The agreement was executed on 22/07/2004, but only becomes effective with the approval of the Parliament of Ghana. The date of approval is not set out in the agreement.
Offshore blocks comprising an area of 1957.05 square kilometers (or 481,9598,926 acres) based on a WGS-84 spheriod and UTM projection system. The contract area is designated by the coordinates set out in page 1 of Annex 1 to the agreement.
Crude oil (hydrocarbons which are liquid at 14.65 psia pressure and sixty degrees Farenheint, and includes condensates and distillates obtained from natural gas) and natural gas (including wet gas, dry gas and residue gas remaining after the the extraction of liquid hydrocarbons from wet gas)
The agreement shall be in force and effect for a term of 30 years, counted as from its effective date. The exploration period, beginning in the agreement's effective date, will last for no longer than 7 years, unless it is extended. If a new regulatory regime for deepwater exploration (more than 200 mts. deep) is instituted in Ghana, Contractor will benefit from any extension of exploration periods envisaged therein. The exploration period is divided in an initial exploration period of 3 years, and two separate extension periods of 2 years, each. The Contractor will be allowed to keep performing the exploration works if its work and investment commitments are complied with during each phase. Contractor also has the option of relinquishing a part or the full contract area at any time. For each well drilled by the Contractor during the initial exporation period, such initial period will be extended by 6 months (and the commencement of the subsequent periods will be postponed accordingly). The agreement also lists the instances, during each of the divisions of the exploration period, in which Contractor will have the right to extend the deadlines for completion of the works related to each subdivision of the exploration phase (such as when Contractor is drilling or testing any well - being entitled in this case to have a 180-day extension to complete such works -, conducting an appraisal programme. or informing the Government of a commercially relevant discovery).
The agreement was executed on 22/07/2004, but only becomes effective with the approval of the Parliament of Ghana. The date of approval is not set out in the agreement.
Once a field with commercialy relevant resources is discovered and identified, Contractor will submit to the Ministry of Energy a development plan for that field which will also contain details on the measures that will be taken for protection of the environment.
Contractor will provide a system for disposal of water and waste oil, oil base mud and cuttings in accordance with international disposal standards. Contractor will endeavour its best efforts with the purpose of protecting the environment and generating minimum ecological damage or destruction during the operations, preventng the waste of oil and damage to the offshore and onshore areas adjacent to the contract areas. Contractor will be liable for any breach of its environmental protection obligations, and will bear the costs connected to cleanup and repair of any eventually affected areas (such costs to be included as Petroleum Costs).
The Minister of Energy and GNPC may access all sites and offices of Contractor to inspect all buildings and installations relating to pretoleum operations. GNPC is also entitled to inspect Contractor's books and accounts. Contractor will provide GNPC with quarterly summaries of the costs incurred with petroleum operations under the terms of the agreement. Contractor must maintain accurate books and records of account in Ghana (in accordance with generally accepted accounting principles of the international petroleum industry). Contractor must submit quarterly accounts of Petroleum Costs. All financial statements submitted by Contractor in accordance with the agreement are subject to review by GNPC. GNPC will inform its approval or disapproval within 90 days. GNPC may to audit financial statements by an independent international auditing firm, at its cost, within 2 years of their submission. Any unresolved audit claim is submitted to the Joint Management Committee for decision (which must be unanimous). A detailed report of all petroleum operations will also have to be presented by Contractor.
Contractor will not pay any taxes for petroleum exports. No taxes will be due for imports of plant, equipments and materials utilized in the petroleum operations.
Save for withholding 5% as tax from the amount due by Contractor to any subcontractor, in accordance with the Petroleum Income Tax Law, no further amounts will have to be withheld by Contractor in relation to its subcontractors. Contractor will not withhold any amounts as taxes in respect of services provided to Contractor by an affiliate, provided such services are charged at cost. Foreign national employees of Contractor, its affiliates and subcontractors are exempt from income tax and withholding tax liabilities if they are resident in Ghana for 30 days or less in any calendar year.
GNPC will make the sufficient arrangements to ensure that the Contractor has the option to fully depreciate in 5 years the capital allowance deductions for the purposes of calculating chargeable income of the Contractor. In case any of the taxes levied in Ghana fail to qualify as creditable against the income tax liability of Contractor or any of its affiliates in any jurisdiction, the parties agree to negotiate to establish a creditable tax (as long as no adverse effects are caused to the State or GNPC).
35%, calculated in accordance with the Petroleum Income Tax Law of 1987, or at such lower rate as may be applicable under any amended Petroleum Income Tax Law
Contractor is to pay to the State an additional oil entitlement (AOE) in accordance with the Petroleum Law and the Petroleum Income Tax Law 1987 out of its share of petroleum (according to its participating interest). State may elect to be paid in cash or in oil. AOE is calculated based on the after royalty, after tax inflation-adjusted Rate of Return, achieved by the Contractor on the development and production area to date. AOE is based on the Contractor's net cash flow, for each development and production area.
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"Arms length commercial transactions" mean sales to parties independent of the seller, which do not involve exchange or barter of oil, government to government transactions, direct or indirect sales to affiliates, or sales other than for US dollars or convertible currency. Any crude oil sold on a non-arm's length commercial transaction will be calculated based on market prices of comparable crude oil sold in arms length transactions.
Seven and one half percent (7.5%) of the gross production of crude oil will be delivered to the State as royalties. If all or any part of the accumulation of crude oil, however, is located in deepwaters (200 meters or more), the royalty rate will be 5%. Further, the royalty rate for any crude oil having an API gravity of less than 20 will be 5%. The rate applicable over the gross production of natural gas is of 5%. Payment will be made in cash or in crude oil, as chosen by the State.
The State has no equity participation in the Contractor companies, but GNPC has a 10% participating interest in all operations. GNPC also has an option to acquire a 2.5% participation in fields where commercial exploration of petroleum are carried out.
Contractor will also be responsible for the payment of surface rental fees to the State, per square kilometre of the total contract area remaining at the beginning of each calendar year, or upon the creatio of a new oil production and development area, in the amounts set forth below: During the initial exploration period, the amount due is of US$20 per sq. km.; during the 1st extension period, the amount of US$24 per sq. km; during the 2nd extension period, the amount of US$30 per sq.km.; and in reference to the development and production area, the amount of US$100 per sq. km.
Ghanaian nationals will be engaged, as soon as reasonably possible, in employment at all levels in the petroleum industry, including technical, administrative and managerial positions. Where qualified nationals are available, Contractor will provide them with employment positions as far as is reasonably possible. Contractor will submit to GNPC an employment plan setting out what kind of professionals it needs to hire. GNPC will provide the qualified personnel according to such plan. If requested by GNPC, Contractor will provide opportunities for a mutually agreed number of GNPC personnel for secondment to on the job training. Contractor also will set up a training program to be conducted by GNPC in accordance with the terms of the agreement. For the implementation and maintenance of such programs, Contractor shall pay to GNPC the amount of US$125,000 during the initial exploration period; US$100,000 during the first extension period; US$75,000 during the second extension period and after; and US$100,000 during the development and production period.
Contractor shall give preference to materials, goods and services produced in Ghana, including shipping services, if such materials, services and products can be shown to meet standards generally acceptable to international oil and gas companies and supplied at prices, grades, quantities, delivery dates and other commercial terms equivalent to or more favorable than those provided from abroad.
GNPC must procure access for the Contractor to infrastructure for transporting or processing petroleum, owned by the State or GNPC or any Affiliate upon the request of the Contractor but subject to the third party's capacity requirements. Access to such infrastructure will be on fair and reasonable terms and expenses will be borne by the Contractor.
In case the shares of crude oil which the State and GNPC are entitled to receive are not sufficient to fulfil the domestic supply requirement, Contractor will be obliged (along with other parties producing crude oil in Ghana) to supply a volume of crude oil to be used to meet the internal consumption demand, provided, however, that Contractor's obligation to supply crude oil will not exceed 25% of the totality of Contractor's share of crude oil production. The domestic supply requirement takes effect on the earlier of the date on which the Contractor is free of any pre-existing contractual obligations and 6 months from the date of notice by the State. The State will pay the weighted average Market Price for the month of delivery.
Contractor must regularly provide to GNPC information and data relating to worldwide petroleum science and technology, petroleum economics and engineering, and assist GNPC personnel to acquire knowledge and skills relating to the petroleum industry. This includes sending GNPC personnel to US universities, including University of Oklahoma.
Exploration operations will start no later than 75 days after the date the agreement is considered to be in force and effect. During the first 18 months, Contractor will acquire, process and interpret at least 1000 sq. km. of new 3-D seismic data, and the minimum investment to be made by Contractor in such phase will be of US$ 4 million. During the year following the end of the first phase, Contractor will have to drill at least one exploration well in the area. The minimum investment to be made in such phase is of US$ 8 million. For the following 2 years, Contractor will have to drill one additional well, with a minimum investment of US$ 8 million. The same work and investment commitment will apply for the 2-year period following the end of the previous phase. Appraisal wells or other work will not count towards this mining exploration work and investment obligation.
[FIRST PAGE OF ARBITRATION CLAUSE IS MISSING - PG 74]Any arbitration procedure initiated in reference to the agreement will be conducted in accordance with the rules of the International Centre for Dispute Resolution. The proceedings will be held in London, at the International Centre for Dispute Resolution. Language of arbitration will be English. In lieu of arbitration, parties to the dispute (including with respect to accounting) may refer the dispute to a sole expert whose decision will be final and binding.
Information disclosed by Contractor to the Ministry of Energy and GNPC, including reports, studies and analysis, will be treated as confidential, provided that the Ministry and GNPC will be authorized to furnish such information to other State agencies and consultants, as well as to third-parties for the purpose of obtaining a Petroleum Agreement in respect of any acreage adjacent to the contract area.
No other taxes, fees or duties will be imposed to Contractor aside from those expressly listed in Article 12 of the agreement. Contractor will be entitled to economic and fiscal stability according to the rights and benefits set forth in the agreement.