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PETROLEUM PROSPECTING LICENSE

This Deed made the ~ day of ~ .

, 2013 between the Government of the

Republic of Guyana, represented herein by t e M1mster (heremafter referred to as "the M1mster"

or the "Government" as the case may be) of the One Part;

And

Repsol Exploraci6n S.A.(hereinafter refened to as "Repsol"); a Company incorporated under the

Jaw of Spain with its registered office at Mendez Alvaro No 44, 28045 Madrid - Spain and

registered in Guyana under the Companies Act 1991 with its registered address in Guyana

situated at 157 ' C' Waterloo Street, North Cummingsburg, Georgetown, Guyana; (hereinafter

referred to as the "Licensee") of the Other Part;

WHEREAS in accordance with the Petroleum (Exploration and Production) Act 1986

(Act No. 3 of 1986) and the Regulations made thereunder (hereinafter refelTed to as the "Act"

and "Regulations" respectively),the Licensee have by application dated 61h day of December

2012, applied to the Minister for the grant of a Petroleum Prospecting License in respect of the

area constituted by blocks described and identified in the First Schedule hereto and shown on a

map thereto attached;

WHEREAS under authority confelTed by section 10 of the Act the Minister has entered

into an agreement of even date herewith (hereinafter refelTed to as the "Petroleum Agreement")

with the Licensee for the grant to the Licensee of a Petroleum Prospecting License subject to the

tem1s of the Petroleum Agreement.

NOW, THEREFORE, in exercise of the powers confetTed upon the Minister by section 10 and

21 of the Act:

1.



I, the Minister, do hereby grant to the Licensee for a period of four (4) Years

commencing on the Effective Date of the Petroleum Agreement (with two (2) optional

renewal periods ofthree (3) Years each), this Petroleum Prospecting License in respect of

the area constituted by the blocks described in the First Schedule hereto and identified

and shown on the map attached thereto (hereinafter refelTed to as the "prospecting area")

conferring on the Licensee, by subject to the Act and the Regulations made thereunder

and to the conditions specified hereunder or to which the Licensee is otherwise subject

under the Petroleum Agreement, the exclusive right to explore in the prospecting area for

petroleum and the right to carry on such operations and execute such works therein as are

necessary for that purpose.



2.



This Petroleum Prospecting License is granted subject to the following conditions:

A)



In accordance with Article 4.1 of the Petroleum Agreement, during the term of

this Petroleum Prospecting License, the Licensee shall, in or in relation to, the

prospecting area, catTy out the work in Article 4.1(a) and 4.1(b) and 4.1(c) of the

Petroleum Agreement.



Government Of Guyana - Repsol Exploraci6n S.A.

Petroleum Prospecting Licen se



Page 1



The initial period of four (4) Years shall be divided into two (2) phases, phase 1

shall be for two and a half (2.5) Years and phase 2 shall be for one and a half (1.5)

Years.

Phase 1 of the initial period (two and a half (2.5) Years)

(a) During phase 1, the Contractor shall:







Acquire, process and interpret 500 km of 2D seismic within

the Contract Area, and

Acquire, process and interpret 2,000 sq. km of 3D seismic

within the Contract Area



(b) At the end of phase 1, the Contractor shall elect either to relinquish the

entire Contract Area or enter phase 2.

Phase 2 of the initial period (one and a half (1.5) Years)

(a) During phase 2, Contractor shall commence to drill an Exploration

Well to the Cretaceous Formation in accordance to Article 4.2.

(b) At the end of the initial period of four (4) Years, the Contractor shall

elect either to relinquish the eGtire Contract Area except: (i) for any

Discovery Area in respect of which the Minister is informed under

section 30 of the Act, (ii) for any Natural Gas Discovery Area pending

the outcome from market development which is to assist Contractor

with whether to declare commerciality and (iii) for the area contained

in any Petroleum Production Licence, or subject to Article 5 relinquish

twenty percent (20%) of the Contract Area and renew the Petroleum

Prospecting Licence for a further period of up to three (3) Years.



First renewal period of three (3) Years:

The first renewal period of three (3) Years shall be divided into two (2) phases,

each phase consisting of eighteen (18) months. Contractor shall submit a

proposal with the work commitment to be performed during the two phases of the

first renewal period along with the relevant application. At the end of the first

renewal period of three (3) Years, the Contractor shall elect either, to relinquish

the entire Contract Area except: (i) for any Discovery Area in respect of which the

Minister is informed under section 30 of the Act, (ii) for any Natural Gas

Discovery Area pending the outcome from market development which is to assist

Contractor with whether to declare commerciality and, (iii) for the area contained

in any Petroleum Production Licence, or subject to Article 5, relinquish twenty

percent (20%) of the Contract Area and renew the Petroleum Prospecting Licence

for a second period of three (3) Years.



Government Of Guyana - Repsol Exploraci6n S.A.

Petroleum Prospecting License



Page2



Second renewal period of three (3) Years:

The second renewal period of three (3) Years shall be divided into two (2) phases,

each phase consisting of eighteen (18) months. Contractor shall submit a

proposal with the work commitment to be performed during the two phases of the

second renewal period along with the relevant application. At the end of the

second renewal period of three (3) Years, the Contractor shall relinquish the entire

Contract Area except: (i) for any Discovery Area in respect of which the Minister

is informed under section 30 of the Act, (ii) for any Natural Gas Discovery Area

pending the outcome from market development pursuant to section 33(1) of the

Act and as set out in Article 8.4, which is to assist Contractor with whether to

declare commerciality and, (iii) for the area contained in any Petroleum

Production Licence and any other portion of the Contract Area on which the

Minister agrees to permit the Contractor to conduct further exploration activities.

(B)



Within sixty (60) days after the Effective Date of the Petroleum Agreement, the

licensee shall submit to the Minister details of the work programme and budget

(on the basis of the minimum work programme specified in (A) above) to be

undertaken during the remaining portion of the calendar year. Thereafter, for so

long as this Petroleum Prospecting License remains in force, the Licensee shall

submit an annual work programme and budget (on the basis of the minimum work

progranm1e specific: i:: (A) above) not later than c:1e 0) ~ onth prior to the

beginning of the calendar year.



(C)



Subject to the provisions of the Act and the Petroleum Agreement and other

conditions of the Petroleum Prospecting License, the Licensee shall conduct

prospecting operations hereunder in accordance with the annual work programme

and budget submitted pursuant to clause 2(B) herein.



(D)



The Licensee shall, before commencing any prospecting operations in the

prospecting area, furnish to the Minister the name and address of the manager

who at the time of commencement of such prospecting operations shall have

supervision over the prospecting operations to be carried out. Thereafter, any

change in name and/or address of the manager shall be forthwith notified to the

Minister. Any notice which the Minister or any person authorized by the Minister

is required or entitled to serve upon the Licensee shall be sufficiently served if

the same shall be delivered or sent by post to such manager at such address and

served in accordance with Article 33 of the Petroleum Agreement.



(E)



The Licensee shall observe and give effect to the terms of the Petroleum

Agreement.



3.



Where during any period covered by this Petroleum Prospecting License the obligations

of the Licensee under this petroleum prospecting license have been suspended by reason

of force majeure pursuant to the Petroleum Agreement, the period for which this

petroleum prospecting license has been granted shall be extended as specified in Article

24 ofthe Petroleum Agreement.



4.



The Licensee shall pay to the Government during the tenn hereby granted an annual



Government Of Guyana - Repsol Exploraci6n S.A.

Petroleum Prospecting License



Page3



LJ

charge in respect of the prospecting area as specified in Article 10 of the Petroleum

Agreement.



lJ



u

Ll



5.



The Licensee shall be entitled to renew this petroleum prospecting license as set forth in

Ariicle 3.l(b) of the Petroleum Agreement.



6.



Unless the context otherwise requires, tenns and expressions used in this Petroleum

Prospecting License shall have the same meaning as in the Act or the Petroleum

Agreement.



IN WITNESS WHEREOF, I Donald Ramotar, the Minister, do hereby grant this Petroleum

Prospecting License and set my hand and affixed the seal of the Government of the Republic of

Guyana and the Licensee has set his seal, the day, month and year first herein above written.



u



Signed By:

The Minister Responsible For Petroleum

Representing the Government of the Republic

ofGuya



Ll





l

His Excellency, Donald



u



u

u



amotar

President of the Republic of Guyana

(Minister Responsible for Petroleum)



Witness



Signed By:

Repsol Exploraci6~J-A·



v~



Ll



Authorized Company Officer/Director

jD~ ~



A . }-\'} JL-\ Ultf



LJ

REPJOL



LJ



Repsol Exploraci6n S.A. - Guyana



Government Of Guyana- Repsol Exploracion S.A.

Petroleum Prospecting License



Page4



FIRST SCHEDULE

DESCRIPTION OF PROSPECTING AREA

Description of area to be granted under Petroleum Prospecting License pursuant to

Article 3 of the Petroleum Agreement.

The area comprises approximately 6,525 square kilometres described herein consisting

of graticular blocks identified herein and shown on the Block Reference Map attached

Latitude and Longitude Measurements are West and North respectively

POINT No.



LATITUDE



LONGITUDE



1



8° 00 .00' N



2



8° 00 .00' N



3



8° 00.00' N



4

6



r

r

r



sr 2s.oo· w

sr 2o.oo· w

sr 1s.oo·w

sr 15.oo· w

5r 1o.oo· w

sr 1o.oo· w



7



yo


56° 55.00' w



8



yo 35.00' N



56° 55 .00' w



9



yo 35.00' N



56° 45.00' w



10



yo 30 .00' N



56° 45 .00' w



11



yo 30.00' N



56° 35.00' w



12



yo15.00'N



56° 35 .00' w



13



yo15.00'N



56° 40.00' w



5



5o.oo· N

so oo· N

4o.oo· N



14



yo10.00'N



56° 40 .00' w



15



r1o.oo·N



56° 45.00' w



16



6° 55.00' N



56° 45 .00' w



17



6° 55.00' N



56° 50 .00' w



18



6° 45.00' N



56° 50.00' w



19



6° 45.00' N



56° 55.00' w



20



6° 40.00' N



56° 55.00' w



21



6° 40.00' N



5yo 1o.oo· w



22



r



2o.oo· N



5yo 1o.oo· w



23



yo 20.00' N



5yo 15.oo· w



24



yo 30.00' N



5yo 15.oo· w



25



yo 30 00' N



26



yo 35.00' N



27



yo 40 .00' N



28



yo 40.00' N



29



yo 45.00' N



5r 2o.oo· w

5r 2o.oo·w

5r 2o.oo·w

sr 2s.oo· w

5r 25.oo·w



FIRST SCHEDULE (cont'd)

Description of Contract Area

The following five (5) minute by five (5) minute square graticu lar blocks describe the

area . The blocks as described are shown on the Block Reference Map attached



Block Q



8,9,20,21 '32-34,44-46 ,57-60,69-72 ,82-84'

94-96 ,107,108,119,120,131 ' 132,143,144



Block R



49 ,61-63 ,73-77 ,85-89,97-101 ' 109-112 ,121-123,133-135



Block X



11 ' 12,23,24,35 ,36,47,48



BlockY



1-3,13, 14,25,26,37



*denotes part block



I

85K



96K



87K



88K



89K



!IOK



!11K



IlK



931<



94K



96K



9SK



96L



9SL



87L



!17K



98K



99K



100K



101K



102K



103K



1001<



1051<



105K



107K



108K



97L



98L



illl.



100L



101L



10!1K



110K



111K



112K



113K



114K



115K



11eK



117K



118K



119K



120K



109L



110L



111L



112L



121K



1221<



12SK



12CK



125K



128K



127K



128K



129K



130K



131K



132K



121L



122L



123L



1331<



1~4K



135K



13iK



137K



1J8K



1J8K



3 142K 143K



1.. K



133L



1~L



1Q



2Q



3Q



4Q



5Q



SQ



7Q



12Q



1R



1 1 - ~ 141K



91L



i2L



102L



103L



1CML



105L



105L



1dh



108L



113L



114L



115L



11&L



117L



118L



~9L



12CL



124L



125L



12SL



121l



128L



12il



130L



131L



132L



135L



136L



137L



1J8L



1J8L



140L



141L



1<12LJ



143L



1..L



2R



3R



4R



5R



6R



7R



8R



9R



10!!'



11R



12R



13R



UR



15R



16R



17R



18R



19R



20R



21R



23R



24R



25R



25R



27R



28R



29R



30R



31R



32R



33R



&,r-,_-+--t--r_,--+--.~~

~ ~~~-+--r-~-+--+--r~--~-+--~,_~1~-+~oo

0

9Q



gg



13Q



14Q



15Q



16Q



17Q



18Q



19Q



20Q



21Q



25Q



28Q



27Q



28Q



29Q



30Q



31Q



32Q



33Q



100



110



22Q



23Q





~Q



5

3tiQ



41Q



37Q



J8Q



39Q



40Q



41Q



42Q



43Q



UQ



45Q



45Q



~



670



SSQ



690



60Q



.t9R.



SOR



51R



52R



53R



S4R



56R



515R



157R



68R



59R



SOR



T1R



72R



6



71



GQ



500



510



1520



53Q



540



~

560



51Q



52Q



53Q



64Q



56Q



55Q



57Q



58Q



69Q



70Q



T1Q



72Q



51R



52R



53R



64R



56R



6eR



57R



5SR



;9R

'



70R



13Q



74Q



75Q



75Q



77Q



78Q



79Q



80Q



81Q



82Q



83Q



84Q



13R



74R



15R



75R



71R



18R



79R



SORJ



SIR



82R



~--t---t---~~--~---1---1-6-IQ-H~-+---+---+---•--~·--~~~9--+---+---~~~~~~--~--~--~

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25

84R



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850



aGO



870



880



99Q



goo



i1 0



i2Q



iJQ



NO



a60



8SQ



85R



8CSR



87R



88R



UR



tOR



81 R



91.



i3R



e.R



MR



MR.



970



98Q



99Q



100Q



1010



1020



1030



1040



106Q



t06Q



1070



1080



97R



98R



99R



100R



101R



102R



103'1



10..R



106R



10SR



107R



108R



t----+---+----f-+--+---+-+---+--23e-:!!!

n!la----+-IREPS0.1:--+__,-*~---+------t.4'{r. t-----+---+----+-t

.---+---+---+---,___,___~--~--~---+---Br-~----lr---r---r---+---....~1 r-+-.r+---+---,___,___~---·

1000



110Q



1110



1120



1130



nco



11so



1110



1170



118Q



1180



1200



10M



110R



111R



112:1



.---+---+---+---,___,___~--~--~---+--~r-~---;r---r---r-~.....

121Q



122Q



123Q



1240



125Q



126Q



127Q



128Q



129Q



130Q



131Q



132Q



121R



122R



123R



1330



1340



1360



1360



1370



1380



1310



1400



1.c1o



1.a20



1430



14CO



133R



134R



135R



1X



2X



3X



••



5X



5X



7X



8X



9X



10X



11X



12X



1Y



2Y



13X



14X



15X



16X



171(



19X



1iX



20X



21X



22X



23X



24X



13Y



••v



15



~3R



114R



'if..



115R



1~+---~~,_



111R



124R



125R



126R



127R



128R



129R



136R



137R



~L



1JSIR



140R



141R



5YJ



ISY



7Y



8Y



9Y



18Y



18Y



20Y







118R



119R



120R



__,___~---r---r---i

130R



131R



132R



143R



1..R



10Y



11Y



12Y



21Y



22Y



23Y



2-CY



45Y



46Y



41Y



~~~--+--+--+-~--~~--~--~~--~-+--+-~--~~--~--~~--~~--~-+~~

17

16Y



16Y



QY



51'J

Guyana Geoloi!Y and Mines Commission

75Y



87Y



99Y



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l : l,OOO..OOO



o.te: lloWf, 2013

111Y



Kilometers



Petroleum Agreement

Government of Guyana- Repsol Exploraci6n S.A.



I _ ......

I ..,. .....



PETROLEUM AGREEMENT



BETWEEN

THE MINISTER RESPONSIBLE FOR PETROLEUM

REPRESENTING THE

GOVERNMENT OF THE REPUBLIC OF GUYANA

AND

REPSOLEXPLORACION S.A.



TABLE OF CONTENTS

Article 1 - Definitions .................................................................................................................... 3

Article 2- Agreement, the Operator, Liabilities and Indemnities ........................................... 9

Article 3 -Petroleum Prospecting Licence and Guarantee ..................................................... 11

Article 4 - Exploration Programme and Expenditure Obligation .......................................... 12

Article 5 - Relinquishment of Areas .......................................................................................... 15

Article 6- Delegation; Co-operation between Contractor and GGMC ................................. 17

Article 7- Annual Work Programme and Budget ................................................................... 19

Article 8 - Discovery and Development ..................................................................................... 20

Article 9 -Records, Reports and Information; Confidentiality ............................................. 23

Article 10 -Annual Licence Rental Charge .............................................................................. 26

Article 11 - Cost Recovery and Production Sharing................................................................ 27

Article 12 - Associated and Non -Associated Gas ................................................................... 29

Article 13 -Valuation of Crude Oil or Natural Gas ................................................................ 34

Article 14- Disposal of Production ............................................................................................. 37

Article 15 - Taxation and Royalty ............................................................................................. 39

Article 16- Contracts and Assignments .................................................................................... 43

Article 17 - Domesti~ Supply Obligation ............................... - ............................................... 4&

Article 18- Guyana Resources ................................................................................................... 47

Article 19 - Employment and Training ..................................................................................... 48

Article 20 - Rights to Assets and Insurance .............................................................................. 50

Article 21 - Import Duties ........................................................................................................ 555

Article 22 - Foreign Exchange Control ..................................................................................... 56

Article 23 -Accounting and Audits ........................................................................................... 57

Article 24- Force Majeure ......................................................................................................... 58

Article 25 - Assignment .............................................................................................................. 60

Article 26 - Sole Expert Determination and Arbitration ........................................................ 61

Article 27- Applicable Law ....................................................................................................... 63

Article 28 - Protection of the Environment .............................................................................. 64

Article 29- Termination and Cancellation ............................................................................... 65

Article 30 - Effective Date .......................................................................................................... 66

Article 31 -Miscellaneous .......................................................................................................... 67

Article 32 - Stability of Agreement ............................................................................................ 68

Article 33 - Notices ...................................................................................................................... 69



Allliex A- Description of Contract Area

A1mex B - Map of Contract Area

Allliex C - Accounting Procedure

Allliex D - Pre-Approved and Certified Petroleum Operations Items

Petroleum Prospecting License



PETROLEUM AGREEMENT

This Agreement is made on the V-i~ day of ~t~.t , 2013 , between the Government of the

Republic of Guyana (the "Govenunent"), r~ted herein by the Minister Responsible for

Petroleum (hereinafter referred to as the "Minister") of the One Part



Vi



And of the Other Pari:

Repsol Exploraci6n S.A. (hereinafter referred to as "Repsol"); a Company incorporated under the

law of Spain with its registered office at Mendez Alvaro No 44, 28045 Madrid - Spain and

registered in Guyana under the Companies Act 1991 with its registered address in Guyana situated

at 157 ' C' Waterloo Street, North Cummingsburg, Georgetown, Guyana;

Repsol Exploraci6n S.A. shall be referred to as "Licensee" and/or "Contractor". The Licensee and

the Minister shall individually be referred to as Party and collectively as Parties.



WHEREAS



(1 )



By virtue of the Petroleum (P:·Jduc: ::::-::~ Act, Cap. 65:05 , Petroleum e)::st:::1g in its natural

condition in strata in Guyana is vested in the State; the Petroleum (Exploration and

P1oduction) Act, No. 3 of 1986 (hereinafter referred to as the "Act" and the Petroleum

(Exploration and Production) Regulations 1986 (hereinafter referred to as the

"Regulations" make provision with respect to prospecting for and production of Petroleum,

and for matters connected therewith;



(2)



The Guyana Geology and Mines Commission (hereinafter referred to as "GGMC") a body

corporate established under the Guyana Geology and Mines Commission Act (No. 9 of

1979) has been seized with the responsibility, inter alia, of planning and securing the



development, exploitation and management of Petroleum, as defined in the Act, in Guyana

so as to ensure for the people of Guyana the maximum benefits therefrom and for doing

such things in relation thereto ;

(3)



With respect to prospecting for and producing Petroleum and for matters connected

therewith the Act and Regulations, subject to certain limitations and conditions contained

therein authorize the Minister to grant Petroleum Prospecting Licences and Petroleum

Production Licences;



(4)



Section 10 of the Act authorizes the Minister to enter into an agreement with any person

with respect to, inter alia, the grant of a Licence, the conditions to be included in a Licence,

the procedure to be followed by the Minister while exercising any discretion conferred

upon him by or under the Act and the manner in which the discretion shall be exercised

and any matter incidental to or connected therewith;



Page I

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A .



(5)



Licensee has submitted to the Minister a proposal ("'the proposal") for a production sharing

agreement in respect of a certain offshore area of Guyana, on terms and conditions

specified in the proposal;



(6)



GGMC has been authorized by the Minister to negotiate this Agreement subject to the

provisions of the Act and Regulations and to the final written approval of the Minister of

its contents and execution thereof and to assist in the administration and implementation

thereof;



(7)



Licensee will have, or will acquire, the financial resources, the managerial, technical and

industrial competence and the experience to carry out Petroleum Operations and will

provide a bond, in accordance with section 13 of the Act; or a parent company guarantee

pursuant to Article 3.2 hereof;



(8)



Pursuant to the aforesaid recitals, Licensee made an application to the Minister for a

Petroleum Prospecting Licence in accordance with regulation 13 of the Regulations (as

hereinafter defined). over the area described in Annex A and shown on the map attached as

Annex B, subject to the terms and conditions herein set forth and subject to the provisions

of the Act and Regulations and Licensee has agreed by execution of this Agreement to

accept the said Licence on the said tem1s and conditions and provisions.



NOW, THEREFORE, in consideration of the premises and covenants and conditions herein

contained, IT IS HEREBY AGREED between the Parties as follow::;:



Page 2

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 1 - Definitions

1. 1



In this Agreement, unless the context otherwise requires:

"Accounting Procedure" means the procedure set out in Annex C;

"Act" means the Petroleum (Exploration and Production) Act No.3 of 1986;

"Affiliated Company" in relation to each party comprising the Contractor means, a

company or corporation;

(i)



which is, directly or indirectly controlled by each party comprising the Contractor;

or



(ii)



which directly or indirectly, controls each party comprising the Contractor; or



(iii)



which is, directly or indirectly, controlled by a company or corporation that also,

directly or indirectly, controls each party comprising the Contractor. For the

purpose of this definition "contror' means the right to exercise a vote of fifty per

cent (50%) or more of all the "01i11g shares;



"Agreed Interest Rate" means interest comp1,1ted on a monthly basis at the rate per annum

equal to the average London Interbank Offer Rate (LIBOR) for six (6) months United

States dollar deposits, as published by the Wall Street Journal, on the first Business Day of

such month being calculated, plus three (3) percentage points;

"Agreement" means this Petroleum Agreement and the Annexes hereto attached and made

a part hereof;

"Appraisal Programme" means a programme carried out following a discovery of

Petroleum in the Contract Area for the purpose of delineating the Petroleum Reservoir, as

defined in the Act, to which that discovery relates in terms of thickness and lateral extent

and estimating the quantity of recoverable Petroleum therein prior to declaration of

commerciality;

"Appraisal Well" means a well drilled for the purpose of an Appraisal Programme;

"Article" means an Article of this Agreement;

"Associated Gas" means all Natural Gas produced from any Field of which the production

of Crude Oil is more than fifty percent (50%) of the total barrels of oil equivalents

("BOES") expected to be produced in said Field as determined in a Development Plan and

includes the gas-cap which overlies and is in contact with Crude Oil. For purpose of BOES

calculation, a conversion factor of 5658 standard cubic feet per barrel (scf/bbl) shall be

used;

Page 3

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A .



"Barrel" means a quantity cons1stmg of forty-two (42) United States gallons, liquid

measure, measured at standard conditions of atmospheric pressure and temperature (14.7

lbs/sq. inch absolute or 1 Kg/sq. em. absolute and corrected to a temperature of sixty (60)

degrees Fahrenheit or fifteen (15) degrees Celsius);

"Business Day'· means a day on which the banks in Georgetown, Guyana are customarily

open for business.

"Calendar Month" or "Month" means any of the twelve months of the Calendar Year;

"Calendar Qumier" or "Quarter" means a period of three (3) consecutive months beginning

on the first day of January, April, July or October;

"Calendar Year" or "Year" means a period of twelve (12) consecutive Months

commencing on January 1 and ending on the succeeding December 31 provided however

that a Year of a te1m of a Licence shall be the period specified in section 2 (2) (b) of the

Act;

"Commercial Discovery" means any discovery, which the Contractor in its sole judgment,

considers economic to develop and produce pursuant to the terms of the Agreement;

"Contract Area" means:

(i)

on the Effective lJate the area described in Annex A and shown on the map in

Annex B and the subject of the Petroleum Prospecting Licence granted to the

Contractor pursuant to Article 3; and

(ii)



thereafter any areas which at any particular time are subject to the Petroleum

Prospecting Licence or Petroleum Production Licence(s) granted to the Contractor

under Article 8;



"Contract Costs" means Exploration Costs, Development Costs, Operating Costs, Service

Costs, General and Administrative Costs, A1mual Overhead Charge and Pre-Contract

Costs;

"Contractor" means Repsol Exploraci6n S.A. and includes its successors and pennitted

ass1gnees;

"Cost Petroleum" has the meaning assigned in Article 1 1;

"Crude Oil" or "Oil" means crude mineral oil, asphalt, ozokerite, distillates, condensates

and all kinds of hydrocarbons and bitumens, both in solid and liquid forms, at standard

conditions of temperature and pressure (60 degrees Fahrenheit or 15 degrees Celsius and

14.7 lbs/sq. in or 1 Kg/sq. em);

"Delivery Point" means in the case of Crude Oil the inlet flange of the lifting tankship; in

Page 4

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



the case of Natural Gas shall be the sales point and the point at which custody transfers

from seller to buyer; or such other economically viable point which shall be agreed to by

the Contractor and the Minister;

"Development Costs" means the expenditure so categorized in Annex C;

"Development Plan .. means the plan referred to in Article 8.4;

"Development Well" means any well drilled as part of a Development Plan;

"Discovery Area" means an area which is part of a Prospecting Area consisting of a

Discovery Block or Blocks in respect of which the Minister has been informed under

section 30 of the Act;

"Discovery Block" means that as defined in the Act;

"Discovery of Petroleum" means that as defined in the Act:

"Effective Date" means the date on which this Agreement comes into force pursuant to

Article 30;

"Expatriate Employee" means any employee (other than a Guyanese citizen) of an y party

comprislng the Contractor, the Operator, any Affiliated Company and/or Sub-Con~ractors ,

not permanently resident in Guyana who is engaged under a contract of service for the

purpose of Petroleum Operations;

"Exploration Costs" means those expenditures so categorized in Annex C;

"Exploration Period" means the initial period, and/or the first renewal period and/or the

second renewal period referred to in Article 4 . 1, as the case may be;



"Exploration Well" means a well drilled, which is not a Development Well , with the

objective of exploring for Petroleum on a geological entity (be it of structural,

stratigraphic, facies or pressure nature) to a depth or stratigraphic level specified in the

work programme for the exploration work programme;

"Field" means an area within the Contract Area consisting of a Petroleum Reservoir or

multiple Petroleum Reservoirs all grouped on, or related to, the same individual geological

structural features or stratigraphic conditions from which Petroleum may be produced

commercially;

"Gas Field" means a Field producing predominantly Non-Associated Gas;

"General and Administrative Costs" and "Annual Overhead Charge" means the

expenditures so categorised in Annex C;

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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



"Geologic Basement" means any igneous or metamorphic rock or any stratum in and

below which the geological structure or physical characteristics of the rock sequence do

not have the properties necessary for the accumulation of petroleum in commercial ·

quantities and which reflects the maximum depth at which any such accumulation can be

reasonably expected;

"Government" means the Government of the Republic of Guyana and its ministries and

agenctes;

"GGMC" means the Guyana Geology and Mines Commission, established under section 3

of the Guyana Geology and Mines Commission Act 1979;

"GGMC Act" means the Guyana Geology and Mines Commission Act 1979;

"Licence" means the Petroleum Prospecting Licence and/or the Petroleum Production

Licence(s) or both as the context requires;

"Lifting Entitlement" means the quantity of Crude Oil to which a Party shall be entitled in

any given period pursuant to Article 11;

"Minister" means the Minister assigned responsibility for Petroleum or where there is no

such Minister, the President;

"Natural Gas" or "Gas" means all hydrocarbons which at standard conditions of

temperature and pressure (60 degrees Fahrenheit or 15 degrees Celsius and 14.7 lbs/sq. in

or 1 Kg/sq. em) is in a gaseous state including but not limited to wet mineral gas, dry

mineral gas and casing head gas, all substances contained therein including helium, which

are produced from an oil or gas well, in their natural state or residue gas remaining after

extraction of NGLs (as defined herein) from wet gas. For purposes of this Agreement,

Natural Gas shall also include liquefiable hydrocarbons obtained from Natural Gas by

condensation or extraction, including ethane, propane, butane, pentanes and heaviers

("Natural Gas Liquids" or "NGLs"). Liquefied methane shall not be considered an NGL,

but rather Natural Gas in the liquid state;

"Non-Associated Gas" means Natural Gas or Gas other than Associated Gas;

"Non-Resident Sub-Contractor" shall mean a Sub-Contractor the control and management

of whose business are exercised outside Guyana;

"Oil Field" means a Field producing predominantly Crude Oil;

"Operating Costs" means those costs so categorized in Annex C;

"Operator" shall have the meaning assigned to it in Article 2.2(a);

"Parties" means the Government and Licensee and includes their successors and permitted

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Government of Guyana - Repsol Exploraci6n S.A.



assignees, and a Party shall mean any of the Parties;

"Petroleum'· shall have the meaning assigned in the Act:

"Petroleum Operations" means Prospecting Operations and/or Production Operations. as

defined in the Act;

"Petroleum Prospecting Licence" means a Licence issued by the Government under the

Act and the Regulations to Licensee for carrying out Prospecting Operations and set forth

in Fonn C of the schedule as specified in the Regulations;

"Petroleum Production Licence" means a Licence to be issued by the Government under

the Act and the Regulations to Licensee for carrying out Production Operations and set

forth in Form D of the schedule as specified in the Regulations;

"Petroleum Reservoir" shall have the meaning assigned in the Act;

"Pre-Contract Cost" means the costs stated in Section 3.1.k of the Accounting Procedure;

"Profit Petroleum" has the meaning assigned in Article 11 ;

"Prospecting Area" has the meaning assigned in the Act;

"Recoverable Contract Costs" has the meaning assigned in Article 11 ;

"Regulations" means the Petroleum (Exploration and Production) Regulations 1986;

"Service Costs" means the expenditures so categorized in Annex C;

" Sub-Contractor" means any company or entity which provides services to the



Contractor in connection with Petroleum Operations;

"Third Pruty Sales" means third party arms length sales made by (i) Contractor or (ii) each

party comprising Contractor, or (iii) Affiliated Company of each party comprising

Contractor to a third party for an arms-length price which is disclosed to the Minister;

1.2



The words and terms used in this Agreement but not defined herein shall, if meanings have

been assigned to them under section 2 of the Act, have, for the purposes of this Agreement,

the same meanings.



1.3



The provision of this Agreement relating to the Petroleum Prospecting Licence shall be

read as part of the provisions of such Licence.



1.4



The provision of this Agreement relating to any Petroleum Production Licence shall be

read as part of the provisions of such Licence.

Page 7



Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



1.5



The prov1s1ons in the Act and Regulations dealing with rights and obligations of the

Contractor shall be read as part of but not nullify the provisions of this Agreement and any

Licence issued to the Contractor.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 2 - Agreement, the Operator, Liabilities and Indemnities

2.1



Agreement

This Agreement constitutes an agreement made under section 10 of the Act consistent with

the Act and the Regulations, and is a production sharing agreement, the objective of which

is the exploration for development and production of Petroleum in the Contract Area by

the Contractor subject to the terms hereof and the provisions of the Act and Regulations

under which the Contractor shall have an economic interest in the development of

Petroleum from the Contract Area.



2.2



2.3



The Operator

(a)



Repsol shall be the Operator charged with conducting the day to day activities of

the Contractor under this Agreement. No transfer of operatorship to another party

not comprising the Contractor shall take effect unless it has been approved by the

Minister which approval shall not be unreasonably withheld. The Minister shall be

notified of any change of operatorship to another party comprising the Contractor

in writing.



(b)



The Contractor shall provide the Minister with a memorandum summarizing the

operating arrangements between the Operator and the Contractor, including ar~y

party comprising the Contractor for the conduct of Petroleum Operations which

will include, inter alia, a provision whereby the Operator agrees to conduct the

Petroleum Operations in accordance with this Agreement, the Licence and any

applicable laws of Guyana.



Liability

The duties, obligations and liabilities of the parties comprising the Contractor under this

Agreement and under any Licence issued pursuant hereto shall be joint and several.



2.4



Indenmity

The Contractor shall, at all times, keep Government indenmified against all actions, claims

and the demands that may be brought or made against Government by a third party by

reason of negligence (any act or omission or reckless disregard of harmful consequences

which results in damage to a third party) by the Contractor or the Operator in the exercise

or purported exercise of the rights of the Contractor under the Act or the Licence, provided

however, that nothing in this Article shall require the Contractor to give the said indenmity

for any claim or demand in respect of Petroleum taken by the Minister pursuant to Article

11 after title has passed to the Minister at the Delivery Point or in respect of assets

acquired by the Minister pursuant to Article 20 from and after the date of acquisition.

Liability by the Contractor to the Government for damages in respect of Petroleum

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Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



Operations under this Agreement is limited to insurance required in accordance with

Article 20.2 (a), provided however, that the Contractor shall not be liable to the

Government for indirect, punitive or consequential damages, including but not limited to,

production or loss of profits.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 3 - Petroleum Prospecting Licence and Guarantee

3.1



3.2



Petroleum Prospecting Licence

(a)



On the Effective Date of this Agreement, the Minister, in accordance with the Act,

the Regulations and the terms of this Agreement, shall grant to the Contractor the

Petroleum Prospecting Licence for an initial period of four (4) Years from the

Effective Date over the area described in Annex A and shown on the map attached

as Annex B hereto.



(b)



Subject to Article 4 and the other terms of this Agreement, such Petroleum

Prospecting Licence may be renewed but not more than twice at the election of the

Contractor for consecutive periods of up to three (3) Years each in accordance with

the provisions of the Act and the Regulations.



Guarantee

Each party compnsmg Contractor shall on or before the sixtieth (60th) day from the

Effective Date during year one (1) of phase one (1) ofthe initial period in accordance with

Article 1.1 (<:.~U~ ~ereunder, and thereafter, no later than ninety (90) days a:f':er e--~

commencement of all subsequent work commitment periods as specified in Article 4.1,

provide a bond, parent company guarantee or other brm of guarantee acceptable to the

Minister in proportion to each participating interest up to the amount of ten (1 0%) of the

budget submitted by the Contractor, pursuant to Article 7.1, for each specific work

commitment period. Notwithstanding the foregoing, if the Contractor exceeds its

minimum work commitment in any phase specified in Article 4.1, the completion of such

work commitment shall constitute a waiver of such proportion of the requirement of the

guarantee by the Minister which is the equivalent of the excess work previously completed

but which is applicable to the subsequent work commitment phase.

If the guarantees are parent company guarantees they shall be in lieu of and satisfy any

obligation to provide a guarantee and/or bond pursuant to the Act, Regulations or this

Agreement on the part or on behalf of the Contractor.



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Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



Article 4 - Exploration Programme and Expenditure Obligation

4.1



Exploration Programme

Subject to the provisions of this Agreement, in discharge of its obligations to carry out

Prospecting Operations in the Contract Area, the Contractor shall carry out the minimum

work described herein, during the periods into which Prospecting Operations are divided

hereunder:

(a)



The initial period of four (4) Years shall be divided into two (2) phases, phase 1

shall be for two and a half (2.5) Years and phase 2 shall be for one and a half (1.5)

Years.

(i) Phase 1 ofthe initial period (two and a half(2.5) Years)

(aa) During phase 1, the Contractor shall:

• Acquire, process and interpret 500 km of 2D seismic within

the Contract Area, and

• Acquire, process and interpret 2,000 sq. km of 3D seiSmic

witi..in ~he Contract Area

(bb) At the end of pha~e 1, the Contractor shall elect either to relinquish the

entire Contract Area or enter phase 2.

(ii) Phase 2 ofthe initial period (one and a half(l.5) Years)

(aa) During phase 2, Contractor shall commence to drill an Exploration

Well to the Cretaceous Fom1ation in accordance to Article 4.2.

(bb) At the end of the initial period of four (4) Years, the Contractor shall

elect either to relinquish the entire Contract Area except: (i) for any

Discovery Area in respect of which the Minister is informed under

section 30 of the Act, (ii) for any Natural Gas Discovery Area pending

the outcome from market development which is to assist Contractor

with whether to declare commerciality and (iii) for the area contained

in any Petroleum Production Licence, or subject to Article 5

relinquish twenty percent (20%) of the Contract Area and renew the

Petroleum Prospecting Licence for a further period of up to three (3)

Years.



(b)



First renewal period ofthree (3) Years:

The first renewal period of three (3) Years shall be divided into two (2) phases,

each phase consisting of eighteen (18) months. Contractor shall submit a proposal

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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



with the work commitment to be perfonned during the two phases of the first

renewal period along with the relevant application. At the end of the first renewal

period of three (3) Years, the Contractor shall elect either. to relinquish the entire

Contract Area except: (i) for any Discovery Area in respect of which the Minister is

informed under section 30 of the Act, (ii) for any Natural Gas Discovery Area

pending the outcome from market development which is to assist Contractor with

whether to declare commerciality and, (iii) for the area contained in any Petroleum

Production Licence, or subject to Article 5, relinquish twenty percent (20%) of the

Contract Area and renew the Petroleum Prospecting Licence for a second period of

three (3) Years.

(c)



Second renewal period of three (3) Years:

The second renewal period of three (3) Years shall be divided into two (2) phases,

each phase consisting of eighteen (18) months. Contractor shall submit a proposal

with the work commitment to be performed during the two phases of the second

renewal period along with the relevant application. At the end of the second

renewal period of three (3) Years, the Contractor shall relinquish the entire

Contract Area except: (i) for any Discovery Area in respect of which the Minister is

informed under section 30 of the Act, (ii) for any Natural Gas Discovery Area

pendinf, th~ outcome from market deve!o~mer:: ~:l::suant to section 33(1) ofthe Ac:

and as set out in Article 8.4, which is to assist Contractor with whether to declare

commerciality and, (iii) for the area contained in any Petroleum Production Licence

and any other portion of the Contract Area on which the Minister agrees to permit

the Contractor to conduct further exploration activities.



4.2



(d)



The minimum work commitment for a given phase or period referred to in Article

4.l(a), (b) and (c) may be undertaken in an earlier phase or period in whole or in

part and in such a case the work commitment with respect to the subsequent period

shall be deemed to be satisfied accordingly in whole or in part as the case may be.

Contractor may conduct additional work beyond the minimum work commitment

in accordance with the terms and conditions of this Agreement, which shall be

subject to Cost Recovery.



(e)



Subject to Article 24 herein and section 43 of the Act, the Minister may extend any

Exploration Period pursuant to a showing of good cause by the Contractor.



No Exploration Well drilled by the Contractor shall be treated as discharging any

obligation of the Contractor to drill such Exploration Well unless either it has been drilled

to the depth or formation agreed with the Minister and specified in the annual work

programme, or before reaching such depth or formation, one or more of the following

occur:

(a)



the Contractor has expended on such Exploration Well and any substitute well

drilled pursuant to Article 4.2 (d) below the amount for such work commitment in

Page 13



Petroleum Agreement

Govemment of Guyan a - Repsol Exploraci6n S.A.



-



the budget submitted by the Contractor and approved by the Minister as specified

in Article 7.1; or



4.3



(b)



the Geologic Basement is encountered; or



(c)



a Discovery is made and the Minister is iniom1ed thereof; or



(d)



insurmountable technical problems are encountered which, in accordance with

good oilfield practice, make further drilling impractical, provided that if the said

Exploration Well is abandoned owing to the said problems before reaching the

Geologic Basement, the Contractor shall drill a substitute well in the Contract Area

to the same minimum depth as aforesaid unless otherwise agreed with the Minister

or until the amount in Article 4.2 (a) less any amounts actually expended on the

abandoned well is reached or one of the criteria listed at Articles 4.2 (b) to (d) is

satisfied.



Expenditure Obligation:

The sum actually spent in fulfilment of the work obligation in a specific phase or period

shall be deemed to have satisfied the Contractor's minimum expenditure obligation for that

· pbase or period. For the avoi::h:.:Jc~ c: c cubt, in the event the Contractor ba:: performed its

work obligation(s) for an amount less than the amount specified in an annual work

progran1111e and budget submitted under Article 7, Contractor shall be deeued to have

fulfilled its expenditure obligation for that phase or period.



Page 14

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 5 - Relinqu ishment of Areas

5.1



If prior to the end of the initial period of the Petroleum Prospecting Licence issued to the

Contractor under Article 3.1 , an application is made by the Contractor for renewal of the

Licence under section 24 (1) of the Act, the Contractor shall relinquish at the end of the

initial period an area equal to at least twenty percent (20%) of the original Contract Area

less the exclusions provided for in Article 5.



5.2



If prior to the end of the first renewal period of the Petroleum Prospecting Licence an

application is made by the Contractor for a second renewal of the Licence under section

24(1) of the Act, the Contractor shall then relinquish at the end of this first renewal period

an area equal to at least twenty percent (20%) of the original Contract Area less the

exclusions provided for in Articles 5.3.



5.3



The areas to be relinquished pursuant to Articles 5.1 and 5.2 shall:



5.4



(a)



comprise Blocks, as defined in the Act;



(b)



exclude any Discovery Area together with a reasonable area of protective acreage

surroun_ding the Discovery Area; and any area under an Appraisal Programme

pursuant to Article 8.4;



(c)



exclude any Discovery Area of Natural Gas in a market development phase;



(d)



exclude any Production Area;



(e)



be selected by Contractor so that:

(i)



the area relinquished shall comprise one (1) discrete area, having regard to

any representations made by the Minister with respect to location, shape

and size;



(ii)



the blocks to be retained for and during the first renewal period pursuant to

Articles 5.1 and 5.2 shall constitute one ( 1) discrete area unless otherwise

agreed to by the Minister.



In the event that an area or areas cannot be identified for relinquishment in accordance

with this Article without including in such area or areas in whole or in part a subsisting

Discovery Area or Production Area or the Minister is of the opinion that the area(s) to be

relinquished will not enable licensing separately or jointly with contiguous unlicensed

areas then the Minister and Contractor shall consult together with a view to agreeing on the

area(s) to be relinquished in the light of the circumstances then prevailing. If after sixty

(60) days from receiving notice of the Contractor' s proposed relinquishments the Parties

cannot agree on a proposed relinquishment, the Parties shall refer the matter to a sole

expert pursuant to Article 26.

Page 15



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A .



5.5



For the purpose of this Article, a Discovery Area shall not include any Discovery Block

which relates to a Discovery in respect of which the Contractor has notified the Minister

that the Discovery is not of potential commercial interest pursuant to section 31 (1) of the

Act, unless such Discovery Block forms a part (and only to that extent) of another

subsisting Discovery Area.



5.6



If a Petroleum Prospecting Licence ceases to have effect with respect to Discovery Blocks

pursuant to section 32 (1) of the Act, such reduction in size of the Contract Area shall be

treated as an advance relinquishment under this Article and shall reduce the area next

required to be relinquished accordingly.



5. 7



Without prejudice to the obligations undertaken in Article 4, the Contractor may at any

time during the period of the Petroleum Prospecting Licence, on giving the Minister no

less than three (3) months notice in writing of its intention to do so, relinquish any Block

or Blocks in the Contract Area pursuant to section 28 of the Act and in accordance with

Articles 5.4 and 5.5. Any such relinquishment shall count towards any subsequent

mandatory relinquishments required under Articles 5.1 , 5.2 or 5.3 above as the case may

be.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 6- Delegation ; Co-operation between Contracto r and GGMC

6.1



The Minister may, subject to the provisions of the Act, or any other law delegate any

person to exercise and perfom1 any of his functions under this Agreement and anything

done by the delegate of the Minister in pursuance of the delegation shall have the same

validity and effect as it would have if done by the Minister.



6.2



The Minister also hereby authorizes GGMC to perfom1, inter alia the following functions:

(a)



to monitor the Petroleum Operations carried out by the Contractor;



(b)



to review any proposed exploration work programme and budgets presented by

Contractor under Article 7 and any Appraisal Programme presented by the

Contractor under Article 8;



(c)



to review any Development Plan submitted by the Contractor in connection with an

application for a Petroleum Production Licence pursuant to section 34 of the Act;



(d)



to ensure the maintenance and availability for inspection of operating records and

reports for Pe::·okum Operations in accordance ·:;ith ~~;.i :::: _\greement;



(e)



to ensure the accounting procedures specified in Annex C of this Agreement are

followed ;



(f)



to ensure compliance with the provisions of this Agreement, Petroleum Act and

Regulations.



6.3



The Contractor and the delegate of the Minister shall co-operate in good faith in the

exercise of the Minister' s functions delegated pursuant to this Article and the Contractor

shall keep the delegate of the Minister advised of all activities taking place during the

course of Petroleum Operations and shall provide the delegate of the Minister with all

available information relating to Petroleum Operations as the Minister or the delegate of

the Minister may reasonably require. Towards this end the delegate of the Minister and the

Contractor shall meet at regular intervals, but at least once every six (6) months, to review

the progress and results of the Petroleum Operations and to discuss the work programme

and other activities to be undertaken in the ensuing months.



6.4



With respect to the matters to be reviewed pursuant to Article 6.2, should the delegate of

the Minister wish to make any specific proposals or revisions thereto, the delegate of the

Minister shall so notify the Contractor specifying its reasons therefor; within reasonable

time thereafter the Contractor and the delegate of the Minister shall meet and endeavour to

agree on the proposals or revisions. The Contractor shall consider and take into account the

proposals of the delegate of the Minister and shall attempt in good faith to reach agreement

on such proposals. If the Contractor and the delegate of the Minister fail to agree within

Page 17



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



sixty (60) days of submission by the Contractor, the exploration work programme and

budget (including as appropriate any minimum work programme to be undertaken pursuant

to Article 4) submitted pursuant to Article 7 and the Appraisal Programme (except in the

case of Gas to which the provision of Atiicle 12 shall apply) submitted pursuant to Atiicle

8 (revised in accordance with any amendments or additions thereto agreed by the delegate

of the Minister and the Contractor) shall be deemed adopted.

6.5



Nothing herein above provided shall preclude the right of the Minister to delegate any

additional function to the delegate of the Minister or subject to Article 6.1 to delegate from

time to time any functions, including those herein contained, to any other agency of

Government. A delegation shall not result in the increase of the obligations or liabilities of

the Contractor and notice of any delegation shall be given promptly to the Contractor.



6.6



Any approvals required by the Minister or delegates of the Minister shall not be

unreasonably withheld. If the Contractor requests required approval from the Minister or

delegates of the Minister, such approval shall be deemed as granted if no response is

provided within sixty (60) days ofthe request.



6.7



The Minister and the delegate of the Minister shall, upon request, either provide to the

Contractor or assist the Contractor in obtaining the assistance required for Contractor to

fulCl r;::quirements of the contract inc~uding !:::: not limited to the following :

(a)



approvals issued by Government agencies or local government institutions 'Nhich

are required to conduct hydrocarbon operations, including approvals necessary to

import goods and services free from duties and taxes;



(b)



approvals for easements and right-of-way to enable Contractors to conduct

operations;



(c)



approvals for security for field operations and personnel;



(d)



permission for entry and exit visas and working pennits for Contractor's

employees, subcontractors and their dependents;



(e)



supply reports, analyses, samples, geological, geophysical and production data

necessary to Contractor from areas inside and outside the Contract Area;



(f)



approvals to export hydrocarbons, and use essential infrastructure necessary for the

economic export of hydrocarbons at normal commercial terms.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 7 -Annual Work Programme and Budget

7.1



Within sixty (60) days after the Effective Date, the Contractor shall prepare and submit to

the Minister in detail a work programme and budget, setting forth the Petroleum

Operations. which the Contractor proposes to cany out (including, as appropriate, any

minimum work obligations to be undertaken pursuant to Article 4) during the remaining

portion of the Calendar Year. In subsequent years no less than one (1) month before the

beginning of the Calendar Year, the Contractor shall prepare and submit to the Minister a

work programme and budget setting f011h Petroleum Operations which the Contractor

proposes to conduct during the upcoming Calendar Year.



7.2



The Contractor may, for good cause, amend the details of any work programme or budget

submitted to the Minister pursuant to Article 7.1 provided that:

(a)



notice of the details ofthe reasons for the amendments is given to the Minister;



(b)



such amendments shall not have the effect of reducing the minimum work

obligations undertaken under Article 4 without the prior consent in writing of the

Minister;



(c)



any proposed amendment shall be subject to review pursuant to Article 6.



Page 19

PetToleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 8 - Discovery and Development

8.1



Where, pursuant to section 30 of the Act, notice has been given to the Minister of a

Discovery in the Contract Area, the Contractor shall fmihwith inform the Minister of the

steps it proposes to take to satisfy the requirements of section 30 (1) (a) (iii) ofthe Act.



8.2



Where the Contractor, pursuant to section 31 ( 1) of the Act, has informed the Minister that,

in its opinion, the Discovery is of potential conunercial interest, the Contractor shall, as

soon as practicable thereafter, submit, for the consideration of the Minister, its proposals

for an Appraisal Programme to meet the requirements of section 30 (1) (b) of the Act.



8.3



Where an Appraisal Programme has been adopted by the Contractor pursuant to Article

8.2, the Minister may, on application by the Contractor pursuant to section 31 (2) of the

Act, stating reasons therefor, extend the period within which application may be made by

the Contractor for a Petroleum Production Licence.



8.4



In furtherance to article 8.3 above, if Contractor deem a Non Associated Gas Discovery is

of potential commercial interest, the time period between the notice of Discovery provided

for in section 31 (1) of the Act and the application for grant of a Petroleum Production

Lic ~nce .:;~1::~~ be extended pursuant to secti)n 31(2) of the Act if necessary, to ;rc·;:de

reasonable time, as agreed to in friendly negotiations between the Parties and in pursuance

of section 33(1) of the Act, to conduct an Appn:.isal Programme, develop a Natural Gas

market, and design and construct facilities necessary to commercialize the Natural Gas.



8.5



Vv'here the Contractor has made an application to the Minister for a Petroleum Production

Licence in respect of any part of the Contract Area in accordance with section 34 (1) of the

Act, such application shall be accompanied by the proposals required under section 34 (3)

of the Act (hereinafter referred to as "the Development Plan") and shall satisfy the

provisions of section 36 of the Act and the Regulations. The Development Plan shall

provide that not later than six (6) months after the grant of the first Petroleum Production

Licence, the Contractor shall in consultation with GGMC, prepare and implement a

programme for training and employment of Guyanese nationals in each phase and level of

Petroleum Operations and for the development of management and technical skills for the

safe and efficient conduct of Petroleum Operations.



8.6



Where the Minister considers that the application has not met the requirements of Article

8.4, he shall so notify the Contractor within sixty (60) days of receipt of the application,

and GGMC and Contractor shall meet to discuss the application with a view to ensuring

that the requirements of Article 8.5 are met. In the event that the Pmiies are unable to

agree on amendments to the application to meet such requirements within sixty (60) days

from the date of aforesaid application (or such longer period as the Parties shall agree), or

where the Minister fails to respond to or act on the aforesaid application within sixty (60)

days, the Contractor may refer the matter to a sole expert pursuant to Article 26 for

determination within sixty (60) days of appointment of such expert or such other time

Page 20



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



period as may be agreed between the Contractor and the Minister.

8. 7



Where the Minister considers that the aforesaid application has met the requirements of

Article 8.5 he shall, within sixty (60) days of receipt thereof, so notify the Contractor. ln

such event or where in the event of a dispute it is detennined by the sole expert pursuant to

Article 26 that the Contractor has made an application which meets the requirements of

Article 8.5, provided the Contractor is not in default under this Agreement, the Minister

shall grant, within sixty (60) days of such notification or detennination as the case may be,

to Contractor, a Petroleum Production Licence (in the Form D of the schedule as specified

in the Regulations) over the area for which the application has been made on terms and

conditions consistent with this Agreement and the Act and Regulations which will enable

the Contractor to carry on Petroleum Operations in the Production Area in accordance with

the Development Plan wherein the level of production set shall be consistent with the

maximum efficient rate of production which conforms to sound reservoir engineering

principles in accordance with good international petroleum industry practice. The initial

term of the Petroleum Production Licence shall be twenty (20) Years commencing next

after the date of the grant of said licence in accordance with the Act. In the event the

Minister imposes policy-based production limits on production below those consistent with

maximum efficiency rates for the Field or Fields, any such production limits will be

imposed countrywide and shall be allocated proportionately based upon demonstrable,

verifiable Field production ::apcities.



8.8



While the Contractor holds a Petroleum Prospecting Licence or has made an application

pursuant to Article 8.5 and in accordance with section 34 (1) of the Act, the Minister shall

not grant a Petroleum Production Licence in respect of all or part of the Contract Area or

area covered by such application (whether on a geographical or geological basis) to any

third party.



8.9



Where the Contractor pursuant to section 31 (1) of the Act has served notice on the

Minister that in its opinion a Discovery made in the Contract Area is not of potential



commercial interest, the provisions of section 32 (1) ofthe Act shall apply.

8.10



If it was determined that the Field as to which the Commercial Discovery applies extends

beyond the boundaries of the Contract Area, or if such is subsequently determined in the

course of development or producing operations in the Field, then Contractor may apply for

an extension of the Contract Area to include the additional acreage encompassing the Field

as determined by the analysis of all the relevant information. The Minister may grant the

extension to the Contractor for such additional acreage to enable the entire Field to be

developed and produced with optimal efficiency in accordance with good oil Field

practice. The said acreage shall not be available to Contractor if it is held under Licence to

a third party. In such instances, the provision of Section 44 of the Act shall apply.



8.11



The Contractor may apply for a renewal of a Petroleum Production Licence for a

maximum ten (10) years. The application for renewal shall be granted as long as the

Page 21



Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



Contractor is in good standing under the Licence.

(a)



Natural Gas: In the event of any Non-Associated Gas discovery within the

Contract Area, in recognition of the fact that Natural Gas projects generally have

much longer lead times from discovery to first commercial production than is the

case for Crude Oil projects, the Minister shall grant Contractor's request for the

maximum ten (1 0) year Petroleum Production License renewal so long as

Contractor is in good standing under the Licence.



(b)



The Minister shall not refuse to grant the renewal of a Petroleum Production

Licence under section 40(1) of the Act without first providing the Contractor;

(i)



Notice stating the grounds of the intended refusal; and



(ii)



Ninety (90) calendar days following the date of the notice referenced in

Article 8.9(b)(i) to respond to or remedy the stated grounds for refusal.



Page 22

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 9 -Records , Reports and Information ; Confi dential ity

9.1



Records, Reports and Infom1ation

(a)



The Contractor shall, at all times while this Agreement is in force, maintain and

submit to the Minister in accordance with the provisions of the Act and the

Regulations, the Petroleum Production Licence and this Agreement, full and

accurate reports, records, retums and accounts of Petroleum Operations in the

Contract Area.



(b)



All data, well logs, maps, magnetic tapes, cuts of cores and cutting samples and all

other geological and geophysical information obtained by the Contractor in the

course of carrying out Petroleum Operations hereunder and all geological,

technical, financial and economic reports, studies and analyses generated in relation

thereto (hereinafter referred to as "Petroleum Data") shall be submitted to the

Minister in accordance with the Regulations.



(c)



The Contractor may freely export for processing or laboratory examination or

analysis samples or other original materials constituting Petroleum Data, provided

that samples equiv::_lent :r:. ::::ze and quality or, where such ~m:~erial is capable of

reproduction, copies of equivalent quality have first been delivered to the Minister.



(d)



Petroleum Data shall be the joint property of the Minister and the Contractor but

shall become the sole property of the Minister with respect to any area which

ceases to be part of the Contract Area, whether as result of relinquishment, or

expiry, surrender or termination of a Licence or otherwise in accordance with the

Act, from the date on which such area ceases to be part of the Contract Area.



(e)



The Minister, through duly appointed



representatives, upon providing the



Contractor with at least seven (7) days notice, shall be entitled to observe the

Petroleum Operations conducted by the Contractor at his sole cost and expense and

at all reasonable times to inspect all assets, records and data kept by the Contractor

relating to such Petroleum Operations. In the exercise of such rights under this

paragraph the Minister shall not unduly interfere with the Contractor's Petroleum

Operations under this Agreement.

(f)



9.2



Nothing in this Article shall be construed as requiring the Contractor or any of the

Parties comprising the Contractor to disclose any of its proprietary technology or

that of its Affiliated Companies which is not acquired in the course of Petroleum

Operations under this Agreement.



Confidentiality

(a)



All Petroleum Data, information and reports obtained or prepared by the Contractor

Page 23



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



hereunder shall, so long as they relate to any part of the Contract Area, be treated as

confidential and each of the Parties undertakes not to publish, reproduce or

otherwise deal with such Petroleum Data or to disclose the same or the contents

thereof to any other person without the consent in writing of the other Party, such

consent not to be unreasonably withheld, provided however, that subject to Atiicle

9.2 (b), this At1icle shall not:

(i)



(ii)



prevent disclosure by the Contractor:

(aa)



to an Affiliated Company or employees of an Affiliated Company;



(bb)



to consultants, professional advisers, data processing centres,

laboratories and Sub-Contractors where disclosure is essential to

work for Contractor;



(cc)



to a bank or other financial institution where disclosure is essential

to work or financing for Contractor or Affiliated Company of

Contractor;



(dd)



to the extent required by any applicable law or the regulations of any

stock exchange upon whic~1 t!le shares of the Contractor Jr a:·

Affiliated Company are quoted, or by governmental order, decree,

regulation or rule, or to the extent required under any legal

proceeding or any court order binding on Contractor or Affiliated

Company of Contractor;



(ee)



to bona fide prospective assignees or transferees of an interest

hereunder of the Contractor or in connection with merger,

consolidation, or a sale of stock of the Contractor or an Affiliated

Company thereof;



(ff)



in connection with data trades;



(gg)



of data information and reports already known to the Contractor or

Affiliated Company prior to the Effective Date; or



(hh)



of data, information and reports acquired independently from a third

party that represents that it has the right to disseminate such data at

the time it is acquired by the Contractor or Affiliated Company;



prevent disclosure pursuant to section 4 of the Act, provided however that

neither the Minister nor Contractor shall disclose Petroleum Data relating to

any area subject to a Licence to a competitor of the Contractor, without the

prior written consent of the other Party; or



Page 24

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



(iii)



be construed as imposing on any Party any obligation hereunder with

respect to any petroleum data, information or reports which are, without

disclosure by such Party, generally known to the public.



(b)



Any petroleum data, information or reports disclosed by the Contractor pursuant to

this Article shall be disclosed on terms which ensure that the data, infom1ation or

repot1s aforesaid are treated as confidential by the recipient (except for disclosures

made pursuant to Article 9.2 (a)(i)(dd)) and prompt notice of all disclosures with

respect to Articles 9.2 (a) (i) (ee) and (ff) shall be given to the Minister



(c)



All petroleum data which becomes the sole property of the Minister pursuant to

Article 9.1 (d) shall continue to be treated as confidential by the Contractor for a

period of one (1) year from the date on which it became the sole property of the

Minister, but may be used by the Contractor in connection with data trades with the

prior written consent of the Minister, such consent not to be unreasonably withheld

subject however to Article 9.2 (b).



(d)



Where a Licence ceases to be in force with respect to any area, the Contractor shall

deliver to the Minister originals of all petroleum data and other information relating

to such area pursuant to regulation 26 of the Regulations provided however that, on

application duly made to hi;l1 pursuant to regulation 28 Gf the R:6ulations, the

Minister shall permit the Contractor to retain copies of petroleum data and

information relating to the Cont-act Area subject to Article 9.2 (b).



(e)



Notwithstanding the provisions of Article 9.1 (d), all the Contractor's proprietary

technology, except technology for which the cost of development has been

approved as Recoverable Contract Cost under this Agreement, shall remain the

property of the Contractor.



Page 25

Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



Article 10 -Annual Licence Rental Charge

The Contractor shall on the Effective Date of the Petroleurn Prospecting Licence or the date of

grant of any Petroleum Production Licence as the case may be and, thereafter, so long as the said

Licence remains in force, on each mmiversary date thereof, pay without demand to the

Govermnent an annual Licence rental charge in respect of the Contract Area for the entire

Exploration Period and such payments shall apply to those areas remaining after taking into

account any relinquishments pursuant to Article 5 as specified below. Payments under this Article

10 shall be paid directly into bank accounts held and controlled by GGMC as notified in writing



Initial Period:

First Renewal Period:

Second Renewal Period:



One hundred thousand US Dollars (lOO,OOO.OOUS$)

One hundred thousand US Dollars (1 OO,OOO.OOUS$)

One hundred thousand US Dollars (lOO,OOO.OOUS$)



Page 26

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 11 - Cost Recovery and Production Sharing

1 1.1



Subject to the ten11s and conditions of this Agreement, the Contractor shall bear and pay all

Contract Costs incurred in carrying out Petroleum Operations and shall recover Contract

Costs only from Cost Petroleum as herein provided.



1 1.2



All Recoverable Contract Costs incurred by the Contractor shall, subject to the terms and

conditions of any agreement relating to Non-Associated Gas made pursuant to Article 12,

be recovered from the value, deten11ined in accordance with Article 13 , of a volume of

Petroleum (hereinafter referred to as " Cost Petrolew11") produced and sold from the

Contract Area and limited in any Month to an amount which equals seventy-five percent

(75%) of the total production from the Contract Area for such Month excluding any Crude

Oil and/or Natural Gas used in Petroleum Operations or which is lost.

"Recoverable Contract Costs" means such Contract Costs as the Contractor is permitted to

recover, as from the date they have been incurred, pursuant to the provisions of Annex C.



11 .3



To the extent that in any Month, Recoverable Contract Costs exceed the value of Cost

Petroleum determined in accordance with Article 13 and/or A1iicle 12, the umecoverable

aJ11ount shall be carried forward and, .::uh~ect to the limitation stipulated in Article 11 .2,

shall be recoverable in the immediately succeeding Month, and to the extent not then

reco"ered, in the subsequent Month or Months.



11.4



The balance of Crude Oil and/or Natural Gas available in any Month after Recoverable

Contract Costs have been satisfied to the extent aforesaid (hereinafter referred to as "Profit

Petroleum") shall be shared between the Government and the Contractor for each Field in

the following proportions:

Profit Petroleum

Production



CBOPD)



First

Next

Next

Next

Above



20 000

20 000

20 000

20 000

80.000



Contractor's Share

50.0

47.5

45.0

42.5

40.0



Minister's Shares

50.0

52.5

55.0

57.5

60.0



11.5



The quantity of Cost Petroleum actually utilized in satisfying the Recoverable Contract

Costs may be allocated by the Contractor to production from any Field or Fields.



11.6



Subject to the provision of Article 14, the Profit Petroleum shall be shared between the



Page 27

Petroleum Agreement

Government of G uyana - Repsol Exploraci6n S.A .



Government and Contractor on a Monthly basis according to their respective entitlements

as set out in Article 11.4.

11.7



To the extent that the actual quantities and costs required to determine Cost Petroleum and

Profit Petroleum for the Month in question are not known, Crude Oil and/or Natural Gas

sharing shall be calculated on an interim basis each Month using the following:

(a) unrecovered Recoverable Contract Cost;

(b) estimated current Recoverable Contract Cost by reference to the agreed work

prograrnrne and budget supplemented by any other relevant documents or information

which are accepted by Contractor and Minister as being reliable indicators of the actual

position for the Month in question;

(c) estimated production for the Month in question;

(d) Crude Oil and/or Natural Gas price from the previous Month calculated.



1 1.8



Retroactive adjustments shall be made to the Crude Oil and/or Natural Gas entitlements

and shall be agreed with the Minister based on recalculations utilizing actual quantities of

Crude Oil anC/c- Na::;ru! Gas produced and saved and r_~c:verable Contract Costs. Ar:y

revised entitlements shall be made, subject to any applicable lifting agreements, as soon as

practicable after such elements have definitely been deterrnineC:.



1 1. 9



The Contractor shall have the right to use in any Petroleum Operations as much of the

production as may reasonably be required by such Petroleum Operations therefor and the

quantities so used or lost shall be excluded from any calculations of Cost Petroleum and

Profit Petroleum entitlement.



Page 28

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A .



Article 12 -Associated and Non -Assoc iated Gas.

12.1



Associated Gas

(a)



The Associated Gas produced from any Oil Field within the Contract Area shall be

with priority used for the purposes related to the operations of production and

production enhancement of Oil Fields, such as Gas injection, Gas Lifting and

power generation.



(b)



Based on the principle of full utilisation of the Associated Gas, and with no

impediment to normal production of Crude Oil, a plan of utili sation of the

Associated Gas shall be included in the Development Plan of each Oil Field. If

there is any excess Associated Gas in the Oil Field after utilisation pursuant to

Article 12.1 (a) the Contractor shall carry out a feas ibility study regarding the

utilisation of such excess Associated Gas of such Oil Field. Such feasibility study,

if carried out before submission of the Development Plan of an Oil Field, shall be

included in the Development Plan. In the event that the Contractor conducts a

further feasibility study of the utilisation of the excess Associated Gas of such Oil

Field, such further feasibility study shall be submitted to the GGMC for review and

~i scussion.

If the excess As:::cc:ated Gas in any Oil Fie!d is t:~:1: 2~d , the

construction of facilities for such utilisation and the production of excess

Associated Gas shall be carried oJt while a Petroleum Production Licence

continues in force.



(c)



If the Contractor believes that excess Associated Gas of an Oil Field has

commercial value, the Contractor shall be entitled, but not required, to make further

investment to utilise such excess Associated Gas subject to terms at least as

attractive as those established for Crude Oil in Article 11 including, but not limited

to, cost recovery for such further investment. If Contractor believes such

Associated Gas is potentially commercial under the current Agreement terms for

Oil, then Article 11 shall apply and the reference made to Barrels of Oil Per Day

(BOPD) in Article 11.4 shall be replaced by Barrels of Oil Equivalents per Day

(BOESD). If the Contractor believes improved terms are necessary, the Parties

shall carry out friendly negotiations in a timely manner to find a new solution to the

utilisation of the said excess Associated Gas and reach an agreement in writing.



(d)



If the Contractor does not believe that the Associated Gas has commercial value,

but the Minister believes the Associated Gas does have commercial value, the

Government may utilize the Associated Gas provided there is no impediment to

normal production of Crude Oil. All handling from the point of separation of

Crude Oil shall be at the sole risk and expense of the Government and will not

affect the amount of Cost Petroleum and Profit Petroleum due to Contractor.



(e)



Expenses incurred by the Contractor in the production and use of the Associated

Page 29



Petroleum Agreement

Governm ent of Guyana - Repsol Exploracion S.A.



Gas of an Oil Field as stipulated in Atiicle 12.1 and those incurred in carrying out

any feasibility study on the utilisation of the excess Associated Gas shall be

charged to the development cost of the Oi I Field and shall be cost recoverable.

(t)



12.2



If the Parties agree that the excess Associated Gas of an Oil Field has no

commercial value, then such Gas shall be disposed of by the Contractor, provided

that there is no impediment to normal production of the Crude Oil , in the most

economic manner consistent with good international petroleum industry practice.



Non- Associated Gas

(a)



When the Contractor in accordance with Article 8.2 has informed the Minister of

any Non - Associated Gas discovery within the Contract Area that is of potential

commercial interest, the Contractor shall inform the Minister whether Contractor

believes such discovery is potentially commercial under the current Agreement

terms. If the Contractor believes that the fiscal terms will have to be revised in

order to economically commercialize the Non-Associated Gas discovery, the

Contractor shall propose revisions to the fiscal terms as the basis for entering into

good faith negotiations to reach mutually acceptable terms for developing the NonAssociated Natural Gas discovery. The agreement, which shall fom1 an annex to

this Agreement,- sr.-J:ll be based on and include t!-le .folic -.,vi::;; principles:

(i)



For a period uf twelve (12) months from the date of the notice delivered to

the Minister under Article 8.2, the Contractor and the Minister shall engage

in good faith negotiations of such revisions to Article 11 that would be

necessary in order to provide the Contractor with project economics terms

at least as attractive as those established for Crude Oil in Article 11. The

Parties recognize that in order to achieve an economically viable

development of Non-Associated Natural Gas, different fiscal regimes may

have to be considered. In the event the Parties cannot agree upon the

necessary revisions to Article 11, a sole expert shall be engaged pursuant to

Article 26.3.0nce the sole expert renders its decision, the Contractor shall

review the decision and shall notify the Minister as to whether it shall

proceed with the development of the Non-Associated Gas discovery under

the terms of the sole expert decision. In the event the Contractor elects not

to proceed, the Contractor shall relinquish the non-Associated Gas

discovery to the Government.



(ii)



The time period between the notice of discovery provided for in section

31 (1) of the Act and the application for grant of a Petroleum Production

Licence shall be extended pursuant to section 31 (2) of the Act, if necessary,

to provide reasonable time as agreed to in friendly negotiations between the

Parties and in pursuance of section 33(1) of the Act to conduct an Appraisal

Programme, develop a Gas market, and design and construct facilities

necessary to commercialize the Natural Gas.

Page 30



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



12.3



(b)



Following the signature of the agreement herein the Contractor shall work out an

Appraisal Programme for the discovered Gas Field according to the terms and

conditions determined in the said agreement and submit it to the GGMC for review

pursuant to Article 6.4. The Contractor shall carry out the Appraisal Programme

which was reviewed and agreed upon with GGMC. The expenses incurred in

carrying out the said Appraisal Programme by the Contractor shall be charged to

the Exploration Costs of the Contract Area and shall be cost recoverable as

permitted under the tem1s of Annex C.



(c)



After completion of the Appraisal Programme of a Gas Field, the Contractor shall

submit a report on the Appraisal Programme to GGMC for its review and

discussion.



(d)



If the Contractor retains a Gas Field beyond the expiration of the Exploration

Period pursuant to Article 12.2, the Contractor shall pay to the Minister at the

commencement of each year of the retention period an annual rental to be arrived at

through friendly negotiations but which shall be no less than Two Hundred

Thousand United States Dollars (200,000US$.). The holding fee shall be refunded

to Contractor on a pro rata daily basis in the event the Contractor relinquishes the

Gas Field or declares such Gas discovery to be a commercial discovery prior to the

er:.d of such year.



General Ccnditions Applicable to Natural Gas

(a)



Subject to the Govemment's election to take its production in kind and reserving its

rights to market its own production, the Parties may agree in writing (where such

agreement shall be considered a part of this Agreement,) on such terms and

conditions to be determined by friendly negotiations but not inconsistent with the

bases for the development and full utilization of any Natural Gas Fields within the

Contract Area, in accordance with the intemational petroleum practices. Subject to

any such written agreement, Contractor shall have the sole responsibility for

marketing all the available Natural Gas from the Contract Area and for negotiating

for the sale thereof on a joint basis at fair market prices and tem1s common to both

the Minister and the Contractor in accordance with Third Party Sales principles.

The Contractor will pursue markets both within and outside Guyana and seek to

market Natural Gas to the highest realization outlets after deduction of

transportation costs. The Contractor will seek to recognize Natural Gas' potential

value at the intemational value of altemative fuels in the end user market of the

buyers.



(b)



The Contractor shall have the right, but not the obligation, to process Natural Gas

for conversion to liquids, chemicals or similar gas utilisation projects and

Contractor shall have the right to dispose of the liquids or products therefrom. The

Contractor shall have the right to process Natural Gas for recovery of the liquids

contained therein. Natural Gas Liquids (NGLs) recovered and sold shall be valued

Page 3l



Petroleum Agreement



Government of Guyana - Repsol Exploraci6n S.A.



based upon the international value of such products as published in Platts and

adjusted to reflect the fair market value of such products FOB Guyana. In addition,

the Contractor shall have the right to liquefy the Natural Gas for sale as LNG

and/or the right to compress the Natural Gas to accommodate sales as compressed

natural gas (CNG).

(c)



The Contractor shall have the right to use Natural Gas, both Associated Gas and

Non-Associated Gas, as may be required for Oil Field and Gas Field operations,

including the right to re-inject for pressure maintenance and enhanced recovery

without charge, fee or royalty.



After a gas marketing alternative for Non Associated Gas has been secured, and the

Natural Gas reserves indicated in the Development Plan have been allocated to a gas

marketing option, or to one or more Natural Gas sale contracts, the satisfaction of the

Natural Gas Domestic Supply Obligation shall not condition, prevent or impede the

performance of Contractor's obligations pursuant to any existing Natural Gas sales

contract or to materially erode the economic return of a Natural Gas Development,

provided that Contractor shall not reduce the delivery of the Natural Gas required to fulfil

the Natural Gas Domestic Supply Obligation. Nevertheless, Contractor shall make

reasonable efforts to supply, at fair market value prices, volumes in excess of Natural Gas

as may be reasonably requ3:;:ed by the Minister, provided :h2t Contractor shall give

preference to performance of any commitments pursuant to any gas sales contract then in

effect.

12.4



General Conditions Related to Petroleum Operations

(a)



Subject to the approvals of appropriate governmental authorities, which approvals

shall not be unreasonably withheld, the Contractor shall have the right to construct,

operate and maintain roads, drill water wells and to place and/or construct fixtures

and installations necessary to conduct the Petroleum Operations, including but not

limited to, storage tanks, trunk pipelines, shipment installations, pipelines, cables or

similar lines, liquefaction, processing and compression, located inside or outside

the Contract Area, as well as construct, operate and maintain or lease facilities for

the transportation of Crude Oil and Natural Gas from the Contract Area. Any

required governmental approvals may be conditional on the use by other producers

of the excess capacity, if any, of those facilities. Where the Minister and Contractor

agree that a mutual economic benefit can be achieved by constructing and operating

common facilities, the Contractor shall use its reasonable efforts to reach agreement

with other producers on the construction and operation of such common facilities.



(b)



Subject to negotiations on a reasonable price and available capacity rights, the

Contractor may have access to and use of any export facility or pipeline or other

facilities or infrastructure built by the Government or by any wholly or partially

owned Guyana state enterprises on terms no less favourable than those of any other

party having access or use of such facility.

Page 32



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



(c)



Subject to negotiatiOns as to a reasonable price and mvnership interest in the

facilities, the Contractor may have the right to participate in the construction,

ownership and operation of any of the types of facilities described in sub-clause

12.4(a) above that are built by the Government or by any wholly or partially owned

state enterprises or by any third pa1iies on terms no less favourable than those of

any other party patticipating therein.



Page 33

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 13 - Valuation of Crude Oil or Natural Gas

13.1



For the purpose of this Agreement the value of a Barrel of Crude Oil or an Mcf of Natural

Gas shall be the average fair market price determined as follows:

(a)



as soon as practicable after the end of each Calendar Month in which Crude Oil or

Natural Gas has been produced and sold from any Field pursuant to this

Agreement, an average price (in terms of United States dollars per Barrel or Met~

FOB, Delivery Point) for each Field shall be determined in respect of production

during that Calendar Month. It is understood that production from different Fields

may be of differing quality and that separate average prices may accordingly be

determined for any Calendar Month in respect of production from each Field;



(b)



the prices aforesaid shall be detem1ined as follows:

(i)



in the event that tifty percent (50%) or more of the total volume of sales by

the Contractor during the Calendar Month of Crude Oil or Natural Gas of a

given quality produced hereunder from a Field were Third Party Sales, as

hereinafter defined, the price of all Crude Oil or Natural Gas from such

Field of that quality shall ~e d::r:: ~c to be the simple arithmetic : ve:::-age

price actually realised, calculated by dividing the total receipts from all such

sales calculated FOB the Delivery Point by the total number of Barrels :Jf

Crude Oil or Mcfs of Natural Gas sold from such Field in such sales;



(ii)



in the event that less than fifty percent (50%) of the total volume of sales by

the Contractor during the Calendar Month of Crude Oil or Natural Gas of a

given quality produced hereunder from a Field were Third Party Sales, the

price of all Crude Oil or Natural Gas from such Field of that quality will be

determined by the arithmetic average of:

(aa)



The simple arithmetic average price actually realised in the Third

Party Sales during the Calendar Month of such Crude Oil produced

hereunder, if any, calculated by dividing the total receipts from all

such sales calculated FOB at the Delivery Point by the total number

of barrels of Crude Oil sold in such sales from such Field; and



(bb)



The simple arithmetic average price per barrel at which one or more

crude oils of similar quality to the Crude Oil are being sold, such

price being determined by calculating the average for the Month in

which production takes place of the mean of the high and low FOB

price or prices for each day of those crude oils as quoted in Platts

Crude Oil Market Wire daily publication. In the event that Platt's

ceases to be published or is not published for a period of thirty (30)

consecutive days then the Parties shall agree on an appropriate

Page 34



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



alternative publication.

In determining the final price, account shall be taken of any

differences between the Crude Oil and the crude oils quoted in

Platt's, for quality, API gravity, sulphur, pour point, product yield as

well as differences in quantity, delivery time, payment and other

contract tem1s to the extent known. Allowance will also be made to

take account of the market area into which the Crude Oil is sold

should it be different from the area used for Platt's.

The selected crude oils will be agreed between Contractor and the

Minister in advance for each Calendar Year and in making the

selection preference will be given to crude oils of similar quality to

Crude Oil from the relevant Field.

The arithmetic average aforesaid will be detennined by the

percentage volume of total sales of Crude Oil by Contractor that are,

and that are not, as the case may be, Third Party Sales during the

Calendar Month in question.

(cc)



~n the .:.:~.: of Natural Gas, the Contractc :r:d the Minister shall

agree on a methodology for valuation of Natural Gas under this

Article 13 .1(b)(ii) which represents the fair mc.rket value of such

Natural Gas FOB Guyana, taking into account composition of the

Natural Gas. This methodology will be reviewed annually and

modified if necessary.



(iii)



all such prices will be adjusted to FOB Delivery Point.



(iv)



for the purposes of this Article Third Party Sales of Crude Oil or Natural

Gas made by the Contractor shall include any Third Party Sales made by the

Contractor or an Affiliated Company of Contractor on the Minister's behalf

pursuant to Article 14 but shall exclude:

(aa)



sales, whether direct or indirect through brokers or otherwise, of any

seller to any Affiliated Company of such seller, unless at

demonstrably arms length price (for example where an Affiliate

Company of Contractor buys and then resells to a third party at an

arms-length price which is disclosed to the Minister);



(bb)



Crude Oil or Natural Gas exchanges, barter deals or restricted or

distress transactions, or any Crude Oil or Natural Gas transaction

which is motivated in whole or in part by considerations other than

the usual economic incentives for commercial arms length crude oil

or natural gas sales; and

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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



(cc)



Government to government sales.



13.2



Contractor shall be responsible for determining the relevant prices in accordance with this

Article. The calculation, basis of calculation and the price arrived at, shall be supplied to

the Minister and shall be subjected to agreement by the Minister before it is finally

detem1ined . Pending final determination the last established average Crude Oil or Natural

Gas price shall be used.



13.3



During the first Calendar Year of production from the Contract Area the Contractor and the

Minister will meet in order to establish a provisional selection of the crude oils and an

appropriate mechanism for the purposes of giving effect to Article 13.1 (b )(ii) above. This

selection will be reviewed annually and modified if necessary.



13.4



In the event of any difference or dispute between the Contractor and the Minister

concerning selection of the crude oils or natural gas, the calculation or the basis of

calculation of the prices and the prices arrived at or generally about the manner in which

the prices are determined according to the provisions of this Article, the matter or matters

in issue shall finally be resolved by a sole expert appointed pursuant to Article 26.3.



13.5



For the purposes of this Article, in determining the "quality" of a Crude Oil regard shall be

giver: t..:; all ;::k,·:ant characteristics including bt.: !: net limited to gravity, sulphur a;.:- d m::-~:1~

content, pour point and product yield. In the case of Natural Gas, quality of the Natural

Gas shall be determined based on its composition.



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Article 14 - Disposal of Production

14.1



Each of the Parties shall have the right to take in kind at the Delivery Point and separately

dispose of its share of the total quantities of production available under this Agreement.

The Contractor shall have the right to use as much production as may be needed in any

Petroleum Operations within the Contract Area and also within the transportation and

terminal system. In the event of third party usage of the transportation terminal systems

the quantities so used or lost outside the Contract Area shall be proportionate to aggregate

use of that transportation and terminal system. All quantities so used or lost shall be

excluded from any calculations of entitlement pursuant to Article 11. The quantity of

production to which the Government is entitled pursuant to Article 11 shall be measured

and delivered to the Government at the Delivery Point and the Government shall be

responsible for all costs and risks associated with the Government's Lifting Entitlement

from and after the Delivery Point.



14.2



Within twelve (12) months after the Minister's approval of a Development Plan, or within a

later period as may be agreed between the Parties but in any event no longer than three (3)

months before the first scheduled lifting of Crude Oil, the Contractor shall propose to the

Minister offtaking procedures to govern the method whereby the Parties will nominate and

Eft their respective shares of Crud~ Oil. The details of such prx ::!dur:::; :::l::1!l be discussed

and agreed upon between Minister and Contractor. The major principles of such

procedures shall include the followin.5:



14.3



(a)



Lifting shall be carried out so as to avoid interference with Petroleum Operations.



(b)



In the event that any Party shall find itself unable for any reason to lift such

quantities of Crude Oil as are to be lifted in accordance with procedures it shall

forthwith notify the other Parties to that effect. Such procedures shall include such

deterrents as the Parties may agree, to prevent a Party from delaying the lifting of

any quantities of Crude Oil not so lifted, to a later period.



(c)



In the absence of any agreement to the contrary between the Parties, the Contractor

and the Minister shall share in each type of grade of Crude Oil in proportion to

their respective Lifting Entitlement.



The Contractor shall, if requested by the Minister, use reasonable efforts to market abroad

on competitive terms all or part of the Minister's Lifting Entitlement subject to payment by

Minister of costs normally borne by a seller in such transactions and on other terms to be

agreed including an agreed marketing fee in respect thereof. The Minister shall provide

the Contractor with at least six (6) months notice before changing between receiving

payments in kind as provided under Article 14.1 and seeking the Contractor to market the

Minister's Lifting Entitlement under this Article.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



14.4



Subject to the provisions of Article 17 hereof, the Contractor shall have the right to export

at the export point chosen for this purpose all Petroleum to which it is entitled under this

Agreement free of any duty, tax or other financial impost, and to receive and retain abroad

all proceeds from the sale of such Petroleum.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 15 -Taxation and Royalty

15. I



Subject to A1iicle 32. and except as provided in Article 15.2, 15.8, and except as otherwise

set forth in this Article 15.1, no tax , value-added tax, excise tax , duty, fee, charge or other

impost shall be levied at the date hereof or from time to time thereafter on the Contractor

or Affiliated Companies in respect of income derived from Petroleum Operations or in

respect of any property held, transactions undertaken or activities performed for any

purpose authorised or contemplated hereunder other than:

(a)



subject to the provisions of Article 21, import duties at the rates specified from time

to time in the Customs Act (Cap. 82:01);



(b)



taxes, duties, fees or other imposts for income derived from specific services

perfonned by the Contractor for the public or commercial enterprises and which is

unrelated to income derived from Petroleum Operations under this Agreement;



(c)



rent due to Govemment in respect of any land rights granted or assigned to the

Contractor;



~d)



annual licence rental



(e ~



subject to Article 15.7, local govemment rates or taxes (being rates 0r taxes not

calculated by reference to income) under laws of general application and which are

non-discriminatory, are commercially reasonable, and do not result in a rate or tax

to Contractor in excess of those generally applicable in Guyana;



(f)



(i) stamp duties, (ii) registration fees , (iii) licence fees, and (iv) any other similar

duty, fee or other impost of a minor nature, provided the above-referenced

categories are imposed under laws of general application.



~harge ~ -it::::



cnder Article 10;



15.2



Except as provided in this Article 15, Contractor, Affiliated Companies, Sub-Contractors

and individuals who are expatriates shall be subject to the income tax laws of Guyana,

including, the Income Tax Act of Guyana (Cap. 81 :01) and the Corporation Tax Act of

Guyana (Cap. 81 :03) and shall separately comply with the requirements of those laws, in

particular with respect to filing retums, assessment of tax, and keeping and showing of

books and records.



15.3



The taxable income of the Contractor ansmg in each year of assessment under this

Agreement for purposes of the income tax laws of Guyana, (including the Income Tax Act

and the Corporation Tax Act referred to in Article 15.2) shall include the amounts of

Contractor's income tax and corporation tax paid pursuant to Article 15.4.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



15.4



The Minister hereby agrees:

(a)



that a sum equivalent to the tax assessed pursuant to Article 15.2 and 15.3 will be

paid by the Minister to the Commissioner General , Guyana Revenue Authority on

behalf of the Contractor and that the amount of such sum will be considered

income of the Contractor; and



(b)



that the appropriate portion of the Government's share of Profit Petroleum delivered

in accordance with the provisions of this Agreement shall be accepted by the

Minister as payment in full by the Contractor of Contractor's share of each of the

following levies, whatsoever the applicable rate of such levies may be, which the

Minister shall then pay on behalf of the Contractor under Article 15.4 (a) to the

Commissioner General , Guyana Revenue Authority:

(i)



the share of royalty payable by Contractor pursuant to Article 15.6;



(ii)



the Contractor's share of the income taxes imposed by the laws of Guyana,

including, but not limited to, income tax imposed by the Income Tax Act

and corporation tax imposed by the Corporation Tax Act and payable at the

date hereof, or from time to time thereafter, and any other levy or charge on

ir;.ccir.C .:>r profits which may become p..:..ya'.:>le from time to time under m ~y

laws, acts, statutes, regulations or orders by the Government; and



(iii)



any other similar charge imposed and payable in respect of Petroleum

Operations at the date hereof, or from time to time hereafter, except charges

ofthe type specified in Article 15.1 (a-b).



15.5



The Contractor shall provide the Minister with the Contractor's income tax returns to be

submitted by the Minister to the Commissioner General, Guyana Revenue Authority so the

Minister can pay income tax on behalf of the Contractor as provided under Article 15.4 (a).

On such returns, the Minister shall note that he is paying the income taxes on behalf of the

Contractor, so that the Commissioner General, Guyana Revenue Authority can properly

prepare the receipts required under this Article 15 .5. Within one hundred and eighty ( 180)

days following the end of each year of assessment, the Minister shall furnish to Contractor

proper tax certificates in Contractor's name from the Commissioner General, Guyana

Revenue Authority evidencing the payment of the Contractor's income tax under the

Income Tax Act and corporation tax under the Corporation Tax Act. Such certificates

shall state the amount of tax paid individually on behalf of Contractor or parties

comprising the Contractor and other particulars customary for such certificates.



15.6



The Government's share of Profit Petroleum specified in Article 11 includes royalty

payable by the Contractor at the rate of one percent (1 %) of Crude Oil produced and sold,

and delivery to the Minister, pursuant to Article 14 of his share of Profit Petroleum

equivalent to royalty shall constitute payment of such royalty in kind. Within one hundred

and eighty (180) days following the end of each year of assessment receipts evidencing

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Petroleum Agreement

Government of Guyana - Repsol Exploracion S.A.



payment of Contractor's royalty shall be furnished by the Minister to the Contractor stating

the amount and other particulars customary for such receipts.

15.7



Subject to the conditions of section 49 of the Act, the Minister may remit in whole or in

part, or defer payment of any royalties payable by Contractor.



15.8



Nothing in this Agreement shall be construed to place an obligation on the Government to

file a tax return declaring its share of production or profit share or to regard such profit

share as income within the meaning of section 5 of the Income Tax Act (Cap 81 :01) or

section 4 of the Corporation Tax Act (Cap 81:03)



15.9



The Minister hereby agrees that the Contractor shall be exempted from the Property Tax

Act pursuant to section 51 of the Act and any other act which amends or replaces in part or

in whole the Property Tax Act



15.10 Notwithstanding any provision to the contrary in this Article, Contractor, Affiliated

Companies or Non-Resident Sub-Contractors shall be exempted from VAT during the

Exploration period on services rendered.

15.11 Notwithstanding any provision to the contrary in this Article, the Government warrants and

agrees with the Contractor that it will procure from the Guyana Revenue Authority (GRA)

the granting of assurances in respect to the Value Added Tax Act for:(i)



The contractor and sub-contractors of the company to be registered in accordance

with the relevant sections of the Value Added Tax Act; and



(ii)



Upon the submission and filing of the appropriate Value Added Tax Return forms

within the prescribed timeframe, Contractor and sub-contractors shall have the right

to obtain VAT refunds according to applicable Value Added Tax Regulations.



1S.12 The Minister agrees that for the duration of the Exploration Period, and for any area within



the Contract Area where exploration activity is in progress, the provisions of section 1O(b)

of the Corporation Tax Act (Cap 81:03), including any successor provisions to section

1O(b) of the Corporation Tax Act (Cap 81 :03), shall not apply to the Contractor, with

respect to any payments made to any Affiliated Companies or Sub-Contractors.

Notwithstanding any provision to the contrary in this Article, Affiliated Companies or

Non-Resident Sub-Contractors shall not be subject to the provisions of the Income Tax Act

of Guyana (Cap. 81.01) and the Corporation Tax Act of Guyana (Cap 81 :03) during the

Exploration Period on income earned in Guyana for any given tax year if the Affiliated

Company or Non-Resident Sub-Contractor has conducted business in Guyana for one

hundred eighty three (183) days or Jess on a cumulative basis in the tax year of assessment.

15.13 There shall be no tax, duty, fee, withholding, charge or other impost applicable on interest

payments, dividends, deemed dividends, transfer of profits or deemed remittance of profits

from Contractor's, Affiliated Companies' or Non-Resident Sub-Contractors' branch in

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Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



Guyana to its foreign or head office or to Affiliated Companies.

15.14 The Minister agrees that for the duration of the Exploration Period, and for any area within

the Contract Area where exploration activity is in progress, the provisions of section 18(h)

of the Income Tax Act (Cap 81 :01 ), including any successor provisions to section 18(h) of

the Income Tax Act (Cap 81:01 ), shall not apply to each party comprising the Contractor,

with respect to head-office expenses paid to any Affiliated Companies.

15.15 The Expatriate Employee shall be liable to pay personal income tax in Guyana on income

earned in Guyana. Guyana (represented herein by the Minister) shall cause the proper

authorities to issue appropriate tax certificates to Expatriate Employees when required.

(i)



If an Expatriate Employee is liable to pay income tax in Guyana on income earned

in Guyana, such Expatriate Employee shall pay such income tax at a rate equal to

the current income tax rate of Guyana;



(ii)



Notwithstanding any provision to the contrary in this Article, Expatriate Employees

shall not be subject to the provisions of the Income Tax Act of Guyana (Cap.

81.01) and shall not be liable for personal income tax in Guyana on income earned

in Guyana for any given tax year if the expatriate is physically present in Guyana

for one hundl· ~d ~ighty three (183) days or le::;s Jn a :'.l::::.:.lative basis in the tax year

of assessment.



15.16 An Order shall be made giving effect to the provisions of this Article in statutory fonn and

language as specified in section 51 of the Act.



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Petroleum Agreement

Government of Guyana -Repsol Exploraci6n S.A.



Article 16 - Contracts and Assignments

16. 1



16.2



The relevant party comprising the Contractor or the Operator shall, upon request, provide

to the Minister copies of:

(a)



contracts with respect to the sale or disposal of Petroleum (including mvmces

issued thereunder);



(b)



any deed of assignment of an interest of any party comprising the Contractor under

this Agreement pursuant to Article 25;



(c)



any instrument by which the Contractor pledges, mortgages, encumbers or

hypothecates its interest under this Agreement or the Contract Area.



Assignments of any kind between one party comprising Contractor and its Affiliated

Company, as well as any assignment of any kind made in accordance with this Agreement

(including one to an unrelated party) shall be exempted from any duties or taxes, including

Capital Gain Taxes payable in such respect and shall be subject to a fee payable to GGMC

upon approval of the assignment for the amount of one hundred thousand United States

Dc~lar:; (lOO,OOOUS$.).



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Petroleum Agreement

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Article 17 - Domestic Supply Obligation

17.1



Tem1s for Crude Oil.

(a)



If the Crude Oil requirements of the domestic market in Guyana (the "Crude Oil

Domestic Demand") exceed the Minister's total entitlement from all Crude Oil

production in Guyana, then the Contractor shall be obliged together with any third

parties which produce Crude Oil in Guyana, to supply and sell a volume of Crude

Oil to be used for such Crude Oil requirements in Guyana, calculated on the basis

of the ratio which the Contractor's Lifting Entitlement to Crude Oil bears to the

sum of Contractor's Lifting entitlement plus the total entitlement of all other

producers in Guyana subject to Article 17.l(c). The volume of Crude Oil which

the Contractor shall be required to sell under this Article shall not exceed the

Contractor's share of Profit Petroleum. The Minister shall give the Contractor

notice on or prior to April 1 of the year preceding the Calendar Year in which the

Government will have the said requirement and the term of tbe supply shall be on a

Calendar Year basis unless otherwise agreed.

For tbe purpose of this Agreement, Crude Oil Domestic Demand shall consi st of

those quar.ti::es of S:--:de Oil (i) used to produce refin ::d products or petrochemicals

in Guyana for end use by business and residential consumers in Guyana, or (ii)

used to produce power in Guyana for end use by business and residential customers

in Guyana, the amounts for which shall be based upon independent, verifiable

govetmnent statistics. Crude Oil, refined products, petrochemicals or fuel for power

generation that are exported from Guyana shall not be considered part of Crude Oil

Domestic Demand.



(b)



The Contractor shall, in any Year, have a right to supply out of Contractor's Lifting

Entitlement the proportion of the Crude Oil requirements of Guyana that the

quantity produced from the Contract Area bears to the total production at the time

in Guyana to the extent that such requirement is not satisfied from any contract

entered into prior to the date of commencement of production from the Contract

Area. For the purpose of this paragraph, the term "the Crude Oil requirements of

Guyana" means the amount by which, in any Year, Crude Oil Domestic Demand

exceeds the Minister's total entitlement to all Crude Oil produced in Guyana. The

Contractor shall give the Minister notice on or prior to April 1 of the Calendar Year

preceding the Calendar Year in respect of which Contractor wishes to exercise the

aforesaid right and the term of the supply shall be on a Calendar Year basis unJess

otherwise agreed. Notwithstanding the foregoing the Contractor shall have the right

to supply the total amount calculated pursuant to the foregoing provisions.



(c)



The price payable for the sale of Crude Oil pursuant to this Article shall be paid in

United States dollars (or other currency as may be agreed) at a place specified by

the Contractor within thirty (30) days of receipt of the Contractor's invoice by the

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Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



Minister, and shall be determined in accordance with Article 13, failing which

Contractor' s obligations in respect of the Domestic Supply Obligations of this

Article 17 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 Crude Oil during the period

of default in payment. Contractor shall recover any am ount due and unpaid by the

Government, plus interest at the Agreed Interest Rate, from the Govermnents

Lifting Entitlement of Crude Oi I.



17.2



(d)



Any sale of Crude Oil as provided for in Article 17.l (a)- (c) shall occur at the

Delivery Point or such other point as the Minister and the Contractor may mutually

agree.



(e)



All tenns and conditions for the sale of Crude Oil pursuant to this Article, shall be

specified in a contract of sale entered into between the Minister and Contractor.



Terms tor Natural Gas.

(a)



If the Natural Gas requirements of the domestic market in Guyana (the "Natural

Gas Domestic Demand") exceed the Minister's total entitlement from all Natural

:::::J.~ production in Guyana, then the Ccntractor shall be obliged tof;et~er \·.':i.:l-. -J.ny

third parties which produce Natural Gas in Guyana, to supply and sell a volume of

Natural Gas to be used for such NatlL·al Gas Domestic Demand in Guyana,

calculated on the basis of the ratio which the Contractor's Lifting Entitlement to

Natural Gas bears to the sum of Contractor's Lifting entitlement plus the total

entitlement of all other producers in Guyana subject to Article 17.2(c). The volume

ofNatural Gas which the Contractor shall be required to sell under this Article shall

not exceed the Contractor's share of Profit Petroleum. The Minister shall give the

Contractor notice on or prior to April 1 of the year preceding the Calendar Year in

which the Government will have the said requirement and the term of the supply

shall be on a Calendar Year basis unless otherwise agreed.

For the purpose of this Agreement, Natural Gas Domestic Demand shall consist of

those quantities of Natural Gas used for domestic residential, commercial and

industrial consumption, including fuel used for domestic power generation

determined by the Minister before the submission of a Development Plan,

including a forecast of the reasonable variation in demand in the future. Natural

Gas liquefied or compressed in Guyana for export or used as feedstock for

petrochemical exports, such as methanol and fertilizer, shall not be considered part

ofNatural Gas Domestic Demand.

Any sales of Natural Gas to the domestic market shall be priced at the net-back

price of such Natural Gas in the production Field, which shall be calculated as the

market destination price where the Natural Gas would be sold minus: transport,

marketing, processing, compression, liquefaction and any other fee or tariff paid to

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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



take the gas from the Field to the destined market. In the event of a failure to reach

agreement on the price, volume and/or terms of sale, either Party may submit the

dispute for sole expert determination pursuant to Article 26.3 .

(b)



The Contractor shall, in any Year, have a right to supply out of Contractor's Lifting

Entitlement the proportion of the Natural Gas requirements of Guyana that the

quantity produced from the Contract Area bears to the total production at the time

in Guyana to the extent that such requirement is not satisfied from any contract

entered into prior to the date of commencement of production from the Contract

Area. For the purpose of this paragraph, the tem1 "the Natural Gas requirements of

Guyana" means the amount by which, in any Year, Domestic Demand exceeds the

Minister's total entitlement to all Natural Gas produced in Guyana. The Contractor

shall give the Minister notice on or prior to April 1 of the Calendar Year preceding

the Calendar Year in respect of which Contractor wishes to exercise the aforesaid

right and the term of the supply shall be on a Calendar Year basis unless otherwise

agreed. Notwithstanding the foregoing the Contractor shall have the right to supply

the total amount calculated pursuant to the foregoing provisions.



(c)



The price payable for the sale of Natural Gas pursuant to this Article shall be paid

in United States dollars (or other cmrency as may be agreed) at a place specified by

the Contractor witL~r. -thirty (30) days of receipt of tbe Co-::t:-::ctor's invoice by the

Minister, and shall be determined in accordance with Article 17.2(a), failing which

Contractor' s obligations in respect of the Domestic Supply Obligations of this

Article 17 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 Natural Gas during the

period of default in payment. Contractor shall recover any amount due and unpaid

by the Government, plus interest at the Agreed Interest Rate, from the

Governments Lifting Entitlement ofNatural Gas.



(d)



Any sale of Natural Gas as provided for in Article 17.2(a) - (c) shall occur at the

Delivery Point or such other point as the Minister and the Contractor may mutually

agree.



(e)



All terms and conditions for the sale ofNatural Gas pursuant to this Article, shall

be specified in a contract of sale entered into between the Minister and

Contractor.



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Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 18 - Guyana Resources

18.1



Jn the conduct of Petroleum Operations pursuant to this Agreement the Contractor shall

require that the Operator give preference to:

(a)



the purchase of Guyanese goods and materials, provided that such goods and

materials are available on a timely basis of the quality and in the quantity required

by Operator at competitive prices; and



(b)



the employment of Guyanese Sub-Contractors in so far as they are commercially

competitive and satisfy the Operator's financial and technical requirements and

meet the requirements of Article 18.1 (a).



18.2



The Operator shall establish appropriate tender procedures for the acquisition of goods.

materials <:~.nd services which shall ensure that Guyanese suppliers and Sub-Contractors are

given adequate opportunity to compete for the supply of goods and services.



18.3



Within ninety (90) days after the end of each Calendar Year the Operator shall provide the

Minister with a report outlining its achievements Iri ·utilising Guyanese resources durmg

that Calendar Year.



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Petroleum Agreement

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Article 19 - Employment and Training

19.1



Subject to the requirements of any Jaw relating to immigration, Govenunent shall provide

the necessary work permits and other approvals required by the Contractor for employment

of Expatriate Employees in Guyana for the purpose of Petroleum Operations.



19.2



Without prejudice to the right of the Contractor to select employees and determine the

number thereof in the conduct of Petroleum Operations, the Operator shall employ and

Sub-Contractors shall employ Guyanese citizens having appropriate qualifications and

experience whenever and wherever possible, .



19.3



During each year of the tenn of the Petroleum Prospecting License, or any renewal

thereafter the Contractor shall pay to GGMC the amounts of:

Initial Period:

First Renewal Period:

Second Renewal Period:



Thirty thousand United States Dollars ($30,000US$.)

Thirty thousand United States Dollars ($30,UOOUS$.)

Thirty thousand United States Dollars (30,000US$.)



Payments under this Article 19.3 shall be paid directly into bank accounts held and

controlled by the GGMC as no~~:5~ c· in writing. The purposes of these payments are noted

hereunder;



19.4



(a)



to provide Guyanese personnel nominated by GGMC with on-the-job training in

Contractor's operations in Guyana and overseas and/or practical training at

institutions abroad, particularly in the areas of logistical planning for undertaking

Petroleum Operations, seismic acquisition and interpretation, economic analysis,

petroleum accounting and contract administration;



(b)



to send qualified Guyanese personnel selected by GGMC on courses at universities,

colleges or other training institutions selected by GGMC;



(c)



to send Guyanese personnel selected by GGMC to conferences and semmars

related to the petroleum industry;



(d)



to purchase for GGMC advanced technical books, professional publications,

scientific instrun1ents or other equipment required by GGMC.



During each year of the term of the Petroleum Prospecting Licence, or any renewal

thereafter, the Contractor, in accordance with its internal applicable policy, shall fully

cover the cost of air travel, tuition and registration fees , suitable lodging and stipend for

daily living and upkeep, to provide training to one suitably qualified Guyanese selected by

the GGMC to pursue a Masters Degree in Oil and Gas E&P progranune in the "Centro

Superior de Formacion" in Madrid, Spain. Candidates for this Master Degree must be

university qualified and must pass the registration requirements. In the event that the

Page 48



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



capacity of "Centro Superior de Formacion" is full in any given year, then the Contractor

will either propose an alternate university in Europe or United States, to provide the

training or will provide to have simultaneous training for more than one candidate in a

different year.



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Petroleum Agreement

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Article 20 - Rights to Assets and Insurance

20.1



Rights to Assets

(a)



The Contractor shall have the right to use free of charge assets previously installed

by the Contractor in relinquished areas which are required for the Petroleum

Operations in the remaining portion of the Contract Area provided that in the event

of re-licencing of the relinquished area, such licence shall exclude the aforesaid

assets.



(b)



Subject to Article 20.1 (c) upon expiry or termination of this Agreement in

accordance with the provisions hereof, the Contractor shall upon notification by

GGMC pursuant to Article 20.1 (d)(i):



(c)



(i)



deliver to the Minister, free of charge, in good order and condition, (fair

wear and tear excepted) all installations, works, pipelines. pumps, casings,

tubings, engines and other equipment, machinery or assets of a fixed or

pem1anent nature constructed, used or employed by the Contractor or the

Operator in the Contract Area;



(ii)



deliver to the Mimster, free of charge, any fixed assets relating to Petroleum

Operations outside the Contract Area and movable assets owned by the

Contractor or Operator and used or employed in connection with Petroleum

Operations and located in Guyana for which costs have been fully recovered

in accordance with Annex C herein; where costs have not been fully

recovered the provisions of Article 20.1 (b )(iii) shall apply;



(iii)



sell to the Minister any other assets owned by the Contractor or Operator

and used or employed by the Contractor or Operator in the Contract Area or

elsewhere in Guyana in connection with Petroleum Operations at a price

equivalent to the unrecovered cost of the assets.



The above provisions of Article 20.1 (b) shall not apply to:

(i)



assets which are still required by the Contractor or Operator for use in

respect of an area in Guyana subject to another petroleum agreement at the

time of expiry or termination of this Agreement;



(ii)



equipment and other assets rented or leased by Contractor in Guyana;



(iii)



equipment and other assets rented or leased by Contractor and imported in

Guyana for use in Petroleum Operations and subsequently exported

therefrom;



(iv)



equipment and any other assets owned or leased by a Sub-Contractor;

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(d)



(v)



household goods and vehicles which are the personal prope11y of employees

of the Contractor and Sub-Contractor;



(vi)



equipment and assets otherwise not owned by Contractor or Operator.



The Contractor shall notify the Minister of all assets acquired as provided in section

4 of Annex C to this Agreement.

(i)



At least six (6) Calendar Months before expiry of the term of this

Agreement, within three (3) Calendar Months following notice of

termination of this Agreement or promptly following cancellation of all

Licences, GGMC shall notify the Contractor of the assets to be delivered or

sold to the Government.



(ii)



Subject to the terms and the provisions of this Article, the Contractor shall

not, within one (1) year of the date upon which it estimates that termination

of this Agreement will occur, remove from the Contract Area or sell any

assets of a fixed or permanent nature which might be deliverable to the

Government under this Article without the consent of the Minister, such

consent not to be unreasonably withheld.



(iii)



Abandonment Programme and Budget

(aa)



Within sixty (60) days after the expiration of the tenn of this

Agreement or the sooner relinquishment of some or all of the

Contract Area, the Contractor shall carry out to the Minister's

satisfaction an abandonment programme agreed with the Minister

for all installations and pipelines provided by Contractor under this

Agreement that the Minister elects not to have delivered up to him

in accordance with Article 20.1 (b). With respect to the area being

relinquished and/or facilities thereon, such abandonment programme

shall comply with and be limited to internationally accepted

standards prevailing at the time of abandonment.



(bb)



Concurrent with the submission of a Development Plan as provided

in Article 8.4, the Contractor shall submit for the Minister's

approval a proposed abandonment programme and budget covering

all such installations and pipelines provided by Contractor under this

Agreement. The abandonment programme and budget may be

revised from time to time with the agreement of the Minister to

account for any changes in the Development Plan.



(cc)



The Minister shall act without unreasonable delay in reaching a

decision on the Contractor's proposal under Article 20.l(d)(iii)(bb)

and may approve or modify or impose conditions thereon . Before

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modifying or imposing conditions on the proposal, the Minister shall

notify the Contractor of the proposed modification or conditions and

give the Contractor the opportunity to make written representations

within sixty (60) days thereafter about the proposed modifications or

conditions. After taking into consideration such representations the

Minister and the Contractor shall make their best efforts to mutually

agree on the proposed modifications or conditions of the

abandomnent programme and budget In the event that the Minister

and Contractor cannot mutually agree on the proposed abandomnent

programme and budget, either Party may by written notice to the

other Party propose that the dispute be referred for determination in

accordance with the provisions of Article 26.

(dd)



In the event that the Contractor does not present a timely proposal to

the Minister under Article 20.1(d)(iii)(bb) the Minister after giving

thirty (30) days notice to the Contractor of his intention to do so,

may prepare an abandonment programme and budget for the

Contract Area if the Contractor does not present a proposal by the ·

end of the thirty (30) day period. When the Minister has so prepared

the abandonment programme and budget, it shall have the same

effect as i+ it h?ri hP.en submitted by the Contractor 1.nr1 approved by

the Minister.



(ee)



Contractor shall have the right on an annual basis to propose a

revised abandomnent prograrmne and budget Such proposal shall

be subject to the approval process in Article 20.1(d)(iii)( cc ). Any

revisions to the abandonment programme and budget shall result in

a revision to the guarantee referred to in Article 20.1 (d)(iii)(hh).



(ff)



All funds required to carry out the approved abandonn1ent

programme shall be made available by Contractor when the costs for

abandonment are incurred.



(gg)



All costs included in the approved abandonment progra!11ille and

budget shall be recoverable as operating costs on a unit of

production basis commencing during the period when the

abandonment programme and budget is approved. The amount to be

recovered in a respective period shall be calculated by dividing the

approved abandonment budget by the estimated ultimate recoverable

reserves, which may be revised from time to time based upon the

actual performance of the Field(s) and multiplying the result by the

units produced in the period .



(hh)



Contractor shall deliver to the Minister within seven (7) days after

the date the abandonment programme and budget are approved an

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undertaking from Contractor·s immediate parent company stating

that such parent company shall ensure provision of financial and

technical resources necessary to conduct the approved abandonment

programme. The amount of the financial unde11aking shall be equal

to the amount recovered under Article 20.1 (d)(iii)(gg) less any

amounts spent under the approved abandonment programme.

(ii)



20.2



Notwithstanding the provisions of Article 20.1 ( d)(iii)(ff) , in the

event the Minister elects to have all or a portion of the facilities

delivered up to him in accordance with Article 20.1 (b), the

Contractor shall pay the Minister at the time of transfer the amounts

stipulated in the latest approved abandonment budget for the

transferred facilities. Upon transfer and receipt of the funds, the

Minister shall assume all responsibilities for the transferred facilities

and their abandonment and shall hold the Contractor harmless

against any liability with respect thereto accruing after the date of

such transfer to the Minister.



(iv)



Subject to Article 20.1 (c), in the event that the Government acquires any

assets pursuant to this Article, the Govemment shall assume all liabilities,

'Nith r~sp ~ct to such assets, arising from apd qfter the date of acquisition an~

shall not direct the Contractor to remove or abandon any such assets

pursuant to regulation 9 (l)(a) of the Regulations. The Government shall

indemnify and hold Contractor harn1less for any and all costs and claims

which may arise from the use or abandonment of any asset from and after

the date of acquisition by the Government.



(v)



Assets not acquired by the Government pursuant to this Article may be sold

or otherwise freely disposed of by the Contractor subject to Article 21.2 and

the Regulations.



Insurance

(a)



The Contractor shall effect at all times during the term of this Agreement, insurance

as required by applicable laws, rules, and regulations and of such type and in such

amount as is customary in the international petroleum industry in accordance with

good oil field practice appropriate for Petroleum Operations in progress in respect

of but not limited to:

(i)



loss or damage to all assets used in Petroleum Operations;



(ii)



pollution caused in the course of Petroleum Operations for which the

Contractor or the Operator may be held responsible;



(iii)



loss or damage to property or bodily injury suffered by any third party in

the course of Petroleum Operations for which the Contractor may be liable

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to provide an indemnity pursuant to Article 2.4;

(iv)



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

Petroleum Operations.



To the extent pem1itted by applicable laws, rules and regulations, such insurance

may be provided through Contractor's affiliate insurance company.

(b)



Subject to the Minister' s approval , which shall not be unreasonably withheld, the

Contractor, notwithstanding the provisions of Article 20.2(a), shall have the right to

self-insure all or part of the aforementioned insurances in Article 20.2(a).



(c)



The Contractor shall require the Operator to carry and to endeavour to have its

Sub-Contractors carry insurance of such type and in such amount as is customary in

the international petroleum industry in accordance with good oil field practices.



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Article 21 - Import Duties

21.1



The Contractor, and the Sub-Contractors engaged in Petroleum Operations shall be

pennitted to import, free of duty, VAT or all or any other duties, taxes, levies or imposts,

all equipment and supplies required for Petroleum Operations including but not limited to

drill ships, platfom1s, vessels, geophysical tools, communications equipment, explosives.

radioactive sources, vehicles, oilfield supplies, lubricants, consumable items (other than

foodstuffs or alcoholic beverages or fuel), as well as all items listed on Annex D. The

aforementioned items, including but not limited to the items listed on Annex D, shall be

deemed approved and certified by the Chief Inspector to be for use solely in carrying out

Petroleum Operations. The Contractor shall give prior notification to the Minister of

Sub-Contractors engaged in Petroleum Operations.





Subject to Article 21.1 , and for as long as this Petroleum Agreement remains in

force the Contractor and Sub-Contractors engaged in Petroleum Operations

hereunder shall be required to pay to the relevant authority excise tax on any fuel

imports, where such imports have been certified by the Chief Inspector to be used

solely in carrying out Petroleum Operations in any area within the Contract Area, at

a rate often percent (10%) or the prevailing rate, whichever is lesser.



21.2



Subject to Article 20, any of the items imported into Guyana may, if no longer required for

Petroleum Operations here~nder, be freely exported at any time by the importing party,

without the payment of any export duty or impost; provided, however, that on the sale or

transfer by the importer of any such item to any person in Guyana (other than the

Government) import duty shall be payable by the impmier on the value thereof at the date

of such sale or transfer as determined by the Customs and Excise Department in

accordance with their applicable rules.



21.3



Each Expatriate Employee, who have been assigned to work in Guyana for the Operator or

its Sub-Contractors shall be pern1itted, subject to the limitations and conditions set out in

the Customs Act, to import into Guyana free of import duty and taxes within six (6)

months on first arrival his personal and household effects including one (1) motor vehicle,

provided, however, that no property so imported by the employee shall be sold by him in

Guyana except in accordance with Government regulations and upon the payment of the

prescribed customs duties. Any importation or replacement of motor vehicles by

Expatriate Employees shall be a matter for consultation with the Minister.



21.4



Each Expatriate Employee shall have the right to export from Guyana, free of all duties

and taxes, and at any time, all of the items imported under Article 21.3.



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Article 22 - Foreign Exchange Control

22.1



Each party comprising the Contractor shall , during the term of this Agreement have the

right:

(a)



to retain abroad all foreign exchange obtained from the exp01i sales of Contractor's

Petroleum and to remit and retain abroad all foreign exchange earned from sales of

Petroleum or assets in Guyana;



(b)



to finance Petroleum Operations hereunder in any currency through any

combination of equity, inter-affiliate or third party loans, inter-company open

accounts, or production payments but no payments of principal or interest in

respect thereof shall be made from any source in Guyana other than the bank

accounts referred to in Article 22.1 (c);



(c)



to open and maintain bank accounts denominated in Guyanese dollars and/or

United States dollars in Guyana and freely dispose of the sums deposited therein

without any restriction; provided the said accounts are credited only with sums

deposited in foreign currency or with the proceeds of the sale of foreign currency

oeing credits relating to or derived from retroleum Operations;



(d)



to ')pen and maintain bank accounts in any foreign currency outside Guyana '.vhich

may be credited without restriction and freely dispose of any sums deposited

therein without restriction and without any obligation to convert into Guyana

currency any part of the said amounts, save that such accounts shall not be credited

with the proceeds of the sale of any Guyanese currency without the consent of the

Bank of Guyana;



(e)



to purchase and, with the approval of the Bank of Guyana, to sell Guyanese

currency, through the authorized banks, without discrimination, at the rate of

exchange determined by the Bank of Guyana for authorized banks at the time of

purchase or sale.



22.2



Expatriate Employees engaged in Petroleum Operations shall be subjected to all Exchange

Control Regulations that may be in effect from time to time. Expatriate Employees shall

be entitled to remit freely abroad any portion of their salaries paid in Guyana and any

investment income that may be earned on the portion of their salaries paid in Guyana.



22.3



Where any party comprising Contractor, Affiliated Company or Sub-Contractor by notice

in writing to the Commissioner General, Guyana Revenue Authority has guaranteed the

full and proper discharge by an Expatriate Employee engaged in Petroleum Operations of

his liability to income tax under the laws of Guyana, that Expatriate Employee shall be

entitled to receive payment of the whole or any part of his remuneration in the country in

which he is nonnally resident.



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Article 23 -Accounting and Audits

23.1



The Contractor shall be responsible for maintaining accounting records relating to

Petroleum Operations under this Agreement in accordance with the Accounting Procedures

set out in Annex C hereto .



23.2



The Minister shall have the right to audit the acco unting records of the Contractor in

respect of Petroleum Operations in accordance with Accounting Procedure.



23.3



Nothing in this Article shall be construed as limiting the right of Govenunent or any

officer of Government pursuant to any statutory power to audit or cause to be audited the

books of the Contractor.



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Article 24 - Force Majeure

24.1



Any non-performance or delay in performance, wholly or in part, by any Patiy hereto or

any of its obligations under this Agreement or in fulfilling any condition of any Licence

granted to such Party or in meeting any requirement of the Act or Regulations and any

Licence issued thereunder, shall, except for the payment of monies due by Government to

Contractor or monies due to Govemment under section 43 (4) of the Act (unless such

failure to pay is prevented by any action of the Govemment), not be a breach of this

Agreement, the Licence or the Act and Regulations if and to the extent that such

non-perfonnance or delay, wholly or in part, is caused by Force Majeure as defined in this

Article.



24.2



In this Article, the term "Force Majeure" shall mean any event beyond the reasonable

control of the Party claiming to be affected by such event which has not been brought

about at its instance and which has caused such non-performance or delay in performance

and, without limitation to the generality of the foregoing, includes acts of God, natural

phenomena or calamities, earthquakes, floods, tsunamis, epidemics, quarantines, fires,

wars declared, or undeclared, hostilities, invasions, blockades, riots, strikes, insurrection,

civil disturbances, mining of the seas, piracy, intemational disputes affecting the extent of

th~ Sont;·:::ct Area and any govemmental J.ct:on or inaction, that would preve::: :~1c

performance of an obligation or ability of the Contractor to export Petroleum (except as

provided in Article 14.5).



24.3



Where any Party is claiming suspension of its obligations on account of Force Majeure,

such Party shall promptly notify the other Parties in writing of the occurrence thereof

giving particulars of the Force Majeure and obligations affected. Each Party shall promptly

notify the other Pmiies as soon as the Force Majeure has been removed or no longer

prevents it from carrying out its obligations hereunder.



24.4



Where a Party is prevented from exercising any rights or performing any obligations under

this Agreement due to a Force Majeure, the Minister hereby agrees pursuant to section 43

(3) of the Act, subject to the proviso therein, that a period of additional time necessary for

restoration of damages caused during a Force Majeure delay shall be added to the time

allowed under this Agreement for the performance of such obligation and for the

performance of any obligation or the exercise of any right dependent thereon and to the

term of any Licence issued pursuant to this Agreement. In the event the Parties cannot

agree on whether the occurrence of the event in question is considered a "force majeure"

event, or if the Minister does not agree an additional time period should be added, pursuant

to section 43(3) of the Act, then a Party may refer the dispute to Arbitration pursuant to

Article 26, to determine the nature of the "force majeure" event and its influence on the

contractual obligations of the Party concemed. The Contractor shall have the option of

terminating this Agreement without any further obligation if Force Majeure exceeds one

(1) year.



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24.5



Without prejudice to the other provisions of this Article, the Parties shall meet to discuss

the consequences of the Force Majeure and the course of action to be adopted in the

circumstances.



24.6



The Government shall not invoke Force Majeure due to any order, regulation or written

directive of the Government which affects the Government ' s perfom1ance of its

obligations under this Agreement.



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Article 25 -Assignment

25 .1



Subject to the regulation 20 of the Regulations, any party comprising the Contractor shall

not assign , or transfer in whole or in part, any of its rights, privileges, duties or obligations

under this Agreement, or any Licence issued pursuant to this Agreement, to any person,

firm or corporation, without the prior written consent of the Minister.



25.2



The Minister shall give his consent under Article 25.1 where:

(a)



the assignment or transfer will not adversely affect the performance or obligations

under this Agreement;



(b)



the assigmnent is not contrary to the interests of Guyana; or



(c)



subject to (a) above, the assignment or transfer is to an approved Affiliated

Company.



25.3



In the event that the Minister does not give his consent or does not refuse a request for an

assignment or transfer by any party comprising Contractor within sixty (60) days of receipt

of such rec;_"Je ~~, consent shall be deemed tc have tc~:: ~iven by the Minister.



25.4



Any assignment made pursuant to this Article shall bind the assignee to all the terms and

conditions hereof and the terms and conditions of any Licence issued pursuant to this

Agreement unless otherwise agreed, and as a condition to any assignment, the assignee

shall provide an unconditional undertaking to the Minister to assume all obligations by

any party comprising the Contractor under this Agreement or any Licence issued pursuant

to this Agreement.



25.5



An application for assignment or transfer of a Licence shall be made in accordance with

Form E of the schedule specified in the Regulations. The applicant shall submit such

additional infonnation relating to the intended assignee which the Minister may reasonably

require to enable him to dispose of the application.



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Article 26 - Sole Expert Determination and Arbitration

26.1



The Parties shall make reasonable efforts to resolve amicably all Disputes by negotiation.

A notice of the existence of a Dispute shall be given by a Party to another Pa.Jiy in

accordance with Article 33 . In the event that no agreement is reached within sixty (60)

days after the date on which a Patiy notifies the other that a Dispute exists, or such longer

period as specifically agreed by the Parties, any Party shall have the right to have such

Dispute detern1ined by arbitration or a sole expert as provided for in this Article 26.



26.2



Any claim, demand, cause of action, dispute, or controversy arising out of or in c01mection

with this Agreement, including any question regarding its formation, existence, validity,

enforceability, performance, tern1ination, or alleged breach ("Dispute") which catmot be

settled amicably by negotiation shall be resolved by binding arbitration or by a sole expert

pursuant to Article 26.3 , Article 26.4 or Article 26 .6, whichever applies.



26.3



An y matter required to be referred to a sole expert for detern1ination under this Agreement,

including under Articles 5.4, 8.5, 12.2(a)(i), 13.4, and any other matter which the Parties

expressly agree in writing to refer to a sole expert, shall be referred to a sole expert for

determination, by a Party giving notice to such effect pursuant to Article 33. The sole

expert shall be appointed by agrec:r.:.:nt between the Parties, and in th-: C'.·ent the Parties fail

to agree on the sole expert within thirty (30) days after receipt of the written notice from

any Party proposing the appointment of a sole expert, such expert shall be :.tppointed by the

International Centre for Expertise of the International Chamber of Commerce (" ICC").A

sole expert shall be an independent and impartial person of international standing with

relevant qualifications and experience. The expert, once appointed, shall have no ex parte

communications with any of the parties to the Dispute concerning the expert determination

or the underlying Dispute. The Parties shall cooperate fully in the expeditious conduct of

such expert determination and to provide the expert with access to all facilities, books,

records, documents, information and personnel necessary to make a fully informed

decision in an expeditious manner. The sole expert shall act as an expert and not as an

arbitrator or mediator, and shall endeavour to resolve the Dispute within thirty (30) days of

his appointment, but no later than sixty (60) days after his appointment. The sole expert

shall decide the manner in which any determination is made, but in any event shall accept

oral and/or written submissions and arguments from the Parties. All correspondence,

documentation and information provided by a Party to the sole expert shall be copied to the

other Party, and any oral submissions to the sole expert shall be made in the presence of all

Parties and each Party shall have a right of response. The decision of the sole expert on

matters referred to him shall be final and binding on the Parties. The Parties shall refer any

Dispute arising out of or relating to such expert decision, including enforcement thereof, to

arbitration pursuant to Article 26.4 or Article 26.6, whichever applies.



26.4



Subject to the provisions herein, the Parties hereby consent to submit to the International

Centre for the Settlement of Investment Disputes (ICSID) any Dispute relating to or arising

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out of this Agreement to arbitration pursuant to the rules of the Convention on the

Settlement of Investment Disputes between States and Nationals of Other States

(hereinafter referred to as the "Convention"). It is hereby stipulated that the transaction to

which this Agreement relates is an investment within the meaning of the Convention. The

Government hereby irrevocably waives any claim to immunity for itself, its agencies, its

enterprises, and any of its assets with regard to any sole expert determination or arbitration

pursuant to this ArtiCle 26 and to any proceedings to recognise or to enforce this Atiicle 26

or any proceeding to recognise or enforce a sole expert detennination, or an arbitral award

rendered in an arbitration thereunder. Without prejudice to the generality of the foregoing,

the waiver of immunity shall include immunity from service of process and immunity from

jurisdiction of any competent court or any arbitration tribunal, and immunity of any of the

Government's, its agencies', or its enterprises' property from execution of any sole expert

determination or arbitration award or judgment entered thereon.

26.5



If the Secretary-General of ICSID refuses to register a request for arbitration or if a

tribunal of arbitrators constituted pursuant to Article 26.4 above detem1ines t~~laa dispute

is outside ofiCSID'sjurisdiction, either Party may request arbitration ofthe disp te before

ission on

three arbitrators pursuant to the Arbitration Rules of the United Nations Co

International Trade Law (UNCITRAL). The American Arbitration Associa ion shall

administer the arbitration under the UNCITRAL Arbitration Rules and shall act as the

appointing auth:;rit; when the UNCITRAL Arb~tra~ion Rules call for an app0i.1ting

authority.



26.6



The seat of the arbitration proceedings pursuant to this Article 26 shall be Washington DC,

United States of America, however, hearings may be held at such other place as the Parties

may agree to in writing. The arbitration proceedings shall be conducted in the English

language.



26.7



The fees and expenses of a sole expert (as well as the charges for the use ofiCSID or other

facilities) shall be borne equally by the Contractor and the Goverrunent. Each Party shall

bear any other expenses it incurs in connection with expert or conciliation proceedings. In

the case of arbitration proceedings, the arbitrators shall assess the expenses incurred by the

Parties, the fees and expenses of the arbitrators, the charges for the use of the facilities and

any other costs related to the arbitration and shall decide by whom such costs shall be paid

in their award. The arbitral award shall be made and payable in dollars of the United

States of America, free of any tax or other deduction. The award shall include interest,

unless the arbitration tribunal determines that it is not appropriate. Interest shall run from

the date of any breach or violation of this Agreement. Interest shall continue to run from

the date of award until the award is paid in full. Interest shall be calculated at the Agreed

Interest Rate. The arbitrator(s) shall render a decision within six (6) months after having

been confirmed, or such other time as the Parties may agree.



26.8



The decision of a majority of the arbitrators shall be final and binding on all the Parties and

judgment on the award may be entered by any court of competent jurisdiction.



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Article 27 -Applicable Law

27.1



This Agreement shall be governed by, interpreted and construed in accordance with the

laws of the Republic of Guyana, and, consistent with such rules of international law as may

be applicable or appropriate, including the generally accepted customs and usages of the

international petroleum industry.



27.2



The parties comprising the Contractor agrees to abide by the laws, regulations, orders,

directives and notifications of Guyana which shall also apply to its Affiliated Companies

and Sub-Contractors engaged in Petroleum Operations in Guyana.



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Article 28 - Protection of the Environment

28.1



In accordance with the Environmental Protection Act, 1996, the Contractor shall obtain an

environmental authorization as required from the Environmental Protection Agency and

comply with the provisions of that Environmental Protection Act in relation to any activity

of this Agreement that is governed by that Environmental Protection Act.



28.2



The Contractor is precluded from initiating any exploration or development activity on

those areas outside of the Contract Area which the Enviro1m1ental Protection Agency may

determine to be sensitive or protected.



28.3



In furtherance of regulation 6 of the Regulations in the conduct of Petroleum Operations

the Contractor shall take necessary and adequate precautions, in accordance with good

international petroleum industry practice, against pollution and for the protection of the

environment and the living resources of the rivers and sea.



28.4



If the Contractor's failure to comply with the provisions of Article 28.1 results in pollution

or damage to the environment, riverine or marine life or otherwise, the Contractor shall

take all reasonable measures in accordance with good international petroleum industry

practice to remed y the failure and the effects thered and sl:::~l where pollution occurs treat

or disperse it in an environmentally acceptable manner. The Contractor shall not be

obligated to remedy vr clean up pollution or environmental damage of any type that

existed prior to the commencement of Petroleum Operations by the Contractor or arises as

a consequence of pre-existing environmental conditions.



28.5



The Contractor shall notify the Minister forthwith in the event of any emergency or

accident arising from Petroleum Operations affecting the environment and shall take such

action as may be prudent and necessary in accordance with good international petroleum

industry practice in such circumstances.



28.6



If the Contractor does not act promptly pursuant to Article 28.4 so as to control or clean up

any pollution within a reasonable period specified by the Minister, the Minister may, after

giving the Contractor reasonable notice in the circumstances, take any actions which are

necessary in accordance with good international petroleum industry practice and the

reasonable costs and expenses of such actions shall be borne by the Contractor.



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Article 29 -Termination and Cancellation

29.1



This Agreement shall be deemed to have been tem1inated if the Petroleum Prospecting

Licence granted to the Contractor pursuant to Article 3 and every Petroleum Production

Licence granted to the Contractor under Article 8 has either expired or, under and in

accordance with the Act and any relevant provision of this Agreement, been surrendered

by the Contractor or lawfully cancelled by the Minister pursuant to section 42 of the Act

but save as aforesaid, shall continue in full force and effect so long as the Contractor

continues to hold any of the said Licences.



29.2



Should any issue arise between the Parties as to whether the Contractor is in default and

such issue cannot be amicably settled by consultation between the Parties and a dispute

thereon is referred for resolution pursuant to Atiicle 26, this Agreement and the said

Licences shall continue in force pending resolution of such dispute.



29.3



Pursuant to section 42 of the Act, the Minister shall not cancel a Licence on the basis of

default unless the Minister has, by notice served on the licensee, given not less than thirty

(30) days notice of such intention and the basis of default. In the notice the Minister shall

specify a reasonable date, not less than sixty (60) Business Days, before which the licensee

me:/ submit a written response or :;:eme.:y :he default.



29.4



On t(.rrnination of this Agreement, or cancellation of any Licence as aforesaid, the rights

and obligations of the Parties shall cease by the termination or cancellation, but such

tennination, or cancellation shall not affect any right of action existing or liabilities

incurred by a Party before the date of termination or cancellation, and any legal

proceedings that might have been commenced or continued against a Party may be

commenced or continued against it.



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Article 30 - Effective Date

30.1



The Effective Date shall be IJ.j~



Hft+J 'lvl3 .



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Article 31 -Miscellaneous

31.1



The Government assures the Contractor that the Contract Area lies entirely within the

tenitorial limits of Guyana and that Guyana has sovereignty over such area. The

Government shall continue to asseti its right to the entire Contract Area and seek to resolve

cunent or future claims, if any, by other States that impugn any portion of the Contract

Area. The Government shall also use its best efforts to permit due observance of the tenns

and conditions of this Agreement by both Parties. Both Parties undetiake not to take any

action inconsistent with the terms and conditions of the Agreement



31 .2



This Agreement shall not be amended or modified in any respect except by written

agreement entered into by all the Parties which shall state the date upon which the

amendment or modification shall become effective.



31 .3



In the event of any conflict between any provisions in the main body of this Agreement

and any provisions in the Annexes, the provision in the main body shall prevail.



31.4



The headings of this Agreement are for convenience of reference only and shall not be

taken into account in interpreting the terms of this Agreement.



31.5



A reference to the singular in this Agreement includes a reference to the plural and vice

versa.



31.6



The provisions of this Agreement shall inure to the benefit of and be binding upon the

Parties and their permitted assignees and successors in interest.



31.7



No waiver by any Party of any one or more obligations or defaults by any other Party shall

be construed as a waiver of any other obligations or defaults whether of a like or of a

different character.



31.8



This Agreement supersedes and replaces any previous Agreement or understanding

between the Parties whether oral or written on the subject matter hereof, prior to the date of

this Agreement.



Page 67

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 32 -Stability of Agreement

32.1



Except as may be expressly provided herein, the Govemment shall not amend , modify,

rescind, tem1inate, declare invalid or unenforceable, require renegotiation of, compel

replacement or substitution, or otherwise seek to avoid , alter, or limit this Agreement

without the prior writ1en consent of Contractor.



32.2



After the signing of this Agreement and in conformance with Article 15, the Government

shall not increase the economic burdens of Contractor under this Agreement by applying to

this Agreement or the operations conducted thereunder any increase of or any new

petroleum related fiscal obligation, including, but not limited to, any new taxes

whatsoever, any new royalty, duties, fees, charges, value-added tax (VAT) or other

imposts.



32.3



If at any time after the signing of this Agreement there is a change in the laws of Guyana

whether t.hTough the amendment of existing Jaws (including the hydrocarbons law, the

customs code or tax code) or the enactment of new laws or a change having the force of

law in the interpretation, implementation or application thereof (whether the change is

specific to the Agreement, the Contractor or of general application) and such change has a

materially adverse effect on the economic benefits, includin !_! those resulting from the

fiscal regime provided by this Agreement, accruing to the Contractor hereunder during the

term of this Agreement, th~ Government shall promptly take any and all affirmative

actions to restore the lost or impaired economic benefits to Contractor, so that Contractor

receives the same economic benefit under the Agreement that it would have received prior

to the change in law or its interpretation, application, or implementation. The foregoing

obligation shall include the obligation to resolve promptly by whatever means may be

necessary any conflict or anomaly between this Agreement and any such new or amended

legislation, including by way of exemption, legislation, decree and/or other authoritative

acts.



32.4



In the event that Contractor's overall economic benefits have been materially and

adversely affected by actions or changes as set forth above in Section 32.3, whether

directly or indirectly, Contractor may notify the Government in writing. The Parties shall

then meet within thirty (30) days after such notification with the objective of reaching

agreement on a remedial action to be taken by the Government, whether by exemption,

legislation, decree and/or other authoritative acts or by amendment to the terms of the

Agreement. If the Parties are unable to resolve their differences within one hundred

twenty (120) days after Contractor has issued the aforementioned notification, then the

Contractor may refer the matter to arbitration in accordance with Aliicle 26. In such case,

the arbitral tribunal is authorized to modify the Agreement to re-establish the economic

benefits under the Agreement to Contractor described in Article 32.3, or in the event this is

not possible, including for example where such dispute would not qualify or constitute a

legal dispute under Article 25 of the ICSID Convention, to award damages to Contractor

that fully compensate it for the loss of economic benefits under the Agreement, both

historical and future losses.

Page 68



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Article 33 - Notices

33.1



All notices and other communications to be given under this Agreement shall be deemed to

have been made properly if delivered in person in writing, mailed with charges prepaid or

sent by facsimile, by one Party to the other at their respective addresses in Guyana as set

forth below and copied to their overseas addresses. Any such notice or communication

given as aforesaid shall be deemed to have been given and received at the time of delivery

(if delivered by hand or by courier) or at the time of receipt (if transmitted by facsimile):

The Minister Responsible for Petroleum

c/o Guyana Geology And Mines Commission

68 Upper Brickdam, Stabroek,

P.O. BOX 1028, Georgetown, GUY ANA.

Attention:

Commissioner, GGMC

Telephone

592-225-3047

Facsimile:

592-227-0084

Repsol Exploraci6n S.A.

c/o 157C Waterloo Srreet, North Cummingsburg, Georgetown, GUY ANA

And

2001 Timberlock Place, Suite 4000

The Woodlands, TX 77380, United States of America

Attention:

Jose A. Muril1as

Telephone:

592-226 1810

Facsimile:

..592-226 1825



33.2



Any Party may, by notice as provided hereunder to the other Parties and GGMC change its

address and other particulars for notice purposes.



IN WITNESS whereof the Parties have caused their duly authorised representatives to set their

hands at the City of Georgetown, in the Republic of Guyana in the presence of one another the day

and year first above written.

Signed by: The Minister Responsible For Petroleum



~5e~t·~n7~~{~e,~epublic of



Guyma.



His Excellency Donald Ramotar, President of the Republic of Guyana

(Minister Responsible For Petroleum)



@



·· ··· ··~· ·· ··



A



orised Company Officer/Director



~..s-t



A. -



A1V ll \' UA\J



REPJOL

Repsol Exploracion S.A. - Guyana

Page 69



Petroleum Agreement

Government of Guyana -Repsol Exploraci6n S.A.



ANNEX A

DESCRIPTION OF CONTRACT AREA

Description of area to be granted under Petroleum Pros pecti ng License pursuant to Articl e 3 of the

Petroleum Agreeme nt.

The area comprises approximately 6,525 square kilometres described herein consisting of graticular

blocks identified herein and shown on the Block Reference Map at Annex B.



Latitud e an dl ong1tu d e Measuremen t s are W es t an d N ort h res peetively

POINT No.



LATITUDE



LONGITUDE



1



so00.00' N

so00 .00' N

so00 .00' N



4o.oo· N



5r

5r

5r

5r

5r

5r



4o.oo· N



56° 55.00' w



35 .00' N



56° 55.00' w



35 .oo· N



56° 45.00' w



3o.oo· N



56° 45.00' w



3o.oo· N



56° 35 .00' w



2



3



25.oo· w

2o.oo· w

15.oo· w



11



r

r

r

r

r

r

r

r



12



r



15.00' N



56° 35 .00' w



13



15.oo· N



56° 40.00' w



14



r

r



1o.oo· N



56° 40.00' w



15



r



1o.oo· N



56° 45.00' w



16



6° 55 00' N



56° 45 .00' w



17



6° 55 .00' N



56° 50 .00' w



1S



6° 45.00' N



56° 50.00' w



19



6° 45.00' N



56° 55.00' w



20



6° 40 .00' N



56° 55 .00' w



21



6° 40.00' N



22



2o.oo· N



5r 1o.oo· w

5r 1o.oo· w



20.00' N



5yo 15.oo·w



3o.oo· N



5r



3o.oo· N



sr 2o.oo· w



35.oo· N



27



r

r

r

r

r

r



4o.oo· N



5r 2o.oo· w

5r 2o.oo· w



2S



yo 40.00' N



sr 25.oo· w



29



yo 45.00' N



5r 25.oo· w



4

5

6

7



s

9

10



23

24

25

26



5o.oo· N

5o.oo· N



Petro leum Agreement

Governm ent of Guyana- Repsol Exploraci6n S.A.



15.00' w

1o.oo· w

1o.oo· w



1s.oo· w



ANNEX A (cont'd)

DESCRIPTION OF CONTRACT AREA



The following five (5) minute by five (5) minute square graticular blocks describe the

area. The blocks as described are shown on the Block Reference Map at Annex B

Block Q



8,9,20,21,32-34,44-46,57-60,69-72,82-84,

94-96,107,108 ,119,120,131 '132, 143,144



Block R



49,61-63,73-77,85-89,97-101 '1 09-112,121-123,133-135



Block X



11 '12,23,24,35,36,47,48



BlockY



1-3,13, 14,25,26,37



*denotes part block



Petroleum Agreement

Government of Guyana- Repsol Exploraci6n S.A.



ANNEX 8

BLOCK REFERENCE MAP



Page Intentionally Blank

Block Reference Map in Next Page



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A .



I

85K



OOK



BTK



98K



99K



IOK



11K



IlK



13K



~K



~K



IlK



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11K



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1001<



101K



1021<



103K



To.tK



105K



106K



107K



108K



97L



10!1K



110K



111K



112K



113K



114K



115K



11el<



1171<



119K



111K



120K



101L



110L



121K



122K



123K



124K



125K



128K



1271<



1281<



129K



130K



131K



132K



121L



136K



137K



139K



139K 1 140K



~141K



J 142K



143K



T.... K



100



110



133K



""L



en.



IIIII.



ML



1071..



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108L



IL



121lL



130L



131l



132L



1.t1 l



U2L j



1.t3L



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8R



9R



10f!t



11R



12R



11R



20R



21R



23R



24R



31R



32R



33R



36R



39R



IOL



I1L



12L



~L



100L



101L



102L



103L



1041..



105L



10GL



111L



112L



11~



114L



11!!1.



t16L



117L



118L



122L



123L



124L



125L



128L



177L



129L



129l



133L



134L



135L



13SL



13TL



138L



139L



1..0L



120



1R



2R



lR



4R



6R



TR



240



13R



UR



16R



16R



19R



360



26R



26R



77R



28R



'



&,~~~--+--+--~~-i--.-~~--+--+~~~-+--~~~--+--+--~'1~-+~oo0

10



20



30



40



50



60



10



8Q



go



130



140



160



160



170



180



190



200



210



260



260



770



29Q



300



310



320



330



370



:sea



:50



40Q



.fTQ



.QQ



aa



.t.to



.cso



220

4



340



230



36Q



17R



-



470

410



:a



6



600

510

520

540

49R

50R

51R

52R

~

SSR

56R

67R4 seR

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5~ 570 sea

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49Q



110



120



S3Q



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570



580



110



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590



600



110



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54R



51R



S2R



S3R



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56R



I59R



57R



56R



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82R

83R

84R

760

790

800

820

83Q

84Q

73R

74R

76R

76R

77R

78R

79R

80~ 81R

740

760

770

730

810

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970



880



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120



930



~Q



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170

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990 1000 1010 1020 1030 1040 106Q

1060



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1100



1110



1120



1130



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108R



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11 1R



112R



r~:SR



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1300



1310



1320



121R



122R



123R



13

124R



125R



133Q



13AQ



1360



1360



1370



1380



1390



1.COQ



1-410



142Q



1430



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133R



134R



135R



136R



137R



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139R



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2X



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1-43R



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32Y



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Guyana Geology and Mines Commwllon

Bloc:kRelo.-eMop

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&



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scale:



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Kilometers



Petroleum Agreement

Government of Guyana- Repsol Exploraci6n S.A.



ANNEX C- ACCOUNTING PROCEDURE

This Annex is part of this Petroleum Agreement (hereinafter referred to as "the Agreement")



-



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



SECTION 1 -GENERAL PROVISIONS

1.1



Det1nitions

For the purpose of this Accounting Procedure the terms used herein which are defined in

the Agreement or in the Act shall have the same meaning when used in this Accounting

Procedure.



1.2



Documentation Required to be Submitted by the Contractor

(a)



(b)



1.3



The Contractor shall keep the accounts, operating records, reports and statements

relating to the Petroleum Operations:

(i)



in accordance with the terms of the Agreement and this Accounting

Procedure; and



(ii)



in such form as may be agreed from time to time between the Parties

which shall identify the categories of costs, expenses, expenditures and

credits classified in Sections 2 and 3 of this Annex.



Pcrsaant to (::) above, the Contractor shall make quarterly Statements relating

the Petroleum Operations including:



~o



(i)



Production Statement (see Section 5 of this Annex).



(ii)



Value of Production and Pricing Statement (see Section 6 of this Annex).



(iii)



Statement of Expenditures and Receipts (see Section 7 of this Atmex).



(iv)



Cost Recovery Statement (see Section 8 of this Annex).



(v)



End-of-Year Statement (see Section 9 ofthis Annex).



(vi)



Budget Statement (see Section 10 ofthis Annex).



Language, Units of Account and Exchange Rates

(a)



Accounts shall be maintained in Guyanese dollars and United States dollars;

however, the United States dollars accounts will prevail in case of conflict.

Barrels shall be employed for measurements of production of Crude Oil required

under the Agreement and this Annex. Standard cubic feet (scf) shall be employed

for measurements of production ofNatural Gas required under the Agreement and

this Annex. The language employed shall be English.



(b)



Should there be any gain or loss from exchange of currency, it will be credited or



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



charged to the accounts under the Agreement.



(c)

(i)



Amounts received and costs, expenses and expenditures made in

cunencies other than United States dollars or Guyanese dollars shall be

converted into United States dollars by using the relevant foreign

exchange rate published in the Wall Street Journal on the tirst business

day following the Month in which the relevant transaction occurred.



(ii)



Amounts received and costs, expenses and expenditures made in

Guyanese dollars or in United States dollars shall be converted from

Guyanese dollars into United States dollars or from United States dollars

into Guyanese dollars on the basis of the average of the buying and

selling exchange rates between the currencies in question as determined

and published by the Bank of Guyana, prevailing on the last Business Day

of the Calendar Month preceding the Calendar Month that the relevant

transaction occuned.



(iii)



The actual exchange rates applied in accordance with sub-section 1.3 (c)

(ii) above and, where relevant, sub-section 1.3 (c) (i) above, shall be

identified in the rele--..: ar..~ Statements required under SU J -Sec~i e:: 1.2 (a) of

this Annex.

1



1.4



1.5



Payments

(a)



All payments between the Parties under the Agreement shall, unless otherwise

agreed, be made in United States dollars and through a bank designated by the

receiving Party.



(b)



All sums due under the Agreement during any Calendar Month shall, for each day

such sums are overdue bear interest at the Agreed Interest Rate.



Audit and Inspection Rights of Government

(a)



The Minister shall have the right to audit upon ninety (90) days written notice, at

his sole cost and expense, accounts and records of the Contractor, maintained

hereunder with respect to each Calendar Year within two (2) years from the end

of each such Year. For purposes of auditing, the Minister may audit, examine and

verify, at reasonable times during normal business hours but not more than once

per Calendar Year, all charges and credits relating to the Contractor's activities

under the Agreement and all books of accounts, accounting entries, material

records and inventories, vouchers, payrolls, invoices and any other documents,

correspondence and records necessary to audit and verify the charges and credits.

During such annual audit, examination and verification in respect of each

Calendar Year the Minister may review items previously subjected to audit in



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



earlier Years but such review shall:

(i)



only be carried out in conjunction with the annual audit for any g1ven

Year; and



(ii)



subject to Section 1.5 (b), no sooner than twelve (12) months following

the previous audit thereof; and



(iii)



only be for the purposes of verifying a matter arising in a later period,

which relates to the earlier Year(s) in question or as specified in Section

1.5 (b).



In conducting such audits, the auditors may physically examine at the sole cost

and expense of the Minister, property, facilities and stocks used in Petroleum

Operations wherever located. Such examinations shall take place at reasonable

times during normal business hours upon fifteen (15) days prior notice.

(b)



At the conclusion of each audit, the Parties shall endeavour to settle outstanding

matters and a written report will be issued to the Contractor within sixty (60) days

of the conclusion of such audit. The report shall include all claims arising from

such audit.

The Contractor shall reply to the report in writing as soon as possible and in any

event not later than sixty (60) days following receipt of the report indicating

acceptance or rejection of the audit claim and in the case of a rejection showing

explanations thereof.

Should the Minister consider that the report or reply requires further investigation

on any item therein, the Minister shall have the right to conduct further

investigation in relation to such matter within sixty (60) days of its receipt of

Contractor's reply. If within sixty(60) days of the Minister's further investigation,

the Parties are unable to agree to the disposition of the Minister's audit claim, the

claim shall be submitted to arbitration in accordance with Article 26 of the

Agreement.

All adjustments resulting from an audit agreed to by the Contractor and the

Minister conducting the audit shall be reflected promptly in the accounts by the

Contractor and any consequential adjustments in Crude Oil entitlements shall also

be made promptly.

In the event that an audit claim by the Minister is not settled to the satisfaction by

the Contractor's reply as provided for above, the Contractor shall be entitled to

recover any disputed amounts pending final resolution of the claim. However,

any subsequent adjustments in the Minister's share of Profit Petroleum following

resolution of the claim shall be repaid with interest, at the Agreed Interest Rate as



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A .



a first claim from Contractor's share of future Profit Oil. In the event that the

Contractor's share of Profit Petroleum is insufficient to provide for the Minister's

extra entitlement including interest, the Contractor shall promptly make an

equivalent payment in United States dollars to the Minister.

(c)



Without prejudice to the finality of matters as described in sub-sections 1.5 (a)

and 1.5 (b) all documents referred to in those sub-sections shall be maintained and

made available for inspection by the Minister for two (2) years following their

date of issue providing, however, that where issues are outstanding with respect to

an audit, the Contractor shall maintain documents for a longer period until the

issues are resolved.



(d)



The Contractor may require that audits hereunder of accounts and records

maintained by Affiliated Companies of the Operator, other than any Affiliated

Company of the Operator which is conducting a substantial part of the Petroleum

Operations on behalf of the Contractor be conducted either by the Operator's

statutory auditors working under the instruction of the Minister (provided such

appointment is accepted by the statutory auditors), failing which, by an

independent finn of auditors of intemational standing to be approved by the

Minister.



(e)



Nothing herein above provided shall entitle the Minister or his auditors to have

access to data and records which:

(i)



are subject to statutory restrictions on disclosure; or



(ii)



do not relate to Petroleum Operations; or



(iii)



are not customarily disclosed in auditing practice m the international

petroleum industry; provided however, that where the Minister or his

auditors seek confirmation that charges subject to restricted access under

(a), (b) and (c) above have been properly charged under this Agreement

and Accounting Procedure, they shall be entitled to seek (at their sole cost)

from the statutory auditors of the Contractor or its Affiliated Companies,

as the case may be, certification that such charges have been levied on a

fair and reasonable basis.



Petroleum Agreement

Government of Guyana- Repsol Exploraci6n S.A.



SECTION 2-



CLASSIFICATION. OEFI'\ITION AJ\0 ALLOCATION OF COSTS. EXPENSES A~O EXI'ENOITlfRES



All costs, expenses and expenditures relating to the Petroleum Operations referred to in Section 3

shall be classified, defined and allocated as follows :

2.1



2.2



Exploration Costs are ali direct and allocated indirect expenditures incurred in the search

for Petroleum in an area which is or was, at the time when such costs were incurred, in

the Contract Area, including:

(a)



Aerial, geophysical, geochemical, paleontological, geological, topographical and

seismic surveys and studies and their interpretation provided the data relates to the

Contract Area.



(b)



Core hole drilling and water well drilling.



(c)



Labour, materials or equipment, and services used in drilling Exploration and

Appraisal Wells with the object of finding Petroleum or for the purposes of

appraising the extent of producible reservoirs already discovered provided such

wells are not completed as producing wells.



(d)



Facilitie~



cr allc-::::t~d portions thereof used solei:· n: support of the purposes

described in (a) (b) and (c) above.



(e)



All General and Administrative Costs, Armual Overhead Charges and all Service

Costs allocated to Exploration Costs.



(f)



Any other Contract Costs incurred in the search for and appraisal of Petroleum

after the Effective Date.



(g)



Armual amounts set forth and paid to GGMC pursuant to Article 19.3 of the

Agreement.



(h)



Rentals.



(i)



Licenses and other fees.



Development Costs shall consist of all expenditures incurred in:

(a)



(b)



Drilling wells, which are completed as producing wells and drilling wells for

purposes of producing from a producible reservoir whether these wells are dry or

producing, and drilling wells for the injection of water or gas to enhance recovery

of Petroleum.

Completing wells by way of installation of casing or equipment or otherwise after

a well has been drilled for the purpose of bringing the well into use as a producer

or as a well for the injection of water or gas to enhance recovery of petroleum.



Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



(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

production purposes.



(d)



The costs of field facilities such as pipelines, Dow lines, production and treatment

units, wellhead equipment subsurface equipment, enhanced recovery systems,

offshore platforms, petroleum storage facilities. expo11 terminals and p1ers,

harbours and related facilities and access roads for production activities.



(e)



Engineering and design studies for field facilities .



(f)



All General and Administrative Costs, Annual Overhead Charges and all Service

Costs allocated to Development Costs.



2.3



Operating Costs are all expenditures incurred in the Petroleum Operations, which are

other than Exploration Costs, Development Costs, General and Administ!ative Costs and

Annual Overhead Charge and Service Costs. The balance of General and Administrative

Costs and Service Costs not allocated to Exploration Costs or Development Costs shall

be allocated to Operating Costs.



2.4



Service Costs



2.5



(a)



These are direct and indirect expenditures in support of the Petroleum Operations

including but not limited to warehouses, piers, marine vessels, vehicles, motorised

rolling equipment, aircraft, fire and security stations, workshops, water and

sewage plants, power plants, housing, community and recreational facilities and

furniture, tools and equipment used in these activities and safety and security

services. Service Costs in any Calendar Year shall include the total costs incurred

in such Year to purchase and/or construct said facilities as well as the annual costs

to maintain and operate the san1e.



(b)



All Service Costs will be allocated to Exploration Costs, Development Costs and

Operating Costs in accordance with standard industry accounting practice or on

an equitable basis otherwise agreed between the Minister and the Contractor.



General and Administrative Costs and Annual Overhead Charge

(a)



General and Administrative Costs are all general and administrative costs in

respect of the local office or offices including but not limited to supervisory,

accounting and employee relations services, but which are not otherwise

recovered.



(b)



An Annual Overhead Charge for services rendered outside Guyana and not

otherwise charged under this Accounting Procedure, for managing the

Contractor's activities under the Agreement and for staff advice and assistance

including but not limited to financial , legal, accounting and employee relations



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



services. For the period from the Effective Date until the date on which the first

Petroleum Production Licence under the Agreement is granted by the Minister

this annual charge shall be five percent (5%) of the Contract Costs including those

covered in sub-sections 2.1 through 2.5(a), incurred during the Calendar Year.

From the date of grant of the Petroleum Production Licence the Annual Overhead

Charge will be:

First US$1 O,OOO,OOO.of Contract Costs:



5%



Next US$1 O,OOO,OOO.of Contract Costs:



3%



In excess ofUS$20,000,000.ofContract Costs:

(c)



1.5%



All General and Administrative Costs and Annual Overhead Charge will be

allocated to Exploration Costs, Development Costs and Operating Costs in

accordance with standard industry accounting practice or on an equitable basis

otherwise agreed between the Minister and the Contractor.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



SECTION 3- COSTS, EXPENSES, EXPENDITURES AND CREDITSOF THE CONTRACTOR



3 .I



Costs Recoverable Without Further Approval of the Minister

Subject to the provisions of the Agreement, the Contractor shall bear and pay the

following costs and expenses in respect of the Petroleum Operations. These costs and

expenses will be classified w1der the headings referred to in Section 2. They are all

recoverable as Contract Costs by the Contractor under the Agreement.

(a)



Surface Rights

This covers all costs attributable to the acquisition, renewal or relinquishment of

surface rights acquired and maintained in force for the Contract Area including

any amounts payable pursuant to Article 10 of the Agreement.



(b)



(c)



Labour and Associated Labour Costs

(i)



Gross salaries and wages including bonuses of the employees of the

Parties comprising the Contractor directly engaged in the Petroleum

Operations, irrespective of the location of such employees, it being

understood that in the case of :k:.: e personnel only a portion of ·,vh')se

time is wholly dedicated to Petroleum Operations, only that pro-rata

portion of applicable wages and salaries will be charged.



(ii)



Costs regarding holiday, vacation, sickness and disability payments

applicable to the salaries and wages chargeable under (i) above.



(iii)



Expenses or contributions made pursuant to assessments or obligations

imposed under the laws of the Republic of Guyana which are applicable to

cost of salaries and wages chargeable under (i) above.



(iv)



Cost of established plans for employees' life insurance, hospitalisation,

pensions, and other benefits of a similar nature customarily granted to the

employees of the Parties comprising the Contractor.



(v)



Reasonable travel and personal expenses of such employees including

those made for travel and relocation of the Expatriate Employees assigned

to the Republic of Guyana all of which shall be in accordance with the

nonnal practice of the Parties comprising the Contractor.



(vi)



Any personal income taxes owing to the Republic of Guyana by

employees of the Parties comprising Contractor and paid or reimbursed by

a Party comprising the Contractor.



Transportation



Petroleum Agreement

Government of Guyana- Repsol Exploraci6n S.A.



The cost of transportation of employees, equipment materials and supplies

necessary for the conduct of the Petroleum Operations.

(d)



Charges for Services

(i)



Third Patiy Contracts

The actual costs of contracts for technical and other services entered into

by the Contractor for the Petroleum Operations, made with third parties

other than Affiliated Companies of the Contractor are recoverable;

provided that the prices paid by the Contractor are competitive with those

generally charged by other international or domestic suppliers for

comparable work and services.



(ii)



Affiliated Companies

Without prejudice to the charges to be made in accordance with

sub-section 2.5, in the · case of services rendered to the Petroleum

Operations by an Affiliated Company, the charges will be no higher than

the usual prices charged by the Affiliated Company to third parties for

comparab~e servi·:~s under similar terms and co:-:ditions elsewhere and

will be fair and reasonable in the light of prevailing international oil

industry practice and conditions.

The salaries, wages and related costs of employees of an Affiliated

Company that are temporarily or permanently assigned in Guyana and are

directly engaged in Petroleum Operations shall be chargeable to the

project at their actual documented cost. The salaries, wages and related

costs of employees of an Affiliated Company that are temporarily or

pennanently outside of Guyana and are directly engaged in Petroleum

Operations shall be chargeable to the project at their actual documented

cost. Costs for salaries, wages and related costs shall be charged to the

project on an actual basis or at a rate based upon the · average cost in

accordance with the Affiliated Company's usual practice.

The

methodology of determining rates based on average cost shall be provided

to the Government upon their request. Such rates may be reviewed at least

annually with the Minister. Reasonable actual documented expenses

(including travel costs) of those employees whose salaries and wages are

chargeable to the project and are reimbursed by the Contractor under their

usual practice shall also be charged to the project.



(e)



Material

(i)



So far as is practicable and consistent with efficient and economical

operation, only such material or equipment shall be purchased or furnished

by the Contractor for use in the Petroleum Operations as may be required



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



for use in the reasonably foreseeable future and the accumulation of

surplus stocks shall be minimized.

(ii)



The Contractor does not warrant material beyond the supplier's or

manufacturer's guarantee express or implied, and in case of defective

material or equipment, any adjustment received by the Contractor from the

suppliers/manufacturers or their agents will be credited to the accounts

under the Agreement.



(iii)

(a)



Except as provided in (b) below, material purchased by the

Contractor for use in the Petroleum Operations shall be valued to

include invoice price less trade and cash discounts (if any),

purchase and procurement fees plus freight and forwarding charges

between point of supply and point of shipment, freight to port of

destination, insurance, taxes, custom duties, consular fees, other

items chargeable against imported material and, where applicable,

handling and transportation expenses from point of importation to

warehouse or operating site, and cost of the material in question

should not exceed those prevailing in normal arms length

transactions on the open market for material of similar quality and

supplied on similar terms at the time of procurement.



(b)



Material purchased from Affiliated Companies of the Parties

comprising Contractor shall be charged at the prices specified at

(1) and (2) hereof.

(1)



New Material (Condition "A")

Shall be valued and invoiced at a price, which should not

exceed



the



price prevailing



in



normal



arms



length



transactions on the open market at the time of procurement.

(2)



Used Material (Conditions "B" and "C")

(i)



(ii)



Material which is in sound and serviceable

condition and is suitable for reuse without

reconditioning shall be classified as Condition "B"

and priced at not more than seventy-five percent

(75%) of the price of new material defined in (1)

above.

Material, which cannot be classified as Condition

"B" but which:

(a)



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



after reconditioning will be further

serviceable for original function as good



second-hand material (Condition "B"), or

(b)



(f)



is serviceable for original function but not

suitable for reconditioning; shall be

classified as Condition "C" and priced at not

more than fifty percent (50%) of the current

price of new material (Condition ''A") as

defined in (1) above.

The cost of

reconditioning shall be charged to the

reconditioned material provided that the

Condition "C" material value plus the cost

of reconditioning does not exceed the value

of Condition "B" material.



(iii)



Material, which cannot be classified as Condition

"B" or Condition "C", shall be priced at a value

commensurate with its use.



(iv)



When the use of material is temporary and its

service to the Petroleum Operations does not justify

the reduction in price as provi drd for in (2) (ii)

hereof, such material shall be priced on a basis that

will result in a net charge to the accounts under the

Agreement consistent with the value of the service

rendered.



Rentals, Duties and Other Assessments

All rentals, taxes, levies, charges, fees, contributions and any other assessments

and charges levied by the Government in connection with the Petroleum



Operations and paid directly by the Contractor.

(g)



Insurance and Losses

Insurance premium and cost incurred for insurance pursuant to Article 20

provided that if such insurance is wholly or partly placed with an Affiliated

Company of the Parties comprising the Contractor, such premium and costs shall

be recoverable only to the extent generally charged by competitive insurance

companies other than an Mfiliated Company of a Party comprising the

Contractor. Costs, losses and damages incurred to the extent not made good by

insurance, are recoverable, including costs, losses or damages resulting from the

indemnities in Article 2 of the Agreement, unless such costs, losses or damages

have resulted solely from an act of willful misconduct or gross negligence of the

Contractor.



Petroleum Agreem ent

Government of Guyana - Repsol Exploraci6n S.A.



(h)



Legal Expenses

All costs and expenses of litigation and legal or related services necessary or

expedient for the procuring, perfecting, retention and protection of the Contract

Area and in defending or prosecuting lawsuits involving the Contract Area or any

third party claim arising out of activities under the Agreement or sums paid in

respect of legal services necessary or expedient tor the protection of the interest of

the Parties are recoverable. Where legal services are rendered in such matters by

salaried or regularly retained lawyers of the Contractor or an Affiliated Company

of the Parties comprising Contractor, such compensation will be included instead

under sub-section 3.1(b) or 3.1(d) above as applicable.



(i)



Training Costs

All costs and expenses incurred by the Contractor in trammg of Guyanese

personnel and such other amounts as may be expended on training under Article

19 of the Agreement.



(j)



General and Administrative Costs and Annual Overhead Charge

The costs described in sub-section 2.5(a) and the charge described in sub-section

2.5(b).



(k)



Pre-Contraci Costs

The sum of one million United States Dollars (US$1,000,000.) in respect of all

costs and expenses incurred by Contractor prior to the Effective Date.



(1)



Interest and Financing Costs

Interest, expenses and related fees incurred on loans raised by the Pm1ies

comprising the Contractor for Petroleum Operations and other financing costs

provided that such expenses, fees and costs are consistent with market rates.



(m)



Abandonment Costs

Amortized abandonment costs calculated pursuant to Article 20.1(d)(iii).



(n)



Social project contributions

Costs and expenses not exceeding two million United States Dollars

(2,000,000US$.) in any given Year incurred by Contractor in social programmes

in the influence area of the Licence.



Petroleum Agreement

Govemment of Guyana - Repsol Exploraci6n S.A.



3.2



3.3



3.4



Costs Recoverable only with Approval of the Minister

(a)



Costs and expenses exceeding two million United States Dollars (2,000,000US$)

in any given Year incurred by Contractor in social programmes in the influence

area of the Licence.



(b)



Donations, and charitable contributions to recognized organisations in Guyana.



(c)



Expenditure on research into and development of new equipment, material and

techniques for use in searching for developing and producing petroleum which

will be of benefit to Petroleum Operations.



Costs not Recoverable under the Agreement

(a)



With the exception of the sum specified m sub-section 3.1(k), costs incurred

before the Effective Date.



(b)



Petroleum marketing or transportation costs of Petroleum beyond the Delivery

Point.



~c)



Amounts paid under Article 3.2 0fthe Agreement, if any, and, other amounts paid

with regard to non-fulfillment of contractual obligations, subject to Section 3.1(g).



(d)



Costs of arbitration and the sole expert in respect of any dispute under the

Agreement.



(e)



Fines and penalties imposed by Courts of Laws of the Co-operative Republic of

Guyana.



(f)



Payments made in accordance with Article 15.4 of the A greement.



(g)



Costs incurred as a result of willful misconduct or gross negligence of the

Contractor or failure to insure where insurance is ·required pursuant to Article

20.2(a) ofthe Agreement.



Other Costs and Expenses

Other costs and expenses not covered or dealt with in the provisions of this Section 3 and

which are incurred by the Contractor in the conduct of the Petroleum Operations are

recoverable subject to the approval of the Minister.



3.5



Credits under the Agreement

The net proceeds of the following transactions will be credited to the Accounts under the

Agreement and shall reduce the amount of Contract Costs, which the Contractor is



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



entitled to recover from Cost Petroleum, by a corresponding amount:



3.6



(a)



The net proceeds of any insurance or claim in connection with the Petroleum

Operations or any assets charged to the accounts under the Agreement when such

operation or assets were insured and the premium charged to the accounts under

the Agreement.



(b)



Revenue received from third parties for the use of propetiy or assets the cost of

which has been charged to the accounts under the Agreement.



(c)



Any adjustment received by the Contractor from the suppliers/manufacturers or

their agents in connection with defective material the cost of which was

previously charged to the accounts under the Agreement.



(d)



Rentals, refunds or other credits received by the Contractor which apply to any

charge which has been made to the accounts under the Agreement, including any

costs and expenses previously charged to the accounts pursuant to sub-section

3.1 (h) and which have been successfully recouped from legal proceedings but

excluding any award granted to the Contractor under arbitration or sole expert

proceedings referred to in sub-section 3.3(d) above.



(e)



The value at the time of export of inventory materials subsequently exported from

the Co-operative Republic of Guyana without being used in the Petroleum

Operations, the acquisition costs of which have been charged to the accow1ts

under the Agreement.



(f)



The proceeds from the sale or exchange by the Contractor of materials,

equipment, plant or facilities, the acquisition costs of which have been charged to

the accounts under the Agreement, including such items sold to the Governn1ent;



(g)



The proceeds from the sale of Petroleum Data which relates to the Contract Area

provided that the acquisition costs of such rights and information have been

charged to the accounts under the Agreement;



(h)



The proceeds derived from the sale or licence of any intellectual property the

development costs of which have been charged to the accounts under the

Agreement.



Duplication of Charges and Credits

Notwithstanding any provision to the contrary in this Accounting Procedure, it is the

intention that there shall be no duplication of charges or credits to the accounts under the

Agreement.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



SECTION 4 -RECORDS AND VALUATION OF ASSETS

The Contractor shall maintain detailed record s of property in use for the Petroleum Operations in

accordance with nom1al practice in exploration and production activities of the international

petroleum industry. The Contractor shall notify the Minister annually in writing of all assets

acquired and all assets disposed of during the preceding twelve (12) months. At reasonable

intervals but at least once a year with respect to moveable assets and once every three (3) years

with respect to immovable assets, inventories of the property under the Agreement shall be taken

by the Contractor. The Contractor shall give the Minister at least thirty (30) days written notice

of its intention to take such inventory and the Minister shall have the right to be represented

when such inventory is taken . The Contractor will state clearly the principles upon which

valuation of the inventory has been based. When an assignment of rights under the Agreement

takes place a special inventory may be taken by the Contractor at the request of the assignee

provided that the costs of such inventory are borne by the assignee.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



SECTION 5 - PRODUCTION STATEMENT

5.1



Upon commencement of production of Petroleum from the Contract Area, the Contractor

shall submit a monthly Production Statement to the Minister showing the following

information separately for each Field and in aggregate for the Contract Area.

(a)



The gross quantity of Crude Oil and Natural Gas produced.



(b)



The quantities of Crude Oil and Natural Gas used for the purpose of canying on

Petroleum Operations including drilling and Production Operations and pumping

to Field storage.



(c)



Quanti ties of Crude Oil and Natura I Gas lost.



(d)



The quantities ofNatural Gas flared.



(e)



The quantity of Crude Oil produced and saved.



(f)



The quantity ofNatural Gas produced and saved.



(g)



The quantity ::>f ~tocks of Crude Oil held at

in question.



(h)



The quantity of stocks of Crude Oil held at the end of the Calendar Month in

question.



(i)



The number of days in the Month during which Petroleum was produced from

each Field.



G)



The average daily production rate for each Field, calculated in accordance with



~he



begi:::r:.::::g of the Calendar Month



Article 11.6 of the Agreement.

5.2



The Production Statement for each Calendar Month shall be submitted to the Minister not

later than sixty (60) days after the end of such Calendar Month.



Petroleum Agreement

Government of Guyana - Repsol Exploracion S.A.



SECTION 6- VALUE OF PRODUCTION AND PRICING STATEMENT

6.1



6.2



The Contractor shall , for the purposes of Atiicle 13 of the Agreement prepare a statement

providing calculations of the value of Crude Oil and the value of the Natural Gas

produced and saved during each Calendar Month for each Field . This statement, which

shall be prepared for each quality of Crude Oil and the Natural Gas produced from the

Contract Area, shall contain the following information:

(a)



The quantities, prices and receipts realised therefor by the Contractor as a result of

Third Party Sales of Crude Oil and the Natural Gas made during the Calendar

Month in question.



(b)



The quantities, prices and receipts realised therefor by the Contractor as a result of

sales of Crude Oil and the Natural Gas made during the Calendar Month in

question, other than Third Party Sales.



(c)



The percentage of total volume of Crude Oil sales which were Third Party Sales.



(d)



The percentage of total volume of Natural Gas sales which were Third Party

Sales.



(e)



Information supplied to the Minister by Contractor for the purposes of Article

13.2 of the Agreement.



The Value of Production and Pricing Statement for each Calendar Month shall be

submitted to the Minister not later than sixty (60) days after the end of such Calendar

Month.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



SECTION 7 - STATEMENT OF EXPENDITURE AND RECEIPTS

7.1



7.2



The Contractor shall prepare with respect to each Calendar Quarter, or on a monthly basis

if requested by the Minister in writing, a Statement of Expenditure and Receipts under

the Agreement. The Statement will distinguish between Exploration Costs, Development

Costs and Operating Costs consistent with the individual categories specified in Sections

2 and 3 herein and will separately identify major items of expenditures within these

categories. The statement will show the following:

(a)



Actual expenditures and receipts on a monthly basis for the period in question.



(b)



Cumulative expenditure and receipts for the budget year in question.



(c)



Cumulative expenditures and receipts since the Effective Date.



(d)



Latest forecast of cumulative expenditures to year end.



(e)



Variations between budget forecast and latest forecast, with explanations thereof.



Subject to 7.1 , the Statement of Expenditure and Receipts shall be submitted to the

Minister no later ~h:-J1 si::::· (SO) days after the end of such C ~le~dar Qumier or Month as

the case may be.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



SECTION 8- COST RECOVERY STATEMENT

8.1



The Contractor shall prepare with respect to each Calendar Month a Cost Recovery

Statement containing the following information:

(a)



Recoverable Contract Costs carried forward from the previous Month, if any.



(b)



Recoverable Contract Costs for the Month in question.



(c)



Total Recoverable Contract Costs, which is that cost at sub-section 8.1 (a) plus

that cost at sub-section 8.1 (b).



(d)



Quantity and value of Cost Petroleum taken and disposed of by the Contractor for

the Month in question.



(e)



Contract Costs recovered for the Month in question.



(f)



Total cumulative amount of Contract Costs to be carried forward into the next

Month.



8.2



Tl~ ~



inf:·:r.::::.tion to be-submitted under Se : tic!1 8.1 (d) and (e) above sha~I t.Je g: - ·~r:. in

separate statements for each Field, so as to indicate together, the Contractor's total

allocation of Cost Oil as required under Article 11 of the Agreement.



8.3



The Cost Recovery Statement to be submitted under sub-section 8.1 shall identify the

unrecovered cost of assets for the purpose of Article 20.1 (b)(iii) of the Agreement.



8.4



During the Production Period, the Cost Recovery Statement for each Month shall be

submitted to the Minister no later than sixty(60) days after the end of such Month and

twice a year during the Exploration Period, not later than 90 days after the end of each

calendar semester.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A .



SECTION 9- END-OF-YEAR STATEMENT

9.1



The Contractor shall prepare an End-of-Year Statement. The Statement will contain

aggregated information for the Year in the same format as required in the Value of

Production and Pricing Statement, Cost Recovery Statement and Statement of

Expenditures and Receipts but will be based on actual quantities of Petroleum produced

and expenses incurred. The End-of- Year Statement for each Calendar Year shall be

submitted to the Minister within one hundred and twenty ( 120) days of the end of such

Calendar Year.

(a)



Crude Oil

(i)



(b)



In the event the domestic supply obligations under Article 17 are effected

by the Government as to Crude Oil, not later than one hundred and twenty

(120) days after the end of each Calendar Year, the Minister, acting on

behalf of the Government, shall make available to Contractor an amtual

summary (the "Domestic Supply Report") describing (a) the

Government's total entitlement from all Crude Oil production in Guyana

during the prior Calendar Year, (b) the quantity of Crude Oil actually

provided to the Government by Contractor and all third parties which

produce Cr.:dc Oil in Guyana during the priJr C:!~:;::!ar Year, and (c) a

description of the quantities and use of all Crude Oil provided to the

Government by Contractor and all third parties which produce Crude Oil

in Guyana, including without limitation, domestic power supply from

power plant facilities, refined products for domestic consumption from

refineries, etc., and any quantities of Crude Oil, refined products,

petrochemicals or fuel for power generation that are exported from

Guyana.



Nat ural Gas

(i)



In the event the domestic supply obligations under Article 17 have been

effected by the Government as to Natural Gas, not later than one hundred

and twenty (120) days after the end of each Calendar Year, the Minister,

acting on behalf of the Government, shall make available to Contractor an

annual summary (the "Domestic Supply Report") describing (a) the

Government's total entitlement from all Natural Gas production in Guyana

during the prior Calendar Year, (b) the quantity ofNatural Gas actually

provided to the Government by Contractor and all third parties which

produce Natural Gas in Guyana during the prior Calendar Year, and (c) a

description of the quantities and use of all Natural Gas provided to the

Government by Contractor and all third parties which produce Natural Gas

in Guyana, including without limitation, domestic residential, commercial

and industrial consumption, fuel used for domestic power generation, etc.,

or, and any quantities of Natural Gas liquefied or compressed in Guyana



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



for export or used as feedstock for petrochemical exports, such as

methanol and fe1iilizer.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



SECTION 10- BUDGET STATEMENT

10.1



The Contractor shall prepare an armual budget pursuant to Article 7 of the Agreement

(the '·Budget Statement"). The Budget Statement will distinguish between Exploration

Costs, Development Costs and Operating Costs consistent with the individual categories

speciiied in Sections 2 and 3 and will show the following:

(a)



Forecast expenditures and receipts under the Agreement for the Calendar Year.



(b)



Cumulative expenditures and receipts to the end of the said Year.



Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



ANNEX D- Pre-Approved and Certified Petroleum Operations Items

A

Acids (stimulation)- chemicals used downhole or injected in oil/gas formations

Acoustical survey equipment- including sonar, side scanning sonar, full wave form sonic loggers

Aeromagnetic recording survey systems

Air slips also known as tubing slips

All terrain vehicles (A TVs)

Automated equipment at the wellhead , processing plant or refinery used to monitor and control production



B

Bags (cloth) with printed tags- used in well testing

Bails (links)

Barrel -chemical mixing when used at the wellhead

Batteries- for production machinery and equipment

Batteries - geophysical when used exclusively for seismic prospecting in blasting and recording systems

Bits - drill includes PDCs, tricones

Blasting systems - used for seismic prospecting

Blowout ignition system

Blowout preventers (BOPs)

Boxes- shipping (used in well testing), core

Building - portable

Building -support- when used as weather-related protective covering for equipment such as electrical

generators or instrumentation

Buildings- that provide ufrr~...~ or dwelling space; geologist lab ltailc:r"s; skid-mounted living trailers

Bulldozers -earth moving equipment



c

Cable - electrical

Cable - wire rope

Cables -electrical (integrated into machinery)

Cables used for seismic prospecting

Calibration gas- for H2S monitors and H2S analyzers

Casing

Casing accessories

Catwalks- see Scaffolding

Cement- oilwell

Cementing equipment

Centralizers- casing attachment

Centrifuge- used to remove fine drill solids from mud systems

Chemical mixing barrel -when used at the wellhead

Chemical storage drums- when used at the manufacturing or processing site

Chemicals used in drilling and production operations

Chemicals used in refining operations

Choke manifold and valves

Circulating system - includes discharge and return lines

Circulating systems- includes mud tanks, mud mixers, discharge and return lines and separators

Cleaners/degreasers - includes oilfield equipment

Cloth bags with printed tags- used in well testing

Coil tubing

Coil tubing reel

Collars - drilling

Communication equipment- includes satellite communications equipment

Annex D Page I

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Compressors -for compression of air or natural gas

Computers- to monitor production/drilling machinery and equipment

Consumables- consumable equipment used in drilling and production operations

Control panels- used to run generators at a well head

Core boxes

Corrosion inhibitors - added to upstream installations for preventative maintenance

Couplings

Custom software- designed for and integrated into drilling and production machinery or equipment

D

Data processing units used for seismic prospecting

DC electric motors (integrated) used to drive the drawworks mud pumps, or top drives, also commonly

called traction motors

Deflocculants- used in fresh water mud systems

Dehydration chemicals

Dehydrators- including mole sieve used at the well head ; used during the production testing phase

Demulsifiers- used in production operations to remove water from crude oil

Density counters- spectral gamma-gamma

Detectors- flame , when used during the production testing phase as an alternative to a flare stack

Diesel power generating systems

Discharge and return lines

Dispersants - production chemicals

Distribution panel -electrical that controls the electrical distribution for the entire rig package

Dope- pipe

Drift"'- fM casing , tubing , and line pipe

Drill bits. includes tricone, PDCs (Polycrystalline Diamond Compact)

Drill collar handling equipment

Drill collars- used in exploration and development drilling

Drill line spool - wire rope

Drill pipe- used in exploration and development drilling

Drill pipe handling equipment

Drill stem testing equipment- includes instrumentation

Drilling - detergent; muds; surfactants

Drilling Rigs and associated equipment- Onshore and Offshore

Drilling fluid -chemicals used to create drilling fluid (see mud)

Drills- all drills used exclusively for seism ic prospecting includes heli, enviro , LIS, track, truck, buggy

Drives -top, rotary and pump

Drums- for chemical storage when used at the manufacturing or processing site



E

EDR system (only an EDR and the embedded dedicated computer equipment that is integrated into the

unit) used at the drilling site

Electric generators and alternators

Electric logging equipment

Electrical cable - distribution panel, electrical generating systems

Electrical distribution panel

Electrical generating systems (integrated)

Electrical submersible pumps - ESP -for artificial lift of petroleum

Electrical surveying equipment

Electrical thermostats

Electromagnetic surveying equipment- includes time and frequency domain induced polarization

equipment

Emergency gas shut off devices

Annex D Page 2

Petrol eum Agreement

Government of Guyana- Repsol Expl orac i6n S.A.



Engine oils

Engines- used for oilfield service

Equipment- hoisting

Explosives- includes those used in seismic, coring , construction



F

Field potentiometers

Filter bags- for the production machinery and equipment

Fishing tools for retrieving tools lost downhole

Fittings- includes those used in the transportation and distribution system , for example, on gathering

lines

Flame detectors- when used during the production testing phase as an alternative to a flare stack

Flare stacks- includes mobile flare stacks used during the production testing phase

Flare tank systems, located at the wellsite, that are directly connected to the drilling rig and are used to

control polluting emissions

Flare tanks and lines

Float equipment

Fluids- fracturing, stimulating , well servicing

Foamers - used downhole to enhance production

Forklifts

Fracturing chemicals

Fracturing equipment

Fuel gas lines- for oil and gas production machinery

Fuel storage tanks- see Tanks

Full wave form sonic logn~r~

G



Gamma-ray spectrometers

Gas- welding , acetylene, argon- when used as an inert welding gas or in repair jobs; calibration gas for

H2S monitors and H2S analyzers

Gas dehydration equipment used in processing plants or refineries up to the point where the petroleum or

natural gas is a marketable product

Gas detection monitors that detect hazardous gas and provide a warning

Gas flow equipment- when used downhole to monitor gas flow

Gas lift lines- located at a production wellsite to encourage the flow or transport of gas from the reservoir

to the surface

Gas shut off devices (emergency)- that are attached to a gas line and automatically shut off gas supply

Gauges - engine

Generating systems- diesel power, electrical

Gensets/generators- portable, mobile or standby alternators generators/gensets)

Geophones

Geophysical batteries -when used exclusively for seismic prospecting in blasting and recording systems

Geronimo and escape lines

Global positioning systems used for seismic prospecting; used for creating stakeless surveys

Graders

Gradiometers- includes potassium gradiometers for radioactive methods of geophysical prospecting

Gravel -for well pads, processing plant on-site roads

Gravitational recording survey systems

Gravity meters

Grease

Ground penetrating radar equipment

Gunny sacks

Guns- perforating that are used during the production testing phase

Annex D Page 3

Petroleum Agreement

Government of Guyana - Rep sol Exploraci6n S.A.



H

Hammer wrenches

Hand held tools

Heat exchangers

Heaters- line, located at the well head to preheat gas but not line heaters on pipeline; used during the

production testing phase

Heli-drills for seismic prospecting

Hoisting equipment

Hooks and swivels- drill pipe handling equipment

Hydraulic tank

Hydraulic winches

Hydrogen sulfide - used for gas scrubbing

Hyperspectral spectrometers used for remote sensing



Imaging equipment- seismic

Incinerator- when used during the production testing phase in place of a flare stack to burn off excess

natural gas

Indicator- weight

Inductive conductivity probes used for electrical or electromagnetic surveying

infrared and hyperspectral spectrometers

Infrared spectrometers used for remote sensing

Inhibitors- corrosion added to upstream installations for preventative maintenance

lnjectr· h"'ad that runs or retrieves the coil t11bing

Instrumentsinstruments or equipment for seismic prospecting

Integrated dtesel power generating systems

Integrated electrical operating systems

Integrated fuel tanks- see Tanks

Integrated navigation systems used for seismic prospecting

Integrated pump units

Integrated steam heaters

L

Lab testing equipment- used for testing drilling fluids

Lab testing equipment- used for testing production fluids

Labels- for vials used in well testing

Laptop computers (see entry under Computers)

LIDAR (Light Detection and Ranging) mapping equipment used for remote sensing

Light towers or light plants

Lighting - industrial explosion proof

Lights

Lignite- drilling mud or fluid

Line heaters- located at the well head to preheat gas, but not line heaters on the pipeline

Line heaters- used on pipelines, but not line heaters located at the well head for preheating gas Industry)

Line pipe

Liners used on the ground

Lines- catline, drill , flare , load line, geronimo and escape, sand line, spool , tong

Lines- discharge, return, flare

Links (bales)

Liquefaction equipment- used in a processing plant or refinery to liquefy C02 so that it can be

transported and marketed



Annex D Page 4

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Liquid viscosifiers

Loaders- includes loaders used to move drill pipe to and from the drilling rig

Logging equipment- electric wireline

Lubricants - specialty

M

Machinery and equipment used to inject substances into a reservoir

Magnetic susceptibility meters

Magnetometers

Main- drum (also known as a drill drum)

Main drum also known as drill drum - part of the drawworks

Maintenance tools- includes cheater bars

Manifold- choke, valve that is an integral piece of the high pressure pumping system

Manifold - choke; mud

Manufactured proppant

Measurement while drilling equipment (MWD) - used to monitor the drill bit's downhole position

Meter skids- used in the transportation of natural gas or petroleum from the well head as they are part of

the distribution system

Mobile radios

Molecular sieve (Mole sieve pellets)- when used as a part of exempt dehydrator equipment

Monitoring equipment- that monitors or controls the operation of machinery and equipment

Monitors- hazardous gas detection monitors that provide a warning

Mooring systems -for storage vessels

Motors- includes mud motors

Motors- traction, mud

Motors- used in the production testing phase; mud motors used downhole in the drilling process

Mud -chemicals used in the creation of drilling fluid

Mud - mixers, tank, manifold , motors

Mud logging equipment and supplies

MWD (Measurement While Drilling) equipment and supplies

N

Navigation systems used for seismic prospecting; used for creating stakeless surveys

Nitrogen- used to stimulate production

Non-polarizing electrodes used for making measurements in drill holes

0

Optical sensors



p

Packers

Paint supplies

Perforating guns- used during the production testing phase

Pipe dope

Pipeline installation equipment

Pipeline coatings - cement or otherwise

Piping systems - used downhole in the production and testing phase

Pit volume totalizer (PVT)- used for monitoring the bore hole

Polarization equipment- time and frequency domain induced

Portable building

Potentiometers - field

Power- tongs and jaws (also see Tongs)

Power plants- includes diesel, electrical

Annex D Page 5

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.



Power tongs

Power washers

Pressure piping systems and its components- used during the production testing phase

Preventers- blowout (BOP)

Probes- inductive conductivity used for electrical or electromagnetic surveying

Production processing equipment- includes separators , compressors , tanks , flow lines, pumps and

valves

Prospecting , seismic- see seismic prospecting

Protectors - thread

Pump lines and valves that run from the mud pump to well

Pump units - includes submersible trash or sump

Pumpjacks

Pumps - explosion proof

Pumps and motors- used in the production testing phase

R

Racks- pipe used in the drilling process

Radar equipment- ground penetrating, side looking aperture

Radio- phone, mobile, VHF , two-way

Radio antenna - MDS

Radioactive prospecting - scintillometers, spectral gamma-gamma density counters , geigermuller

counters, gamma-ray spectrometers, potassium gradiometers

Radioactive sources- used in wireline logging

Ram thread protectors- telescoping

Rer:tctive wolrjin:J gases- when used in a repair Sf'rvic~

Recorder box used for seismic prospecting

Recording system used for seismic prospecting

Reel for coil tubing

Reflectance equipment used for remote sensing

Regulators- includes when used in the transportation and distribution system , for example, gathering

lines

Remote sensing equipment- includes ultraviolet lamps and reflectance , infrared and hyperspectral

spectrometers

Resistivity survey equipment used for electrical or electromagnetic surveying

Return and discharge lines of a circulating system

Rod basket

Rotary and pump drives

Rotary and pump drives

Rotary table



s

Safety valves- used for well control that are a part of the equipment on the service rig

Sand - includes sand used to stimulate well production

Satellite communications equipment

SCADA equipment- (Supervisory Control and Data Acquisition) used at the well head , processing plant

or refinery

Scintillometers

Seismic- instrumentation , drilling equipment, imaging equipment

Seismic explosives

Seismic prospecting- recording system , seismic instrumentation, geophones , cables , data processing

units

Seismic vessels and associated equipment

Self-potential meters used for electrical or electromagnetic surveying



Annex 0 Page 6

Petroleum Agreement

Government of Guyana - Repsol Exploracion S.A.



Sensors - optical

Separator vessels - used during the production testing phase

Snubbing unit- composed of a blowout preventor stack, a hydraulic jack and a power unit to run the

hydraulics

Solids control equipment

Sonar- includes side scanning

Sonic loggers -full wave form

Spectral gamma-gamma density counters

Spectrometers- infrared or hyperspectral used for remote sensing , gamma ray

Spools - includes drill line spool

Spools (specialized pieces that adapt tubing to BOPs or for spacing requirements between BOP and

wellhead)

Stabbing guides- used in the drilling process

Stimulating fluids

Stimulation acids- chemicals used downhole or injected in oil/gas formations

Storage tanks- (see Tanks)

Submersible trash pump unit- used to pump drilling fluids , mud/water

Sulphur recovery equipment- used in processing plants and refineries

Survey equipment (see Global positioning systems and Navigation systems)



T

Tank battery

Tanks- flare , integrated fuel , mud or water, stand alone fuel tank fully integrated with drilling rig that

serves as the direct fuel supply for the rig

Tanks- storage- used at a refi..,er_.' or processing plant

Tanks- water storage

Telecommunication equipment

Thermostats- electrical designed for use with any of the machinery or equipment on this list

Thread protectors- used in the drilling process

Time and frequency domain induced polarization equipment used for electrical or electromagnetic

surveying

Tongs- backup and integral tongs , power tongs and jaws

Tongs- power also called rotary or casing tongs, power tongs and jaws, backup and integral tongs

Tools- fishing tools for retrieving tools lost downhole

Tools- hand

Top drives- Drill Rig

Torque gauges- used in the drilling process

Towers- light

Traction motors

Travelling blocks

Tricones- drill bits

Tubing - includes coil

Tubing slips also known as air slips

Two-way radios



u

Ultraviolet lamps used for remote sensing



v

Vacuum and wash pump used to clean up around rig and wash equipment

Vacuum tanks or systems- truck- or trailer-mounted

Vacuum units

Valve- outlet, manifold (integral part of the high pressure pumping system)

Annex D Page 7

Petroleum Agreement

Government of Guyana - Rep sol Exploraci6n S.A.



Valve manifold (integral part of the high pressure pumping system)

Valves- includes those used in the transportation and distribution system , for example, gathering lines

Valves- safety- used for well logging , drill stem testing or the production testing phase

Vehicles

Vessels -separator- used during the production testing phase

Vessels - supply and anchor handling for offshore petroleum operations

Vessels -for storage of crude oil (FPSO)

Vessels - Mobile Offshore Drilling Units

Vibrators used for seismic prospecting

Viscosifiers - liquid ; dry polymer; concentrated



w

Walkways - see Scaffolding

Waste gas transmission- see Pipes

Waste management bins

Waste water treatment units- mobile

Water clarifiers - used to remove residual oil in produced water prior to disposal or re-use

Water disposal lines- includes associated machinery and equipment that are located within the

processing plant

Water storage tanks

Welding equipment and supplies

Well flow lines transporting raw product from a well to a satellite, battery, line pipe or processing plant

Well logging equipment- includes surface and downhole tools

Well testing equipment- includes surface and downhole tools

Wellhead eq• ·irf"1ent

Winches

Wireline (or slickline) unit- skid- or truck-mounted



Annex D Page 8

Petroleum Agreement

Government of Guyana - Repsol Exploraci6n S.A.