The terms of this contract continue for 25 years from the date of approval of the development plan after expiry of the exploration periods. If commercial production is possible in any of the development areas beyond the initial period of 25 consecutive contract years DNO ASA is entitled to a 5 year extension of the contract term or the producing life of the development area, whichever is lesser, after giving notice to the Government at least one year prior to the end of the period, and after obtaining approval of the coordination committee, and such approval shall not be unreasonably withheld.
The initial term of this contract is from the date of signature of contract until the expiry of the first 4-year exploration period unless extended by DNO ASA for 2 additional 3-year exploration periods. The term of this contract is divided into 3 exploration periods as follows; The first exploration period of 4 years from the date of this contract; The second exploration period for a period of 3 years commencing immediately after the end of the first exploration period; and the third exploration period for a period of 3 years commencing immediately after the end of the second exploration period.
If, at the time of the expiry of an exploration period an exploratory well is being drilled, then the exploration period is automatically continued for 30 days after the expiry of the exploration period until the the completion, suspension or abandonment of the exploratory well. DNO ASA has the right to extend the term by giving notice to the Government at any time prior to the expiry date.
If, at the time of the expiry of an exploration period an appraisal well is being drilled, then the exploration period automatically continues for the time required by DNO ASA for submission and approval of a development plan. The exploration period terminates if the first of the following occurs; (i) a decision by DNO ASA that the study area is non-commercial, (ii) the non-approval of the development plan or (iii) the approval of the development plan and the continuation of this contract in respect of the development area.
Environmental impact assessment and management plan
An environmental baseline study of existing environmental conditions in the contract area, conducted by an independent third party at the cost of DNO ASA should be completed before the commencement of petroleum operations and should be submitted to the Government and incorporated in the environmental impact
DNO ASA should operate according to international petroleum industry practices and use best endeavors to minimize
potential disturbances to the environment, including the surface, subsurface, sea, air,
flora, fauna, other natural resources and property. The order of priority for actions
shall be protection of life, environment and property. DNO ASA should take all necessary steps to respond to and notify
the Government of, all emergency and other events (including explosions, leaks and spills), occurring in relation to the petroleum operations, which are causing or likely to cause material environmental damage or material risk to health and safety.
DNO ASA, their customers and their carriers have the right to export from the Kurdistan Region, petroleum free of all export duties, customs duties, levies
or imposts. Foreign Employees and family members of DNO ASA and its Affiliates, its agents and foreign subcontractors, have the right to import into and re-export from the Kurdistan Region household goods and personal property free of any
import or export duty, customs duty, levy or impost. DNO ASA and any foreign subcontractors bringing equipment, facilities or goods required for petroleum operations into the Kurdistan Region are exempt from any import duties, customs duties, levies or imposts on such equipment, facilities or goods and on the export thereof.
This contract is entered into on the basis that the project will be free from taxes in the Kurdistan Region. The contracting parties, DNO ASA and its foreign employees are entitled to full and
complete exemption from all Government taxes before and after the effective date of
this contract. If any tax is imposed on the contracting parties, foreign employees or DNO ASA within the territory of
Iraq, it will be offset from the Government's share of profit petroleum. Double tax treaties will have effect to give relief from taxes in accordance with the provisions of such treaties. Employees of DNO ASA, contracting parties, their affiliates, subcontractors, and employees assigned by DNO ASA, who are not citizens
or residents of Kurdistan region or of Iraq are not liable to pay personal income tax imposed by the Government. If Iraq has
entered into a double tax treaty which relieves a foreign employee from personal income tax in their home nation, that employee is liable to pay personal income tax to the Kurdistan region in accordance with such treaty.
Annual Work Programs- DNO ASA should prepare and submit the annual work programs and budgets in respect of each exploration period, and for development in conformity with the approved development plan. DNO ASA is responsible for the procurement of installations, equipment and supplies and entering into contracts for the purchase of goods and services with subcontractors. Before the 31st October of each calendar year, DNO ASA must prepare and submit a proposed annual work program and budget, and supporting data for the next calendar year to the co-ordination committee for its review. DNO ASA can incur costs and expenditures in excess of, or outside the approved budget or costs and expenditures while carrying out the approved work program. Such costs and expenditures are recoverable. In case of emergency (as in where there is an immediate threat to life or property), the
DNO ASA may incur emergency expenditures for the amount actually needed but should report such expenditures to the co-ordination committee as soon as they are
made. Petroleum operations should only be performed in accordance with the approved or modified annual work program and budget, for the costs and expenditures to be treated as recoverable costs.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
Following the deduction of royalty and costs and expenses from cost recovery petroleum, the remaining petroleum in any quarter including any portion of cost recovery petroleum not required for recovery of cost and expenses also called, “Profit Oil" or "Profit Natural Gas” should be allocated between the parties in each quarter in the following proportions for each and every development area.
The profit oil should be shared as follows:
Until the cumulative available crude oil after deduction of the royalty from any
development area reaches fifty million barrels: the Government share of the available crude oil from that development area is 60% and DNO ASA’s share is 40%; Thereafter, until the cumulative available crude oil reaches three hundred million barrels: the Government share is 70% and DNO ASA’s share is 30%; Until the cumulative available crude oil after deduction of the royalty reaches one billion barrel:; the Government share is 80% and DNO ASA’s share is 20% and;
until when cumulative available crude oil exceeding one billion barrels the Government share is 85% and DNO ASA’s share is 15%. Any Available Natural Gas, whether associated or non-associated, DNO ASA intends to produce and sell, should be allocated between the parties in each quarter with 50% for the Government and 50% for the DNO ASA.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
Costs and expenses should be recovered from 100% of the remaining petroleum or cost recovery crude oil and cost recovery natural gas. Costs and expenses should be recovered in the quarter in which such costs and expenses are incurred.
If the recoverable costs and expenses in a quarter exceed the value of cost recovery oil and natural gas, the excess can be carried forward for recovery in the subsequent quarters, but not after termination of the agreement. An adjustment will be made to DNO ASA if the cost recovery petroleum received by it was greater or lesser than what it was entitled to for the calendar quarter.
Employers of foreign employees who work in the Kurdistan region are exempt from social insurance, pension fund contributions, and similar payments under the social security system of the Government.
To enable DNO ASA to properly carry out petroleum operations, the Government should assist DNO ASA and produce all consents and approvals required by it or its foreign sub-contractors to conduct petroleum operations, to carry out associated business activities and to open local and foreign bank accounts (for both local and foreign currency) in the Kurdistan Region; to arrange for foreign exchange conversion, use office space, office supplies, transportation and communication facilities and make arrangements for accommodations as required; to assist with any custom formalities; to provide entry and exit visas and work permits for employees and their family members, who arc not citizens of the Kurdistan Region and who come to the Kurdistan Region to implement the agreement and to provide assistance for their transportation, travel and medical facilities whilst in the Kurdistan Region; to provide necessary permits to send abroad documents, data and samples for
analysis or processing during petroleum operations; to contact and instruct appropriate departments and ministries of the Government and any other bodies controlled by the Government to do all things necessary to expedite petroleum operations; to provide permits, approvals, and land usage rights for the construction of bases, facilities and installations for
use in conducting petroleum operations.
DNO ASA is required to carry out the minimum work commitment for each exploration period. In case of a failure to do so, it is liable to pay the Government an amount equal to the minimum financial commitment for the exploration period less all costs and expenses incurred in such period with respect to the minimum work commitment. The payment should be made within 60 days of the end of the exploration period.
If DNO ASA drills exploratory wells during any exploration period in excess of the minimum work commitment for that exploration period, it is entitled to credit such exploratory well or wells against the minimum work commitment for the succeeding exploration period or periods.
The construction, validity' and performance of this agreement is governed by the law's applicable to the kurdistan region and principles of international law. All disputes between the parties arising in out of or relating to this contract, or to the breach, termination or validity thereof, which the parties are unable to resolve amicably, can be referred by either party to arbitration in accordance with the arbitration rules of the united nations commission on international trade law (UNCITRAL). A party need not exhaust administrative or judicial remedies prior to commencement of arbitral proceedings. For the purpose of arbitration under the UNCITRAL rules:
(a) the appointing authority shall be the international court of arbitration of the
international chamber of commerce.
(b) There shall be a single arbitrator appointed in accordance with said rules.
(c) The scat and venue of the arbitration will be london, united kingdom and it
will be conducted in the english language.
(d) The law of the arbitration shall be the laws of england and wales.
The award of the arbitration tribunal should be reduced to writing and shall be final and binding upon the parties. The award should be made and promptly paid in U.S$, free of any deductions or offsets; and any costs and fees incidental to enforcing the award. Judgment on the award can be entered in any court having jurisdiction over the person or assets of any party owing the judgment. Application may be made to such court for a judicial acceptance of the award or an order of enforcement.
DNO ASA may assign and transfer all of its rights and obligations as contractor
under this contract to a newly incorporated company which is an affiliate of DNO ASA and which is incorporated for the sole purpose of such assignment and the carrying out of all the obligations, and the exercise of all rights of DNO ASA.
Any assignment made in breach of the provisions of this article shall be null
and void. DNO ASA can assign all or part of its rights, obligations and interests arising from this contract to a third party provided that the third party has the technical and financial ability to perform the obligations to be assumed by it under this contract and accepts and assumes all of the terms and conditions of this contract. Any assignment is subject to the prior written consent of the Government, which consent shall not be unreasonably withheld or delayed.
If circumstances do not warrant continuation of the petroleum operations, DNO ASA may, by giving written notice to the Government relinquish its rights and be relieved of its obligations under this contract except for the obligations to complete the minimum work commitment. This contract or the rights granted hereunder or the operator’s right cannot be terminated as a result of any act or omission of the operator, except where the operator has carried out an act or omitted to do something at the request of DNO ASA. The Government is entitled to terminate this contract by giving ninety days advance written notice to all parties, if DNO ASA commits a material breach in relation to its obligations under this contract and has not remedied such breach. The termination notice is effective only at the end of the arbitration procedure in the case that the claim of material breach is referred to arbitration and an award confirming such breach is made.
All information and data acquired or obtained by any party in respect of petroleum operations is considered confidential and shall be kept confidential and not be disclosed during the term of the contract to any person or entity, not a Party to this contract, except to an affiliate, provided such affiliate maintains confidentiality' as provided; to a governmental agency or other entity when required by this contract; to the extent such data and information is required to be furnished in compliance with any applicable laws or regulations, or pursuant to any legal proceedings or because of any order of any court binding upon a party; to prospective or actual contractors, consultants and attorneys employed by
any party where disclosure of such data or information is essential to such
contractor's, consultant’s or attorney's work; to a bona fide prospective transferee of DNO ASA’s participating interest; or to a bank, financial institution or any other person providing funding to DNO ASA, to the extent disclosure is required in connection with securing and arranging the funding.
Disclosure shall not be made unless the disclosing party has obtained a written undertaking from the recipient party to keep the data and information strictly confidential for at least 3 years and not to use or disclose the data and information except for the express purpose for which disclosure is to he made.
The contract is subject to applicable Iraqi law, regulations of the coalition provisional authority, and relevant United Nations security council resolutions.
If as a result of force majeure, a party cannot carry out its obligations under this contract, other than the obligation to pay any amounts due, then the obligations to the extent affected by such force majeure will be suspended during the period of force majeure, and for a reasonable time necessary to allow the party to be in the same position as existed prior to the force majeure occurring.
The affected party should notify the other party of the force majeure situation within 7 days of being aware of the circumstances and should keep the other party informed of all significant developments. The notice should give reasonably full particulars of the force majeure, and also estimate the period of time required to remedy the force majeure. The affected party should use all reasonable diligence to remove or overcome the force majeure situation as quickly as possible in an economic manner. The period of such non-performance or delay, and the period necessary for the restoration of any damage done during such delay, will be added to the time given in this contract for the performance of any obligation.
Force majeure means a circumstance which is irresistible or beyond the reasonable control of a party and which prevents, hinders or impedes petroleum operations or the discharge of a party's obligations under this contract, and shall be in accordance with the principles of the international petroleum industry. Except for a declaration of war or the actions of another government, an act or failure to act of the Government will not be treated as force majeure and will not excuse performance by the Government of its obligations under this agreement. DNO ASA has the right to terminate this contract if a force majeure continues for a period in excess of 24 months, by giving 30 days notice to the Government. In such an event, DNO ASA will be released from all obligations and liabilities hereunder.
DNO ASA shall maintain books and accounts of petroleum operations. These should be maintained in Iraqi Dinars and US$ in accordance with generally accepted international petroleum industry accounting principles and should be made available to the authorities and be prepared in the english language.
The Government agrees and commits to DNO ASA to exercise its best efforts to maintain stability of the fiscal conditions for the duration of this contract.