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EXPLORATION AND PRODUCTION
CONCESSION CONTRACT
BETWEEN
THE GOVERNMENT
OF THE REPUBLIC OF MOZAMBIQUE
AND
ENI EAST AFRICA S.p.A.
AND
EMPRESA NACIONAL DE HIDROCARBONETOS, E.P.
FOR
AREA 4 OFFSHORE OF THE ROVUMA BLOCK
REPUBLIC OF MOZAMBIQUE
Execution 1
Table of Contents
Article Subject Page
Parties 1
Preamble 2
1 EPC Documents 3
2 Definitions 4
3 EPC Rights and their Duration 8
4 Work Commitment during Exploration Period 12
5 Conduct of Petroleum Operations 18
6 Commercial Discovery and Development 20
7 Relinquishment of Areas 22
8 Records and Reports 23
9 Cost Recovery and Production Entitlement 25
10 Valuation of Petroleum 32
11 Fiscal Terms and Other Charges 36
12 Production Bonuses 46
13 Lifting Arrangements 47
14 Conservation of Petroleum and Prevention of Loss 48
15 Decommissioning 49
16 Insurance 52
17 Natural Gas 55
18 Employment and Training 58
19 Indemnification and Liability 60
20 Title 61
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Article Subject Page
21 Rights of Inspection 62
22 Accounting and Audits 63
23 Confidentiality 64
24 Assignment 66
25 Force Majeure 68
26 Foreign Exchange Control 70
27 Nature and Extent of the Rights of the Concessionaire 73
28 Protection of the Environment 80
29 Surrender and Cancellation 83
30 Consultation, Arbitration and Independent Expert 88
31 Applicable Law 92
32 Language 93
33 Joint Operating Agreement 94
34 Future Agreements 95
35 Notices 96
Annexes
Annex “A” Description of the EPC Area
Annex “B” Map of the EPC Area
Annex “C” Accounting and Financial Procedure
Annex “D” Form of Bank Guarantee
Annex “E” Form of Parent Company Guarantee
Annex “F” Joint Operating Agreement
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Parties
This Exploration and Production Concession Contract (“EPC”) is made subject to
applicable law on the........day of December 2006:
(a) THE GOVERNMENT OF THE REPUBLIC OF MOZAMBIQUE, hereinafter
referred to as “the Government” and herein represented by the Minister for Mineral
Resources; and
(b) ENI EAST AFRICA S.p.A., a company established under the laws of Italy
hereinafter referred to as “Eni” and herein represented by the appointed
representative, and
(c) EMPRESA NACIONAL DE HIDROCARBONETOS, E.P., a company established
in accordance with the laws of the Republic of Mozambique, herein represented by
its Chairman of the Board hereinafter referred to as “ENH”.
Eni and ENH shall hereinafter be referred to as the “Concessionaire”. The
Concessionaire and the Government shall hereinafter collectively be referred to as
the “Parties”.
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Preamble
WHEREAS, applicable Petroleum law provides that all Petroleum resources in the soil and
the subsoil of the land territory, in the seabed of internal waters and the territorial sea, in
the exclusive economic zone and on the continental shelf, are the property of the Republic
of Mozambique;
WHEREAS, pursuant to applicable Petroleum law, the Government has the authority to
ensure the implementation of the policy for Petroleum Operations and has for the purpose
of this EPC appointed the Ministry of Mineral Resources, hereinafter referred to as
“MIREM”, to carry out certain functions for and on behalf of the Government as hereafter
specified;
WHEREAS, the Government desires to award to Eni and ENH the right to undertake
Petroleum Exploration, Development and Production in certain areas subject to the
jurisdiction of the Republic of Mozambique;
WHEREAS, the Concessionaire is willing, on certain terms and conditions stipulated to
undertake Petroleum Exploration, Development and Production in the EPC Area and has
for such purpose technical competence and adequate financial resources;
WHEREAS, the applicable Petroleum law provides that Petroleum Exploration,
Development and Production shall be carried out under a concession;
NOW THEREFORE it has been concluded as follows:
Article 1
EPC Documents
The EPC consists of this EPC main document and the following Annexes, which form an
integral part hereof:
Annex “A” Description of the EPC Area
Annex “B” Map of the EPC Area
Annex “C” Accounting and Financial Procedure
Annex “D” Form of Bank Guarantee
Annex “E” Form of Parent Company Guarantee
Annex “F” Joint Operating Agreement
Subject to the conclusion of the EPC, the Concessionaire shall submit a signed joint
operating agreement as stipulated in Annex F, for which Government approval is a
condition under this EPC.
In the event of conflict between the provisions of the EPC main document and its Annexes,
the EPC main document shall prevail.
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Article 2
Definitions
Definitions stipulated in applicable Mozambican Petroleum law, currently Law no. 3/2001
of 21 February and Decree No. 24/2004 of 20 August apply to this EPC unless otherwise
expressly defined . Words and phrases used in this EPC including its Annexes shall have
the following meanings:
“Affiliated Company" means, in relation to any Person constituting the Concessionaire,
any parent company which directly or indirectly controls such Person or any company
which is directly controlled by such Person or any company which is controlled, directly or
indirectly, by any such parent company.
For the purpose of the foregoing definition:
(a) a company is directly controlled by another company or companies holding shares or
other equity ownership carrying in the aggregate more than fifty percent (50%) of the
voting rights exercisable at general meetings; and
(b) a particular company is indirectly controlled by a company or companies (“parent
company or companies”) if a series of companies can be specified, beginning with
the parent company or companies and ending with the particular company, so related
that each company of the series, except the parent company or companies, is directly
controlled by one or more of the companies earlier in the series.
“Commercial Assessment Period" applies to a Discovery Area and means the period
commencing at the time when the appraisal report regarding the Appraisal Programme
relating to the Discovery of non-Associated Natural Gas has been submitted by the
Concessionaire.
“Commercial Production ” means production of Petroleum and delivery of the same at the
Delivery Point under a programme of production and sale as provided for in a
Development Plan as amended from time to time.
“Cost Petroleum ” means the portion of Petroleum Produced available to the
Concessionaires to cover the costs and expenses incurred in carrying out the Petroleum
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Operations as stipulated in the EPC.
“Decommissioning Fund” means the fund established to cover the costs of
decommissioning operations.
“Delivery Point” means the point in the Republic of Mozambique which, in the case of
Natural Gas, is the inlet flange of the transmission pipeline, and in the case of Crude Oil
the inlet flange of the lifting tankship or, in either case, such other point as may be agreed
by MIREM and the Concessionaire.
“Effective Date” means the first day of the month following the date on which this EPC
has been signed by the Government and the Concessionaire, the conditions in Article 3.2
have been met, and the ruling of the Administrative Tribunal has been obtained.
“Evaluation Period” means the period, following a notice by the Concessionaire that it has
made a Discovery, within which the Concessionaire is required to inform MIREM whether
such Discovery is of potential commercial interest.
“Exclusive Petroleum Operations ” means those Petroleum Operations carried out pursuant
to applicable law and this EPC chargeable to the account, benefit and liability of less than
all Persons constituting a Concessionaire under this EPC.
“Expatriate Personnel” means any employee of any Person constituting the
Concessionaire, of an Affiliated Company of any such Person or of any Subcontractor,
provided such employee is not a citizen of the Republic of Mozambique and whose
contract of employment provides for the payment or the reimbursement of the cost of his
passage to and from the Republic of Mozambique.
“Exploration Operations" means operations conducted hereunder for or in connection
with Exploration for Petroleum in the EPC Area and includes operations conducted to
carry out an Appraisal Programme or to drill any Appraisal Well.
“Exploration Period” means any relevant period of Exploration set out in this EPC.
“Exploration Well” means any well, the purpose of which at the time of the
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commencement of drilling is to explore for an accumulation of Petroleum, which
accumulation was at that time unproven by drilling.
“MIREM” means the Ministry of Mineral Resources or any other person or entity
appointed to administer and regulate Petroleum Operations for and on behalf of the
Government under the EPC whose identity has been notified in writing to the
Concessionaire.
“Participating Interest" means the percentage interest portion, as further described in
Article 3.2, of each party constituting the Concessionaire in the rights, privileges, duties
and obligations derived from this EPC.
“Person" means any natural person or any corporation, association, partnership, joint
venture or entity which is considered a legal entity under the law of Mozambique or the
laws of the country pursuant to which such corporation, association, partnership, joint
venture or entity is governed.
“Petroleum Production Tax" means the Imposto sobre a Produgao de Petroleo as defined
by applicable law.
“Petroleum Produced ” means Petroleum which has been extracted from a reservoir,
initially separated and processed into Crude Oil, condensate or Natural Gas delivered to the
Delivery Point appropriate for onwards transportation in bulk or through a pipeline. The
same applies to “Crude Oil Produced”, “Condensate Produced” and “Natural Gas
Produced” as the case may be.
“Profit Petroleum" means that portion of Disposable Petroleum, in excess of Cost
Petroleum, which is allocated to the Parties under the terms of the EPC.
“Subcontractor ” means any Person retained by the Concessionaire to carry out any part of
the Petroleum Operations.
"State Participating Interest" means the share of the Participating Interest owned by an
entity holding this Participating Interest on behalf of the Government.
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“Wellhead" is the inlet flange of the first valve after the wellhead production manifold.
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Article 3
EPC Rights and their Duration
3.1 This EPC:
(a) is a concession awarded pursuant to Petroleum Law (Law No. 3/2001 of 21
February), which authorises the conduct of certain Petroleum Exploration,
Development and Production activities in an Area as defined herein;
(b) confers on the Concessionaire, subject to applicable law and the terms and
conditions set forth in this EPC, an exclusive right to conduct Petroleum
Operations in order to produce Petroleum from resources originating from
one or more Petroleum Deposit in the subsoil of the seabed within the limits
of the EPC Area;
(c) save where access to an existing Oil Pipeline or Gas Pipeline System is
available on reasonable commercial terms, confers a non- exclusive right
subject to applicable law to construct and operate an Oil Pipeline or Gas
Pipeline System for the purpose of transporting Petroleum Produced from
Petroleum Deposits under this EPC.
3.2 (a) Prior to this EPC reaching the Effective Date this EPC has to be approved
by the Council of Ministers, the appurtenant agreements to this EPC have to
be signed by the Concessionaire, and the ruling of the Administrative
Tribunal has to be obtained.
b) On the Effective Date the respective Participating Interests of Eni is ninety
percent ( 90 %) and of ENH is ten percent (10 %) respectively.
3.3 The rights and obligations of the Concessionaire shall commence on the Effective
Date and shall subsist:
(a) during the Exploration Period; and
(b) subject to terms and conditions as hereinafter provided, during the
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Development and Production Period;
provided that obligations of the Concessionaire which have accrued hereunder
before the end of any relevant Exploration Period or an applicable Development
and Production Period shall, notwithstanding that this EPC has otherwise been
cancelled subject to applicable law or the terms and conditions of this EPC,
continue to be binding on the Concessionaire for the period provided by the
applicable law and for the purpose of any claim in respect thereof, the provisions of
Article 30 shall continue to apply.
The initial Exploration Period shall commence on the Effective Date. Unless the
EPC is terminated earlier in accordance with its terms, it shall continue for a period
of forty eight (48) months.
Where the Concessionaire desires to extend the Exploration Period the
Concessionaire shall submit a notice to MIREM to that effect. Such notice has to
be submitted not later than thirty (30) days before the expiry of the initial
Exploration Period or any subsequent Exploration Period would otherwise expire.
Provided the Concessionaire has fulfilled, or is deemed to have fulfilled, its
obligations under the initial Exploration Period, the Concessionaire is entitled:
(a) at the end of the initial Exploration Period, to a second Exploration Period
of twenty four (24) months; and
(b) at the end of a second Exploration Period, to a third Exploration Period of
twenty four (24) months; and
(c) to the rights referred to in Article 3.6; and
(d) to such additional time that may be necessary to give effect to Article 25.4
on force majeure.
(a) Where pursuant to Article 6 the Concessionaire has notified MIREM that it
has made a Discovery, the Exploration Period shall not, in respect of the
Discovery Area to which that Discovery relates, terminate before the end of
the Evaluation Period.
(b) Where before the end of the Evaluation Period the Concessionaire has
pursuant to Article 6 notified MI REM that a Discovery is of potential
commercial interest, the Exploration Period shall not in respect of the
Discovery Area to which that Discovery relates terminate before approval
of the Development Plan.
(c) Where pursuant to Article 17.3 the Commercial Assessment Period has
commenced in respect of a Discovery of Natural Gas, the Exploration
Period shall not, in respect of the Discovery Area to which that Discovery
relates, terminate so long as that Commercial Assessment Period continues.
(d) Where the work program of the Concessionaire due to reasons beyond the
reasonable control of the Concessionaire has been delayed due to the
inability to secure appropriate equipment necessary to conduct Petroleum
Operations (including but not limited to drill ships, drill barges and seismic
vessels) the Concessionaire shall inform MIREM and in the cases where it
is necessary for the Concessionaire to complete the Exploration work
commitments submit a properly reasoned request for such extension that
may be necessary to allow the completion of such Exploration work
program. The competent authority shall without undue delay consider and
respond to such request and if not granted give grounds for refusing to grant
the extension;
3.7 Where the Concessionaire has not prior to the expiry of the third Exploration
Period given to MIREM a Declaration of Commerciality by notice, the
Concessionaire shall at the end of that period have no further rights or obligations
in the EPC Area or under this EPC except as specifically provided herein.
3.8 Where, during a relevant Exploration Period the Concessionaire has given to
MIREM a Declaration of Commerciality by notice, the Concessionaire shall, in
respect of the Development and Production Area to which any such notice relates,
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continue at the end of the Exploration Period to have rights and obligations
hereunder for so long as the Development and Production Period for that
Development and Production Area subsists.
3.9 A “Development and Production Period” shall commence with respect to each
Development and Production Area on the date on which the Development Plan for
that Development and Production Area has been approved in accordance with
applicable law, and notice to that effect has been given to the Concessionaire and,
unless this EPC is sooner terminated in accordance with its terms or applicable law,
shall, in respect of the Development and Production Area to which the said notice
relates, continue to subsist for an Development and Production Period of thirty (30)
years and for such additional periods that may be necessary to give effect to Article
25.4.
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Article 4
Work Commitment during Exploration Period
4.1 The Concessionaire shall, in the discharge of its obligations to carry out
Exploration Operations, carry out the work stipulated in this EPC unless otherwise
provided or pay to the Government the sums set forth below in this Article. The
Exploration work commitments stipulated in this Article may not be performed
individually or collectively by the Concessionaire as Exclusive Petroleum
Operations.
4.2 During the initial Exploration Period of forty eight (48) months, the Concessionaire
shall conduct the following items collectively referred to as “Exploration work
commitment”:
a) Reprocess and re-interpret of 1000 Km of 2D seismic;
b) Acquire 2000 Km of 2D seismic; and
c) Acquire 1000 SqKm of 3D seismic.
In case of non-performance of the Exploration work commitment described in this
Article 4.2, save for exemptions listed in this Article, the total amount to be paid by
the Concessionaire to Government (hereinafter referred to as “Minimum
Expenditure”) for this period shall be twelve million US dollars (US$ 12,000,000).
4.3 During a subsequent second Exploration Period of twenty four (24) months, the
Concessionaire shall conduct the following items collectively referred to as
’’Exploration work commitment”:
a) Drill one (1) Exploration Well to a depth of five thousand meters (5000m)
from the sea level or to a target of Cretaceous sequences, whichever comes
first; and
b) Drill one (1) Exploration Well to a depth of five thousand meters (5000m)
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from the sea level or to a target of Cretaceous sequences, whichever comes
first.
In case of non-performance of the Exploration work commitment described in this
Article 4.3 save for exemptions listed in this Article the Minimum Expenditure for
this extension period shall be fifty million US dollars (US$ 50,000,000).
4.4 During a subsequent third Exploration Period of twenty four (24) months, the
Concessionaire shall conduct the following items collectively referred to as
“Exploration work commitment”:
a) Drill one (1) Exploration Well to a depth of five thousand meters (5000m)
from the sea level or to a target of Cretaceous sequences, whichever comes
first; and
b) Drill one (1) Exploration Well to a depth of five thousand meters (5000m)
from the sea level or to a target of Cretaceous sequences, whichever comes
first.
In case of non-performance of the Exploration work commitment described in this
Article, save for exemptions listed in this Article, the Minimum Expenditure for
this Exploration Period shall be fifty million US dollars (US$ 50,000,000).
4.5 Should any well forming part of the Exploration work commitment provided for in
Articles 4.3 and 4.4 be abandoned, for any reason other than a reason specified in
Article 4.6 below, before reaching the defined objectives of such well, the
Concessionaire shall drill a substitute well. In this event the relevant Exploration
Period shall be extended by a reasonable period of time as MIREM may agree to
allow the drilling and evaluation of the substitute well.
4.6 Unless otherwise approved by MIREM, any well which forms part of the
Exploration work commitment provided for in Articles 4.3 and 4.4 shall be drilled
to such depth as set forth in those Articles, unless before reaching the required
depth:
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(a) further drilling would in the reasonable opinion of the Concessionaire
present an obvious danger, due to such events as, but not limited to, the
presence of abnormal pressure or excessive losses of drilling mud;
(b) impenetrable formations are encountered;
(c) Petroleum bearing formations are encountered which require protecting,
thereby preventing planned depths from being reached; or
(e) MIREM agrees to terminate the drilling operation.
4.7 In circumstances that the drilling of any well is drilled for the purpose of Article
4.6 it may be terminated at a lesser depth and shall be deemed to have satisfied all
the Concessionaire’s obligations in respect of that well.
4.8 During the drilling of Exploration Wells hereunder, the Concessionaire shall, in
accordance with applicable law, keep MIREM informed of the progress of each
well and shall:
(a) as soon as reasonably possible, consult with MIREM regarding any
proposed well testing programme;
(b) test potentially commercially viable horizons in the opinion of the
Concessionaire and after consultation with MIREM, within the EPC Area
indicated by wireline logging or by other means of formation evaluation;
and
(c) promptly undertake a technical evaluation of the said test results and of all
other relevant subsurface data and submit the same to MIREM as soon as it
has been completed.
4.9 If, at the end of any Exploration Period, the Exploration work commitment for that
period has been completed to the reasonable satisfaction of MIREM, the
expenditure incurred by the Concessionaire during that period shall be deemed to
I sedition cop)' 14
equal or exceed the Minimum Expenditure for that period specified in Articles 4.2,
4.3 and 4.4. The Concessionaire shall be relieved from any other obligation
incurred during that period and MIREM may call on the Minimum Expenditure
guarantee set forth in Article 4.10(a) for the outstanding amounts under Article 4.11
and 4.12, if any.
4.10(a) Minimum Expenditure guarantee
Without prejudice to the joint and several liability of the Persons constituting the
Concessionaire, each of the Persons constituting the Concessionaire shall by no
later than thirty (30) days after the Effective Date, and where this EPC has been
extended pursuant to Article 3.5, on the first day of such extension period,
provide, in substantially the form shown in Annex “D” an unconditional and
irrevocable bank guarantee in respect of its participating interest share and the
relevant portion of Carry of the Minimum Expenditure for the initial Exploration
Period, or, as the case may be the Minimum Expenditure obligations for any
further Exploration Periods, as the same may have been reduced by the provisions
of Article 4.11. For the purpose of this Article 4.10(a), where a Person
constituting the Concessionaire has undertaken to fund payments in respect of
Minimum Expenditure which would otherwise have been payable by another
Person constituting the Concessionaire, the share of Minimum Expenditure of
that Person constituting the Concessionaire giving that undertaking will be
deemed to include the share of Minimum Expenditure for which such other
Person constituting the Concessionaire would have been liable if no such
undertaking had been given.
4.10(b) Parent company guarantee
Without prejudice to the joint and several liability of the Persons constituting the
Concessionaire, the Operator on behalf of the Persons constituting the
Concessionaire shall no later than thirty (30) days after the approval of the
Development Plan provide, in substantially the form shown in Annex “E” an
unconditional and irrevocable parent company guarantee from an entity
acceptable to MIREM in respect of all its obligations under this EPC beyond the
scope of the Minimum Expenditure guarantee.
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4.11 The amount of any bank guarantee given pursuant to Article 4.10(a) shall be
reduced by the Concessionaire in discharge of its obligations under Articles 4.2, 4.3
and 4.4 as follows:
(i) during the initial Exploration Period:
• three hundred thousand US dollars (USS 300,000) at completion of
Article 4.2(a);
• two million seven hundred thousand US dollars (USS 2,700,000) at
completion Article 4.2 (b);
• nine million US dollars (USS 9,000,000) at completion of Article 4.2
(c).
(ii) during the second Exploration Period:
• twenty five million US dollars (USS 25,000,000) at completion of
Article 4.3 item (a);
• twenty five million US dollars (USS 25,000,000) at completion of
Article 4.3(b).
(iii) during the third Exploration Period:
• twenty five million US dollars (USS 25,000,000) at completion of
Article 4.4 item (a);
• twenty five million US dollars (USS 25,000,000) at completion of
Article 4.4(b).
4.12 If, at the end of the initial Exploration Period or at the end of any subsequent
Exploration Period, the Concessionaire has not performed the Exploration work
commitment under Articles 4.2, 4.3 or 4.4, MIREM shall notify the Concessionaire
and within fourteen (14) days of such notification, have the right to call on the
Minimum Expenditure guarantee for the payment there under to MIREM of the full
amount of the shortfall as stipulated in Article 4.11.
4.13 In the event where the number of Exploration Wells drilled by the Concessionaire
and/or the quantity of seismic data acquired during any Exploration Period exceeds
the number of wells and/or seismic data provided for in the Exploration work
commitment for that period, as specified in Articles 4.2, 4.3 and 4.4, the number of
additional Exploration Wells drilled and/or the quantity of seismic data acquired by
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the Concessionaire during such Exploration Period may be carried forward and
treated as work undertaken in discharge of the Concessionaire’s commitment to
drill Exploration Wells and/or to acquire seismic data during the succeeding period;
provided, however, if by reason of the provisions of this Article the Exploration
work commitment of the Concessionaire for any period as specified in Articles 4.2,
4.3 and 4.4 have been fully discharged by the Concessionaire before that period
commences, the Concessionaire, after consultation with MIREM, shall adopt a
work commitment for the period in question so as to ensure the continuity of
Petroleum Operations in, or in connection with, the EPC Area during that period.
4.14 Otherwise than as provided in such Articles, nothing in Articles 4.12 or 4.13 shall
be read or construed as extinguishing, postponing or modifying any commitment of
the Concessionaire to carry out seismic surveys or to drill Exploration Wells
pursuant to this Article.
4.15 Neither the Appraisal Wells nor seismic surveys carried out pursuant to an
Appraisal Programme drawn up pursuant to Article 6.2 nor the expenditure
incurred by the Concessionaire in carrying out such Appraisal Programme shall be
treated as discharging in whole or in part the Minimum Expenditure obligations set
out in Articles 4.2, 4.3 and 4.4.
4.16 Within forty five (45) days from the Effective Date and thereafter, for so long as an
Exploration Period subsists and at least ninety (90) days prior to the end of each
calendar year or at such other times as may be approved in advance by MIREM, the
Concessionaire shall prepare in reasonable detail and submit to MIREM an
Exploration work programme and budget for the remaining portion of the calendar
year or, for the subsequent calendar year, and a proposed structure for the
Concessionaire’s organisation for the conduct of Exploration Operations in the EPC
Area.
4.17 The Exploration work programme and budget prepared by the Concessionaire shall
be consistent with obligations under this Article and shall set forth the Exploration
Operations which the Concessionaire proposes to carry out during the remaining
portion of the calendar year or, in the case of the programme and budget for
subsequent years, during the following calendar year. The Concessionaire shall
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consider any recommendations made by MIREM in respect thereof and after
making such revisions thereto as the Concessionaire considers appropriate submit
the Exploration work programme and budget to MIREM for information.
4.18 The Concessionaire may at any time amend the Exploration work programme and
budget submitted in accordance with Article 4.16, provided that the amended
Exploration work programme and budget are:
(a) prepared in reasonable detail and submitted to MIREM, whose
recommendations in respect thereof shall be considered by the
Concessionaire;
(b) consistent with the Concessionaire’s obligations under this Article;
and
(c) submitted to MIREM for information once the Concessionaire has made
such revisions as it deems appropriate after consideration of any
recommendations made by MIREM.
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Article 5
Conduct of Petroleum Operations
5.1 The Concessionaire shall carry out Petroleum Operations in the EPC Area:
(a) diligently and with due regard to Good Oilfield Practice;
(b) subject to all applicable laws, specifically the Petroleum Law and the
Regulations for Petroleum Operations;
(c) in accordance with environmental and safety standards generally accepted
in the international petroleum industry and applicable from time to time in
similar circumstances;
(d) in respect of any Development and Production Area in compliance with the
Development Plan for that Development and Production Area.
5.2 Where the Concessionaire is more than one Person any obligation of the
Concessionaire hereunder shall be a joint and several obligation of the Persons who
constitute the Concessionaire, save for the following each of which shall be a
several obligation of each of those Persons:
(a) the obligation to pay Corporate Income Tax or any other tax assessed and levied on
profit or net income;
(b) the obligation to observe stipulations relating to confidentiality set out in Article 23
save in respect of their application to anything done or to be done by the Operator
in his capacity as such; and
(c) the obligation to observe stipulations relating to foreign exchange set out or
referred to in Article 26, save in respect of their application to anything done or to
be done by the Operator in his capacity as such.
5.3 Eni shall be the Operator. No change of the Operator may take effect unless it has
been approved in writing by MIREM.
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T
5.4 Throughout the period of this EPC the Concessionaire or where more than one
Person constitutes the Concessionaire, the Operator shall ensure that it has a
general manager or another appointed representative who shall reside in the
Republic of Mozambique or such other country as may be mutually agreed by all
Parties. The Concessionaire or, as the case may be, the Operator shall appoint the
general manager or other representative and shall notify MIREM of the identity of
the individual so appointed within one hundred and twenty (120) days after the
Effective Date. If for any reason the individual so appointed ceases to be general
manager, the Concessionaire or, as the case may be, the Operator shall as soon as
practicable appoint a replacement acceptable to MIREM and shall notify MIREM
of the identity of the replacement.
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Article 6
Commercial Discovery and Development
6.1 Where, in the course of the Petroleum Operations, a Discovery of Petroleum is
made in the EPC Area, the Concessionaire shall as soon as reasonably possible by
notice inform MIREM whether or not, in its opinion, the said Discovery is of
potential commercial interest.
6.2 For a Discovery of potential commercial interest the Concessionaire shall promptly
prepare an Appraisal Programme and, after consultation with MIREM, carry out
such Appraisal Programme and submit a report of the appraisal activities to
MIREM within three (3) months after the completion of the Appraisal Programme.
6.3 The Concessionaire shall submit for Government consideration and approval a
Development Plan for a proposed Development and Production Area for the
Discovery, so as to include such a Development and Production Area in a single
area, so far as the boundaries of the EPC Area permit, the entire area of the
Petroleum reservoir or reservoirs in respect of which a Declaration of
Commerciality has been given. MIREM shall consider without undue delay the
proposed Development Plan submitted by the Concessionaire. If the MIREM is
unable to complete consultation with concerned relevant authorities within twelve
(12) months from receipt of the proposed Development Plan submitted by the
Concessionaire for approval, then MIREM shall notify the Concessionaire and shall
when possible indicate when it is expected that the consultation process shall be
completed.
6.4 If Commercial Production of a Discovery has not commenced within a period of
five years (5) years, or such longer period as may be specified in an approved
Development Plan, from the date on which the Development Plan is approved, then
the rights and obligations of the Concessionaire over the Development and
Production Area to which the Discovery relates shall be extinguished as though the
said area had been surrendered pursuant to Article 29. Such period may be
extended:
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1
(a) where the Concessionaire commenced promptly to implement the
Development Plan as soon as the Development Plan was approved and has
continued to diligently implement the Development Plan but with regard to
a Discovery predominantly constituting of Crude Oil at the end of the five
(5) year period and with regard to a Discovery predominantly consisting of
Non-Associated Natural gas at the end of the five (5) year period, or in both
cases such longer period as is specified in the approved Development Plan,
has not yet commenced Commercial Production; or
(b) by the period of time that the commencement of Commercial Production has
been delayed for lack of any approval or permit required to be obtained
from the Government or any agency thereof after the implementation of the
Development Plan has begun and prior to the commencement of
Commercial Production and such delay is not attributable to actions or
omissions which are within the reasonable control of the Concessionaire; or
(c) by any period that may be necessary to give effect to Article 25.4.
Kxi'cutlon copy 22
Article 7
Relinquishment of Areas
7.1 Where, pursuant to a request by the Concessionaire under Articles 3.5 (a) and (b),
the Exploration Period is extended at the end of the Initial Exploration Period or
subsequently, the Concessionaire shall relinquish its rights:
(a) at the commencement of the second Exploration Period of twenty four (24)
months in respect of a portion of the EPC Area so that the area retained,
excluding what is already included in a Development and Production Area
or in a Discovery Area, does not exceed seventy five per cent (75%) of the
EPC Area on the Effective Date;
(b) at the commencement of a third Exploration Period of twenty four (24)
months in respect of a portion of the EPC Area so that the area retained,
excluding what is already included in a Development and Production Area
or in a Discovery Area, does not exceed seventy five per cent (75%) of the
EPC Area on the Effective Date as reduced under letter (a) above;
(c) at the end of the third Exploration Period in respect of the remainder of the
EPC Area other than any Development and Production Areas or any area in
respect of which the Exploration Period has been further extended pursuant
to Articles 3.5 (c) and (d).
7.2 For the purpose of this Article, a Discovery Area shall not include any area which
relates to a Discovery in respect of which:
(a) the Concessionaire has notified MIREM that the Discovery is not considered
to be of potential commercial interest, is not commercial or is no longer
considered to be commercial.
(b) a Development and Production Area has previously been delineated.
Execution copy 23
Article 8
Records and Reports
8.1 The Concessionaire shall prepare and, at all times while this EPC is in force,
maintain accurate and up-to-date records of its operations in the EPC Area. The
Concessionaire shall also furnish MIREM with such available information, data
and reports relating to the Petroleum Operations, as well as assessments and
interpretations relating to the Petroleum Operations all of which as MIREM may
reasonably require.
8.2 Well logs, maps, magnetic tapes, core and cutting samples and other geological and
geophysical information obtained by the Concessionaire in the course of carrying
out the Petroleum Operations shall be submitted to MIREM and, save as provided
in Article 8.3 or authorised pursuant to Article 23, may not be published,
reproduced or otherwise dealt with without the consent of MIREM.
8.3 The Concessionaire may retain for its own use copies of material constituting
Documentation, with the approval of MIREM, and retain for its own use original
material constituting Documentation; provided that samples equivalent in size and
quality or, where such material is capable of reproduction, copies have been
supplied to MIREM. The Concessionaire may freely export for processing or
laboratory' examination or analysis samples or other original materials constituting
Documentation; provided that samples equivalent in size and quality or, where such
material is capable of reproduction, copies of equivalent quality have first been
delivered to MIREM.
8.4 The Concessionaire shall keep MIREM currently advised of all major
developments taking place during the course of the Petroleum Operations and
without prejudice to the generality of the foregoing the Concessionaire shall:
(a) within forty five (45) days after the end of each calendar quarter prepare and
deliver a progress report to MIREM which shall contain a narrative report
of activities hereunder during such quarter with plans and maps showing the
places where the work described was done; and
K*edition copy 24
(b) within four (4) months after the end of each calendar year prepare and
deliver to MIREM an annual report which shall consolidate and where
necessary revise and amplify the quarterly progress reports furnished in
respect of that calendar year.
Execution copy
Article 9
Cost Recovery and Production Entitlement
9.1 The Concessionaire shall bear and pay all costs incurred in carrying out the
Petroleum Operations in which the Concessionaire participates, and the
Concessionaire shall recover such costs permitted by the provisions of this EPC
including Annex “C” of this EPC (hereinafter “Recoverable Costs”), and shall be
remunerated exclusively by means of an entitlement to quantities of Petroleum to
which the Concessionaire is entitled as herein provided.
9.2 The provisions related to cost recovery and profit entitlement set out in this Article
shall apply to Petroleum with effect that the Government and the Concessionaire
shall have title in undivided participating entitlement to the Petroleum available for
sale in any given period. Unless otherwise instructed by Government the sale of
such Petroleum shall take place on a joint dedicated basis by the Concessionaire
and the Concessionaire will hold those entitlements in undivided proportions equal
to the proportions in which during that period each Party was entitled to Disposable
Petroleum. Such instructions shall not affect volumes of Petroleum subject to
contract. Accordingly, the proceeds from the sale on a joint dedicated basis of
Petroleum in any given period shall be divided between the Government and the
Concessionaire in the proportions in which they had title in undivided entitlements
to the Petroleum sold.
9.3 From the total quantity of Petroleum Produced, the Concessionaire may take a
portion thereof necessary to discharge the Concessionaire’s obligation for the
Petroleum Production Tax. The balance of Petroleum remaining after the aforesaid
portion has been set aside is hereinafter referred to as “Disposable Petroleum”.
9.4 (a) For purposes of the R-factor calculation, Disposable Petroleum and Cost
Petroleum shall be calculated in respect of the whole of the EPC Area.
(b) Insofar as permitted by applicable law and this EPC, all costs incurred by
the Concessionaire in relation to Petroleum Operations shall be recovered from
Disposable Petroleum, as available at the Delivery Point.
Extent ion copy 26
(c) In addition, and in the event the Government and/or the Concessionaire
elect to take Profit Petroleum in kind, the Concessionaire shall, for accounting and
reporting purposes, record Cost Petroleum separately:
(i) in respect of each Development and Production Area, and
(ii) in the form of liquids and gas, on a pro-rata basis relative to the
volumes of Petroleum Produced.
Condensate shall be taken in liquids or gas on the basis of its character at the
Delivery Point.
9.5 For each calendar year, Cost Petroleum shall be limited to seventy five percent
(75%) of Disposable Petroleum.
9.6 The Cost Petroleum for any quarter calculated in the manner aforesaid shall be
increased by:
(a) the amount of any contributions made by the Concessionaire into the
Decommissioning Fund during such quarter; and
(b) the costs incurred by the Concessionaire during such quarter to implement
an approved Decommissioning Plan prepared pursuant to applicable law
and the provisions of Article 15 save to the extent that, such costs have
been funded by withdrawals from the Decommissioning Fund; and
(c) provided that in no event shall the Cost Petroleum exceed the Disposable
Petroleum.
9.7 Costs, to the extent permitted by the provisions of Annex “C” of this EPC, shall
subject to Article 9.8, be recovered from Cost Petroleum:
(a) in respect of the amount of Development and Production Capital
Expenditures stipulated in Annex “C” of this EPC incurred during each
year, by the recovery of such amount at a maximum yearly rate of twenty
five (25 %) on a linear depreciation basis, beginning in the year in which
Execution copy 27
such amount is incurred or in the calendar year in which Commercial
Production commences, whichever year is later;
(b) in respect of costs attributable to Exploration as stipulated in Annex “C” of
this EPC (hereinafter referred to as “Exploration Costs”), by the recovery of
the full amount in the year in which they were incurred or in the year in
which Commercial Production commences, whichever year is later; and
(c) in respect of operating costs attributable to Petroleum Operations stipulated
as Operating Costs in Annex “C” to this EPC (hereinafter referred to as
“Operating Costs”) (including any contributions into the Decommissioning
Fund pursuant to applicable law, the provisions of Article 15 and including
any costs incurred by the Concessionaire to implement an approved
Decommissioning Plan prepared pursuant to the provisions of applicable
law save to the extent, in either case, that such costs have been funded by
withdrawals from the Decommissioning Fund), by the recovery of the full
amount in the year in which they were incurred.
9.8 To the extent that Recoverable Costs in any year exceed the value of Cost
Petroleum available in that year, the unrecovered excess shall be carried forward
for recovery in succeeding years.
9.9 The quantity of Cost Petroleum to which the Concessionaire is entitled in any year
shall be established on the basis of the value of the Petroleum Produced during
such year, determined in accordance with Article 10.
9.10 Profit Petroleum, shall be shared between the Government and the Concessionaire
according to a scale varying with the value of the R-Factor, where:
(a) R-Factor = (Cumulative Cash Inflows) n /
(Cumulative Capital Expenditures) n
(b) Cumulative Cash Inflows n =
Cumulative Cash Inflows (n-1)
+ Concessionaire portion of Profit Petroleum n
Execution copy 28
+ Concessionaire’s Cost Petroleum n
- Operating Costs n
- Computed Corporate Income Tax n
(c) Cumulative Capital Expenditures n =
Cumulative Capital Expenditures (n-1)
+ Exploration Costs n
+ Development and Production Capital Expenditures n
Where:
n is the current year; and (n-1) is the previous year;
Concessionaire’s Cost Petroleum is the amount of Recoverable Costs
actually recovered;
Computed Corporate Income Tax is the Concessionaire’s corporate income
tax obligation computed according to applicable tax law and Article 11.
For the purpose of calculating the R-Factor, the first year (n=l) shall be the year
during which the Effective Date occurs. Any Capital Expenditures incurred prior to
the Effective Date shall not be deemed for the purpose of the R-Factor calculation
to have been incurred during the year of the Effective Date.
The R-Factor shall be calculated on the last day of each calendar year and the
applicable ratio shall determine the sharing of Profit Petroleum throughout the
following calendar year.
The scale for Profit Petroleum is as follows:
I . went kill copy 29
R-Factor Government’s Concessionaire’s
Portion Portion
less than one 15% 85%
Equal to or greater than one 25% 75%
and less than two
Equal to or greater than 35% 65%
two and less than three
Equal to or grater than 45% 55%
three and less than four
Equal to or grater than four 55% 45%
9.11 (a) If there is a breach of the warranty set out in Article 11.6 or in the event that
after the Effective Date there is a change in the laws of the Republic of
Mozambique of the kind referred to in Article 11 and as a result the Parties
meet to agree on changes to be made to this EPC, then during the period
starting when the change in the law comes into effect and ending when an
agreement between the Parties is reached pursuant to Article 11, the portion of
Profit Petroleum to which the Concessionaire and the Government would
otherwise be entitled shall be adjusted so that the net revenues to be received by
the Concessionaire from Petroleum Operations are the same as they would have
been if no change in the law had taken place.
(b) Where the Parties have reached agreement on the changes to be made to this
EPC pursuant to Article 11, this EPC will be deemed to stand amended to the
extent necessary to give effect to that agreement in accordance with its terms.
9.12 Concessionaire’s Cost Petroleum and Profit Petroleum calculations shall be done
for each calendar year on an accumulative basis. To the extent that actual quantities
and expenses are not known, provisional estimates based on the approved work
programme and operating and capital budgets shall be used. Until such time as the
value of Petroleum attributable to a year is determined, the calculations will be
based on the value of such Petroleum during the preceding year and in the absence
of such value, on the value agreed to between MIREM and the Concessionaire.
Adjustments shall be made during the succeeding year based on actual Petroleum
quantities, prices and expenses in relation to such year.
Execution copy 30
9.13 Any person constituting the Concessionaire, excluding an entity holding a State
Participating Interest or a Permitted Assignee, shall pay all costs properly incurred
under this EPC in relation to the State Participating Interest (herein referred to as
“Carry”) subject to the following conditions:
a) Carry shall be paid by Concessionaires having a Carry obligation pro-rata to
their Participating Interests in this EPC.
b) In the event that a third party, other than an entity holding a State
Participating Interest or a Permitted Assignee, has acquired a Participating
Interest in the EPC from any person constituting the Concessionaire, such
third party shall be obliged to take over a proportionate share of the Carry.
c) If a State Participating Interest is totally or partially transferred to a non-
Permitted Assignee, the Carry already paid with respect to the transferred
interest and not yet reimbursed to the Concessionaires subject to Cany shall
be immediately due and paid to the Concessionaires pro-rata to their
respective Participating Interests by such non-Permitted Assignee. The share
of any future Carry, to be borne by each Concessionaire having a Carry
obligation, shall be calculated according to the new composition of the
Concessionaires having such Carry obligation.
d) The Carry shall be limited to all costs incurred under this EPC by the
Concessionaire in discharging its obligations under this EPC, up to and
including the date upon which the Development Plan has been approved.
e) The Cany shall be used exclusively to pay for costs properly incurred under
this EPC in relation to the State Participating Interest. Save for in respect of a
transfer to a Permitted Assignee, ENH may not assign directly or indirectly
the benefits derived under Carry. Any transfer of a Participating Interest
subject to Carry requires the prior written approval of MIREM. The term
“Permitted Assignee” means for the purpose of this Article the Government
or a Mozambican Person wholly owned and controlled by the Government.
Ktccutlon copy 31
f) From the date of commencement of Commercial Production, ENH and any
entity designated by the Government to manage the State Participating
Interest portion shall reimburse in full the Carry in cash or in kind to the
Persons constituting the Concessionaire. Such reimbursement shall be
calculated as and taken from the Cost Petroleum of said Person having
benefited from the Carry. All amounts owed up to approval of the
Development Plan resulting from the Carry shall be subject to payment of
interest in United States Dollars calculated at the LIBOR rate (as defined in
and determined in accordance with Article 28.7) plus one (1) percentage
point, from the date such costs are incurred by the Persons (other than ENH
or a Permitted Assignee), until reimbursed in full. In the event such date
occurs during weekends or public holidays then the first subsequent quoted
LIBOR rate shall be used.
Article 10
Valuation of Petroleum
The value of Petroleum referred to in Articles 9 and 11 shall, to the extent such
Petroleum consists of Crude Oil, be determined at the end of each calendar month
commencing with the calendar month in which Commercial Production of Crude
Oil begins. To the extent such Petroleum consists of Natural Gas it shall be
determined at the end of each calendar month commencing with the calendar
month in which commercial delivery at the Delivery Point begins.
A value for each separate export grade of Crude Oil will be:
(a) in the case of sales to non-Affiliated Companies, the weighted average price
per barrel at the Delivery Point of each separate export grade of Crude Oil
being the prices FOB within the meaning defined in Incoterms 2000, at
which such Crude Oil has been sold by the Concessionaire during that
calendar month; or
(b) If the Concessionaire sells the Crude Oil to a third party on terms different
from FOB (as per Incoterms 2000), then for the purpose of this EPC, a
calculated net-back FOB price shall be applied. The net-back FOB price
shall be established by deducting from the price agreed the actual and direct
costs incurred by the Concessionaire in fulfilling the obligations under their
sales contract additional to those obligations included under a FOB contract.
(c) in the case of sales to Affiliated Companies, such price as agreed between
MIREM and the Concessionaire on the basis of adding the following two
factors together:
(i) the weighted average calendar month FOB price for Brent rated Crude
Oil, or such other appropriate marker Crude Oil for the production in
question for the period in question. The weighted average will be
based on the days in each calendar month when a closing price is
reported in Platts Oilgram price report. Days such as weekends and
holidays with no price reports will be ignored;
(ii) a premium or discount to the price of the Brent rated Crude Oil, or
such other appropriate marker Crude Oil for the production in
question to be determined by reference to the quality of the Crude Oil
produced from the EPC Area and the cost of moving such Crude Oil
to the market.
10.3 In any case in which MIREM and the Concessionaire are unable to agree a price
under Article 10.2 (c), in order to determine the premium or discount referred to
therein the following procedures shall be undertaken:
(a) MIREM and the Concessionaire shall submit to each other their assessments
of the premium or discount together with an explanation of the key factors
taken into consideration in assessing the premium or discount;
(b) if the premium or discount submitted by each of MIREM and the
Concessionaire are within ten United States Cents (10 US 0) per barrel of
each other the average will be taken for the purposes of setting the final
value of the Crude Oil;
(c) if the premium or discount submitted by each of MIREM and the
Concessionaire differ by more than ten United States Cents (10 US 0) per
barrel each will resubmit a revised premium or discount to the other on the
third (3rd) business day after the first exchange of information;
(d) if the premium or discount submitted by each of MIREM and the
Concessionaire on the second exchange of information are within ten
United States Cents (10 US 0) per barrel of each other the average will be
taken for the purposes of setting the final value of Crude Oil;
(e) if the premium or discount submitted on the second exchange of
information differ by more than ten United States Cents (10 US 0) per
barrel the matter shall, in accordance with Article 30.6, be referred for
determination by a sole expert who shall establish a price based on the
criteria set out in Article 10.2(c) but always within the range established by
the Parties under Article 10.3(d).
10.4 The value calculated for Natural Gas Produced from reservoirs within the EPC
Area shall be:
(a) in the case of sales to non-Affiliated Companies, the weighted average price
per Gigajoule of commercial specification Natural Gas at the Delivery Point
at which such Natural Gas has been delivered by the Concessionaire during
that calendar month, shall be the weighted average price per Gigajoule of all
other commercial specification Natural Gas delivered during the same
calendar month from reservoirs subject to the jurisdiction of the Republic of
Mozambique and the weighted average of posted or publicly available
prices for alternative fuels to Natural Gas for large scale industrial
consumers including power generators in the market where such has been
delivered to ultimate customers.
(b) in the case of sales to Affiliated Companies, such price as stipulated in sub-
paragraph a) above for sales to non-Affiliated Companies or such price
agreed between MIREM and the Concessionaire.
10.5. In the event that the Government enters into a commercial Gas and/or Crude Oil
Sales Agreement with the Concessionaire for the purchase by the Government of
Crude Oil and/or Natural Gas from the Concessionaire, such sales shall be at a
price no higher than the price of Crude Oil and/or Natural Gas sold to Affiliated
Companies from the EPC Area as determined in terms of this Article 10.
Execution copy 35
Article 11
Fiscal Terms and Other Charges
11.1 The Concessionaire and its Subcontractors shall, save to the extent they are exempt
therefrom, be subject to all applicable law of the Republic of Mozambique which
impose taxes, duties, levies, charges, fees or contributions.
11.2 During the term of this EPC, the Concessionaire and its Subcontractors are entitled
to the rights of Tax and Customs Incentives in terms of Law No. 3/2001, of 21
February as defined in the Code of Fiscal Benefits (CFB), approved by Decree No.
16/2002, of 27 June. The Concessionaire and its Subcontractors shall be exempt
from the payment of the following taxes, duties, imposts, and other charges:
(a) Customs duties with regard to the importation of goods destined to be used
in Petroleum Operations, vehicles and other imported supplies, but
excluding light vehicles for transport of passengers in accordance with
article 44 paragraph a) of the CFB;
(b) Duties and other customs and fiscal charges on goods temporarily imported
for use in Petroleum Operations, including but not limited to such as
drilling rigs, seismic vessels, machinery, equipment, aircraft and boats in
accordance with article 44 paragraph b) of the CFB;
(c) Customs duties on the exportation of the goods referred to in the preceding
paragraphs once the goods no longer are needed for the Petroleum
Operations in accordance with article 44 paragraph c) of the CFB;
(d) Customs duties and custom charges with regard to the exportation of
Petroleum Produced in the Republic of Mozambique in accordance with
article 44 paragraph d) of the CFB; and
(e) The imports and exports referred to in the preceding paragraphs shall also
benefit from an exemption from the Value Added Tax (VAT) as provided
in the VAT Code approved by Decree No. 51/98, of 29 September in
accordance with article 44 paragraph e) of the CFB.
11.3 The Expatriate Personnel of the Concessionaire and of its Subcontractors shall be
exempt under this EPC from:
(a) Any and all taxes on or related to the income of non resident Expatriate
Personnel of the Concessionaire or its Subcontractors or any other tax of a
similar nature imposed on the work earnings of such Expatriate Personnel;
(b) Customs duties and other levies payable on the importation of personal and
household effects of Expatriate Personnel and their dependants imported
into the Republic of Mozambique on first arrival, provided that those
customs duties shall become payable on such items upon their sale in the
Republic of Mozambique to a person who is not exempt from such duties.
The Expatriate Personnel shall have the right to export from the Republic of
Mozambique free of any customs duties and levies the aforesaid personal
and household effects imported by them, within the conditions stipulated in
the customs tariff.
11.4 For the puipose of this EPC, the listed imposts (“Listed Imposts”) are:
(a) The Corporate Income Tax (IRPC) which shall be levied in accordance with
Decree No. 21/2002, of 30 July, as the same may be amended from time to
time but always subject to Articles 11.9 and 9.13, and shall be payable by
the Concessionaire or, where the Concessionaire is more than one Person,
payable by each of the Persons constituting the Concessionaire who shall be
separately assessed and charged. The following provisions shall apply to
IRPC levied in respect of income derived from Petroleum Operations
hereunder:
(i) For any investment made in a continuous manner and in relation to a
deposit or field where an investment is commenced prior to the end of the
year 2010 to commence production at a future date, a twenty-five percent
(25%) reduction in the rate of Corporate Income Tax (IRPC) on the net
income from any such field shall apply for a period of eight (8) years
starting from the year of first production. After the expiration of the first
Execution copy 37
eight (8) years calculated from the first year of Commercial Production
from any such deposit or field and for other fields which first commence
production during and after the year 2010, the 1RPC shall be levied on the
net income derived from Petroleum Operations from such fields in the
EPC Area at the rate of thirty-two percent (32%) or the rate then in effect
pursuant to applicable law, whichever is less.
In determining the net income of the Concessionaire for the puiposes of
(ii)
calculating IRPC in any year of tax, or if the Concessionaire is more than
one Person, the net income of any Person constituting the Concessionaire,
depreciation shall be applied as follows:
(aa) Depreciation shall be deducted at the rates indicated below,
beginning in the year in which the expenditure is incurred or Commercial
Production commences, whichever year is the later:
- in respect of expenditure on Exploration Operations, including the
drilling of Exploration and Appraisal Wells, at one hundred
percent (100%);
- in respect of capital expenditure on Development and Production
Operations at the annual rate of twenty five percent (25%) of
such expenditure on a linear depreciation basis;
- in respect of operating expenditure, at one hundred percent
(100%).
(bb) The Concessionaire, or if the Concessionaire is more than one
Person, any Person constituting the Concessionaire, may in any year elect to
defer depreciation wholly or partly. In exercising the election to defer, the
Concessionaire, or if the Concessionaire is more than one Person, any
Person constituting the Concessionaire, shall notify the competent entity in
the Ministry of Finance not later than end of February of the year following
the year in question, of its intention to defer depreciation. In such notice, the
Concessionaire, or if the Concessionaire is more than one Person, any
Person constituting the Concessionaire, shall specify:
Execution copy 38
the rate at which it intends to depreciate expenditure on
Exploration Operations or operating expenditures during the
year in question, such rate not being in excess of one
hundred percent (100%); and
the rate at which it intends to depreciate capital expenditure
on Development and Production Operations during the year
in question, such rate not being in excess of twenty five
percent (25%).
The rate notified by the Concessionaire or, if the Concessionaire is more
than one Person, by any Person constituting the Concessionaire shall only
apply to the year specified in the notice. Depreciation in future years shall
be made at the rate set in Article 11.4(a)(ii)(aa) unless a further written
notice under this Article is submitted.
(iii) Deferred depreciation, being the difference between the allowed rate
and the rate notified by the Concessionaire, or if the Concessionaire is
more than one Person, by any Person constituting the Concessionaire, as
the rate it intends to use during the year in question, may be taken as a
deduction against net income in any future year. The Concessionaire, or
if the Concessionaire is more than one Person, any Person constituting
the Concessionaire, shall notify the competent entity in the Ministry of
Finance in writing not later than the end of February of the year
following the year in question of its intent to take such deferred
depreciation during such year;
(iv) Expenditure for professional training of Mozambican workers, shall up to
a maximum amount of five percent (5%) of taxable income, be deductible
for the purposes of calculating IRPC in accordance with article 18
paragraph 1 of the CFB, during the first five (5) years from the date of
commencement of production; provided, however, that, when the
professional training is for the use of technologically advanced
equipment, the allowable income tax deduction for the purposes of
Execution copy 39
calculating the IRPC shall be a maximum amount of ten percent (10%) of
taxable income in accordance with article 18 paragraph 2 of the CFB.
(v) The Concessionaire shall be exempt from stamp duties for incoiporation
activities and for any alterations to the social capital and the articles of
association for a period of five (5) years from start of operations in
accordance with article 20 of the CFB.
(vi) The Concessionaire shall benefit from a reduction of 50% on real property
transfer tax (SISA) on the acquisition of real estate, provided this was
acquired in the first three (3) years from the date of authorisation of the
investment, or start of operations in accordance with article 21 of the
CFB.
(vii) For the purpose of calculating liability for IRPC , a loss incurred by the
Concessionaire in any year may be carried forward for deduction for up to
six (6) years after the year in which such loss is incurred.
(b) Customs duties and other levies and taxes not otherwise exempted under this
Article 11;
(c) Levies, charges, fees or contributions which are non discriminatory and are levied
in return for the provision of specific identifiable services or goods by the Republic
of Mozambique or use of facilities owned by the Republic of Mozambique or any
state company, such as without limitation, water, electricity, port usage and similar
services or goods;
(d) Taxes, duties, levies, charges, fees or contributions provided they are imposed
under laws of general application, which do not discriminate or have the effect of
discriminating against the Concessionaire and are of a minor nature. For the
purpose of this Article a tax, duty, levy, charge, fee or contribution shall not be
treated as being of a minor nature if either alone or in combination with any other
tax duty, levy, charge, fee or contribution not falling under Articles 11.4(a), (b), or
(c), it would result in a charge in excess of United States Dollars two hundred and
fifty thousand (US$250,000) in any one (1) year period or United States Dollars
Emotion copy 40 If
five hundred thousand (US$500,000) in any continuous period of five (5) years;
(e) Non resident foreign Subcontractors of the Concessionaire conducting activities in
connection with Petroleum Operations pursuant to this EPC shall be subject to a
withholding tax at the single flat rate of ten percent (10%) of the gross amount of
the payments of its invoices in respect of the work or services it performed for the
Concessionaire. The Concessionaire responsible to make payments of such invoices
shall calculate the amount of income tax due as Subcontractor IRPC on this basis,
and shall withhold such income tax from the payments made to the foreign
Subcontractor and pay immediately such withheld income tax to the competent
entity of the Ministry responsible for tax collection in the fiscal area of the
Concessionaire on behalf of the foreign Subcontractor in accordance with the
periods established by the law;
(f) No taxes shall be imposed or withheld with respect to payments to any non resident
foreign Subcontractor other than as provided under Article 11.4 e).
11.5 (a) In accordance with the Petroleum Law and Decree No. 19/04, of 2 June, the
Concessionaire shall deliver to the Government in kind as Petroleum
Production Tax:
(i) in respect of Natural Gas produced from deposits in the EPC Area
onshore, a quantity of five percent (5%) of the Natural Gas; in
respect of Crude Oil produced from deposits in the EPC Area
located onshore, a quantity of eight percent (8%) of the Crude Oil;
(ii) in respect of Natural Gas produced from deposits in the EPC Area
in water depth less than one hundred (100) metres, a quantity of
four percent (4%) of the Natural Gas, and in respect of Crude Oil
produced from deposits in the EPC Area in water depth less than one
hundred (100) metres, a quantity of seven percent (7%) of the Crude
Oil;
(iii) in respect of Natural Gas produced from deposits in the EPC Area
in water depth equal to or in excess of one hundred (100) metres and
tiKUtMO copy
less than five hundred (500) metres, a quantity of three percent (3%)
of the Natural Gas, and in respect of Crude Oil produced from
deposits in the EPC Area in water depth equal to or in excess of one
hundred (100) metres and less than five hundred (500) metres, a
quantity of five percent (5%) of the Crude Oil;
(iv) in respect of Natural Gas produced from deposits in the EPC Area
in water depth equal to or in excess of five hundred (500) metres, a
quantity of two percent (2%) of the Natural Gas, and in respect of
Crude Oil produced from deposits in the EPC Area at a water depth
equal to or in excess of five hundred (500) metres , a quantity of
three percent (3%) of the Crude Oil;
provided always that the rate of Petroleum Production Tax for a Petroleum Deposit
shall be a composite rate for Natural Gas and a separate composite rate for Crude
Oil where such Petroleum Deposit in the EPC Area does not lie entirely within one
of the water depth categories established by Articles 11.5(a)(i) to (iv) above, such
composite rates being established pro rata with the amount of Petroleum in place
estimated to be in each of the relevant water depth categories, and being established
at the time of the approval of the appropriate Development Plan and not subject to
change thereafter; provided that if a Development Plan is amended, then this
amended Development Plan may include a revised composite rate for Natural Gas
and revised composite rate for Crude Oil for such Petroleum Deposits in the EPC
Area and such revised composite rates shall apply from the beginning of the year
following the date the amended Development Plan is approved. In the case of a
revision to the composite rates as provided aforesaid, in no circumstances shall any
retroactive adjustments be made to the amount of the Petroleum Production Tax
calculated prior to the time of the approval of the amended Development Plan.
(b) The Concessionaire shall, pursuant to Article 13 of the Regulations relating to
Petroleum Production Tax attached to Decree No. 19/04, of 2 June, or subsequent
applicable legislation deliver to the competent entity in the Ministry of Finance and
MIREM, not later than the 20th (twentieth) day of each calendar month and with
respect to the previous month, as measured at the Delivery Point, a statement of:
Kxccution copy 42
(i) the quantity of Crude Oil and the quantity of Natural Gas produced
in that calendar month;
(ii) the quantities of Crude Oil and the quantities of Natural Gas sold in
that calendar month;
(iii) the quantities of Crude Oil held in storage at the beginning and the
end of the calendar month;
(iv) the quantity of Crude Oil and the quantity of Natural Gas inevitably
lost;
(v) the quantity of Crude Oil and the quantity of Natural Gas flared,
escaped, re-injected or used in Petroleum Operations;
(vi) the quantity of Crude Oil and the quantity of Natural Gas on which
Petroleum Production Tax is due;
(vii) the quantity of Petroleum Production Tax deliverable for that
calendar month and the particulars of the calculation thereof; and
(viii) any other information relevant for the calculation of Petroleum
Production Tax for Crude Oil and for Natural Gas.
(c) The Government may, in lieu of the Petroleum Production Tax deliverable in kind
referred to in this Article 11.5, by one hundred and eighty (180) days notice require
the Concessionaire to pay to the Government each month fully or partly in cash the
relevant percentage of the value, ascertained in accordance with the provisions of
Article 11, of the Crude Oil and the Natural Gas which has been produced from the
EPC Area in that month.
(d) The Petroleum Production Tax for a given calendar month in respect of Crude Oil
and in respect of Natural Gas and the respective payments in cash are deliverable or
payable before the end of the following calendar month.
tAccntioii copy 43
/
(e) Payment in cash of the percentage specified in the relevant notice given under
Article 11.5(c) shall continue until the Government delivers a further written notice
as provided in Article 11.5(c) providing revised instructions to the Concessionaire.
The Government warrants that in respect of Petroleum Operations or income
11.6
derived from Petroleum Operations, on the Effective Date there were no taxes,
duties, levies, charges, fees or contributions other than the Listed Imposts and the
taxes in respect of which the Concessionaire and its Subcontractors are exempt
under Articles 11.2 and 11.3.
In the exercise of its rights and benefits regarding the exemption from customs
11.7
duties on import and export stipulated under this Article, the Concessionaire shall
comply with the applicable procedures and formalities duly imposed by applicable
law.
Nothing in the provisions set out in this Article 11 shall be read or construed as
11.8
imposing any limitation or constraint on the scope, or due and proper enforcement,
of applicable Mozambican law of general application which does not discriminate,
or have the effect of discriminating, against the Concessionaire, and provides in the
interest of safety, health, welfare or the protection of the environment for the
regulation of any category of property or activity carried on in Mozambique;
provided, however, that the Government will at all times during the life of the
Petroleum Operations ensure in accordance with Article 28, that measures taken in
the interest of safety, health, welfare or the protection of the environment are in
accordance with standards generally accepted from time to time in the international
petroleum industry and are not unreasonable.
In the event that, after the Effective Date, any other tax is introduced in the
Republic of Mozambique which is not of the type set out in Article 11 and, as a
result, there is an adverse effect of a material nature on the economic value derived
from the Petroleum Operations by the Concessionaire, the Parties will, as soon as
possible thereafter, meet to agree on changes to this EPC which will ensure that the
Concessionaire obtains from the Petroleum Operations, following such changes, the
same economic benefits as it would have obtained if the change in the law had not
been effected.
execution copy 44
Article 12
Production Bonuses
The Concessionaire shall pay the following production bonuses to the Government, which
shall not be a Recoverable Cost for the purposes of Annex “C” of this EPC:
Production Bonuses
payable in US Dollars
At the Commencement of Initial Commercial $ 1,000,000.00
Production
When production from the EPC Area first reaches $ 1,000,000.00
25,000 BOE per day average for a month
When production from the EPC Area first reaches $ 5,000,000.00
each further tranche of 75,000 BOE per day
average for a month
For the purpose of this Article:
(i) “Commencement of Initial Commercial Production” means the date on
which Commercial Production has been sustained for a period of thirty (30)
consecutive days from the EPC Area; and
(ii) “BOE” means the equivalent number of Barrels of Crude Oil resulting when
Natural Gas is converted to Crude Oil on the basis of one (1) Barrel of
Crude Oil for each six thousand (6,000) standard cubic feet of Natural Gas.
Mt-cutlon copy 45
Article 13
Lifting Arrangements
13.1 (a) The Concessionaire shall subject to provisions regulating the production
and sale of Petroleum be entitled to lift and export freely its entitlement to
Petroleum Produced under this EPC.
(b) Each Party shall take its entitlement to Petroleum consistent with Good
Oilfield Practice at an approximately regular rate throughout each calendar
year.
(c) Not later than ninety (90) days prior to the date scheduled for the
commencement of Commercial Production, the Parties shall establish
offtake procedures covering the scheduling, storage and lifting of Petroleum
and such other matters as the Parties shall agree. Such procedures shall be
consistent with Good Oilfield Practice.
13.2 Notwithstanding Article 9.2 or instructions given in accordance with Article 9.2,
the Government may by six (6) months notice given to the Concessionaire or
Operator require the Concessionaire or Operator to sell on behalf of the
Government during the succeeding calendar year unless otherwise instructed the
whole or any portion of the volume of Petroleum Production Tax taken in kind and
when applicable Profit Petroleum not previously committed to which the
Government is entitled pursuant to this EPC during said succeeding year. The
quantity of such Profit Petroleum, which the Government desires to sell shall be
specified in said notice. The Concessionaire or Operator shall sell that quantity of
Petroleum on the open market at the best price reasonably obtainable and remit the
proceeds of the sale directly and forthwith to the Government. The Concessionaire
or Operator shall not charge the Government any fee for the selling of the
Petroleum of the Government.
'.xrcutlon copy 46
Article 14
Conservation of Petroleum and Prevention of Loss
14.1 The Concessionaire shall, before carrying out any drilling, prepare and submit for
review by MIREM a well programme including a contingency plan designed to
achieve rapid and effective emergency response in the event of a blow-out or fire,
escape, waste or loss of Petroleum or damage to Petroleum bearing strata.
14.2 In the event of a blow-out or fire, escape, waste or loss of Petroleum or damage to
Petroleum bearing strata, the Concessionaire shall notify MIREM within twenty
four (24) hours of becoming aware of such occurrence, promptly implement the
relevant contingency plan and as soon as practicable thereafter submit a full report
thereon to MIREM.
14.3 Without prejudice to the obligations of the Concessionaire under Article 29, in the
case of relinquishment or surrender by the Concessionaire or termination of the
rights of the Concessionaire pursuant to this EPC, the Concessionaire shall within
ninety (90) days from the date of such relinquishment, surrender or termination, in
respect of the whole of the EPC Area or, as the case may be, any part of the EPC
Area which has been relinquished or surrendered:
a) plug or close off, in a manner consistent with Good Oilfield Practice, all
wells drilled as part of the Petroleum Operations unless otherwise agreed
between MIREM and the Concessionaire.
(b) take all action necessary, in accordance with Good Oilfield Practice, to
prevent hazards to human life or to the property of others or the
environment resulting from conditions in the EPC Area or, as the case may
be, any part thereof caused by Petroleum Operations, being conditions
which were or ought with reasonable diligence to have been evident at the
time of relinquishment, surrender or termination.
Execution copy 47
Article 15
Decommissioning
15.1 If in the reasonable expectation of the Concessionaire, the Concessionaire will
cease to produce Petroleum under this EPC from the EPC Area, the EPC expires,
is cancelled or surrendered pursuant to the proceedure stipulated in this EPC and
applicable law the Concessionaire shall submit to MIREM for approval a
Decommissioning Plan. The Decommissioning Plan shall be prepared in
accordance with applicable law and shall include, but not be limited to:
(a) particulars, separately set out in respect of each Development and
Production Area, of measures to be taken, to effect decommissioning
including but not limited to:
(i) decommissioning of equipment and installations for each
Development and Production Area;
(ii) timely removal of equipment and installations not required for
ongoing Petroleum Operations in any other Development and
Production Area; and
(iii) any other steps that may reasonably be required in order to prevent
hazard to human life, or to the property of others or to the
environment.
(b) estimates of the time required to complete operations under the plan;
(c) a budget for operations under the plan, including particulars of the costs of
decommissioning equipment and installations;
(d) a schedule of the work programme with related costs to be drawn from the
Decommissioning Fund in order to meet the costs of implementing the plan;
and
(e) such environmental, engineering and feasibility studies as may be necessary
to support the proposed plan.
15.2 The Decommissioning Plan shall be prepared in compliance with applicable law
and the provisions of Article 28 and shall ensure that decommissioning is
Ksccutton copy 48
conducted in a manner which will give effect to standards generally recognised as
applicable in the international petroleum industry and the Concessionaire’s
standards for decommissioning.
15.3 In the event that the Concessionaire does not submit a Decommissioning Plan to
MIREM within the time allowed MIREM may serve upon the Concessionaire a
notice requiring the Concessionaire to submit to MIREM, within a period of ninety
(90) days from date on which the notice was served, a Decommissioning Plan. If
within that period no Decommissioning Plan is submitted, MIREM may
commission consultants of international standing to prepare a Decommissioning
Plan.
15.4 A Decommissioning Plan prepared by a consultant in accordance with applicable
law and this Article shall be implemented by the Concessionaire in accordance with
its terms as though it were an obligation of the Concessionaire set forth in Article
28. The cost of commissioning engineering consultants to prepare a consultant’s
plan shall be payable by the Concessionaire to the Government.
15.5 In the event that the Concessionaire considers that production from a Development
and Production Area will cease before a Decommissioning Plan has been prepared,
decommissioning measures for that Development and Production Area will be
prepared by the Concessionaire in accordance with the requirement for
decommissioning set out in Articles 15.3 and 15.4, and where those measures have
been approved by MIREM will take effect as an amendment to the Development
Plan for that Development and Production Area.
15.6 Not later than at the commencement of Petroleum production from reserves within
the EPC Area, the Concessionaire shall establish in a bank of its choice an interest
bearing United States dollar account or such other currency account to be mutually
agreed by the Parties to be denominated as the Decommissioning Fund into which
the Concessionaire shall set aside from time to time funds to be able to cover the
decommissioning costs calculated in accordance with this EPC to meet the
estimated costs of implementing an approved Decommissioning Plan. At the time
of establishment of the account for the Decommissioning Fund the Concessioaire
shall deposit US dollars ten thousand (US$ 10.000) or equivalent amount if an
Execution copy 49 ft t X'
alternative currency is agreed. The bank so designated shall have a long term rating
of not less than “AA” by Standard and Poor’s Corporation or “Aa2” by Moody’s
Investor Service or a comparable rating by another mutually agreed rating service.
Preference shall be given to banks in Mozambique possessing the required rating.
15.7 The calculation of the amounts to be set aside for estimated future
Decommissioning costs into the Decommissioning Fund shall be governed as
follows:
a) The estimates of: (i) the recoverable reserves and the projected production schedule
and (ii) total decommissioning costs for the Concessionaire proposed
decommissioning solution as well as reasonable alternative decommissioning
solutions shall be submitted for MIREM approval. The M1REM shall based on the
proposals from the Concessionaire select a preliminary decommissioning solution
to form the basis for the calculation of decommissioning costs to be covered by a
Decommissioning Fund created for the purpose of covering such decommissioning
costs. Adequate provisions for successive revisions of such estimates shall when
required herein, required by applicable law or deemed necessary by the
Concessionaire due to substantial changes in fact also be included in any updated
Decommissioning Plan.
b) In any calendar year in which the Concessionaire did not submit to MIREM a
revised Decommissioning Plan or the total estimated decommissioning cost,
Concessionaire shall update the value of the latest total estimated decommissioning
cost preliminary approved by MIREM in order to account for the escalation of such
approved estimated decommissioning costs in the period between the calendar year
in which such costs were estimated and the then current calendar year. For this
purpose, and for each calendar year, the applicable annual US Dollar escalation
index shall be based on the Producers Price Index for the Drilling of Oil and Gas
Wells as published by the United States Bureau of Labor Statistics The annual
index to be used in year “n” shall be determined by difference between the annual
index relating to the year in which the latest approved estimate is determined and
the same annual index relating such year “n”. In the event the above US Bureau of
Labour Statistic ceases, for any reason whatsoever, to publish the Producers Price
Index for the Drilling of Oil and Gas Wells set out in the preceding paragraph of
•vmitlon cupv 50
this Clause or when an alternative currency is selected, Parties shall determine
either an alternative independent internationally recognised source, or an alternative
representative index.
15.8 The Concessionaire will not withdraw money from the Decommissioning Fund
save for the purpose of meeting the costs of implementing an approved
Decommissioning Plan and all statements relating to the Decommissioning Fund
provided by the bank from time to time shall be copied to MIREM.
15.9 Payments into the Decommissioning Fund shall be cost recoverable in accordance
with provisions applicable to this EPC.
15.10 Costs incurred by the Concessionaire to implement an approved Decommissioning
Plan shall be cost recoverable in accordance with provisions in that regard set out in
Article 9 and for the purpose of IRPC shall be treated as an operating expense save
where, in either case, such costs have been funded by withdrawals from the
Decommissioning Fund.
15.11 Any funds remaining in the Decommissioning Fund after the approved
Decommissioning Plan has been completed shall be treated as Profit Petroleum and
the remaining balance shall be shared in accordance with the provision of Article
9.7.
15.12 In the event that at the time of implementing any Decommissioning Plan there are
insufficient funds available in the Decommissioning Fund to fund the operations of
that plan, the shortfall shall be met in full by the Concessionaire.
15.13 An approved Decommissioning Plan shall, subject to the provisions of Article 20.2,
be implemented prudently and without undue delay.
Kxrcution copy 51
Article 16
Insurance
16.1 The Concessionaire shall effect and maintain, in respect of Petroleum Operations,
unless otherwise agreed between the Parties, all insurance required by applicable
Mozambican law and, as the case may be, required by other applicable law and
such other insurance as MIREM and the Concessionaire may agree from time to
time. Such insurance shall at least include insurance against the following risks:
(a) loss or damage to all Installations and equipment which are owned or used
by the Concessionaire in the Petroleum Operations;
(b) pollution caused in the course of the Petroleum Operations by the
Concessionaire for which the Concessionaire may be held responsible;
(c) property loss or damage or bodily injury suffered by any third party in the
course of the Petroleum Operations by the Concessionaire for which the
Concessionaire may be liable to indemnify the Government;
(d) the cost of removing wrecks and cleaning up operations following an
accident in the course of the Petroleum Operations by the Concessionaire;
and
(e) the Concessionaire’s and/or the Operator’s liability for its employees
engaged in the Petroleum Operations.
16.2 In relation to Development and Production Operations, the Concessionaire shall
submit to MIREM a programme for the provision of an “All Risks” insurance
which may, inter alia, cover physical damage to the facilities under construction
and installation as well as legal liabilities arising out of the Development and
Production Operations.
16.3 Any insurance required to be effected by the Concessionaire pursuant to the
provision of Articles 16.1 and 16.2 may, at the Concessionaire’s discretion and
subject to the approval of MIREM, be provided by one or more of the following
Kxi'cution copy 52
options:
(a) non-insurance wherein the Concessionaire itself carries the risks and no
premia are charged; provided, however, that in the case of any losses or
damages resulting from a risk where the Concessionaire has elected to non-
insure, such losses or damages shall not be Recoverable Costs for the
purpose of Annex “C” of this EPC;
(b) insurance through an insurance company wholly owned by the Operator or
the Concessionaire in which case the premia charged shall be at prevailing
international insurance market rates;
(c) the Concessionaire utilising for the benefit of Petroleum Operations
insurance which is placed as part of a global coverage in which case the
premia charged shall be at the rates obtained for such global coverage; or
(d) subject to Article 19, insurance through the international insurance markets
at prevailing rates, provided that:
(i) an insurance company wholly owned by the Operator or a
Concessionaire may participate in any internationally placed
insurance or reinsurance; and
(ii) the Concessionaire shall have the option to tender and effect all
appropriate reinsurance for any insurance placed through insurance
companies registered in the Republic of Mozambique.
16.4 Unless otherwise approved by M1REM, the Concessionaire shall competitively
tender all renewable insurances placed into the international markets at least once
every three (3) years.
16.5 The Concessionaire shall require its Subcontractors to carry equivalent insurance of
the type and in such amount as is required by law and is customary in the
international petroleum industry in accordance with Good Oilfield Practice.
Article 17
Natural Gas
17.1 The Concessionaire shall have the right to use Natural Gas extracted from
reservoirs within the EPC Area for the Petroleum Operations in the EPC Area
including but not limited to power generation, pressure maintenance and recycling
operations.
17.2 The terms and conditions relating to the use and production of Associated Natural
Gas shall be as follows:
(a) In the event the Concessionaire elects to process and sell Associated Natural
Gas, the Concessionaire shall notify MIREM and, for the purposes of cost
recovery and entitlement of production, such Natural Gas shall be treated by
the Parties in the same way as other Natural Gas.
(b) In the event the Concessionaire elects not to process and sell Associated
Natural Gas not used for purposes stipulated in Article 17.1 or paragraph (c)
below, the Government may offtake without any payment to the
Concessionaire but at the Government’s sole risk and cost, such Natural Gas
at the gas/oil separator; provided that such offtake does not materially
disrupt or delay the conduct of the Petroleum Operations.
(c) The Concessionaire may re-inject any Associated Natural Gas which is not
taken by Government pursuant to paragraph (b) above, used for Petroleum
Operations, processed and sold by the Concessionaire, or taken by
Government in accordance with paragraph (b) above, and the costs of such
disposal shall be recoverable to the extent that such re-injection is included
in the Development Plan.
17.3 The terms and conditions relating to the Appraisal Program and the commercial
assessment of the production and sale of non-Associated Natural Gas shall be as
follows:
(a) On completion of an Appraisal Programme relating to a Discovery of non-
li'xccution copy 54
Associated Natural Gas made by the Concessionaire and the submission of
an appraisal report thereon, the “Commercial Assessment Period” shall, if
the Concessionaire so requests, commence and shall continue in respect of
any Discovery Area for a period of six (6) years, exercisable at the sole
option of the Concessionaire. An extension may be granted upon
application by the Concessionaire to the Government, for a second period of
up to two (2) years. An appraisal report submitted under this Article shall
include the estimated recoverable reserves, projects delivery rate and
pressure, quality specifications and other technical and economic factors
relevant to the determination of a market for available Natural Gas. The
Concessionaire may, at any time during the Commercial Assessment
Period, inform the MIREM by notice that the Petroleum reservoir located
in any Discovery of non-Associated Natural Gas made by the
Concessionaire in respect of which an appraisal report has been submitted,
is commercial.
(b) If the Concessionaire does not request a Commercial Assessment Period
pursuant to paragraph (a) above within ninety (90) days from the date on
which the appraisal report was submitted, the Concessionaire shall inform
the MIREM by notice whether any Discovery of non-Associated Natural
Gas made by the Concessionaire in respect of which an appraisal report has
been submitted, is commercial.
Where the Concessionaire pursuant to this Article gives notice that any Discovery of
non-Associated Natural Gas made by the Concessionaire is commercial, that notice
shall, for the purpose of this EPC, be a notice of Commercial Discovery.
17.4 The Commercial Assessment Period shall end on the first to occur of:
(a) the date following that on which Concessionaire gives a Notice of
Commercial Discovery under Article 17.3;
(b) the date that the Concessionaire voluntarily surrenders the Discovery Area
to which the Commercial Assessment Period relates; or
hxicutimi cup) 55
(c) expiry of the period to which Concessionaire is entitled to under Article
17.3.
17.5 The Concessionaire shall be deemed to have relinquished all rights to the Discovery
of non-Associated Natural Gas if it has not given a notice of Commercial
Discovery under Article 17.3 by the end of the Commercial Assessment Period or
on earlier relinquishment of that portion of the EPC Area.
17.6 The Concessionaire shall be responsible for investigating market opportunities and
seek to develop a market for non-Associated Natural Gas produced from any
Development and Production Area and shall sell such non-Associated Natural Gas
on a joint dedicated basis on terms common to all the parties constituting the
Concessionaire. Every contract for the sale of such non-Associated Natural Gas
made by the Concessionaire under this article shall be subject to approval by the
MIREM. In applying for such approval the Concessionaire shall demonstrate to the
MIREM that the prices and other terms of sale of such Natural Gas represents the
market value obtainable for such Natural Gas, taking into consideration a fair
market cost for transporting the Natural Gas from the Delivery Point to the
purchaser and having regard to the alternative uses and markets that can be
developed for such Natural Gas.
17.7 With its application for approval of any gas sales contract, pursuant to Article 17.6,
the Concessionaire may apply in respect of any Development and Production Area
from which non-Associated Natural Gas will be produced for sale under that gas
sales contract, for an extension of the Development and Production Period and
where such extension is necessary to facilitate the sale of gas under any such
contract the MIREM will grant the same.
V
K.xccutHin copy 56
Article 18
Employment and Training
18.1 Subject to the Government’s security review of any individual entering
Mozambique and the procedures and formalities of the applicable Mozambican law
relating to immigration the Government shall provide the necessary permits or
other approvals required for the employment and admission into the Republic of
Mozambique of Expatriate Personnel employed by the Concessionaire or its
Subcontractors for the purpose of this EPC.
18.2 In the conduct of the Petroleum Operations, the Concessionaire shall endeavour to
utilise citizens of the Republic of Mozambique having appropriate qualifications to
the maximum extent possible at all levels of its organisation, as Sub-Contractors or
employed by Sub-Contractors. In this connection, the Concessionaire shall, in
consultation with MIREM, propose and carry out an effective training and
employment programme for its Mozambican employees in each phase and level of
operations, taking account of the requirements of safety and the need to maintain
reasonable standards of efficiency in the conduct of the Petroleum Operations.
Such employees may be trained in the Republic of Mozambique or abroad as
required by the training programmes prepared by the Concessionaire.
18.3 The Concessionaire shall co-operate with MIREM in giving a mutually agreed
number of Government employees the opportunity to participate in training
activities provided by the Concessionaire or any of its Affiliated Companies for its
employees and specifically for Government employees.
18.4 In order for MIREM to monitor the fulfilment of the employment and training
obligations contained in this Article, the Concessionaire shall annually submit its
recruitment and training programmes to MIREM.
18.5 The Concessionaire shall pay one million United States dollars (US$ 1,000,000) to
the Government. This amount shall be used as institutional support to the entities
involved in promotion and administration of Petroleum Operations. Such payment
shall be made within thirty (30) days from the Effective Date to the Government in
accordance with the instruction provided by the representative of the Government
(execution copy 57
designated in this EPC.
18.6 (a) During the Exploration Period, the Concessionaire shall pay to the
Government two hundred thousand United States Dollars (US$ 200,000)
per year, to be spent on training and institutional support programmes
within the Government. The Concessionaire and the Government may
mutually agree to training activities to be funded by Concessionaire. In such
instances the agreed amount of funding shall be used as a credit against the
following year’s training obligation. The first payment shall be made on the
anniversary of the Effective Date within the Exploration Period of this EPC
and subsequent payments shall be made on the anniversaries thereof.
b) During the Development and Production Period the Concessionaire shall
pay to the Government three hundred thousand United States Dollars
(US$300,000) per year to be spent on training and institutional support
programmes within the Government. The Concessionaire and the
Government may mutually agree to training activities to be funded by
Concessionaire. In such instances the agreed amount of funding shall be
used as a credit against the following year’s training obligation. The first
payment shall be made within thirty (30) days from the approval of the first
Development Plan and subsequent payments shall be made on the
anniversary thereof.
18.7 The Concessionaire shall pay to the Government two hundred and fifty thousand
United States dollars (US$ 250 000) for social support projects for the citizens of
the Republic of Mozambique in areas where Petroleum Operations take place. The
Concessionaire may recommend social programs to be funded by the
Concessionaire and if agreed by the Government the agreed amount of funding
shall be used as a credit against the following year social support obligation. The
first payment shall be made within thirty (30) days from the Effective Date. Such
annual amount to be paid by the Concessionaire until a total amount of one million
United States Dollars (USS 1.000.000) has been paid in full.
18.8 The Concessionaire shall include as part of the Development Plan proposals for the
activities required to satisfy the obligations contained in Article 18.3 during the
Execution cop}' 58
Development and Production Period.
18.9 The sums expended by the Concessionaire to satisfy the obligations contained in
this article shall be recoverable costs for the purpose of Annex “C” of this EPC.
r.\eciitJ0H copy 59
Article 19
Indemnification and Liability
19.1 The Concessionaire shall indemnify and hold the Government harmless from and
against any and all claims instituted against the Government by third parties in
respect of injury, loss or damage caused by the Concessionaire in the conduct of the
Petroleum Operations in which the Concessionaire participates, provided that the
claims are duly qualified by a third party or the Government. In no case the
Concessionaire's liability under this Article shall include punitive damages.
19.2 The Government shall indemnify and hold the Concessionaire, its Subcontractors
and any of its Affiliated Companies harmless from and against any and all claims
instituted against the Concessionaire, its Subcontractors and any of its Affiliated
Companies by third parties in respect of injury, loss or damage caused by the acts
or omissions of the Government in its commercial capacity.
19.3 Except as provided for in Article 19.8 no Party hereto shall settle or compromise
any claim for which another Party is responsible hereunder without the prior
written consent of such other Party, and in the event that it does so, the indemnity
aforesaid shall not have effect in relation to the claim so settled or compromised.
19.4 Notwithstanding anything to the contrary in this EPC, the Concessionaire, its
Subcontractors and any of its Affiliated Companies carrying out such Petroleum
Operations on behalf of the Concessionaire shall not be liable to the Government
and the Government shall not be liable to the Concessionaire, for consequential loss
or damage including but not limited to inability to produce Petroleum, loss of
production, loss of profit or punitive damages.
19.5 Subject to Article 19.4, in carrying out Petroleum Operations under this EPC the
Concessionaire shall be liable for any injury, loss or damage suffered by the
Government and caused by the Concessionaire or by any Affiliated Company or
Subcontractor carrying out Petroleum Operations on behalf of the Concessionaire if
such injury loss or damage is the result of the Concessionaire’s, the Affiliated
Company’s or the Subcontractor’s failure to meet the standards required by this
EPC.
Invention copy 60
19.6 Any claim pursued by any third parties which would entitle any of the Parties
(together the ‘indemnified Party”) of this EPC to be indemnified by any of the
other Parties of this EPC (together the “Indemnifying Party”) shall be promptly
communicated by notice to the Parties so that the Indemnifying Party may promptly
intervene in the claim and pursue its defence. The Indemnified Party which is in
breach of the obligation to notify the claim and causes the Indemnifying Party not
to be able to properly pursue its defence, shall loose its rights to the indemnification
under this Article.
19.7 If within thirty (30) days of receipt of such claim notice, the Indemnifying Party
notifies the Indemnified Party that it elects to assume the defence of such claim,
then the Indemnifying Party shall have the rights to defend, at its cost and expense,
such claim by all appropriate proceedings including any compromise or settlement
thereof, so long as any settlement agreement does not provide for or result in any
continuing liability or obligation on the Indemnified Party in respect of such third
party claim.
19.8 If the Indemnifying Party fails timely to elect to assume the defence of such claim,
then the Indemnified Party shall have the right to defend at the sole cost and
expense of the Indemnifying Party the third party claim by all appropriate
proceedings including any compromise or settlement thereof.
r.wciition copy 61
Article 20
Title
20.1 Title to the Concessionaire’s entitlement of Petroleum Produced under this EPC
shall pass to the Concessionaire at the Wellhead. Thereafter the Government and
the Concessionaire shall own the Petroleum jointly, and in undivided shares, until
each takes individual title to and delivery of its entitlement of Petroleum at the
Delivery Point.
20.2 The Concessionaire shall finance the cost of all facilities and equipment to be used
in Petroleum Operations. Subject to applicable law and this Article the
Concessionaire shall have the right to use such equipment and facilities for
Concessionaire Petroleum Operations during the term of this EPC and any
extensions thereof until the EPC expires, is surrendered or cancelled, in which case
the title to said facilities and equipment at the option of the Government and
without additional compensation may be transferred to the Government. In the
event that Government requires the transfer of such facilities and equipments to the
Government or to a Mozambican Person wholly owned or controlled by the
Government, Concessionaire shall be released from all responsibility and liability
of every kind pertaining to decommissioning of such facilities and equipments as
well as payment of any further funds in the Decommissioning Fund. Government
shall indemnify Concessionaire from and against any loss, damage and liability of
any nature whatsoever, as well as any claim, action or proceeding instituted against
Concessionaire by any person or entity, including, but not limited to any
Governmental authority, arising from, or connected with, the continued use of such
facilities and equipments and their ultimate decommissioning, as well as any failure
by Government or person appointed by Government to properly decommissioning
such facilities and equipments.
20.3 The Concessionaire shall be the owner of facilities and necessary appurtenant
equipment for use in Petroleum Operations under this EPC unless otherwise
approved by the Government. The provisions of Article 20.2 above with respect to
the title of property passing to the Government shall not apply to equipment
approved by the Government as belonging to third parties. Moveable facilities and
equipment owned by foreign third parties may be freely exported from the Republic
Kxscutfon copy 62
of Mozambique in accordance with applicable law and the terms of the applicable
agreement.
20.4 Third parties may subject to terms and conditions stipulated by applicable
Petroleum law have the right to the use available spare capacity of facilities and
necessary appurtenant equipment on terms and conditions to be agreed between the
parties and acceptable to the Government. Such terms and conditions shall include
a tariff that shall represent the payment for the Concessionaire's cost of additional
investments required for facilitating such third party use as well as operational costs
and a profit element reflecting the risk taken by the owner of the facilities. The
tariff for third party use of facilities and appurtenant equipment shall be approved
by the Government. When the Concessionaire and the third parties wishing to make
use of facilities can not agree to a reasonable tariff for third party use the
Government may stipulate the tariff.
20.5 Third party use of facilities and necessary appurtenant equipment shall only take
place when such third party use is not materially negatively affecting
Concessionaire Petroleum Operations and is feasible from a technical,
environmental and safety point of view.
Kscciitlnn copy 63
Article 21
Rights of Inspection
MIREM shall have the right at its own cost, save for transport and accommodation to be
provided by the Concessionaire, to post duly appointed representatives on site on a
permanent basis at metering stations, provided that such appointed representatives shall not
interfere with any Petroleum Operations.
Execution copy 64
Article 22
Accounting and Audits
22.1 The Concessionaire shall be responsible for maintaining accounting records of all
costs, expenses and credits of the Petroleum Operations in accordance with the
provisions of Annex “C” of this EPC. The said accounting records shall be kept in
the Republic of Mozambique.
22.2 MIREM shall have the right to audit and inspect the Concessionaire’s accounting
records in accordance with the provisions of Annex “C”.
KxeCHtfqn copy 65
Article 23
Confidentiality
23.1 This EPC, the Documentation and other records, reports analyses, compilations,
data, studies and other materials (in whatever form maintained, whether
documentary, computer storage or otherwise) are confidential (hereinafter referred
to as “Confidential Information”) and except as authorised by applicable law or this
Article shall not be disclosed to any third party without the prior written consent of
all the Parties hereto, which consent shall not be unreasonably withheld.
23.2 Nothing in this Article shall prevent the disclosure of Documentation, excluding the
Concessionaire’s interpretations and assessments, to a third party by the
Government:
(a) if it relates to an area which is no longer part of the EPC Area; or
(b) with the written consent of the Concessionaire, which shall not be
unreasonably withheld if, in the judgment of the Government the
Documentation might have significance for the assessment of prospectivity
in an adjoining area over which the Government is offering Exploration
rights.
23.3 Restrictions on disclosure imposed by this Article shall not apply to a disclosure
made reasonably:
(a) if it is required for the purpose of any arbitration or legal proceedings or
claim relating to this EPC or to the Petroleum Operations;
(b) to a Subcontractor, or consultant in connection with the conduct of
Petroleum Operations;
(c) by the Concessionaire or Operator to a third party where such disclosure is
essential to the safe conduct of Petroleum Operations;
(e) by the Concessionaire to a third party for the purpose of entering into a
contract for data exchange with another entity operating in Mozambique
where all data exchanged relates to Petroleum Operations within
Mozambique;
(f) by any Person constituting the Concessionaire to a bona fide intending
assignee of an interest under this EPC or an interest in any Person
constituting the Concessionaire;
(g) to a third party in connection with and for the purpose of the sale or
proposed sale of Petroleum from the EPC Area;
(h) to a third party in connection with the financing or proposed financing of
Petroleum Operations;
(i) which is required by any applicable law or by the rules or regulations of any
recognised stock exchange on which shares of the disclosing Party or any of
its Affiliated Companies are listed; or
(j) if, and to the extent that, it is already public knowledge without improper
disclosure hereto.
Any Confidential Information disclosed pursuant to paragraphs (b), (d), (e), (f) or
(h) of this Article 23.3 shall be disclosed on terms that ensure that such
Confidential Information is treated as confidential by the recipient.
23.4 None of the Persons constituting the Concessionaire shall be required to disclose
any of its proprietary technology or that of their Affiliated Companies or
proprietary technology of a third party licensed to the Persons constituting the
Concessionaire or the Operator.
1.sedition copy 67
Article 24
Assignment
24.1 Subject to Article 9.14 and this Article the Concessionaire, and where the
Concessionaire is more than one Person every Person who constitutes the
Concessionaire, may assign to another Person its rights and obligations hereunder
or an undivided proportionate part thereof. The same applies to other direct and
indirect transfers of interest or participation in the EPC, including, inter alia,
assignment of shareholdings or any legal instrument which provides or may
provide decisive control over a Person constituting the Concessionaire or its
Participating Interest in this EPC. Save as provided in Article 24.2, an assignment
shall require the prior written consent of the Minister of Mineral Resources.
24.2 No consent shall be required by the Minister of Mineral Resources in case of an
assignor who is not in material breach of any of the terms and conditions hereof in
respect of an assignment:
(a) as a result of an Assignment Notice served on a Defaulting Participant
under this EPC; or
(b) if required to give effect to the default procedures under a joint operating
agreement concluded in relation to the Petroleum Operations.
24.3 Each assignment made pursuant to this Article shall be effected by an instrument in
writing to be executed by the assignee on terms whereby such assignee accepts and
agrees to become a Person constituting the Concessionaire and to be bound by the
terms and conditions of this EPC including all appurtenant documents required by
an administrative decision or applicable law and free of any transfer charge or fees.
24.4 No unitisation pursuant to this EPC or applicable law or any adjustment to the
portion of the unitised Discovery allocated to the EPC Area shall be considered to
be an assignment under this Article.
XA
Kxccution copy 68 Jr»
Article 25
Force Majeure
25.1 The non-performance or delay in performance, wholly or in part, by the
Government or the Concessionaire of any obligation under this EPC excepting an
obligation to make payments hereunder, shall be excused if, and to the extent that,
such non-performance or delay is caused by Force Majeure.
25.2 For the purpose of this EPC, the term Force Majeure means any cause or event
beyond the reasonable control of, and not brought about at the instance of, the Party
claiming to be affected by such event, and which has caused the non-performance
or delay in performance. Without limitation to the generality of the foregoing,
events of Force Majeure shall include natural phenomena or calamities including
but not limited to, epidemics, earthquakes, storms, lightning, floods, fires,
blowouts, wars declared or undeclared, transboundary hostilities, blockades, civil
unrest or disturbances, labour disturbances, strikes, quarantine restrictions and
unlawful acts of government.
25.3 The Party claiming suspension of its obligations under this EPC on account of
Force Majeure shall:
(a) promptly notify the other Parties of the occurrence thereof;
(b) take all actions that are reasonable and legal actions to remove the cause of
Force Majeure but nothing herein shall require the Concessionaire, subject
to applicable law, to resolve any labour dispute except on terms satisfactory
to the Concessionaire; and
(c) upon removal or termination thereof, promptly notify the other Parties and
take all reasonable action for the resumption of the performance of its
obligations under this EPC as soon as possible after the removal or
termination of Force Majeure.
Kvi'Ctitioii copy 69
25.4 Where under this EPC the Concessionaire is required or has the right to do any act
or to carry out any programme within a specified period or the rights of the
Concessionaire hereunder are to subsist for a specified period the specified period
shall be extended so as to take reasonable account of any period during which by
reason of Force Majeure the Concessionaire has been unable to carry out the
programme necessary to exercise a right, carry out its obligations or enjoy its rights
hereunder.
25.5 Where a Force Majeure situation continues for more than fifteen (15) consecutive
days, the Parties shall meet forthwith in order to review the situation and to agree
on the measures to be taken for the removal of the cause of Force Majeure and for
the resumption in accordance with the provisions of this EPC of the performance
of the obligations hereunder.
i.wcntfon copv 70
Article 26
Foreign Exchange Control
26.1 The Concessionaire shall at all times comply with the procedures and formalities
relating to dealings in foreign exchange which may be in force in the Republic of
Mozambique from time to time and the Government undertakes to ensure that those
procedures and formalities will not in any way diminish the rights accorded to the
Concessionaire under clauses 26.2 to 26.8.
26.2 The Concessionaire shall have the right but not the obligation:
(a) to open and keep one or more accounts denominated in Mozambican
currency with any bank in the Republic of Mozambique authorised by
Banco de Mozambique for this purpose and to dispose freely of the sums
deposited therein without restriction.
Such accounts may be credited only with:
(i) the proceeds of the conversion into Mozambican currency pursuant
to Article 26.2(c) of United States dollar funds deposited in the
accounts referred to in Article 26.2(b);
(ii) the unused balance of any sums drawn from such account; and
(iii) amounts received in Mozambican currency in respect of funds
related to Petroleum Operations including sale of Petroleum or of
any rental, refund or other credit received by the Concessionaire
which apply to any charge made to the accounts under this EPC.
(b) to open and keep one or more accounts denominated in United States
dollars, with any bank in the Republic of Mozambique authorised by Banco
de Mozambique for this purpose, to freely import and deposit into such
account funds required for the conduct of Petroleum Operations and to
freely dispose of the sums deposited therein without restriction, provided
always that such accounts are credited only with sums deposited in United
I'.W'Ciilion copy 71 JA
States dollars;
(c) to purchase Mozambican currency from banks in the Republic of
Mozambique, exchange houses, other financial institutions, authorised by
Banco de Mozambique for this purpose.
26.3 (a) The Concessionaire and the Operator acting on behalf of the Concessionaire
shall have the right to open and keep up to four (4) accounts (as well to
open and keep further accounts outside the Republic of Mozambique with
the prior consent of the Bank of Mozambique) with any bank outside the
Republic of Mozambique, in any foreign currency, and freely dispose of the
sums deposited therein without restriction, with funds related to Petroleum
Operations. Such accounts, however, shall not be credited with the proceeds
of the sale of Mozambican currency without the prior consent of the Bank
of Mozambique except for funds generated by the sale within the Republic
of Mozambique of Petroleum, or of assets held in respect of Petroleum
Operations, which may be credited to the aforesaid accounts without the
need for prior consent.
(b) Save in respect of funds needed by the Concessionaire to discharge its
obligations under this EPC to the Government, which payments may be
made out of proceeds deposited in such offshore accounts, the
Concessionaire shall have the right to retain abroad all proceeds and
payments under this EPC received in said bank accounts, and to dispose
freely of the same without any obligation to convert the whole or any part of
such proceeds and payments to Mozambican currency or to otherwise
repatriate the same or any part thereof to the Republic of Mozambique;
provided, however, that subject to applicable law, the estimated amount of
tax due in respect of the Concesssionare’s share of Profit Petroleum shall be
remitted to an account in the Republic of Mozambique within 45 days, and
all amounts to which the Government is entitled shall be remitted to the
Republic of Mozambique within 30 days.
(c) All payments to the Government and/or to ENH shall be made in United
States dollars , unless the Parties have agreed otherwise, to two accounts
Execution copy 72
domiciled in the Republic of Mozambique, the first to be indicated by the
Government and the other by ENH.
(d) The Concessionaire shall be obliged to report periodically on the operation
of the accounts referred to in clause 26.3(a), above. Specifically, the
Concessionaire shall copy the Government on monthly bank statements
received. The Government shall be entitled to audit such accounts.
Amounts spent on any such audits shall be cost recoverable. The
Concessionaire shall wave banking confidentiality as to the Government in
respect of such accounts in order to facilitate any such audits.
26.4 Subject to withholding tax due, all non-resident Subcontractor and all of the
Expatriate Personnel of the Concessionaire, the Operator or of any Subcontractors,
shall be entitled to receive in any currency other than Mozambican currency the
whole or any part of his compensation outside the Republic of Mozambique. All
payments to resident subcontractors shall be made exclusively in Mozambique.
26.5 This foreign exchange regime shall not apply to ENH or its legal successor, in the
event that same is a Mozambican Person, as a Person constituting Concessionaire
under this EPC, which shall be subject to the regime set forth in applicable law.
26.6 Subject to clause 26.3(b), above, the Concessionaire may receive, remit and retain
abroad and freely dispose of all or any part of the proceeds realised from the sale of
its share of Petroleum, including the portion of Crude Oil for the recovery of costs
and the Profit Petroleum to which it is entitled.
26.7 Subject to withholding tax due, the Concessionaire shall have the right freely to
declare and pay dividends to their shareholders and to remit the same abroad under
the terms of the applicable law.
26.8 The Government and the Concessionaire shall develop procedures under which
amounts demonstrably expended under this EPC that are cost recoverable, as well
as such further amounts demonstrably expended as may be classifiable as capital
expense under applicable law, shall be entitled to capital registration
notwithstanding the account from which the corresponding expenses were made.
I.\mit Iwi copy 73
Ksecufjojj copy
74
Article 27
Nature and Extent of the Rights of the Concessionaire
27.1 Subject to any right that the Government may have under the laws of Mozambique
for imperative reasons in the national interest to acquire Petroleum to which the
Concessionaire holds title, and the right of the Government to collect Petroleum
Production Tax in kind pursuant to Article 11.6 (d) the Concessionaire may, by
export or otherwise, freely sell or otherwise dispose of its entitlement to Petroleum
as provided for in this EPC.
27.2 The rights granted under this EPC to the Concessionaire and its Subcontractors
shall include the right of use and enjoyment of the land and maritime areas
encompassed in the EPC Area, for the purpose of conducting Petroleum
Operations. For that purpose Concessionaire and its Subcontractors may construct
and operate such works, facilities, platforms, structures and pipelines as may be
necessary. Such rights to be exercised by the Concessionaire provided, however,
that the lawful occupier of any land in the EPC Area shall retain any rights he may
have to graze stock upon or cultivate the surface of the land, except to the extent
that such grazing or cultivation interferes with Petroleum Operations in any such
area. Further, for the purpose of conducting Petroleum Operations, Concessionaire
and its Subcontractors may conduct and operate works, facilities, platforms,
structures and pipelines necessary in the EPC area. Such rights to be exercised by
the Concessionaire, provided, however, that such Persons shall retain rights they
may have to fishing or aquaculture, except to the extent such activities interfere
with Petroleum Operations in such area.
27.3 The right of the Concessionaire to use the land, maritime area or sea bed shall
continue to apply to acreage initially included within the EPC Area but
subsequently relinquished in accordance with the terms of this EPC where such
use is reasonably necessary for purposes of conducting Petroleum Operations in the
EPC Area then remaining under this EPC.
27.4 For the purposes of carrying out Petroleum Operations, the Concessionaire and any
Subcontractors shall have at all times access to and from the EPC Area and to any
other area in the Republic of Mozambique where the Concessionaire has acquired
execution copy 75
or constructed facilities, subject to Articles 27.9(f) and (g).
27.5 The rights of the Concessionaire under Articles 27.2, 27.3, 27.4, 27.8, and 27.9
shall be exercised reasonably so as to affect as little as possible the interests of any
lawful occupier of land in the EPC Area.
27.6 Where in the course of conducting Petroleum Operations in the EPC Area the
Concessionaire causes disturbance to the rights of the lawful occupier of any land
or causes damage to his growing crops, trees, buildings, stock or works the
Concessionaire shall pay to the lawful occupier such compensation in respect of
any such disturbance or damage as may be agreed by a settlement or as
Concessionaire may be adjudged liable to pay by final, non-appealable order or
judgement of a court or arbitral body under Mozambican jurisdiction.
27.7 Where in the course of conducting Petroleum Operations in the EPC Area the
Concessionaire causes disturbance to the rights of a Person having their fishing
fields or grounds occupied, aquaculture activities limited, fishing or aquaculture
equipment moved to less favourable locations from a maritime resource
management or commercial point of view, as well as having their equipment, catch
or harvest polluted or damaged the Concessionaire shall pay to the Person affected
such compensation in respect of any such demonstrable disturbance or damage as
may be agreed by settlement or as Concessionaire may be adjudged liable to pay by-
final, non-appealable order or judgement of a court of or arbitral body under
Mozambican jurisdiction.
27.8 Where the amount of any compensation to be paid pursuant to Articles 27.6 and
27.7 is in dispute, the matter shall be referred for determination to a sole expert
pursuant to Article 30.6 as though it were a matter in dispute between the Parties.
27.9 For the purposes described in this Article the following rights are granted to the
Concessionaire subject to and in accordance with the provisions of the work
programme related thereto and applicable law:
(a) to drill for and have the free use of water and impound surface waters and to
establish systems for the supply of water for the Petroleum Operations and
Execution copy 76
for consumption by its employees and its Subcontractors;
(b) with the consent of, and subject to such terms and conditions agreed with,
any Person having the right to dispose of such minerals, to carry away and
use for Petroleum Operations in Mozambique, materials such as gravel,
sand, lime, gypsum, stone and clay; provided that if the Person having the
right to dispose of the same is the Government or an agency of
Government; then Concessionaire shall have the use of such minerals for
the Petroleum Operations in accordance with applicable law;
(c) to erect, set up, maintain and operate engines, machinery, pipelines,
gathering lines, umbilicals, storage tanks, compressor stations, pumping
stations, houses, buildings and all other constructions, installations, works,
platforms, facilities and other fixtures which are required in furtherance of
its Petroleum Operations;
(d) to erect, set up, maintain and operate all communication and transportation
systems and facilities but shall not, save for temporary purposes, do so
unless drawings of and locations for their sites have been submitted to and
approved by the Government, under reasonable conditions of installation
and operation of such systems and facilities;
(e) to erect, maintain and operate harbour and terminal facilities for use
exclusively in Petroleum Operations, together with the necessary means of
communication and transport between such facilities and any part of the
EPC Area; provided that the consent of the Government to the location of
such works shall first be obtained;
(f) with respect to lands located outside of the EPC Area, to have the right of
way over land not in the beneficial occupation of any Person and in the case
of land in the beneficial occupation of the Government or any state
company, agency or instrumentality of the Government to have right of way
on such reasonable terms and conditions as the Government and the
Concessionaire may agree; and
Execution copy 77
(g) with respect to lands located outside of the EPC Area, to have, otherwise
than aforesaid, the use of land necessarily required for the conduct of
Petroleum Operations with the agreement of the Person holding a right
affected, including the lawful occupier of land or, in the case of unoccupied
land or land occupied by the Government or any state company, agency or
instrumentality of the Government on such reasonable terms and conditions
as the Government shall specify, provided that if the Concessionaire is
unable to reach agreement with the Person so affected on the terms and
conditions for the use of any such right including land the Concessionaire
shall immediately notify the Government. If the use of the rights by the
Concessionaire is to be of a temporary nature, not exceeding one (1) year,
the Government shall authorise such temporary use upon deposit by the
Concessionaire with the Government of a sum by way of compensation to
such Person holding the right for loss of use and damage to its interest. If
the use is required to be for a period longer than one (1) year, the
Government shall authorise the use by the Concessionaire of the right in
question upon deposit by the Concessionaire with the Government of such
sum by way of compensation and shall direct appropriate proceedings to
grant the Concessionaire the right to use and legally utilize the right under
the law at the moment in force as if the Petroleum Operations were in all
respects a work of public utility.
27.10 The Concessionaire shall be subject to the procedures and formalities required by
applicable law for the exercise of the rights set forth in this Article.
27.11 (a) In the event that the Government exercises any right it may have under the
applicable laws to acquire for imperative reasons in the national interest
Petroleum belonging to the Concessionaire, the Government shall give not
less than forty five (45) days notice of the exercise of such right and of the
volumes it wishes to acquire, and the Concessionaire shall supply the
volumes so notified from the Petroleum to which the Concessionaire is
entitled under this EPC at the Delivery Point or such point that may be
agreed or such point within Mozambican jurisdiction designated by the
Government. Additional cost incurred by Concessionaire in order to deliver
such Petroleum at any other point than the Delivery Point with facilities and
i U'Ctltioll copy 78
f
equipment in place, as well as other necessary costs related to the delivery
of such Petroleum, shall be reimbursed to the Concessionaire by
Government and the cost of any new facilities and equipment to be used for
such delivery shall be paid by the Government.
(b) The Government shall pay the Concessionaire the full market value of the
Petroleum so acquired determined in accordance with Article 10. Payment
for the Petroleum so acquired in any calendar month shall be made in
United States dollars within thirty (30) days after the end of that calendar
month. The Concessionaire may receive, remit and retain abroad and freely
dispose of all or any part of the sums so paid.
(c) The Government shall not exercise its right to acquire Petroleum belonging
to the Concessionaire:
(i) in respect of any month unless during that month the Government is
taking Petroleum Production Tax entirely in kind pursuant to
Article 11.5;
(ii) unless it is also exercising the same right rateably among all
producers of Petroleum within the Republic of Mozambique (to the
extent practicable taking into account the geographical location of
the production in relation to the geographical location of the
requirements).
27.12 The Government undertakes that so long as this EPC subsists:
(a) The Government, its political subdivisions, agencies and instrumentalities,
to the extent that they have or may acquire the power to do so, will not
expropriate, nationalise or intervene in the assets, rights, interests or any
other property of any kind of the Concessionaire held for the purpose of
Petroleum Operations including the rights held by the Concessionaire
hereunder.
Without prejudice to the rights of the Government acting through MIREM
Execution copy- 79 V
to regulate Petroleum Operations in the Republic of Mozambique, for the
purpose of this undertaking, the Government shall be deemed to have
intervened in the property or assets of the Concessionaire if (otherwise than
pursuant to a judgment or in exercise of its rights as a mortgage creditor, or
in accordance with the law of insolvency, liquidation or creditor’s rights) it
assumes power of management over such property or assets or exercises
effective control of such property or assets.
(b) In the event of a breach of Article 27.12(a), nothing in the provisions of
Article 19.5 shall be read or construed as preventing consideration of the
projected flow of profits (if any) from Petroleum Operations hereunder for
the purpose of determining the value of property or assets expropriated,
nationalised or made subject to intervention.
(c) In the event that the Petroleum Law is repealed or amended, the
Government undertakes to ensure that this EPC remains in full force and
effect provided always that nothing in this provision will be construed as
requiring the Government to relieve the Concessionaire from compliance
with the provisions of applicable law relating to Petroleum Operations, not
inconsistent herewith, which may be in force from time to time.
27.13 (a) Where for the purpose of conducting Petroleum Operations hereunder the
Concessionaire, Operator or any Subcontractor requires from MIREM, the
Government or from any agency or instrumentality of the Government or
from a political subdivision thereof any approvals, licences, permits,
authorisations, consents or releases or any assistance, advice or guidance
relating to the above, then subject to the terms and conditions of this EPC,
the same shall be granted or given expeditiously and without undue delay.
(b) Without prejudice to the generality thereof, the undertaking set out in
Article 27.13(a) shall apply to:
formalities relating to the import and export of goods including the
export of Petroleum Produced hereunder;
formalities relating to the use by the Concessionaire of any form of
transport for the movement of employees, equipment and materials
and to the use of communication and port facilities in the Republic
of Mozambique;
the grant of permits or other approvals required for the admission
into and employment in the Republic of Mozambique of Expatriate
Personnel;
- the grant of land rights or the permits or other approvals necessary
for the use of land in accordance with this Article 27;
- the grant of rights to take or use water and minerals;
- procedures and formalities relating to foreign exchange; and
- approval of assignments and, to the extent required, transactions
relating to the shares of any Person constituting the Concessionaire.
The Government will expedite all formalities regarding the
Concessionaire’s registration to do business in Republic of Mozambique
and the registration of any leases, contracts or other documents. The
Government will, to the extent that circumstances and resources permit,
ensure that the Concessionaire and its employees and property enjoy
reasonable protection in Republic of Mozambique.
27.14 In the event of changes in Petroleum legislation or in other Mozambican legislation
affecting Petroleum Operations that may, individually or in the aggregate, create a
material adverse effect to the economic benefits of the Concessionaire or to the
State in terms of this EPC, the Parties shall, as soon as possible after any of the
above-mentioned situations occur, meet to verify and agree on the changes, in all
cases, that may be required to the EPC in order to restore, as closely as possible, the
economic benefits that the Concessionaire would have derived if the change in the
legislation had not been effected.
The provisions of this article shall not be read or construed as imposing any
limitation or constraint on the scope, or due and proper enforcement, of
Mozambican legislation which does not discriminate, or have the effect of
discriminating, against the Concessionaire, and provides for the protection of
health, safety, labour or the environment, or for the regulation of any category of
property or activity carried on in Mozambique, provided, however, that the
r
Execution copy 81
Government will at all times during the period of Petroleum Operations ensure that,
in accordance with the terms of Article 31, measures taken for the protection of
health, safety, labour or the environment are in accordance with standards that are
reasonable and generally accepted in the international petroleum industry.
K'CCIitioli cup.' 82
Article 28
Protection of the Environment
28.1 The Government will at all times during the life of the Petroleum Operations ensure
in accordance with this Article, that measures taken in the interest of safety, health,
welfare or the protection of the environment are in accordance with standards
generally accepted from time to lime in the international petroleum industry and are
not unreasonable.
28.2 In carrying out Petroleum Operations hereunder the Concessionaire shall:
(a) in accordance with accepted standards in the international petroleum
industry employ up-to-date techniques, practices and methods of operation
for the prevention of environmental damage, the control of waste and the
avoidance of unnecessary loss of, or damage to, natural resources;
(b) observe applicable laws and regulations of general application in force from
time to time in the Republic of Mozambique for the protection of the
environment; and
(c) comply strictly with the obligations relating to the protection of the
environment it has assumed under any approved Development Plan .
28.3 The Concessionaire undertakes for the purposes of this EPC to take all necessary
and adequate steps in accordance with Good Oilfield Practice to:
(a) ensure, if the Concessionaire is otherwise legally responsible, proper
compensation for injury to Persons or damage to property caused by the
Petroleum Operations;
(b) avoid irremediable environmental damage to the EPC Area and adjoining or
neighbouring lands and marine areas caused by the Concessionaire’s
Petroleum Operations; and
(c) rehabilitate at its own cost all areas that suffer environmental damage as a
Execution copy 83
result of the Petroleum Operations.
28.4 If the Concessionaire fails to comply with the terms of Articles 28.2 or 28.3 or
contravenes any law on the prevention of environmental damage and such failure or
contravention results in any environmental damage, the Concessionaire shall take
all necessary and reasonable measures to remedy such failure or contravention and
the effects thereof.
28.5 (a) If the Government has reasonable grounds to believe that any works or
installations erected by the Concessionaire or any operations carried out by
the Concessionaire in the EPC Area are endangering or may endanger
Persons or any property of any other Person or is causing pollution or
harming wildlife or the environment to a degree which the Government
considers unacceptable, the Government shall notify the Concessionaire of
its concerns and the Government and the Concessionaire shall immediately
consult to agree on remedial measures to be taken by the Concessionaire.
Said remedial measures will be undertaken w'ithin a reasonable period of
time to repair any damage and to prevent further damage to the extent
reasonably practicable. If there is a disagreement between the Government
and the Concessionaire regarding the existence of a problem of the type
described in this Article or the remedial action to be taken by the
Concessionaire, such matter shall be submitted to a sole expert for
determination pursuant to Article 30.6.
(b) in the case of any matter referred to a sole expert under Article 28.5(a), if
requested by the Government, the Concessionaire shall undertake such
temporary measures to address the Government’s concerns as may be
reasonably requested by the Government.
28.6 Without limitation to the generality of Articles 28.2, 28.3, 28.4 and 28.5, the
Concessionaire shall cause a consulting firm or individuals, approved by the
Government on account of their special knowledge of environmental matters, to
carry out an environmental impact study on terms of reference determined by the
Concessionaire and approved by the Government, in order to establish what the
effect will be on the environment, human beings, wildlife or marine life in the EPC
l.U'ciitliin copy 84
Area in consequence of the Petroleum Operations to be undertaken under this EPC
28.7 If the Concessionaire fails to comply with any terms contained in this Article
within a reasonable period of time the Government may, after giving the
Concessionaire notice of such failure to comply and a reasonable period of time
necessary to take corrective action, take any action which may be necessary to cure
such failure, and recover, immediately after having taken such action, all
expenditure incurred in connection with such action from the Concessionaire
together with interest at the prevailing LIBOR rate calculated from the date such
expenditure is made until repaid. “LIBOR” meaning the annual rate equal to the
average three (3) month term compounded quarterly at the London inter-bank
offered rate for United States dollar deposits as published by the Wall Street
Journal or, if not published therein, then by the Financial Times of London. Should
a rate not be quoted for a relevant date (such as weekends or public holidays), then
the first subsequent quoted rate shall be used.
28.8 The Concessionaire and MIREM shall notify each other of any environmentally,
archaeologically, historically or similarly protected areas or features which might
be affected by the Petroleum Operations.
28.9 In the event that Petroleum Operations are intended to be conducted within the
boundaries of any protected area within the EPC Area, the Concessionaire shall
obtain such additional approvals from the Government, as may be required by
applicable law.
Execution copy 85
Article 29
Surrender and Cancellation
29.1 The Concessionaire on giving to MIREM not less than thirty (30) days notice may:
(a) if its obligations in respect of any Exploration Period have been fulfilled, at
any time thereafter surrender its rights in respect of the entire EPC Area
with the consequence that no new obligations will thereafter accrue; and
(b) at any time, surrender its rights in respect of any acreage forming part of the
EPC Area with the consequence that no new obligations will thereafter
accrue in respect of such acreage; provided, however, that:
(i) no surrender by the Concessionaire of its rights over any part of the
EPC Area shall relieve the Concessionaire of any of its obligations
as set out in Article 4; and
(ii) any area surrendered shall be continuously delineated by meridians
and parallels of latitude expressed in whole minutes of a degree.
29.2 Unless otherwise provided in this Article, the Government may, by notice to the
Concessionaire, cancel this EPC for the reasons given in applicable law, including
in any of the following events:
(a) the Concessionaire is in material breach of the terms and conditions of this
EPC;
(b) the Concessionaire fails to materially comply within a reasonable period of
time with any final decision reached as a result of arbitration proceedings
conducted pursuant to Article 30.2 or fails within a reasonable period of
time to accept as final and binding the decision of a sole expert to whom,
pursuant to this EPC, any matter has been referred under Article 30.6;
(c) where the Concessionaire is one Person, an order is made or a resolution is
passed by a court of competent jurisdiction winding up the affairs of the
86
ICvi'ciition copy
Concessionaire unless the winding up is for the purpose of amalgamation or
reorganisation and the Government has been notified of the amalgamation
or reorganisation, or if without the approval of the Government, the
majority of the shares in the Concessionaire are acquired by third parties
other than an Affiliated Company; or
(d) the Concessionaire is more than one Person and all Persons who constitute
the Concessionaire are for the purpose of Article 29.3(a) Defaulting
Participants.
29.3 (a) In the event that more than one Person constitutes the Concessionaire, and
in respect of any such Person (hereinafter in this Article referred to as the
“Defaulting Participant”) an event occurs of the kind described in Article
29.2(c) or any such Person (also hereinafter referred to as the “Defaulting
Participant”) is in material breach of an obligation under this EPC which as
provided in Article 5.2(a) is a several obligation, the Government will not
be entitled to cancel this EPC pursuant to Article 29.2 or otherwise, unless
all the Persons who constitute the Concessionaire are Defaulting
Participants, but may subject to Article 29.4, serve on the Defaulting
Participant a notice (hereinafter referred to as an “Assignment Notice”).
(b) Where an Assignment Notice has been served on a Defaulting Participant,
the Defaulting Participant shall forthwith, unconditionally, without
consideration, and free from all encumbrances assign its undivided
participating share in this EPC to the other Persons who constitute the
Concessionaire (the “Non-Defaulting Participants”) in undivided shares in
proportion to the undivided shares in which the Non-Defaulting Participants
hold their shares in this EPC, and each of the Non-Defaulting Participants
shall be obliged to accept that assignment. A Non-Defaulting Participant
accepting such an assignment shall not be responsible for any obligations of
the assigning Defaulting Participant to the Government, or any third party
which accrued prior to the assignment.
29.4 The Government may cancel this EPC pursuant to Article 29.2 or serve an
Assignment Notice under Article 29.3 only if:
K locution copy 87
(a) the Government gives not less than ninety (90) days notice (the “Notice”) to
the Concessionaire or, as the case may be, the Defaulting Participant, of an
intention to cancel this EPC or to serve an Assignment Notice stating in
detail in the Notice the alleged material breach or other grounds for
cancellation or service of an Assignment Notice relied upon by the
Government;
(b) the Concessionaire or the Defaulting Participant is given a period of thirty
(30) days from its receipt of the Notice to provide any information it wishes
the Government to consider;
(c) the Concessionaire or Defaulting Participant is given a period of sixty (60)
days from its receipt of the Notice:
(i) to cure or remove such material breach or other grounds specified in
the Notice for cancellation or service of an Assignment Notice; or
(ii) if such material breach or other grounds aforesaid cannot be cured or
removed within such sixty (60) day period, to immediately begin
efforts to cure or remove the alleged material breach or other
grounds aforesaid and to diligently pursue such efforts; or
(iii) where it is impossible to cure or remove such material breach or
other grounds aforesaid, to pay reasonable compensation to the
Government, in respect thereof; and
(d) the Concessionaire or the Defaulting Participant either:
(i) has failed within the said sixty (60) days to cure or remove such
material breach or other grounds aforesaid pursuant to Article
29.4(c)(i); or
(ii) has failed to diligently pursue efforts to cure or remove such
material breach or other grounds aforesaid pursuant to Article
29.4(c)(ii); or
McCIltiflU C(,py 88
(iii) in the event that it is impossible to cure or remove such material
breach or other grounds aforesaid, has failed within the said sixty
(60) days to pay reasonable compensation;
and the Concessionaire or the Defaulting Participant has not commenced
arbitration proceedings pursuant to Article 29.5.
29.5 Any dispute between the Parties as to whether :
(a) there are grounds under Article 29.2 on which this EPC may be cancelled;
(b) there are grounds under Article 29.3 on which an Assignment Notice may
be served on any Person;
(c) the requirements of Article 29.4(a), (b) and (c) have been satisfied; or
(d) the Concessionaire or, as the case may be, the Defaulting Participant has
remedied or removed a ground in respect of which this EPC may be
cancelled under Article 29.2 or an Assignment Notice served under Article
29.3 or whether full, prompt and effective compensation has been paid in
respect of grounds for cancellation or the service of an Assignment Notice
which are impossible to remedy or remove
shall be referred to arbitration under Article 30.
29.6 (a) Where notice of a dispute has been given by the Concessionaire in respect
of any of the matters specified in Article 29.5, the Government may not
pursuant to Article 29.2 cancel this EPC until the matter or matters in
dispute have been resolved by an award and in that event only if
cancellation is consistent with the award rendered;
(b) Where the existence of a material breach of the terms and conditions of this
EPC relates to a matter in dispute between the Government and the
Concessionaire which has been referred for determination by a sole expert
Ku'CUtlon copy 89
pursuant to Article 30.6, a notice served on the Concessionaire pursuant to
Article 29.4 may not rely upon that matter as a reason for the intended
cancellation of this EPC until the sole expert has determined the matter and
in that event only if cancellation would be consistent with the way in which
the matter has been so determined.
Exceiitiiiii copy 90
jr,
Article 30
Consultation, Arbitration and Independent Expert
30.1 For the purpose of this article there are two Parties, the Government and the
Concessionaire.
30.2 A dispute shall be resolved, if possible, by negotiation between the Parties. A
notice of the existence of a dispute shall be given by a Party to another in
accordance with the provisions of Article 35. In the event that no agreement is
reached within thirty (30) days after the date one Party notifies the other that a
dispute exists, or such longer period that is specifically provided for elsewhere in
this EPC, either Party shall have the right to have such dispute determined by-
arbitration or an expert as provided for in this Article 30. Arbitration and expert
determination as aforesaid shall be the exclusive method of determining a dispute
under this EPC.
30.3 Subject to the provisions of this Article 30, and save for any matter to be referred to
a sole expert as provided in clause 30.6, the Parties shall submit any dispute arising
out of or in connection with this EPC which cannot be resolved by negotiation as
provided in clause 30.2 to arbitration as hereinafter provided:
(a) the dispute shall be submitted to the International Centre for Settlement of
Investment Disputes (“ICSID”) for settlement by arbitration pursuant to the
Convention on the Settlement of Investment Disputes between States and
Nationals of Other States in accordance with the arbitration rules thereof in
effect on the Effective Date (the “Convention”). It is hereby stipulated that
the transaction to which this EPC relates is an investment;
(b) the seat of the arbitration shall be Geneva, Switzerland and the law of the
merits of the arbitration shall be Mozambique law. The arbitration shall be
conducted in the English language. If for any reason an ICSID arbitral
tribunal declines to approve Geneva as the place of arbitration, the place of
arbitration for that case shall be the Permanent Court of Arbitration in the
Hague. Notwithstanding Article 32, the English version of this EPC signed
by the Parties shall be used as the official translation in arbitral proceedings;
t.u'ctitfon copy 91
(c) if the dispute is not between one or more Parties who are nationals of a
Contracting State, on the one hand, and the Government and/or ENH, on the
other hand, or if for any reason the Centre refuses to register a request for
arbitration or an arbitral tribunal established in accordance with the ICSID
Arbitration Rules determines that the dispute is not within the jurisdiction of
the Centre, the dispute shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules. In the event that UNCITRAL Arbitration
Rules shall be applied, the appointing authority shall be the Permanent
Court of Arbitration in The Hague
(d) an award by an arbitrator or arbitrators shall be final and binding on all
Parties;
(e) the arbitral panel shall be composed of three (3) arbitrators to be appointed
in accordance with the ICSID Rules, provided that, upon mutual agreement
of both Parties, the arbitration may be conducted by a sole arbitrator
appointed under the ICSID Rules. Unless both Parties have agreed that the
dispute shall be settled by a sole arbitrator, the claimant Party shall
nominate in the request for arbitration, and the respondent Party shall
nominate within thirty (30) days of the registration of the request, one (1)
arbitrator pursuant to the ICSID Rules. Within a period of thirty (30) days
from the date when both arbitrators have accepted their appointments the
arbitrators so appointed shall agree on a third arbitrator, who shall act as
Chairman of the arbitral tribunal. If either Party fails to nominate an
arbitrator as provided above, or if the arbitrators nominated by the Parties
fail to agree on a third arbitrator within the period specified above, then
ICSID shall make such appointments as necessary in accordance with the
ICSID Rules. If both Parties have agreed that the dispute shall be settled by
a sole arbitrator the sole arbitrator shall be nominated by agreement
between them subject to acceptance by the nominated arbitrator; provided
that if the Parties are unable to agree on a nominee for sole arbitrator within
thirty (30) days from the date of the registration of the request, then ICSID
shall appoint the sole arbitrator in accordance with the ICSID Rules;
£?£€*&»! copy 92
(f) insofar as practicable, the Parties shall continue to implement the terms of
this EPC notwithstanding the initiation of arbitral proceedings and any
pending disputes; and
(g) the provisions set out in this Article 30 shall continue after the termination
of this EPC; and
(h) Neither any sole expert nor any arbitrator of the arbitral tribunal, as
applicable, shall be of the same nationality as any Party.
30.4 An award or a decision, including an interim award or decision, in arbitral
proceedings pursuant to this Article 30 shall be binding on the Parties and judgment
thereon may be entered in any court having jurisdiction for that purpose. Each of
the Parties hereby irrevocably waives any defences based upon sovereign immunity
and waives any claim to immunity:
(a) in respect of proceedings in aid of arbitration or to enforce any such award
or decision including, without limitation, immunity from service of process
and from the jurisdiction of any court; and
(b) in respect of immunity from the execution of any such award or decision
against the property of the Republic of Mozambique held for a commercial
purpose.
Parties in this clause 30.4 shall be understood to include each Person constituting
the Concessionaire.
30.5 Any matter in dispute of a technical nature not involving interpretation of law or
the application of this EPC and which is required to be referred to a sole expert for
determination under the provisions of this EPC, including Articles 10.3 (e) and 28.5
(a) of this EPC and Article 2.1 (e) of Annex "C" or other issues of a substantially
equivalent nature to said clauses (or with respect to any other matter which the
Parties may otherwise agree to so refer) shall be referred by a Party giving notice to
such effect pursuant to Article 35. Such notice shall contain a statement describing
the dispute and all relevant information associated therewith. A sole expert shall be
Execution copy 93
an independent and impartial person of international standing with relevant
qualifications and experience appointed pursuant to the mutual agreement of the
Parties. Any sole expert appointed shall act as an expert and not as an arbitrator or
mediator and shall be instructed to endeavour to resolve the dispute referred to him
within thirty (30) days of his appointment, but in any event within sixty (60) days
of the appointment. Upon the selection of the sole expert, the Party receiving the
notice of referral above shall submit its own statement containing all information it
considers relevant with respect to the matter in dispute. The decision of the sole
expert shall be final and binding and not subject to any appeal, save for fraud,
corruption or manifest disregard of applicable procedure of this EPC. If the Parties
are unable to agree on the appointment of a sole expert within twenty (20) days
after a Party has received a notice of referral under this Article the sole expert shall
be selected by the ICC Centre for Expertise, and the person so selected shall be
appointed by the Parties.
30.6 The sole expert shall decide the maimer in which any determination is made,
including whether the Parties shall make oral or written submissions and
arguments, and the Parties shall co-operate with the sole expert and provide such
documentation and information as the sole expert may request. All correspondence,
documentation and information provided by a Party to the sole expert shall be
copied to the other Party, and any oral submissions to the sole expert shall be made
in the presence of all Parties and each Party shall have a right of response. The sole
expert may obtain any independent professional or technical advice as the sole
expert considers necessary. The English version of this EPC signed by the Parties
shall be used as the official translation in any determination by the sole expert. The
fees and expenses of a sole expert appointed under the provisions of Article 30.5
shall be borne equally by the Parties.
30.7 The Parties hereby agree not to exercise any right to institute legal proceedings
under any law or jurisdiction to set aside any interim or final arbitral award made
pursuant to this Article 30, except that nothing in this Article 30.7 shall be read or
constmed as imposing any limitation or constraint on either Party’s right to seek to
nullify any such interim or final arbitral award (a) rendered by an ICSID arbitral
tribunal on the limited grounds and in accordance with the procedure set forth in
Article 52 of the Convention or (b) rendered by the arbitral tribunal pursuant to the
Execution copy 94
UNCITRAL Arbitration Rules on the limited grounds set forth in Article 52 of the
Convention.
l.wcution copy 95
Article 31
Applicable Law
31.1 This EPC shall be governed by and construed in accordance with the applicable
laws of the Republic of Mozambique.
(a) The Government and the Concessionaire agree to cooperate on preventing
31.2
corruption. The parties undertake to take administrative disciplinary actions
and rapid legal measures in their respective responsibilities to stop,
investigate and prosecute in accordance with national law any person
suspected of corruption or other intentional misuse resource.
(b) No offer, gift, payments or benefit of any kind, which would or could be
construed as an illegal or corrupt practice, shall be accepted, either directly
or indirectly, as an inducement or reward for the execution of this EPC or
for doing or not doing any action or making any decision in relation to this
EPC.
(c) The above is equally applicable to the Concessionaire, its Affiliated
Companies, agents, representatives, sub-contractors or consultants when
such offer, gift, payments or benefit violate:
(i) the applicable laws of the Republic of Mozambique;
(ii) the laws of the country of formation of the Concessionaire or of its
ultimate parent company (or its principal place of business); or,
(iii) the principles described in the Convention on Combating Bribeiy of
Foreign Public Officials in International Business Transactions,
signed in Paris on December 17, 1997, which entered into force on
February 15, 1999, and the Convention's Commentaries.
References in this EPC to applicable law are without prejudice to the rights of the
31.3
Parties under Article 27.14 when such applicable law is Mozambican law.
I'Accution copy 96
Article 32
Language
This EPC has been drawn up in the Portuguese and English languages and three (3)
originals of each version have been prepared for signature by the Government and the
Concessionaire. One (1) signed original of each version will be retained by the Parties.
Both the Portuguese and English versions are binding. However, the Portuguese text will
prevail in case of conflict.
Execution copy 97
Article 33
Joint Operating Agreement
33.1 A joint operating agreement shall be signed between Persons constituting the
Concessionaire immediately upon execution of this EPC.
33.2 The joint operating agreement is subject to the approval of the Government and
such an approval is a condition for the EPC.
33.3 Every agreement other than the joint operating agreement relating to the Petroleum
Operations made between the Persons who constitute the Concessionaire shall be
consistent with the provisions of this EPC and shall be submitted to MIREM as
soon as the same has been executed.
KsccutioB copy 98
Article 34
Future Agreements
It is understood that any written agreement which may at any time be concluded between
the Concessionaire on the one hand and the Government on the other, as may be required
or desired within the context of this EPC shall be deemed to have been approved to the
same extent as if it was originally included in this EPC.
Execution copy 99
Article 35
Notices
35.1 All notices, invoices and other communications hereunder shall be deemed to have
been properly given or presented, if delivered in writing in person or by courier or
sent by facsimile confirmed by courier at the addresses indicated in Article 35.2
with the charges associated with the delivery of the notice, invoice or other
communication being paid by the sender.
35.2 All such notices shall be addressed to the Government or the Concessionaire, as the
case may be, as follows:
(a) The Government
MINISTERIO DOS RECURSOS MINERAIS
Predio Montepio, Avenida Femao de Magalhaes, 34, Is1 floor
Caixa Postal 4724
Maputo, Mozambique
Attention Chairman of the National Petroleum Institute
Telephone +258 21 320935
Telefax +258 21 430 850
(b) Eni East Africa S.p.A.
Via Emilia, 1 - 20097 San Donato Milanese (MI)
Italia
PO BOX: 20097
Attention Chairman
Telephone + 39 02 52064582
Telefax + 39 02 52063259
(c) Empresa Nacional de Hidrocarbonetos E.P.
Execution copy 100
Av. 25 de Setembro, 270, block 1
Time Square, 4'1' floor
Caixa Postal 4787
Maputo, Mozambique
Attention Chairman
Telephone : +258 21 429456
Telefax : +258 21 324808
35.3 Subject to Article 35.4 each Party hereto may substitute or change the aforesaid
address by giving written notice thereof to the others.
35.4 The Concessionaire shall at all times maintain an address in Maputo for the purpose
of service of notice.
Execution copy 101
ANNEX A
DISCRETION OF THE EPC AREA
POINTS Latitude S Longitude E
N 10° 06' 42" o
O
©
O 10° 05* 29" 41° 02’01"
P 10° 05' 29" 41° 45’
Q 12° 00' 41° 45'
M 12° 00' o
o
o
ANNEX B
MAP OF THE EPC AREA
39°0'0"E 39°30’0"E 40°0'0"E 40°30’0"E 41WE 41°30'0"E
9°0'0"S-
°30'0"S'
0°0’0"S-
°30'0"S'
rws-
°30'0"S-
2°0'0"S'
°30'0"S-
3°0'0"S'
Annex “C”
EPC Accounting and Financial Procedure
Execution cop}
TABLE OF CONTENTS
Annex C EPC Accounting and Financial Procedure
Section 1 General Provisions................................................................................................5
1.1 Definitions...................................................................................................................5
1.2 Statements required to be submitted by the Concessionaire.......................................5
1.3 Language and Units of Account..................................................................................6
1.4 Payments....................................................................................................................6
1.5 Audit and Inspection Rights of the Government..........................................................7
Section 2 Classification, Definition and Allocation of Costs and Expenditures.......................8
2.1 Exploration Costs........................................................................................................8
2.2 Development and Production Capital Expenditures.....................................................8
2.3 Operating Costs..........................................................................................................9
2.4 Service Costs..............................................................................................................9
2.5 General and Administrative Expenses.......................................................................10
Section 3 Costs, Expenses, Expenditures and Credits of the Concessionaire....................12
3.1 Subject to Applicable Law, costs recoverable without further approval of the
Government....................................................................................................................12
3.2 Costs recoverable only with approval of the Government..........................................16
3.3 Costs not recoverable under the EPC.......................................................................16
3.4 Recoverability and Deductibility.................................................................................16
3.5 Credit under the EPC................................................................................................16
3.6 Duplication of Charges and Credits...........................................................................17
Section 4 Records and Valuation of Assets........................................................................18
Section 5 Production Statement..........................................................................................19
5.1 ...................................................................................................................................19
5.2 ...................................................................................................................................19
Section 6 Value of Production and Petroleum Production Tax Statement...........................20
6.1...................................................................................................................................20
6.2 ...................................................................................................................................20
Section 7 Cost Recovery Statement...................................................................................21
7.1 ..................................................................................................................................21
7.2 ...................................................................................................................................21
Section 8 Statement of Expenditure and Receipts..............................................................22
8.1...................................................................................................................................22
82...................................................................................................................................22
Section 9 Final End-of-Year Statement...............................................................................23
Section 10 Budget Statement.............................................................................................24
10.1 .................................................................................................................................24
10.2 .................................................................................................................................24
10.3 .................................................................................................................................24
Section 11 Long Range Plan and Forecast.........................................................................25
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11.1 Exploration Plan 25
Section 12 Revision of Accounting and Financial Procedures.............................................27
Section 13 Conflict with the EPC........................................................................................28
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iii
Annex C EPC Accounting and Financial Procedure
This Annex is attached to and made part of the Exploration and
Production Concession Contract dated December , 2006, awarded by
the Government of the Republic of Mozambique to Eni East Africa S.p.A
and Empresa Nacional de Hidrocarbonetos, (ENH) E.P (hereinafter
referred to as "the EPC").
fixmilius cfifij
Page 4 of 28
Section 1 General Provisions
1.1 Definitions
For the purposes of this EPC Accounting and Financial Procedure the
terms used here in which are defined in applicable law, the EPC shall
have the same meaning when used in this EPC Accounting and Financial
Procedure.
1.2 Statements required to be submitted by the Concessionaire
(a) Within ninety (90) days of the Effective Date, the Concessionaire shall
submit to the Government a proposed outline of charts of accounts,
operating records and reports, which outline shall be in accordance with
applicable Mozambican law and generally accepted and recognised
accounting principles, consistent with best practice in the international
petroleum industry. Within ninety (90) days of receiving the above
submission Government shall either indicate its approval of the proposal
or request revisions to the proposal. Within one hundred and eighty (180)
days after the Government has approved the Concessionaire’s proposals,
the Concessionaire and Government shall approve an outline charts of
accounts, operating records and reports which shall describe the basis of
the accounting system and procedures to be developed and used under
the EPC. Following such approval, the Concessionaire shall expeditiously
prepare and provide the Government with formal copies of the
comprehensive charts of accounts related to the accounting, recording
and reporting functions, and allow Government to examine the
Concessionaire's manuals, if any, and to review procedures which are,
and shall be, observed under the EPC.
(b) Notwithstanding the generality of the foregoing, the Concessionaire is
required to make regular statements relating to the Petroleum Operations.
These Statements are as follows:
(i) Production Statement (see Section 5 of this Annex);
(ii) Value of Production and Petroleum Production Tax Statement (see
Section 6 of this Annex);
(iii) Cost Recovery Statement (see Section 7 of this Annex);
(iv) Statement of Expenditures and Receipts (see Section 8 of this
Annex);
(v) Final End-of-Year Statement (see Section 9 of this Annex);
(vi) Budget Statement (see Section 10 of this Annex);
(vii) Long Range Plans (see Section 11 of this Annex).
(c) All reports and statements will be prepared in accordance with the EPC,
applicable law and, where there are no relevant provisions in either of
these, in accordance with generally accepted and recognised accounting
principles consistent with best practice in the international petroleum
industry.
I'.xccutlon itup)
Page 5 of 28
1.3 Language and Units of Account
(a) Accounts shall be maintained in United States dollars and such
other currency as may be required under the applicable law. United
States dollars shall be the currency of reference for cost recovery
purposes. Metric units and barrels shall be employed for measurements
required under this Annex. The language employed shall be English and
such other language as may be required under the applicable law. Where
necessary for clarification the Concessionaire may also maintain accounts
and records in other languages, units of measurement and currencies.
(b) It is the intent of this Accounting and Financial Procedure that
neither Government nor the Concessionaire should experience an
exchange gain or loss at the expense of, or to the benefit of, the other.
However, should there be any gain or loss from exchange of currency, it
will be credited or charged to the accounts under the EPC.
(c) Amounts received and costs and expenditures made in
Mozambican Meticais or in United States dollars shall be converted from
Mozambican Meticais into United States dollars or from United States
dollars into Mozambican Meticais on the basis of the average of the
buying and selling exchange rates between the currencies in question as
published by Banco de Mocambique or in accordance with the applicable
law, prevailing on the actual day of the transaction on which such
amounts are received and costs and expenditures are paid or as agreed
by the Parties.;
1.4 Payments
(a) Except as provided in Subsections 1.4(b) and (c), all payments between
the Parties shall, unless otherwise agreed, be in United States dollars and
through a bank designated by each receiving party.
(b) Payment of any tax by the Concessionaire shall be made in accordance
with the provisions of the EPC and the applicable law.
(c) Discharge of the Concessionaire's obligation with respect to the
Petroleum Production Tax and the Government's share of Profit
Petroleum shall be made in accordance with the EPC.
(d) All sums due by a Concessionaire to the Government under the EPC
during any calendar month shall, for each day such sums are overdue
during such month, bear interest compounded quarterly at an annual rate
equal to the average three (3) month London interbank offered rate
(LIBOR) plus one (1) percentage points for United States dollar deposits
as published by the Wall Street Journal or, rf not published therein, then
by the Financial Times of London. Should a rate not be quoted for a
relevant date (such as weekends or public holidays), then the first
subsequent quoted rate shall be used.
1.5. Audit and Inspection Rights of the Government
(a) Upon giving the Concessionaire thirty (30) days notice, the competent
authority of the Government shall have the right to audit the
Concessionaire's accounts and records maintained in accordance with the
EPC provisions with respect to each calendar year within three (3) years
from the end of each such calendar year. An audit report with respect to
Concessionaire’s accounts of any calendar year must be submitted to the
Concessionaire within three (3) years from the end of such calendar year.
For purposes of auditing, the Government may examine and verify at
reasonable times all charges and credits relating to the Petroleum
Operations such as books of account, accounting entries, material
records and any other documents, correspondence and records
necessary to audit and verify the charges and credits. Furthermore the
auditors shall have the right in connection with such audit to visit and
inspect, subject to reasonable notification, all sites, plants, facilities,
warehouses and offices of the Concessionaire serving the Petroleum
Operations including visiting personnel associated with those operations.
(b) Without prejudice to the finality of matters as described in Subsection
1.5(a) all documents referred to in that sub-section shall be maintained
and made available for inspection by the Government for such a time as
prescribed by the applicable law.
(c) In the event that Government does not conduct an audit with respect to a
calendar year or conducts the audit but does not issue an audit report
within the time specified in Subsection 1.5 (a) above , Government shall
be deemed not to have objected the Cost Recovery Statement prepared
and maintained by the Concessionaire and such Cost Recovery
Statement shall be considered true and correct for Cost Recovery
purposes for such calendar year absent material mistake, fraud or willful
misconduct. In case where Government conducts a review and issue an
audit report, Government shall be deemed not to have objected to the
Cost Recovery Statement and such Cost Recovery Statement shall be
considered true and correct for Cost Recovery purposes for such calendar
year with respect to each item which is not the subject of an exception in
such audit report absent material mistake, fraud or willful misconduct.
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Section 2 Classification, Definition and Allocation of Costs and Expenditures
All expenditures relating to the Petroleum Operations shall, subject to
Applicable Law be classified, defined and allocated as follows:
2.1. Exploration Costs
“Exploration Cost" shall consist of all direct and allocated indirect costs
incurred in the search for Petroleum in the EPC Area, including but not
limited to:
(a) Aerial, geophysical, geochemical, paleontological, geological,
topographical and seismic surveys and studies and their interpretation.
(b) Core hole drilling and water well drilling.
(c) Labour, materials and services used in drilling wells with the object of
finding new Petroleum Reservoirs or for the purpose of appraising the
extent of Petroleum Reservoirs already discovered provided such wells
are not completed as producing wells.
(d) Facilities used solely in support of these purposes including access roads
and purchased geological and geophysical information.
(e) Service Costs allocated to the Exploration Operations as per the
provisions of Subsection 2.4 of this Accounting Procedure.
(f) General and Administrative Expenses allocated to the Exploration
Operations as per the provisions of Subsection 2.5 of this Accounting
Procedure.
2.2. Development and Production Capital Expenditures
“Development and Production Capital Expenditure” shall consist of all
expenditures incurred in the Development and Production Operations,
including but not limited to:
(a) Drilling wells which are completed as producing wells and drilling wells for
purposes of producing from a Petroleum Reservoir already discovered
whether these wells are dry or producing.
(b) Completing wells by way of installation of casing or equipment or
otherwise after a well has been drilled for the purpose of bringing the well
into use as a producing well.
(c) Intangible drilling costs such as labour, consumable material and services
having no salvage value which are incurred in drilling and deepening of
wells for production purposes.
(d) The costs of field facilities such as flow lines, production and treatment
units, wellhead equipment, subsurface equipment, enhanced recovery
systems, offshore platforms, Petroleum storage facilities, export terminals
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and piers, harbours and related facilities, and access roads for production
activities.
(e) Engineering and design studies for field facilities.
(f) Service Costs allocated to the Development and Production Operations
as per the provisions of Subsection 2.4 of this Accounting Procedure.
(g) General and Administrative Expenses allocated to the Development and
Production Operations as per the provisions of Subsection 2.5 of this
Accounting Procedure.
2.3. Operating Costs
“Operating Costs" shall consist of all expenditures incurred in the Petroleum
Operations after the start of the Commercial Production which are other than
Exploration Costs, Development and Production Capital Expenditures, General
and Administrative Expenses and Service Costs, including but not limited to:
(a) Operating, servicing, maintaining and repairing production and injection
wells and all field facilities completed during the Development and
Production Operations.
(b) Planning, producing, controlling, measuring and testing the flow of
Petroleum and collecting, gathering, treating, storing and transferring the
Petroleum from the Petroleum Reservoir to the Delivery Point.
(c) The balance of General and Administrative Expenses and Service Costs
not allocated to the Exploration Operations or the Development and
Production Operations.
2.4 Service Costs
“Service Costs" shall consist of direct and indirect expenditures in support
of the Petroleum Operations including warehouses, offices, camps, piers,
marine vessels, vehicles, motorised rolling equipment, aircraft, fire and
security stations, workshops, water and sewage plants, power plants,
housing, community and recreational facilities and furniture, tools and
equipment used in these activities. Service costs in any calendar year
shall include the total costs incurred in such year to purchase and/or
construct said facilities as well as the annual costs to maintain and
operate the same. All Service costs will be regularly allocated as
specified in Subsections 2.1(e), 2.2(f) and 2.3 to Exploration Costs,
Development and Production Capital Expenditures and Operating Costs.
Service Costs incurred during the period commencing with the Effective Date and
ending with the date of approval by MIREM of the first Development Plan for a
proposed Development and Production Area, shall be fully allocated to
Exploration Cost. Commencing with the date of approval by MIREM of the first
Development Plan for a proposed Development and Production Area, and if it
becomes necessary to allocate Service Costs to or between Petroleum
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Operations, such allocation shall be made on an equitable basis in accordance
with applicable law, failing agreement, the allocation to be determined by a sole
expert in accordance with Article 30 of the EPC.
The Concessionaire shall furnish a description of its allocation procedures
pertaining to Service Costs, along with each proposed Development Plan.
2.5 General and Administrative Expenses
“General and Administrative Expenses" shall consist of:
(a) All main office, field office and general administrative costs in the
Republic of Mozambique including but not limited to supervisory,
accounting and employee relations services.
(b) An overhead charge for services rendered outside the Republic of
Mozambique for managing the Petroleum Operations and for staff advice
and assistance including financial, legal, accounting and employee
relations services. This charge shall be five percent (5%) of Contract
Costs up to five million US dollars (US$5,000,000), three percent (3%) of
that portion of Contract Costs between five million US dollars
(US$5,000,000) and ten million US dollars (US$10,000,000) and one and
one half percent (1.5%) of Contract Costs which are in excess of ten
million US dollars (US$10,000,000). The contract costs referred to herein
shall include all Exploration Costs, Development and Production Capital
Expenditures, Operating Costs and Service Costs.
(c) All General and Administrative Expenses will be regularly allocated
as specified in Subsections 2.1(f), 2.2(g) and 2.3 to Exploration Costs,
Development and Production Capital Expenditures and Operating Costs.
General and Administrative Expenses incurred during the period
commencing with the Effective Date and ending with the date of approval
by MIREM of the first Development Plan for a proposed Development and
Production Area, shall be fully allocated to Exploration Cost.
Commencing with the date of approval by MIREM of the first Development
Plan for a proposed Development and Production Area, if it becomes
necessary to allocate General and Administrative Expenses to or between
Petroleum Operations, such allocation shall be made on an equitable
basis agreed between the parties in accordance with applicable law,
failing agreement, the allocation to be determined by a sole expert in
accordance with Article 30 of the EPC.
The Concessionaire shall furnish a description of its allocation procedures
pertaining to General and Administrative Expenses, along with each
proposed Development Plan
2.6 Decommissioning Fund
For the purpose of costs related to the implementation of a Decommissioning Plan a
Decommissioning Fund shall be established for each Development and Production
Area, commencing from the calendar quarter in whichever of the following situations
first occur:
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a) the Petroleum Produced has reached 50% of the aggregate
recoverable resources as determined in an approved Development
Plan and any successive reappraisal of such initial recoverable
reserves; or
b) five (5) years prior to the expiry or surrender of this EPC or the use of
any facility for the purpose of extracting Petroleum from a Production
and Development Area within this EPC is permanently terminated.
For every subsequent calendar quarter in which Petroleum is produced, the
Concessionaire shall charge as Operating Costs a portion of the estimated future
cost of decommissioning.
The amount to be deposited in the Decommissioning Fund for a calendar quarter
shall be charged as Operating Costs subject to the Cost Recovery limitation
stipulated in article 9.5 of the EPC and calculated in the following manner:
QD = (ECA X (EPR/CPP)) - DFB
where:
QD is the amount of funds to be transferred to
the Decommissioning Fund in respect of the
relevant calendar quarter;
ECA is the estimated cost of abandonment
operations established pursuant to the
Decommissioning Plan;
EPR is the estimated remaining Petroleum
reserves to be recovered from the end of
the calendar quarter in which the
Decommissioning Fund was opened;
CPP is the cumulative production of Petroleum
from the end of the calendar quarter in
which the Decommissioning Fund was
opened;
DFB is the Decommissioning Fund balance at
the end of the previous calendar quarter.
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Section 3 Costs, Expenses, Expenditures and Credits of the Concessionaire
3.1 Subject to Applicable Law, costs recoverable without further approval of
the Government.
Subject to the provisions of the EPC and applicable law, the
Concessionaire shall bear and pay the following costs and expenses in
respect of the Petroleum Operations. These costs and expenses will be
classified under the headings referred to in Section 2. They are
recoverable by the Concessionaire under the EPC.
(a) Surface Rights
This covers all direct costs attributable to the acquisition, renewal or
relinquishment of surface rights acquired and maintained in force for the
EPC Area.
(b) Labour and Associated Labour Costs
(i) gross salaries and wages including bonuses and premiums of the
Concessionaire's employees directly engaged in the Petroleum
Operations, irrespective of the location of such employees, it being
understood that in the case of those personnel only a portion of
whose time is dedicated to the Petroleum Operations, only that
pro-rata portion of applicable salaries, wages and fringe benefits
will be charged;
(ii) the Concessionaire’s costs regarding holiday, vacation, sickness
and disability payments applicable to the salaries and wages
chargeable under (i) above.
(iii) expenses or contributions made pursuant to assessments or
obligations imposed under the laws of the Republic of
Mozambique which are applicable to the Concessionaire's cost of
salaries and wages chargeable under (i) above;
(iv) the Concessionaire's cost of established plans for employees' life
insurance, hospitalisation, pensions, and other benefits of a like
nature customarily granted to the Concessionaire's employees;
(v) reasonable travel and personal expenses of employees of the
Concessionaire including those made for travel and relocation of
the expatriate employees and their families assigned to the
Republic of Mozambique, all of which shall be in accordance with
the Concessionaire's normal practice;
(vi) any personal income taxes of the Republic of Mozambique
incurred by employees and paid or reimbursed by the
Concessionaire.
(c) Transportation
The cost of transportation of employees, equipment, materials and
supplies necessary for the conduct of the Petroleum Operations.
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t,
(d) Charges for Services
(i) Third Party Contracts
The actual costs of contracts for technical and other services
entered into by the Concessionaire for the Petroleum Operations,
made with third parties, including the Affiliated Companies which
have contracted with Concessionaire to perform services that are
normally provided by third parties, are recoverable, provided that
the prices paid by the Concessionaire are no higher than those
generally charged by other international or domestic suppliers for
comparable work and services.
(ii) Affiliated Companies of Concessionaire
Without prejudice to the charges to be made in accordance with
Subsection 2.5, in the case of services rendered to the Petroleum
Operations by an Affiliated Company of the Concessionaire, such
services shall be rendered under service agreements between
Concessionaire and Affiliated Companies, and the charges will be
based on actual costs and will be competitive. The charges will be
no higher than the most favourable prices charged by the Affiliated
Company to third parties for comparable services under similar
terms and conditions elsewhere. The Concessionaire shall specify
the amount of the charges which contributes an allocated
proportion of the general material, management, technical and
other costs of the Affiliated Company, and the amount which is the
direct cost of providing the services concerned. If necessary,
certified evidence regarding the basis of prices charged may be
obtained from the auditors of the Affiliated Company.
(e) Material
(i) General
So far as is practicable and consistent with efficient, economical
and internationally accepted operational requirements, only such
material shall be purchased or furnished by the Concessionaire for
use in the Petroleum Operations as may be required for use in the
reasonably foreseeable future and to the extent that such
purchase or supply are in accordance with the EPC.
(ii) Warranty of Material
The Concessionaire does not warrant material beyond the
supplier’s or manufacturer's guarantee and, in case of defective
material or equipment, any adjustment received by the
Concessionaire from the suppliers/ manufacturers or their agents
will be credited to the accounts under the EPC.
(iii) Value of material charged to the accounts under the EPC
(a) Except as otherwise provided in (b) below material
purchased by the Concessionaire for use in the Petroleum
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Operations shall be valued to include invoice price less
trade and cash discounts (if any), purchase and
procurement fees plus freight and forwarding charges
between point of supply and point of shipment, freight to
port of destination, insurance, taxes, customs duties,
consular fees, other items chargeable against imported
material and where applicable handling and transportation
expenses from point of importation to warehouse or
operating site, and its costs should not exceed those
currently prevailing in normal arms-length transactions on
the open market.
(b) Materials purchased from Affiliated Companies of the
Concessionaire shall be charged at the prices specified in
(1) and (2) hereof.
(1) New material (condition "A") shall be valued at the
current international price which should not exceed
the price prevailing in normal arms-length
transactions on the open market.
(2) Used material (conditions "B" and "C”)
(i) material which is in sound and serviceable
condition and is suitable for reuse without
reconditioning shall be classified as
condition "B" and priced at seventy-five
percent (75%) of the current price of new
materials defined in (1) above.
(ii) material which cannot be classified as
condition "B" but which:
(a) after reconditioning will be further
serviceable for original function as
good second-hand material condition
"B", or
(b) is serviceable for original function but
substantially not suitable for
reconditioning,
shall be classified as condition "C" and
priced at fifty percent (50%) of the current
price of new material as defined in (1)
above. The cost of reconditioning shall be
charged to the reconditioned material
provided that the condition "C" material
value plus the cost of reconditioning does
not exceed the value of condition "B"
material.
(iii) Material which cannot be classified as
condition "B" or condition "C" shall be priced
at a value commensurate with its use.
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(iv) material involving erection costs shall be
charged at the applicable percentage, in
accordance to its condition, of the current
dismantled price of new material as defined
in (1) above.
(v) When the use of material is temporary and
its service to the Petroleum Operations does
not justify the reduction in price as provided
for in (2)(ii) hereof, such material shall be
priced on a basis that will result in a net
charge to the accounts under the EPC
consistent with the value of the service
rendered.
(f) Rentals, Duties and Other Assessments
All rentals, taxes, levies, charges, fees, contributions and any other
assessments and charges levied by the Government its political
subdivisions, agencies and instrumentalities, in connection with the
Petroleum Operations and paid directly or indirectly by the
Concessionaire with the exception of the Corporate Income Tax imposed
on the Concessionaire.
(g) Insurance and Losses
Insurance premia and costs incurred for insurance arranged in
accordance with the EPC provided that if such insurance is wholly or
partly placed with an Affiliated Company of the Concessionaire, such
premia and costs shall be recoverable only to the extent generally
charged by competitive insurance companies other than an Affiliated
Company of the Concessionaire. Costs and losses incurred as a
consequence of events which are, and in so far as, not made good by
insurance obtained under the EPC are recoverable under the EPC.
(h) Legal Expenses
All costs and expenses of litigation and legal or related services
necessary or expedient for the procuring, perfecting, retention and
protection of the EPC Area, and in defending or prosecuting lawsuits
involving the EPC Area or any third party claim arising out of activities
under the EPC, or sums paid in respect of legal services necessary or
expedient for the protection of joint interest of the Government and the
Concessionaire are recoverable. Where legal services are rendered in
such matters by salaried or regularly retained lawyers of the
Concessionaire or an Affiliated Company of the Concessionaire, such
compensation will be included instead under Subsection 3.1(b) or 3.1(d)
above, as applicable.
(i) Training Costs
All costs and expenses incurred by the Concessionaire in training of its
employees located in Mozambique and engaged in the Petroleum
Operations pertaining to activities in the EPC area and such other training
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as required under the EPC or applicable law. Payments made in
accordance with Article 18.5 and Article 18.6 of the EPC.
(j) General and Administrative Expenses
The costs described in Subsection 2.5(a) and the charge described in
Subsection 2.5(b).
(k) The costs of any guarantee required by the Government under the EPC.
(l) Payments into the Decommissioning Fund and cost incurred for the
decommissioning according to applicable law and the EPC.
3.2 Costs recoverable only with approval of the Government
Interest, fees and related charges incurred on commercial loans raised by
the Concessionaire for the Petroleum Operations to the extent that such
interest, fees and related charges are commensurate with interest, fees
and related charges normally paid on loans of such nature, approval in
respect thereof not to be unreasonably withheld.
3.3 Costs not recoverable under the EPC
(a) Petroleum marketing or transportation costs of Petroleum beyond the
Delivery Point.
(b) Costs of arbitration and the independent expert under Article 30 of the
EPC.
(c) Petroleum Production Tax and Corporate Income Tax
(d) Fines and penalties imposed by any public authority in the Republic of
Mozambique or elsewhere.
3.4 Recoverability and Deductibility
The determination of whether the costs and expenses set forth herein are
recoverable or non-recoverable shall apply only to this EPC, and shall not
be interpreted to preclude the Concessionaire from deducting said
amounts in computing its net income from the Petroleum Operations for
Corporate Income Tax purposes under applicable law.
3.5 Credit under the EPC
The net proceeds of the following transactions will, subject to applicable law, be
credited to the accounts under the EPC:
(a) The net proceeds of any insurance or claim in connection with the
Petroleum Operations or any assets charged to the accounts under the
EPC when such operations or assets were insured and the premia
charged to the accounts under the EPC.
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(b) Revenue received from outsiders for the use of property or assets
charged to the accounts under the EPC.
(c) Any adjustment received by the Concessionaire from the
suppliers/manufacturers or their agents in connection with a defective
material the cost of which was previously charged by the Concessionaire
to the accounts under the EPC.
(d) Rentals, refunds or other credits received by the Concessionaire which
apply to any charge which has been made to the accounts under the
EPC.
(e) The amounts received for inventory materials under the EPC and
subsequently exported from the Republic of Mozambique without being
used in the Petroleum Operations.
(f) Legal expenses charged to the accounts under Subsection 3.1(h) and
subsequently recovered by the Concessionaire.
3.6 Duplication of Charges and Credits
Notwithstanding any provision to the contrary in this Accounting and
Financial Procedure, it is the intention that there shall be no duplication of
charges or credits in the accounts under the EPC.
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Section 4 Records and Valuation of Assets
The Concessionaire shall maintain detailed records of property in use for
the Petroleum Operations in accordance with Applicable Law and normal
practice in exploration and production activities of the international
petroleum industry. At reasonable intervals but at least once a year with
respect to movable assets and once every five (5) years with respect to
immovable assets, inventories of the property under the EPC shall be
taken by the Concessionaire. The Concessionaire shall give the
Government at least thirty (30) days written notice of its intention to take
such inventory and the Government shall have the right to be represented
when such inventory is taken. The Concessionaire will clearly state the
principles upon which valuation of the inventory has been based. When
an assignment of rights under the EPC takes place a special inventory
may be taken by the Concessionaire at the request of the assignee
provided that the costs of such inventory are borne by the assignee.
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Section 5 Production Statement
Subsequent to the commencement of commercial production from the
EPC Area, the Concessionaire shall submit a monthly production
statement (hereinafter referred to as the “Production Statement”) to the
Government showing the following information for each Development and
Production Area:
(a) The quantity of Crude Oil produced.
(b) The quantity of Natural Gas produced.
(c) The quantities of Petroleum used for the purposes of carrying on drilling
and production operations and pumping to field storage.
(d) The quantities of Natural Gas flared.
(e) The size of Petroleum stocks held at the beginning of the month.
(f) The size of Petroleum stocks held at the end of the month.
(g) Any other relevant information as may be required under the applicable
law.
The Production Statement of each calendar month shall be submitted to
the Government no later than seven (7) business days after the end of
such calendar month.
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Section 6 Value of Production and Petroleum Production Tax Statement
6.1
The Concessionaire shall prepare a statement covering the determination
of the fair market value of Crude Oil and Natural Gas respectively,
produced during each calendar month and the value of the Petroleum
Production Tax payable to the Government. This statement shall contain
the following information:
(a) The quantities and prices realised therefore by the Concessionaire as a
result of sales of Crude Oil and Natural Gas respectively to third parties
(b) made during the calendar month in question.
The quantities and the prices realised therefore by the Concessionaire as
a result of sales of Crude Oil and Natural Gas respectively made during
(c) the calendar month in question, other than to third parties.
The quantity of stocks of Crude Oil and if applicable Natural Gas at the
end of the preceding calendar month.
(d) The quantity of stocks of Crude Oil and if applicable Natural Gas at the
end of the calendar month in question.
(e) The total Petroleum Production Tax liability for Crude Oil and natural Gas
respectively for the calendar month.
(f) Information available to the Concessionaire, when requested by the
Government, concerning the prices of Crude Oil or Natural Gas produced
by the main petroleum producing and exporting countries including
contract prices, discounts and premia, and prices obtained on the spot
markets.
The value of Production and Petroleum Production Tax Statement of each
calendar month shall be submitted to the Government not later than thirty
(30) days after the end of such calendar month.
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Section 7 Cost Recovery Statement
7.1
The Concessionaire shall prepare with respect to each calendar quarter a
cost recovery statement (hereinafter referred to as the “Cost Recovery
Statement”) containing the following information:
(a) Recoverable costs carried forward from the previous quarter if any.
(b) Recoverable costs for the quarter in question.
(c) Total recoverable costs for the quarter in question (Subsection 7.1(a) plus
Subsection 7.1(b)).
(d) Quantity and value of Cost Petroleum taken proportionally in Crude oil
and Natural Gas and disposed of by the Concessionaire for the quarter in
question.
(e) EPC costs recovered for the quarter in question.
(f) Total cumulative amount of EPC costs recovered up to the end of the
quarter in question.
(g) Amount of recoverable EPC costs to be carried forward into the next
quarter.
The Cost Recovery Statement of each quarter shall be submitted to the
Government no later than thirty (30) days after the end of such quarter.
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Section 8 Statement of Expenditure and Receipts
8.1
The Concessionaire shall prepare with respect to each calendar quarter a
statement of expenditures and receipts under the EPC (hereinafter
referred to as the “Statement of Expenditure and Receipts”). The
statement will distinguish between Exploration Costs, Development and
Production Capital Expenditures, Operating Costs, decommissioning
costs and the balance of the Decommissioning Fund and will identify
major items of expenditures within these categories. The statement will
show the following:
(a) Actual expenditures and receipts for the quarter in question.
(b) Cumulative expenditure and receipts for the budget year in question.
(c) Latest forecast cumulative expenditures at the year end.
(d) Variations between budget forecast and latest forecast and explanations
thereof.
The Statement of Expenditure and Receipts of each calendar quarter shall
be submitted to the Government no later than thirty (30) days after the
end of such quarter.
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Section 9 Final End-of-Year Statement
The Concessionaire will prepare a Final End-of-Year Statement. The
statement will contain information as provided in the Production
Statement, Value of Production and Petroleum Production Tax Statement,
Cost Recovery Statement and Statement of Expenditures and Receipts
but will be based on actual quantities of Petroleum produced and
expenses incurred. Based upon this statement, any adjustments that are
necessary will be made to the payments made by the Concessionaire
under the EPC. The Final End-of-Year Statement of each calendar year
shall be submitted to the Government within sixty (60) days of the end of
such calendar year.
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Section 10 Budget Statement
10.1
The Concessionaire shall prepare an annual budget statement
(hereinafter referred to as the “Budget Statement”). This will distinguish
between Exploration Costs, Development and Production Capital
Expenditures and Operating Costs and will show the following:
(a) Forecast expenditures and receipts for the budget year under the EPC.
(b) Forecast cumulative expenditures and receipts to the end of the said
budget year.
(c) A schedule showing the most important individual items of forecast
Development and Production Capital Expenditures for the said budget
year.
10.2
The Budget Statement shall be submitted to the Government with respect
to each budget year no less than ninety (90) days before the start of the
year except in the case of the first year of the EPC when the Budget
Statement shall be submitted within thirty (30) days of the Effective Date.
10.3
It is recognised by the Concessionaire and the Government that the
details of the Budget Statement may require changes in the light of
existing circumstances and nothing herein contained shall limit the
flexibility to make such changes. Consistent with the foregoing the
revision of said Statement is provided for annually.
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Section 11 Long Range Plan and Forecast
The Concessionaire shall prepare and submit for information and planning
purpose to the Government either one or both of the following two (2) long
range plans, whichever is appropriate:
11.1 Exploration Plan
During the Exploration Period, the Concessionaire shall prepare an
Exploration Plan for each period of three (3) calendar years commencing
as of the first day of January following the Effective Date (hereinafter
referred to as the "Exploration Plan”) which shall contain the following
information:
(a) Estimated Exploration Costs showing outlays for each of the three (3)
calendar years covered by the Exploration Plan.
(b) Details of seismic operations planned for each such year.
(c) Details of all drilling activities planned for each such year.
(d) Details of infrastructure utilisation and requirements.
The first such Exploration Plan shall also include the above information for
the period starting on the Effective Date and ending on the last day of
December of that calendar year.
The Exploration Plan shall be revised at the beginning of each calendar
year following of the Effective Date. The Concessionaire shall prepare
and submit to the Government the first Exploration Plan within sixty (60)
days of the Effective Date and thereafter shall prepare and submit to the
Government no less than forty-five (45) days before the end of each
calendar year following the Effective Date a revised Exploration Plan.
11.2 Development Forecast
The Concessionaire shall prepare a development forecast for each period
of five (5) calendar years (hereinafter referred to as the “Development
Forecast”) commencing as of the first day of January following the date
when the first development plan is approved and the Concessionaire
commences the implementation of such plan.
The Development Forecast shall contain the following information:
(a) Forecast of Development and Production Capital Expenditures for each of
the five (5) calendar years.
(b) Forecast of Operating Costs for each such calendar year.
(c) Forecast of Petroleum production for each such calendar year.
(d) Forecast of number and types of personnel employed in the Petroleum
Operations in the Republic of Mozambique.
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Page 25 of 28
(e) Description of proposed Petroleum marketing arrangements.
(f) Description of main technologies employed.
(g) Description of working relationship of the Concessionaire to the
Government.
The Development Forecast shall be revised at the beginning of each
calendar year commencing as of the second year of the first Development
Forecast. The Concessionaire shall prepare and submit to the
Government the first Development Forecast within one hundred and
twenty (120) days from the date when the first development plan is
approved or deemed to have been approved by the Management
Committee and the Concessionaire commences the implementation of
such plan and thereafter shall prepare and submit a revised Development
Forecast to the Government no later than forty-five (45) days before each
calendar year commencing as of the second year of the first Development
Forecast.
11.3 Changes of Plan and Forecast
It is recognised by the Concessionaire and the Government that the
details of the Exploration Plan and Development Forecast may require
changes in the light of existing circumstances and nothing herein
contained shall limit the flexibility to make such changes. Consistent with
the foregoing the revision of said Plan and Forecast is provided for
annually.
>11 CO|>>
Page 26 of 28
Section 12 Revision of Accounting and Financial Procedures
The provisions of this Accounting and Financial Procedure may be
amended by determined by Applicable Law or in absence of such law
agreement between the Concessionaire and the Government. The
amendments shall be made in writing and shall state the date upon which
the amendments shall become effective.
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Page 27 of 2 8
Section 13 Conflict with the EPC
In the event of any conflict between the provisions of this Accounting and
Financial Procedure and the EPC, the provisions of the EPC shall prevail.
Execution copy
Page 28 of 28
ANNEX“D”
Bank Guarantee
[Date]
Ministry of Mineral Resources
The Minister of Mineral Resources
Av. Fernao de Magalhaes, 34, 1
Maputo, Mozambique
1. We understand that on_2006, the Government of the Republic of
Mozambique, Empresa Nacional de Hidrocarbonetos, (ENH) E.P and Eni East
Africa S.p.A. (the latter also the “Guaranteed Party”) entered into an Exploration and
Production Concession Contract for Area 4 of the Rovuma Basin offshore of
Mozambique (the “EPC”). For purposes of this Bank Guarantee, ENH and the
Guaranteed Party are collectively referred to as the “Concessionaire”. Capitalised
words not defined in this Bank Guarantee shall have the meaning ascribed to them
in the EPC.
2. We, the undersigned [BANK LEGAL NAME] (the “Bank"), hereby, save for the
conditions stipulated below in clause 5, unconditionally and irrevocably guarantee in
favour of the Government of the Republic of Mozambique (the “Government") the due
and punctual payment of all sums owed to the Government and unpaid by the
Guaranteed Party in respect of the Concessionaire’s failure to fulfil the Exploration
work commitment in relation to the...............Exploration Period, up to a maximum
of United States_(US$ _,000,000).
3. The guarantee amount referred to in clause 2 above shall be reduced from time to
time upon delivery to the Bank of a certificate from the Guaranteed Party
countersigned on behalf of the Government setting forth the amount of such
reduction based on completion of the corresponding items of the Exploration work
commitment determined according to Article 4 of the EPC.
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4, This Bank Guarantee shall become effective on the Effective Date of the EPC and
shall terminate on the expiry of the ................ Exploration Period, or such earlier
time as the total of the reductions during such Exploration Period equal the
guarantee amount referred to in clause 2 above.
5. Demands may be made under this Bank Guarantee by the Government by
delivering to the Bank the Government's written statement setting forth the amount
claimed and certifying that the amount claimed represents the amount due and
owing by the Guaranteed Party in respect of the Concessionaire’s failure under the
EPC to fulfil the Exploration work commitment in relation to the ...............
Exploration Period:
(a) the Concessionaire has failed to incur the Minimum Expenditure in relation to
the relevant Exploration Period:
(b) the Guaranteed Party has been notified in writing by the Minister of Mineral
Resources, by registered letter or courier (a copy of which to be attached to
such written statement), of Concessionaire's non-compliance and the details
thereof, and has been advised that a drawing is being made against this
unconditional and irrevocable Bank Guarantee; and
(c) the Concessionaire has been provided a minimum of fourteen (14) days to
correct the conditions of non-compliance and has failed to do so.
6. Upon its cancellation or expiry, this Bank Guarantee shall be returned to the
Guaranteed Party.
The duly authorised representative of the Bank has executed this Bank Guarantee on this
the_day of_20[ ].
Very truly yours,
for and on behalf of
[BANK LEGAL NAME]
El edition copy
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ANNEX “E”
Parent Company Guarantee
THIS GUARANTEE is made the day of 20[ ]
BY and BETWEEN
(1) Eni S.p.A, a limited liability company established under the laws of Italy (the
"Guarantor"), in favour of
(2) THE GOVERNMENT OF THE REPUBLIC OF MOZAMBIQUE, herein represented
by the Minister for Mineral Resources and Energy (the "Government");
(each a "Party" and collectively the "Parties")
WHEREAS
A On_, the Government, Empresa Nacional de Hidrocarbonetos, (ENH)
EP and Eni East Africa S.p.A. (the “Concessionaire") entered into an Exploration
and Production Concession Contract (the "EPC") for Area 4 of the Rovuma Basin,
offshore of Mozambique.
B The Guarantor is the ultimate parent company of Eni East Africa S.p.A. (the
“Company”).
C The Government requires that the due and proper performance of the Company
Obligations shall be guaranteed by the Guarantor under the terms of this Guarantee
and the Guarantor is willing to grant this Guarantee.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1 DEFINITIONS AND INTERPRETATION
1.1 "Company Obligations" means any obligations limited to the Company’s
Participating Interest in the EPC and related to or arising out of the Company’
activities relevant to Petroleum Operations during any period occurring any time
after completion of the Exploration Period up to and including final
implementation of decommissioning of facilities.
1.2 “Third Party Claimant” means a natural person who is a citizen of the Republic
of Mozambique or any legal entity established and registered pursuant to
Mozambican law, with its headquarters in Mozambique and having at least 50%
of its share capital held by citizens of Republic of Mozambique.
Terms defined in the EPC shall have the same meaning when used in this Guarantee.
Words referred to in the singular shall include the plural and vice versa.
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2 GUARANTEE
2.1 The Guarantor irrevocably and unconditionally guarantees, subject to all the
other terms of this Guarantee, that if the Company fails, in whole or in part, to
perform any of the Company Obligations towards the Government, and to
satisfy any claim of a Third Party Claimant made against the Company as a
result or consequence of the Company’s acts or omissions in carrying out the
Company Obligations (each of the Government, and Third Party Claimant
being hereinafter collectively referred to as the “Beneficiaries”), the Guarantor
shall as soon as reasonably practicable following a demand made in
accordance with clause 3, take such steps itself as shall be necessary:
(a) to perform such Company Obligation or remedy such breach; or
(b) where such failure or breach is not capable of remedy, restore performance of
the breached Company Obligation.
2.2 This Guarantee shall become effective thirty (30) days after the approval of
the Development Plan and shall terminate on termination of all relevant
Petroleum Operations subject to the applicable law and the EPC.
2.3 Upon termination of this Guarantee the Guarantor shall have no further
liability whatsoever to the Beneficiaries under or in connection with this
Guarantee save in respect of any breach notified by the Beneficiaries in
accordance with clause 3 this Guarantee prior to its termination.
3 DEMANDS
3.1 The Beneficiaries shall notify the Guarantor in writing when a breach of a
Company Obligation has occurred and such notice shall contain a description
of such breach.
3.2 Subject to clauses 4 and 7 of this Guarantee, if the Company fails to remedy a
breach specified in a notice given under clause 3.1 within fourteen (14) days
of receipt of such notice by the Guarantor, the Beneficiaries may then make a
demand in writing to the Guarantor that shall (i) set out the alleged breach of
the Company Obligation(s); and (ii) require the Guarantor to take such steps
as are provided in clause 2 of this Guarantee.
4 RIGHTS AND OBLIGATIONS
4.1 The Beneficiaries shall be obliged before exercising any of the rights, powers or
remedies conferred upon it in respect of the Guarantor by this Guarantee or by
law:
4.1.1 to notify the Company of the breach of a Company Obligation;
4.1.2 if the Company:
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(a) in the case of a claim by the Government, disputes the breach notified by the
Government, to have obtained an arbitral award or expert determination
confirming such breach by the Company; or
(b) in the case of a claim by a Third Party Claimant, disputes the breach notified
by such Third Party Claimant, to have obtained a court judgment or order,
provided that such judgment or order of a court has been issued against the
Company and such judgment or order is final and non-appealable; and
4.1.3 to make or file any claim or proof in winding-up or dissolution of the Company (to
the extent applicable).
5 LIMITATIONS
5.1 The obligations of the Guarantor under this Guarantee shall not be discharged
or impaired by any act or omission or any other event or circumstances
whatsoever (whether or not known to the Company, the Guarantor or the
Beneficiaries) which would or might (but for this clause 5) operate to impair or
discharge the Guarantor's liability under this Guarantee, including, but without
limitation:
5.1.1 any of the Company Obligations being or becoming illegal or invalid, in
any respect;
5.1.2 any granting of time (or other indulgence) to the Company or any other
person; or
5.1.3 any amendment to or variation, waiver or release of, any of the terms of the
EPC to the extent that such amendment, variation, waiver or release is
made with the Guarantor's prior written consent.
6 ASSIGNMENT AND SUCCESSORS
6.1 Any benefit of this Guarantee shall not be assignable by the Beneficiaries to
any person.
6.2 The Guarantor may not assign its rights and obligations under this Guarantee
without the prior written consent of the Government.
7 LIMITATION AND MAXIMUM LIABILITY OF GUARANTOR
7.1 Notwithstanding any other provisions of this Guarantee, the Guarantor shall
have all of the rights, limitations, defences including, without limitation, all
rights of set off, available to the Company under the EPC or at law in the case
of a claim by a Third Party Claimant in relation to any demand made under
clause 3.2 of this Guarantee In no circumstances shall the Guarantor be liable
to pay any amount under this Guarantee which is greater than the Company
would have been liable to pay if the Company had performed the Company
Obligations.
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7.2 Notwithstanding any other provision of this Guarantee, the Beneficiaries prior
to making any demand or any attempt to collect under this Guarantee, shall
first pursue collection from the Company and shall exhaust all resources
against and liquidation of the Company assets, including but not limited to any
applicable insurance coverage available to satisfy any Company Obligations.
8 GOVERNING LAW AND JURISDICTION
This Guarantee shall be governed by and construed in accordance with the laws
of the Republic of Mozambique. The provisions of Article 30 of the EPC shall
apply 'mutatis mutandis' to this Guarantee in respect of all disputes between the
Government, the Guarantor or the Company.
9. NOTICES
9.1 Any notice to be given by either Party to the other under this Guarantee shall be in
writing and shall be delivered by hand to the Guarantor or the Beneficiaries, as the
case may be, or sent to such recipient by recorded delivery letter or facsimile
addressed to such recipient at such address and for the attention of such person
as the Guarantor or the Beneficiaries, as the case may be, shall from time to time
designate by notice, and until such notice shall be given the addresses of the
Guarantor and the Beneficiaries shall be as follows:
The Guarantor
Attention: _
Telephone: _
T el ef ax: _
The Government
Avenida Fernao de Magalhaes 34
Caixa Postal 2904
Maputo, Mozambique
Attention: National Petroleum Institute
Telephone: +258 21 320 935
Telefax: +258 21 430 850
9.2 All notices delivered by recorded delivery or hand shall be deemed to be effective
upon receipt. Notices given by facsimile shall be deemed to have been received
where there is confirmation of uninterrupted transmission by a transmission report
and where there has been no telephonic communication by the recipient to the
senders (to be confirmed in writing) that the facsimile has not been received in
legible form within twenty-four (24) hours of sending.
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IN WITNESS WHEREOF this Guarantee has been executed by the Guarantor and has
been accepted by the Government on the date specified above.
for and on behalf of XXX
for and on behalf of THE
GOVERNMENT OF THE REPUBLIC
OF MOZAMBIQUE
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1
ANNEX F
JOINT OPERATING AGREEMENT