Lion Petroleum shall use the resources of the contract area as productively as possible and ensure that petroleum discovered and produced, or mud or any other fluids or substances do not escape or waste. Lion Petroleum shall also prevent damage to adjacent strata which bear petroleum or water, and prevent water entering through wells into strata bearing petroleum, except where water injection methods are used for secondary recovery operations. Lion Petroleum shall properly confine petroleum in receptacles constructed for that purpose, and not place crude oil in an earthen reservoir except temporarily in an emergency. Lion Petroleum shall also dispose of waste oil, salt water and refuse in accordance with good international petroleum industry practice, avoiding pollution.
Lion Petroleum shall be enabled to use the water in the contract area for the purpose of the petroleum operations but Lion Petroleum shall not unreasonably deprive the users of land, domestic settlement or cattle watering place of the water supply to which they are accustomed.
At the request of the government, Lion Petroleum shall appoint an independent auditor to audit annually the books and accounts. The government may audit within 2 calendar years of the period to which they relate.
The portion of profit oil the government is entitled to receive shall be inclusive of all Lion Petroleum's taxes based on income or profits, but excludes the tax paid by Lion Petroleum on behalf of its sub-contractors.
Partage de production - Eléments de "Profit Oil" (critères pour la modification du partage, - TRI, facteur "r", niveau de production, etc.)
The total crude oil produced from the contract area minus the cost oil shall be considered profit oil and be shared between Lion Petroleum and the government as follows:
First 0-20,000 barrels per day (bpd): government 55%, Lion Petroleum 45%;
20,001-30,000 bpd: government 60%, Lion Petroleum 40%;
30,001-50,000 bpd: government 63%, Lion Petroleum 37%;
50,001-100,000 bpd: government 68%, Lion Petroleum 32%;
Over 100,000 bpd: government 78%, Lion Petroleum 22%.
When the value of crude oil for any calendar quarter exceeds US$ 50 per barrel free on board Mombasa (threshold price) then a second tier amount is payable by Lion Petroleum to the government.
The second tier amount will be calculated in respect of each calendar quarter according to the following formula:
R = CSPO x 26% x (V - threshold price)
Where;
R is the second tier amount in US dollars;
V is the value of crude oil in US dollars for that calendar quarter and expressed in US$ per barrel, provided that V exceeds the threshold price; and
CSPO is Lion Petroleum’s share of profit oil for that calendar quarter in barrels.
Partage de production - Eléments de "Cost Oil" (base de calcul, limites sur le recouvrement des coûts, e.g. comme % des revenues ou de la production, crédit d'investissement, etc.)
Lion Petroleum shall recover a maximum of 55% of all crude oil produced and saved from the contract area during that fiscal year to recover petroleum costs.
The government's will have an 18% participation interest during the exploration phase which will be carried and paid for in full by Lion Petroleum until such time as the government elects to convert its carried participation interest into a full working participation interest. From that point on, the government shall be responsible for all its costs related to the area covered by the development and production plan.
The government’s participation interest shall include:
(a) a right to a vote in proportion to its participating interest on all decisions taken under the participation agreement;
(b) own and separately take and dispose of its share in the petroleum produced and saved to which the contractor is entitled under this contract, corresponding to its participating interest in that development area;
(c) assume its share of costs, expenses and obligations incurred in respect of that development area, from the effective date of its participation;
(d) own a participating interest share in all assets acquired to petroleum operations in or related to the development area;
(e) reimburse Lion Petroleum, without interest, pro-rata to the government participating interest, its share of all costs, expenses and expenditure incurred in respect of the development area from the date the development plan.
Lion Petroleum shall give preference to Kenyan materials and services in its procurement, as long as such materials and services are comparable in price, quality, quantity, performance, and timeliness of delivery with non-Kenyan materials and services. Lion Petroleum will provide the government a tentative schedule of contemplated service and supply contracts with an estimated value exceeding US$ 500,000 per contract. Lion Petroleum shall select its contractors and sub-contractors through competitive bidding or by appropriate sole sourcing in accordance with good international petroleum industry practice for contracts exceeding US$ 500,000.
Lion Petroleum shall train its citizen employees. The training program shall be established in consultation with the government. Lion Petroleum shall contribute to the government training fund a minimum of US$ 60,000 per year during the initial exploration period, US$ 80,000 during the first additional exploration period, US$ 100,000 during the second additional exploration period, and US$ 200,000 per year during the development period.
With written consent from the government, Lion Petroleum shall have the right to construct roads, drill water wells and to place fixtures and installations necessary to conduct the petroleum operations, including but not limited to storage tanks, shipment installations, pipelines, cables or similar lines, located inside or outside the contract area.
Lion Petroleum shall ensure that works and installations erected offshore in Kenya's territorial waters and exclusive economic zone shall be:
(a) constructed, placed, marked, buoyed, equipped and maintained so that there are safe and convenient channels for shipping;
(b) fitted with navigational aids approved by the government;
(c) illuminated between sunset and sunrise in a manner approved by the managing director, Kenya Ports Authority; and
(d) kept in good repair and working order.
The consent of the government for infrastructure may be conditional on the use by other producers of the excess capacity, if any, of those facilities. Where the parties agree that a mutual economic benefit can be achieved by constructing and operating common facilities, Lion Petroleum shall use its best efforts to reach agreement with other producers on the construction and operation of common facilities. Other producers may only use Lion Petroleum facilities where there exists excess capacity and for reasonable compensation, including a reasonable return on investment to Lion Petroleum as determined by an independent expert, and provided the use does not unreasonably interfere with its petroleum operations. The government may, in consultation with Lion Petroleum, consent to the laying of pipelines, cables and similar lines in the contract area by other persons, but those lines shall not unreasonably interfere with the petroleum operations of Lion Petroleum.
During the initial exploration period, Lion Petroleum is committed (i) to spending a minimum of US$ 250,000 to review and reinterpret the existing seismic and gravity data, to conduct geological mapping of structure and analyzing existing reports in respect of Block 2B; (ii) to spending a minimum of US$ 1,500,000 to acquire blockwide, airborne gravity and aeromagnetic data; (iii) to spending a minimum of US$ 4,000,000 to acquire 400 line kilometers of 2D seismic or spend a minimum of US$ 7,000,000 on 25 square kilometers of 3D; (iv) to spending a minimum of US$ 6,000,000 to drill 1 contingent well to a minimum vertical of 3000 meters. During the first additional exploration period, Lion Petroleum is committed (i) to spending a minimum of US$ 7,000,000 to acquire, process, and interpret 25 square kilometers of 3D seismic; (ii) to spending a minimum of US$ 6,000,000 to drill 1 exploratory well to a minimum total vertical depth of 3000 meters. During the second additional exploration period, Lion Petroleum is committed (i) to spending a minimum of US$ 7,000,000 to acquire, process, and interpret 25 square kilometers of 3D seismic; (ii) to spending a minimum of US$ 12,000,000 to drill 2 exploratory wells to a minimum total vertical depth of 3000 meters.
Any dispute in connection with this contract shall be settled amicably. Where such settlement cannot be reached, the dispute shall be referred to arbitration in accordance with the UNCITRAL arbitration rules adopted by the United Nations Commission on International Trade Law. The number of arbitrators shall be three. Each party appoints one arbitrator, and the two appointed arbitrators shall appoint the third one.
When a dispute in connection with this contract cannot be settled amicably, it shall be referred to arbitration in accordance with the UNCITRAL arbitration rules adopted by the United Nations Commission on International Trade Law. The arbitration shall take place in Nairobi, Kenya and shall be in English. The decision of the majority of the arbitrators shall be final and binding on the parties. Any judgment upon the award of the arbitrators shall be enforceable in any court of competent jurisdiction.
The government shall keep all information supplied by Lion Petroleum under this contract confidential, and shall not disclose it other than to a person employed by or on behalf of the government, except with Lion Petroleum’s consent.
The government may use any information supplied, for the purpose of preparing and publishing reports and returns required by law, and for the purpose of preparing and publishing reports and surveys of a general nature. The government may publish any information, which relates to a surrendered area at any time after the surrender, and in any other case, 3 years after the information was received. The government shall not disclose, without the written consent of Lion Petroleum, to any person, other than a person employed by or on behalf of the government, know-how and proprietary technology supplied by Lion Petroleum.