], a company organized and existing under the laws of [_ J


(hereinafter referred to as the “Disclosing Party”); and [_ _], a company organized and


existing under the laws of [_ J (hereinafter referred to as the “Receiving Party").


The companies named above may collectively be referred to as the “Parties” or individually as “Party”.


WHEREAS in connection with the Possible Transaction (as defined below) by the Receiving Party, the


Disclosing Party is willing, in accordance with the terms and conditions of this Agreement, to disclose


certain Confidential Information (as defined below) relating to the Offshore Central Tano Block offshore of


the Republic Of Ghana (the “Area”) shown in Exhibits A to D attached hereto; and


WHEREAS the Petroleum Agreement covering the said Contract Area requires that the Disclosing Party


require the execution of a confidentiality agreement by Receiving Party prior to the disclosure of


Confidential Information in order to govern such disclosure and that a copy of all such signed


confidentiality agreements be provided to GNPC. -


NOW THEREFORE, in consideration for the mutual undertakings of the Disclosing Party and the


Receiving Party under this Agreement, the Parties agree as^ollows:


1. Definitions


As used in this Agreement the following words and terms shall have the meaning ascribed to them below:


1.1 “Affiliated Company” means any Person which:


a. Controls directly or indirectly a Party, or


b. Is Controlled directly or indirectly by such Party, or


c. Is directly or indirectly controlled by a Person which directly or indirectly Controls such a Party.


1.2 “Confidential Information" means individually or collectively:


a. any and all corporate information concerning the Disclosing Party and any Affiliated Companies


of the Disclosing Party, and


b. any and all data and information obtained as a result of petroleum operations in the Area,


including without limitation well data and seismic information together with all other data and information


obtained by or on behalf of the Disclosing Party in connection with the Disclosing Party’s petroleum


operations in the Area, as well as geological and economic reports, studies, interpretations and analyses


prepared by or on behalf of the Disclosing Party in connection with its petroleum operations in the Area.


Confidential Information includes certain proprietary data and information that is the property of GNPC


(hereinafter "GNPC Information") as described in Exhibit B attached hereto.


Provided that, the following shall not constitute Confidential Information:


c. information that can be reasonably demonstrated by the Receiving Party as being already lawfully


known to Receiving Party as of the Effective Date;





92


d. information that is or becomes available to the public other than through the act or omission of


Receiving Party or of any other Person to whom Confidential Information is disclosed by the Receiving


Party pursuant to Article 4.2 unless public disclosure was made pursuant to Article 4.1;


e. information that is acquired independently from a third party that has a right to disseminate such


information at the time it is acquired by the Receiving Party; or


f. information that can be reasonably demonstrated by the Receiving Party to have been developed


by Receiving Party independently of the Confidential Information received from Disclosing Party.


1.3 “Control” means the ownership directly or indirectly of 50% or more of the voting rights in a


Person or the ability to direct, directly or indirectly, the management or policies of a Person, whether


through the appointment of the directors, the ownership of voting shares or other voting rights, pursuant


to written contract or otherwise. “Controls”, “Controlled by” and other derivatives shall be construed


accordingly.


1.4 “Evaluation Material” means information derived in whole or in part from Confidential


Information, and generated by or on behalf of the Receiving Party. For purposes of this Agreement,


Evaluation Material may include without limitation models, technical, financial and economic reports,


Studies, interpretations, analyses, estimates of reserves, and evaluations and notes of documents or


meetings.


1.5 “GNPC” means Ghana National Petroleum Corporation, a Statutory Corporation established by


Provisional National Defence Council Law 64 of 1984 with its Head Office at Petroleum House, Harbour


Road, Tema.


1.6 “Person” means an individual, joint venture, corporation, company, firm, partnership, limited


partnership, Limited Liability Company, trust, estate, government agency or any other entity, including


unincorporated business associations.


1.7 “Petroleum Agreement” means the Petroleum Agreement dated__, 201_between the


Government of the Republic of Ghana, Ghana National Petroleum Corporation, Amni International


Petroleum Development Ghana Limited in respect of the Central Tano Block, offshore of the Republic of


Ghana (and all amendments and supplements thereto).


1.8 “Possible Transaction” means any possible business arrangement with the Disclosing Party


under which Receiving Party would acquire directly or indirectly all or part of the rights and interests


owned by Disclosing Party and/or Disclosing Party Affiliates in one or more offshore hydrocarbon


exploration, development or production assets located within the Area.


2. Disclosure


In connection with the Possible Transaction, Disclosing Party is willing to disclose to Receiving Party


certain Confidential Information. The Parties agree that the disclosure by the Disclosing Party and the


receipt by the Receiving Party of the Confidential Information is subject to the terms of this Agreement.


3. Undertaking of Confidentiality, Restriction on Use and Damages


3.1 In consideration of the disclosure referred to in Article 2 above, the Receiving Party agrees that


the Confidential Information and the Evaluation Material shall be held and treated strictly in confidence


and may not be disclosed, licensed, traded, published or otherwise revealed in any manner whatsoever,


without the prior written consent of the Disclosing Party except as provided in Article 4 below.


3.2 The Receiving Party shall (and shall procure that any Affiliated Company shall) not use or permit


the use of the Confidential Information and/or the Evaluation Material other than for the purpose of





93


evaluating the Area and determining whether to enter into negotiations in connection with the Possible


Transaction with the Receiving Party.


3.3 The Receiving Party shall (and shall procure that any Person that receives Confidential


Information and/or Evaluation Material pursuant to and in accordance with Article 4.2 hereof shall) keep


any Confidential Information it receives and any copies thereof and any Evaluation Material secure and


confidential (in a manner no less secure and confidential than Receiving Party and such Persons keep


their respective confidential information) and to prevent the Confidential Information and any Evaluation


Material from being disclosed in breach of this Agreement.


3.4 The Receiving Party agrees not to disclose to anyone, except as provided for by Article 4 below,


the fact that the Confidential Information has been made available or that discussions or negotiations are


taking place or have taken place between Disclosing Party and Receiving Party or any Party’s Affiliated


Companies.


3.5 The obligations of the Receiving Party for confidentiality and non-use as set forth in this


Agreement shall commence from receipt of the Confidential Information by the Receiving Party. Further,


the obligation not to disclose shall not be affected by bankruptcy, receivership, assignment, attachment or


seizure procedures, whether initiated by or against the Receiving Party, nor by the rejection of any


agreement between GNPC and Disclosing Party and/or Receiving Party, by a trustee of Receiving Party


in bankruptcy, or by the Receiving Party as a debtor-in-possession or the equivalent of any of the


foregoing.


3.6 The Receiving Party agrees to indemnify Disclosing Party against direct damages (including,


losses, damages, claims, expenses and reasonable attorney’s fees) incurred or suffered as a result of a


breach of this Agreement by Receiving Party or its Affiliated Companies. Such direct damages shall be


the sole exclusive remedy, and all other remedies or damages at law or in equity are waived except such


equitable relief as may be granted under Article 11. In no event shall the Parties be liable to each other


for any other damages, including incidental, consequential, special, or punitive damages, regardless of


negligence or fault.


4. Permitted Disclosure and Obligation of Receiving Party for Permitted Disclosures


The Receiving Party may disclose Confidential Information and/or Evaluation Material without the prior


written consent of the Disclosing Party:


4.1 To the extent the Confidential Information and/or Evaluation Material is required to be disclosed


under applicable law, order, decree, regulation or rule of any governmental entity having jurisdiction over


the Receiving Party, or any regulatory entity, securities commission or stock exchange on which the


securities of the Receiving Party or any of its Affiliated Companies are listed or are to be listed, provided


that the Receiving Party shall make all reasonable efforts to give written notice to the Disclosing Party


prior to such disclosure (including full details of the circumstances of such disclosure); or


4.2 To the following persons on a need to know basis and only for the purpose described in Article


3.2:


4.2.1 employees, officers and directors of the Receiving Party;


4.2.2 employees, officers and directors of an Affiliated Company of the Receiving Party;


4.2.3 any professional consultant or agent retained by the Receiving Party or its Affiliated Company; or


4.2.4 any bank, financial institution or entity financing or proposing to finance the Possible Transaction,


including any professional consultant retained by such bank, financial institution or entity for the purpose


of evaluating the Confidential Information and/or Evaluation Material.





94


 Prior to making any such disclosure to Persons under Articles 4.2.3 and 4.2.4 above, however, the


Receiving Party shall obtain an undertaking of confidentiality, on terms no less stringent than contained in


this Agreement, from each such Person; provided, however, that in the case of outside legal counsel, the


Receiving Party shall only be required to procure that such legal counsel is bound by an obligation of


confidentiality.


4.3 The Receiving Party shall be responsible to the Disclosing Party for any act or omission of the


entities and Persons described in Article 4.2 that would constitute breach of this Agreement as if the


action or omission had been perpetrated by the Receiving Party and shall immediately notify the


Disclosing Party upon becoming aware that Confidential Information has been disclosed in breach of this


Agreement.


5. Ownership of Confidential Information





5.1 Receiving Party acknowledges the Confidential Information, excluding the GNPC Information,


remains the property of the Disclosing Party and the Disclosing Party may use such Confidential


Information for any purpose without obligation to the Receiving Party.





5.2 Receiving Party acknowledges that the GNPC Information is and remains the property of GNPC


and GNPC may use such GNPC Information for any purpose without obligation to the Disclosing Party or


Receiving Party. In addition, Receiving Party acknowledges that in the event that it acquires, directly or


indirectly an interest in the Area, that it may be required tq enter into a data licensing agreement with


GNPC with respect to the GNPC lnformatiQn.prj;.te.FiinS to be agreed between GNPC and the Receiving


Party.


5.3 The Receiving Party shall acquire no proprietary interest'in or title or right to the Confidential


1 Information. ‘i 1 ^ • i


6. Return of Confidential Information


6.1 Disclosing Party may demand the return of the Confidential Information at any time upon giving





written notice to Receiving Party.


6.2 Within thirty (30) days of receipt of the notice referred to in Article 6.1 or upon completion of the


Receiving Party’s review and/or evaluation of the Confidential Information, the Receiving Party shall


retain no copies of the Confidential Information, but shall:


6.2.1 Return all of the original Confidential Information to the Disclosing Party;


6.2.2 Destroy or delete or cause to be destroyed or deleted all copies and reproductions (both written


and electronic) of Confidential Information and any Evaluation Material in its possession and/or in the


possession of persons to whom it was disclosed by the Receiving Party. Confidential Information or


Evaluation Material that is in electronic format (including all electronic back-up files - subject to Art 6.3.1)


i shall also be deleted; and


6.2.3 Provide a written certification, signed by an authorized officer of the Receiving Party, that


Receiving Party has fully complied with its obligations under this Clause 6.2.


6.3 The provisions of Article 6.1 and 6.2 do not apply to the following:





6.3.1 Confidential Information or Evaluation Material that is retained in the computer backup system of


Receiving Party or a Person to whom it was disclosed under Article 4.2 if the Confidential Information or


Evaluation Material will be destroyed in accordance with the regular ongoing records retention process of


Receiving Party or such Person and if the Confidential Information is not used prior to its destruction;


J





95


6.3.2 Confidential Information or Evaluation material that must be retained under applicable law or


regulation, including by stock exchange regulations or by governmental order, decree, regulation or rule;


and


6.3.3 any corporate documents or reports of the Receiving Party which contain data derived from the





Confidential Information or Evaluation Material which were presented to its executive board (or the


equivalent thereof) and are required in accordance with applicable law or its document retention policy to


be retained;





provided that any Confidential Information and/or Evaluation Material that is so retained shall remain


subject to the terms of this Agreement.


7. Remedies





The Receiving Party understands and acknowledges that any breach of the terms of this Agreement may


cause the Disclosing Party irreparable harm, and damages may not be an adequate remedy, and


therefore agrees that the Disclosing Party, an Affiliated Company of Disclosing Party shall have the right


to apply to a court of competent jurisdiction for specific performance and/or an order restraining and


enjoining any such breach or further disclosure and for such other relief as may be deemed appropriate.


Such right is to be in addition to the remedies otherwise available to the Disclosing Party, an Affiliated


Company of Disclosing Party at law or in equity.





8. Term


This Agreement shall terminate on the later of five (5) years from the Effective Date or the date on which





disclosure is no longer restricted by the terms of the Petroleum Agreements currently covering the Area.


.Y ;;


9. Representations and Warranties


i





The Disclosing Party represents and warrants that it has the right and authority to disclose the


Confidential Information to the Receiving Party. However the Disclosing Party, its Affiliated Companies


and their respective principals, officers, directors and employees make no representation or warranties,


express or implied as to the quality, accuracy and completeness of the Confidential Information disclosed


hereunder, and the Receiving Party expressly acknowledges the inherent risk of error in the acquisition,


processing, and interpretation of geological and geophysical data. The Disclosing Party, its Affiliated


Companies and their respective principals, officers, directors and employees shall have no liability


whatsoever with respect to the use of or reliance upon the Confidential Information by the Receiving Party


or its Affiliated Companies or Persons to whom the Receiving Party discloses Confidential Information


under Article 4.2.





10. Assignment





The rights and obligations of the Receiving Party under this Agreement may not be assigned in whole or


in part by the Receiving Party without the prior written consent of the Disclosing Party. Any attempted


assignment by Receiving Party without the prior written approval of Disclosing Party shall be void. Without


limiting the prior provisions of this Article 10, this Agreement shall bind and inure to the benefit of the


Parties and their respective successors and permitted assigns.





11. Governing Law and Dispute Resolution





11.1 This Agreement shall be governed by and interpreted in accordance with the laws of the Republic


of Ghana.


11.2 Any dispute arising out of, relating to, or in connection with this Agreement, including any


question regarding its existence, validity or termination, shall be settled under the Rules of Arbitration of








96


the International Chamber of Commerce by three arbitrators appointed in accordance with said rules.


The place of arbitration shall be London United Kingdom. The proceedings shall be in the English


language.


11.3 The resulting arbitral award shall be final and binding without right of appeal, and judgment upon


such award may be entered by any court having jurisdiction thereof. A dispute shall be deemed to have


arisen when either Party notifies the other Party in writing to that effect. Receiving Party understands and


acknowledges that any breach of the terms of this Agreement may cause the Disclosing Party irreparable


harm for which damages may not be an adequate remedy. Accordingly, the arbitrator may award both


monetary and equitable relief, including injunctive relief and specific performance or other such relief as


may be deemed appropriate. The Disclosing Party may apply to any competent judicial authority for


interim or conservatory relief; an application for such measures or an application for the enforcement of


such measures ordered by the arbitrator shall not be deemed an infringement or waiver of the Agreement


to arbitrate and shall not affect the powers of the arbitrator. Any monetary award issued by the arbitrator


shall be payable in U.S. dollars. Each Party waives any right to damages other than those provided in


Article 3.6.


11.4 Unless the parties expressly agree in writing to the contrary, the parties undertake as a general


principle to keep confidential all awards in their arbitration, together with all materials in the proceedings


created for the purpose of the arbitration and all other documents produced by another party in the


proceedings not otherwise in the public domain - save and to the extent that disclosure may be'required


of a party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in bona fide


legal proceedings before a state court or other judicial authority.


11.5 Any Party that now or hereafter has a right to claim immunity for itself or any of its assets hereby


waives such immunity and agrees not to claim such immunity, in connection with this Agreement,


including any dispute hereunder. This waiver includes immunity from (A) legal process of any sort


whatsoever, (B) jurisdiction or judgment, award, determination, order or decision of any court, arbitrator,


tribunal or Expert, (C) inconvenient forum, and (D) any effort to confirm, enforce, or execute any decision,


settlement, award, judgment, service of process, execution order, attachment (including pre-judgment


attachment) or other remedy that results from an expert determination, arbitration or any judicial or


administrative proceedings commenced pursuant to this Agreement.


12. Non-exclusivity


The disclosure of Confidential Information to Receiving Party is non-exclusive, and Disclosing Party may


disclose the Confidential Information to others at any time pursuant to the terms and conditions of the


Petroleum Agreement.


13. No Rights in the Area


Unless otherwise expressly stated in writing, any prior or future proposals or offers made in the course of


the discussions of the Parties are subject to all necessary management and government approvals and


may be withdrawn by either Party for any reason or for no reason at any time. Nothing contained herein is


intended to confer upon Receiving Party any right whatsoever to the interest of Disclosing Party in the


Area.


14. No Waiver


No waiver by either Party of any one or more breaches of this Agreement by the other Party shall operate


or be construed as a waiver of any future breach or breaches by the same or other Party, whether of like


or of different character. Except as may be expressly provided in this Agreement no Party shall be


deemed to have waived, released or modified any of its rights under this Agreement unless such Party


has expressly stated in writing, that it does waive, release or modify such right.


 15. Modifications





No amendments, changes or modifications to this Agreement shall be valid except if the same are in


writing and signed by a duly authorized representative of each of the Parties hereto.


16. Severability


If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable,


then this Agreement, including all of the remaining terms, will remain in full force and effect as if such


invalid or unenforceable term had never been included.


17. Interpretation


17.1 Headings. The topical headings used in this Agreement are for convenience only and shall not


be construed as having any substantive significance or as indicating that all of the provisions of this


Agreement relating to any topic are to be found in any particular Article.


17.2 Singular and Plural. Reference to the singular includes a reference to the plural and vice versa.


17.3 Include. The words "include" and "including" have an inclusive meaning, are used in an illustrative


sense and not a limiting sense, and are not intended to limit the generality of the description preceding or


following such term.


»


18. Counterpart Execution


This Agreement may be executed in counterparts and each counterpart shall be deemed an original


Agreement for all purposes; provided that neither Party shall be bound to this Agreement until both


parties have executed a counterpart. For purposes of assembling the counterparts into one document,


Disclosing Party is authorized to detach the signature page from one counterpart and, after signature


thereof by Receiving Party, attach each signed signature page to a counterpart.


19. Entirety


This Agreement comprises the full and complete agreement of the Parties hereto with respect to the


disclosure of the Confidential Information and supersedes and cancels all prior communications,


understandings and agreements among the Parties with respect to disclosure of the Confidential


Information to the Receiving Party by the Disclosing Party, whether written or oral, expressed or implied.


20. No Third Party Beneficiaries


20.1 This Agreement is made for the benefit of the Parties, any Affiliated Company of the Disclosing


Party and their respective successors and permitted assigns.


20.2 It is the intention of the Parties that:


(a) any person who is an Affiliated Company of the Disclosing Party; and


(b) GNPC in respect of any GNPC Information,


has a right under the U.K. Contract (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of


any term of this Agreement. Except as aforesaid, a person who is not a party to this Agreement has no


right under such Act to enforce or enjoy the benefit of any term of this Agreement.











98


20.3 Notwithstanding any provisions of this Agreement, the Parties to this Agreement do not require


the consent of any third party to vary this Agreement at any time provided that the consent of GNPC will


be required for any variation which relates to any provision as it applies to GNPC Information.


21. Notices


All notices authorized or required between the Parties by any of the provisions of this Agreement shall be


in writing, in English and delivered in person or by courier service or by facsimile which provides written


confirmation of complete transmission, and properly addressed to such Parties as shown below. Oral


communication and email do not constitute notice for purposes of this Agreement and email addresses


and telephone numbers for the Parties are listed below as a matter of convenience only. A notice given


under any provision of this Agreement shall be deemed delivered only when received by the Party to


whom such notice is directed, and the time for such Party to deliver any notice in response to such


originating notice shall run from the date the originating notice is received. “Received” for purposes of


this Article 21 shall mean actual delivery of the notice to the address or facsimile address of the Party


specified hereunder. Each Party shall have the right to change its address at any time and/or designate


that copies of all such notices be directed to another person, by giving written notice thereof to all other


Parties.


Disclosing Party Name


Address:














Attention:





Facsimile:


Email:





Telephone:








Receiving Party Name





Address:








Attention:





Facsimile:





Email:





Telephone:


IN WITNESS WHEREOF the duly authorized representatives of the Parties have caused this Agreement


to be executed on the date first written above.


DISCLOSING PARTY





[___1





Signature: _


Name: _


Title: _





Date: _











RECEIVING PARTY


[_ J


Signature: _





Name: _


Title: _


Date: _
































Signature page to CONFIDENTIALITY AGREEMENT:


[Central Tano Block, Offshore of the Republic of Ghana]


100