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PRODUCTION SHARING CONTRACT
THE REPUBLIC OF LIBERIA
REPRESENTED BY THE NATIONAL OIL
COMPANY OF LIBERIA
OFFSHORE BLOCK Y
PRODUCTION SHARING CONTRACT
The Republic of Liberia, (STATE) represented for the purposes of this Contract by
the National Oil Company of Liberia (NOCAL), a company incorporated under the
laws of Liberia;
____________, a company incorporated in the jurisdiction of the (_________),
hereinafter referred to as “the Contractor”.
the discovery and exploitation of petroleum are important for the interest and
the economic development of the country and its people;
NOCAL wishes to undertake operations for exploration for exploitation,
transportation, storage, processing and marketing of petroleum;
NOCAL has the mining rights in respect of Petroleum exploration and
exploitation over the entirety of available areas in Liberia including the
Delimited Area defined hereinafter;
NOCAL wishes to promote the development of the Delimited Area, and the
Contractor wishes to cooperate with NOCAL by assisting it in the exploration
for and production of the potential resources within the Delimited Area, and
thereby encouraging the economic growth of the country;
The company which is a Party to this Contract shall be the Contractor; and
The Contractor represents that it has the financial resources, the technical
competence and the organization capacity necessary to carry out in the
Delimited Area the Petroleum Operations specified hereinafter.
NOW THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
The following terms used in this contract shall have the following meaning:
ASSOCIATED NATURAL GAS means Natural Gas, which exists in the
reservoir with Crude Oil, which is or could be produced in association with
APPRAISAL PREIMETER means any part of the Delimited Area where
one or more Petroleum discoveries have been made, and in respect of which
NOCAL has granted to the Contractor an exclusive appraisal authorization for
the purpose of appraising the extent of said discoveries.
ANNUAL WORK PROGRAM means the document describing, item by
item, the Petroleum Operations to be carried out during a Calendar Year
within the Delimited Area and in each Exploration Perimeter, if any,
established in accordance with the Contract.
ARMS LENGTH SALES. For the purpose of determining arms length
sales, the price of Crude Oil will generally be based n a per barrel basis of one
or more Crude Oil blends which at the time of calculation are being freely and
actively traded in the international oil market and have similar characteristics
and quality to t he Crude Oil being marketed. The price for such Crude Oil
will be ascertained from Platt’s Crude Oil Market Wire daily publication or
the spot market for the same Crude Oil ascertained in a similar manner.
1.5 AFFILIATED COMPANY means:
1.25.1 a company or any other entity which directly or indirectly controls or is
controlled by any entity constituting the Contractor; or
1.25.2 a company or any other entity which directly or indirectly controls or is
controlled by a company or entity which itself directly or indirectly
controls any entity constituting the Contractor.
Such “control” means direct or indirect ownership by a company or any
other entity or more than fifty percent (50%) of the shares, conferring
voting rights, forming the stock or another company.
BARREL means U.S. barrel, i.e., 42 U.S. gallons measured at a temperature
of 60o F and under an atmospheric pressure.
BUDGET means the itemized cost estimates of the Petroleum Operations
described in an Annual Work Program.
CALENDAR YEAR means a period of twelve (12) consecutive months
beginning on January first (1st) and ending on the following December thirtyfirst (31 st), according to the Gregorian calendar.
CONTRACT YEAR means a period of twelve (12) consecutive months
beginning on the Effective Date or on the anniversary thereof.
CRUDE OIL means crude mineral oil, asphalt, ozokerite, and all kinds of
Petroleum and bitumen, either solid or liquid in their natural condition or
obtained from Natural Gas by condensation or extraction, including
condensates and Natural Gas liquids.
CONTRACTOR means _____________ and any of its successors and
permitted assigns that shall act as operator and shall conduct Petroleum
CONTRACT means this Production Sharing Contract and its appendices
forming an integral part hereof, together with any extension, renewal,
replacement or modification hereto, which may be mutually agreed between
DELIVERY POINT means the F. O. B. point connection the loading
facilities to the vessel when loading Crude Oil in the Republic of Liberia or
any other transfer point mutually agreed between the Parties.
FISCAL YEAR means a period of twelve (12) consecutive months
beginning on January first (1st) and ending on the following December thirtyfirst (31 st).
EFFECTIVE DATE means the date on which this Contract comes into
force and effect, as defined in Article 37.
PETROLEUM COSTS means all expenditures actually incurred and paid
by the Contract for the purposes of the Petroleum Operations under this
Contract, and determined in accordance with the Accounting Procedure
attached hereto as Appendix 2.
DOLLAR means dollar of the United States of America.
DELIMITED AREA means the area in respect of which NOCAL under this
Contract, grants to the Contractor an exclusive exploration right. The areas
surrendered by the Contractor in accordance with the provisions of Articles
3.5 and 3.6 shall be deemed as excluded from the Delimited Area, which shall
be reduced accordingly. Conversely, the Exploration Perimeter(s) shall be an
integral part of the Delimited Area during the term of the relevant exclusive
EXPLOITATION PERIMETER means any part of the Delimited Area in
respect of which NOCAL has granted to the Contractor an exclusive
FIELD means a commercial accumulation of Petroleum in one or several
overlaying horizons, which has been appraised in accordance with the
provisions of Article 11.
NATURAL GAS means methane, ethane, propane, butane and dry or wet
gaseous hydrocarbons, whether or not associated with Crude Oil, as well as
gaseous products extracted in association with Petroleum, such as without
limitation, nitrogen, hydrogen sulfide, carbon dioxide, helium and water
NON-ASSOCIATED NATRURAL GAS means Natural Gas other than
Associated Natural Gas.
PETROLEUM OPERATIONS means Crude Oil and Natural Gas.
PARTIES means NOCAL and the Contractor; and PARTY means either
NOCAL or the Contractor.
TOTAL PRODUCTION means the total production of Crude Oil or the
total production or Natural Gas obtained from the whole Delimited Area less
the quantities used for the requirements of the Petroleum Operations and any
THRID PARTY means a company or any other entity, other than the
Contractor, which does not come within the foregoing definition.
SCOPE OF THE CONTRACT
The Contract is a Production Sharing Contract and includes all the provisions of
the agreement between NOCAL and the Contractor.
NOCAL authorizes the Contractor to be the Operator pursuant to the terms set
forth herein and to carry out the useful and necessary Petroleum Operations in
the Delimited Area, on an exclusive basis.
The Contractor under takes, for all the work necessary for carrying out the
Petroleum Operations provided for hereunder, to comply with good international
petroleum industry practice and to be subject to the laws and regulations in force
in Liberia unless otherwise provided under this Contract.
The Contractor shall supply all financial and technical means necessary for the
proper performance of the Petroleum Operations.
The Contractor shall bear alone the financial risk associated with the
performance of the Petroleum Operations. The Petroleum Costs related thereto
shall be recoverable by the Contractor in accordance with the provisions or
During the term hereof, in the event of production, the Total Production arising
from the Petroleum Operations shall be shared between the Parties according to
the terms set forth in Articles 16.2 and 16.3.
On the Effective Date, the Delimited Area shall be the area as defined in
The Contractor shall furnish NOCAL with all reports, information and data
referred to hereunder, including without limitation any agreement, for the
provision of goods and services in respect of Petroleum Operations in excess of
$100,000, binding on the entities constituting the Contractor.
DURATION OF EXPLORATION PERIODS AND
The exclusive exploration authorization is hereby granted to the Contractor for a
period of __________consecutive years defined by three consecutive periods.
A first Exploration Period of ________ Contract Years, a second Exploration
Period of _______ Contract Years and the third Exploration Period of _______
Contract Years in respect of the entire Delimited Area.
If during the first exploration period set forth above the Contractor has fulfilled
the exploration work commitments defined in Article 4, as ascertained by the
Government, the exclusive exploration authorization shall, at the Contractor’s
request, be renewed for a second exploration period of _______ Contract Years.
If, at the end of such second exploration period and provided that is has fulfilled
its work commitments as set forth above, the Contract so request, a third
exploration period shall be authorized for two (2) Contractual Years.
The applications referred to in Articles 3.2 and 3.3 shall be made at least sixty
(60) days prior to the expiration of the current exploration period.
The Contractor shall surrender at least the following surfaces:
a. Twenty-five percent (25%) of the initial surface of the Delimited Area at
the expiration of the first exploration period.
b. Twenty-five percent (25%) of the initial surface of the Delimited Area at
the expiration of the second exploration period.
Such surrenders shall be constituted of one block of a simple geometrical shape
delimited by north-south, east-west lines or by natural boundaries of the area
For the purpose of computing the surface to be surrendered, the surface in
respect to any Exploration Perimeter shall be deducted form the initial surface of
the Delimited Area.
The surfaces previously surrendered pursuant to the provisions of Article 3.6
shall be deducted for the surfaces to be surrendered.
Subject to its compliance with the above-mentioned requirements, the
Contractor shall have the right to determine the area to be surrendered.
The Contractor undertakes to furnish NOCAL with a precise description and a
map showing the details of the surrendered areas and those retained, together
with a report specifying the work carried out in the surrendered areas from the
Effective Date and the results obtained.
During any exploration period, the contractor may, at any time, notify NOCAL
that it surrenders the whole or any part of the Delimited Area and the rights
granted to it by giving sixty (60) day’s notice to that effect.
No surrender during or at the expiration of any exploration period shall reduce
the work commitments and the investment obligations set forth in Article 4 for
the current exploration period.
In the event of surrender, the Contractor shall have the exclusive right to retain,
for their respective term, the surfaces in respect of respect of Appraisal
Perimeters and Exploitation Perimeters which would have been granted and to
carryout the Petroleum Operations therein.
At the expiration of the third exploration period set forth in Article 3.3, the
Contractor shall surrender the whole remaining surface of the Delimited Area
expect as to any Appraisal Perimeters and Exploitation Perimeters which would
have then been granted.
If at the expiration of all the exploration periods the Contractor has not obtained
an exclusive appraisal authorization or an exclusive exploitation authorization,
this Contractor shall terminate.
If an exploratory well is operating at the expiry of an exploration period, then
NOCAL shall grant Contractor an extension of the exclusive exploration
authorization of 60 days (after the exploration well is terminated and the rig
released) in order to evaluate the results of the well.
The termination of this Contract, whatever the reason thereof, shall not relieve
the Contractor of any obligations under this Contracts incurred prior to, or
arising from, said termination and which shall be fulfilled.
EXPLORATION WORK COMMITMENTS
The Contractor shall commence the geological and seismic work within three
months from the Effective Date.
The Contractor, during the first exploration period defined in Article 3.1, shall
carry out a minimum work programme at a cost of no less than _________
million Dollars which includes a 3D Seismic Survey of _______square km and
the drilling of _______ exploration well.
The Contractor, during the second exploration period defined in Article 3.1,
shall carry out a minimum work programme at a cost of no less than ________
million Dollars including a commitment to drill _______ exploration well (s) .
The Contractor, during the third exploration period defined in Article 3.1, shall
carry out a minimum work programme at a cost no less than ________ million
Dollars including a commitment to drill _______ exploration well (s).
4.5 Each of the exploratory wells shall be drilled to a minimum depth of
___________________ meters, after deduction of the water depth, or to a lesser
depth if the continuation of drilling performed in accordance with good
international petroleum industry practice is prevented for any of the following
The basement is encountered at a lesser depth than the minimum
Continuation of drilling presents an obvious danger due to the existence of
abnormal formation pressure;
Rock formations are encountered the hardness of which prevents, in
practice, the continuation of drilling by the use of appropriate equipment;
Petroleum formations are encountered the crossing of which requires, for
their protection, the laying of casing preventing the minimum contractual
depth from being reached.
In the event that any of the above reasons occurs, the exploratory well shall be
deemed to have been drilled to the minimum contractual depth.
Notwithstanding any provision in this Article to the contrary, NOCAL and the
Contractor may, at any time, agree to abandon the drilling of a well at a lesser
depth than the minimum contractual depth.
In order to carry out the exploration drilling defined in Article 4.3 and 4.4 in the
best technical conditions in accordance with good international petroleum industry
practice, the Contractor undertakes to make the expenditure required to meet the
objectives of the well work programme which will include drilling and as
If during the exploration period the Contractor has performed its work
commitments for an amount lesser than the amount specified above, it shall be
deemed to have fulfilled its investment obligations relating to that period.
Conversely, the Contractor shall perform the entirety of its work commitments
set forth in respect of an exploration period even if it results in exceeding the
amount specified above for that period.
If at the expiration of any of the three (3) exploration periods defined in Articles
3.1, 3.2 and 3.3 or upon the date of surrender of the whole Delimited Area, or
upon the date of termination of this Contract, the Contractor has not fulfilled its
applicable work commitments set forth in this Article, it shall pay as
compensation to NOCAL, within thirty (30) days after that date of expiration,
surrender or termination, the unspent balance of exploration work commitments
above-defined for the current exploration period.
ESTABLISHMENT AND APPROVAL OF ANNUAL WORK
PROGRAMS AND BUDGETS
5.1 At least three (3) months before the beginning of each Calendar Year, or for the
first year, within one (1) month from the Effective Date, the Contractor shall
prepare and submit for approval to NOCAL an Annual Work Program together
with the related Budget for the entire Delimited Area, specifying the Petroleum
Operations that the Contractor proposes to perform during the Calendar Year and
5.2 If NOCAL wishes to propose any revisions or modifications to the Petroleum
Operations specified in said Annual Work Program, it shall, within thirty (30)
days after receipt of the program, so notify the Contractor, presenting all
justifications deemed useful. In that event, NOCAL and the Contractor shall meet
as soon as possible to consider the proposed revisions or modifications and to
mutually establish the Annual Work Program and the related Budget in its final
form, in accordance with good international petroleum industry practice.
However, during the Exploration Period, the Annual Work Program and the
related Budget established by the Contractor after the above mentioned meeting
shall be deemed to be approved provided that they comply with the obligations set
forth in Article 4 and provided that any increase in expenditure is mutually agreed
by NOCAL and the Contractor in the forum of a Joint Operations Committee
according to the terms of Article 5.5.
Each part of the Annual Work Program and Budget in respect of which NOCAL
has not proposed any revision or modification within the period of thirty (30) days
above-mentioned, shall be carried out by the Contractor within the stated time.
5.3 Should NOCAL fail to notify the Contractor of its wish for revision or
modification within the period of thirty (30) days above-mentioned, such Annual
Work Program and the related Budget submitted by the Contractor shall be
deemed to be approved by NOCAL. It is agreed by NOCAL and the Contractor
that the Contractor may acquire knowledge as and when the work is implemented
or certain events may justify changes to the details of the Annual Work Program.
In that event, after notification to NOCAL, the Contractor may make such changes
provided that the basic objectives of said Annual Work Program are not modified.
5.4 Whenever NOCAL is required to exercise its discretion or its approval is required
under this Agreement, it shall exercise its discretion or grant its approval on the
basis of the efficient and economic conduct of Petroleum Operations in respect of
the Delimited Area and in accordance with good international oil industry
5.5 At the commencement of the first Exploration Period NOCAL and the Contractor
shall form a Joint Operations Committee (JOC) consisting of not more than three
(3) members appointed by NOCAL and not more than three (3) members
appointed by the Contractor. The purpose of this JOC will be to review present
and future Petroleum Operations and report jointly to NOCAL and the Contractor.
5.6 The JOC shall meet twice every calendar year or as otherwise agreed by the
members. No meeting of the JOC shall be held unless two (2) members each
appointed by the Contractor and NOCAL are present.
5.7 The Contractor shall appoint the first Chairman of the JOC who shall hold office
until the second anniversary following the Effective Date. Thereafter, NOCAL
and the Contractor shall have the alternating right to nominate a Chairman of the
JOC who shall hold office for a period of two (2) years.
5.8 All costs of the meeting of the JOC shall be borne by the Contractor and these
costs will be regarded as recoverable costs. Members of the JOC shall be entitled
to sitting fees for attendance at the JOC (payable by the Contractor) in such
amounts as are agreed by NOCAL and the Contractor.
CONTRACTOR’S OBLIGATIONS IN RESPECT OF THE
EXPLORATION PERIODS AND ENVIRONMENTAL
6.1 The Contractor shall provide all the necessary funds and purchase or hire all the
equipment, facilities and materials required to carry out the Petroleum
6.2 The Contractor shall provide all technical assistance, including the personnel
required to carry out the Petroleum Operations.
6.3 The Contractor shall be responsible for the preparation and performance of the
Annual Work Programs which shall be carried out in the most appropriate
manner in observance of good international petroleum industry practice.
6.4 The Contractor undertakes to take all the reasonable and practical steps to:
(a) Ensure the protection of water-bearing strata encountered during its work;
(b) Carry out the tests necessary for determining the value of any show
encountered during drilling and the exploitability of any possible Petroleum
(c) Avoid losses and discharges of Petroleum produced as well as losses and
discharges of mud or any other product used in the Petroleum Operations.
6.5 The Contractor further undertakes to carry out all petroleum operations in
accordance with the Environmental Protection and Management Laws of Liberia
and all international environmental protocols. In this respect, the Contractor
(a) Submit to the Government and Environmental Impact Statement (EIS) prior
to the commencement of exploration and production.
(b) Take reasonable preventative, corrective and restorative measures to protect
from pollution, contamination or damage resulting Petroleum Operations
water bodies, land surfaces and the atmosphere, and that any pollution,
contamination and damage of such water bodies, land surface and atmosphere
hereunder the rectified.
Subject to the foregoing, and at the conclusion of Petroleum Operations in the
Delimited Area, the Contractor will undertake reasonable efforts to restore the
terrain to a state in which it is useable.
6.6 All works and facilities erected by the Contractor hereunder shall, according to
their nature and to the circumstances, be built, placed, signaled, marked, fitted
and preserved so as to allow at any time and in safety free passage to navigation
within the Delimited Area, and without prejudice to the forgoing, the Contractor
shall, in order to facilitate navigation, install the sound and optical devices
approved or required by the competent authorities and maintain them in a manner
satisfactory to said authorities.
6.7 In the exercise of its right to build, carry out work and maintain all facilities
necessary for the purposes hereof, the Contractor shall not disturb and existing
graveyard or building used for religious purposes, nor cause a nuisance to any
government or public building, except with the prior consent of NOCAL, and
shall make good the damage caused by it in that event.
6.8 In its conduct of Petroleum Operations, the Contractor undertakes to take all
necessary precautions to prevent marine pollution.
6.9 In order to prevent pollution, NOCAL and Contractor agree that Contractor shall
observe all existing international environmental protocols, regulations and rules
as may be applicable to prevent pollution and preserve the environment. NOCAL
and the Contractor shall meet and consider any measure, which may be necessary
to preserve the environment.
6.10 NOCAL and the Contractor shall commission periodic environmental audits as
required to ensure compliance with EIS.
6.11 The Contractor and its subcontractors shall be obligated to give preference to
enterprises and goods from Liberia, if conditions of price, quality, delivery time
and terms of payment are similar to those from other counties or from nonLiberia sources. Specifically, the contractor commits itself to award to only
Liberians, supply, constructions or service contracts, the estimated value of which
is under __________________________________________.
CONTRACTOR’S RIGHTS IN RESPECT OF THE
7.1 Without prejudice to the provisions hereof, the Contractor shall have the right
to carry out the Petroleum Operations within the Delimited area. Such rights
includes, inter alia;
(a) full responsibility for, management of and control over all the Petroleum
(b) authority to exercise any of the right of the rights conferred hereby through
agents and independent contractors, and to pay accordingly any of their
expenses and costs in the place and in the currency chosen by the
7.2 The Contractor shall have the right to clear the ground, dig, perforate, drill,
build, erect, place, supply, operate, manage and maintain ditches, pools,
wells, trenches, excavations, dams, canals, water conduits, plants, tanks,
basins, maritime and other storage facilities, primary distillation units, first
extraction gasoline separator units, sulfur plants, and other facilities for
Petroleum production, together with the pipelines,, pumping stations,
generator units, power plants, high voltage lines, telephone, telegraph, radio
and other communication facilities, factories, warehouses, offices, employees’
housing, hospitals, premises, orts, docks, harbors, dikes, jetties, dredges, sea
walls, under water piers and other facilities, ships, vehicles, railways,
warehouses, workshops, foundries, repair shops and all the auxiliary services
which are necessary for or useful to the Petroleum Operations or in
connection therewith; and all additional facilities which are or may become
necessary for or reasonably subsidiary to the carrying out of the Petroleum
7.3 The agents, employees and representatives of the Contractor or its
subcontractors shall have the right, for the purposes of the Petroleum
Operations to enter into or leave the Delimited Area and shall have free
access to all the facilities set up by the Contractor.
7.4 The Contractor shall have the right, subject to the payment of fees applicable
in Liberia, to remove and use the surface soil, mature timber, clay, sand,
limestone, gypsum, stones and other similar materials, which may be
necessary for the performance of the Petroleum Operations.
With the consent of the competent administrative services, the Contractor may
make reasonable use of such materials for the performance of the Petroleum
Operations, subject to payment of fees applicable in Liberia, when they are
located on land owned by the STATE and placed in the vicinity of the land
where said Operations are taking place.
The Contractor may take or use the water necessary for the Petroleum
Operations, provided that existing irrigation or navigation are not impaired
and that land, house or watering places for livestock are not deprived or a
reasonable quantity of water.
ACTIVITY REPORTS DURING THE EXPLORATION PERIODS
AND SUPERVISION OF PETROLEUM OPERATIONS
8.1 Subject to the terms of Articles 8.5 and 8.6, NOCAL shall own and may freely
use all the original data and documents relating to the Petroleum Operations such
as, but without limitation, records, samples, geological, petrophysical, drilling
and operating reports.
8.2 The Contractor undertakes to furnish NOCAL with the following periodic
(a) daily reports on drilling operations;
(b) weekly reports on seismic operations;
(c) within thirty (30) days after each Calendar quarter, a report on the Petroleum
Operations carried out together with a detailed statement on Petroleum Costs
in respect of the preceding quarter;
(d) prior to the end of February of each Calendar Year, an annual report on the
Petroleum Operations carried out together with a detailed statement on
Petroleum Costs in respect of the preceding Calendar Year.
8.3 In addition, the following reports or documents shall be furnished to NOCAL as
soon as they are prepared or obtained:
(a) a copy of all geological surveys and syntheses together with the related maps;
(b) a copy of all geophysical surveys, measurement and interpretation reports,
map profiles, sections or other documents related thereto, as well as, at
NOCAL’s request, the originals of all recorded seismic magnetic tapes;
(c) a copy of the drilling location and completion report for each well together
with a complete set of recorded logs;
(d) a copy of all drill tests or production tests together with any study related to
the flow or production of a well;
(e) a copy of all reports relating to core analyses.
All maps, sections, profiles, logs and all other geological or geophysical
documents shall be supplied on an appropriate transparent support in view of
A representative portion of the cores and cuttings removed from each well, as
well as samples of fluids produced during drill tests or production tests shall also
be supplies to NOCAL within a reasonable period.
Upon expiration or in the event of surrender or termination of this Contract, the
original documents and samples relating to the Petroleum Operations shall be
provided to NOCAL.
8.4 The Contractor shall keep NOCAL informed of its activities through the duly
designated representative of the latter. In particular, the contractor shall notify
NOCAL as soon as possible and in any event at least fifteen (15) days in advance
of all projected Petroleum Operations, such as any geological survey, seismic
surveys, and commencement of drilling and installation of a platform. In the
event the Contractor decides to abandon a drilling it shall notify NOCAL thereof
within at least seventy-two (72) hours prior to such abandonment, unless
operational safety demands a faster response.
8.5 All data, information, documents, reports and statistics including interpretation
and analysis supplied by the Contractor pursuant to this Contract shall be treated
as confidential and shall not be disclosed by any Party to any other person
without the express written consent of the other Parties within the life f the
Exploration, Appraisal or Exploration authorization period.
8.6 The provision of Article 8.5 shall not prevent disclosure:
8.6.1 By NOCAL or the State
(a) To any agency of the State or to any advisor or consultant to NOCAL
(b) For the purpose of complying with the State’s international obligations for
the submission of statistic and related data.
8.6.2 By the Contractor
(a) To its affiliates, advisors or consultants
(b) To a bona fide potential assignee or all or part or the contractor’s interest
(c) To banks or other lending institutions for the purpose of seeking external
financing of costs of the Petroleum Operations
(d) To Non-Affiliates who shall provide services for the Petroleum
Operations, including sub-contractors, vendors, and other service
contractors, where this is essential for their provision of services.
(e) To government 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.
8.6.3 Any Party disclosing information or providing data to a Third Party under the
terms or this Article shall require such persons to undertake the confidentiality
of such data.
OCCUPATION OF LAND
6.1 The STATE shall make available to carry the Contractor, and only for the
purposes of the Petroleum Operation, any land, which it owns and which is
necessary for said operations. The Contractor shall have the right to build and
the obligation to maintain, above and below the ground, the facilities
necessary for the Petroleum Operations.
The Contractor shall indemnify the STATE for any damage caused to the land
by the construction, use and maintenance of its facilities on such land.
The STATE shall authorize the Contractor to build, use and maintain
telephone, telegraph and piping systems above and below the ground and
alone the land not belonging to the STATE, provided that the contractor pays
to the land-owners, a reasonable compensation mutually agreed upon.
6.2 The rights on land owned by private persons, which would be necessary for
the carrying out of the Petroleum Operations, shall be acquired by direct
agreement between the Contractor and the private person concerned.
In event of disagreement, the Contractor shall notify the STATE thereof, and
the later shall proceed to expropriation for a public purpose, at Contractor’s
expenses. When determining the value of those property rights, no
consideration shall be given to the Contractor’s purpose for acquiring them
and the STATE agrees that no law or procedure for said acquisition shall have
the effect of giving them an excessive value or a confiscation value. Those
rights acquired by the STATE shall be registered in its name, but the
Contractor shall be entitled to benefit therefrom for the purposes of the
Petroleum Operations. During the entire term of this contract, the STATE
guarantees that the Contractor shall be protected in the use and occupation of
such land just as if it owns the property rights thereto.
USE OF FACILITIES
10.1 For the purpose of the Petroleum Operations, the Contractor shall have the right
to use, in accordance with the applicable laws, any railroad, tramway, road,
airport, landing strip, canal, river, bridge, waterway and any telephone or
telegraph network in Liberia whether owned by the STATE or by any private
enterprise, subject to the payment of fees then in effect or mutually agreed upon
which will not be in excess of the prices and tariffs charged to Third Parties for
The Contractor shall have the right to use for the purposes of the Petroleum
Operations any land, sea or air transportation means for the transportation of its
employees or equipment, subject to compliance with the laws and regulations
which generally govern the use of such means of transportation.
10.2 The STATE shall have the right to use for exceptional matters any
transportation and communication facility installed by the Contractor, subject to
a fair compensation mutually agreed upon which will not be in excess of the
prices and tariffs charged to Third Parties for similar services provided that such
use does interfere with Petroleum Operations.
10.3 Nothing in this Contract shall limit the STATE’S right to build, operate and
maintain on, under and along the land made available to the Contractor for the
purposes of the Petroleum Operators, roads, railroads, airports, landing strips,
canals, bridges, pipelines, useful telephone and telegraph lines, provided that
such rights is not exercised in a manner which restricts or hinders the
Contractor’s rights hereunder, or the Petroleum Operations.
APPRAISAL OF A PETROLEUM DISCOVERY
In the event the Contractor discovers Petroleum, it shall, as promptly as
possible, notify NOCAL thereof and submit to it, within thirty (30) days after
the date of the temporary plugging or abandonment of the discovery well, a
report including all information relating to said discovery.
If the Contractor wishes to undertake appraisal work relating to the
abovementioned Petroleum discovery, it shall submit for approval to NOCAL,
within sis (6) months after the date of notification of said discovery, the
appraisal work program and the estimate of the related Budget.
The Provisions of Article 5 shall be applicable, mutates mutandis, to said
program as regards its approval and performance, it being understood that the
submitted program shall comply with good international petroleum industry
If the Contractor meets the conditions referred to in Article 11.2 and on
request to NOCAL, the letter shall grant to it an exclusive appraisal
authorization for a duration of two (2) years from the date of approval of the
appraisal work program and the related Budget, in respect of the Appraisal
Perimeter specified in said program. Except otherwise provided by this
Article, the Contractor shall, during the term of said exclusive appraisal
authorization, be subject to the same regime as that applicable to the exclusive
11.3.1 The Contractor shall then diligently carry out the appraisal work program for
the discovery in question; in particular it shall drill the appraisal wells and
carry out the production tests specified in said program.
At the Contractor’s request at least thirty (30) days prior to the expiration of
the appraisal period above-defined, the duration of said period may be
extended by a maximum of six (6) months, provided that such extension is
justified by the continuation of the drilling and production tests specified in
the appraisal program.
Further extensions of the appraisal period may be requested by the Contractor
and granted by NOCAL in the event that further geological, geophysical,
subsurface, facilities or commercial work is considered justified by the
Contractor in order to establish whether the field corresponding to the
Petroleum discovery is commercial.
11.3.2 Within three (3) months after the completion of appraisal work, and no later
than thirty (30) days prior to the expiration of the appraisal period, the
Contractor shall provide NOCAL with a detailed report giving all the
information relating to the discovery and the appraisal thereof.
11.3.3 If, after having carried out the appraisal work, the Contractor considers that
the Field corresponding to the Petroleum discovery is commercial, it shall
submit to NOCAL, together with the previous report, an application for an
exclusive exploitation authorization accompanied by a detailed development
and production plan for said Field, specifying inter alia;
(a) the planned delimitation of the Exploitation Perimeter applied for by the
Contractor, so that it covers the areas defined by the seismic closure of the
field concerned, together with all the technical justifications with respect
to the extent of said Field;
(b) an estimate of the reserve in place; the proven and probable recoverable
reserves and the corresponding annual productions, together with a study
on the methods of recovery and the possible valorization of the products
associated with Crude Oil, such as any Associated Natural Gas,
(c) item by item, the description of equipment and work necessary for
production, such as the number of development wells, the number
platforms, pipelines, production, processing, storage and loading facilities
together with their specifications;
(d) the estimated schedule for its implementation and the projected date of
(e) the estimates of investments and exploitation costs together with an
economic evaluation demonstrating the commercial nature of the
discovery in question.
11.3.4 The commercial nature of one or more Petroleum Fields shall be determined
by the Contractor, provided that it shall, at the end of appraisal work, submit
to NOCAL the economic study referred to in Article 11.3.3 (e) demonstrating
the commercial nature of said Field or Fields.
A Field may be declared commercial by the Contractor if, after taking into
account the provisions of this Contract and the submitted development and
production plan, the projected incomes and expenses determined in
accordance with good international petroleum industry practice confirm the
commercial nature of said Field.
11.3.5 For the purposes of evaluating the commercial nature of said Field or Field,
NOCAL and the Contractor shall meet within thirty (3) days after the
submission of the development and production plan accompanied by the
11.3.6 The development and production plan submitted by the Contractor shall be
subject to the approval of NOCAL. Within nine (90) days after the
submission of said plan, NOCAL may propose revisions or modifications
hereto by notifying the Contractor thereof with all the useful justifications. In
that event, the Parties shall meet as soon as possible in order to consider the
proposed revisions or modifications and establish by mutual agreement the
plan in its final form; the plan shall be deemed to be approved by NOCAL
upon the date of such agreement.
Should NOCAL fail to notify the Contractor of its wish for revision or
modification within the above-mentioned nine (90) day period, the
plan submitted by the Contractor shall be deemed to be approved by
NOCAL at the expiration of said period.
If for reasons not technically justified, the Contractor, within twelve (12)
months after notification to NOCAL of a Petroleum discovery, has not applied
for an exclusive appraisal authorization or if, after its granting, it has not
commenced the appraisal work in respect of said discovery, or if the
Contractor, within eighteen (18) months after completion of the appraisal
work, does not declare the discovery as commercial NOCAL may require that
the Contractor surrenders all its rights in respect of the area deemed to
encompass said discovery without any compensation for the Contractor. If,
within sixty (60) days after NOCAL’s request, the Contractor has not notified
its decision, it shall surrender said area and will forfeit all its rights on
Petroleum which could be produced from said discovery, and any area so
surrendered shall be deducted from the surfaces to be surrendered under
GRANT OF AN EXLUSIVE EXPLOITATION AUTHORIZATION
IN RESPECT OF A COMMERCIAL DISCOVERY
A commercial Petroleum discovery shall entitle the Contractor to an exclusive
right, if it so requests pursuant to the conditions set forth in Article 11.3.3, to
obtain, in respect of the field concerned, an exclusive exploitation
authorization covering the related Exploitation Perimeters with the Delimited
Area shall not be limited.
If the Contractor makes several commercial discoveries in the Delimited Area,
each such discovery shall, in accordance with provisions of Article 12.1 give
rise to an exclusive exploitation authorization each corresponding to an
Exploitation Perimeter. The number of exclusive exploitation authorizations
and related Exploitation Perimeters within the Delimited Area shall not be
If in the course of work carried out after the grant of an exclusive exploitation
authorization, it appears that the area defined by the seismic closure of the
Field concerned is larger than originally estimated pursuant to Article 11.3.3,
NOCAL shall grant to the Contractor, as part of the exclusive exploitation
authorization already granted, an additional area so that the entirety of said
field is included in the Exploitation Perimeter, provided, however, that the
Contractor supplies NOCAL, together with its application with the technical
evidence of the extension so required and provided, further, that the above
mentioned extension is an integral part of the Delimited Area as defined at the
time of said application.
Where a field extends beyond the boundaries of the Delimited Area, NOCAL
may require the Contractor to exploit said Field in association with the right
holder of the adjacent area under the provisions of a unitization agreement.
Within six (6) months after NOCAL has notified its request, the Contractor
shall submit to its approval the development and production plan of the Field
concerned which shall be prepared in agreement with the right holder of the
DURATION OF THE EXPLOITATION PERIOD
The duration of an exclusive exploitation authorization during which the
Contractor is authorized to carry out the exploitation of a Field declared
commercial is set at twenty-five (25) years from its date of issue.
If upon expiration of the exploitation period of twenty-five years abovedefined, a commercial exploitation of a Field remains possible NOCAL may
authorize the Contractor, at the latter’s request submitted at least twelve (12)
months prior to said expiration, to continue under this Contract the
exploitation of said Field during an additional period of no more than ten (10
years, provided that the Contractor has fulfilled all its obligations during the
current exploitation period.
If, upon expiration of that additional exploitation period, a commercial
exploitation of said Field remains possible, the Contractor may request
NOCAL at least twelve (12) months prior to said expiration that it be
authorized to continue the exploitation of said Field under this Contract,
during the current exploitation.
The Contractor may, at any time, fully or partially surrender any exclusive
exploitation authorization by giving at least twelve (12) months’ prior notices
which may be reduced with NOCAL’s consent.
That notice shall be accompanied by the list of steps which the surrendering
Contractor undertakes to take, in accordance with good international
petroleum industry practices arising out of its surrender.
Interruption of development work or production of a Field declared
commercial, for a consecutive period of at least six (6) months, decided by the
Contractor without NOCAL’s consent, or abandonment of the exploitation of
Field, may give rise to the withdrawal of the exclusive exploitation
authorization concerned. In the event of any disagreement between NOCAL
and the Contractor regarding the circumstances of the interruption then the
JOC shall meet to resolve the disagreement.
Upon expiration surrender or withdrawal of the last exclusive exploitation
authorization granted to the Contractor, this Contract shall terminate.
The termination of this Contract, whatever the reason thereof, shall not relieve
the Contractor of any obligations incurred prior to, or arising from, said
expiration or termination and which shall be fulfilled.
For any field in respect of which an exclusive exploitation authorization has
been granted, the Contractor undertakes to perform, at its sole cost and its own
financial risk, all the Petroleum Operations useful and necessary for the
exploitation of said Field.
However, if the Contractor can provide accounting evidence, during either the
development period or the production period, that the exploitation of a field
cannot be commercially profitable notwithstanding that an exclusive
exploitation authorization has been granted in accordance with the provisions
of Article 12.1, NOCAL agrees not to force the Contractor to continue the
exploitation of such Field.
In that event, NOCAL, in its discretion, may withdraw the exclusive
exploitation authorization concerned from the Contractor without any
compensation for the latter, by giving a sixty (60) days’ prior notice.
CONTRACTOR’S OBLIGATIONS AND RIGHTS IN RESPECT
OF EXCLUSIVE EXPLOITATION AUTHORIZATIONS
The Contractor shall commence development work not later than (6) months
after approval of the development and production plan referred to in Article
11.3.6 and shall continue it with the maximum diligence.
The provisions of Articles 5, 6, 7, 8, 9 and 10 are also applicable, mutatis
mutandis, in respect of any exclusive exploitation authorization.
the Contractor shall have the right to build, use, operate and maintain all the
Petroleum storage and transportation facilities which are necessary for the
production transportation and sale of Petroleum produced, pursuant to the
conditions specified in this Contract.
The Contractor may determine the route and location of any pipeline inside
Liberia which is on the surface land of Liberia or under the waters that lie
within the jurisdiction of the State which is necessary for the Petroleum
Operations, provided that it shall submit plans to NOCAL for approval prior to
the commencement of work; any pipeline crossing or running alongside roads
or passageways (other than those used exclusively by the Contractor) shall be
built so as not to hinder the passage on those roads or passageways.
The contractor may, to the extent and for the duration of the excess capacity of
a pipeline or processing, transportation or storage facility built for the purses
of the Petroleum Operations, be obligated to accept the flow of Petroleum
coming from exploitations other than that of the Contractor, provided that such
flow shall not cause prejudice to the Petroleum Operations, and provided,
further, that a reasonable tariff covering a normal remuneration for capital
invested in respect of the pipeline or facility concerned shall be paid by the
Following the grant of an exclusive exploitation authorization, the Contractor
undertakes to proceed diligently with the carrying out of development wells,
spacing them in a manner so as to ensure, in accordance with good
international petroleum industry practice, the maximum economic recovery of
the Petroleum contained in the Field in question.
The Contractor shall, in the conduct of development and production
operations, comply with all good international petroleum industry practice
which in particular ensures the good conservation of fields and maximum
economic recovery of Petroleum.
The Contractor shall, inter alia, carry out enhanced recovery studies and use
such recovery processes if they may lead to an increase in Petroleum recovery
rate under economic conditions.
The Contractor shall provide NOCAL with all the reports, studies,
measurement results, tests and documents enabling the monitoring of the
proper exploitation of each Field.
The Contractor shall, in particular, carry out the following measures on each
monthly testing of production and gas/oil ratio;
half-yearly measurement of the field reservoirs pressure.
The Contractor undertakes to produce every year from each Field quantities of
Petroleum in accordance with the provisions of Article 15.6.
The annual production rates of each field shall be submitted by the Contractor
together with the Annual Work Programs for the approval of NOCAL which
shall not be withheld provided that the Contractor gives proper technical and
The Contractor shall measure, in a point mutually agreed between the Parties,
all Petroleum produced and not used for the requirements of the Petroleum
Operations, and excluding unavoidable losses, after extraction of water and
sediments, by using the measurement appliances and procedures customarily
used in the international petroleum industry.
The authorized NOCAL’s representatives shall have the right to examine those
measurements and inspect or cause to be inspected the appliances or
procedures used. If the contractor wishes to change said measurement
appliances or procedures, it shall obtain prior approval from NOCAL. Where
the appliances and procedures used therefore have caused an overstatement or
understatement of measured quantities, the error shall be deemed to have
existed since the date of the last calibration of the appliances, unless the
contrary can be justified, and the proper adjustment shall be made for the
period of existence of such error.
RECOVERY OF PETROLEUM COSTS AND PRODUCTION
From the commencement of regular production of Crude Oil, the contractor
shall market all the production of Crude Oil obtained from the Delimited Area,
in accordance with the provisions hereinafter defined.
For the purposes of recovery of the Petroleum Costs, the Contractor may
freely take each Calendar Year a portion of the Production in no event greater
than _____________________ of the total Production of Crude Oil or gas
from the Delimited Area, or only any lesser percentage which would be
necessary and sufficient to recover remaining cost.
The Value of such portion of total Production allocated to the recovery of the
Petroleum Costs by the Contractor, as defined in the preceding paragraph,
shall be calculated in accordance with the provisions of Article 18.
If during a Calendar Year the Petroleum Costs not yet recovered by the
Contractor under the provisions of this Article 16.2 exceed the equivalent in
value of _____________________ of the Total Production of Crude Oil or
Total Production of Gas from the Delimited Area, as calculated above, the
balance of the Petroleum Costs which cannot be recovered in that Calendar
Year shall be carried forward in the following Calendar Year or Years until
full recovery of the Petroleum Costs or until the expiration of this Contract.
The quantity of Crude Oil from the Delimited Area remaining during each
Calendar Year after the Contractor has taken from the Total Production the
portion necessary for the recovery of the Petroleum Costs, hereinafter referred
to as “Remaining Oil Production,” shall be shared between NOCAL and the
Contractor as follows:
The Remaining Oil Production shall be shared according to the daily Total
Production from the Delimited Area:
Increments of daily oil
Total Production (in
Barrels per day)
In case of natural gas, the following production sharing shall apply:
Increments of daily Gas
For the purpose of this Article, the daily total Production shall be the average
rate of Total Production during the calendar quarter in question.
For the purposes of consistency with the tax laws of the Republic of
Liberia, the Contractor shall be liable to pay its own Income Tax to the
Government of Liberia.
NOCAL may receive its share of production defined in Article 16.3 and 16.4
either in kind or in cash.
If NOCAL wishes to receive in kind all or part of its share of production
defined in Article 16.3 or 16.4 it shall so notify in writing the Contractor at
least ninety (90) days prior to the beginning of the calendar quarter concerned
specifying the precise quantity that it wishes to receive in kind during said
If NOCAL wishes to receive in cash all or part of its share of production
defined in Article 16.3 or 16.4 or if NOCAL has not notified the Contractor if
its decision to receive its share of production in kind pursuant to Article 16.7,
the Contractor shall market NOCAL’s share, of production to be taken in cash
for the quarter concerned, lift said share during such quarter and pay to
NOCAL within thirty (30) days following the date of each lifting, an amount
equal to the quantity corresponding to NOCAL’s share of production
multiplied by the sale price defined in Article 18.
NOCAL may require payment, for sales of its share of production sold by the
Contractor, in Dollars or in the foreign currency in which the sale has been
Unless otherwise provided for in this Contract the Contractor shall, in respect
of its Petroleum Operations, be subject to the laws generally applicable and
the regulations in force in Liberia concerning taxes which are or may be levied
on incomes, or determined thereto.
It is specifically acknowledged that the provisions of this Article shall apply
individually to any entity comprising the Contractor under this Contract.
The Contractor shall keep separate accounts for each fiscal Year in respect of
the Petroleum Operations, in accordance with the regulations in force in
Liberia, enabling in particular the establishment of a profit and loss account as
well as a balance sheet showing both the results of said Petroleum Operations
and the asset and liability items allocated or related thereto.
For the purposes of Article 17.1 the Contractor shall in respect of its net profit
arising from Petroleum Operations, be liable to corporate income tax under the
laws and regulations in force in Liberia. Income tax applicable to Petroleum
Operations carried out under this Contract shall be thirty-five percent (35%),
which shall be paid directly by the Contractor to the Government of
For the purposes of assessing the Contractor’s taxable net income in respect of
a Fiscal Year, the profit and loss account shall, inter alia, be credited by the
the Contractor’s annual gross income recorded in its accounting books,
arising from the marketing of the quantity of Crude Oil or Gas to
which it is entitled under Articles 16.2, 16.3 or 16.4 all other incomes
or proceeds related to the Petroleum Operations, including inter alia
those arising from:
the sale of related substances;
processing, transportation of storage of products for Third
Parties in the facilities dedicated to the Petroleum Operations.
Such profit and loss account shall be debited with all charges necessary for the
purposes of the Petroleum Operations in respect of the fiscal Year concerned,
which may be deducted under the applicable laws of Liberia and the
provisions of this Contract.
In particular the following items may be debited from the income of the fiscal
In addition to the charges specifically set forth below in this Article
17.4, all other Petroleum Costs, including the costs supplies, personnel
and manpower expenses, costs of services provided to the Contractor
in respect of the Petroleum Operations, provided, however, that costs
of supplies, personnel and services rendered by Affiliated Companies
shall be deductible provided that they do not exceed those which
would be normally charged in arm’s length transactions between
independent buyer and seller for identical or similar supplies or
Overhead costs relating to the Petroleum Operations performed under
this Contract, including without limitation:
Rentals for movable and immovable properties as well as
As set out in the Accounting Procedure in light of the services
rendered to the Petroleum Operations performed in Liberia, of
wages and salaries paid to managers and employees residing
abroad, and the general and administrative overhead costs of
the central services of the Contractor and its Affiliated
Companies working for its account, located abroad, and
indirect costs incurred by said central services abroad for their
account. Overhead costs paid abroad shall in no event be
greater than the limits specified in the Accounting Procedure.
Interest paid to creditors of the Contractor, for their actual amount,
subject to the limits specified in the Accounting Procedure.
Losses of materials or assets resulting from destruction or damage,
assets which are renounced or abandoned during the year, bad debts,
indemnities paid to third Parties as compensation for damage.
Reasonable and justified reserves made for clearly identified future
losses or liabilities which current events render probable.
Any other losses or changes directly related to the Petroleum
Operations, including exchange losses realized in connection with the
Petroleum Operations as well as bonuses and amounts paid during the
Surface Rentals as defined in Article 17.10.
Any other Contractor Expense recorded according to the Accounting
The Contractor’s taxable net profit shall be equal to the difference, if positive,
between all the amounts credited and all the amounts debited in the profit and
loss account, plus an amount equal to Contractor’s Liberian income tax. If
this amount is negative, it shall constitute a loss.
Within three (3) months after the end of a Fiscal Year, each entity constituting
the Contractor shall submit to the competent tax authorities its annual tax
return together with financial statements, as required by applicable
Except for the income tax defined in this Article and the bonuses provided for
in Article 19, the Contractor shall be exempt from all other levies, duties, taxes
or contributions of any nature whatsoever arising from the Petroleum
Operations and any revenues related thereto or, more generally, on
Contractor’s property, activities or actions, including its establishment and its
Surface rentals shall be payable to NOCAL per square kilometer of
the area remaining at the beginning of each Calendar Year as part of the
Delimited Area, in the amounts as set out below:
Phase of Operation
Surface Rentals Per Annum
First Exploration Period
$___ per sq. km.
Second Exploration Period
$ ___ per sq. km.
Third Exploration Period
$ ___ per sq. km.
Development & Exploitation Area
$____per sq. km
VALUATION OF PETROLEUM
For the purposes of this Contract, the Crude Oil price shall be the F.O.B.
“Market Price” at the Delivery Point, expressed in Dollars per barrel and
payable within thirty (30) days after the date of the bill of lading, as
determined hereinafter for each quarter.
A market Price shall be determined for each type of Crude Oil or Crude Oil
The Market Price applicable to liftings of Crude Oil made during a calendar
quarter shall be calculated at the end of said quarter and shall be equal to the
weighted average of the process obtained for Crude Oil from the Delimited
Area during said quarter by the Contractor and by NOCAL from independent
purchasers, as adjusted to take into account the differences in quality and
gravity as well as in F.O.B. delivery terms and payment conditions.
In the event such sales are not made, the Market Price shall be determined on
the basis of the prices obtained on the international market during said quarter
between independent buyers and sellers for sales of crude oils of quality
similar to the Crude Oil from the Delimited Area in the same markets as those
in which the Liberian Crude Oil would normally be sold, as adjusted to take
into account the differences in quality, gravity, transportation as well as in
sales and payment conditions. For the avoidance of doubt, oil sales into the
Liberian market shall be valued according to the terms of this Article 18.3.
The following transactions shall, inter alia, be excluded from the calculation of
the market Price of Crude Oil;
sales in which the buyer is an Affiliated Company of the seller as well
as sales between entities constituting the Contractor;
sales in exchange for other than payment in freely convertible
currencies and sales fully or partially made for reasons other then the
usual economic incentives involved in Crude Oil sales on the
international market (such as exchange contracts, sales from
government to government or to government agencies).
Within ten (10) days following the end of each quarter, the Parties shall advise
each other of the prices obtained for their share of production of Crude Oil
from the Delimited Area sold to independent purchasers during the quarter in
question, indicating for each sale the identity of the purchaser, the quantities
sold, the delivery and payment terms.
Within twenty (20) days following the end of each quarter, the Contractor
shall determine in accordance with the provisions of Article 18.2 or Article
18.3, as the case may be, the market Price applicable for the quarter
concerned, and shall notify NOCAL of that market Price, indicating the
method of calculation and all data used in the calculation of that Market Price.
With in thirty (30) days following receipt of the notice referred to in the
preceding paragraph, NOCAL shall verify that the calculation of Market Price
complies with the provisions hereof and shall notify the Contractor of its
acceptance or objections. Failing notification from NOCAL within that thirty
(30) day period the market Price provided for in the Contractor’s notice
referred to in the preceding paragraph shall be deemed to have been accepted
In the event that NOCAL has notified objections to the market Price, the
parties shall meet within fifteen (15) days following NOCAL’s notification to
mutually agree on the market Price. If the parties fail to agree on the market
Price applicable to a given quarter within seventy-five (75) days after the end
of that quarter, NOCAL or the Contractor may immediately submit to an
expert, appointed in accordance with the following paragraph, the
determination of the Market Price (including the determination of reference
crude oils if the parties have not determined them). The expert shall determine
the price within thirty (30) days after his appointment and his conclusions
shall be final and binding on the Parties. The expert shall decide in
accordance with the provisions of this Article.
The expert shall be selected by agreement between the parties or, if no
agreement is reached, by the International Center of Expertise of the
International Chamber of Commerce in accordance with its rules on Technical
Expertise, at the request of the most diligent party. The expertise costs shall
be charged to the Contractor and included in the Petroleum Costs.
In the event it would be necessary to calculate on a provisional basis during a
quarter the Crude Oil price applicable to the liftings made during said quarter,
that price shall be established as follows:
For any sale to independent buyers, the price applicable to that sale
shall be the price obtained for the Crude Oil for said sale, as adjusted
to take into account the F.O.B. delivery terms and thirty (30) days
For any lifting other than those which are the subject of a sale to
independent buyers, the price applicable to that lifting shall be the
Market Price determined for the preceding quarter or, if that Market
Price has not been determined a price set up by agreement between the
Parties or, failing agreement, the last known Market Price.
Once the market Price for a quarter has been determined on a final basis
adjustment if required, shall be made within thirty (30) days.
BONUSES AND HYDROCARBON
The Contractor shall pay to NOCAL the following bonuses:
_______________ dollars when the total Production of Crude Oil from
the Delimited Area first reaches the average rate of thirty thousand
(30,000) barrels per day during a period of thirty (30) consecutive
_________________ dollars when the total Production of Crude Oil
from the Delimited Area first reaches the average rate of fifty thousand
(50,000) barrels per day during a period of thirty (30) consecutive
_________________dollars when the Total Production of Crude Oil
form the Delimited Area first reaches the average rate of
______________________________ barrels per day during a period
of thirty (30) consecutive days.
Each of the amounts referred to in (a), (b), and (c) above shall be paid with
thirty (30) days following the expiration of the reference period of thirty (30)
These bonuses shall not be recoverable and shall therefore not be treated
as Petroleum Costs.
HYDROCARBON DEVELOPMENT FUND
19.3.1 To stimulate research in the field of hydrocarbon, most
especially in continental areas, and to assist the Government in
its overall goal of achieving energy sustainability, a
Hydrocarbon Development Fund, to be managed by NOCAL,
has been established.
Within thirty (30) days of the Effective Date of this Agreement,
______________________________ to this Fund.
The contribution to the Hydrocarbon Development
Fund referred to in Article 19.3.1 will be recoverable and
therefore, shall be considered as Petroleum Costs.
OWNERSHIP AND ABANDONMENT OF ASSETS
Upon expiration, surrender or termination of this Contract, whatever the
reason thereof, in respect of all or part of the Delimited Area, or at the end of
exploitation of a Field, the Contractor shall transfer at no cost to NOCAL the
ownership of assets, movables and immovables, used for the requirements of
the Petroleum Operations carried out in the area so surrendered, located
whether inside or outside the Delimited Area, such as wells and their
equipment, building, warehouses, docks, lands, offices, plants, machinery and
equipment, bases, harbors, wharfs, jetties, buoys, platforms, pipelines, roads,
bridges, railroads and other facilities.
Such transfer of ownership shall cause the automatic cancellation of any
security or surety concerning those assets, or which those assets constitute.
However, the Contractor may continue to use those assets beyond the date
referred to in the first paragraph, for the requirements of its Petroleum
Operations in Liberia governed by other contracts.
20.2 If NOCAL decides not to accept, for all or part of the assets, the transfer of
ownership provided for in Article 20.1, it may, not later than ninety (90) days
following the date specified in said Article, require the Contractor in accordance
with good international petroleum industry practice, to perform abandonment
operations and to remove, at the cost of the Contractor, the facilities relating to the
Non-Associated Natural Gas
21.1.1 In the event of a Non-Associated Natural Gas discovery, the
Contractor shall engage in discussions with NOCAL with a view to
determining whether the appraisal and exploitation of said discovery
have a potentially commercial nature.
21.1.2 If the Contractor, after the above-mentioned discussions, considers that
the appraisal of such Non-Associated Natural Gas discovery is
justified, it shall undertake the appraisal work program for said
The Contractor shall have the right, for the purposes of evaluating the
commerciality of the Non-Associated Natural Gas discovery, if it so
requests at least thirty (30) days prior to the expiration of the third
exploration period set forth in Article 3.3 to be granted an exclusive
appraisal authorization concerning the Appraisal Perimeter of the
abovementioned discovery, for a term of two (2) years.
In addition, the Parties shall jointly evaluate the possible outlets for the
Natural Gas, both on the local market and for export, together with the
necessary means for its marketing, and they shall consider the
possibility of a joint marketing of their shares of production in the
event the Natural Gas discovery would not otherwise be commercially
exploitable. For that purpose, a Consultative Committee for Natural
Gas shall be established by the Parties to ensure the coordination of the
upstream and downstream components of the Natural Gas project and
facilitate its evaluation and implementation.
21.1.3 Following completion of appraisal work, in the event the Parties
should jointly decide that the exploitation of that discovery is justified
to supply the local market, or in the event the Contractor should
undertake to develop and produce that Natural Gas for export, the
Contractor shall submit prior to the expiration of the appraisal period
an application for and exclusive exploitation authorization which
NOCAL will grant under the terms provided by Article 12.1.
The Contractor shall then have the right and obligation to proceed with
the development and production of that Natural Gas in accordance with
the approved development plan referred to in Article 11.3 and the
provisions of this Contract applicable to Crude Oil shall apply, mutatis
mutandis, to Natural Gas, unless otherwise specifically provided under
21.1.4 If the Contractor considers that the appraisal of the Non-Associated
natural Gas discovery concerned is not justified, NOCAL may, by
giving twelve (12) months prior notice which may be reduced either
with NOCAL’s consent or automatically in the event the exclusive
exploration authorization expires earlier, require the Contractor
surrender its rights in respect of the area encompassing said discovery.
In the same manner, if the Contractor, after completion of appraisal
works, considers that the Non-Associated Natural Gas discovery is not
commercial, NOCAL may, by giving three (3) months prior notice,
unless the exclusive exploration authorization expires earlier, require
the Contractor to surrender its rights on the area encompassing said
In both cases, the Contractor shall forfeit its rights to all NonAssociated natural Gas which could be produced from said discovery,
and NOCAL may then carry out, or cause to be carried out, all the
appraisal, development, production, processing, transportation and
marketing work relating to that discovery, without any compensation
for the Contractor.
21.1.5 Notwithstanding the terms of Article 21.1.4, if the Operator is of the
view that the Non-Associated Gas discovery in question is noneconomic as a standalone development but can demonstrate that there
is sufficient prospectivity in the region to support a combined
development of current discovered reserves and future exploration
prospects as a combined economic development, then NOCAL will
provide the Contractor a period of thirty-six (36) months before
exercising its rights pursuant to Article 21.1.4.
ASSOCIATED NATURAL GAS
21.2.1 In the event of a commercial discovery of Crude Oil, the Contractor
shall state if it considers that the production of Associated Natural Gas
is likely to exceed the quantities necessary for the requirements of the
Petroleum Operations related to the production of Crude Oil (including
re-injection operations), and if it considers that such excess is capable
of being produced in commercial quantities. In the event the
Contractor shall have informed NOCAL of such as excess, the Parties
shall jointly evaluate the possible outlets for that excess of Natural
Gas, both on the local market and for export (including the possibility
of joint marketing of their shares of production of that excess of
Natural Gas in the event such excess would not other wise be
commercially exploitable), together with the means necessary for its
In the event the Parties should decide that the development of the
excess of Natural Gas is justified, or in the event the Contractor would
wish to develop and produce that excess for export, the Contractor
shall indicate in the development and production program referred to in
Article 11.3.3 the additional facilities necessary for the development
and exploitation of that excess and its estimate of the costs related
The Contractor shall then have the right to proceed with the
development and exploitation of that excess in accordance with the
development and production program approved by NOCAL under the
terms provided by Article 11.3.6, and the provisions of the Contract
applicable to Crude Oil shall apply, mutatis mutandis, to the excess of
Natural Gas, unless otherwise specifically provided by Article 21.3.
A similar procedure shall be applicable if the sale of marketing of
Associated Natural Gas is decided during the exploitation of a Field.
21.2.2 In event the Contractor should not consider the exploitation of the
excess of Natural Gas as justified and if NOCAL, at any time, would
wish to utilize it, NOCAL shall notify the Contractor thereof, in which
the Contractor shall make available to NOCAL free of charge
at the Crude Oil and Natural Gas separation facilities all or part
of the excess that NOCAL wishes to lift;
NOCAL shall be responsible for the gathering, processing,
compressing and transporting of that excess from the
abovementioned separation facilities, and shall bear any
additional costs related thereto;
the construction of the facilities necessary for the operations
referred to in paragraph (b) above, together with the lifting of
that excess by NOCAL, shall be carried out in accordance with
good international petroleum industry practice and in such a
manner as not to hinder the production, lifting and
transportation of Crude Oil by the Contractor.
21.2.3 Any excess of Associated Natural Gas which would not be utilized
under Articles 21.2.1 and 21.2.2, shall be re-injected by the Contractor.
However, the Contractor shall have the right to flare said gas in
accordance with good international petroleum industry practice,
provided that the Contractor furnishes NOCAL with a report
demonstrating that said gas cannot be economically utilized to improve
the rate of recovery of Crude Oil by means of re-injection pursuant to
the provisions of Article 15.6, and provided, further, that NOCAL
approves said flaring, which approval shall not be unreasonably
Provisions common to Associated and Non-Associated Gas
21.3.1 In order to encourage the exploitation of Natural Gas, NOCAL may
grant to the Contractor specific benefits when they are duly justified
concerning, inter alia, the recovery of the Petroleum Costs relating to
21.3.2 The Contractor shall have the right to dispose of its share of production
of Natural Gas, in accordance with the provisions of this Contract. It
shall also have the right to proceed with the separation of liquids from
all Natural Gas Produced, and to transport, store as well as sell on the
local market or for export its share of liquid petroleum so separated
which will be considered as Crude Oil for the purposes of their sharing
between the Parties under Article 16.
21.3.3 For the purposes of this Contract, the Natural Gas price,
expressed in Dollars per million BTU, shall be equal to:
with respect to Natural Gas export sales to Third Parties, the
price obtained from purchasers;
with respect to sales on the local market of Natural Gas as a
fuel, such price as NOCAL and the Contractor shall mutually
FOREIGN EXCHANGE CONTROL
The Contractor shall comply with the foreign exchange control regulations,
subject to the provisions of this Article.
The Contractor shall have the right to retain abroad all the foreign currencies
arising from export sales of all Petroleum to which it is entitled under this
Contract, or from assignments, as well as equity, incomes from loan and more
generally, all assets acquired abroad by it, and to freely dispose of such
foreign currencies or assets to the extent that they may exceed its requirements
for its operations in Liberia.
No restriction shall be exercised on importation by the Contractor of funds
intended for the performance of the Petroleum Operations.
22.4.1 The Contractor shall have the right to purchase currencies of Liberia with
foreign currencies, and freely exchange into foreign currencies of its election
any funds held by it in Liberia in excess of its local requirements at exchange
rates which shall not be less favorable than those generally applicable to any
other buyer or seller of foreign currencies.
The laws and regulations in force in the Republic of Liberia and the provisions of
international law as may be applicable to international oil and gas activities shall
apply to the Contractor, to this Contract and to the Operations which are the purpose
thereof, unless otherwise provided by the Contract.
The registers and accounting books relating to this Contract shall be
maintained and recorded in Dollars. Said registers and accounting books shall
be used to determine the Petroleum Costs, gross income, exploitation costs
and net profits for the purpose of the preparation of the Contractor’s tax
return; they shall contain, inter alia, Contractor’s accounts showing the sales
of Petroleum under this Contract.
Whenever it is necessary to convert into Dollars expenses and incomes
expressed in another currency, the exchange rates to be used shall be equal to
the arithmetic average of the daily closing rates for the purchase and sale of
said currency during the month when the expenses were paid and the income
The originals of the registers and accounting books referred to in Article 24.1
shall be kept in Liberia.
The registers and accounting books shall be supported by detailed Documents
with respect to receipts and Petroleum Costs.
ACCOUNTING METHOD AND AUDITS
The Contractor shall maintain its accounts in accordance with the regulations
in force and with the provisions of the Accounting Procedure set out in
Appendix 2 attached hereto forming an integral part of this Contract.
After giving the Contractor notice thereof in writing, the STATE shall have
the right cause the registers and accounting books relating to the Petroleum
Operations to be inspected and audited by its own agents or by experts of its
election, and shall have a period of four (4) years following the end of each
Calendar Year to carry out those inspections or audits relating to said year and
may submit its objections to the Contractor for any contradictions or errors
found during such inspection or audits.
Should the STATE fail to make any claim within the abovementioned period
of four (4) years, no further objection or claim shall be made by the Liberian
administration for the Calendar Year concerned.
IMPORT AND EXPORT
(a) The Contractor shall have the right to import into Liberia, in its own name
or on behalf of its contractors and subcontractors, all the technical equipment,
materials, machinery and tools, goods
and supplies necessary in the Contractor’s opinion for the proper conduct and
achievements of the Petroleum Operations; such imports include but are not
limited to, drilling exploration, development, production, transportation, sales
and marketing, equipment pipelines, tanks, geological and geophysical tools,
boats, ships, launches, drilling barges, ships and platforms, production
platforms, civil engineering and telecommunication equipment, power plants
and all related equipment, aircraft automotive equipment and other vehicles,
instruments, tools, spare parts, alloys and additives, camping equipment,
protective clothing and equipment, medical surgical and sanitary equipment,
supplies and instruments necessary for the installation and operation of
hospitals and dispensaries, documentation equipment, construction materials
of all types, lumber, office furniture and equipment, automobiles, explosives,
chemicals, fuels, ship supplies, pharmaceutical products, medicines.
The Contractor shall have the right to import into Liberia, in its own
name or on behalf of its contractors or subcontractors, the furniture,
clothing, household appliances and all personal effects for all the
foreign employees and their families assigned to work in Liberia for
the Contractor or its contractors or subcontractors.
However, the Contractor, its agents, contractors and subcontractors
undertake not to proceed with the imports mentioned in Article 26.1 (a)
insofar as such items are available in Liberia under equivalent
conditions of quantity, quality, price, delivery and terms of payment
unless specific requirements or technical emergencies are presented by
The Contractor, its agents, contractors and subcontractors shall have
the right to re-export from Liberia, free of all duties and taxes and at
any time, all the items imported under Article 26.1 (a) and (b) which
are no longer necessary for the Petroleum Operations except the items
which have become the property of the State under the provisions of
All the technical materials, machinery and tools, goods and supplies specified
in Article 26.1 which the Contractor, its agents, contractors and
subcontractors, their foreign employees and their families will have the right
to import in one or more shipments to Liberia, shall be fully exempt of all
duties and taxes payable as a result of the importation (“entry duties and
As the case may be, the applicable administrative formalities will be those of
the following regimes:
Exceptional temporary admission regime in full suspension of entry
duties and taxes for equipment, materials, machinery and tools, goods
and supplies necessary for the proper progress of the Petroleum
Operations, for the entire duration of their use in Liberia including the
continental shelf, it being understood that for the equipment, materials,
machinery and tools, and goods and supplies consumed during the
operations or left in place, the exceptional temporary admission
discharge will be automatic by simple quarterly declaration and
without payment of duties and taxes.
In the event of a duly justified emergency, the equipment, materials,
tools and machinery, goods and supplies will be placed at the disposal
of the users as soon as they arrive in Liberia and the administrative
regularization relating to their admission will be made later and as
soon as possible.
Supply regime for consumable goods and foodstuffs, fuels and
lubricants used at sea, in particular on all ships, aircraft and machinery
used for petroleum exploration and exploitation.
Exempt admission regime according to the regulations in force, for
furniture, clothing, household appliances and personal effects.
The Contractor, its agents, contractors and subcontractors shall provided that
they inform the STATE in advance of their intent to sell and subject to the
provisions of Article 20, have the right to sell in Liberia, all equipment,
materials, machinery and tools, goods and supplies which they have imported
when they are considered as surplus and no longer necessary for the Petroleum
Operations. In that event, the seller shall be responsible for paying all duties
and taxes applicable on the date of the transaction and for filing all the
formalities prescribed by the regulations in force.
During the term of this Contract, the Contractor, its customers and
their carriers shall have the right to export freely at the export point selected
for that purpose, free of all duties and taxes and at any time, the portion of
Petroleum to which the Contractor is entitled in accordance with the
provisions of this Contract, after deduction of all deliveries made to the
DISPOSAL OF PRODUCTION
Each Calendar Year, up to a total of ten percent (10%) of the share of Crude
Oil Production to which the Contractor is entitled, shall be sold to NOCAL by
the Contractor for the purpose of satisfying the needs of the domestic market
of Liberia. Such contribution of the Contractor shall be in proportion to its
share of production, in the total Crude Oil Production in Liberia.
The quantity of Crude Oil the Contractor shall be obligated to sell to NOCAL
shall be notified to it by NOCAL at least three (3) months prior to the
beginning of each calendar quarter.
The price of the Crude Oil sold to NOCAL under Article 28.1 for the needs of
the domestic market shall be the Market Price defined in Article 18.
That Crude Oil price shall be payable to the Contractor in Dollars two (2)
months after receipt of the invoice unless otherwise agreed between the
The transfer of title to, and risk of, the share of Petroleum production to which
each party is entitled shall be made at the Delivery Point, or at any other
transfer point agreed between the Parties.
Each of the Parties shall have the right and obligation, to dispose of and lift the
share of Petroleum to which it is entitled under this Contract. Such share shall
be lifted on as regular a basis as possible, it being understood that each of the
Parties, within reasonable limits, will be authorized to lift more (overlift) or
less (underlift) that its share of Petroleum produced and unlifted by the lifting
day to the extent that such overlift or underlift does not infringe on the rights
of the other Party and is compatible with the production rate and the storage
In the establishment of the sequence of liftings, priority will be given to the
Party with the largest share of produced and unlifted quantity of Petroleum at
a given time. The Parties shall periodically meet to establish a provisional
lifting program on the basis of the principles above-described and taking into
account the wishes of the Parties as regards the dates and quantities of their
liftings, provided that those wishes are compatible with said principles.
PROTECTION OF RIGHTS
The Contractor shall take all necessary steps to achieve the objectives of this
Contract in its conduct of Petroleum Operations.
NOCAL shall take all necessary steps to facilitate the implementation by the
Contractor of the objectives of this Contract, and the STATE shall protect the
property and operations of the Contractor, its employees and agents in the
territory of Liberia.
At the request of the Contractor, the STATE shall prohibit the construction of
dwelling or business buildings in the vicinity of installation which the
Contractor may declare dangerous as a result of its operations. It shall take all
necessary precautions to prohibit anchoring in the vicinity of submerged
pipelines at river passages, and to prohibit any hindrance to the use of any
other installation necessary for the Petroleum Operations whether on land or
The Contractor shall take out and cause to be taken out by its contractors and
subcontractors, in respect of the Petroleum Operations all insurances of the
type and for such amounts customarily used in the international petroleum
industry, including without limitation, third party liability insurance and
insurances to cover damage to property, facilities, equipment and materials,
without prejudice to such insurances with would be required under Liberian
PERSONNEL AND TRAINING
The Contractor shall, for the purposes of the Petroleum Operations, employ
Liberian personnel whenever qualified for requirements of the employment.
Managers, technicians, engineers, accountants, geologists, geophysicists,
scientists, chemists, drillers, foremen, mechanics, skilled workers, secretaries
and executive employees may be hired outside Liberia if similarly qualified
specialists cannot be hired in Liberia.
Upon commencement of the Petroleum Operations, the Contractor shall
provide funding for Training Programmes (____________________) and for
the purpose the Contractor shall devote an annual Training Budget of:
(a) ________________ during each year of the exploration period;
(b) ________________ during each year of the exploitation period.
Additionally, the Contractor shall make an annual contribution of
__________________________________ to the University of Liberia for
the enhancement of programmes in Geology, Mining Engineering and
Upon commencement of the petroleum Operations, the Contractor shall
provide funding for Social and Welfare programmes in Liberia and for that
purpose the Contractor shall devote an annual Social and Welfare Budget:
(a) ________________ during each year of the exploration period;
(b) ________________ during each year of the exploitation period.
An escrow account shall be established by both Parties for the purposes of
receiving money and paying for the programmes detailed in Articles29.2.1 and
29.2.2 and they shall both be signatories to such account, except for the
contribution to the University of Liberia which shall be paid directly to
The Training requirements shall be developed by both Parties with the
Understanding that NOCAL shall provide 70% of the training candidates and
the Contractor shall provide 30% of the candidates.
The Training and Social and Welfare Programmes shall be mutually agreed by
The Training and Social and Welfare expenses borne by the Contractor shall
be included in recoverable Petroleum Costs. Funding for the Training and
Social and Welfare Programmes shall be paid within thirty (30) days of the
Effective Date. Thereafter, payments shall be made within thirty days of
each subsequent anniversary of the agreement.
The Entry into Liberia of all foreign personnel shall be authorized and the
STATE shall issue the documents necessary for that entry to all members of
the foreign personnel, such as entry visas, working permits and exit visas, in
compliance with the immigration regulations in force in Liberia.
At the request of the Contractor, the STATE shall facilitate any
Immigration formalities with the Immigration Bureau, at the points of entry
into and exit from Liberia, in respect of the Contractor’s employees,
contractors, subcontractors and agents, and their families, all without undue
All the employees required for the conduct of the Petroleum Operations shall
be under the Contractor’s authority or that of its contractors, subcontractors
and agents, in their capacity as employers. Their work, number of working
hours, salaries and any other matters relating to their employment conditions
shall be determined by the Contractor or its contractors, subcontractors and
ACTIVITY REPORTS IN RESPECT OF
EXCLUSIVE EXPLOITATION AUTHORIZATIONS
The provision of Article 12 shall apply, mutatis mutandis, to any exclusive
exploitation authorizations. In addition, the following periodic activity reports
shall, inter alia, be furnished in respect of each Field:
daily production reports:
monthly reports stating the quantities of Petroleum produced and those
sold during the previous month together with information on such
Unless the Contractor gives its written consent, the information relating to a
Field under exploitation, except statistical data about activity, shall be
considered as confidential by the Parties during the term of this Contract.
The Contractor shall forthwith notify the STATE of any material damage
whatsoever caused to the petroleum fields of facilities, and shall take all
necessary steps to terminate it and carry out the necessary repairs.
From the year of granting an exclusive exploitation authorization, the annual
report referred to in Article 8.2 shall also include the following:
information on all development and production operations carried out
during the previous Calendar Year, including the quantities of
Petroleum produced and those sold, if any;
information on all transportation and sales operations together with the
location of the main facilities built by the Contractor, if any;
a statement specifying the number of employees and workers, their
qualification and their nationality, together with a report on the
medical care and training provided to them.
In the event of any dispute between the STATE or NOCAL and the Contractor
relating to, or arising out of, the interpretation or execution of the provisions
of this Contract, the parties shall make their best efforts to settle such dispute
If within three (3) months from the date of notice of such dispute by either
Party to the other, the Parties have not reached settlement, the dispute shall, at
the request of the most diligent Party, be referred for arbitration to the
International Chamber of Commerce in accordance with its rules and
The arbitration shall be held in ______________________. The language
used during the procedure shall be the English language. The arbitration shall
be determined by three (3) arbitrators. The arbitrators shall not have the same
nationality as the Parties.
The arbitration tribunal’s award shall be final; it shall be binding on the Parties
and shall be enforceable in any court of appropriate jurisdiction.
The expenses of any arbitration shall be borne equally by the Parties, that is to
say, each party shall pay the expenses of its own arbitrator and the expenses of
the third arbitrator in equal shares, and any expenses imposed by the
International Chamber of Commerce shall be shared equally by the Parties.
The performance by the Parties of their obligations under this Contract shall
not be suspended during the course of the arbitration.
Termination by the Contractor. During the Exploration and Exploitation
Periods, the Contractor may surrender, by not less than sixty day notice to
NOCAL, all of its rights and obligations hereunder in respect of all or any part
of the Delimited Area, and the operator shall be relieved of all obligations to
NOCAL in respect of the area so surrendered except those obligations rising
out of a related to the surrender.
Termination by NOCAL. Subject to the provisions of Article 31, NOCAL
shall have the right to terminate this Agreement if any of the following events
(hereinafter called “Events of Default”) shall occur and be continuing:
Where the Contractor shall fail to make any of the payments described
in this Agreement on the due payment date, and such default is not
cured within thirty (30) days after notice by NOCAL or within such
longer periods as may be specified in said notice;
Where the Contractor shall materially fail to comply with its work
commitments and other conditions in this Agreement and such failure
is not cured within ninety (90) days after notice by NOCAL of within
such longer period as may be specified in the notice;
Where the Contractor shall (i) voluntarily dissolve, liquidate or wind
up its affairs, or make an assignment of all of substantially all of its
assets for the benefit of creditors other than an assignment made to
secure indebtedness incurred in the ordinary course of business; (ii) file
a petition or application to any tribunal for the appointment of a trustee
or receiver for all or any substantial part of the Contractor’s assets; (iii)
commence any proceedings for its bankruptcy, reorganization,
arrangement, insolvency or readjustment of debt under the laws of any
jurisdiction, whether now or hereafter in effect, or if any such petition
or application is filed, or any such proceedings are commenced against
it, shall indicate its approval thereof, consent thereto or acquiescence
therein, or (iv) if any order is entered appointing any such trustee or
receiver, or adjudicating the Contractor bankrupt or insolvent, or
approving the petition in any such proceedings, and provided that the
Contractor shall fail to take corrective measure(s) to have such order
removed or lifted within sixty (60) days;
Where the Contractor shall fail to carry out Exploration as required by
Article 4, or cease Exploration for a period of twelve (12) consecutive
months or cease production with respect to all Production Areas for a
period of twenty-four (24) consecutive months, unless such failure or
cessation is consented to by NOCAL or is caused by a state of force
Opportunity to cure. In the case of an alleged Event of Default described
above, NOCAL, before taking any further action, shall provide Notice to the
Contractor of the alleged occurrence of such Event of Default and of
NOCAL’s views in that regard and shall offer the Operator a fair opportunity
to consult with NOCAL to resolve the matter. If, after a reasonable period of
time of consultation, NOCAL is of the reasonable opinion that the matter
cannot be resolved by further consultation, NOCAL may they send to the
Contractor Notice of NOCAL’s intention to terminate this Agreement. If the
Event of Default is not cured within sixty (60) days after said Notice, or within
such longer period as may be necessary to allow a reasonable period of time to
effect such cure, then this Agreement shall be terminated, subject to Article
Disputes Regarding Events of Default. Notwithstanding the provision of
Article 32.2 if the Contractor disputes whether there has been an Event of
Default described above and, within sixty (60) days after receipt by the
Contractor of NOCAL’s Notice of its intention to terminate this Agreement,
refers such dispute to arbitration in accordance with Article 31, then
termination of this Agreement shall not take effect until the finality of, and in
accordance with, an arbitration award upholding NOCAL’s right to terminate
No delay or default of a party in performing any of the obligations resulting
from this Contract shall be considered a breach of this Contract if such delay
or default is caused by a case of Force Majeure.
If in the event of Force Majeure the performance of any of the obligations
under this Contract is delayed, that delay extended by the period of time
required to repair the damage caused during such delay and to resume the
Petroleum Operations shall be added to the period provided by this Contract
for the performance of said obligation, and the exclusive exploration or
exploitation authorizations shall be extended by that period as regards the area
concerned by Force Majeure.
Force Majeure means any event unforeseeable and beyond the control of a
Party, such as: earthquake, flood, accident, strike, lockout, riot, delay in
obtaining the rights-of-way, insurrection, civil disturbances, sabotages, acts of
war or conditions attributable to war, or any other cause beyond its control,
similar to or different from those already mentioned.
Where a Party considers it is prevented from performing any of its obligations
by the occurrence of Force Majeure, it shall forthwith notify the other party
thereof by specifying the grounds for establishing Force Majeure, and take all
necessary and useful steps to ensure the normal resumption of the performance
of the concerned obligations upon termination of the event constituting the
Obligations other than those affected by Force Majeure shall continue to be
performed in accordance with the provisions of this Contract.
JOINT AND SEVERAL OBLIGATIONS
All the clauses, conditions and provisions of this Contract shall be binding on
the Parties and their respective successors and assignees. This Contract
constitutes the only agreement between the Parties and no previous
communication, promise or agreement, whether oral or written, between the
Parties, related to the purpose of this Contract may be asserted to amend the
The STATE certifies and guarantees that there is no other applicable
agreement with respect to the petroleum rights within the Delimited Area, that
it will perform its obligation in fairness and good faith and that this Contract
will not be cancelled, amended or modified except by agreement between the
Where the Contractor is constituted by several entities, the obligations and
liabilities of those entities under this Contract shall be point and several.
RIGHTS OF ASSIGNMENT
All or part of the rights and obligations arising from this Contract may be
assigned by any of the entities constituting the Contractor to Third Parties
whose technical and financial reputation is well established; the assignees with
the other entities constituting the Contractor shall thereafter be jointly and
severally liable for the obligations arising from this Contract.
The terms of any assignment shall be subject to the prior approval of NOCAL,
which approval shall not be unreasonably withheld.
If within thirty (30) days following notification to NOCAL of a projected
assignment accompanied by all the related information and the draft
assignment deed, NOCAL has not given its decision, that assignment shall be
deemed to be approved by NOCAL.
From the date of approval of an assignment, the assignee shall comply with
the terms and conditions of this Contract.
All or part of the joint and several rights and obligations arising from this
Contract may be freely assigned at any time by any of the entities constituting
the Contractor to one or more Affiliated Companies or other entities
constituting the Contractor.
STABILITY OF CONDITIONS
This Contract is executed between the Parties in accordance with the laws and
regulations in force at the date of its signing and on the basis of the provisions
of said laws and regulations, as regards, inter alia, the economic, fiscal and
financial provisions of this Contract.
This Agreement may not be amended or modified by virtue of the adoption or
amendment of Law or regulation by the State of Liberia after the Effective
Date of this Agreement. This Agreement may only be amended or modified
by written agreement of all parties.
Periodic Review: In the event of changes in circumstances from those
existing at the Effective Date, that have a material effect on the terms of this
Agreement, either NOCAL or the Contractor shall at the request of the other
consult together. If it is established that such Profound Changes in
Circumstances have occurred, then the Parties shall effect such changes in or
clarifications to this Agreement that they agree are necessary. The Parties
shall meet in good faith to make the necessary revisions and adjustments to the
Agreement in order to maintain such expected economic benefits to each of
the Parties, provided that the economic benefits to the Parties shall not be
reduced as a result of exercising the terms of this article. For the purposes of
this Agreement the term “Profound Changes in Circumstances” shall mean
such changes in the economic conditions of the petroleum industry world wide
or in Liberia or such changes that result in such a material and fundamental
alteration of the conditions and assumptions relied upon by the Parties at the
Effective Date of this Agreement (or the time after any subsequent review
under this Article) to the effect that the overall balance of equities and benefits
reasonably anticipated by the Parties will no longer be achievable.
Additionally, the Parties also agree to review the agreement every five years to
consider the concerns of any of the Parties.
IMPLEMTATION OF THE CONTRACT
The Parties agree to cooperate in every possible manner to achieve the
objectives of this Contract.
NOCAL shall facilitate the Contractor’s performance of its activities by
granting it any permits, licenses, access rights necessary for the performance
of the Petroleum Operations and by making available to it any appropriate
services and facilities, so that the Parties can obtain the best benefit from a
sincere cooperation. However, the Contractor shall observe the applicable
procedures and formalities, and shall apply to the competent Ministries and/or
Agencies of the Administration.
The Parties agree to respect the terms of this Agreement and not to unilaterally
abrogate any part of the terms and conditions contained herein.
Any notices or other communication under this Contract shall be deemed to
have been made when they are delivered to an authorized representative of the
Party concerned at the location of Said Party’s principal office in Liberia, or
sent by telegram, cable or facsimile with all expenses paid, or deposited as
registered letters with the Postal administration of Liberia with postage
Notifications shall be deemed to have been made on the date when the
addressee shall receive them.
If NOCAL considers that the Contractor has committed a breach in the
performance of any of its obligations, it shall so notify the Contractor in
writing and the Contractor shall have sixty (60) days to remedy the breach or
refer the matter to arbitration in accordance with this Contract.
The terms and conditions of this Contract may be modified only in writing and
by mutual agreement between the Parties.
Unless otherwise specified in writing, the Ministry and NOCAL shall
represent the STATE under this Contract and is empowered to grant, in the
name and on behalf of the STATE, any consent necessary or useful for the
implementation of this Contract.
Heading in this Contract are inserted for purposes of convenience and
reference and in no event shall define, restrict or describe the scope of object
of the Contract or of any of its clauses.
Appendices 1 and 2 attached hereto shall form and integral part of this
Any waiver of the STATE or NOCAL concerning the performance of any
obligation of the Contractor shall be in writing and signed by the
representative of the STATE or NOCAL, and no waiver shall be implied if the
STATE or NOCAL does not exercise any of its rights to which it is entitled
under this Contract.
Upon execution by the parties and when promulgated as the law of the
Republic of Liberia, this Contract shall become effective, the date of execution being
referred to as the Effective Date, and said Contract shall become binding on the
Counterparts. This Agreement may be executed in multiple counterparts, and by
different Parties in separate counterparts, and each such counterpart shall be deemed
an original Agreement for all purposes, provided that no Party shall be bound by this
Agreement unless and until all parties have executed a counterpart.
IN WITNESS WHEREOF, the Parties have signed this Contract on the date as set
Dr. Fodee Kromah
NATIONAL OIL COMPANY OF LIBERIA
Mr. Clemenceau B. Urey
CHAIRMAN, BOARD OF DIRECTORS
NATIONAL OIL COMPANY OF LIBERIA
Dr. Eugene Shannon
MINISTER OF LANDS, MINES & ENERGY
REPUBLIC OF LIBERIA
Dr. Antoinette Sayeh
MINISTER OF FINANCE
REPUBLIC OF LIBERIA
Hon. Richard Tolbert
CHAIRMAN, NATIONAL INVESTMENT COM.
REPUBLIC OF LIBERIA
Hon. Frances Johnson-Morris
MINISTER OF JUSTICE
REPUBLIC OF LIBERIA
REPUBLIC OF LIBERIA
National Legislature of the Republic of Liberia
Attached to and made part of this Contract between the Republic of
Liberia and the Contractor.
On the Effective Date, the Delimited Area, designated as Block 13, is
formed by the area included inside the perimeter constituted by the points
indicated on the map attached thereto.
The geographical coordinates of those points are the following, with
Reference to the Greenwich meridian:
Those coordinates are only given for purposes of defining the Delimited
Area and shall not be considered as the boundaries of the national
jurisdiction of Liberia.
The surface of the Delimited Area above-defined is deemed to be equal to
about ______________ sq. km.
Attached to and made part of this Contract between the Republic of
Liberia and the Contractor.
Article 1 – General Provisions
This Accounting Procedure shall be followed and observed in the
performance of the obligations under the Contract to which this
Appendix is attached.
The purpose of this Accounting Procedure is to establish the
principles of accounting which shall reflect the Operators actual
costs relating to Joint Operations to the end that the Operator shall
subject to the processes of the Agreement neither gain nor lose by
reason of the fact that it acts as Operator.
Accounts and Statements
The registers and accounting books of the Contractor shall be in
conformity with accounting rules and regulations for business
applicable in Liberia. However, the Contractor may apply the
accounting rules and procedures customarily used in the petroleum
industry, insofar as none of these are contrary to the rules and
regulations referred to above.
In accordance with the provisions of Article 25 of the Contract,
accounts, books and registers shall be maintained and recorded in
Dollars. These accounts shall be used, inter alia, to determine the
amount of Petroleum Costs, the recovery of said Costs, the
production sharing, as well as for the purposes of Contractor’s tax
The Contractor shall record all operations connected with the
Petroleum Operations in accounts separate from those relating to
any other activities which it may carry out in the Republic of
All accounts, books, records and statements, together with
documents supporting expenses incurred, such as invoices and
service contracts, shall be kept in the Republic of Liberia in order
to be provided at the request of the competent authorities of
The definitions of the terms used in this appendix 2 shall be the
same as those of the same terms set forth in the Contract. In the
event of any conflict between the provisions of this Accounting
Procedure and the Contract, the provisions of the Contract shall
The provisions of this Accounting Procedure may be modified by
mutual agreement between the Parties.
The Parties agree that if any provision of the Accounting Procedure
proves inequitable to either Party, such provision shall be modified
in good faith by the Parties.
Article II – Petroleum Costs
Petroleum Costs Account
The Contractor shall maintain a “Petroleum Costs Account” which
will record in detail the expenses incurred by the Contractor
directly relating to the Petroleum Operations carried out under this
Contract, and which will be recoverable in accordance with the
provisions of Article 16 of the Contract.
This petroleum Costs Account shall, inter alia, record separately,
by Appraisal Perimeter of Exploitation Perimeter if any, the
overhead costs in Liberia;
overhead costs abroad.
The Petroleum Costs Account shall enable, inter alia, to identify at
the total amount of Petroleum Costs since the Effective;
the total amount of Petroleum Costs recovered;
the total amount credited to the Petroleum Costs Account
pursuant to Article II.4 (b) below:
the total amount of Petroleum Costs which remain to be
the calculation of taxable income.
For the purposes of Article 16 of the Contract, Petroleum Costs
shall be recovered in the following sequence:
exploitation expenses in respect of a Field incurred and paid
from the date of commencement of regular production;
other Petroleum Costs.
In addition, within each of the foregoing categories, the costs shall be
recovered in the sequence in which they are incurred.
Unless otherwise provided for in this Accounting Procedure the
intent of the Parties is not to duplicate any item of the credit or
debit of the accounts maintained under the Contract.
Items debited to the Petroleum Costs Account
The following expenses and costs shall be debited to the Petroleum
II.2.1 Personnel Expenses
All payments in respect of the salaries and wages of the
Contractor’s employees will be those costs directly assigned
to the Petroleum Operations carried out under this Contract.
The precise amounts of expenses will be reviewed in the
future and will be in agreement with accepted human
resource procedures adopted by the Contractor that are
generally applicable in the international oil and gas industry.
The expenses allowed will be the actual expenses incurred as
permitted by such Human Resource Procedures.
II.2.2 Overhead Costs In Liberia
Wages and salaries of the Contractor’s personnel directly
engaged in the Petroleum Operations in the Republic of
Liberia, whose work time is not directly allocated to the
programs, as well as costs of maintaining and operating in
Liberia a main and administrative office and sub-offices
necessary for the Petroleum Operations.
II.2.3 Overhead Costs Abroad
The Contractor shall charge costs paid abroad, connected to
the carrying out of the Petroleum Operations by the
Contractor or its Affiliated Companies. The amounts
charged shall be the actual costs borne by the Contractor.
These costs, including a detailed breakdown of the costs,
will be provided to the JOC for its review and agreement.
Construction, maintenance expenses, we well as rents paid
All offices, houses, warehouses and buildings of other types,
Including housing for employees, and cost of equipment,
furniture, and fittings necessary for the operation of those
buildings directly required for the performance of the
II.2.5 Materials, Equipment and Rentals
Costs of equipment, materials, machinery, and facilities
Purchased or provided for use in the Petroleum Operations,
as well as rentals or compensations paid or incurred for the
use of any equipment of facilities required directly for the
performance of the Petroleum Operations.
Costs of services directly related to Petroleum operations
rendered by subcontractors and consultants, as well as any
costs directly related to services rendered by the STATE or
NOCAL or any other authorities of the Republic of Liberia.
Costs of services directly elated to Petroleum Operations
rendered by Affiliated Companies, provided that such costs
shall not exceed those normally charged by independent
companies for an identical or similar service.
II.2.7 Insurance Premiums
Premiums paid for insurances customarily taken out for the
Petroleum Operations to be carried out by the Contractor.
II.2.8 Legal Expenses
All expenses of handling, investigation and settlement of
litigation or claims directly arising from the Petroleum
II.2.9. Financial Costs
All interests paid by the Contractor in respect of the loans
from Third parties and advances obtained from Affiliated
Companies, provided that those loans and advances shall be
for the purpose of the financing of Petroleum Costs related
only to the development of Petroleum Operations in respect
of a field. In the event such financing is provided by
Affiliated Companies, the allowable interest rates shall not
exceed the rates customarily used in the international
financial market for loans of a similar nature.
II.2.10 Other Expenses
Any other expenses incurred and paid by the Contractor for
the purposes of the necessary and proper conduct of the
Operations under the approved annual Work Programs and
Budgets, other than the expenses covered and dealt with by
Foregoing provisions of this Article and other than the
expenses excluded from the Petroleum Costs.
Expenses not chargeable to the Petroleum Costs Account
The expenses which are not directly necessary for the performance
of the Petroleum Operations, and the expenses excluded by the
provisions of the Contract or this Accounting Procedure as well as
by the regulations in force in Liberia, are not chargeable to the
Petroleum Costs Account and shall therefore not be recoverable.
Such expenses shall include, without limitation:
expenses relating to the period before the Effective Date;
any expenses relating to the operations carried out beyond
the Delivery Point, such as transportation and marketing
financial costs relating to the financing of exploration
Petroleum Operations, and those relating to the share of
financing of development Petroleum Operations;
bonuses defined in Article 19 of the Contract;
II.4 Items credited to the Petroleum Costs Account
The following incomes and proceeds shall, inter alia, be credited to
the Petroleum Costs Account:
income arising from the marketing of the quantity of Crude
Oil to which the Contractor is entitled under Article 16 of the
Contract for the purpose of recovery of the Petroleum Costs;
any other incomes or proceeds related to the Petroleum
Operations specifically those arising from:
• Sales of related substances;
• Any services rendered to Third Parties using the
facilities dedicated to the Petroleum Operations,
including, but not limited to, processing,
transportation and storage of products for Third
Parties in those facilities.
Article III – Cost Evaluation Basis For Services, Materials and
Equipment Used in the Petroleum Operations
III.1 Technical Services
A reasonable rate shall be charged for the technical services
rendered by the Contractor or its Affiliated Companies for the
direct benefit of the Petroleum Operations carried out under the
Contract, such as gas, water, core analyses and any other analyses
and tests, provided that such charges shall not exceed those
normally charged by independent technical service companies and
laboratories for similar services.
III.2 Purchase of Materials and Equipment
Materials and equipment purchase from third Parties and directly
necessary for the performance of the petroleum Operations carried
out under the Contract shall be charged to the Petroleum Costs
Account at “Net Cost” incurred by the Contractor.
“Net Cost” shall include such items as taxes, shipping agent fees,
transportation, loading and unloading costs, license fees, related to
the supply of materials and equipment, as well as transit losses not
recovered through insurance.
III.3 Use of Equipment and Facilities Exclusively by the Contractor
Equipment and facilities owned by the Contractor and used directly
for the petroleum Operations shall be charged to the Petroleum
Costs Account at a rental rate which shall be sufficient to cover
maintenance, repairs, depreciation and services required for the
performance of the Petroleum Operations.
III.4 Valuation of Materials
All materials transferred to Liberia from the Contractor’s
warehouses, or from those of any entity constituting the Contractor
or their Affiliated Companies, shall be valued as follows:
New material (condition “A”) means new material
which Has never been used; one hundred percent
(100%) of the current market price, which corresponds
to the price normally charged for similar supplies in
arm’s length transactions between buyer and seller.
Material in good condition (condition “B”) means
material in good condition which is still usable for its
original purpose without repair, at a maximum of
seventy-five percent (75%) of the price of new
Other Used Material
Other used material (condition “C”) means material
still usable for its original purpose, but only after
Reconditioning: at a maximum of fifty percent (50%)
of the price of new material.
Material In Poor Condition
Material in poor condition (condition “D”) means
material no longer usable for its original purpose but
still usable for other purposes: at a maximum of
twenty-five percent (25%) of the price of new
Scrap material (condition “E”) means material beyond
usage and repair: prevailing price of scrap material.
III.5 Materials and Equipment Disposed By The Contractor
Material and equipment purchased by all the entities constituting
the Contractor shall be valued in accordance with the principles
defined in Article III.4 above.
Materials and equipment purchased by any entity constituting the
Contractor or by Third Parties shall be valued at the received sale
price, which shall in no event be less than the price determined in
accordance with the principles defined in Article III.4 above.
The corresponding amounts shall be credited to the Petroleum
Article IV – Inventories
The Contractor shall keep a permanent inventory both in quantity
and value of all normally controllable materials used for the
Petroleum Operations and shall proceed at reasonable intervals
with the physical inventories as required by the Parties.
A written notice of intention to take an inventory shall be send by
the Contractor at least ninety (90) days prior to the commencement
of said inventory so that the STATE and the entities constituting
the Contractor may be represented at their own expenses during the
IV. 3 Information
In the event the STATE or any entity constituting the Contractor
shall not be represented at an inventory, such Party or Parties shall
be bound to accept the inventory taken by the Contractor which
shall furnish to such Party or Parties a copy of said inventory.
Article V – Financial and Accounting Statements
The Contractor shall furnish the STATE and NOCAL with all the reports,
records and statements provided by the provisions of the Contract and the
applicable regulations and, inter alia, the following financial and
State of Exploration Work Obligations
Such annual statement shall be submitted not later than one (1)
month after the end of each Contractual Year in respect of the
It shall present with details the exploration work and expenditures
carried out by the Contractor to fulfill its obligations set forth
Article 4 of the Contract, excluding specifically appraisal wells and
related appraisal expenditures as well as development expenditures,
exploitation expenses, overhead costs and bonuses.
Statement of Recovery of Petroleum Costs
A quarterly statement shall be submitted not later than one (1)
month after the end of each Calendar Quarter. It shall present the
following items of the Petroleum Costs Account:
the amount of Petroleum Costs which remain to be recovered
at the beginning of the quarter;
the amount of Petroleum Costs in respect of that quarter and
recoverable under the provisions of the Contract;
the quantity and the value of the production of Petroleum
taken by the Contract of during the quarter for the purpose of
recovery of the Petroleum Costs;
the amount of incomes or Proceeds credited for the purpose
of Article II.5 (b) above during the quarter;
the amount of Petroleum Costs which remain to be recovered
at the end of the quarter.
In addition, an annual statement of the recovery of Petroleum Costs
Shall be submitted prior to the end of February of each Calendar
Statement of Production
After commencement of production, such monthly statement shall
be submitted not later than fifteen (15) days after the end of each
It shall present for each month the detailed production of each
Exploitation Perimeter and, inter alia, the quantities of Petroleum:
stored at the beginning of the month;
lifted during the month;
lost and used for the requirements of the Petroleum
stored at the end of the month.