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[handwritten] Pre-partiament Change mode o Art 21.2





PETROLEUM AGREEMENT



AMONG



GOVERNEMENT OF THE REPUBLIC OF GHANA



[coat of arms]



GHANA NATIONAL PETROLEUM CORPORATION



[logo]



GNPC EXPLORATION AND PRODUCTION COMPANY LIMITED



AND



AGM PETROLEUM GHANA LD.



[logo]



IN RESPECT OF



SOUTH DEEPWATER TANO CONTRACT AREA



DATED



10th SEPTEMBER 2013







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TABLE OF CONTENTS



ARTICLE Page No.

ARTICLE 1: DEFINITIONS 3

ARTICLE 2: SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT AREA 12

ARTICLE 3: EXPLORATION PERIOD 15

ARTICLE 4: MINIMUM EXPLORATION PROGRAMME 18

ARTICLE 5: RELINQUISHMENT 23

ARTICLE 6: JOINT MANAGEMENT COMMITTE 24

ARTICLE 7: OBLIGATIONS OF CONTRACTOR AND GNPC; RIGHTS OF CONTRACTOR 30

ARTICLE 8: COMMERIALITY 35

ARTICLE 9: SOLE RISK ACCOUNT 42

ARTICLE 10: SHARING OF CRUDE OIL 45

ARTICLE 11: MEASUREMENT AND PRICING OF CRUDE OIL 51

ARTICLE 12: TAXATION AND OTHER IMPOSTS 54

ARTICLE 13: FOREIGN EXCHANGE TRANSACTIONS 57

ARTICLE 14: SPECIAL PROVISIONS FOR NATURAL GAS 59

ARTICLE 15: DOMESTIC SUPPLY REQUIREMENT (CRUDE OIL) 65

ARTICLE 16: INFORMATION AND REPORTS: CONFIDENTIALITY 66

ARTICLE 17: INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION 71

ARTICLE 18: ACCUNTING AND AUDITING 73

ARTICLE 19: TITLE TO AND CONTROL OF GOODS AND EQUIPMENT 75

ARTICLE 20: PURCHASING AND PROCUREMENT 77

ARTICLE 21: EMPLOYMENT AND TRAINING 78

ARTICLE 22: FORCE MAJEURE 80

ARTICLE 23: TERM AND TERMINATION 81

ARTICLE 24: CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT 84

ARTICLE 25: ASSGNMENT 86

ARTICLE 26: MISCELLANEOUS 88

ARTICLE 27: NOTICE 91

ANNEX 1: CONTRACT AREA 94

ANNEX 2: ACCOUNTING GUIDE 95

ANNEX 3: SAMPLE AOE CALCULATIONS 114







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ANNEX 4: CONFIDENTIALITY AGREEMENT 115







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THIS PETROLEUM AGREEMENT, made this 10th day of September 201 by and among:



(1) THE GOVERMENT OF THE REPUBLIC OF GHANA (hereinafter referred to as the "State"), represented by the Minister for Energy (hereinafter referred to as the "Minister");



(2) THE GHANA NATIONAL PETROELUM CORPORATION, a public corporation established by the Ghana National Petroleum Corporation Law, 1983 PNDCL 64 (hereinafter referred to as "GNPC");



(3) GNPC EXPLORATION AND PRODUCTION COMPANY LIMITED, a company incorporated n Ghana and havind its registered office at Petroleum House, Harbour Road, Tema (hereinafter referred to as "Explorco"); and



(4) AGM PETROLEUM GHANA LTD a company incorporated in GHana and having its registered office at 39 Ring Road, Central Acera, Ghana (hereinafter referred to as "AGM Ghana").



Each of the State, GNPC, Explorco and AGM Ghana are referred to as a "Party" and collectively the "Parties".



WITNESSES THAT:



1. All Petroleum existing in its natural state within GHana is the property of the Republic of Ghana and held in trust by the State on behalf of the people of Ghana.



2. In accordance with the Petroleum Law, the Minister has prepared a reference map showing areas of petroeum filds with the jurisiction of Ghana, divided into numbered areas and each of which is described as a "Block".



3. GNPC has by virtue of the Petroleum Law the rigth to undertake Exploration, Development and Production of Petroleum over all Blocks declared by the Minister to be open for Petroleum Operations.



4. GNPC is further authorised to enter into association by means of a Petroleum Agreement with a contractor for the purpose of Exploration, Development and Production of Petroleum.



5. The Contract Area that is the subject matter of this Petroleum Agreement is within the jurisdiction of Ghana and has been delared open for Petroleum Operations by the Minister and the State desires to encourage and promote Exploration, Development and Production within the said area.



6. Contractor having the financial ability, technical competente and professional skills necessary for carrying out the Petroleum Operations herein described, desired to associate with GNPC in the Exploration for, and Development and Production of the Petroleum resource of the said area.







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7. Contractor shall comply with all applicable laws of Ghana as in effect from time to time including without limitation any regulations or directives issued by or other acts of the Petroleum Commission pursuant to the Petroleum Commission Act, 2011 (Act 821) as required by applicable law from time to time.



8. The Parties are commited to providing Ghanaian nationals employment at all levels in the Petroleum industry, includiing technical, administrative and managerial positions, and Contractor accordingly commits to providing and supporting an adequate programme of training for Ghanaian nationals as an integral part of this Agreement.



9. It is a goal of the State that, within a period of fifteen (15) years from the Effective Date of this Agreement there shal be an indigenous company with operatorhship capacity and qualifications os such standard as required to performe the Petroleum Operations in a safe or prudent manner. The Contractor is committed to providing the technical assistance necessary to enable the State to fulfil such aspirations.



10. The Parties are committed to provigind an annual local content plan for fulfilling the applicable Ghanaian contec requirements with resect to the provision of goods and services.





NOW THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agrred and declared as follows:







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ARTICLE 1



DEFINITIONS



1. In this Agreement:



1.1 "Accounting Guide" means the accounting guide which is attached hereto as Annex 2 and made a part hereof;



1.2 "Additional Interes" has the menaing such term is given in Article 2.5;



1.3 "Affiliate" means anyy person, wheter a natural person, corporation, parthership, unincorporated associatio or other entity directly, or indirectly through one or more intermedareis, controls, is controlled by, or is under common control with a Party. For this purpse "control" means the direct or indirect ownership of an aggregate of more than fifty per cent (50%) of votating capital or voting rights of or the entitlement (directly or indirectly) to appoint a majority of the director or equivalent management body of, or to direct the policies or operations of the other entity;



1.4 "Agreement" means this Agreement betwwen the State, GNPC and Contractor, and includes the Annexes attached hereto in each case, as amended from time to time;



1.5 "AOE" has the meaning such term is given in Artcile 10.2;



1.6 "Appraisal" means operations or activities carried out following a Discovery of Petroleum for the purpose of delineating the accumulations of Petroleum to which that Discovery relates in terms of thickness and lateral extent and estimating the quantity of recoverable Petroleum therein and all operations or activities to resolve all uncertainties required for determinations of commerciality of a discovery;



1.7 "Appraisal Programme" means a programme for the conduct of Appraisal;



1.8 "Appraisal Well" means a well drilled pursuant to an Appraisal Programme;



1.9 "Associated Gas" means Natural Gas produced from a well in association with Crude Oil;



1.10 "Barrel" means a quantity or unit of Crude Oil equal to forty-two (42) United States gallons at a temperature of sixty (60) degrees Fahrenheit and at fourteen and sixy-five one-hundredths per square inch at atmospheric (14.65 psia) pressure;



1.11 "Block" means an area of approximately 685 square kilometres as depicted on the reference map prepared by the Minister in accordance with the provisions of the Petroleum Law;



1.12 "Budget" means a statement prepared in accordance with the Accounting Guide indicating expenditures to be made in accordance with an accompanying Work Programme;







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1.13 "Business Day" means a day on which banks are open for business in London, New York and Accra;



1.14 "Calendar Year" means the period of twelve (12) months of the Gregoriam calendar, commencing on January 1 and ending on the succeeding December 31;



1.15 "Carried Interest" means an interest held by GNPC pursuant to this Agreement in respect of which Contractor pays for the conduct of Petroleum Operations without any entitlement to reimbursement from GNPC other than for Production Operations;



1.16 "Commercial Discovery" means a Discovery which is determined to be commercial in accordance with the provision of Article 8 of this Agreement;



1.17 "Commercial Production Period" means in respect f each Development and Production Area the period from the Date of Commencement of Commercial Production until the termination of this Agreement or earlier relinquishment of such Development and Production Area;



1.18 "Consideration" means aggregate cash consideration, plus the fair market price of any other consideration, payable by any party. For these purposes determining required approvals, the value of Profect Contracts and/or amendments thereto denominated in currencies other than US Dollars shall be translated into US Dollars in accordance with Article 1.3 of the Accounting Guide;



1.19 "Contract Area" means the area covered by this Agreement in which Contractor is authorised in association with GNPC to explore for, develop and produce Petroleum, which as at the Effective Date comprises approimately 3,482 kms2 and is described in Annex 1 attached hereto (which Annex is made a part of this Agreement) but excluding any portions of such area in respect of which Contractor's rights hereunder are from time to time relinquished or surrendered pursuant to this Agreement;



1.20 "Contract Award Period" means (a) if the earlier of the Project Contracts contemplated by Article 6.10(c) is awarded between January 1 and June 30 of any Contract Year, the period from January 1 of such Contract Year through June 30 of the following Contract Year, and (b) if the earlier of the Project Contracts contemplated in Article 6.10(c) is awarded between July 1 and December 31 of any Contract Year, the period from July 1 of such Contrac Year through December 31 of the following Contract Year;



1.21 "Contract Year" means a period of twelve (1) calendar months, commencing on the Effecive Date or any anniversary thereof;



1.22 "Contractor" means collectiveley (a) AGM Ghana and its permitted successors and assigns and (b) Explorco and its permitted successor and assigns or, to the extent that one Contractor Party undertakes the Petroleum Operations, it shal mean that Contractor Party and "Contractor Party" means any one of them as the context requires;







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1.23 "Contractor Services Arrangement" means the arrangement between the Contractor and the Operator for the provision of technical serices to the Operator, which agreement will be pre-approved by GNPC at signing an initialed by GNPC in confirmation of such approval;



1.24 "Crude Oil" means hydrocarbons which are liquid at fourteen and sixty-five one-hundredths per square inch at atmospheric (14.65 psia) pressure and sixty (60) degrees Fharenheit and includes condensates and distillates obtained from Natural Gas;



1.25 "Date of Commencement of Commercial Production" means, in respect of each Development and Production Area, the data on which production of Petroleum under a programme of regular production, lifting and sale commences as defined in an approved Developement Plan;



1.26 "Data of Commercial Discovery" means the date referred to in Article 8.14;



1.27 "Day" means a day in the Gregorian calendar;



1.28 "Default Rate" means LIBOR plus three per cent (3%)



1.29 "Delivery Point" means the point of the loading facility at which Crude Oil reaches the inlet flange of the lifting tankships intake pipe or such other point which may be agreed betwwen the Minister and the Contractor;



1.30 "Development" or "Development Operations" means the following activities carried out in connection with a Development Plan; the building and installation of facilities for Production, and includes drilling of Development Wells, construction and installation of equipment, pipelines, facilities, plants and systems, in and outside the Contract Area, which are required for achieving Production, treament, transport, storage and lifting of Petroleum, and preliminary Production activities carried out prior to the Date of Commencement of Commercial Production, and includes all related planning and administrative work, and may also include the construction and installation of approved secondary and tertiary recovery systems;



1.31 "Development Costs" means Petroleum Costs incurred in Developent Operations;



1.32 "Development and Production Area" means that portion of the Contract Area reasonably determined by the Contractor (in consultation with the JMC) or by GNPC if a Sole Risk Operation on the basis of the available seismic and well data to cover the area extent of an accumulation or accumulations of Petroleum constituting a Commercial Discovery, enlarged in area by ten percent (10%), such enlargement to extend uniformly around the perimeter of such accumulation and to be further enlarged by the area covering any extension of the accumulation(s) which is revelad by further Petroleum Operations;



1.33 "Development Period" means in respect of each Development and Production Area, the period from the Date of Commercial Discovery until the Date of Commencement of Commercial Production;







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1.34 "Development Plan" means the plan for development of a Commercial Discovery prepared by Contractor in consultation with the JMC and approved by the Minister pursuant to Article 8;



1.35 "Development Well" means a well drilled in accordance with a Development Plan for producing Petroleum including wells for pressure maintenance or for incresing the Production rate;



1.36 "Discovery" means finding within a well at the end of drilling during Exploration Operations one or more accumulations of Petroleum the existence of which, until that finding, was unproved by drilling and which can be or is recovered at the surface in a flow measurable by conventional international petroleum industry testing methods (which, in the case of water depths greater than four hundred (400) metres, may include Modular Formation Dynamics Testing, also referred to as "MDI" by Schlumberger);



1.37 "Discovery Area" means that portion of the Contract Area, determined by the Contractor (subject to approval by JMC) or GNPC if a Sole Risk Operation on the basis of the available seismic and well data to cover the areal extent of the geological structure in which a Discovery is made. A Discovery Area may be modified at any time by the Contractor (or by GNPC, if applicable) if justified on the basis of new information, but may not be modified after the date of completion of the Appraisal Programme and submission of a report under Article 8.9;



1.38 "DIscovery Notice" means a writen notification to the Minister, Petroleum COmmission and GNPC providing information which shall include, the name and location of the well from which the accumulation(s) have been found, the depth interval(s), estimates of gross and net pay thickness, stratigrapy, and type of reservoir and fluids encountered;



1.39 "Effective Date" shall have the meaning to it in 26.13;



1.40 "Existing Project Contract" means a Project Contract existing at the time of a relevant Project Contract Amendment, as previosly amended, supplemented or otherwise modified;



1.41 "Exploration" or "Exploration Operations" means the search for Petroleum by geological, geophysical and other methods and the drilling of Exploration Well(s) and includes any activity in connection therewith or in preparation thereof and any relevant processing and Appraisal, including technical and economic feasibility studies, that may be carried out to determine whether a Discovery of Petroleum constitutes a Commercial Discovery;



1.42 "Exploration Costs" means Petroleum Costs incurred, both within and ouside Ghana, in conducting Exploration Operations hereunder determined in accordance with the Accountind Guide attached hereto an Annex 2;



1.43 "Exploration Period" means the period commencing on the Effective Date and continuing during the time provided for in Article 3.1 within which Contractor is







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authorised to carry out Exploration Operations and shall include any periods of extensions provided for in this Agreement. The period shall terminate with respect to any Discovery Area on the Date of Commercial Discovery in respect of such Discovery Area;



1.44 "Exploration Well" means a well drilled in the course of Exploration Operations conducted hereunder during the Exploration Period, but does not include an Appraisal Well;



1.45 "First Extension Period" has the meaning given to such term in Article 3.1(a) hereof;



1.46 "Force Majeure" means any event beyond the reasonable control of the Party claiming to be affected by such event which has not bee brouht about directly or indirectly at its own instance or which has not been brought about directly or indirectly at the instance of an Affiliate; provided that the State shall not be considered for this purpse an Affiliate of GNPC or Explorco. FOrce Majeure events may include, but are note limited to, earthquake, storm, flood, lightning or other adverse weather conditions, war, terrorism, embargo, blockade, riot or civil disorder;



1.47 "Foreign National Employee" means an expartriate employee of Contractor, its Affiliates, or its Sub-contractors who is not a citizen of Ghana;



1.48 "Ghana" mean the territory of the Republic of Ghana and includes rivers, streams, water courses, the territorial sea, seabed, and subsoil, the contiguous zone, the exclusibe economic zone, continental shelf, the airspace and all other areas within the jurisdiction of Ghana;



1.49 "GNPC Law" means the Ghana National Petroleum Corporation Law 1983 (PNDCL 64) as the same may be amended from time to time;



1.50 "Gross Production" means the total amount of Petroleum produced and saved from a Development and Production Area during Production Operations which is not used by Contractor in Petroleum Operations and is available for distribution to the Parties in accordance with Article 10;



1.51 "Gross Negligence" means ny act r failure to act (whether sole, joint or concurrent) which was made in reckless disregard to, harmful consequences such person knew or should have known, such act or failure would have on another person or entity;



1.52 "Indigenous Ghanaian company" means a company incorporated under the Companies Act (Act 179) of Ghana:



(a) having at least fifty-one percent (51%) of its equity owned by a citizen or citizens of Ghana; and



(b) where practical, having GHanaian citizens holding at least eighty percent of senoir management positions and one hundred percent of non-managerial and other positions;







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1.53 "Initial Exploration Period" has the meaning given to such term in Article 3.1(a) hereof;



1.54 "Initial Interest" means the interest of GNPC in all Petroleum Operations provided for in Article 2.4;



1.55 "International Good Oil FIeld Practice" means all those users and practices that are generally accepted in the international petroleum industry as good, safe, economical and efficient in exploring for, producing, processing and transporting Petroleu,;



1.56 "Joint Management Committe" or "JMC" means the committe established pursuant to Article 6 hereof;



1.57 "Joint Operating Agreement" or "JOA" means the joint agreemtn to be entered into among AGM Ghana, Explorco and the Operator in respect of the Contractor Area;



1.58 "LIBOR" means the reta which the Financial TImes, or if the Financial Times is not so published the Wall Street Journal, certifies to be the London Interbank Offered Rate in the London Interbank Eurodollar market on thirty (30) Day deposists on the last business Dy of the immediately preceding month provided that, in the event that neither the Financial Times nor the Wall Street Journal are published, the Parties shall endeavour to agree on a source of certification of LIBOR in reference to market practice and, if the Parties are unable to agree on a source of certification for LIBOR, any Party may refer the matter to a Sole Expert for certification;



1.59 "Major Contract" means a Project Contract under which the Consideration exceeds US$ 10,000,000;



1.60 "Market Price" means the market price for Crude Oil realized by Conctractor under this Agreement as determined in accordance with Article 11.7 hereof;



1.61 "Market Related Services" means any services, including the provision of assets, provided by an Affiliate of a Contractor Party which in the ordinary course of business provides such services on an arm's-lenght third party basis to the market generally;



1.62 "Material Contract Amendment" means a Project Contract Amendment, or any series of Project Contract Amendments, that involves:



(a) for Project Contract Amendments of any Existing Project Contracts other than Major Contracts: an increase to the Consideration payable under such contract by the Contractor (or any Affiliate, agent or other third party acting on behalf of the Contractor) which would make such Existing Project Contract a Major COntract; or



(b) for Project Contract Amendments of any Existing Project Contracts that are Major Contracts: Consideration in excess of US$10,000,000;



1.63 "Month" means a month of the Calendar Year;







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1.64 "Natural Gas" means all hydrocarbons which are gaseous at fourteen and sixty-five one-hundredths per square inch at atmospheric (14.65 psia) pressure and sixty (60) degrees Fahrenheit temperature ad includes wet gas, dry gas and residue gas remaining after the extraction of liquid hydrcarbons from wet gas;



1.65 "Non-Associated Gas" means Natural Gas produced from a well other than in association with Crude Oil;



1.66 "Operator" means the person as may be jointly proposed by the Parties and approved by the Minister (which approval shall not be unreasonably withheld), being either GNC, a Contractor Party or an entity wholly-owned by two or more Contractor Parties to conduct Petroleum Operations hereunder on behalf of the Parties;



1.67 "Participating INterest" means for GNPC, the interest held by GNPC in accordance with provision of Article 24 and Article 2.5, and for the Contractor, the interest held by the Contractor in accordance with the provisions of Article 2.10;



1.68 "Paying Interest" means an interest held by GNPC in respect of which GNPC pays for the condct of Petroleum Operations as expressly provided for in Article 2.7;



1.69 "person" means a natural person or any corporation, unicorporated association, trust, partnership or other legal entity;



1.70 "Petroleum" means Crude Oil or Natural Gas or a combination of both;



1.71 "Petroleum Commission" means a body established by the Petroleum Commission Act. 2011 for the regulation and the management of the utilization of petroleum resources in the upstream sector;



1.72 "Petroleum Commission Act" means the Petroleum Commission Act, 2011 (Act 821) as the same may be amended from time to time;



1.73 "Petroleum Costs" means ll expenditres made and costs incurred, by the Contractor or the Operator, both within and outside Ghana, in conducting Petroleum Operations hereunder determined in accordance with the Accounting Guide attached hereto as Annex 2;



1.74 "Petroleum Income Tax Law" means the Petroleum Income Tax Law, 1987 (PNDCL 188) as the same may be amended from time to time;



1.75 "Petroleum Law" means the Petroleum (Exploration and Production) Law, 1984 (PNDCL 84) as the same may be amended from time to time;



1.76 "Petroleum Operations" means all activities, both in and outside Ghana relating to the Exploration for, Development, Production, handling, storage, processing and transportation (to the Delivery Point) of Petroleum contemplated under this Agreement and includes Exploration Operations, Development Operations and Production Operations and all activities in connection therewith;







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1.77 "Petroleum Product" means any product derived from Petroleum by any refining or other process;



1.78 "Pre-Award Attachment" means any order, decree, injunction or other decision however denominated) of any court, arbitral body or other competent authority requested by a Party and issued prior to a final arbitral award issued pursuant to Article 24 of this Agreement that attaches, seizes, freezes or otherwise restricts the use or alienation of any property (whether tangible or intangible) of the other Party pending issuance of the final arbitral award wheter such property is in the possession or control of a Party or of a third party;



1,79 "Production" or "Production Operations" means activities other than Exploration Operations or Development Operations undertaken in order to extract, save, treat, measure, handle, store and transport (to the Delivery point) Petroleum to storage and/or loading poins and to carry out any type of primary, secondary or tertiary operations, including recycling, recompression, injection for maintenance of pressure and water flooding and all related activites such as planning and administrative work and shall also include maintenance, repair, abandonment or decommissioning and replacement of facilities, and well workovers in every case, conducted after the Date of Commencement of Commercial Production of the respective Development and Production Area;



1.80 "Production Costs" means Petroleum Costs incurred in Production Operations;



1.81 "Project Contract" means a contract between the Contractor (or any Affiliate, agent or other third party acting on behalf of the Contractor) and any other person or entity for the performance of any the obligations of the Contractor hereunder or under any related agreement, but shall exclude contracts solely for the transport, processing or sale of Petroleum after the Delivery Point;



1.82 "Project Contract Amendment" means an amendment, supplement or other modification of any Project Contract (including any change order or similar discretionary modification of any Project Contract in connection with the implementation or adminstration thereof), or any series of such amendments, supplements or other modifications;



1.83 "Quarter" means a period of three (3) Months, commencing January 1, April 1, July 1 or October 1 and ending March 31, June 30, September 30, or December 31, respectively;



1.84 "Second Extension Period" has the meaning given to such term in Article 3.1(a) hereof;



1.85 "Sole Expert" means the person appointed to resolve a dispute pursuant to Articles 24 hereof;



1.86 "Sole Risk" means an operation conducted at the sole cost, risk and expense of GNPC;



1,87 "Specified Rate" means LIBOR plus one per cent (1%);







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1.88 "Standard Cubic Foot" or "SCF" means the quantity of gas that occupies one (1) cubie foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperatura;



1.89 "State" means the Government of the Republic of Ghana, specifically excluding GNPC and Explorco;



1.90 "Subcontractor" means a third party with whom GNPC or Contractor has entered into a contractr for the provision of goods or services in connection with the Petroleum Oeprations;



1.91 "Termination" means termination of this Agreement pursuant to Article 23 hereof;



1.92 "Work Programme" means the annual plan for the conduct of Petroleum Operations prepared pursuant to Article 4.3, 6.4 and 6.5; and



1.93 "Year" means a continuous twelve (12) Month period.











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ARTICLE 2



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



2.1 This Agreement provides for the Exploration for and Development and Production of Petroleum in the Contract Area by GNPC in association with Contractor.



2.2 Subject to the provision of this Agreement, Contractor shall be responsible for the execution of such Petroleum Operations as are required by the provisions of this Agreement and subject to Article 9, is hereby appointed the exclusive entity to conduct Petroleum Operations in the Contract Area. In order that the Parties may cooperate in the implementation of Petroleum Operations, GNPC and Contractor shall establish a Joint Management COmmitte, to conduct and manage Petroleum Operations.



2.3 In the event that no COmmercial Discovery is made in the Contract Area, or that Gross Production achieved from the Contract Area is insuffcient fully to reimburse Contractor in accordance with the terms of this Agreement, then Contractor shall bear its own loss; GNPC and the State shall have no obligations whatsoever to Contractor in respect of such loss and the Contractor, after bearing its own losses, including all liabilities arising from Petroelum Operations, shall have no further obligation or liability to GNPC and the State as to such matter, excepting only as oherwise expressly provided in this Agreement.



2.4 GNPC shall fave a ten percent (10%) Initial Interest in all Petroleum Operations under this Agreement. With respect to all Exploration and Development Operations GNPC's Initial Interest shall be a Carried INterest. With respect to all production Operations GNPC's Initial Interest shall be a Paying Interest.



2.5 In addition to the Initial Interest provided for in Article 2.4, GNPC shall have the option in respect of each Development and Production Area to acquire an additional interest of up to 15% in the Petroleum Operations in such equal percentage of all the Development and Production Costs incurred after the Date of Commercial Discovery in respect of such Development and Production Area (or make arrangement satisfactory to Contractor to that effect). GNPC shall notify Contractor of the exercise of its option to acquire an Additional Interest within ninety (90) days of the Date of Commercial Discovery, COntractor shall provide to GNPC within seven (7) days of the Date of Commercial Discovery notice detailing COntractor's calculation of the Contractor Third Party Rate (as defined below).



2.6 If GNPC opts to take an Addition INterest as provided for in Article 2.5 then within six (6) Months of the date of its election, GNPC shal reimburse Contractor for all expenditures attributable to GNPC's Additional Interest and incurred from the Date of Commercial Disovery to the date GNPC notifies







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Contractor of its election togeher with interes at a rate (the "Contract Third Party Rate") no higher than (a) the weighted average rate applicable to any third party debt financing pursuant to which the Contractor (or its Affiliates) has financed such Additional Interest from and including the date of the relevant expenditure to and explucding the date the Contractor is reimbursed or (b) if Contractor has no third party debt financing, the Specified Rate. With respect to all Development and Productio Costs incurred subsequent to the Date of COmmercial Discovery in any Development and Production Area, the additional Interest shall be a Payng Interest.



2.7 For the avoidance of doubt GNPC shall only be liable to contribute to Petroleum Cost:



(a) incurred in respect of Development Operations in any Development and Production Area and to the extent only of any Additional Interest acquired n such Development and Production Area under Article 2.5; and

(b) incurred in erspect of Production Operations in any Development and Production Area both to the extent to:

(i) its ten percent (10%) Initial Interest; and

(ii) any Additional Interest aquired in such Development and Production Area under Atciel 2.5.



2.8 GNPC may contribute to Petroleum Opertions by provinind relevant services as shall be agreed with the Operator. Upon completion o the work associated with said contrution, GNPC shall invoice the Contractor for the costs incurred and shall proide reasonable supporting documentation in respect of such costs. Contractor shall pay GNPC the invoiced amount within thirty (30) days of receipt o the invoice, GNPC may elect to eanr credit for the invoice amounts incurred toward its share, if any, of Development COsts. Such credit shall incur interest at the Specified Rate annually from the respective dates such contributed costs were incurred until thery are utilised as credits toward GNPC's share of Development Cost. If during the Exploration Period GNPC has earned such credit and if GNPC elects not to hold an Additional Interest or no Commercial Discovery is made in the Contract Area, COntractor shall reimburse GNPC in an amount equivalent to the credit within sixty (60) days following the end of the Exploration PEriod or Contractor's relinquishment of the entire Contract Area, whichever occurs first. The actual amount of any credit earned by GNPC shall be the fair market rates at which such services could be obtained under freely competitive conditions at the time were perfomed.



2.9 Upon notifying Contractor of its decision to acquire an Additional Interest pursuant to Article 2.5, GNPC may at the same time elect to have Contractor advance up to fifty percent (50% of GNPC's total proportionate share of Development Cost as they are incurred, including such Costs as will already have been incurred from the Date of Commercial Discovery and which are



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[signatures]reimbursable under Article 2.6 on terms (i.e., period of payment and interest rate) no worse than the Contractor Third Party Rate.



2.10 Contractor's Participating Interest in all Petroleum Operations and in all rights under this Agreement shall be ninety per cen (90%), reduced proportionately at any given time and in any given part of the Contract Area by the Additional Interest of GNPC pursuant to Article 2.5 or the Sole Risk Interest of GNPC pursuant to Article 9.



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[signatures]ARTICLE 3



EXPLORATION PERIOD



3.1 The Exploration Period shall begin on the Effective Date and shall not extend beyond seven (7) years except as provided for in accordance with this Agreement and the Petroleum Law.



(a) The Exploration Period shall be divided into an Initial Exploration Period of three and one half years ("Iniaital Exploration Period") and, first extension period of one and one half years ("First Extension Period"). And second extension period of two (2) years ("Second Extension Period") and where applicable the further periods or which provision is mad hereafter

(b) Where Cotnractor has fulfilled its work obligations set out in Artcile 4.3 before the end of the Initial Exploration Period or, as the case may be, the First Extension Period, and has exercised its option by applying to the Minister in writting for an extension, the Minister will be deemed to have granted an extension into the First or, as the case may be, into the Second Extension Period.

(c) For eah well drilled by Contractor or with Contractor's participation during the Initial Exploration Period shall be extended by three (3) Monthes and the commencement of subsequent periods shall be postponed in their entirety accodingly.



3.2 Following the end of the Second Extension Period, subject to the profisions of Article 3.4, Contractor will be entitled to an extension or extensions, by reference to Article 8, of the Exploration Period as follows:



(a) Where at the end of the Second Extension Period Contractor is drilling or testin any well, Contractor shall be entitled to an extension for such further period as may be reasonably required to enable Contractor to complete such work and assess the results and, in the event that Contractor notifies the Minister that the results from any such well show a Discovery which merits appraisal, Contractor shall be entitled to a further extension for such period as may be reasonably required to carry out an Appraisal Programme and determine whether the Discovery constitutes a Commercial Discovery;

(b) WHere at the end of the Second Extension Period Contrator is engaged in the conduct of an Appraisl Programme in respect of a Discovery which has not been completed. Contractor shall be entitled to a further extension following the end of the Second Extension for such period as may be reasonbly required to complete that Apprasil Programme and determine whether the Discovery constitutes a Commercial Discovery;



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(c) Where at the end of the Second Extension Period Contractor has undertaken work not falling under paragraphs (a) or (b) which is not complete, Contractor will be entitled to a further extension following the end of the Second Extension Period for such period as the Minister considers reasonable for the purpose of enabling such work to be completed.

(d) Where pursuant to Article 8 COntractor has before the end of the Secon Extension Period, including extensions under (a), (b) and (c) above, given to the Minister a noice of COmmercial Discovery, Contractor shall, if the Exploration Period would otherwise have been terminate, be entitled to a further extension of the Exploration Period in respect of the DIscovery Area during which it must prepare the Development Plan in respect of the Commercial Discovery until either;

(i) the Minister has approved the Development Plan as set out in Article 8, or

(ii) in the event that the Development Plan is not approved by the Minister as set out in Article 8 and the matter or matterhs in issue betwwen the Minister and Contractor have been referred for resolution under Article 24, on (1) Month after the date on which the final decision thereunder has been given.



3.3 Without prejudice to the requirements of Article 3.1, where at the end of the Initial Exploration Period or, as the ease may be, at the end of the First Extension Period Contractor has failed to complete its minimum work and expenditure obligations as specified in Article 4 in respect of that period but has made reasonable arrangements during the Initial Exploration Period or the FIrst Extension Period, as pplicable, to remedy its default, or is in the course of drilling or testig any well pursuant to an approved Work Programme, Contractor shall be entitled to an extension of the then current applicable Period to enable it to (a) to compete such work and (b) to submit any application for an extension under Article 3.1(b), subject to such reasonable terms and conditions as the Minister may stipulate to assure performance of the work.



3.4 Save in respect of a Discovery Area:



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

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



subject to Article 3.5 and 8 nothing in Article 3.2 shal be read or construed as requiring or permitting the extension of the Exploration Period beyond seven (7) years from the Effective Date except for reason of FOrce Majeure.



3.5 The provisions of Article 3.2(a), 3.2(b) and 3.2(c) and Arcle 3.3 in so far as they relate to the duration of the extension period to which Contractor will be



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entitle shall be read and construed as requiring the Minister to give effect to the provision of Artcle 8 relating to the time within which Contractor must meet the requirements of that Article.





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[signatures]ARTICLE 4

MININUM EXPLORATION PROGRAMME



Exploration Operations shall begin as soon as practicable an in any case not later than sixty (60) days after the Effective Date.



(a) In recognition of the work conducted by GNPC prior to the date of execution of this Agreement in bringing the Contract Area to its current leve of prospectivity, within ninety (90) days after the Effective Date, Contractor shall pay to GNPC an amount equal to Twenty Million United States Dollars (US$20,000,000). Such expenditure shall be considered a Petroleum Cost.

(b) As soon as practicable after the Effective Date, GNPC shall deliver all data of any of the types described in Article 16.1 that it holds as of such time in respect of the Contract Area to Contractor. Such data shalld be considered Project Data for the purposes of Article 16.2

(c) GNPC shall, at the request of Contractor, make available to Contractor such records and information relating to the COntract Area as are relevant to the perfrmance of Exploration Operations by Contractor and are in GNPC's possession, provided that Contractor shall reimburse GNPC the reasonable costs of licensing the data arising after the Effective Date and for other costs reasonably incurred in procuring or otherwise makin such records and information available to Contractor.



4.3 Subject to the provision of this Article, in discharge of its obligations to carry out Exploration Operations in the Contract Area, Contractor shall during the several phases into which he Exploration Period is divided carry out the work specified hereinafter:



(a) Initial Exploration Period: Commencing on the Effective Date and terminating at the end of the first half of the 4th Contractor Year (a total of 42 Months).



Description of Work

By the end of the Initial Exploration Period, contractor shall have undertaken the work described below:

(i) Acquire, process and interpret seven hundred fifty (750) square kilometres of 3D seismic data; and

(ii) Drill a minimum of two (2) Exploration Wells.



Minimum Expenditure: COntractor's minimum expenditure for the work in the Initial Exploration Period shall be Two Hundred Fifty-Nine Milion United States Dollars (US$259,000,000).



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As security for Contractor's minimum expenditure obligation for the work in the Initial Exploration Period, AGM Ghana shall provide to GNPC within ninety (90) days of the Effective Date a performance bond or ban guarantee form a financial institution, in a form and from a jurisdiction, in each case, acceptable to GNPC and in an amount not less tahn One Hundred Million States Dollars (US$100,000,000) (the "Initial Performance Bond").



In addition to the Initial Performance Bond, if at any time on or prior to the last day of the Initial Exploration Period, GNPC determines (in its sole discretion) that the Contractor is not or as not been conducting Petroleum Operations in a manner or on a schedule likely to safey the minimum work obligations for the Initial Exploration Period, GNPC may by notice to AGM Ghana require AMG Ghana to provide to GNPC, within forty five (45) days after such notice is given, an additional performance bond or bank guarantee form a financial institution, in a form and from jurisdiction, in each case, acceptable to GNPC and in an amount up to the difference between (i) Two Hundred Fifty-Nine Million United States Dollars (US$ 259,000,000) and (ii) (A) One Hundred Million United States Dollars (US$ 100,000,000) plus (B) the amount of Petroleum Costs expended in furtherrance of the minimum work obligation at the time of the notice (the "Addiciontal Performance Bond"); provided, however, that GNPC may, in its sole discretion notice to AGM Ghana during the Initial Exploration Period that no Additional Perfomance Bond shall be required. For the avoidance Performance Bond during the Initial Exploration Period, the Additional Perfomance Bond shall not be required and upon the Minister's certification of the completion of the minimum work obligation for the Initial Exploration Period, the Initial Performance Bond and any Additional Performance Bond may terminate and GNPC shall promptly return any associated instruments to AGM Ghana.

(b) First Extension Period: Commencing at the end of the Initial Exploration Perdiod and terminating at the end of further 1.5 Contract Years.



Description of Work

By the end of the First Extension Period, contractor shall have undertaken the work described below:

(i) Reprocess existing data where required; and

(ii) Drill a minimum of on (1) Exploration Well.

Minimum Expenditure: COntractor's minimum expenditure for the work in the Initial Exploration Period shall be One Hundred Twenty-Six Milion United States Dollars (US$126,000,000).



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[signatures]

(c) Second Extension Period: Commencing at the end of the First Extension Period and terminating at the end of further two Contract Years.



Description of Work

(i) Reprocess existing data where required; and

(ii) Drill a minimum of on (1) Exploration Well.

Minimum Expenditure: Contractor's minimum expenditure for the work in the Second Extension Period shall be One Hundred Twenty-Six Milion United States Dollars (US$126,000,000).

(d) Work accomplished in any period in excess of the above obligations may be applied as credit in satisfaction of work obligations called for in any other Period. The fulfilment of any work obligation shall relieve Contractor of the corresponding minimum expenditure obligation but the fulfilment of any minimum expenditure obligation shall not relieve Contractor of the corresponding work obligations. Should the Contractor fail to perform any of its minimum work obligation under Article 4.3 within the relevant Period, the Contractor shall pay to GNPC, any unspent amount of the Minimum Expenditure obligation under Article 4.3 for the Initial Exploration Period, the First Extension Period or the Second Extension Period as the case may be. Norwithstanding the second sentence of this paragraph, in the event that such a payment is made in respect of the Initial Exploration Period and there has been a Discovery, the Contractor shall be deemed to have fulfilled the work obligation for the Initial Exploration Period; provided hoever that Contractor's right to advance to the First Extension Period in such event shall be at the discretion of the Minister.



4.4 No Appraisal Wells drilled or seismic surveys carried out by Contractor as part of an Appraisal Programme undertaken pursuant to Article 8 and no expenditure incurred by Contractor in carrying out such Appraisal Programme shall be treated as discharging the minimu work obligations under Article 4.3.



4.5 The seismic programme in Article 4.3(a), when combined with existing data, shall be such as will enable a study of the regional geology of the COntract Area and the preparation of a report thereon with appropriate maps, cross sections and illustrations, as well as a geophysical survey of the Contract Area which, when combined with existing data, shall provide:



(a) a minimum seismic grid adequate to define prospective drill sites over prospective closures as interpreted from data available to Contractor; and

(b) a seismic evaluation of structural and stratigraphic conditions over the remaining portions of the Contract Area.



4.6 Each Exploration Well shall be drilled at a location and to an objective depth determined by Contractor in consultation with GNPC. Except as otherwise



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[signatures]provided in Article 4.7 or 4.8 below, the minimum depth of each obligatory Exploration Well shall be whichever of the following is fist encountered:

(a) the depth of not less than 2,000 metres below the mud-line, to reach close to the base of the syn-rift succession; subject to operational conditions, and as determined by well-site micro-palcontology;

(b) the depth of 300 metres into the primary objective;

(c) the depth at which Contractor encounters geologic basement; and

(d) the depth at which a Discovery is made and tested.



4.7 The minimum depth of one (1) of the obligatory Exploration Wells in Article 4.3 shall be whichever of the following is first encountered:

(a) the depth of not less than 2,000 metres below the mud-line, to reach close to the base of the syn-rift succession; subject to operational conditions permitting, and as deterined by well-site micro-palcontology;

(b) a depth sufficient to penetrate 300 metres into the upper albian formation; or

(c) the depth at which Contractor encounters geological basement.



4.8 If in the course of drilling an obligatory Exploration Well the Contractor concludes that drilling to the minimum depth specified in Article 4.6 or 4.7 above is impossible, impracticable or imprudent in accordance with International Good Oil Field Practice, the Contractor may plug and abandon the Exploration Well and GNPC and the Minister shall have the option of either:



(a) waiving the minimum depth requirement, in which case Contractor will be deemed to have satisfied the obligation to drill such Exploration Well; or

(b) provided that a reasonable amount of time (and for this purpose, fifteen (15) Monthes shall be a reasonable amount of time) shall be allowed for Contractor to source a suitable drilling rig, requiring Contractor to drill a substitute Exploration Well at a location determined by COntractor in consultation with GNCP and to the minimum depth set forth in Article 4.6 or 4.7, except that if in the course of drilling such substitute Exploration Well Contractor establishes that drilling to the minimum depth specified in Article 4.6 or 4.7 above is impossible, impracticable or imprudent in accordance with International Good Oil Field Practice, then Contractor may plug and abandon the substitute Exploration Well and will be deemd to have satisfied the obligation to drill one (1) Exploration Well.



The above option shall be exercised by GNPC and the Minister (acting together) within sixty (60) days from notice given by Contractor to GNPC of the completion of the pluggind and abandonment of the Exploration Well, and failure to exercise such option shall constitute a waiver by GNPC and the Minister of the minimum depth requirement pursuant to 4.6 or 4.7 as the case



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[signatures]may be. Whislt the Contractor is sourcing a suitable drilling rig or drilling or testing a substitute Exploration Well as contemplated by this Article 4.8, the COntractor shall be deemed to be "in the course of drilling or testing an well pursuant to an approved Work Programme" for the purposes of Article 3.3.



4.9 During the Exploration Period, Contractor shall have the right to perfomr additional Exploration Operations subject to the terms of this Agreement and applicable law (including, without limitation, gravit and magnetic surveys, drilling stratigraphic wells, reprocessing two or three dimensional seismic data within the Contract Area, environmental and metocean studies, technical and economic evaluations of each Well and additional geological and geophysical studies), provided that:



(a) the minimum work obligations are completed within the applicable period; and

(b) JMC approval shall be required for such Exploration Operations; provided that Contractor may elect to perform such additional Exploration Operations in the absence of any required approval by the JMC, at their sole risk but only in the event of a subsequent COmmercial Discovery associated with such additional Exploration Operations shall the cost of such Exploration Operations be considered allowable Petroleu Cost for AOE purposes and any such subsequent Commercial Dsicovery had been made in connection with operations that were not performed as sole risk operations, including, without limitation, participation by GNPC in such COmmercial Discovery.



4.10 During the Exploration Period, Contractor shall deliver to GNPC and the Minister reports on Exploration Operations conducted during each Quarter within thirty (30) days following the end of that Quarter. Further requests for nformation by the Minister under Section 9(1) of the Petroleum Law shall be complied with within a reasonable time and copies of documents and other material containing such information shall be provided to GNPC.





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[signatures]

ARTICLE 5



RELINQUISHMENT



5.1 Except as provided in Article 5.2, 8.3, 8.11, 8.17, 8.18, 8.19, 8.29, 14.9 and 14.16. Contractor shall relinquish porions of the Contract Area in the manner provided hereafter.



(a) If on or before the expiration of the Initial Exploration Period, Contractor elects to enter into the First Extension Period pursuant to Article 3.1(b) then subject to Article 5.2 at the commencement of the First Extension Period the area retained shall not exceed seventy percent (70%) of the Contract Area as at the Effective Date.

(b) If on or before the expiration of the First Extension Period, Contractor elects to enter into the Second Extension Period pursuant to Article 3.3 then subject to Article 5.2 at the commencement of the Second Extension Period the area retained shall not exceed forty-five percent (45%) of the COntract Area as at the Effective Date.

(c) On the expiration of the Second Extension Period, Contractor shall subject to Article 5.2 relinquish the remainder of the retained Contract Area.



PROVIDED HOWEVER THAT if at the end of the Initial Exploration Period or the FIrst or Second Extension Period as the case may be COntractor elects not to enter into the First or Second Extension Period Contractor shall relinquish the entire Contract Area.



5.2 THe provisions of Article 5.1 shall not be read or construed as requiring Contractor to relinquish any portions of the Contract Area which constitutes or forms part of either a Discovery Area (excluding a Discovery Area determined by the terms of this Agreement to neither merit Appraisal nor to be commercial) or a Development and Production Area.



5.3 Each area to be relinquished pursuant to this Article shall be selecte by Contractor and shall be measured as far as possible in terms of continuous and compact units of a size and shape which will permit the carrying out of Petroleum Operations in the relinquished portions.



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[signatures]ARTICLE 6



JOINT MANAGEMENT COMMITTEE



6.1 In order that GNPC may at all times participate in respect of the implementation of Petroleum Operations, GNPC and Contractor shall not later than thirty (3) days ater the Effective Date establish a Joint Manageent Commite. Without prejudice to the rights and obligations of Contractor for day-to-day management of the operations, the JMC hsall oversse, supervise and, as specified in this Agreement, approve the Petroleum Operations and ensure that all approved Work Programmes and Development Plans are complied with and also that accounting for costs and expenses and the maintenance of records and reports concerning the Petroleum Operations are carried out in accordance with this Agreement and the accounting principles and procedures generally accepted in the international petroleum industry.



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

(a) THe JMC shall be composed of two (2) representatives of GNPC and two (2) representatives of Contractor. Any Contractr Party not represented on the JMC may appoint a representative to attend all JMC meetings as an observer and shall receive copies of all notices and materials distributed to the members of the JMC concurrently with the distribution of such notices and materials to the JMC members. GNPC and COntractor shall also designate a substitute or alternate for each member. IN the case of absence or incapacity of a member of the JMC, such alternate shall automatically assume the rights and obligations f the absent or incapacitaded member.

(b) The CHairperson of the JMC shall be designated by GNPC from amongst the members of the JMC.

(c) COntractor shall be responsible in consultation with GNPC for the preparation of agenda and supporting documents for each meeting of the JMC and for keeping records of the meetings and decisions of the JMC. GNPC shall have the rigth to inspect all records of the JMC at any time. Contractor shal circulate the agenda and supporting documents for each meeting to all members and the substitutes or alternates designated pursuant to Article 6.2(a).

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



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



(a) All meetingf of the JMC shall be held in Acera, Olso, London or such other place as may be agreed upon by members of the JMC.

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



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(c) A meeting of the JMC may be convended by either Party giving not less than twenty (20) days notice to the other or, in a case requiring urgent action, notice of such lesser duration as the members may agree upo.

(d) Decisions of the JMC shall require unanimity, provided, however that decisions and approvals required for budgetary and day to day operational matters associated with Appraisal, Development and Production Operations, the expenditures, outlays or advances for which Contractor will be required to make one a one hundred per cent (100%) basis shall require approval of the Contractor's representative only.

(e) Any member of JMC may vote by written and signed proxy held by another member.

(f) Desicions of the JMC may be made without holding a meeting if all representatives of both Parties or such representatives as are required to make a decision on such matter pursunt to this Article 6 notify their consent to such decision in the manner provided in Article 27.

(g) GNPC and Contractor have the right to bring expert advisors to any JMC meetings to assit in the discussions of technical and other matters requiring expert advice.

(h) The JMC may also establish such subcommittes as it deems appropriate for carrying out its funcions including:

(i) a technical subcommitte;

(ii) an audit subcommitte;

(iii) an accounting subcommittee; and

(iv) a contract and procurement subcommitte;

(i) Costs and expenses related to attendance by GNPC in or outside Acera (e.g. travel, transportation, lodging, per diem and insurance) in accordance with applicable laws, regulations and GNPC policies and procedures shal be borne by Contractor and treated as Petroleum Cost.



6.4 The JMC shal oversse Exploration Operations (except Sole Risk Operations or sole riks operations carreid out pursuant to Article 4.9) as follows:



(a) Not later than ninety (90) days before the commencing of each Calendar Year. Contractor shall prepare and submit to the JMC for its review and approval a detailed Work Programme and Budget covering all Exploration Operations which Contractor proposes to carry out in the coming Calendar YEar and shall also give an indication of Contractor's tentative preliminary exploration plans for the succeding Calendar Year, provided that where the Effective Date occurs later than 30 June in any Calendar Year Contractor shall have the option of submitting a Work Programme and



25

[signatures]





Budget covering the remaining months of the Calendar Year in which the Effective Date occurs and the succeding Calendar Year, within ninety (90) days after the Effective Date;



(b) Upon notice to the Minister and GNPC, Contractor may amend any Work Programme or Budget submitted to the JMC pursuant to this Article which notice will state why in COntractor's opinion the amendment is necessary or desirable; provided that any material amendment of such type shall be submitted to the JMC for review and approval (for which purpose an increase shall be material if its exceeds 5% of the line iem or 5% of the total Budget);

(c) Every Work Programme submitted to the JMC pursuant to this Article 6.4 and every revision or amendment thereof shall be consistent with the requirements set out in Article 4.3 relating to minimum work and expenditure for the period of the Exploration Period in which such Work Programme or Budget falls;

(d) Contractor shall report any Discovery to GNPC immediately following such Discovery and shall place before the JMC for review its Appraisal Programme Commission, a copy of which submission shall also be sent to the Minister for inforamtion purposes;

(e) Within thirty (30) days of completion of any Appraisal Programme a JMC meeting to discuss the results of the Appraisal Programme shall be convened to take place before submission of the detailed Appraisal report to the Petroleum COmmission and the Minister provided for in Article 8.9;

(f) the JMC will review and apprve WOrk PRogramme and Budgets and any amendments or revision thereto, and Appraisal Programmes and any relevant amendments or revision thereto, submitted to it by Contractor pursuan to this Article, and timely give such advice as it deems appropriate which Contractor shall consider before submitting the Work Programmes and Budgets or Appraisal Programmes, as applicalbe, for approvals required by law or pursuant to this Agreement, as soon as reasonably practicable, and GNPC and Contractor shall use reasonable best efforts to cause their respective representatives to complete their review, and confirm its advice, approval or non-approval, as relevant, within sixty (60) days of their submission;

(g) after the Date of Commercial Discovery, Contractor shall seek the concurrence of GNPC's JC representatives, which concurrence shall not be unreasonably withheld, on any proposal for the drilling of an Exploration Well or Wells not associated with the Commercial Discovery and not otherwise required to be drilled under Article 4.3 or 4.8. If concurrence is note secured by Contractor, Contractor may nevertheless



26

[signatures]elect to drill the Exploration Well or Wells but only in the event of a subsequent COmmercial DIscovery associated with the Well or Wells shall the costs of such Well or Wells be considered Petroleum COsts for AOE purposes.



6.5 From the Date of Commercial Discovery, the JMC shall have supervision of Petroleum Operations as follows:



(a) Within sixty (60) days after the Date of Commercial Discovery, Contractor shall prepare and submit to the JMC for approval any revisions to its annual Work Programme and Budget that may be necessary for the remainder of that Calendar Year and for the rest of the Exploration Period;

(b) At least ninety (90) days before the commencement of each subsequent Calendar Year, Contractor shall submit to the JMC for review and approval a detailed Work Programme and Budget setting forth all Development and Production Operations which Contractor proposes to carry out in that Calendar YEar and the estimated cost thereof and shall also give an indication of Contractor's plans for the succeding Calendar Year; and

(c) Within sixty (60) days of the Date of Commencement of Commercial Production and thereafter not later than one hundred and twenty (120) days before the commencement of each Calendar Year, Contractor shall submit to the JMC for its review and approval an annual production schedule (addressng all of the Work Programmes and Budgets proposed in the COntract Year) which shall be in accordance with International Good Oil Field Practice, and shall be designated to provide the most efficient, beneficial and timely production of the Petroleum resources.



provided that the JMC will make such review and approval (if it decides to give approval) as soon as reasonable practicable and GNPC and Contractor shall use reasonable best efforts to cause their respective representatives to complete their review and confirm their approval or non-approval within sixty (60) days of submission of the relevant Work Programme and Budget.



6.6 Lifting schedules and other supplementary agreements provided for under Article 10.7 shall be subject to JMC approval.



6.7 The JMC shall review all of COntractor's reports on the conduct of Petroelum Operations.



6.8 Contractor's insurance programme and the programmes for training Operator personnel and technology transfer submitted by Contractor and the accomplanying budgets for such schmes and programmes shall be subject to JMC approval;



6.9 Except as otherwise agreed in writting by the parties, the JMC shall be entitled to:



(a) review and approve tender procedures, including without limitation determining the terms and conditions of competitive tender procedures,



27

[signatures]reasonable pre-qualification criteria for bidders and the forms of contract therefor and certifying the winner of such tenders for Project Contracts under which the Consideration exceeds US$ 1,000,000;



(b) review and approve Major Contracts and contracts for Market Related Services;



(c) review and approve all Material Contract Amendments;



(d) acting through a contract and procurement subcommittee, review and approve any Project Contract or Project Contract Amendment under which the Consideration exceeds US$ 1,000,000 based on its compliance or non-compliance with the requirements of this Agreement or of Ghanaian law in effect from time to time;



(e) appoint such subcommittees as it shall deem appropriate, each such submommitte having such authority as is delegated to it by the JMC in accordance with this Agreement and related documents;



(f) consider any other matter arising under or relating to this Agreement or any related agreemetn that is referred to the JMC by any or all of the parties and



provided that all matters coming before the JMC pursuant to this Article shall be presented and decided seperately from decisions with respect to proposed modifications of the Development Plan or proposed annual Work Programmes and Budget (or amendments thereto) pursuant to Article 6.4; provided, further, that the JMC will make its review and give its approval (if it decides to give approval) as soon as reasonably practicable, and GNPC and Contractor shall use their reasonable best efforts to cause their respective representatives to complete their review and confirm their approval or non-approval within sixty (60) days.



6.10 Contractor shall provide GNPC ten (10) Business Days' pior written notice of the award of a Project Contract when such award:



(a) has not been approved by the JMC or the contract and procurement subcommittee, as applicable;



(b) does not result from a competitive tendering process;



(c) would result in the award of more than one Project Contract with the same vendor or Affiliates of such vendor for (a) the same, substantially similar or interchangeable goods, or (b) the same, substantially similar or equivalent services, within the same Contract Award Period and in such case, would result in the aggregate value of such Project Contracts exceeding the threshold for Major Contracts.



In the event that such a notice is required such notice shall set out the commercial, financial, technical or operational reason for which the Contractor believes that the award of a separate contract to the same vendor is justified,







28

[signatures]without prejudice to GNPC's right to review such reasons pursuant to the Accounting Guide.



6.11 If during any meeting of the JMC the Parties are unable to reach agreement concerning any of the matters provided for in Article 6.5, 6.6, 6.7, 6.8 and 6.9 the matter shall be deferred for reconsideration at a further meeting to be held not later than fifteen (15) days following the original meeting. If after such further meeting the Parties are still unable to reach agreement, the matter in dispute shall be referred to the Parties forthwith. Failing agreement within fifteen (15) days thereafter, the matter in dispute shall, at the request of any Party, be referred for resolution under Article 24.



6.12 The concorrence or approval of JMC representatives shall not be unreasonably withheld or delayed with respect to any Work Programme or Budget or any other matter submitted by Contractor in accordance with this Article 6.





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[signatures]ARTICLE 7



RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC



7.1 Subject to the provisions of this Agreement, Contractor shall be responsible for the conduct of Petroleum Operations and shall perform its obligations in a workmanlike manner, with due care and expedition and in accordance with International Good Oil Field Practice, including without prejudice to the generality of the foregoing:



(a) conduct Petroleum Operations with almost diligence, efficiency and economy, in accordance with accepted international petroleum industru practices, observing sound technical and engineering practices using appropriate advanced technology and effective equipment, machinery, materials and methods;



(b) take all practicable steps to ensure compliance with Section 3 of the Petroleum Law; including ensuring the recovery and prevention of wast of Petroleum in the Contract Area in accordance with accepted internation petroleum industry practices;



(c) prepare and maintain in Ghana full and accurate records of all Petroleum Operations performed under this Agreement;



(d) prepare and maintain accounts of all operations under this Agreement in such a manner as to present a full and accurate record of the costs of such Petroleum Operations, in accordance with the Accounting Guide;



(e) disclose to GNPC and the Minister any operating or other agreement among the Parties that constitute Contractor relating to the Petroleum Operations hereunder, which agreement shall not be inconsistent with the provisions of this Agreement;



(f) Prepare and implement arrangements for ensuring at all times the Operator's capacity as a compentent operator;



(g) provide and be solely responsible for the payment of all costs related or incidential to all services, equipment and supplies necessary for the execution of the activities to be conducted by the Contractor under this Agreement and the related documents;



(h) prepare and submit in accordance with this Agreement for approval by the JMC (i) the Development Plan and (ii) such other matters as are specified in this Agreement and the related documents as subject to approval by the JMC;



(i) take all measures consitent with International Good Oil Field Practice (i) to control the flow and prevent loss or wast of Petroleum, (ii) to prevent any injurious ingress of water and damage to Petroleum bearing strata and (iii) to manage reservoir pressure;





30

[signatures](j) not to flare any Natural Gas except to the extent necessary to mitigate or prevent an emergency or for safe operations as provided in the Development Plan;



(k) keep the Minister and GNPC promptly advised in writting of all material developments which occur, or the occurrence of which is reasonably foreseeable, affecting or likely to affect Petroleum Operations;



(l) to take such steps in case of emergency, and make such immediate expenditures as are necessary in accordance with International Good Oil Field Practice, Environmental, Industrial Hygiene and Safety Legislation and/or this Agreement and the related documents for the protection of health, life, the environment and property, and to report in reasonable detail all such steps taken and expenditures made promptly to the JMC;



(m) notify promptly the Minister and GNPC if the Contractor becomes aware of any unusual event or circumstance occurring in the Contract Area or such other areas where Contractor is undertaking activities contemplated under this Agreement or the related documents that could reasonably be expected to adversely affect the environment;



(n) implement and administer contracts entered into with Affiliates in the same fashion as it would contracts entered into with non-Affiliate third parties in comparable transactions negotiated, implemented and administered on an arm's lenght basis;



(o) maintain or decommission, as appropriate, all existing facilities and assest and all other assts used or held for use in connection with Petroleum Operations, in accordance with International Good Oil Field Practice, applicable law and this Agreement; and



(p) perform and observe each other term, covenant and agreement of the Contractor contained in this Agreement and the related documents;



7.2 In connection with its performance of Petroleum Operations, Contractor shall have the right within the terms of and pursuant to applicable law and regulations in effect from time to time:



(a) to establich offices in Ghana and to assign to those offices such representatives as it shall consider necessary for the purposes of this Agreement;



(b) to use public lands for installation and operation of shore bases, and terminals, harbours and related facilities, petroleum storage and processing pipelines from fields to terminals and delivery facilities, camps and other housing;







31

[signatures](c) to receive licenses and permission to install and operate such communications and transportation facilities as shall be necessary for the efficiency of its operations;



(d) to bring to Ghana, provided that reasonable efforts are made to identify Ghanaian personnel with the requisite skill and experience in accordance with Contractor's plan for training and developing Ghanaian nationals referenced in Article 8.13(n) and Article 21.5. Such number of Foreign National Employees as shall be necessary for its operations, including employees assigned on permanent or resident status, with or without families, as well as those assigned on temporary basis such as rotational (rota) employees;



(e) to provide or arrange for reasonable housing, schooling and other amenities, permanent and temporary, for its employees and to import personal and household effects, furniture and vehicles, for the use of its personnel in Ghana;



(f) to be solely responsible for provision of health, accident, pension and life insurance benefit plans on its Foreign National Employees and their families; and such employees shall not be required to participate in any insurance, compensation or other employee or social benefif programs established in Ghana;



(g) to have, together with its personnel, at all time the right of ingress to and egrees from its offices in Ghana, the Contract Area, and the facilities associated with Petroleum Operations hereunder in Ghana including the offshore waters, using its owned or chartered means of land, sea and air transportation;



(h) to engage such Subcontractors, expatriate and national, including also consultants, and to bring such Subcontractor and their personnel to Ghana as are necessary in order to carry out the Petroleum Operations in a skillful, economic, safe and expeditious manner; and said Subcontractors shall have the same rights as Contractor specified in this Article 7.2 to the extent they are engaged by Contractor for the Petroleum Operations hereunder; and



(i) to establish the Operator to act on behalf of Contractor in fulfilling its obligations hereunder and to allow the Operator to benefit from the rights afforded to the Contractor hereunder.



7.3 Provided that Contractor has complied with all of its obligations under this Agreement as it is required at such time, GNPC (or an agency of the State, as appropriate) shall reasonably assit Contractor in carrying out Contractor's obligations expeditiously and efficiently as stipulated in this Agreement, and in particular GNPC (or such agency) shall use its reasonable best efforts to assist Contractor and its Subcontractors, as long as they appropriately complete







32

[signatures]applicable procedures and other requirements proscribed by relevant authorities to:



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



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



(c) subject to Article 7.2(d) hereof, obtain entry visas and work permits or any other documenttion that may be required from time to time for such number of Foreign National Employees of Contractor and Subcontractors engaged in Petroleum Operations and members of their families who will be resident in Ghana, and make arrangements for their travel, arrival, medical services and other necessary amenities;



(d) comply with Ghana customs procedures and obtain permits for the importation of necessary materials;



(e) obtain the necessary permits to transport documents, samples or other forms of data to foreign countries for the purpose of analysis or processing if such if deemd necessary for the purposes of Petroleum Operations;



(f) contact government agencies dealing with fishing, meteorology, navigation and communications as required;



(g) identify qualified Ghanaian personnel as canditated for employment by Contractor in Petroleum Operations; and



(h) procure access on competitive commercial terms for the storage processing, transportation and/or marketing of Petroleum produced under this Agreement through facilities owned by the State, GNPC (or its Affiliates) or any third party.



7.4 All reasonable and docmented expenses incurred by GNPC in connection with any of the matters set out in Article 7.3 above shall be bornnnne by Contractor.



7.5 GNPC shall use its best reaonable efforts to render assistance to Contractor in emergencies and major accidents, and such other assistance as may be requested by Contractor, provided that any reaonable expenses involved in such assistance shall be borne by Contractor..



7.6 Provided Contractor has met all pre-conditions, if any, for any Government approva, permit, waiver or similar action required, then if any such approval, permit, waiver or similar action required in the performance of the Petroleum Operations by the Contractor has not been obtained after sixty (6) days from the application for such approval, permit, waiver or similar action, and due to such delay, the Petroleum Operations under an approved Work Programme and budget cannont be conducted by Contractor, on the receipt by GNPC of written notice of such delay in obtaining the relevant Government approval, permit, waiver or similar action, the relevant provision of this Agreement shall be







33

[signatures]suspended for the period of delay caused by the Government's delay in giving the necessary approval, permit waiver or similar action and any deadline set herein for the completion of any act required or permitted to be done hereunder, shall accommodate the period of time equal to the delay caused by such Government inaction and the Parties shall take all reasonable measures to minimize the consequences of the delay on the Petroleum Operations







34

[signatures]ARTICLE 8



COMMERCIALITY



8.1 Contractor shall submit a Discovery Notice to the Minister, Petroleum Commission and GNPC in writting as soon as possible after any Discovey is made, but in any event not later than thirty (30) days after the date any such Discovery is made.



8.2 As soon as possible after the analysis of the test results of such Discovey is complete and in any event not later than one hundred (100) days from the date of such Discovery, Contractor shall by a further notice in writting to the Minister indicate wheter in the opinion of Contractor the Discovery merits appraials.



8.3 Where the Contractor does not make the indication required by Article 8.2 within the period indicated or indicates that the Discovery does not merit appraisa. Contractor shall, subject to Article 8.17 and 8.19 below, relinquish the Discovery Area associated with the Discovery.



8.4 Where Contractor indicates that the Discovery merits Appraisal, Contractor shall within one hundred and eighty (180) days from the date of such Discovery submit to the Petroleum Commission for approval and to the Minister for information purposes an Appraisal Programme shall include a plan for delineating the accumulation of Petroleum to which that Discovery relates in terms of thickness and lateral extent and estimating the quantity of recoverable Petroleum therein and all operations or activities to resolve all uncertainties required for determination of commerciality of a Discovery. Unless otherwise instructed by the Petroleum Commission, Contractor shall conduct a separte appraisal for each Discovery where Contractor indicates that such Discovery merits appraisal.



8.5 In the absence of regulations otherwise governing the process, the Minister shall use all reasonable efforts to procure that in considering the Appraisal Programme submitted under Article 8.4, the Petroleum Commission shall act reasonably and timely and adhere to the procedure set fotth in this Article 8.5. Petroleum Commission shall within sixty (60) days of submission of the Appraisal Programme, give the Contractor a notice in writing stating:



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



(b) if not approved, any revisions or improvements required by the Petroleum Commission to be made to the proposed Appraisal Programme, and the reaons therefor; or



(c) if conditionally approved, the condition to the approval of the proposed Appraisal Programme, and the reasons therefor.



If the Petroelum Commission does not provide such notice after such sixty (60) day period, such Appraisal Programme shall be deemed not approved.







35

[signatures]If the Petroleum Commission notifies the Contractor that the Appraisal Programme is not approved or falls to satisfy such obligation to notify the Contractor within the timeframe provided or the Contractor notifies the Petroleum Commission that it does not accept the revisions or conditions required for any approval pursuant to this Article 8.5, the Petroleum Commission and the Contractor shall consult within thirty (30) days of the earlier of (x) the date of the notice by the Petroleum Commission and (y) the date such notice was due with a view to amending the Appraisal Programme to be acceptable to both. Should the Petroleum Commission not agree to so consult or should the Petroleum Commission and the Contractor fail to agree changes required for such approval within fourteen (14) days following said consultation, Contractor may lodge a complaint with the Minister and request resolution. If such dispute is note resulved by the Minister within thirty (30) days from the date such complaint was lodged, such dispute shall be resolved in accordance with Article 24. If the Petroleum Commission has not given a notive in writing pursuant to this Article 8.5, then the arbitration panel shall determine wheter the Petroelum Commission's failure to give such notice was reasonable and lawful. If the Petroleum Commission has given a notice in writting pursuant to Article 8.5(b) or 8.5(c), and the revisions or conditions cannot be agreed on, then the arbitration panel shall determine wheter the Petroleum Commission's giving such revisions or conditions proposed was reaonsable and lawful. In each case, the arbitration panel shall also determine the appropriate damages and/or other award flowing from any such unreasonable or unlawfulness.



8.6 Where Contractor seeks to amend an approved Appraisal Programme, it shall submit such amendment to the JMC for review pursuant to Article 6.4(d) before sumission to the Petroleum Commission for approval.



8.7 Unless Contractor and the Minister otherwise agree in any particular case, Contractor shall have a period of two (2) years from the date of Discovery to complete the Appraisal Programme; provided that such pedior shall be extended by which the period from the submission of the Appraisal Programme for approval until its approval exceeds 60 days. In the event Contractor requires a period of more than the two (2) years (adjusterd as described in the prior sentence) to complete the Appraisal Programme. Contractor shall submite request to the Minister for an extension with a firm programme with timelines to justify the request.



8.8 Contractor shall commence an Appraisal Programme within one hundred and fifty (150) days from the date of approval of the Appraisal Programme by the Petroleum Commission. Where the Contractor is unable to commence appraisal work within one hundred and fifty (150) days from the date of approval of the Appraisal Programme by the Minister, GNPC shall be entitled to exercise the option provided for in Article 9.1 to enable prompt appraisal, provided however that after Contractor actually embarks on appraisal work or obtains an extension of time for such work this options may not be exercised.







36

[signatures]8.9 Not later than ninety (90) days from the date on which said Appraisal Programme relating to the Discovery is completed Contractor will submit to the Petroleum Commission with a copy to the Minister a report containing the results of the Appraisal Programme. Such report shall include all available technical and economic data relevant to a determination of commerciality, including, but not limited to, geological and geophysical conditions, such as structural configuration, physical properties and the extent of reservoir rocks, areas, thickness and depth of pay zones, pressure, volume and temperature analysis of the reservoir fluids; preliminary estimates of Crude Oil and/or Natural Gas reserves; recovey drive characteristics; anticipated production performance per reservoir and per well; fluid characteristics, including gravity, sulphur percentage, sediment and water percentage and refinery assay pattern.



8.10 Not later than ninety (90) days from the date on which said Appraisal Programme is completed Contractor shall, by a further notice in writing, inform the Minister whether the Discovery in the option of Contractor is or is not a Commercial Discovery.



8.11 If Contractor fails to notify the Minister as provided in Article 8.10 or informas the Minister that the Discovery is not commercial, then subject to Article 8.18, Contractor shall relinquish such Discovery Area; provided, however, that in appropriate cases, before declaring that a Discovery is not commercial, Contractor shall concult with the other Parties and may make appropriate representations proposing minor changes in the fiscal and other provisions of this Agreement which may, in the opinion of Contractor, affect the determination of commerciality. The other Parties may, where feasible, and in the best interests of the Parties agree to make such changes or modifications in the existing arrangements.



8.12 If Contractor pursuant to Article 8.10 informs the Minister that the Discovery is a Commercial Discovery, Contractor shall not later than one hundred and eighty (180) days thereafter, prepare and submit to the Minister a Development Plan.



8.13 The Development Plan referred to in Article 8.12 shall be based on detailed engineering studies and shall include:



(a) Contractor's proposals on the delineated of the proposed Development and Production Area and for the development of any reservoir(s), including the method for the disposal of Associated Gas in accordance with the provisions of Part II of Article 14;



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



(c) Contractor's proposals relating to the spacing, drilling and completion of wells, the production, storage, processing, gas utilization, transportation delivery facilities and necessary infrastructure developments required for







37

[signatures]the production, storage and transportation of the Petroleum, including without limitation:



(i) the estimated number, size and production capacity of production facilities if any;

(ii) the estimated number of Production Wells;

(iii) the particulars of feasible alternatives for transportations of the Petroleum, including pipelines;

(iv) the particulars of onshore installations required, including the type and specifications or size thereof; and

(v) the particulars of other technical equipment required for the operations;



(d) the estimate of the reserves together with the estimated annual production profiles throughout the life of the filed to be developed pursuant to the Development Plan for Crude Oil and Natural Gas form the Petroleum reservoirs;



(e) tic-ins with other petroleum fields where applicable;



(f) information on operation and maintenance;



(g) a description of technical solutions including enahnced recovery methods;



(h) estimates of capital and operating expenditures;



(i) the economic feasibility studies carried out by or for Contractor in respect of alternative methods for Development of the Discovery, taking into account;



(i) location;

(ii) water depth (where applicable);

(iii) meteorological conditions;

(iv) estimates of capital and operating expenditures; and

(v) any other relevant data and evaluation thereof;



(j) the safety measures to be adopted in the course of the Development and Production Operations, including measures to deal with emergencies;



(k) environmental impact assessments as required by the applicable laws of the Republic of Ghana in effect and as amended from time to time;



(l) measures to protect the environment and a contigency plan for handling of emergencies (including the provision and maintenance of equipment stockpiles to respond to an emergency;







38

[signatures](m) Contractor's proposals with respect to the procurement of goods and services obtainable in Ghana;



(n) Contractor's technology transfer plan;



(o) Contractor's plan for training and employment of Ghanaian nationals which shall contain among other things reasonable procedures for identifying Ghanaian personnel for all employment vacancies in Ghana;



(p) the timetable for effecting Development Operations; and



(q) a plan for decommissioning and abandonment;



8.14 The date of the Minister's approval of the Development Plan shall be the Date of Commercial Discovery.



8.15 The Minister shall within ninety (90) Days following submission of the Development Plan give Contractor a notice in writing stating:



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



(b) if not approved, any revisions proposed by the Minister to the Development Plan as submitted, and the reasons thereof; or



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



If the Minister does not provide such notice after such ninety (90) day period, such Development Plan shall be deemed not approved.



If the Minister notifies the Contractor that the Development Plan is not approved or fails to satisfy its obligation to notify the Contractor within the timeframe provided under this Article 8.15 or the Contractor notifies the Minister that it does not accept the revision or conditions proposed the Contractor and the Minister shall consult (and shall include GNPC in such consultations) with a view to within a period of thirty (30) days from the earlier of (x) the date of such notice by the Minsiter and (y) the due date of such notice above amending the Develomento Plan to be acceptable to both. Shoul the Minister not agree to so consult or should the Minister and the Contractor fail to agree changes required for such approval within fourteen (14) days following said thirty (30) day period, the resulting dispute arising out of this Article 8.15 shall be resolved in accordance with Article 24. If the Minister has not given a notice in writing pursuant to this Article 8.15, then the arbitration panel shall determine wheter the Minister's failure to give such notice was reasonable and lawful. If the Minister has ive a notice in writing pursuant to Article 8.15(b) or 8.15(c), and the Parties cannot agree on the revisions or conditions, then the arbitration panel shall determine wheter the Minsiter's giving such revisions or conditions proposed was reasonable and lawful. In each case, the arbitration panel shall







39

[signatures]

also determine the appropriate damages and/or other award flowing from any such unreasonableness or unlawfulness.



8.16 Where the issue in dispute referred for resolution pursuant to Article 24 is finally decided in favour of Contractor the Minister shall forthwith give the requisite approval to the Development Plan submitted by Contractor.



8.17 Where the issue in question referred for resolution pursuant to Article 24 is finally decided in favour of the Minister in whole or in part, Contractor shall forthwith:



(a) amend the proposed Development Plan to give effecto to the final decision rendered under Article 24, and the Minister shall give the requisite approval to such revised Development Plan; or



(b) subject to Article 8.20 below relinquish the Discovery Area.



8.18 Notwithstanding the relinquishment provisions of Articles 8.3 and 8.11 above, if Contractor indicates that a Discovery does not at the time merit appraisal, or after appraisal or potentially become a Commercial Discovery at a later date during the Exploration Period, then Contractor need not relinquish the Discovery Area and may continue its Exploration Operations in the Contract Area during the Exploration Period; provided that the Contractor shall explain to the Petroleum Commission or the Minsiter as applicable what additional evaluations, including Exploration work or studies, are or may be planned in order to determine whether subsequent appraisal is warranted or that the Discovery is commercial. Such evaluations shall be performed by Contractor accoding to a specific time table (which shall not exceed the time frame specified under Article 8.19) to be approved by JMC, subject to Contractor's right of earlier relinquishment of the Discovery Area. After completion of the evaluations, Contractor shall make the indications called for under Article 8.2 or 8.9 and either proceed with appraisal, confirm commerciality or relinquish the Discovery Area.



8.19 In any case, if a Discovery is made in the Initial Exploration Period or First Extension Period, the Contractor shall by the end of the subsequent phase (that is the First Extension Period or Second Extension Period as the case may be), take a decision to appraise the Discovery or relinquish such Discovery. Likewise, if the Contractor has completed the appraisal of a Discovery in the Initial Exploration Period or First Extension Period, the Contractor shall by the end of the subsequent phase (that is, the First Extension Period or Second Extension Period as the case may be), take a decision to determine commerciality or relinquish such Discovery. If at th end of the Exploration Period the Contractor has neither indicated its intent to proceed with an Appraisal Programme nor declared the Discovery to be a Commercial Discovery, then the Discovery Area shall be relinquished.







40

[signatures]

8.20 Upon completion of an Appraisal Programme and before Contractor makes a determination of non-commerciality, Contractor may consult with the other Parties and may make appropriate representations proposing minor changes in the fiscal and other provision of this Agreement which may, in the opinion of Contractor, affect the determination of commerciality. The other Parties may, agree to make such changes or modifications in the existing arrangements. In the event the Parties do not agree on such changes or modifications, then subject to Articles 8.18 and 8.21. Contractor shall relinquish the Discovery Area.



8.21 Nothing in Article 8.3, 8.11, 8.17 or 8.18 above shall be read o construed as requiring Contractor to relinquish:



(a) any area which constitutes or fomrs part of another Discovery Area in respect of which:

(i) Contractor has given the Minister a separate notice stating that such Discovery merits appraisal; or

(ii) Contractor has given the Minister a separate notice indicating that such Discovery is a Commrecial Discovery; or



(b) any area which consitutes or forms part of a Development and Production Area.



8.22 For avoindance of doubt, where Contractor makes a Discovery after the expiration of the Exploration Period Contractor shall notify the Minister of such Discovery pursuant to Article 8.1 and surrender such Discovery to GNPC.



8.23 In the event a field extends beyonnd the boundaries of the Contract Area, the Minister may require the Contractr to exploit said field in association with the third party holding the rights and obligations under a petroleum agreement covering the said field (or GNPC as the case may be). The exploitation in association with said third party or GNPC shall be pursuant to good utilization and engineering principles and in accordance with accepted interntation petroleum industry practicies.







41

[signatures]ARTICLE 9



SOLE RISK ACCOUNT



9.1 Subject to Article 8.2, GNPC may notify Contractor that it will at its Sole Risk, commence to appraise a Discovery, provided that within thirty (30) days of such notification from GNPC, Contractor may elect to commence to appraise that Discovery within its Work Programme (whether as a joint operation of the Contractor Parties or a sole operation of a Contractor Party).



9.2 Where an appraisal undertaken under Article 9.1 at the Sole Risk of GNPC results in a determination that a Discovey is a Commercial Discovery, Contractor may develop the Commercial Discovery upon reimbursement to GNPC of all expenses incurred in undertaking the appraisal and after arranging with GNPC satisfactory terms for the payment of a premium equivalent to seven hundred per cent (700%) of such expenses. Such premium shall not be reckoned as cost of Petroleum Operations for the purspose of the Accounting Guide. In the event that Contractor declines to develop said Discovery, Contracor shall relinquish the Development and Production Area established by the Appraisal Programme conducted by GNPC under Article 9.1.



9.3 During the Exploration Period, GNPC may, at its Sole Risk, require Contractor to continue drilling to penetrate and test horizontal deeper than those containded in the Work Programme fo Contractor or required under Article 4. GNPC may also at its Sole Risk require the Contractor to test a zone or zones which Contractor has not included in Contractor's test programme. Notice of any such requirement shall be given to Contractor in writting as early as possible prior to or durnig the drilling of the well, but in any case not after Contractor has begun work to complete or abandon the well. The exercise by GNPC of this right shall be in an agreed manner (such agreement not to be unreasonably withheld or delayed by Contractor) which does not prevent Contractor from complying with its work obligations under Article 4.3 and takes into account the availability of necessary third party equipment for hire, including a drilling rig.



9.4 At any time before commencing deeper drilling as required by GNPC pursuant to Article 9.3, Contractor may elect to embody the required drilling in its own Exploration Operation, in which case any resulting Discovery shall not be affected by the provisions of this Article 9 shall not apply to any resulting Discovery.



9.5 Where any Sole Risk deeper drilling required pursuant to this Article 9 results in a Discovery, GNPC shall have the right, at its Sole Risk, to appraise, develop, produce and dispose of all Petroleum from such Discovery and if it desired to do so shall conduct such Sole Risk Operations unless GNPC proposes otherwise and Contractor agrees. Provided however that if at the time such Petroleum is tested from the producing horizon in a well, Contractor's Work Programme incldes a wel or wells to be drilled to the same producing horizon, and provided that the well or wells drilled by Contractor result(s) in a Petroleum producing well







42

[signatures]producing from the same horizon, Contractor shall, after reimbursing GNPC for all costs associated with its Sole Risk deeper drilling in said well, have the right to include production from that well in total production for the purposes of establishing a Commercial Discovery, and, if Commercial Discovery is subsequently established, to develop, produce and dispose of the Petroleum in accordance with the provisions of this Agreement.



9.6 Alternatively, if at the time such Petroleum is tested from a producing horizon in a well pursuant to a Sole Risk operation Contractor's Work Programme does not include a well to be drilled to said horizon, Contractor has the option to appraise and/or develop, as the case may be, the Discovery for its account under the terms of this Agreement if it elects within a period of sixty (60) days after such Discovery. In such case, Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection with such Sole Risk operations, and shall make satisfactory arrangements with GNPC for the payment of premium equivalent to seven hundred percent (700%) of such expenses. Such premium shall not be reckoned as Petroleum Costs for the purposes of the Accounting Guide.



9.7 During the term of this Agreement, GNPC shall have the right, at its Sole Risk, and upon six (6) months prior notice to Contractor, to drill one (.1) or two (2) wells per Calendar Year within the Contract Area provided that the work intended to be done by GNPC had not been scheduled for a Work Programme to be performed by Contractor and the exercise of such right by GNPC and the arrangement made by GNPC for undertaking such drilling do not interfere with a Work Programme or prevent Contractor from satisfying its work obligations. Within thirty (30) days after the receipt of such notice Contractor may elect to drill the required well or wells as part of Contractor's Exploration Operations.



9.8 In the event that a well drilled at the Sole Risk of GNPC in accordance with Article 9.7 above in a Discovery, GNPC shall notify Contractor and shall have the right to appraise and develop as the case may be or require Contractor to develop, after GNPC declares a Commercial Discovery, such Commercial Discovery for a mutually agreed service fee, so long as Contractor has an interest in the Contract Area, GNPC taking all the interest risk and costs and hence having the right to all Petroleum produced from the Commercial Discovery, provided however that Contractor has the option to appraise and/or develop, as the case may be, the Discovery for its account under the terms of this Agreement if it so elects within a period of sixty (60 ) days after the receipt of GNPC's written notice of such Discovery.



9.9 Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection with such Sole Risk operations, and shall make satisfactory arrangement with GNPC for the payment of a premium equivalent seven hundred percent (700%) of such expenses before exercising the option under Article 9.8. Such premium shall not be reckoned as Premium Cost for the purposes of Accounting Guide.



43



9.10 In the event that Contractor declines to develop the Commercial Discovery or no agreement is reached on the service fee arrangement as provided for in Article 9.8, Contractor shall relinquish Development and Production Area associated with such Commercial Discovery.



9.11 Sole Risk operation under this Article 9 shall not extend the Exploration Period nor the term of this Agreement provided however that Contractor shall complete any agreed programme of work commenced by it under this Article at GNPC’s Sole Risk, and subject to such provisions hereof as the Parties shall then agree, even though the Exploration Period as defined in Article 3 or term of this Agreement may have expired.



9.12 The exercise by GNPC of its Sole Risk rights under this Article 9 shall be performed in an agreed manner with Contractor, which includes a financing plan, and which does not prevent or interfere with Contractor from complying with its work obligations under Article 4.3, an Appraisal Programme and a Development Plan.



9.13 GNPC shall indemnify and hold harmless Contractor against all actions, claims, demands and proceedings whatsoever brought by any third party or the State, arising out of or in connection with Sole Risk operations under this Article 9, unless such actions, claims, demands and proceedings are caused by Contractor’s Gross Negligence or willful misconduct.



















44ARTICLE 10



SHARING OF CRUDE OIL



10.1 Gross Production of crude oil from each Development and Production Area shall (subject to Calendar Year adjustment developed under the provision of Article 10.7) be distributed amongst the Parties in the following sequence and proportions;



(a) Ten percent (10%) of the Gross Production of Crude oil shall be delivered to the State as the ROYALTY, pursuant to the provisions of the Petroleum Law. Upon notice to Contractor, the State shall have the right to elect to receive cash in lieu its royalty share of such Crude Oil. The State’s notice shall be given to Contractor at ninety (90) days in advance of each lifting period, such periods to be established pursuant to the provisions of Article 10.7. In such case, said share of Crude Oil shall be delivered to Contractor and it shall pay to the State the value of said share in cash at the relevant weighted average Market Price for the relevant period as determined in accordance with Article 11.7;



(b) After distribution of such amounts of Crude Oil as are required pursuant to Article 10.1(a), the amount of Crude Oil, if any, shall be delivered to GNPC to the extent it is entitled for Sole Risk operation under Article 9.



(c) After distribution of such amount of Petroleurn as are required pursuant to Article 10.1(a) and 10.1(b), the remaining Crude Oil produced from each Development and Production Area shall be distributed to Contractor and subject to Article 10.1(e), to GNPC on the basis of their respective Participating Interests pursuant to Article 2;



(d) The State’s AOE (as hereinafter defined) , if any, shall be distributed to the State out of the Contractor’s share of Crude Oil determined under Article 10.1(c). The State shall also have the right to elect to receive cash in lieu of the AOE share of the Crude Oil accorded to it pursuant to Article 10.2. Notification of said election shall be given in the same notice to which the State notifies Contractor of its election to receive cash in lieu of Crude Oil under Article 10.1(a). In such case, said share shall be delivered to Contractor and it shall pay to the State the value of said share in cash at the relevant weighted average Market Price for the relevant period as determined in accordance with Article 11.7;



(e) In the event that GNPC has failed to pay any amounts due to Contractor pursuant to Article 15.3 of this Agreement (such amount with interest

thereon in accordance with Article 26.7 being hereinafter called “Default Amounts”) and for so long as any such advances and interest thereon remain unrecovered by Contractor, an amount of Crude Oil shall be delivered to GNPC sufficient in value to reimburse it for its share of Production Costs paid by it to that date, until such share of Production



45Costs has been fully reimbursed to it, after which a volume of Crude Oil shall be delivered to Contractor equivalent in value to the outstanding amounts of the aforesaid Default Amounts until such Default Amounts are fully recovered by Contractor. The value of the Crude Oil for the purpose of this Article 10 shall be the Market Price determined pursuant to Article 11.7.

10.2 At any time the State shall be entitled to a portion of Contractor’s share of Crude Oil then being produced from each separate Development and Production Area (hereinafter referred to as “Additional Oil Entitlement” or “AOE”) on the basis of after-tax inflation-adjusted rate of return “ROR” which Contractor has achieved with respect to such Development and Production Area as of that time. Contractor’s ROR shall be calculated on its NCF and shall be determined separately for each Development and Production Area at the end of each Month in accordance with the following computation:



(a) Definitions:

“NCF” means Contractor’s net cash flow for the Month for which the calculation is being made, and shall be computed in accordance with the following formula:

NCF – x-y-z

Where



“x” equals all revenues received during such Month by Contractor from the Development and Production Area, including an amount computed by multiplying of Crude Oil taken by Contractor during such Month in accordance with Article 10.1(d) and 10.1(c): excluding such Crude Oil taken by Contractor on GNPC’s behalf, lifted by the Market Price applicable to such Crude Oil during the Month when lifted, plus any other proceeds specified in the Accounting Guide received by Contractor, including, without limitation, the proceeds from any sale of assets to which Contractor continues to have title. For the avoidance of doubt, “x” shall not include revenues from Crude Oil lifted by Contractor which is part of another Party’s entitlement (e.g. Royalty, AOE Oil delivered to Contractor because the State has elected to receive cash in lieu of Crude Oil. Crude Oil purchased by Contractor from GNPC or the State) but shall include revenues from Crude Oil owned by Contractor but lifted by another Party (e.g. Crude Oil purchased by GNPC or the State from Contractor).



“y” equals one-twelfth (1/12) of the income tax paid by the Contractor to the State with respect to the Calendar Year in respect of the Development and Production Area. If there are two (2) or more Development and Production Areas, the total income tax paid by Contractor in accordance with the Petroleum Income Tax Law 1987 shall for purposes of this calculation be allocated to the Development and Production Area on the basis of hypothetical tax calculations for the separate Development and Production Areas. The hypothetical tax calculations for each



46Development and Production Area shall be determined by allocating the total amount of tax incurred for each Calendar Year by Contractor under the Petroleum Income Tax Law to each Development and Production Area based on the ratio that the chargeable income from a given Development and Production Area bears to the total chargeable income of Contractor. The chargeable income of Contractor is determined under section 2 of Petroleum Income Tax Law and the chargeable income of a Development and Production Area shall be calculated by deducting from the gross income derived from or allocated to that Area those expenses deductible under section 3 of the Petroleum Income Tax Law which are reasonably allocable to that Area. A negative chargeable income for an Area shall not be as zero for purposes of this allocation and not more (or less) than the total income tax paid by Contractor shall be allocated between the Areas.



“z” equals all Petroleum Costs specified in the Accounting Guide and expended by Contractor or the Operator during such Month with respect to the Development and Production Area, including any Petroleum Costs paid by Contractor on GNPC’s behalf, and not reimbursed by GNPC within the month, provided that all Petroleum Costs for Exploration Operations not directly attributable to a specific Development and Production Area shall for purposes of this calculation be allocated to the Development and Production Area having the earliest date of Commencement of Commercial Production; and provided further that for the purpose of the ROR calculation Petroleum Costs shall not include any amounts in respect of interest on loans obtained for the purposes of carrying out Petroleum Operating.



“FAn”, “SAn”, “TAn” and “ZAn” means First Account, Second Account, Third Account and Fourth Account, respectively, and represent accounts as of the last day of the Month in question as determined by the formulae in (b) below,



“FAn-1”, “SAn-1”, “TAn-1” and “ZAn-1” respectively, mean the lesser of (i) the “FAn”, “SAn”, “TAn” and “ZAn” as the case may be, as of the last day of the Month immediately preceding the Month in question, or (ii) zero. Slated otherwise, FAn-1 shall equal FAn as of the last day of the Month immediately preceding the Month in question, if such FAn was a negative number, but shall equal zero if such FAn was a positive number. Likewise, SAn-1 shall equal SAn as of the last day of the Month immediately preceding the Month in question, if such SAn was a negative number, but shall equal zero if such SAn was a positive number. Likewise, TAn-1 shall equal TAn as of the last day of the Month immediately preceding the Month in question, if such TAn was a negative number, but shall equal zero if such TAn was a positive number. Likewise, ZAn-1 shall equal ZAn as of the last day of the Month immediately preceding the Month in question, if such ZAn was a negative number, but shall equal zero if such ZAn was a positive number. In the ROR calculation for the first Month of Petroleum Operations, FAn-1, SAn-1, TAn-1 and ZAn-1 shall be zero.





47

“i” for the month in question equals one (1) subtracted from the quotient of the United States Industrial Goods Wholesale Price Index (“USIGWPI”) for the Month second preceding the Month in question (e.g. use August data for October’s computation) as first reported in the International Financial statistics of the International Monetary Fund, divided by the USIGWPI for the same second preceding Month of the immediately preceding Calendar Year as first reported in International Financial Statistics of the International Monetary Fund. If the USIGWPI ceases to be published, a substitute U.S. Dollar-based price index shall be used.

“n” refers to the nth Month in question

“n-1” refers to the Month immediately preceding the nth Month



(b) Formula:

FAn = (FAn-1(1+(0.125+i)/12))+NCF



SAn = (SAn-1(1+(0.175+i)/12))+NCF



In the calculation of SAn an amount shall be subtracted from NCF identical to the value of any AOE which would be due to the State if reference were made hereunder only to FAn



TAn = (TAn-1(1+(0.225+i)/12))+NCF



In the calculation of TAn an amount shall be subtracted from NCF identical to the value of any AOE which would be due to the State if reference were made hereunder only to FAn and SAn



ZAn = (ZAn-1(1+(0.275+i)/12))+NCF



In the calculation of TAn an amount shall be subtracted from NCF identical to the value of any AOE which would be due to the State if reference were made hereunder only to FAn, SAn and TAn



(c) Prospective Application:

The State’s AOE measured in barrels of oil will be as follows:



(i) FAn, SAn, TAn and ZAn are all negative, the State’s AOE for the Month in question shall be zero;





48

(i) FAn is positive and SAn, TAn and ZAn are all negative, the State’s AOE for the Month in question shall be equal to the absolute amount resulting from the following monetary calculation:

10% of the FAn for that Month divided by the weighted average Market Price as determined in accordance with Article 11.7.



(ii) FAn and SAn are positive, but TAn and ZAn are negative, the State’s AOE for the Month in question shall be equal to the absolute amount resulting from the following monetary calculation:

the aggregate of 10% of FAn for that Month plus [12.5%] of the SAn for that Month all divided by the weighted average Market Price as determined in accordance with Article 11.7.



(iii) FAn, SAn, and TAn are positive, but ZAn is negative, the State’s AOE for the Month in question shall be equal to the absolute amount resulting from the following monetary calculation:

the aggregate of 10% of FAn for that Month plus 12.5% of the SAn for that Month plus 20% of the TAn all divided by the weighted average Market Price as determined in accordance with Article 11.7.



(iv) FAn, SAn, TAn, and ZAn are all positive, the State’s AOE for the Month in question shall be equal to the absolute amount resulting from the following monetary calculation:

the aggregate of 10% of FAn for that Month plus 12.5% of the SAn for that Month plus 20% of the TAn plus 30% of the ZAn all divided by the weighted average Market Price as determined in accordance with Article 11.7.



(d) The AOE calculations shall be made in U.S. Dollars with all non-dollar expenditures converted to U.S. Dollar in accordance with Section 1.3 Annex 2. When the AOE calculation cannot be definitively made because of disagreement to the World Market Price or any other factor in the formulae, then a provisional AOE calculation shall be made on the basis of such factors, and such provisional calculation shall be subject to correction and provision upon the conclusive determination of such factors, and appropriate retroactive adjustments shall be made.



(e) The AOE shall be calculated on a monthly basis, with the AOE to be paid commencing with the first Month following with the Month in which FAn, SAn, TAn, or ZAn (as applicable) becomes positive. Because the precise amount of the AOE for a Calendar Year cannot be determined with certainty until after the end of that Calendar year, deliveries (or payments in lieu) of the AOE with respect to a Month shall be made during such Calendar Year based upon the Contractor’s good faith estimates of the



49amounts owing, with any adjustments following the end of the Calendar Year to be settled pursuant to the procedures agreed to pursuant to Article 10.7. Final calculations of the AOE shall be made within thirty (30) days following the filing by the Contractor of the annual tax return for such Calendar year pursuant to the Petroleum Income Tax Law, and the amount of the AOE shall be appropriately adjusted in the event of a subsequent adjustment of the amount of tax owing on such term.



10.3 GNPC shall act as agent for the State in the collection of all Petroleum accruing to the State under this Article and delivery to GNPC by Contractor shall discharge Contractor’s liability to deliver the share of the State.



10.4 The State or GNPC, having met the requirements of Article 15.1, may elect, in accordance with terms and conditions to be mutually agreed by the Parties, that all or part of the Crude Oil to be distributed to the State or to GNPC pursuant to this Article shall be sold and delivered by the State or GNPC to Contractor or its Affiliate for use and disposal and in such case Contractor or its Affiliate shall pay to the State or to GNPC, as the case may be, the Market Price for any Crude Oil so sold and delivered. Market Price for purposes of this Article 10.4 shall be the amounts actually realized by Contractor or said Affiliate on its resale of said Crude Oil in arm’s length commercial transactions, or for its other resales or dispositions of said Crude Oil, based upon world market prices determined in the manner specified to in Article 11.7(b).



10.5 Ownership and risk of loss of all Crude Oil produced from the Contract Area which is purchased, and all of its percentage Interest or other Crude Oil lifted, by Contractor shall pass to Contractor at the outlet flange of the marine terminal or other storage facility for loading into tankers or other transportation equipment referred to in Article 11.1.



10.6 Subject to the provisions of Article 15 hereof, Contractor shall have the right freely to export and dispose of all the Petroleum allocated and/or delivered to it pursuant to this Article.



10.7 The Parties shall through consultation enter into supplementary agreements concerning Crude Oil lifting procedures, lifting and tanker schedules, loading conditions, Crude Oil metering, and settlement of lifting imbalances, if any, among the Parties at the end of each Calendar Year. The Crude Oil to be distributed or otherwise made available to the Parties in each Calendar Year in accordance with the preceding provisions of this Article shall insofar as possible be in a reasonably equal monthly quantities.



10.8 To assist in the making of the AOE calculation in accordance with Article 10.2, there is attached as Annex 3 to this Agreement a worked example of the calculation using hypothetical figures, rates and thresholds, for the purpose of illustration only.





50ARTICLE 11



MEASUREMENT AND PRICING OF CRUDE OIL



11.1 Crude Oil shall be delivered by Contractor to storage tanks or other suitable holding facility constructed, maintained and operated in accordance with applicable laws and good oilfield practice. Crude Oil shall be metered or otherwise measured for quantity and tested for quality in such storage facilities for all purposes of this Agreement. Any Party may request that measurements and tests be done by an internationally recognised inspection company. Contractor shall arrange and pay for the conduct of any measurement, or test so requested provided, however, that in the case of (1) a test requested for quality purposes and/or (2) a test requested on metering (or measurement) devices, or where the test results demonstrate that such devices are accurate within acceptable tolerances agreed to by the Parties or if not established by the Parties, then in accordance with international Good Oil Field Practice, the Party requesting the test shall reimburse the Contractor for the costs associated with the test or tests.



11.2 GNPC or its authorised agent shall have the right:

(a) to be present at and to observe such measurement of Crude Oil;

(b) to examine and test whatever appliances are used by Contractor thereof; and

(c) to install or require Contractor to install device or equipment for the purpose of determining the quantity and quality of Crude Oil.



11.3 In the event that GNPC considers Contractor’s methods of measurement to be inaccurate GNPC shall notify Contractor to this effect and the Parties shall meet with ten (10) days of such notification to discuss the matter. Where after thirty (30) days the Parties cannot agree over the issue they shall refer for resolution under Article 24 the sole question of whether Contractor’s method of measuring Crude Oil is accurate. Retrospective adjustments to measurements shall be made where necessary to give effect to the decision rendered under Article 24.



11.4 If upon the examination or testing of appliances provided for in Article 11.2 any such appliances shall be discovered to be defective:

(a) Contractor shall take immediate steps to repair or replace such appliance; and

(b) subject to the establishment of the contrary, such error shall be deemed to have existed for three (3) months or since the date of the last examination and testing, whichever occurred more recently.



11.5 In the event that Contractor desires to adjust, repair or replace any measuring appliance, it shall give GNPC reasonable notice to enable GNPC or its authorised agent to be present.



5111.6 Contractor shall keep full and accurate accounts concerning all Petroleum measured as aforesaid and provide GNPC with copies thereof on a monthly basis, not later than ten (10) days after the end of each month.



11.7 The Market Price for Crude Oil delivered to Contractor hereunder shall be established with respect to each lifting or other period as provided elsewhere in this Agreement as follows:



(a) on Crude Oil sold by Contractor in “arm’s length commercial transactions” (defined in Article 11.7(c) below), the Market Price shall be the price actually realized by Contractor on such sales;



(b) on sales of Crude Oil by Contractor in an arm’s length commercial transaction, on exports by Contractor without sale or on sales under Article 15.3, the Market Price shall be determined by reference to world market prices of comparable Crude Oil sold in arm’s length commercial transactions for export in the major world petroleum markets, adjusted for oil quality, location, timing and conditions of pricing, delivery and payment; provided that in the case of sales under Article 15.3 where such sales relate to part only of Contractor’s entitlement, prices actually realized by Contractor in sales of the balance of its proportionate share falling within Article 11.7(a) above shall be taken into account in determining Market Price. For purposes of this Article 11.7(b), “comparable Crude Oils” shall mean Crude Oils of similar API gravity, sulphur content, and acidity, and if Contractor cannot identify comparable Crude Oils for the purposes of this Article, the Parties may agree on an alternative method for establishing a comparable Crude Oil;



(c) sales in “arm’s length commercial transactions” shall mean sales to purchasers independent of the seller, which do not involve Crude Oil, exchange or barter transactions, government to government transaction, sales directly or indirectly to Affiliates, or sales involving consideration other than payment in U.S. Dollars or currencies convertible thereto, or affected in whole or in part by considerations other than the usual economic incentives for commercial arm’s length Crude Oil sales;



(d) the price of Crude Oil shall be expressed in U.S. Dollars per barrel, F.O.B. the point of delivery by Contractor



(e) if Crude Oils of various qualities are produced from the Contract Area, the Market Price shall be determined separately for each type sold and/or exported by Contractor, only to the extent that the different quality grades remain segregated through to the point where they are sold, and if grades of different quality are commingled into a common stream, Contractor and GNPC shall agree on an equitable methodology for assessing relative value for each grade of Crude Oil comprising the blend and shall implement the





52agreed methodology for having the producer(s) of higher quality Crude Oil(s) be reimbursed by the producer(s) of lower quality Crude Oil(s).



11.8 Contractor shall provide to GNPC (for use by the State and GNPC) information on each lifting which shall include the buyer of the cargo, sales basis with respect Benchmark crude oil, the pricing basis, the differential , any deductions and Market Price determined by it for each lifting not later than thirty five (35) days after the end of such lifting. For the purposes of this clause the obligation of Contractor shall be several.



11.9 If GNPC considers that the Market Price notified by Contractor was not correctly determined in accordance with the provisions of Article 11.7, it shall so notify the Contractor not later than thirty (30) days after notification by Contractor of such price, and GNPC and Contractor shall meet not later than twenty (20) days thereafter to agree on the correct Market Price.



11.10 In the event that GNPC and Contractor fail to agree upon the commencement of meeting for the purpose described in Article 11.9 above, the Market Price shall be referred for determination in accordance with Article 24 if this Agreement.



11.11 Pending a determination under Article 11.10, the Market Price will be deemed to be the last Market Price agreed or determined, as the case may be, or if there has been no such previous agreement or determination, the price notified by Contractor for the lifting in question under Article 10.7. Should the determined price be different from that used in accordance with the foregoing then the difference plus interest at the Specified Rate shall be paid in cash by or to Contractor, as the case may be, within thirty (30) Days of such determination.







53ARTICLE 12



TAXATION AND OTHER IMPOSTS



12.1 Subject to applicable laws and regulations as the same may be amended from time to time, the tax, duty, fee and other imposts that shall be imposed by the State or any entity or any political subdivision on Contractor, its Subcontractor or its Affiliates in respect of activities related to Petroleum Operations and the sale or export of Petroleum shall include but not limited to the following:



(a) Taxes in accordance with Petroleum Income Tax Law 1987 (PNDC L188) and income tax shall be levied at the rate of thirty-five percent (35%);



(b) Tax in respect of gain (calculated as the consideration received less the cost base at the time of realisation) from far the direct or indirect sale, transfer or assignment of (a) a partial or the entire interest in this Agreement (b) assets acquired or used in Petroleum Operation under this Agreement or (c) shares of Contractor, at the rate under Ghanaian law in effect at the time of the sale, transfer or assignment;



(c) Payments for rental of Government property, public lands or for the provision of specific services requested by Contractor from public enterprises; provided, however, that the rates charged Contractor for such rentals or services shall not exceed the prevailing rates charged to other members of the public who receive similar services or rentals;



(d) Surface rentals payable to the State pursuant to Section 18 of the Petroleum Law per square kilometre of the area remaining at the beginning of each Contract Year as part of the Contract Area, in the amount as set forth below,



Phase of Operation Surface Rentals Per Annum



Initial Exploration Period US $50 per sq. km

1st Extension Period US $100 per sq. km

2nd Extension Period US $100 per sq. km

Development & Production Area US $200 per sq. km



These rentals shall be pro-rated where the beginning of a Period and the end of a Period or the creation of a Development and Production Area occurs during the course of a Calendar Year.



12.2 Save for withholding tax at the rate provided for under applicable law from the aggregate amount due to a resident Subcontractor or non-resident Subcontractor, Contractor shall not be obligated to withhold any amount in respect of tax from any sum due from Contractor to any Subcontractor in respect of work and services for or in connection with this Agreement. Notwithstanding the



54

foregoing, the withholding tax in respect of services provided to Contractor by an Affiliate of any company comprising Contractor shall be waived provided such services are charged at cost.



Contractor shall not be liable for any export tax on Petroleum exported from Ghana and no duty or charge shall be levied on such exports. Vessels or other means of transport used in the export of Contractors Petroleum from Ghana shall not be liable for any tax, duty or other charge by reason of their use for that purpose.



12.3 Subject to local purchase obligations hereunder, Contractor and Subcontractors may import into Ghana all plant, equipment and materials to be used solely and exclusively in the conduct of Petroleum Operations without payment of customs and other duties and taxes on imports save administrative fees and charges;



PROVIDED THAT:



(a) GNPC shall have the right of first refusal for any item imported duty free under this Article which is later sold in Ghana; and



(b) where GNPC does not exercise its right of purchase Contractor may sell to other person subject to the relevant law.



12.4 Contractor shall not be liable to pay VAT on plant, equipment and materials, and related services supplied in Ghana, to be used solely and exclusively in the conduct of Petroleum Operations.



12.5 Foreign National Employees of Contractor or of its Affiliates, and of its Subcontractors, shall be permitted to import into Ghana free of import duty their personal and household effects in accordance with Section 22.7 of PNDCL 64; provided, however, that no property imported by such employee shall be resold by such employee in Ghana except in accordance with Article 12.2.



12.6 subject to GNPC rights under Article 19, Contractor, Subcontractors and Foreign National Employee shall have the right to export from Ghana all items imported duty free pursuant to Article 12.3. Such export shall be exempted from all customs and other duties, taxes, fees and charges on exports save minor administrative charges.



12.7 Parties will negotiate in good faith to ensure that Contractor is afforded tax credits for corporate taxes paid in Ghana. However, no adverse effect should occur to the economic rights of GNPC or the State.



12.8 The Ghana Income Tax law applicable generality to individuals who are not employed in petroleum industry shall apply in the same fashion and at the same rates to employees, of Contractor, its Affiliates, and its Subcontractor, provided, however, that Foreign National Employee of Contractor, its Affiliates, and its Subcontractor shall be exempted from the income tax and







55withholding tax liabilities unless they are resident in Ghana for more than thirty (30) consecutive days or sixty (60) days in aggregate in any Calendar Year.



12.9 Subject to guidelines to be issued by the Minister, the Contractor shall make contributions to a decommission fund based on estimated costs of abandonment. Such contributions shall be allowed as deduction from assessable income from the year of assessment the contributions commenced. In the year of assessment in respect of which decommission has been completed in accordance with an approved decommission plan, the surplus fund shall be treated as chargeable income and subject to tax. The amount left after the tax shall be subject to Additional Oil Entitlement at the highest rate at which the Contractor paid AOE during the period of contributions to the relevant decommission fund. Any surplus after payment of the tax and AOE shall revert to the Contractor.



12.10 Parties will negotiate in good faith to ensure that Contractor is afforded tax credits for corporate taxes paid in Ghana. However no adverse effect should occur to the economic rights of GNPC or the State.



Notwithstanding the above provision of this Section, the Taxation Laws of Ghana to the extent that they are applicable shall be applied to the Employees of Contractor, its Affiliates or Subcontractors.



12.11 It is the intent of the Parties that payments by Contractor of tax levied by the Petroleum Income Tax Law or any other tax imposed on Contractor qualify as creditable against the income tax liability of each company comprising Contractor in its jurisdiction. Should the fiscal authority involved determined that the Petroleum Income Tax does not impose a creditable tax, the Parties agree to negotiate in good faith with a view to establishing creditable tax on the precondition that no adverse effect should occur to the economic rights of GNPC or the State.



12.12 All tax returns prepared and payments made by Contractor and its Affiliates or Subcontractors and Foreign National Employees thereof shall be made in United State Dollars.









56ARTICLE 13



FOREIGN EXCHANGE TRANSACTIONS



The provisions of this Article 13 shall be subject to applicable legislation governing foreign exchange transactions in Ghana in force from time to time.



13.1 Contractor shall for the purpose of this Agreement be entitled to receive, remit, keep and utilise freely abroad all foreign currency obtained from the sales of the Petroleum assigned to it by this Agreement or purchased hereunder, or from transfers, as well as its own capital, receipts from loans and in general all assets thereby acquired abroad. Upon making adequate arrangements with regards to its commitment to conduct Petroleum Operations, Contractor shall be free to dispose of this foreign currency or assets as it deems fit.



13.2 Contractor shall have the right to open and maintain in Ghana bank account in foreign currency and Ghana currency. No restriction shall be made on the import by Contractor in an authorised manner of funds assigned to the performance of the Petroleum Operations and Contractor shall be entitled to purchase Ghanaian currency through authorised means, without discrimination, at the prevailing rate of exchange, provided, however, that such prevailing rate applicable to Contractor hereunder for all transactions for converting Ghanaian currency into U.S. Dollars, and vice versa, shall be at a buying and selling, as the case may be, rate of exchange not less favourable to Contractor than that quoted by the State or its foreign exchange control to any person or entity on the dates of such conversion (excerpting those special rates provided by the State to discretely defined groups for special, limited purposes).



13.3 Contractor shall be entitled to convert in an authorised manner into foreign currencies of its choice funds imported by Contractor for the Petroleum Operations and held in Ghana which exceeds its local requirements at the prevailing rate of exchange referred to in Article 13.2 and remit and retain such foreign currencies outside Ghana.



13.4 In the event of resale by Contractor or its Affiliates of Crude Oil purchased from the State or GNPC, the State or GNPC shall have the right to request payment for such sales of its share of production to Contractor or its Affiliates to be held in the foreign currency in which the resale transaction took place or in U.S. Dollars.



13.5 Contractor shall have the right to make direct payments outside of Ghana from its home offices in the United States of America, and elsewhere, to its Foreign National Employees, and to those of its Subcontractors, and suppliers ‘not resident in Ghana’ (as that term is defined in Section 160 of the Internal Revenue Act 2000 (Act 592) for wages, salaries, purchases of goods and performance of services, whether imported into Ghana or supplied or performed therein for Petroleum Operations carried out hereunder, in accordance with the provisions of this Agreement, in respect of services performed within the framework of this Agreement, and such payments shall be considered as part of the costs incurred





57in Petroleum Operations. In the event of any changes in the location of Operator's home or other offices, Operator shall so notify GNPC and the State.



13.6 All payments which this Agreement obligates Contractor to make to GNPC or the State, including income taxes, shall be made in United States Dollars, cxcept as requested otherwise pursuant to Article 13.4 above. All payments shall he made by telex transfer in immediately available funds to a bank to be designated by GNPC or the State, and reasonably accessible to Contractor by way of its being able to receive payments made by Contractor and give a confirmation of receipt thereof, or in such other manner as may be mutually agreed.



13.7 All payments which this Agreement obligates GNPC or the State to make to Contractor shall be made in United States Dollars. All payments shall be made by electronic transfer (or in such other manner as may be mutually agreed) in immediately available funds to a bank to be designated by Contractor, and reasonably accessible to GNPC or the State by way of its being able to receive payments made by GNPC or the State and give confirmation of receipt thereof.



58ARTICLE 14



SPECIAL PROVISIONS FOR NATURAL GAS



PARTI-GENERAL



All natural gas produced by Contractor in association with GNPC under this Agreement shall be the property of the Corporation in accordance with the provisions of Section 16.2 of the Petroleum Law. subject to Parts III and IV of this Article.



14.1 Contractor shall have the right to use Natural Gas produced from any Development and Production Area for Petroleum Operations within the Contract Area such as reinjection for pressure maintenance and/or power generation at no cost.



14.2 Contractor shall not flare nor vent Natural Gas except:



(a) to the extent provided for in an approved Development Plan;



(b) during production testing operations.



when required for operational safety and the safety of persons engaged in Petroleum Operations in accordance with international Petroleum industry practice:



(c) as otherwise authorised by the Minister.



14.3 Contractor shall have the right to extract and dispose of liquid hydrocarbons pursuant to the provisions of this Agreement relating to Crude Oil Residual Natural Gas remaining after the extraction of liquid hydrocarbons is subject to the provisions of this Article 14.



PART 11-ASSOCIATED GAS



14.4 All gas produced in association with Crude Oil, and not used pursuant to Article 14.1, is the property of GNPC. The Development Plan of each Development and Production Area shall include a plan of utilization for the Associated Gas.



14.5 If Contractor considers that production, processing and utilisation of Associated Gas from any Development and Production Area is non-economic GNPC or any State appointed agency, body or subcontractor shall have the option to offtake all Associated Gas not used as reinjection for pressure maintenance and/or power generation pursuant to Article 14.2 at the outlet flange of the gas-oil separator on the crude oil production facility at its Sole Risk for its own use. GNPC and Contractor shall work together to develop the appropriate interface between Gas infrastructure owned by the State and/or GNPC and Contractor's Development Plan and to that end the Development Plan proposed by Contractor shall include:



(a) a statement of the facilities necessary for the delivery to GNPC of such Associated Gas; and



59(b) a plan for the reinjection of Associated Gas into the reservoir if needed for pressure support and



(c) a plan for power-generation.



14.6 The decision of GNPC as to whether or not to exercise the option provided for in Article 14.5 shall be made in a timely manner. In making such decision and in its subsequent conduct GNPC shall avoid the prevention of or delay to the orderly start up or continuation of the production of Crude Oil as envisaged in the approved Development Plan.



14.7 If GNPC elects to offtake Associated Gas under Article 14.6 above. GNPC shall be responsible for any additional facilities needed for the delivery of the Gas to GNPC, provided that:



(a) if Contractor subsequently wishes to participate in GNPC's gas utilisation programme, it shall reimburse GNPC for the costs of such facilities plus a premium of three hundred percent (300%); or



(b) if Contractor subsequently develops a gas utilisation programme and requires the use of GNPC's gas facilities, Contractor shall pay GNPC an agreed fee for such use.



PART III-NON-ASSOCIATED GAS



14.8 Contractor shall have the right to commercialize a Discovery of Non-Associated Gas in the Contract Area in accordance with the provisions of this Agreement. Except as otherwise provided in this Agreement, the terms applicable to a Discovery as provided under Article 8 of this Agreement shall apply to a Discovery of non-Associated Gas.



14.9 Where Contractor submits notice pursuant to Article 8.2 and pursuant to Article 8.18 indicates that the Discovery does not at that time merit Appraisal but may merit Appraisal or additional evaluation at a later date during the Exploration Period or during the initial period under a new Agreement made pursuant to Article 14.16(a) below, then Contractor need not submit a proposed Appraisal Programme at that time but instead shall indicate what other studies or evaluations (in accordance with a definite time-table) may be warranted before an Appraisal Programme is undertaken. Where Contractor's Notice indicates that the Discovery will not merit appraisal at any time during the Exploration Period or during the initial period under a new Agreement made pursuant to Article 14.16, then Contractor shall relinquish the rights to the Non-Associated Gas within that Discovery Area.



14.10 Not later than ninety (90) days from the date on which the Appraisal Programme relating to a Discovery is concluded, Contractor shall submit to the and Minister a report containing the results of the Appraisal Programme (the "Appraisal Report"). The Appraisal Report may conclude that the Discovery merits



60commercial assessment. If the Appraisal Report concludes that the Discovery merits commercial assessment, Contractor shall submit to the Minister within thirty (30) days from the date of submission of the Appraisal Report, programme incorporating a specific timetable for conducting such commercial assessment for approval by the Minister. If the Minister approves this programme, such commercial assessment shall be conducted within the Exploration Period and, if applicable, during the initial period under a new Agreement made pursuant to Article 14.16. Notwithstanding the above, the Minister may approve the conduct of other studies or evaluation, in accordance with a specific timetable, which may be warranted before a commercial assessment is undertaken, if Contractor notifies the Minister that commercial assessment of the Discovery is not warranted at that time but the Discovery may merit such assessment at a later date during the Exploration Period or during the initial period aforesaid.



14.11 The purpose of the commercial assessment shall be to study the uses to which production from the Discovery Area separately, can be devoted and whether involving exports or domestic utilization. As part of the assessment, the Parties shall also pursue discussions on the required contractual arrangements for disposition of the Natural Gas to GNPC. Contactor may undertake the Gas commercialization project at a level that will facilitate the achievement of the Contractor's rate of return, and shall use the State's gas infrastructure if available.



14.12 Contractor may consult with the Minister and GNPC and may make appropriate representations proposing changes in the fiscal and other provisions of this Agreement which may, in the opinion of Contractor, affect the above determinations made pursuant to Articles 14.9 and 8.4. The Minister and GNPC may, where feasible and in the best interests of the Parties, agree to make such changes or modifications in the existing arrangements.



PART IV NATURAL GAS PROJECTS



14.13 If at any time during the commercial assessment Contractor informs the Minister in writing that the Discovery can be produced commercially, it shall within (one hundred and eighty) 180 days submit to the Minister and to GNPC its proposals for an agreement relating to the development the Discovery on the principles set forth in this Part IV of Article 14. The State and GNPC undertake on receipt of such notice to negotiate in good faith with Contractor with a view to reaching agreement on terms for such production. Any such agreement will be based on terms and fiscal requirements which shall be no less favourable to Contractor than those provided for in Articles 10 and 11 and which take full account of the legitimate interest of the State as the resource owner.



14.14 If at any time during the commercial assessment Contractor has identified a market for the reserves of Non-Associated Gas or any part thereof that can be



61saved without prejudice to an export project, the Parties shall proceed in good faith to negotiate the appropriate contractual arrangements for the disposition of the Natural Gas. In the event of a market for such Gas, Contractor shall receive for delivery its share of the Natural Gas at a price to be agreed in good faith between GNPC and Contractor, taking into account among other things, the cost of finding and developing the Natural Gas, a reasonable return on exploration and development investment and the uses which will be made of the Natural Gas.



14.15 In the event of a Discovery of Natural Gas in the Contract Area which is to he developed and commercially produced, the provisions of this Agreement in respect to interests, rights and obligations of the Parties regarding Crude Oil shall apply to Natural Gas, with the necessary changes in points of detail, except with respect to specific provisions in this Agreement concerning Natural Gas and different or additional provisions concerning Natural Gas which may be agreed by the Parties in the future.



(a) The system for the allocation of Natural Gas among the Parties shall follow the same general format as Article 10.1 provides for Crude Oil, with the exception that the royalty to be delivered to the State on Natural Gas shall be at the rate of five percent (5%) of the annual Gross Production of Natural Gas as an incentive to enhance the viability of a Gas project on the basis herein provided for.



(b) The Parties recognise that projects for the Development and Production of Natural Gas are generally long-term in nature for both the project developers and the customers who purchase the Natural Gas. Substantial investments and dedication of facilities require long-term commitments on both sides. This Agreement, being for a specific term of years, may not cover the length of time for which customers in given cases will require commitments on the part of the Parties to this Agreement to deliver their respective shares of the output. Accordingly the Parties agree to consider undertaking such commitments where reasonably required for the efficient and viable development of a Natural Gas project. It is recognised that, unless otherwise agreed by the Parties hereto, Contractor will have no right or interest in the project or the Natural Gas produced and delivered after the term of this Agreement has expired.



(c) In the event that Contractor or an Affiliate by mutual agreement with GNPC and the State constructs facilities to receive Natural Gas from the Development and Production Area for further processing or for use as a feedstock or fuel in order to convert such a Natural Gas into one or more commercially marketable products, the Contractor shall be entitled to pay GNPC or the State for such gas the price, if any, paid by the State or GNPC under Article 14.14.



62(d) The Parties will consider collaboration in obtaining any common external financing available for Natural Gas production possibilities, including project financing: however, each Party shall remain free to finance externally its share of such facilities to the extent it prefers to do so.



14.6 (a) Where Contractor has during the continuance of the Exploration Period made a Discovery of Non-Associated Gas but has not before the end of the Exploration Period declared that Discovery to be commercial, the State and GNPC will, if Contractor so requests, enter into a new Petroleum Agreement with Contractor in respect of the Discovery Area to which that Discovery relates;



(b) The State and GNPC shall not be under any obligation to enter into an Agreement pursuant to this Article 11.16 unless before the end of the Exploration Period Contractor has carried out an Appraisal Programme in respect of that Discovery pursuant to Article 14.8 and submitted to the Minister a report thereon pursuant to Article 14.10, or has commenced an Appraisal Programme and has notified the Minister of reasonable arrangements to undertake and complete such an Appraisal Programme during the period provided for in Article 14.16(c)(i) below:



(c) A Petroleum Agreement entered into pursuant to Article 14.16:



(i) shall, unless the Discovery in respect of which the Agreement has been made is declared by Contractor to be a Commercial Discovery. continue in force for an initial period not exceeding five (5) years:



(ii) shall in the event that the Discovery is declared by Contractor to be a Commercial Discovery:



(A)continue in force for an aggregate period not exceeding 25 (twenty-five) years;



(B) include, or be deemed to include, all the provisions which, mutatis mutandis, would have applied to a Commercial Discovery of Non-Associated Gas pursuant to Article 14.15 if Contractor had declared such Discovery to be a Commercial Discovery under this Agreement;



(iii) shall contain in respect of the initial period or of any renewal period details of the evaluations or studies (in accordance with a specific Timetable) which Contractor proposes to undertake in order to determine or keep under review the commerciality of the Discovery: and



(iv) shall confer on GNPC pre-emptive rights in respect of the Gas contained in the reservoir to which the Discovery relates substantially in the form of the provisions hereinafter set out in Article 14.16.



63(d) Where Contractor has not. before the end of the initial period, declared the Discovery to be commercial and the Minister has in his discretion determined that further evaluation or studies may be required before the Discovery can be declared commercial. the right of Contractor to retain the Discovery Area shall continue for a further period not exceeding in the aggregate five (5) years. The right of Contractor to retain the Discovery Area aforesaid shall he secured by the renewal of the Agreement referred to in Article 14.16 or where necessary by a new Agreement entered into by the Parties for that purpose.



(e) (i) Where Contractor has not declared the Discovery to be a Commercial Discovery, if GNPC has identified a market for the Gas contained in the reservoir to which the Discovery relates, or any part thereof, it may at any time during the initial period or the aggregate period referred to in Article 14.16(d) above serve on Contractor a notice giving particulars of the quantities of Gas required to serve that market and the price offered; and on the basis of the procedure detailed in Article 9, exercise the right referred to in Article 14.16(c)(iv) above.



(ii)Within three (3) months from the receipt of a notice as aforesaid Contractor may declare the Discovery to be commercial and in accordance with the Agreement and the Petroleum Law prepare and submit to the Minister a Development Plan for the production of the Gas in association with GNPC.



(iii) If Contractor has not, within the period of three (3) months aforesaid, declared the Discovery to be commercial GNPC may at its sole risk and expense develop the Discovery and in that event the Contractor shall cease to have any rights in respect of the Gas in the reservoir required for that purpose.



14.17 For the purpose of calculating the State's five percent (5%) royalty share on Natural Gas; if the State elects to take its royalty on Natural Gas in cash, the value of such Natural Gas shall he the actual realized price received by the Contractor, less transportation, compression and marketing costs which shall be in accordance with the principles indicated in Article 11.



64ARTICLE 15



DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)



15.1 Crude Oil for Consumption in Ghana (in this Article called the "Domestic Supply Requirement") shall be supplied, to the extent possible, by the State and GNPC from their respective entitlements under this Agreement and under any other contract for the production of Crude Oil in Ghana.



15.2 Consumption shall for the purposes of this Article include crude oil processed in Ghana and the equivalent of crude oil derived products imported into Ghana



15.3 Contractor shall be obliged together with any third parties which produce Crude Oil in Ghana within 2 months notice from the State. to supply a volume of Crude Oil to be used for such Domestic Supply Requirements, calculated on the basis of the ratio of Contractor's entitlement to Crude Oil under Article 10.1(d) to the sum of the similar entitlements of all such third parties and provided that Contractor's obligation to supply Crude Oil for purposes of meeting the Domestic Supply Requirement shall not exceed the total of Contractor's said entitlement under this Agreement.



15.4 The State shall purchase any Crude Oil supplied by Contractor pursuant to this Article at the Market Price determined under Article 11.7 for the Month of delivery, and the State shall pay such prices in accordance with Article 13.7 within thirty (30) days after receipt of invoice, failing which Contractor's obligations in respect of the Domestic Supply Requirement under this Article 15 shall be suspended until payment is made good, at which time deliveries shall be resumed subject to any alternative commitments that may have been reasonably entered into by Contractor to dispose of the Domestic Supply Requirement Crude Oil during the period of default in payment. Contractor shall recover any amount due and unpaid by the State, plus interest at the Specified Rate from GNPC.



The calculation of the Domestic Supply Requirement shall be done on a Calendar Year basis, broken down by Month. The calculation shall begin with the determination of the quantities of Crude Oil required for Consumption in Ghana in each relevant Month (the "Monthly Domestic Consumption") during the applicable Calendar Year.



65ARTICLE 16



INFORMATION AND REPORTS: CONFIDENTIALITY



16.1 Contractor shall keep GNPC regularly and fully informed of operations being carried out by Contractor under this Agreement and provide GNPC with all information, data, (film, paper and digital forms). samples, interpretations and reports. (including progress and completion reports) including but not limited to the following:



(a) processed seismic data and interpretations thereof;



(b) well data, including but not limited to electric logs and other wireline surveys, and mud logging reports and logs, oil or hydrocarbon samples. samples of cuttings and cores and analyses made therefrom:



(c) any reports prepared from drilling data or geological or geophysical data, including maps or illustrations derived therefrom:



(d) well testing and well completion reports;



(e) reports dealing with location surveys. seabed conditions and seafloor hazards and any other reports dealing with well, platform or pipeline locations;



(f) reservoir investigations and estimates regarding reserves, field limits and economic evaluations relating to future operations:



(g) daily, weekly, monthly and other regular reports on petroleum Operations;



(h) comprehensive final reports upon the completion of each specific project or operation;



(i) contingency programmes and reports on safety and accidents:



(j)procurement plans. subcontracts and contracts for the provision of services to Contractor,



(k) for such subcontracts and contracts for the provision of services to Contractor bid documents and their evaluation reports a statement showing the values, executing companies, award and completion dates.



Data shall be provided on film, paper and in digital format as available in an acceptable format to GNPC. In respect of the reports, including text and graphics, paper and digital copies shall be submitted



16.2 Contractor, its direct parent company and the Operator shall have the right to retain for its use in connection with the conduct of Petroleum Operations in Ghana under this Agreement copies of data. well logs, maps, magnetic tapes, other geological and geophysical information, portions of core samples and copies of reports, studies and analyses ("Project Data"), referred to in Article 16.1, and to disclose such Project Data, with the prior written consent of



66GNPC, to wholly-owned Affiliates of its ultimate parent company, the Operator and/or its subcontractors, subject in each case to Article 16.6, as it may reasonably require to conduct Petroleum Operations in Ghana hereunder.



16.3 Not later than thirty (30) days following the end of each Calendar Year, Contractor shall submit to GNPC a report covering Petroleum Operations performed in the Contract Area during such Calendar Year. Such report shall include, but not be limited to:



(a) a statement of the number of Exploration Wells, Appraisal Wells and Development Wells drilled, the depth of each such well, and a map on which drilling locations are indicated;



(b) a statement of any Petroleum encountered during Petroleum Operations, as well as a statement of any fresh water layers encountered and of any other minerals discovered;



(c)a statement of the quantity of Petroleum produced and of all other minerals produced therewith from the same reservoir or deposit;



(d)a summary of the nature and extent of all exploration activities in the Contract Area:



(e)a general summary of all Petroleum Operations in the Contract Area; and



(f) a statement of the number of employees engaged in Petroleum Operations in Ghana, identified as Ghanaian or non-Ghanaian, Contractor will inform the latter that details as to nationality are required by GNPC and that Contractor is available to assist them to supply that information.



16.4 All data, information and reports including interpretation and analysis supplied by Contractor pursuant to this Agreement shall be treated as confidential and shall not be disclosed by Contractor to any other person without the express written consent of the other Parties. However subject to Article 16.6, GNPC shall have the right to disclose data, information and reports including interpretation and analysis in respect of Petroleum Operations to any other person.



16.5 The provisions of Article 16.4 shall not prevent disclosure by Contractor:



(i)to its Affiliates, advisers or consultants;



(ii) to a Bona Fide Potential Assignee (i.e, a company in respect of which a senior executive of the Contractor has written a letter addressed to Contractor and copied to GNPC confirming that in the opinion of said executive, that company has the financial wherewithal and technical competence to meet the obligations associated with the interest being offered sought; and has considered the potential acquisition at a sufficiently senior level within its organization in order for it to be regarded as a genuine potential purchaser of such interest) of all or



67part of Contractor's Interest hereunder provided GNPC is given prior notice of such potential assignee;



(iii) to banks or other lending institutions for the purpose of seeking external financing of costs of the Petroleum Operations;



(iv) to non-Affiliates who shall provide services for the Petroleum Operations, including Subcontractors, vendors and other service contractors, where this is essential for their provision of such services, and provided GNPC is notified about such disclosure:



(v) to governmental agencies for obtaining necessary rulings, permits. licenses and approvals, or as may be required by applicable law or financial stock exchange, accounting or reporting practices, and provided GNPC is given prior notice of such disclosure;



(vi) to the extent necessary in any Arbitration Proceedings or proceedings before a Sole Expert or in proceedings before any court: or



(vii) with respect to data, etc., which already through, no fault of the disclosing Party is in the public domain.



16.6 Any Party disclosing information or providing data to any third party under this Article (other than to the persons specified in Article 16.5(v)) shall require such persons to observe the confidentiality of such data by executing a confidentiality agreement in the form attached hereto as Annex 4. The Parties shall take reasonable measures to ensure that those third parties permitted to receive. information und data under Articles 16.2, 16.5(1), 16.5(ii), 16.5(iii) and 16.5(iv) shall observe the confidentiality of such information and data by cither executing a suitable confidentiality agreement or incorporating the relevant confidentiality provisions in their service agreements. Disclosure under Articles 16.2, 16.5(i), 16.5(ii), 16.5(iii) and 16.5(iv) shall not be made unless before such disclosure the disclosing Party has obtained a written undertaking from the recipient party to keep the information strictly confidential and to use the information for the sole purpose described in Articles 16.2, 16.5(i). 16.5(ii). 16.5(iii) und 16.5(iv) whichever applies, with respect to the disclosing Party.



16.7 Public statements and press releases regarding the Petroleum Operations undertaken under this Agreement shall be issued jointly by the Contractor and GNPC, and the Parties shall agree on the timing and wording of such statements and releases to the public. Where, however, a Party is required to make a public announcement or statement under the applicable laws, rules or regulations of any government legal proceedings or a stock exchange having jurisdiction over such Party or any of its Affiliates, to the extent permitted by law, that Party shall inform the other Party of such requirement and submit the text of the proposed announcement or statement for comment and/or approval. Should a Party fail to respond for more than five (5) days (or such shorter period as may be reasonable in the event of an emergency or disaster or required to enable the disclosing



68party to comply with applicable law or regulation) to request for the approval of a public statement or announcement for such purposes, such failure shall be deemed approval of the request.



16.8 To the extent required by the Contractor and/or its Affiliates for compliance with the obligations of the Contractor and/or its Affiliates under the regulations of any stock exchange or similar platform upon which the securities of the Contractor and/or its Affiliates are traded, each Party will use reasonable efforts (i) to ensure that information received hereunder which may impact the valuation of any stock of the Contractors and/or their Affiliates ("Inside Information") is to the extent possible only disclosed to such persons that have a need for such Inside Information in their work for the Parties and (ii) to use reasonable endeavours to maintain a list, which shall state at least: (a) the identity of any person working for them having access to Inside Information; (b) the reason why any such person is on the list; and (c) the date at which the list was created and to update this list (x) whenever there is a change in the reason why a person is on the list: (y) to add additional persons to the list, and (z) to remove such persons from the list who no longer have access to such information and transmit such list to a Contractor Party within a reasonable time of such Contractor Party's request therefor: provided, however, that Contractor shall (1) reimburse GNPC for all reasonable expenses in connection with such cooperation and (II) indemnify and hold harmless GNPC and the State from, and GNPC and the State shall have no liability for, any fines or penalties levied by any such securities exchange or related regulator in connection with any such rules.



16.9 Subject in all cases to the terms of any technical services agreements, all intellectual property rights to any and all inventions. discoveries or improvements made or conceived in connection with Petroleum Operations either through a Contractor Party's employees, contractors (including the Contractor Parties). sub-contractors, secondees, GNPC's employees or otherwise, shall be jointly owned by GNPC and Contractor.



16.10 Notwithstanding any provision to the contrary in this Agreement, if a Contractor Party or an Affiliate of a Contractor Party has used its own confidential information, proprietary intellectual property or technology in Petroleum Operations then, subject to GNPC (or its successors or permitted assignees) entering into a usual and customary non-disclosure and licensing agreement (which such agreement shall be on terms that are commercially reasonable under the circumstances), such Contractor Party or its Affiliate shall provide GNPC (or its successors or permitted assignees) with rights to use such confidential information, proprietary intellectual property or technology in other operations of GNPC for its successors or permitted assignees) outside of the Contract Area. The terms and conditions of the foregoing rights will be provided for in separate agreements to be agreed between GNPC (or its successors or permitted assignees) and such Contractor Party or its relevant Affiliate. Further, GNPC (or its successors or permitted assignees) and such Contractor Party or its relevant



69Affiliate will enter into a usual and customary confidentiality agreement relating to confidential information disclosed to GNPC (or its successors or permitted assignees) pursuant to any such licensing agreements, which confidentiality agreement shall restrict, inter alia, GNPC (or its successors or permitted assignees) from making disclosure of such information to such Contractor Party's oil and gas industry competitors.



70ARTICLE 17



INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION



17.1 GNPC shall have the right of access to all sites and offices of Contractor and the right to inspect all buildings and installations used by Contractor relating to Petroleum Operations. Such inspections and audits shall take place in consultation with Contractor and at such times and in such manner as not unduly to interfere with the normal operations of Contractor.



17.2 Contractor shall take all necessary steps, in accordance with International Good Oil Field Practice, to perform activities pursuant to the Agreement in a safe manner and shall comply with all requirements of Governing Law, including labour, health safety and environmental laws and regulations issued by the Environmental Protection Agency of Ghana and other relevant State agencies



17.3 Contractor shall provide an effective and safe system for disposal of water and waste oil, oil base mud and cuttings in accordance with applicable laws and accepted international Petroleum industry practice, and shall provide for the safe completion or abandonment of all boreholes and wells.



17.4 Contractor shall exercise its rights and carry out its responsibilities under this Contract in accordance with accepted international Petroleum industry practice, and shall take steps in such manner as to:



(a) result in minimum ecological damage or destruction;



(b) control the flow and prevent the escape or the avoidable waste of Petroleum discovered in or produced from the Contract Area:



(c) prevent damage to Petroleum-bearing strata;



(d) prevent the entrance of water through boreholes and wells to Petroleum bearing strata, except for the purpose of secondary recovery,



(e) prevent damage to onshore lands and to trees, crops, buildings or other structures: and



(f) avoid any actions which would endanger the health or safety of persons.



17.5 In the event of a release of Petroleum or other materials on the seabed, in the sea, on land or in fresh water, or if Contractor's operations result in any other form of pollution or otherwise cause harm to fresh water, marine, plant or animal life, Contractor shall, in accordance with International Good Oil Field Practice,, to control the pollution, to clean up Petroleum or other released material. or to repair. to the maximum extent feasible, damage resulting from any such circumstances. If such release or pollution results directly from negligence. Gross Negligence or willful misconduct of the Contractor, its Affiliate or Sub-Contractor, the cost of subcontract clean-up and repair activities shall be borne by Contractor and shall not be included as Petroleum Cost under this Agreement



71



17.6 Contractor shall notify GNPC immediately in the event of any emergency or major accident or major release of materials into the environment (and promptly in the event of any other accident or release of materials into the environment)and shall take such action as may be prescribed by GNPC the Operator's emergency procedures and by accepted international Petroleum industry practices.



17.7 If Contractor does not act promptly so as to control, clean up or repair any pollution or damage, GNPC may, after giving Contractor reasonable notice in the circumstances, take any actions which are necessary, in accordance with applicable laws and accepted international Petroleum industry practice in the same or similar circumstances and the reasonable costs and expenses of such actions shall be borne by Contractor and shall, subject to Article 17.5 be included as Petroleum Costs.



72ARTICLE 18



ACCOUNTING AND AUDITNG



18.1 Contractor shall mantain, at its office or registred address in Ghana, books of account and supporting records in the manner required by applicable law and accepted accounting principles generally used in the international petroleum industry and shall file reports, tax returns and any other documents and any other finanial returns which are required by applicable law.



18.2 In addition to the boos and reports required by Articcl 18.1, Contractor shall maintain, at its office or registered address in Ghana, a set of accounts and records relating to Petroleum Operations under this Agreement. Such accounts shall be kept in accordance with the requirements of the applicable law and accepted accounting priciples generally used in the international Petroleum industry.



18.3 THe accounts required by Articles 18.1 and 1.2 shall be kept in United States Dollars or suc other currency as GNPC and Contractor may agree.



18.4 Contractor will provide GNPC with quartely and annual (unaudited) financial statements and summaries of the Petroleum Costs incurred under this Agreement.



18.5 GNPC shall review all financial statements submitted by the Contractor as required by this Agreement, and shall signify its provisional approval or disapproval of such statements in writting ninety (90) days of receitp failling wich the financial statements as submitted by Contractor shall be deemed approved by GNPC; in the event that GNPC indicates disapproval of any such statement, the Parties shal meet within fifteen (15) days of Contractor's receipt of the notice of disapproval to review the matter.



18.6 Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall have the right at its sole expense and upon giving reasonable notie in writting to Contractor to audit the books and accounts of Contractor relating to Petroleum Operations within two (2) years from the submission by Contractor of any report of financial statement. GNPC shall not, in carrying out such audt, interfere unreaonably with the conduct of Petroleum Operations. Any such audit shall be undertaken by an independent auditing firm and shall be completed within nine (9) months after commencement. Contractor shall provide all necessary facilities for auditors appointed hereundder by GNPC including working space and timely access to all relevant personnel, records, files and other materials.



If GNPC desired verification of charges from an Affiliate, Contractor shall at GNPC's sole expense obtain for GNPC or its representatives an audit certificate to this purpose from the statutory auditors of the Affiliate concerned. Copies of audit reports shall be provided to the Contractor and GNPC. Any unresolved audit claim resulting from such audit, upon which Contractor and GNPC are unable to agree shall be submitted to the JMC for decision which must be



73

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unanimous. In the event that a unanimous decision is not reached in respect of any audit claim, then such unsolved audit claim shall be submitted for resolution in accordance with Article 24. Subject to any adjustments resulting from such audits, Contractor's accounts and financial statements shall be considered to be correct on expiry of a period of six (6) years from the date of their submission unless before the expiry of such six (6) year period GNPC has notified Contractor of any exceptions to such accounts and statements.



18.7 Nothing in this Article shall be read or construed as placing a limit on GNPC's access to Contractor's book and accounts in respect of matters arising under Article 23.4(a).



18.8 In the event of any changes in location of the Contractor's office or registered address in Ghana. Operator shall so notify GNPC and the State.



18.9 Petroleum Costs incurred with respect to the Contract Area shall have no bearing on allowable or non-allowable costs under any other contract area or Contractor's eligibility or otherwise for deductions in computing Contractor's net income from Petroleum Operations for income tax purposes in any other contract area. Similarly Petroleum Costs incurred in any other contrac area shall have no bearing on allowable or non-allowable costs in respect of the Contract Area or Contractor's eligibility or otherwise for deductions in computing Contractors' net income from Petroleum Operations for income tax purposes in respect of the Contract Area.





74

[signatures]

ARTICLE 19



TITLE AND CONTROL OF GOODS AND EQUIPMENT



19.1 GNPC shall be sole and unconditional owner of:

(a) Petroleum produced and recovered as a result of Petroleum Operations except for such Petroleum as is distributed to the State and to Contractor pursuant to Artcile 10 or 14 thereof;

(b) all physical assets other than those to which Artcile 19.3 or 19.4 apply, which are purchased, installed, constructed or used by Contractor in Petroleum Operations as from time:

(i) the full cost thereof has been fully depreciated according to applicable law or recovered in accordance with the provision of the Accounting Guide (whichever first occurs); or

(ii) this Agreement is terminated and Contractor has not disposed of such assets prior to such termination, whichever occurs first.



19.2 Contractor shall have the use of the assets referred to in Artcile 19.1(b) for purposes of its operations under this Agreement without payment provided that Contractor shall remain liable for maintenance, insurance and other costs associated with such use. WHere Contractor has failed to keep any such asset in good woring condition (normal wear and tear excepted), GNPC shall have the right to recover the cost of repair or replacement of such assets from COntractor. Contractor shall indemnify GNPC against all losses, damages, claims or legal action resulting from Contractor's use of such assets, if and in as far as such losses, damages, claims or legal actions were directly or indirectly caused by Contractor's Gross Negligence or willful misconduct.



19.3 Equipment or any other assets rented or leased by Contractor which is importerd into Ghana for use in Petroleum Operations and subsequently re-exported therefrom, which is of the type customarily leased for such use in accordance with International Good Oil FIeld Practice or which is otherwise not owned by Contractor shall not be transferred to GNPC. No equipment or assets owned or leased by a Subcontractor shall by reason of the provisions of this Article 19 be deemed to be transferred to GNPC.



19.4 All assets acquired by Contractor to which the provisions of Article 19.1(b) above do not apply may, where required for further Petroleum Operations, be retained by GNPC for such operations provided that GNPC shall thereby be liable to pay a reasonable and mutually agreed fee for such use, and shall bear the cost of repair or replacement upon failure to keep such assets in good woring condition (normal wear and tear excepted), and further provided that Contractor does not require such assets for its Petroleum Operations.



19.5 Upon the termination of Petroleum Operations in any Area, Contractor shall give GNPC the option to acquire any movable and immovable assets used for such



75

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Petroleum Operations and not affected by the provision of Article 19.1(b) at a reasonable and mutually agreed price, always provided that Contractor does not require such assets for Contractor's Petroleum Operations in the Contract Area.



19.6 All assets which are not affected by Article 19.1(b) nor subject to Article 19.4 or 19.5 above, and all subcontractor equipment, may be freely exporte by Contractor or its Subcontractor, respectively, at its discretion.



76

[signatures]ARTICLE 20



PURCHASING AND PROCUREMENT



20.1 Subject to all applicable laws, Contractor, its subcontractors or other entities which cooperate with them shall:

(a) acquire materials, equipment, machinery and consumer goods produced or provided in Ghana by an Indigenous Ghanaian company in Ghana which are of the same or approximately the same quality as foreign materials, equipement, machinery and consumer goods and which are available for sale and delivery in due time at prices which are no more than ten percent higher than the imported items including transportation and insurance costs and custom charges due;

(b) contractor local Ghanaian service provided by INdigenous Ghanaian company to the extent to which the services they provide are similar to those available on the international market an their prices when subject to the same tax charges are no more than ten percent higher than the prices charges by foreign contractors for similar services.



20.2 For the purposes of Article 20.1, price comparisons shall be made on a c.i.f. ccra delivered basis.



77

[signatures]ARTICLE 21



EMPLOYMENT AND TRAINING



21.1 To enable the establishment of programmes to train Ghanian personnel for work in Petroleum Operations and for the transfer of management and technical skills required for the efficient conduct of Petroleum Operations, COntractor shall pay to GNPC within thirty (30) days of the beginning of each Contract Year, or in respect to the first Contract Year, ninety (90) days of the Effective Date, One Million United States Dollars (US$1,000,000). Such payments shall be considered Petroleum Costs of the Contractor.



21.2 In addition to the payment made pursuant to Article 21.1, Contractor shall pay to Explorco within two hundred and seventy (270) days of the Effective Date:

(a) Fifteen MIllion United States Dollars (US$15,000,000) for the planning, development and construtction of a university in Ghana offering petroleum engineering, geology and petroleum-related courses, such amount to be paid pursuant to the letter of credit described in Article 21.4; and

(b) Eight Million United States Dollars (US$8,000,000) for Explorco's corporate development needs, such amount to be paid pursuant to the letter of credit described in Article 21.4



21.3 The expenditures under Article 21.2(a) and 21.2(b) and interest on such expenditures at the Specific Rate shall not be considered a Petroleum Cost of the Contractor, and Contractor may recover such amount purusnat to the JOA.



21.4 Notwithstaing anything to the contrary in Article 21.1 or 21.2, within ninety (90) days of the Effective Date, AGM Ghana shall deliver a standby letter of credit in the amount of Twenty-three Million UNited States Dollars (USS$23,000,000) in favor of Explorco that is drawable within two hundred and seventy (270) days of the Effective Date upon presentation by Explorco.



21.5 Where qualified Ghanaian personnel are available for employment in the conduct of Petroleum Operations, Contractor shall ensure taht as ar as reasonably possible opportunities for the employment of such personnel shall be provided. FOr this purpose, Contractor shall from time to time submit to GNPC an employment plan stating the foreseeable number of persons (and the required professions and technical capabilities) required prior to and during the conduct of Petroleum Operations. GNPC shall be given the opportunity to provide the qualified personnel for engagement according to the said plan.



21.6 Contractor shall, if so requested by GNPC, provide opportinities for a mutually agreed number of personnel nominated by GNPC to be seconded to the Operator for on-the-job training or attachment in all phases of its Petroleum Operations under a mutually agreed secondment contract. Such secondment contract shall include continuing education and shor industry courses mutually identified as beneficial to the secondee. Cost an other expenses connected with such



78

[signatures]assignment of GNPC personnel shall be borne by the Contractor and shall be considered as Petroleum Costs.



21.7 COntractor shall regularly provide to GNPC information and data relating to worldwide Petroleum sicence and technology Petroleum economics and engineering available to Contractor, and shall assist GNPC personnel in every way to acquire knowledge and skills in all aspects of the Petroleum industry.



21.8 It is agreed that there will be no disclosure or transfer of any documents, data, know-how, technology or other information owned or supplied by Contractor, its Affiliates, or nonAffiliates, to third parties without Contractor's prior written consnet, and then only upon agreemtn by the recipients to retain such information in strict confidence.





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[signatures]ARTICLE 22



FORCE MAJEURE



22.1 The failure of a Party to fulfill any term or condition of this Agreement, except for the payment of monies, shall be excused if and to the extent that such failure arises form Force Majeure, provided taht, if the event is reasonably foreseeable such party shall have prior thereto taken all appropriate precautions and all reasonable alternative measures with the objective of carrying out the terms and conditions of this Agreemtn. A Party affecte by an event of Force Majeure shall promptly give the other Parties notice of such event and also of the restoration of normal conditions.



22.2 A Party unable by an event of Force Majeure to perform any obligation hereunder shall take all reasonable measures to remove its inability to fulfill the terms and conditions of this Agreement with a miimum of delay, and the Parties shall take all reasonable measures to minimise the consequences of any event of Force Majeure.



22.3 Any period set herein for the completion by a Party of any act required or permitted to be done under the terms of this Agreemtn, shall be extend for a period of time equal to that during which such Party was unable to perform such actions as a result of Force Majeure, together with such time as may be required for the resumption of Petroleum Operations.



22.4 Except in the case of:

(a) a law of general application which is not discriminatory;

(b) an action taken in consequence of an emergency arising from a condition of Force Majeure;



GNPC may not clain Force Majeure in respect of any action or provision of the State or any ageny of the State.





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[signatures]ARTICLE 23



TERM AND TERMINATION



23.1 Subject to this Article 23 the term of this Agreement shal be twenty-five (25) years commencing from the Effective Date.



23.2 Unless this Agreement has benn earlier terminated, all rights and obligations of the Parties shall cease and this Agreement shall terminate at the end of the term provided for in Article 23.1, above.



23.3 SUbject to Article 22, Termination of this Agreement shall reault upon the occurrence of any of the following:

(a) the relimquishiment of surrender of the entire Contract Area;

(b) the terminations of the Exploration Period including extension pursuant to Article 3 without notification by Contractor of commerciality pursuant to Article 8 in respect of a Discovery of Petrleum in the Contract Area, provided however Termination hsall not occur while Contractor has the right to evaluate a Discovery for Appraisal or commerciality and/or propose a Development Plan pursuant to Article 8 tor 14, or once a Development Plan has been approved, nor when the provisions of Articles 8.13 through 8.19 are applicable;

(c) if, following a notice that a Discovery is a Commercial Discovery the Exploration Period terminates under Article 3 without a Development Plan being apporved, provided however that termination hsall not occur when the provision of articles 8.13 through 8.19 are applicable; or

(d) the failure of Contractor thwough any cause other than Force Majeure, to commence preparations with respect to Development Operations pursuant to Article 8.12.



23.4 Subject to Article 22 and pursuant to procedures descried in Article 23.5 below GNPC and/or the State may terminate this Agreement upon the uncorrected occurrence of any the events (or failures or act listed) below:

(a) the submission by Contractor to GNPC of a written statement which Contractor knows or should have know to be false, in a material particular, or the realease by Contractor to any print or electronic media or to a stock exchange of a written statement regarding the Petroleum Operations in Ghana in breach of Article 16.7 in a form which Contractor knows or should have known to be false in a material particular provided that in the event of intent on the part of Contractor to cause serious damage to GNPC or the State, a period for remedy of such false statement shall not be given;

(b) the assignment or purported assignment by Contractor of this Agreement contrary to the provisions of Article 25 hereof;



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[signatures](c) the insolvency or bankrptey of Contractor, the entry by Contractor into any agreements or composition with its creditors, taking advantage of any law for the benefit of debtor or Contractor's entry into liquidation, or receivership, whether compulsory or voluntary, provided that if Contractor is more than one Party, then the insolvency or bankruptey of one Contractor Party shall not lead to a termination of the Agreement if the other Contractor Party will assue the rights and obligations of the defaulting Contractor Party proportionate to the total of GNPC's Initial Interest and Additional Interest, provided that such proportionate share shall not be carried or financed by Contractor. GNPC may exercise this right by notice to all Contractor Parties within thirty (30) days following insolvency or bankruptey of the defaulting Contractor Party. GNPC's written notice shall state the percentage share of the interest of the defaulting Contractor Party which GNPC proposes to acquire;

(d) the intenional extraction by Contractor of any material of potential economic vale other than as authorised under this Agreement, or any applicable law. Where, however, in the course of Petroleum Operations conducted in accordance with Internation Good Oil Field Practice, Contractor unavoldably extracts any mineral, Contractor shall immediately notify the Minister of Mines and surrender such mineral to the State;

(e) failure by Contractor:

(i) to fulfill its minimum work obligations pursuant to Article 4.3, save (A) where the Minister has waived the default or (B) where there has been a Discovery and the Contractor has paid the minimum expenditure amount to GNPC pursuant to the final sentence of Article 4.3(d) or (C) where the requirements of Article 4.8(b) have been satisfied;

(ii) to carry out an approved Appraisal Programme undertaken by Contractor pursuant to Article 8, unless Contractor notifies GNPC, the Petroleum COmmision and the Minister that the Appraisal Programme should be amended and submits said amendment to the JMC and the Petroleum COmmission for approval; or

(iii) to carry out the terms of an approved Development Plan;

(f) failure by COntractor to comply with any of its material obligations pursuant to Article 7.1(a) to (o) or any other material obligation of the Contractor contained in this Agreement (for wich purpose, and without limitation, the Contractor's obligation in Article 4.8 shall not be a material obligation);



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[signatures](g) failure by Contractor to make any payment of any sum due to GNPC or the State pursuant to this Agreement within thirty (30) days after receiving notice that such paymento is due, except where liability for payment of such sum is disputed in good faith by COntractor in which case the matter shall, if agreement in reltion to it caoont be reached after thirty (3) days, be referred to arbitration under Article 24; or

(h) failure by Contractor to comply with any decisions reached as a result of any arbitration proceedings conducted pursuant to Article 24 hereof.



23.5 If GNPC and/or the State believe an event or failure to act as described in Article 23.4 above has occurred, a written notice shall be given to Contractor describing the event or failure. Contractor shall have thirty (30) days fro receipt of said notice to commence and pursue remedy of the event or faiulre cited in the notice. If after said thirty (3) days Contractor has failed to commence appropriate remedial action, GNPC and/or the State may then issue a written notice of Termination to Contractor which shall become effective thirty (30) days from receipt fo said notice by Contractor unless Contractor has referred the matter to arbitration. In the event that Contractor disputes whether an event specified in Artciel 23.3 or Article 23.4 has occured of been remedied. Contractor may, any time up to the effective date o any notice of Termination refer the dispute to arbitration pursuant to Artciel 24 hereof. If so referred, GNPC and/or the State may not terminate this Agreement in respect of such event except in accordance with the terms of any resulting arbitration award as provided for in Article 24.



23.6 In the event that AGM Ghana fails to provide either the Initial Performance Bond or any required Additional Performance Bond to GNPC pursuant to, and at the time required by, Article 4.3(a), this Agreement shall immediatley and automatically terminate



23.7 Upon Termination of this Agreement, all rights of Contractor hereunder shall cease, except for such rights as may at such time have accrued, and without prejudice to anhy obligation or liability imposed or incurred under this Agreement prior to Termination and to such rights and obligations as the Parties may have under applicable law.



23.8 Upon Termination of this Agreement or in the event of an assignment of all the rights of COntractor, all wells and associated facilities shall be left in a state of good repair in accordance with aplicable laws and INternational Good Oil FIeld Practice.





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[signatures]ARTICLE 24



CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT



24.1 Except in the cases specified in Article 26.3, the Parties shall first attempt to resolve any dispute arising out of or in connection with this Agreement, including any dispute regarding its validity (a "Dispute") by way of consultation and negotiation between senior authorized personnel.



24.2 In the event that no agreement is reached within thirty (30) days of the date on which a Party notifies the other of the existence of a Dispute pursuant ro Article 24.1, or such longer period specifically agreed to by the Parties or specified elsewhere in this Agreement, such Dispute shall be referred to and finally resolved by artibration under the auspices of the International Chamber of Commerce (the "ICC") and adopting the Rules of Arbitration of the International Chamber of Commerce (the "ICC Rules"), which ICC RUles are deemed incorporated by reference into this Article 24.



24.3 None of the Parties to this AGreement shall seek any Pre-Award Attachment. Any step taken in breach of the agreement to refer disputes to arbitration in accordance with this Article and/or the seeking of any Pre Award Attachment shall be deemed a breach of this Agreement by such Party. IN the event of a breach of this Arciel, each non-breaching Party shall, without prejudice to any other remedies, be entitled to recober from each breaching Party all costs and expenses, including reasonable attorneys' fees, that such non-breaching Party was thereby required to incur.



24.4 THe tribnal shall consist of three (3) arbitrators. The arbitratos shall be appointed in accordance with the ICC Rules.



24.5 No arbitrator or SOle Expert shall have any economic interest or relationship with any such Party or any Party's ultimate parent company.



24.6 The seat of the artibration proceedings shall be in London, England, or at such other location as the Parties may agree in writing. THe proceedings shall be conducted in the English language.



24.7 The award of the tribunal shall be final and binding upon the Parties. The Parties undertake to carry out any award without delay and waive their right to any form of recourse based on grounds other than those contained in the United Nations Convention on the Recognition and Enforcement or Arbitral Awards of 1958 insofar as such waiver can be validly made. Judgement upon the award may be entered by any court having jurisdition thereof or having jurisdiction thereof or having jurisdiction over the relevant Party or its assets.



24.8 The right to arbirate disputes arising out of this Agreement shall survive the termination of this Agreement.



24.9 The Parties to a dispute arising under this Agreement, including the Accounting Guide, may alect, by mutual written agreeement, to refer a dispute for expert determination by a sole expert to be appointed of the Parties who



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[signatures]is a recognised specialist with respect to the subject of the Dispute (a "Sole Expert"). In such case, the Parties shall agree on the terms of reference for such proceeding, the schedle of presentation of evidence and testimony of witesses, and other procedural matters. The decision of the SOle Expert shall be final and binding upon hte Parties. The Sole Expert shall have ninety (90) days after receiving submissions from the Parties to decide the case, subject to any extensions mutually agreed to by the Parties to the dispute. Upon failure of the Sole Expert to decide the matter within such time, any Party have the right to have such DIspute referred to arbitration under the foregoing provisions of this Article 24.



24.10 Each Party to a dispute shall pay its own counsel and other costs; however, costs of the arbitration tribunal and the ICC shall be allocated in accordance with the decision of the tribunal. The costs and fees of the Sole Expert shall be borne equally by the Parties to the dispute.





24.11 Each of the State, GNPC and Contractor hereby irrevocably agree that to extent that such party, has any right of immunity from any legal proceedings whether in Geneva, Ghana, England or elsewhere in connection with or arising from terms and conditions of this Agreement, including immunity form service of process, immunity form jurisdiction or judgement or any arbitration tribunal, immunity from execution of judgement or tribunal award, such party hereby expressly and irrevocalby waives any such immunity and agrees not to assert or invoke any such rights or clain in any such proceedings whether in Geneva, Hana, England or elsewhere. Notwithstading the foregoing the provisions of this Article shall not constitute a waiver by the State and GNPC of any right that eiteher has under applicable law to lciam sovereign immunity for itself or any of its assets in respect of any effort to confirm, enforce or execute any Pre-Award Attachment.



24.12 In the event of a matter being referred for resolution under this Article 24, the Parties' obligation hereunder (whether related to the matter referred for resolution or otherwise) shall continue to applly, unless the parties agree that any such obligation shall be suspended until such matter has been resolved.



24.13 No Party shall be held liable to any other for any consequential, special, indirect or punitive damages (including loss of profit or loss of production) arising directly or indirectly out of or in relation or in connection to this Agreement, regardless of cause or fault.



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[signatures]

ARTICLE 25



ASSIGNMENT



25.1 Other than transfers of any interest in this Agreement to a wholly-owned Affiliate of such Contractor Party's ultimate parent entity, no interest in this Agreement shall be assigned by a Contractor Party directly or indirectly in whole or in part, without the prior written consent of GNPC (which consent shall not be unreasonable withheld) and the Minister, GNPC and/or the Minister may impose such reasonable conditions upon the giing of consent under this Article as may be deemed by GNPC or the Minister appropriate in the circumstances,



25.2 Any assignment of this Agreement shall bind the assigne as a Party to this Agreement to all the terms and conditions hereof unless otherwise agreed and as a condition to any assignment COntractor shall provide an unconditional undertaking by the assignee to assume all obligations assigned by Contractor under this Agreement.



25.3 WHere in consequence of an assignment hereunder COntractor is more than one person:

(a) any operating or other agreement made between the persons who constitute contractor and relating to the Petroleum Operations hereuder shall be disclosed to GNPC and the Minsiter and shall not be inconsistent with the provisions of this Agreement;

(b) an operating agreeement shall be established by the JMC to regulate the conduct of Petroleum Operations thereoafter, including cash-calls and the limits of authority;

(c) no change in the scope of the operations may take palce withtout the prior approval in wirtting of GNPC which approval shall not be unreasonably delayed or withheld; and

(d) the duties and obligations of Contractor hereunder shall be joint and several except those relating to the payment of income tax pursuant to Article 12 which shall be the several obligation of each such person.



25.4 GNPC's acquisition of an Additional INterest under Article 2 or a SOle Ris Interest pursuant to Article 9 shall not be deemed to be an assignment within the meaning of this Article 25.



25.5 The transfer or disposal by a COntractor Party (the "Seeling Party") of all or part of its Participating Interest, whether directly or indirectly by assignment, merger, consolidation or sale of stock or other conveyance, other than with or to a wholly-owned Affiliate of such COntractor Party's ultimate parent entity, shall be subject to the following procedure:

(a) Once the Selling Party and a proposed transferee have fully negotiated the final terms and conditions of a transfer, such final terms and conditions shall be promptly discloses in full detail to GNPC and the State in a notice





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[signatures]from the transferor, GNPC shall gave the right to acquire the Participating Interest form the transferor on the same terms and conditions agreed to by the proposed trasferee if, within thirty (30) Days of transferor's notice, GNPC delivers to the transferor a counter-notice that its accepts the agreed terms and conditions of the transfer without reservations or conditions. If GNPC does not deliver such counter-notice, the transfer to the proposed transferee may be made, subject to the other provisions of this Agreement and the laws and regulations, under termes and conditions no more favourable to the transferee than those set forth in the notice to GNPC and the State, provided that the transfer shall be concluded within one hundred and eighty (180) days from the date of the notice plus such reasonable additional period as may be required to secure requisite approvals.



(b) In the event that the Selling PArty's proposed transfer of part or all of its Participating INterest involves consideration other than cash or involves other properties included in a wider transaction then the Participating Interest (or part thereof) shall be allocated a reasonable and justifiable cash value by the transferor in any notification to GNPC and the State. GNPC may satisfy the requirements of this Article 25.5 by agreeing to pay such cash value in lieu of the consideration payable in the selling party shall meet at a mutually convenient time and place to attempt to resolve the dispute and to agree upon a cash valuation. In the event such Parties fail to reach agreement within ninety (90) calendar days from the date on which such notification is received by GNPC or the State from the transferor. Article 24 of this Agreement shall apply.





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[signatures]ARTICLE 26



MISCELLANEOUS



26.1 This Agreemento and the relationship between the State and GNPC on one hand and Contractor on the other shall be governed by and construed in accordance with the laws of the Republic of Ghana in effect from time to time.



26.2 The State confirms that it will accord to each Contractor Party treatment consistent with the minimum standard of treatment required to be accorded to foreign investors under customary international law.



26.3 Without prejudice to the rights and obligations of the parties under the Agreement, in the event that after the Effective Date any applicable Law, Rule, Decree, or Regulation of the Republic of Ghana is made or amended, that makes further observance of the original terms and conditions of this Agreement impossible or that has a material adverse effect on the rigths, obligations and benefits arising from the economic, fiscal and financial provisions of this Agreement (a "Material Change of Law"), the Parties shall, if a Party so requests, meet as soon as possible to negotiate possible modifications to the Agreement as provided under Article 26.4 and 26.5.



26.4 Where a Party considers that a Material Change of Law or a significant change in the circumstances prevailing at the time the Agreement was entered into, has occurred affecting the economic balance of the Agreement, the Party affected hereby shall notify the other Parties in writing of the claimed change, with a statement of how the claimed change has affected the relationship between the Parties.



26.5 Within a period of three (3) monthes of receipt of notification under Article 26.4, the other Parties shall indicate in writing their reaction to such notification and shall meet the engage in negotiations with a view to amending, or rectifying, the provisions of this Agreement as they agree is necessary to restore the relative economic position of the Parties at the date of the Agreement.



26.6 This Agreement and the rights and obligations specified herein may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the Parties. No waiver by any Party of any of its rights hereunder shall be construed or implied, but shall be binding on such Party only if made specifically, expressly and in writing.



26.7 Except for payment obligations arising under the Petroleum Income Tax Law, any Party failing to pay amounts payable by it under this Agreement (including the provisions of Annex 2) on the respective dates on which such amounts are payable by such Party hereunder shall be obligated to pay interest on such unpaid amounts to the party to which such amounts are payable. The rate of such interest with respect to each day of delay during the period of such nonpayment shall be the Default Rate. Such interest shall accure from the respective dates such amounts are payable until the amounts are duly paid. The



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Party to whom any such amount is payable may give notice of nonpayment to the Party in default and if such amount is not paid within fifteen (15) days after such notice, the Party to which the amount is owed may, in addition to the interest referred to above, seek remedies available pursuant to Article 24.



26.8 The rights and obligations under this Agreement of the State and GNPC on the one hand and Contractor on the other shall be separate and proportional and not joint. This Agreement shall not be construed as creating a partership or joint venture, nor an associations or trust (under any law other than the Petroleum Law), or as authorising any Party to act as agent, servant or employee for any other Party for any purpose whatsover except as provided in Article 10.3.



26.9 The duties and obligations of each Party constituting Contractor hereunder shall be joint and several and it is recognised that each such Party shall own and be responsible for its undivided Interest in the rigths and obligations of Contractor hereunder, provided, however, that the following payments shall be the separte obligation of and shall be made by each Party which constitutes the Contractor:

(i) Payments under the Petroleum Income Tax Law;

(ii) Payments of royalty taken in cash under the provisions of Article 10.2(a); and

(iii) AOE share under the provisions of Article 10.2(b).



26.10 In construiing this Agreement:

(a) no consideration shall be given to the captions of the Articles, Sections, or Subsections which are inserted for convenience in locating the provisions of this Agreement and not as an aid in its constructin;

(b) the word "includes" and its derivatives menas "includes, but is not limited to" and corresponding derivative expressions;

(c) a defined term has its defined throughout this Agreement and each annex, and attachment to this Agreement, regardless of whether it apperars before or after the place where it is defined;

(d) the plural shall be deemed to include the singular, and vice versa;

(e) each gender shall be deemed to include the other genders;

(f) each annex and attachment to this Agreement is a part of this Agreement, but if there is any conflict or inconsistency between the main body of this Agreement and any annex or attachament, the provisions of the main body of this Agreement shall prevail; and

(g) each reference to an Article, Section or Subsection refers to an Article, Section or Subsection of this Agreement unless expressly otherwise provided.



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26.11 This Agreement comprises the full and complete agreement of the Parties hereto with respect to the subject matter hereof and supersedes and cancels all prior communications, understandings and agreements between the Parties hereto, whether written or oral, expressed.



26.12 Contrator shall at all times comply, and shall ensure that its agents, subcontractors and Affiliates while in Ghana carrying out activities contemplated by this Agreement and related documents comply, with the laws of the Republic of Ghana in effect from time to time during the term of this Agreement to the extent that the Contractor has notice of or, with the exercise of reasonable inquiry, would have knowledge of, such laws. Nothing in this Agreement or any related document shall require the Contractor or any of its agents, subcontractors or Affiliates to violate the laws of the Repulic of Ghana in effect from time to time. To the extent any conflict exists between the terms of this Agreement and the laws of the Republic of Ghana in effect from time to time, the Contractor shall not be found to be in breach of this Agreement to the extent the Contractor complies with the terms of laws of the Republic of Ghana in effect at such time.



26.13 This Agreement shall not take effect unless and until the date on which (a) it has been ratified by the parliament of Ghana; and (b) each of the JOA and the shareholders agreement of the Operator has been executed by each of the relevant parties thereto (the "Effective Date").



26.14 The State confirms that the Ghanaian Public Procurement Act does not, as of the Effective Date, apply to Contractor.



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ARTICLE 27



NOTICE



27. Any Notice, Application, Requests, Agreements, Consent, Approval, Instruction, Delegation, Waiver or other communication required or permitted to be given hereunder shall be in writing and hsall be deemed to have been properly given when delivered in person to an authorised representative of the Party to whom such notice is directed or when actually received by such Party through registered mail, telex or telegram at the following address or at such other address as the Party shall specify in writting fifteen (15) days in advance:



FOR THE STATE:



MINISTER FOR ENERGY

MINISTRY OF ENERGY

PRIVATE MAIL BAG

MINISTRY POST OFFICE

ACCRA, GHANA

Telephone: 233 (0)302 667151-3

Telex: 2436 ENERGY GH

Telefax: 233 (0)302 668262



FOR GHANA NATIONAL PETROLEUM CORPORATION:



THE CHIEF EXECUTIVE

GHANA NATIONAL PETROLEUM CORPORATION

PETROLEUM HOUSE

HARBOUR ROAD

PRIVATE MAIL BAG

TEMA

GHANA

Telephone: 233 (0)303-204726

Telefax: 233 (0)303-202854



FOR CONTRACTOR:



GNPC EXPLORATION AND PRODUCTION COMPANY LIMITED

PETROLEUM HOUSE

HARBOUR ROAD

TEMA

GHANA





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Telephone: 233 (0)303-204726

Telefax: 233 (0)303-202854



And:



AGM PETROLEUM GHANA LTD

39 RING ROAD

CENTRAL ACCRA

GHANA

Telephone: +233 302225770, +233 244682154

Telefax:



With copy to:



AGM (GIBRALTAR) LIMITED

57/63 LINE WALL ROAD

GIBRALTAR



Telephone: -350 200 64991

Telefax:

Email: info@minexcoine.com





IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above





FOR THE STATE



By [signature]

EMMANUEL ARMAH-KOFI BUAM



Its MINISTER





Witnessed:

By [signature]

PROF THOMAS AKABZAN



Its [signature]









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FOR GHANA NATIONAL PETROLEUM CORPORATION



By [signature]

ATO [ilisibe]

Its CHAIRMAN





Witnessed:

By: [signature]

KYERETULE OPOILU

Its DIRECTEUR



FOR CONTRATOR:



GNPC EXPLORATION AND PRODUCTION COMPANY LIMITED

By [signature]

Its DIRECTEUR



Witnessed

By [signature]

[ilisible]

Its SECRETARY



AGM GHANA PETROLEUM LTD

By [signature]

[ilisible

Its DIRECTEUR



Witnessed

By [signature]

SRERRÉ SKOGEN

Its CHAIRMAN





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ANNEX 1



CONTRACT AREA



[map]

CONTRACT AREA



Latitude Longitude

A = 04 06 30N 03 10 00W

B = 04 35 00N 02 56 30W

C = 03 55 00N 02 56 30W

D = 03 55 01N 02 30 00W

E = 03 40 00N 02 30 00W

F = 03 40 13N 03 23 51W





[signatures]





ANNEX 2



ACCOUNTING GUIDE



The purpose of this Accounting Guide is to establish equitable methods as between the Parties for determining charges and credits applicable to operations under the Agreement. Principles established by this Accounting Guide shll truly reflect the Contractor's actual cost.



SECTION 1



1.1 GENERAL PROVISIONS



1.1.1 Words and terms appearing in this Annex shall have the same meaning as in the Agreement and to that end shall be defined in accordance with Article 1 of the Agreement.



1.1.2 This Annex may be amended by an unanimous decision of the JMC.



1.1.3 In the event of a conflict between the provision of the Accounting Guide and the provisions of the Agreement, the provisions of the Agreement shall prevail.



1.2 STATEMENTS REQUIRED TO BE SUBMITED BY CONTRACTOR



1.2.1 Within sixty (6) days from the Effective Date, Contractor shall propose to GNPC an outline of the chart of accounts, operating records and reports to be prepared and maintained, which shall describe the basis of the accounting principles and procedures to be used during the term of the Agreement, and shall be consistent with applicable law as in effect from time to time and with accepterd accounting principles generally used in the internation petroleum industry from time to time.



1.2.2 Within ninety (90) days of the receipt of such proposal GNPC shall either accept it or request such revisions as GNPC deems necessary. Failure to notify Contractor of any requested revisions withing a ninety (90) day period shall be deemed acceptance of such proposal.



1.2.3 Within one hundred and eighty (180) days forom the Effective Date, the Parties shall either agree on such outline or submit any outsanding issue for determination by a Sole Expert pursuant to the provisions of Article 24 of the Agreement.



1.2.4 Following agreement over the outline Contractor shall prepare and submit to GNPC format copies of the chart of accounts relating to the accounting, recording and reporting funcions listed in suc ouline, Contractor shall also permit GNPC to inspect its manuals and to review all procedures which are to b followed under the Agreement, Contractor's Allowable Cost Statement and Final Year Statement shall be issued by an independent internationally-recognized auditing company. GNPC shall be permitted to audit on site of all of the





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Contractor's record that evidence any of the reports issued by the Contractor unde the Agreement in accordance with the procedures set forth in Article 18 of the Agreement.



1.2.5 Withou prejudice ot the generality of the foregoing, Contractor shall make separate statements relaing to Petroleum Operations for each Development and Production Area as follow:



(a) Cash Call Statemnet (see Section 5)

(b) Production Statement (see Section 6)

(c) Value of Production Statement (see Section 7)

(d) Allowable Cost Statement (see Section 8)

(e) Statement of Expenditures and Receipts (see Section 9)

(f) FInal End-of-Year Statement (see Section 10)

(g) Budget Statement (see Section 11)

(h) Long Range Plan and Forecast (see Section 12)



1.3 LANGUAGE, MEASUREMENT, AND UNITS OF ACCOUNTS



1.3.1 The US Dollar being the currency unit for investiments and compensation hereunder shall therefore be the unit of currency for all bookkeeping and reporting under the Agreement. When transactions for an asset or liability are iin Ghana cedis or currency other than the US Dollar, the respective accounts shall be kept in such other currency as well as the US Dollar.



1.3.2 Measurement required under this Annex shal be in metric system and Barrels.



1.3.3 The English language shall be employed.



1.3.4 Where necessary for purposes of clarification, Contractor may also prepare financial reports in other languages, units of measurement and currencies.



1.3.5 It is the intent of the Parties that no Party shall experience any gain or loss at the expense of or to the benefit of the other as a result of exchange of currency. Where any such gain or loss arises it shall be charged or credited to the accounts under the Agreement.



1.3.6 The rate of exchange for the conversion of currency shall be the rate actually incurred (which shall be at the prevailing rate at the date of acquisition). WHere actual rates are not known, the arithmetic average of







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buying and selling rate quoted by the Ban of Ghana, at a close of business on the date of such currency conversion shall be used.



1.3.7 Current Assets and Liabilities shall be converted at the rate previling on the date of settlement of the account.



1.3.8 To translate transactions in Ghana cedis into dollars or vice versa at the year end for revenue and expenditure the rates of the transactions or average monthly rates where reasonable will be used.



1.3.9 To translate transactions in Ghana cedis into dollars or vice versa at the year end of assets, liabilities and capital items the year end rate will be used.





SECTION 2



2.1 CLASSIFICATION AND ALLOTMENT OF COSTS AND EXPENDITURE



2.1.1 All expenditure relating to Petroleum Operations shall be classifieed, as follows:



(a) Exploration Expenditure;

(b) Development Expenditure;

(c) Production Expenditure;

(d) Service Costs; and

(e) General and Administrative expenses



and shall be defined and allotted as herein below provided.



2.2 EXPLORATION EXPENDITURE



2.2.1 Exploration Expenditure shall consist of all direct, indirect and allotted costs incurred in the search for Petroleum in the COntrac Area, including but not limited to expenditure on:



(a) aerial, geographical, geochemical, palcontological, geological, topographical and services surveys, and studies and their interpretations;

(b) borehole drilling and water drilling;

(c) labour, materials and services used in drilling wells with the objective of finding new Petroleum reservoirs or for the purpose of appraising of Petroleum reservoirs already discovered, provided such wells are not completed as production wells;





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(d) facilities used solely for Exploration Operations, including access rodas, where applicable, and purchased geological and geophysical information;

(e) all service cost allotted to Exploration Operation on the basis of procedures proposed by the Contractor on an equitable basis; and

(f) all General and Administrative Expenses allotted to Eploration Operations based on the percentage share of projected budget expenditure which will be adjusted to actual expenditure at the end of each year.



2.2.2 Exploration cost shall be tied to resultant commercial discoveries. Whe exploration activity is undertaken after a commercial discovery that exploration cost shall be regarded as capital work-in-progress. If the exploratory activity results in commercial discovery it shall be regarded as cost of new the discoery and subsequent field. WHere there is no commercial discovery it shall be charged to the previous discovery field.



2.3 DEVELOPEMENT EXPENDITURE



2.3.1 Development Expenditure shll consist of all expenditure incurred in Development Operations, including but not limited to expenditure on:



(a) drilling wells which are completed as producing wells and drilling wells for purposes of producing a Petroleum reservoir already discovered, whether these wells are dry or producing;

(b) tangible drilling coss or completing wells by way of installation of casing or equipment or otherwise after a well has been drilled for the purpose of bringing such well into use as a producing well;

(c) intangible drilling costs such as labour, consumable material and services habing no salvage value which are incurred in drilling and deepening of wells for producing purposes;

(d) field facilities such as pipelines, flow lines, production and treatment units, wellhead equipment, subsurface equipment, enhanced recovery systems, offshore platforms, Petroleum storage facilities and access rodas for production acvities;

(e) engineering and design studies for field facilities;

(f) all service costs alotted to Development on equitable basis;

(g) all General and Administrative Expenses allotted to Development Operations based on the percentage projected budget expenditure





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which will be adjusted to actual expenditure as the end of the year.

(h) Capital allowance for development expenses shall be granted under the following conditions:

(i) Development activity has been approved by the Minister;

(ii) Development activity has been completed; and

(iii) Production activity has started after the completion of the development activity;



2.4 PRODUCTION EXPENDITURE



Production Expenditure shall consist of but not limited to all expenditure incurred in Petroleum Operations including appropriate abandonment charges, after the Date of COmmencement of Commercial Production, such expenditure being other than Exploration Expenditure, Development Expenditure, General and Administrative Expenses and Service Costs THe balance of General and Administrative Expenses and Services Costs not allotted to Exploration Operations or to Development Operations under Section 2.2 and 2.3 shall be allotted to Production Expenditure.



2.5 SERVICE COSTS



2.5.1 Services Costs shall consist of but not be limite to all direct and indirect expenditure incurred in support of Petroleum Operations, including the construction or installation of Warehouses, piers, marine vessels, vehicles, motorised rolling equipment, aircraft, fire security stations, workshops, water and sewerage plants, power plants, housing community and recreational facilities and furniture, tools land, equipment used in such construction or installations.



Service Costs in any Calendar Year shall include the total costs incurred in such year to purchase and construct or install such facilities as well as the annual cost of maintaining and operating such facilities.



2.5.2 All Service Costs will be regularly allotted on an equitable basis to Exploration Expenditure, Development Expenditure and Production Expenditure;



2.6 GENERAL AND ADMINISTRATIVE EXPENSES



General and Administrative Expenses shall consist of:



2.6.1 All main office, field and general administrative costs in the Republic of GHana, including but not limited to supervisory, accounting and employee relations services.





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2.6.2 An overhead charge for the actiaul cost of services rendered outsied the Republic of Ghana by Contractor and its Affiliates for managing Petroleum Operations and for staff advice and assistance, including but not limited to financial legal accounting and employee realtions services in the following amounts:



(a) FOr the Explorations Phase: US Dollars 0 - 20 million - One opint two five percent (1.25%) to a cap of US$ 200.000.00 per annum.

(b) FOr Development Phase: US Dollars 0 - 50 million - One point two five percent (1.25% to a cap of US$ 500.000.00 per annum.

(c) For Production Phase: US Dollar 0 - 10 million - 1 percent (1%) to a cap of US$ 200.000.00 per annum.



2.6.3 All General and administrative Expenses will be regularly allotted as specified in subsections 2.2(1), 2.3(g) and 2.4 to Exploration Expenditure, Development Expenditure and Production Expenditure.



SECTION 3



3.1 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF CONTRACTOR



3.1.1 Contractor for the purpose of this Agreement shall charge the following allowable costs to the accounts:



(a) costs of acquiring surface rights;

(b) labour and associate costs;

(c) transportation costs;

(d) charges for services;

(e) material costs;

(f) rentals, duties and other assessments;

(g) insurance and losse;

(h) legal expenses;

(i) training expenses;

(j) general and administrative expenses;

(k) utility costs;

(l) office facility charges;





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(m) communications charges;

(n) ecological and environmental charges;

(o) abandonment cost; and

(p) such other costs necessry for the Petroleum Operations.



3.2 COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT



Cost of acquiring surface rights shall consist of all direct costs attributable to the acquisition renewal or relinquishment of surface rights acquired and maintained in force over the Contract Area.



3.3 LABOUR AND ASSOCIATE LABOUR COSTS



3.3.1 Labour and associated labour costs shall include but not be limited to:



(a) gross salarie and ages including bonuses of those employees or secondes of COntracotr and of its Affiliates engaged in Petroleum Operations who are permanentley or temporarily assigned to Ghana;

(b) Costs regarding holidays, vacation, sickness and disability payments applicable to the salaries and wages chargeable under (a);

(c) expenses or contributions made pursuant to assesments or obligations imposed under the laws of the Republic of GHana which are applicable to cost of salarie and wages chargeable under (a);

(d) cost of etalihed plans for employees life insurance, hospitalisations, pensions and other benefits of a lke nature customarily granted to employees; and

(e) reasonable travel and personal expenses of employees or secondees and their families, including those made for travel and relocation of the personnel.



3.4 TRANSPORTATION COSTS



Transportation costs and other related costs of transportation of employees or secondees of the Contractor or its Affiliates, equipment, materials and supplies necessary for the conduct of Petroleum Operations.



3.5 CHARGES FOR SERVICES



3.5.1 Charges for services shall include:



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(a) the costs of third party contract which are the actual cost of contracts for technical and other services entered into by Contractor or its Affiliates for Petroleum Operations made with third parties other than the Contractor or Affiliates of Contracotr, provided that the prices paid by COntractor are no higher than the prevailing rates for such services in the regional market;

(b) costs of technical and other services of personnel assigned by the Contractor and its Affiliates when perfoming managment, engineering, tresury tax, employee relations, computer services, purchasing, and all other funcions for the direct benefit of Petroleum Operations; provied that charges for such services shall be at actual cost;

(c) cost of general services, including, but not without limitaion, professionl consultants and other who perform services for the direct benefis of Petroleum Operations.



3.5.2 All Services furnished by Contractor and its Affiliates (other than the Operator) shall be performed based on a form of Services Agreement to be approved by the JMC and at actual cost, on a no gain no loss basis, without element of profit and with no allocation of fixed costs in the determination of the service fees, and an administration charge of not more than 5 per cent (5%) of the services fees.



3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS



All rentals, taxes, duties, levies, charges, fees, contributions and any other assessments and charges levied by the Government in connection with Petroleum Operations or paid for the benefit of Petroleum Operations, with the exception of the income tax specified in the Article 12 of the Agreement;



3.7 INSURANCE AND LOSSES



(a) Insurance premium and costs incurred for insurance, provided that if such insurance is wholly or party placed with an Affiliate or Contractor, such premium and costs shall be recoverable only to the extent not in excess of those generally charged by competitive insurance companies other than Affiliate; and;

(b) costs and losses incurred as a conseuqnce of events, which are, insofar a not made good by insurance, allowable under Article 17 of the Agreement.

(c) Costs or expenses necessary for the repair or replacement of property resulting damage or losses incurred.



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1023.8 LEGAL EXPENSES



All costs and expenses of litigation and legal or related services necessary or expedient for the procuring, perfecting, retaining and proteting the rights hereunder and in defending or proscuting lawsuits involving the Contract Area or any third party clain arising out of activities under the Agreement, or sums paid in respect of legal services necessary or expedient for the protection of the joint interest of GNPC and Contractor, provided that where legal services are rendered in such matters by salaried or regularly retained lawyer or Contractor or an Affiliate of Contractor, such compensation will be included instead under either Section 3.3 or 3.5, as applicable. The preceding costs and expenses shall not include costs of any nature (including attorney's fees and the fees of the ICC, arbitrators, the Sole Expert, other experts, professionals and translators) incurred in connection with any consultation, arbitration or Sole Expert process under Artice 24 of the Agreement.



3.9 TRAINING COSTS



All costs and expenses incurred by Contractor or the Operator in training of its employees and nominees of GNPC to the extent that such training is attributable to Petroleum Operations under the Agreement.



3.10 GENERAL AND ADMINISTRATIVE EXPENSES



General and Administratitve Expenses shall consist of the costs described in Subsectionn 2.6.1 and the charge described in Subsection 2.6.2.



3.11 UTILITY COSTS



Any water, electricit, heating, fuel or other energy and utility costs used and consumed for the Petroleum Operations.



3.12 OFFICE FACILITY CHARGES



The cost and expenses of constructing, establishing, maintaining and operating offices, camps, housung and any other facilities in Ghana necessary to the conduct of Petroleum Operations. The cost of constructing or otherwise establishing any operating facility which may be used at any time in operations of more than one field shall be charged initially to the field or fields for which the facility is first used. Costs incurred, thereafter shall be allocated in a resonable manner, consistent with international accounting practice, to the fields for which the facility is used.



3.13 COMMUNICATION CHARGES



The cost of acquiring, leading, installing, operating, repairing and maintaining communication systems, including radio and microwave facilities



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3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES



All charges for environmental protection and safety measures conducte in the Contract Area in accordance with Article 17 of the Agreement



3.15 ABANDONMENT COST



Cost relating to the decommissioning and abandonment of operations and facilities, site restoration and other associated operations accrued from a reasonable date in advance based on estimte of such cost (with subsequent adjustments to actuals) as provided in Article 12.9 of the Agreement.



3.16 OTHER COSTS



Any other cost not covered or dealt with in the foregoing provisions which are incurred and not mentioned in this Section 3.16 for the necessary and proper conduct of Petroleum Operations.



3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT



3.17.1 The Following costs shall not be allowable under the Agreemtno:

(a) commission paid to intermediaries by Contractor;

(b) charitable donations and contributions, except where prior approval has been obtained from GNPC;

(c) interest incurred on loans raised by the Contractor as well as any other borrowing costs or costs to secure finance (including professional and advisory fees and expenses);

(d) costs (including duties) arsing from the marketing or processing Petroleum or transportation of Petroleum beyond the Delivery Point;

(e) the costs of any Bank Guarantee under the Agreement and any other amounts spent on intdermmities with regard to non-fulliment of contractual obligations;

(f) premium paid as a result of GNPC exercising a Sole Risk option under Article 9 of this Agreement;

(g) costs of any nature (including attorney's fees and the fees of the ICC, arbitrators, the Sole Expert, other experts, profesionals and translators) incurred in connection with any consultation, arbitration or Sole Expert process under Article 24 of the Agreement;

(h) fines, penalties and interest due pursuant to an applicable law or regulation and/or imposed by a competent admistrative or judicial body;



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[signatures](i) costs, damages and other liabilities incurred as a resultt of (1) a breach of any provision of the Agreement other than a contractual standard of care, (2) Gross Negligence with respect to any contractual standard or care forth in this Agreement, and/or (3) Willful Misconduct, in each case by the Contractor, the Operator, their respecive Affiliates and/or subcontractors, and/or any other entities or pesons for whom the Contractor is responsible under the Agreement;

(j) (1) income taxes (including any taxes on the net income of permanent establishments in Ghana and any capital gains taxes or taxes on assigments of interest), withholding taxes and/or royalty shares or other Petroleum entitlements, in each case pai to authorities in Ghana in connection with or related to the Agreement, (2) any taxes pai to authorities outside Ghana, except any foreign value added taxes or other foreign taxes paid with respect to products or services imported into Ghana, (3) any taxes subject to reimbursement or refund and; (4) any other taxes that should be deemd non-allowable costs;

(k) cost incurred by the Contractor under contracts or amendments thereto that were subject to (1) approval by te JMC or GNPC and were not so approved, or (2) award or approval in accordance with tender procedures and were not awardd or approved in accordance with the applicable tender procedures;

(l) cost than (1) are not incurred in accordance with a Budget in force at the time the cost was incurred, or (2) exceed by more than 10% any budget line item set forth in the Budget in force at the time the cost was incurred, except for costs that are incurred in accordance with the Agreement in response to an emergenc;

(m) cost that are not documented in accordance with applicable law or this Agreement; and

(n) any bonus payments payable by the Contractor to the State, any other government body in Ghana, GNPC or any affiliates of GNPC under the Agreement.



3.18 ALLOWABE AND DECUCTIBILITY



The costs and expenses set forth herein shall be for the purpose of determining allowable or non-allowable costs and expenses only and shall have no bearing on Contractor's eligibility or otherwise for deductions in computing Contractor's net income from Petroleum Operations for income tax purposes under the Agreement.



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[signatures]3.19 CREDITS UNDER THE AGREEMENT



3.19.1 The net proceeds of the following transactions will be credited to the accounts under the Agreement

(a) the net proceeds of any insurance or clain in connection with Petroleum Operations or any assets charges to the accounts under the Agreement when such operations or assets were insured and the premium charged to the accounts under the Agreement;

(b) revenue received from third parties for the use of property or assets charged to the accounts under this Agreement;

(c) any adjustment from the suppliers or manufactures or their agents in connection with a defective equipment or material the cost of which was previoulsy charged to the account under the Agreement;

(d) the proceeds received for inventory materials previously charged to the account under the Agreement and subsequently exported from the Republic of Ghana or transfered or sold to third parties;

(e) rentals, refunds or other credits received which apply to any charge which has been made to the account under the Agreement but expluding any awark granted under arbitration or Sole Expert procedins;

(f) the proceeds from the sale or exchange or plant or facilities from the Development and Production Area or plant or facilities the acquisition costs and the cost of sale;

(g) the proceeds derived from the sale or issue of any intellectual property the development costs of which were incurred pursuant to this Agreement;

(h) the proceeds from the sale of any petroleum information derived from Petroleum Operations under this Agreement; and

(i) any General and Administrative Expenses or Service Expenses that benefit any operation or activity other than Petroleum Operations.



3.20 DUPLICATION OF CHARGES AND CREDITS



Notwithstanding any provision to the contrary in this Annex, it is the intention that there shall be no duplication of charges or credits in the accounts under the Agreement.



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[signatures]SECTION 4



4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER THE AGREEMENT



Material purchased, leasd or rented by Contractor for use in Petroleum Operations shall be valued at the actual net cost incurred by Contractor or its Affiliates. The net cost shall include invoice price less trande and cash discounts, if any, purchase and procurement fees plus freight and forwarding charges between point of supply and point of shipment, freight to port of destination, insurance, taxes, customs duties, consular fees, other items chargeable against imported material and any other related costs actually paid.



4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE



4.2.1 Contractor shall notify GNPC of any goods supplied by an Affiliate of Contractor, Materials purchased from Affiliate of Contractor shall be charged at the prices specified in Sections 4.2.1 and 4.2.2 and 4.2.3 below.



4.2.2 New Material (Condition "A") New material shall be classified as Condition "A". Such material shall be valued at the prevailing market price, plus expenses incurred in procuring such new materials, and in moving such materials to the location where the material shall be used;



4.2.3 Used Material (Condition "B") Used material shall be classified as Condition "B" provided that it is in sound and serviceable condition and is suitable for reuse without reconditioning. Such material shall be valued at not more than seventy five percent (75%) of the current price of new material valued according to Section 4.2.1 above.



4.2.4 Used Material (Condition "C") Used material which is serciccable for original funcion as good second hand material after reconditioning and cannot be classified as Condition "B" shall be classified as Condition "C". Such material shall be valued at not more than fifty percent (50%) of the curren price of new material valued according to Section 4.2.1 above. The cost of reconditioning shall be charged to the reconditioned material provided that that the value of such Condition "C" material plus the cost of reconditioning does not exceed the value of Condition "B" material.



4.3 CLASSIFICATION OF MATERIALS



Materials cost shall be charged to the respective Exploration Expenditure, Development Expenditure, Operating Expenditure accounts at the time the material is acquired and on the basis of th intended use of the material. Should such material subsequently be used other than as intended, the relevent charge will be transferred to the appropriate account.



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[signatures]4.4 DISPOSAL OF MATERIALS



Sales of property shall be recorded at the net amount collected by the Contractor form the purchaser.



4.5 WARRANTY OF MATERIALS



In the case of defective material or equipment, any adjustment received by Contractor from the suppliers or manufacturers of such materials or their agents will credited to the accounts under the Agreement.



4.6 CONTROLLABLE MATERIALS



4.6.1 The Contractor shall directly or via the Operator control the acquisition, location, storage and dispoition of materials which are subject to accounting record control, physical inventory and adjustment for averages and shortages (hereinafter referred to as Controllabe Material).



4.6.2 Unless additional inventories are scheduled by the JMC. Contractor shall conduct one physical inventory of the Controllable Material each Calendar Year which shall be completed prior to the end of the year. The Contractor shal conduct said inventory on a dae to be approved by the JMC. Failure on he part of GNPC to participate in a JMC schedule or approved physical inventory shll be regarded as approval of the results of the physical inventory as conducted by the Contractor.



4.6.3 The gain or loss resulting from the physical inventory shall be reflected in the stoc records of Controllable Materials. The Contractor shall compile a reconciliation of the inventory with a reasonable explanation for such gains or losses. Failure on the part of GNPC to object to Contractor's reconciliation within thirty (30) days of compilation of said reconciliation shall be regarded as approval by GNPC.



SECTION 5



5.1 CASH CALL STATEMENT



5.1.1 In respect of any Exploration Costs to which GNPC is contributing or any Development and Production Area in which GNPC elects to take a participating interest, and i any case where Contractor conduts Sole Risk Operations for GNPC's account, Contractor shall at least fifteen (15) days prior to the commencement of any Month submit a Cash Call Statement to GNPC. Such Cash Call Statement shall include the following information:

(a) Due Data;

(b) Payment Instructios;

(c) The balance prior to the Cash Call being issued;



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(d) The cash call being issued;

(e) Amount of US DOllars due; and

(f) An estimation of the amounts of US Dollars required from GNPC for the following month.



5.2 Not later than the twenty fifth day of each Month, Contractor will funish GNPC's statement reflecting for the previous month:

(a) Payments;

(b) The nature of such payments by appropriate classifications; and

(c) THe balance due to or from GNPC.



5.3 Contractor may in the case where a large unforeseen expenditure becomes necessary issue a special Cash Call Statement requiring GNPC to meet such Cash Call within (10) days or receipt of such Statement.



SECTION 6



6.1 PRODUCTION STATEMENT



6.1.1 Subsequent to the Date of Commencement of Commercial Production from the COntract Area, Contractor shall submit a monthly Production Statement to GNPC showing the following information for each Development and Production Area as appropriate:

(a) the quantity of Crude Oil produced and saved;

(b) the quantity of Natural Gas produced and saved;

(c) the quantities of Petroleum used for the purpose of conducting drilling and Production Operations, pumping to field storage and re-injections;

(d) the quantities of Natural Gas flared;

(e) the size of Petroleum stocks held at the beginning of the Month; and

(f) the size of Petroleum stocks held at the end of the Month.



6.2 The Production Statement of each Calendar Month shall be submitted to GNPC not later than ten (10) days after the end of such month.



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[signatures]SECTION 7



7.1 VALUE OF PRODUCTION STATEMENT



During each Quarter Contractor shall prepare a statement providing calculations of the value Crude Oil produced and saved based on the Market Price established under Artile 11 of this Agreemtent, the amounts of Crude Oil allocated to each of the Parties during that Quarter, the buyer of the cargo, sales basis with respect to Benchmark crude oil, the pricing basis, the differential, and any deductions. Each Production Statment shall be submitted to the Minister and GNPC not later than thirty (30) days following the determination, notification and acceptance of the World Market Price to GNPC according to Article 11 of this Agreement.



SECTION 8



8.1 ALLOWABLEC COST STATEMENT



8.1.1 Contractor shall prepare with respect to each Quarter, an Allowable Cost Statement containing the following information with respect to costs that are allowable under Section 3.17 of this Accounting Guide:

(a) Total Petroleum Cost in previous Quarters, if any;

(b) Petroleum Costs for the Quarter in question;

(c) Total Petroleum Costs as of the end of the Quarter in question (subsection 8.11 (a) plus subsection 8.11 (b) above;

(d) Petroleum Costs for Development Operations advanced in the Quarter in respect of GNPC's Participating Interest pursuant to Article 2.8 of the Agreemtent; and

(e) Costs as specified in (d) above which have been recovered during the Quarter pursuant to Article 10.2.e of the Agreement and the balance, if any, of such costs unrecovered and carried forward for recovery in a later period.



8.1.2 Petroleum Costs for Exploration, Development and Production Operations as detailed above shall be separately identified for each Developmente and Production Area. Petroleum Cost for Exploration Operations not directly attributable to a specific Developement Area shall be shown separately.



8.2 The Allowable Cost Statemnet of each Quarter shall be submitted to GNPC no later than thirty (30) days after the end of such Quarter.



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[signatures]SECTION 9



9.1 STATEMENT OF EXPENDITURES AND RECEIPTS



9.1.1 Subsequent to the Date of Commencement of Commercial Production from the Contract Area, Contracto shall prepare with respect to each Quarter a Statement of Expenditures and Receipts. The Statements will disinguish between Exploration Expenditure and Development Expenditure and Production Expenditure and Development Expenditure and Production Expenditure and will identify major items of expenditure within these categories. The Statement will show the following:

(a) actual expenditures and receipts for the Quarter in question;

(b) cumulative expenditures and receipts for the budget year in question;

(c) lastet forecast of cumulative expenditures at the year end;

(d) variations between budget forecast and lastest forecast and explanations therefore;

(e) price per barrel of crude oil sold; and

(f) price per barrel of oil equivalent of Gas sold.



9.1.2 The Statement of Expenditures and Receipts of each Calendar Quarter shall be submitted to GNPC not later than thirty (3) days after the end of such Quarter for provisional approval by GNPC.



SECTION 10



10.1 FINAL END-OF-YEAR STATEMENT



The Contractor will prepare a Final End-of-Year Statement. The Statement will contain information as provided in the Production Statement, Valu of PRoduction Statements, Allowable Cost Statement and Statements of Expenditures and Receipts as appropriate. The FInal End-of-year Statement of each Calendar Year shall be submitted to GNPC within ninety (90) days of the end of such Calendar Year. Any necessary subsequent adjustments shall be reported promptly to GNPC.



SECTION 11



11.1 BUDGET STATEMENT



11.1.1 The Contractor shall prepare an annual budget statement. This will distinguish between Exploration Expenditures, Developments Expenditures and Production Expenditures and will show the following:



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(a) forecast Expenditures and Receipts for the budget year under the Agreement;

(b) cumulative Expenditures and Receipts to the end of said budget year; and

(c) the most important individual items of Explorations, Development and Production Expenditures for said budget year.



11.1.2 The budget may include a budget line or lines for unforessen expenditures which, however, shall not exceed ten percent (10%) of the total budgetary expenditure.



11.2 The Budget Statement shall be submitted to GNPC and JMC with respect to each budget year no less than ninety (90) days before the start of such year except in the case of the first year of Agreement when the Budget Statement shall be submitted within sixty (60) days of the Effective Date.



11.3 Where Contractor foresees that during the budgets period expenditures have to made in excess of the ten percent (10%) pursuant to section 11.1.1 hereof, contractor shall submit a revision of the budget to GNPC.



SECTION 12



12.1 LONG RANGE PLAN AND FORECAST



12.1.1 Contractor shall prepare and submit to GNPC the following:

(a) During Exploration Period, an Exploration Plan for each year commencing as of the Effective Date which shall contain the following information:

(i) Estimated Exploration Costs showing outlays for each of the years or the number of years agreed and covered by the Plan;

(ii) Details of seismic oprations for each such year;

(iii) Details of drilling activities planned for each such year; and

(iv) Details of infrastructure utilisation and requirements.



The Exploration Plan shall be revised on each anniversary of the Effective Date. Contractor shall prepare and submit to GNPC the first Exploration Plan for the Initial Exploration Date and thereafter shall prepare and submit to GNPC no later than forty five (45) days before each anniversary of the Effective Date a revised Exploration Plan.



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(b) In the event of a Development Plaan being approved, the Contractor shall prepare a Development Forecast for each calendar year of the Development Period, which shall contain the following information:

(i) forecast of capital expenditure portions of Development and Production expenditures for each Calendar Year of the Development Period;

(ii) forecast of operating costs for each Calendar Year;

(iii) forecast of Petroleum Production of each Calendar Year;

(iv) forecas of number and types of personnel employed in the Petroleum Operations in the Republic of Ghana;

(v) description of proposed Petroleum marketing arrangements;

(vi) description of main technologies employed; and

(vii) description of the working relaionship of Contractor to GNPC.

(c) The Development forecast shall be revised at the beginning of each Calendar Year commencing as of the second year of the first Development forecast Contractor shall prepare and submit to GNPC the first Development forecast within one hundred and twenty (120) days of the date when the first Development Plan is approved by the Minister and Contractor commences the implementation of such plan and thereafter shall prepare and subit a revised Development Forecast to GNPC no later than forty five (45) days before each Calendar Year commencing as of the second year of the first Development forecast.



12.2 CHANGES OF PLAN AND FORECAST



It is recognised by Contractor and GNPC that the details of the Exploration Plan and Development forecast may require changes in the light of existing circumstances and nothing herein contained shall limit the flexibility to make such changes. Consistent with the foregoing the said Plan and Forecast may be revised annually.



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[signatures]12ANNEX 3



SAMPLE AOE CALCULATION



Sample AOE calculation using COla and Medea AEO thresholds

SAMPLE AOE CALCULATION*

Account | ROR | AOE

FA | 12.5% | 12.5%

SA | 17.5% | 15%

TA | 22.5% | 17.5%

YA | 27.5% | 22.5%

ZA | 32.5% | 27.5%



Disclaimer: AOEs are calculate on a monthly basis but for ease of analysis the sample calculations were based on annual figures



Inflation Rate 3%

(Amounts in million of US$)

Year | NCF | FAn@12.5%pa | AOE1@12.5% | SAn@17.5%pa | AOE2@15%| TAn@22.5%pa | AOE3@17.5%| YAn@27.5%pa | AOE4@22.5%| ZAn@32.5%pa | AOE5@27.5% | TOTA AOE Payments



| | 12,5% | 12,5% | 17,5% | 15,0% | 22,5% | 17,5% | 27,5% | 22,5% | 32,5% | 27,5% |

| | | | | | | | | | | |

1 | 150,00 | 150,00 | 0,00 | 150,00 | 0,00 | 150,00 | 0,00 | 150,00 | 0,00 | 150,00 | 0,00 | 0,00

2 | 240,00 | 413,25 | 0,00 | 420,75 | 0,00 | 428,25 | 0,00 | 465,75 | 0,00 | 448,25 | 0,00 | 0,00

3 | 310,00 | 787,30 | 0,00 | 317,00 | 0,00 | 847,45 | 0,00 | 878,65 | 0,00 | 910,50 | 0,00 | 0,00

4 | 550,00 | 1459,34 | 0,00 | 1534,49 | 0,00 | 1613,55 | 0,00 | 1696,64 | 0,00 | 1783,87 | 0,00 | 0,00

5 | 280,00 | 1965,53 | 0,00 | 2129,06 | 0,00 | 2305,01 | 0,00 | 2494,12 | 0,00 | 2697,14 | 0,00 | 0,00

6 | 80,00 | 2350,19 | 0,00 | 2645,52 | 0,00 | 2972,79 | 0,00 | 3354,83 | 0,00 | 3734,53 | 0,00 | 0,00

7 | 65,00 | 2779,47 | 0,00 | 3252,85 | 0,00 | 3795,85 | 0,00 | 4416,95 | 0,00 | 5125,42 | 0,00 | 0,00

8 | 990,00 | 2220,29 | 0,00 | 2929,68 | 0,00 | 3773,79 | 0,00 | 4774,12 | 0,00 | 5954,94 | 0,00 | 0,00

9 | 1470,00 | 1057,42 | 0,00 | 2060,27 | 0,00 | 3256,11 | 0,00 | 4760,22 | 0,00 | 6598,95 | 0,00 | 0,00

10 | 1630,00 | 365,98 | 45,74 | 398,86 | 0,00 | 2514,71 | 0,00 | 4627,88 | 0,00 | 7357,31 | 0,00 | 45,74

11 | 970,00 | 970,00 | 121,25 | 233,78 | 0,00 | 2307,20 | 0,00 | 5190,57 | 0,00 | 9120,41 | 0,00 | 121,25

12 | 750,00 | 750,00 | 93,75 | 374,55 | 56,18 | 2295,48 | 0,00 | 6173,69 | 0,00 | 11758,09 | 0,00 | 149,93

13 | 680,00 | 680,00 | 85,00 | 595,00 | 89,25 | 2375,07 | 0,00 | 7550,83 | 0,00 | 15429,46 | 0,00 | 174,25

14 | 410,00 | 410,00 | 51,25 | 358,75 | 53,81 | 2675,78 | 0,00 | 9548,90 | 0,00 | 20597,92 | 0,00 | 105,06

15 | 220,00 | 220,00 | 27,50 | 192,50 | 28,88 | 3194,48 | 0,00 | 12297,69 | 0,00 | 27745,55 | 0,00 | 56,38

| | | | | | | | | | | |

Total | 5445,00 | | 228,12 | | 0,00 | | 0,00 | | 0,00 | | 0,00 | 652,61





[signatures]ANNEX 4



CONFIDENTIALITY AGREEMENT





THIS AGREEMENT is entered into this....day of..., (the "Effective Date") by and between [ ], ac company organized and existing under the laws, of [ ] (hereiafter referre to as the "Disclosing Party"); and...., a company organized and existing under the laws of....(hereinafter referred to as the "Receiving Party").



The companies named above may collectively be referred to as the "Parties" or individually as "Party".



WHEREAS in connection with the Possible Transaction (as defined below) by the Receiving Party, the Discplosing Party is willing, in accordance with the terms and conditions of this Agreemtent, to disclose certain Confidental Information (as defined below) realting to the Contract Area (the "Area") shown in Exhibits A to D attached hereto; and



WHEREAS the Petroleum Agreement covering the said Contrac Area requires that the Disclosing Party require the execution of a confidentiality agreement by Receiving Party prior to the disclosure of Confidential Information in order to govern such disclosure and that a copy of all suchh signed confidentiality agreements be provided to GNPC.



NOW THEREFORE, in consideration for the mutual undertakings of the Disclosing Party and the Receiving Party under this Agreement, the Parties agree as follows:



1. Definitions



As used in this Agreemento the following words and terms shall have the meaning ascribed to them below:



1.1 "Affiliated Company" means any Person which:

a. Controls directly or indirectly a Party, or

b. Is Controlled directly or indirectly by such Party, or

c. Is directly or indirectly Controlled by a Person which directly or indirectly Controls such a Party.



1.2 "Confidential Information" means individually or collectively;



[signatures]1.2.1 any and all data and information obtained as a result of petroleum operations in the Area, including without limitation well data and seismic information together with all oher data and information obtained by or on behalf of the Disclosing Party in connection with the Disclosing Party's petroleum operations in the Area as well as geologial and economic reports, studies, interpretations and analyses repared by or on behalf of the Disclosing Party in connection with its petroleum operations in the Area. Confidential Information includes certain proprietary data and information that is the property of GNPC (hereinafter "GNPC Information") as described in Exhibit B attached hereto.



Provided that, the following shall not constitute Confidential Information:



1.2.2 Information that can be reasonably demonstrated by the Receiving Party as being already lawfully kown to Receiving Party as of the Effective Date;



1.2.3 information that is becomes available to the public other Person to whom Confidential Information is disclosed by the Receiving Party pursuant to Article 4.2 unless public disclosure was made pursuant to Article 4.1



1.2.4 Information that is acquired independently form a third party that has a right to dissminate such information at the time it is acquired by the Receiving Party; or



1.2.5 Information that can be reasonably demonstrated by the Receiving Party to have been developed by Receiving Party independently of the COnfidential Information received from Disclosing Party.



1.3 "Control" means the ownershi directly or indirectly of 50% or more of the voting rights in a Person or the ability to direct, directly or indirectly, the management or policies of a Person, whether through the appointment of the directors, the ownership of voting shares or other voting rights, pursuant to written contract or otherwise. "Controls". "Controleld by" and other derivatives shall be construed accordingly.



1.4 "Evaluation Material" means information derived in whole or in part from Confidential Information, and generated by or on behalf of the Receivin Party. For purposes of this Agreement Evaluation Material may include without limitaion models, technical, financial and economic reports, studis, interpretations, analyses, estimates of reserves, and evaluations and notes of documents or meetings.



1.5 "GNPC" means Ghana National Petroleum Corporation, a Statutory Corporation established by Provisional National Defence Council Law 64 of 1984 with its Head Office at Petroleum House, Harbour Road, Tema.



1.6 "Person" means an individual, joint venture corporation, company, firm, partnership, limited parternship, limited liability company, trust, estate, government agency or any other entity, including unicorporated business associations.



[signature]

1.7 "Petroleum Agreement" means the Petroleum Agreemento dated [ ] between the Government of the Republic of Ghana, Ghana National Petroleum Corporation, [ ] in respect of the Contract Area Offshore Ghana (and all amendiments and supplements thereto).



1.8 "Possible Transaction" means any possible business arrangement with the DIsclosing Party under which Receiving Party would acquire directly or indirectly all or part of the rights and interest owned by Disclosing Party and/or Disclosing Party Affiliates in one or more offshore hydrocarbon exploration, development or production assets located within the Area.



2. Disclosure



In connection with the Possible Transaction, Disclosing Party is willing to disclose to Receiving Party certain Confidential Information. The Parties agree that the disclosure by the Disclosing Party and the receipt by the Receiving Party of the COnfidential Information is subject to the terms of this Agreement.



3. Undertaking of Confidentiality, Restriction on Use nd Dameges



3.1 In consideration of the disclosure referred to in Article 2 above, the Receiving Party agrees that the Confidential Information and the Evaluation Material shall be held and treated strictly in confidence and may not be disclosed, licensed, traded, published or otherwise revealed in any manner whatover, without the prior written consent of the Disclosing Party except as provided in Article 4 below.



3.2 The Receiving Party shall (and shall procure that any Affiliate COmpany shall) not use or permit the use of the COnfidential Information and/or the Evaluation Material other than for the purpose of evaluation the Area and deterimining wheter to enter into negotiations in connection with the Possible Transaction with the Receiving Party.



3.3 The Receiving Party shall (and shall procure that any Person that receives Confidential Information and/or Evaluation Material pursuant to and in accordance with Article 4.2 hereof shall) keep any Confidential Information it receives and any copies thereof and any Evaluation Material secure and confidential (in a manner no less secure and confidential than Receiving Party and such Persons keep their respective condidential information) and to precent the Confidential Information and any Evaluation Materials from being disclosed in breach of this Agreement.



3.4 The Receiving Party agrees not ot disclose to anyone, except as provided for by Article 4 below, the fact that the Confidential Information has been made available or that discussions or negotiations are taking place or have taken



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[signatures]place between Disclosing Party and Receiving Party or any Party's Affiliated Companies



3.5 The obligations of the Receiving Party for confidentiality and non-use as set forth in this Agreement shall commence from receipt of the Confidential Information by the Receiving Party. Further, the obligation not to disclose shall not be affected by bankruptcy, receivership, assignment, attachment or seizure procedures, wheter initiated by or aginst the Receiving party, nor by the rejection of any agreement between GNPC and Disclosing Party and/or Receiving Party, by a trustee of Receiving Party n bankruptcy, or by the Receiving Party as a devtor-in-possesssion or the equivalent of any of the foregoing.



3.6 The Receiving Party agrees to indemnif Disclosing Party against direct damages (including, losses, damages, claims, expenses and reasonble attorney's fees) incurred or suffered as a result of a breach of this Agreement by Receiving Party or its Affiliated Companies. Such direct damages shall be the sole exclusive remedy, and all other remedies or damages at law or in equity are waived except such equitable relief as may be granted under Article 11. In no event shall the Parties be liable to each other for any other damages, including incidental, consequential, special, or punitive damages, regardless of negligence or fault.



4. Permitted Disclosure and Obligation of Receiving Party for Permitted Disclosures



The Reciving Party may disclose Confidential Information and/or Evaluation Material without the prior written consent of the Disclosing Party:



4.1 To the extent the Confidential Information and/or Evaluation Material is required to be disclosed inder applicable law, order, decree, regulation or rule of any governamental entity having jurisdiction over the Recebing Party, or any regulation entity, securities commission or stock exchange on which the securities of the Receiving Party or any of its Affiliated Companies are listed o rare to be listed, provided that the Receiving Party shall make all reasonable efforts to give written notice to the Disclosing Party prior to such disclosure (including full details of the circumstances of such disclosure); or



4.2 To the following persons on a need to know basis and only for the purpose descrived in Article 3.2;



4.2.1 employees, officers and directors of the Receiving Party;



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[signatures]4.2.2 employees, officers and directors of an Affiliated Company of the Receiving Party;



4.2.3 any professional consultant or agent retained by the Receiving Party or its Affiliated Company; or



4.2.4 any bank, financial institution or entity financing or proposing to finance the Possible Transaction, including any professional consultant retained by such bank, financial institution or entity for the purpose of evaluating the Confidential Information and/or Evaluation Material.



Prior to making any such disclosure to Persons under Articles 4.2.3 and 4.2.4 avove, however, the Receiving Party shall obtain an undertaking of confidentiality, on terms no less stringent than contained in this Agreement, from each such Person, provided, however, that in the case of outside legal counsel, the Receiving Party shall only be required to procure that such legal counsel is bound by an obligation of confidentiality.



4.3 The Receiving Party shall be responsible to the Disclosing Party for any act or omission of the entities and Persons described in Article 4.2 that would consitute breach of this Agreement as if the action or omission had been perpetrated by the Receiving Party and shall immediately notify the Disclosing Party upon becoming aware that Confidential Information has been disclosed in breach of this Agreement.



5. Owenership of Confidential Information



5.1 Receiving Party acknowledges the Confidential Information excluding the GNPC Information, remains the property of the Dsiclosing Party and the Disclosing Party may use such Confidential Information for any purpose without obligation to the Receiving Party.



5.1 Receiving Party acknowledges that the GNPC Information is and remains the property of GNPC and GNPC may use such GNPC Information for any purpose without obligtaion to the Disclosing Party or Receiving Party. In addition, Receiving Party acknowledges that in the event that it acquires, directly or indirectly an interest in the Area, that it may be required to enter into a data licensing agreement with GNPC with respect to the GNPC Information on terms to be agreed between GNPC and the Receiving Party.



5.3 The Receiving Party shall acquire no proprietary interest in or title or right to the Confidential Information



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[signatures]6. Return of Confidential Information



6.1 Disclosing Party may demand the return of the Confidential Information at any time upon giving written notice to Receiving Party.



6.2 Within thirty (30) days of receipt of the notice referred to in Article 6.1 or upon completion of the Receiving Party's review and/or evaluation of the Confidential Information, the Receiving Party shall retain no copies of the Confidential Information, but shall:



6.2.1 Returno all of the original Confidential Information to the Disclosing Party;



6.2.2 Dstroy or delete or cause to be destroyed or deleted all copies and reproductions (both written and electronic) of Confidential Information and any Evaluation Material in its possession and/or in the possession of persons to whom it was disclosed by the Receiving Party. Confidential Information or Evaluation Material that is in electronic format (including all electronic back-up files - subject to Art 6.3.1) shall also be deleted; and



6.2.3 Provide a written certification, signed by an authorized offcier of the Receiving Party, that Receiving Party has fully complied with its obligations under this Clause 6.2.



6.3 The provisions of Article 6.1 and 6.2 do not apply to the following:



6.3.1 Confidential Information or Evaluation Material that is retained in the computer backup system of Receiving Party or a Person to whom it was disclosed under Article 4.2 if the Confidential Information or Evaluation Material will be destroyed in accordance with the regular ongoing records retention process of Receiving Party or such Person and if the Confidential Information is not used prior to its destruction;



6.3.2 Confidential Information or Evaluation material that must be retained under applicable law or regulation, including by stock exchange regulations or by governmental order, decree, regulation or rule; and



6.3.3 any corporate document or reports of the Receiving Party which contain data derived from the Confidential Information or Evaluation Material which were presented to its executive board



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[signatures](or the equivalent thereof) and are required in accordance with applicable law or its document retention policy to be retained;



provided that any Confidential Information and/or Evaluation Material that is so retained shall remain subject to the terms of this Agreement.



7. Remedies



The Receiving Party understands and acknowledges that any breach of the terms of this Agreement may cause the Disclosing Party irreparable harm, and damages may not be an adequete remedy, and therefore agrees that the Dsiclosing Party, an Affiliated Company of Disclosing Party shall have the right to apply, ex parte without the need to post any type of bond or security, to a court of competent jurisdiction, for specficic performance and/or an order restraining and ejoingin any such breach or further disclosure and for such other relief as-may be deemed appropriate. Such right is to be in addition to the remedies otherwise available to the Disclosing Party, an Affiliated Company of Disclosing Party at law or in equity.



8. Term



This Agreement shall terminate on the later of five (5) years from the Effective Date or the date on which disclosure by Disclosing Party is no longer restricted by the terms of the Petroleum Agreement(s) currently covering the Area.



9. Representation and Warranties



The Disclosing Party represents and warrants that it has the right and authority to disclse the Confidential Information to the Receiving Party. However the Disclosing Party, its Affiliated Companies and their respective principals, officers, directors and employees make no representaion or warranties, express or implied as to the quality, accuracy and complteness of the Confidential Information disclosed hereunder, and the Receiving Pary expressly acknowledges the inherent risk of error in the acquisition, processing, and interpretation of geological and geophysical data. The Disclosing Party, its Affiliated Companies and their respective principals, officers, directors and employees shall have no liability whatsoever with respect to the use of or reliance upon the Confidential Information by the Receiving Party or its Affiliated Companies or Persons to whom the Receiving Party discloses Confidential Information under Article 4.2.



10. Assignment



The rights and obligations of the Receiving Party under this Agreement may not be assigned in whole or in part by the Receiving Party without the prior written consent of the Disclosing Party. Any attempted assignment by Receiving Party without the prior writeen approval of Disclosing Party shall be void. Without limiting the prior provisions of this Article 10, this Agreement shall bind and inure to the benefit of the Parties and their respective successors and permitted assigns.



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[signatures]

11. Governing Law and Dispute Resolution



11.1 This Agreement shallb be governed by and interpreted in accordance with the laws of England and Wales.



11.2 Subject to Article 7 of this Agreement, any dispute arising out of, relating to, or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be settled under the Rules of Arbitration of the Internation Chamber of Commence by three artitrators appointed in accordance with said rules. The place of arbitration shall be Gene Switzerland. The proceedings shall be in the English language.



11.3 The resulting arbitral award shall be final and binding without right of appeal, and judgement upon such award ma y be entered by any court having jurisdiction thereof. A dispute shall be deemed to have arisen when either Party notifies the other Party in writting to that effect. Receiving party understand and acknowledges that any breach of the terms of this Agreement may cause the Disclosing Party irreparable harm for which damages may not be an adequate remedy. Accordingly, the arbitrator may award both monetary and equitable relief, including injunctive relief and specfic performance or other such relief as may be deemed appropriate. The Discplosing Party may apply to any competent judicial authority for interim or conservatory relief; an application for such measures or an application for the enforcement of such measures ordered by the arbitrator shall not be deemed an infringement or waiver of the Agreement to arbitrate and shall not affect the powers of the arbitrator. Any monetary award issued by the arbitrator shall be payable in US dollars. Each Party waives any right to damages other than those provided in Article 3.6.



11.4 Unless the parties expressly agree in writing to the contrary, the parties undertake as a general principle to keep confidential all awards in their arbitration, together with all materials in the proceedings created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain - save and to the extent that disclosure may be required of a party by legal duty, to protect or purse a legal right or to enforce or challenge an award in bona fide legal proceedings before a state court or other judicial authority.



11.4 Any Party that now or hereafter has a right to claim immunity for itseft or any of its assets hereby waives such immunity and agrees not to claim such immunity, in connection with this Agreement, including any dispute hereunder. This waiver includes immunity from (A) legal process of any sort whatsover, (B) juriscition or judgment, award, determiniation, order or decision of any court, arbitrator, tribunal or Expert, (C) inconvenient forum, and (D) any effort to confirm, enforce, or execute any decision, settlement,



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[signatures]award, judgment, service of process, execution order, attachment (including pre-judgment attachment) or other remed that results from an expert determination, arbitration or any judifical administrative proceedings commenced pursuant to this Agreement.



12. Non-exclusivity



The disclosure of Confidential Information to Receiving Party is non-exclusive, and Disclosing Party may disclose the Confidential Information to others at any time pursuant to the terms and conditions of the Petroleum Agreements.



13. No Rights in the Area



Unless otherwise expressly stated in writting, any prior or future proposals or offers made in the course of the discussions of the Parties are subject to all necessary management and government approvals and may be withdrawn by either Party for any reason or for no reason at any time. Nothing contained herein is intened to confer upon Receiving Party any right whatsover to the interest of Disclosing Party in the Area



14. No Waiver



No waiver by eiteher Party of any one or mode breaches of this Agreement by the other Party shall operate or be construed as a waiver of any future breach o breaches by the same or other Party, whether of like or of different character. Except as may be expressly provided in this Agreemtn no Party shall be deemed to have waived, realesed or modified any of its rights under this Agreement unless such Party has expressly stated in writing, that it does waive, release or modify such right.



15. Modifications



No amendments, changes or modifications to this Agreemtn shall be valid except if the same are in writting and signed by a duly authorized representative of each of the Parties hereto.



16. Severability



If any term of this Agreement is held by a court of competent jurisdiction to be invalid or uneforceable, then this Agreement, including all of the reamining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included.



17. Interpretation



17.1 Heading. The topical heading used in this Agreement are for convenience only and shall not be construed as having any substantive significative or as indicating that all of the provisions of this Agreement relating to any topic are to be found in any particular Article.



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[signatures]17.2 Singular and Plureal. Reference to the singular includes a reference to the plural and vice versa.



17.3 Inluce. The words "include" and "including" have an inclusive meaning, are used in an illustrative sense and not a limiting sense, and are not intended to limit the generality of the description preceding or following such term.



18. Counterpart Execution



This Agreement may be executed in counterparts and each counterpart shall be deemed an original Agreement for all purposes; provided that neiterh party shall be bound to this Agreemetn until both parties have executed a counterpart. For purposes of assembling the counterparts into one document, Disclosing Party is authorized to detach the signature page from one counterpart ad, after signature thereof by Receiving Party, attcah each signed signature page to a counterpart.



19. Entirety



This Agreemtn comprises the full and complte agreement of the Parties hereto with respect to the disclosure of the Confidential Information and supersedes and cancels all prior communications, understandings and agreements among the Parties with respect to disclosure of the Confidential Information to the Receiving Party by the Disclosing Party, wheterh written or oral, expressed or impled.



20. No Third Party Beneficiaries



20.1 This Agreement is made for the benefit of the parties, any Affiliated Company of the Disclosing Party and their respective successors and permitted assigns.



20.2 In is the intention of the Parties that:



(a) any person who is an Affiliated Company of the Dsclosing Party; and

(b) GNPC in respect of any GNPC Information.



has a right under the UK Contract (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Agreement. Except as aforesaid, a person who is not a party to this Agreeement has no right under such Act to enforce or enjoy the benefit of any temr of this Agreement,



20.3 Notwithstanding any provisions of this Agreement, the Parties to this Agreemetn do not require the consent of any third party to vary this Agreement at any time provded that the consent of GNPC will be required for any variation which relates to any provision as it applies to GNPC Information.



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[signatures]IN WITNESS WHEREOF the duly authorized representatives of the Parties have caused this Agreemnt to be executed on the date first written above.



DISCLOSING PARTY



____________





Signature:

Name:

Title:

Date:



RECEIVING PARTY



____________





Signature:

Name:

Title:

Date:





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[signatures]21. Notices



All notices authorized or required between the Parties by any of the provisions of this Agreement shall be in writting, in Englise and delivered in person or by courier service or by facsmile which provides writen confirmation of complete transmission, and properly addressed to such Parties as shown below. Oral communication and email do not constitute notice for purposes of this AGreement and email addresses and telephone numbers for the Parties are listed below as a matter of convenience only. A notice given under any provision of this Agreement shall be deemed delivered only when received by the Party to whom such notice is directed, and the time for such Party to deliver any notice in response to such originating notice shall run from the date the originating notice is received. "Received" for purposes of this Article 21 shall mean actual delivery of the notice shall have the right to change its address at any time and/or designate that copies of all such notices be directed to another person, by giving written notice thereof to all other Parties.





DISCLOSING PARTY



Address:



Attention:

Facsimile:

Email:

Telephone:



RECEIVING PARTY



Address:



Attention:

Facsimile:

Email:

Telephone:





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[signatures]POLICY NO: SA-000749-201-BP-LA



PERFORMANCE BOND



AGM PETROLEUM GHANA LIMITED



PERDIOD 24TH APRIL, 2014 TO 24TH DECEMBER, 2017



[logo]

INSURANCE

Standard Alliance Insurance Pic



"your access to a rewarding life"



[ilisible text]



IT IS IMPORTANT THAT YOU READ THIS DOCUMENT



[signatures]B. This Performance Bond shall have a Tenor of forty-five (45 months begining) from 24th April 2014 until it shall expire on its own terms on 24th December 2017 and shall be available only for the Initial Exploration Period as defined by the Petroleum Agreement.



C. This Bond will reduce in value very on hundred and eigth (180) days by the amount of expenditure incurred by the Participation on Petroleum Exploration Operations in respect of the South Deep Water Tano Block and verified as such in accordance with the provisions of the Petroleum Agreement.



D. Any claim by the Beneficiary that The Principal has failed fulfill its work and minimum expenditure obligations shall be mde good by the Surety to The Beneficiary upon verification by a Sole Expert appointed jointly by the Beneficiary and the Surety to determine that:



i. The Principal has failed to meet is work and minimum expenditure obligations.

ii. The Principal has failed to remedy its breach of its work and expenditure obligations in siple of notice to that effect issued by the Beneficiary during the initial explorations Period in any case notices issued within ninety (90) days from his expiry of the Inicial Exploration Period.

iii. All efforts to obtain rectification from the Principal of as breah of its obligations has failed.

iv. The amount claimed by the beneficiary is accurate or otherwise needs adjustment.



E. Such claims by the Beneficiary shall be made by a letter addresed to the Surety signed by two authorized signators of the Beneficiary accompainied by the requisite Board Resolution and duly authenticated by a [ilisible] message to our bankers as shall be advided.



F. Such claim shall be met of all expenditures incurred by the Principal on Petroleum Exploration Operators for the Initial Exploration Period, as shall be evidenced from time-to-timee by the reduction in value from this Performance Bond and the Chart of Accounts prepared in accordance with the Petroleum Agreement.



G. The Beneficiary shall ensure the project is strictly supervised and monitored by qualified project Consultant in the with approved programme of work and shall also furnish the Surety a quartely progress recon of the projec [ilisible] the duration of the Bond.



H. The Survey shall not be liable under this Bond from any loss or damage arising as a resulta of No Commercial Discovery or Insuffcient Gross.



[signatures][logo]

INSURANCE

Standard Alliance Insurance Pic

24 April 2014



Ghana National Petroleum Corporation

Petroleum House

PBM

TEMA

GHANA



Dear Sirs.



1. WHEREAS by a Petroleum Agreement between AGM Petroleum Ghana Limited of 73/15 AIRPORT, ACCRA-NORTH, GHANA and GNPC Explore (The Principal) on the one part and Ghana National Petroleum Corporation (The Beneficiary) and the Government of Ghana on the other part which became effective on the 24th January 2014 (herein after described as the Petroleum Agreement) the Principal is required to perform certain obligations in the South Deep Water Tano Block (offshore Ghana) which shall include:



A. The acquisition, processing and interpretation of 750km2 of 3D seismic data.



B. The drilling of two exploration wells.



2. AND WHEREAS pursuant to the said Petroleum Agreement The Princiapl a required to issue a Performance Bond in favour of The Beneficiary, as security for the performance of its work and minimum expenditure obligations.



Whereas such Performance Bond is to be made available to the benefit of the Beneficiary no later than ninety (90) days from the effective date of 24ht January 2014.



Whereas such Performance Bond shall be for a minimum work and expenditure obligation of $100,000,000 (One Hundred Million US Dollars).



Now therefore, we STANDAR ALLIANCE INSURANCE PLC OF PLOT I BLOC 94 PROVIDENCE STREET LEKKI PHASE 1, LAGOS acting as Surety for and on behalf of the Principal issue its Performance Bond for the maximum amounts $100,000,000 (One Hundred Million US Dollars) as security for the performance by the Princiapl of its minimum work and expenditure obligations in accordance with the Petroleum Agreement, which became effective on the 24th January 2014 and that



A. We acting as Surety hereby warrant that we are duly and firmly bound to pay any sums of money as shall arise from the figure by the Principal to comply with the minimum work and expenditure obligations for the Initial Exploration Period of forty-two (42) months as definied by the Petroleum Agreement.



[signatures]



[ilisible text]Production of all in the Contract Area as in the terms of Petroleum Agreement



I. In the case of any intended variation of the terms and conditions contained in the Petroleum Agreemtn, the Surety shall first be notified in writing and such variation shall if approved be accepted in writtin by the Surety provided that and variantions or alterations not notifief to the Surety shall relesse the Surety from any liability under this Bond.



J. The Beneficiary shall ensure and secure a comprehensive Oil & Gas Insurance policy with a reputable insurance company for the project [ilisible] interest of the Surety as Fira Loss Payse in the event of loss or damage arigins from the activities of the Contractor.



K. This Performance Bond as valid up to 24th December 2017 and shall cease to have effect from this date. The Beneficiary shall retnur this Bond within thirty (30) days from this expiry date which Bond shall stand as cancelled on the said 24th December 2017.



L. This Performance Bond is governed by the law of the Federal Republic of Nigeria.



3. PREMIUM PAID FOR THIS BOND IS NOT REFUNDABLE UNDER ANY CIRCUMSTANCE, THIS BOND BECOME VALID ONLY AFTER THE EFFECTIVE RECEITP OF THE PREMIUM IT IS THE RESPONSABILITY OF THE BENEFICIARY TO SECURE THE PAYMENT OF THE PREMIUM.



4. PERIOD OF BOND 24TH APRIL 2014 TO 24TH DECEMBER 2017.



5. IN WITNESS WHEREOF the Principal and the Survey have hereunder set their respective Common Seals to be affixed the day and year fisrls above written.



The Common Seal fo the within named

STANDARD ALLIANCE INSURANCE PLC

Is hereunto affixed in the presence of



[signature]

MANAGING DIRECTOR



[signature]

COMPANY SECRETARY



The Common Seal of the within named

AGM PETROLEUM GHANA LIMITED

Is hereunto affixed in the presence of



[signature]

MANAGING DIRECTOR



[signature]

COMPANY SECRETARY



AGM Petroleum

House No 73

15 Nme Lane

Airpot Residential Area

Accra

Ghana



ANKMAH & ASSOCIATES

BARRISTERS SOLICCITOR & NOTABLES

1ST FLR FIORE HEIGHTS BLD

RING ROAD CENTRAL TEL 225770

PO BOX 12050 ACCRA-NORTH



[stamp]