This contract is made and entered into in both the English language and the Albanian language. If there is a conflict between the English language version and the Albanian language version, the English version will prevail.
The development and production period shall commence on the date that the development plan is approved by Albpetrol and the National Agency for Natural Resources and shall continue until its expiration 25 years from the date of approval of the plan. Upon the expiration of the development and production period, the government and Sherwood shall have the right in accordance with the license agreement to request from the government an extension of the development and production period for successive periods of 5 years on the same conditions as provided for under this contract.
Environmental impact assessment and management plan
Sherwood shall as soon as reasonably possible after the date the contract is signed, submit for the approval from the relevant environmental authority a report (the "baseline study") on the environmental baseline status of the project area as at the day the contract is signed. With each expansion of the project area or take over of a new well, as the case may be, Sherwood shall submit for the approval from the environmental authority a baseline study on the environmental baseline status of the expanded portion of the project area or newly taken over well, as the case may be, as at the relevant date.
Sherwood shall conduct petroleum operations in a safe and proper manner in accordance with generally accepted international petroleum industry practice and shall cause as little damage as reasonably practicable to the general environment, including, among others, the surface, air, lakes, rivers, sea, animal life, plant life, crops, other natural resources and property.
If there is a blow-out, accident or other emergency, Sherwood shall take all immediate steps to bring the emergency situation under control and protect against loss of life and loss of or damage to property and prevent harm to natural resources and the general environment.
Any associated gas produced from the project area, to the extent not used in petroleum operations under this contract, may be flared in accordance with current environmental regulations if the processing or utilization thereof is not economical and is not technically and commercially viable to re-inject Associated Gas. The flaring shall be permitted to the extent that gas is not required to effect the economic recovery of crude oil by secondary recovery operations, including re-pressuring and recycling.
Albpetrol shall have 12 months from receipt of each cost account statement to audit and raise objections as to any such cost account statement, provided that Albpetrol shall not be entitled to conduct more than two audits of Sherwood's books, records and accounts in any fiscal year. Albpetrol and Sherwood shall agree on any required adjustments. Supporting documents and accounts will be available to Albpetrol during that 12 month period. If within the time limit of 3 months period following the lapse of the above twelve 12 month Albpetrol has not advised Sherwood of its exception to such statement, such statement shall be considered as approved.
Sherwood will pay Albpetrol a signature bonus of US$50,000 upon execution of the petroleum agreement for the Kucova Oilfield and receipt of all necessary governmental and regulatory approvals of the petroleum agreement (“PA”) and Sherwood will spend for Albpetrol US$50,000 per each contractual year in respect of the annual training bonus upon issuing from the Council of Ministers of the Republic of Albania of the approval of the petroleum for the Kucova Oilfield.
The amount of $US 50,000 as signature bonus shall not be cost recoverable.
Other than those taxes and duties set forth in Art. 13.1 and Art. 14.1, Sherwood and its respective affiliates, and expatriate personnel shall be exempted from Albanian taxes and duties, with respect to all activities relating to the petroleum operations to the extent so provided in Albanian Law. This exemption does not include normal port, warehouse and postal charges and other similar customary charges of general application for actual services rendered.
Sherwood shall be liable to tax on profit in conformity with Law No.7811, and amended by Law No.8297 in conformity with the license agreement dated 07/06/ 2007 granted by the government.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
Available petroleum--the amount of petroleum, less any amount used in petroleum operations, flared or injected, and less any deemed production to which Albpetrol is entitled under this contract, produced, saved and metered from the project area at the measurement point--shall be measured at the measurement point and allocated as set forth in this contract. Available petroleum shall be allocated between Albpetrol (the "Albpetrol share") and Stream Oil & Gas ("cost recovery petroleum") based on the R factor as defined as:
R Factor Albpetrol Share Cost Recovery Petroleum
R < or = 1.0 1% 99%
1.0 < R < or = 1.5 2% 98%
1.5 < R < or = 2.0 3% 97%
R > 2.0 4% 96%
The Albpetrol share will be in oil and delivered in nature in contract area.
The R Factor is calculated as follows:
RN =AK/BK
where:
RN means the R Factor for calendar quarter N.
AK means the sum of Sherwood's revenues minus profit petroleum tax accrued in calendar quarter N and all preceding calendar quarters following the date this contract is approved.
BK means the sum of petroleum costs in calendar quarter N and all preceding calendar quarters following the date this contract is approved.
Any re-adjustment in entitlement for the current calendar quarter will be spread over the next calendar quarter in a way that the party which is entitled to additional available petroleum for the current calendar quarter will lift the readjustment quantity in equal monthly proportions in addition to its regular entitlements. If the production in any month is insufficient to supply the re-adjustment quantity, then the unsupplied entitlement shall be carried forward and spread equally over the remaining months of the next calendar quarter. The determination of the R Factor shall first be done for the first calendar quarter following the date the contract is approved.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
Sherwood shall be entitled to the cost recovery petroleum to recover all petroleum costs borne by it inside or related to the Project Area (cost recovery). Petroleum costs shall be as described in Annex B. After Sherwood has recovered all of its petroleum costs from the cost recovery petroleum, the remaining cost recovery petroleum shall be "profit petroleum." As its reward for the risk of conducting the petroleum operations under the petroleum agreement, Sherwood shall be entitled to 100% of the profit petroleum.
Sherwood will select its management and employees according to its discretion, and shall determine the conditions of employment and the number of employees to be used for petroleum operations. However Sherwood and its sub-contractors will, to the extent available, employ qualified Albanians to carry out the petroleum operations, giving priority to Albpetrol personnel, if their professional skills, knowledge and expertise fit with operational requirements. Otherwise, Sherwood shall be free to employ such expatriate professionals as it deems necessary. Labor relations, as regards employment contracts, and the rights and obligations of Albanian employees will be according to Albanian labor law.
Sherwood, its contractors and subcontractors shall give priority to goods and materials produced in Albania if these goods and materials are being offered under equally favorable conditions regarding the quality, price and availability, and in the quantities required. Sherwood shall give priority to services performed by Albanian sub-contractors if such services are offered under equally favorable conditions regarding the quality, price and availability they may be offered by foreign sub-contractors. For the above purposes, prices for locally manufactured materials, equipment, machinery and consumables and for services of local contractors shall be compared with the prices of goods and services in the international market after transportation and insurance costs have been added.
Sherwood shall solicit competitive bids for any services performed pursuant to items included in an annual program and budget, if such services are expected to exceed US$ 500,000. Albpetrol has the right to attend the opening of bids for all such tenders.
Sherwood will spend for Albpetrol US$50,000 per each contractual year in respect of the annual training bonus upon issuing from the Council of Ministers of the Republic of Albania of the approval of the petroleum agreement for the Kucova Oilfield.
Title to assets in possession of Sherwood in connection with the petroleum operations shall, by virtue of the license agreement, be transferred to National Agency for Natural Resources at the time the costs of such fixed and movable assets have been fully recovered as petroleum costs, or at the time of termination or relinquishment of petroleum operations, whichever first occurs, all such assets being in good working order, normal wear and tear excepted.
If Sherwood retains the right to full and free use of those assets during the term of this contract, including those installed before the date the contract is approved. Any movable asset may be sold to a third party with the prior approval of National Agency For Natural Resources, which approval shall not be unreasonably withheld. The proceeds from the sale of any asset shall be used by Sherwood as a recovery of petroleum costs.
As of the date this contract is approved, Sherwood will be entitled to use free of charge and for the performance of the petroleum operations:
- all other assets, equipment, means and infrastructure (including roads, electricity power lines and water, oil and gas pipelines) existing in the contract area on the date this contract is approved, but (unless otherwise agreed with the supplier) subject to payment, on a non-discriminatory basis, at reasonable cost for electricity, water, oil and gas used.
- Sherwood shall use the above infrastructure under commercially reasonable terms and conditions, the pipelines that transport the petroleum produced in the contract area to the ports and
refineries in Albania.
Sherwood shall provide all necessary funds and shall bear all costs and expenses required in carrying out petroleum operations under this contract except to the extent as is otherwise provided in this contract.
Sherwood shall endeavor to achieve the efficient use and safe development for and production of petroleum and optimize the ultimate economic recovery of petroleum from the project area.
Sherwood shall ensure that all materials, equipment and facilities used in petroleum operations comply with generally accepted engineering norms, are of proper construction and are kept in optimal working order.
Sherwood shall purchase or lease all equipment, materials, services and supplies required to be purchased or leased pursuant to the annual programs.
Any dispute or claim including any purported termination arising out of or relating to this contract or the breach, termination or validity of it, or to the petroleum operations carried out under this contract, shall be finally and conclusively settled by arbitration in accordance with United Nations Commission on International Trade Law Arbitration Rules.
The arbitration shall take place in Zurich, Switzerland. The language to be used in the arbitration proceedings shall be English. Stream Oil & Gas and Albpetrol expressly waive any right to appeal an arbitral award to any court whatsoever, and the arbitral award shall be final and binding upon Stream Oil & Gas and Albpetrol.
The right to arbitrate under this Art. 19 shall survive the termination of this contract.
Albpetrol expressly waives any right to claim sovereign immunity in connection with any proceeding instituted pursuant to this article, any proceeding to compel enforcement of this article, or any proceeding to enforce any award made by arbitration.
Except as otherwise specified under this contract, all information acquired or received under this contract shall be maintained by Sherwood and Albpetrol as strictly confidential and shall not be divulged without the prior written consent of the other party while this contract remains in force. The exception being, to the extent required to comply with laws, rules or regulations of any stock exchange to which Sherwood may be subject unless such information becomes part of the public domain through sources other than Sherwood. Furthermore, Sherwood shall be bound by these obligations of confidentiality for a period of 5 years following termination of this contract.
Albpetrol and Sherwood may disclose any such information to its employees, affiliates, consultants or subcontractors to the extent required for the efficient conduct of petroleum operations provided that in the case of disclosure to employees and affiliates it ensures adequately the protection of the confidential nature of the information concerned, and in the case of disclosure to consultants or subcontractors provided that the intended recipients have first entered into a confidentiality undertaking.
For purposes of obtaining new offers on relinquished portions of the contract area or on areas adjacent to the contract area, Albpetrol may show any other entity data on such relinquished portions in uninterpreted and basic form during the term of this contract.
Subject to obtaining confidentiality undertakings as provided in Art. 23.2 above, either Sherwood or Albpetrol may disclose such information obtained pursuant to this contract as required by financing institutions from which the disclosing party is seeking finance for the purposes of carrying out its obligations under this contract.
Subject to obtaining a confidentiality agreement, Sherwood may show any such information to bona fide potential assignees who have an interest in the petroleum rights granted to Sherwood under this contract.
The activities of Sherwood in performing the petroleum operations shall be governed by and conducted in accordance with the requirements of the Albanian Law.
All questions with respect to the interpretation or enforcement of, or the rights and obligations of the Sherwood and Albpetrol under, this contract and which are the subject of arbitration in accordance with Art. 19 shall be governed by the laws of England.
If, as a result of any change in the laws, rules and regulations of Albania, any right or benefit granted to Sherwood under this contract or the license agreement (dated 07/06/ 2007 granted by the ministry and the national agency for national resources to Albpetrol governing petroleum operations in the contract area, and to which Sherwood will become a party upon execution and registration of the instrument of transfer attached as Annex E) is infringed in some way, and a greater obligation or responsibility is imposed onto Sherwood or, in whatever other way the economic benefits accruing to Sherwood from this contract or the license agreement are negatively influenced by any change in the laws, rules and regulations of Albania, and such an event is not provided for herein, the parties will immediately amend this contract and license agreement, and Albpetrol, the national agency for natural resource and the ministry will immediately undertake other necessary actions to eliminate the negative economic effect on Sherwood.