Environmental impact assessment and management plan
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall cause a consulting firm, approved by the government, to carry out an environmental impact study in order to establish what the effect will be on the environment, human beings, wildlife or marine life in the contract area in consequence of the petroleum operations.
Anadarko and Empresa shall, before carrying out any drilling, prepare and submit for review by the government a well program 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.
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall carry out petroleum operations in accordance with environmental and safety standards generally accepted in the international petroleum industry.
The government will at all times during the life of the petroleum operations ensure 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 carrying out petroleum operations Anadarko and Empresa 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; an
(c) comply strictly with the obligations relating to the protection of the environment it has assumed under the development plan .
Anadarko and Empresa will take all necessary and adequate steps in accordance with Good Oil Field Practices to:
(a) ensure proper compensation for injury to persons or damage to property caused by the petroleum operations;
(b) avoid irremediable environmental damage to the contract area and adjoining or neighboring lands and marine areas caused by petroleum operations; and
(c) rehabilitate at its own cost all areas that suffer environmental damage as a result of the petroleum operations.
If the government has reasonable grounds to believe that any works or installations erected by Anadarko and Empresa or any operations are endangering or may endanger persons or any property or is causing pollution or harming wildlife or the environment to a degree which the
government considers unacceptable, the parties shall immediately consult to agree on remedial
measures to be taken.
In the case of relinquishment, surrender or termination by Anadarko and Empresa, Anadarko and Empresa shall within 90 days from the date of relinquishment, surrender or termination:
(a) plug or close off, in a manner consistent with good oil field practices, all wells drilled as part of the petroleum operations unless otherwise agreed.
(b) take all action necessary, in accordance with good oil field practices, to prevent hazards to human life or to the property of others or the environment resulting from conditions in the contract area or any part caused by petroleum operations, which were or should have been evident at the time of relinquishment, surrender or termination.
Anadarko and Empresa shall maintain insurance on pollution caused in the course of the petroleum operations.
Anadarko Mocambique Area 1 Limitada and Empresa Nacional de Hidrocarbonetos, E.P. have the right to drill for and freely use water and impound surface waters and to establish systems for the supply of water for the petroleum operations and for consumption by its employees and subcontractors.
The government has the right to audit and inspect the accounting records of Anadarko Mocambique Area 1 Limitada and Empresa Nacional de Hidrocarbonetos, E.P.
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall pay the following production bonuses:
At the commencement of initial commercial production: US$ 5 million;
When production first reaches 20,000 BOE per day: US$ 10 million;
When production first reaches each further tranche of 50,000 BOE per day average for a calendar month: US$ 20 million.
"BOE" is the equivalent number of barrels of crude oil resulting when natural gas is converted to crude oil on the basis of 1 barrel of crude oil for each 6,000 standard cubic feet of natural gas.
The corporate income tax shall be levied in accordance with the income tax law, as may be amended from time to time but always subject to Arts. 11.9 and 9.11 (which discuss how the parties will deal with any subsequent changes of laws or introduction of new taxes).
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
The share of profit petroleum between the government and Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall be calculated using the value of an R-Factor.
The R factor is the current year’s cumulative cash inflows divided by the previous year’s cumulative cash expenditures.
The R-Factor is calculated where:
(a) R-Factor = (cumulative cash inflows)n /
(cumulative capital expenditures)n
(b) Cumulative cash inflows =
cumulative cash inflows (n-1)
+ Empresa and Anadarko portion of profit petroleum (n)
+ Empresa and Anadarko'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;
Empresa and Anadarko's cost petroleum is the amount of recoverable costs actually recovered;
Computed corporate income tax is the Empresa and Anadarko'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=1) 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:
R-Factor less than 1: 10% government; 90% Anadarko and Empresa
R-Factor equal to or greater than 1 and less than 2: 20% government; 80% Anadarko and Empresa;
R-Factor equal to or greater than 2 and less than 3: 30% government; 70% Anadarko and Empresa;
R-Factor equal to or greater than 3 and less than 4: 50% government; 50% Anadarko and Empresa;
R-Factor equal to or greater than 4: 60% government; 40% Anadarko and Empresa.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
For each calendar year, all recoverable costs incurred by Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) in relation to petroleum operations shall be limited to 65% of disposable petroleum. The cost petroleum for any quarter shall be increased by:
(a) the amount of any contributions made by Anadarko and Empresa into the decommissioning fund during such quarter; and
(b) the costs incurred by Anadarko and Empresa during such quarter to implement an approved decommissioning plan save to the extent that such costs have been funded by withdrawals from the decommissioning fund. However the cost petroleum shall never exceed the disposable petroleum.
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.
Restrictions on transactions with affiliated parties
For the sale of petroleum to affiliated companies, a value for separate export grade of crude oil will be agreed between the government and Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) on the basis of adding the following two factors:
(i) the weighted average free on board price for Brent rated crude oil for the month, or another appropriate marker crude oil for the production in the period in question. The weighted average will be based on the closing price reported in Platts Oilgram price report;
(ii) a premium or discount to the price of the Brent rated crude oil, or such other appropriate marker crude oil for the production to be determined by reference to the quality of the crude oil produced and the cost of moving it to the market.
For the sale of natural gas to affiliated companies the price shall be as stipulated for sales to non-affiliated companies or such price agreed between the government and Anadarko and Empresa.
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall pay a petroleum production tax of 5% of the natural gas and 8% of the crude oil produced onshore. For offshore deposits at a depth of less than 100 meters, Anadarko and Empresa shall pay a quantity of 4% of natural gas and 7% of the crude oil. For offshore deposits at a depth of greater than 100 meters and less than 500 meters, Anadarko and Empresa shall pay a quantity of 3% of natural gas and 5% of the crude oil. For offshore deposits at a depth of greater than 500 meters, Anadarko and Empresa shall pay a quantity of 2% of natural gas and 3% of the crude oil.
Anadarko will carry the state participating interest (also called carry). In case of assignment of the rights, the carry will be taken over by the transferee. The carry will be reimbursed in cash or in kind out of the cost petroleum from the date of commercial production. The interest rate is compounded quarterly at Libor +1%. The carry will cover costs incurred until the approval of the first development plans.
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall pay to the government US$ 1 million per year for social support projects for the citizens of the Republic of Mozambique in areas where petroleum operations take place. Anadarko and Empresa may recommend social programs to be funded and if agreed by the government the agreed amount of funding shall be considered as a credit against the following year's social support obligation. These expenses shall be considered recoverable costs.
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall endeavor to employ citizens of the Republic of Mozambique having appropriate qualifications to the extent possible at all levels of its organization and as sub-contractors or employed by sub-contractors.
In order for the government to monitor the fulfillment of the employment and training obligations Anadarko and Empresa shall annually submit its recruitment and training programs to the government.
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall, in consultation with the government, propose and carry out an effective training and employment program 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. Anadarko and Empresa shall co-operate with the government to give a mutually agreed number of government employees the opportunity to participate in training activities.
During the exploration period and the development and production period, Anadarko and Empresa shall pay to the government US$ 1 million per year, to be spent on training support programs within the government. The parties may mutually agree to training activities to be funded by Anadarko and Empresa. Anadarko and Empresa shall pay US$ 2 million per year for institutional support to the government.
This amount may be used as institutional support to the entities involved in promotion and administration of petroleum operations. These expenses shall be considered recoverable costs.
Training expenditures for Mozambican workers shall be deductible from net income for the purposes of calculating corporate income tax, up to a maximum of 5% during the first 5 years of production. Training for the use of technologically advanced equipment will have a maximum 10% allowable income tax deduction for purposes of calculating the corporate income tax.
Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall finance the cost of all facilities and equipment to be used in petroleum operations.
Anadarko and Empresa may erect, maintain and operate:
- the machinery, constructions, installations, works, facilities and other fixtures which are required for its petroleum operations;
- all communication and transportation systems and facilities with the approval of the government; and
- harbor 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 contract area.
If there is not an existing oil pipeline or gas pipeline system available on reasonable commercial terms Anadarko and Empresa shall have a non-exclusive right to construct and operate an oil pipeline or gas pipeline system to transport petroleum produced under this contract.
Third parties may have the right to use available spare capacity of facilities and necessary 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 represents the payment for Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa)'s cost of additional investments required for facilitating such third party use as well as [delete line break] operational costs and a profit element reflecting the risk taken by the owner of the facilities. Third party use shall only take place when it is not materially negatively affecting Anadarko and Empresa’s petroleum operations and is feasible from a technical, environmental and safety point of view.
During the initial exploration period, Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa) shall conduct the following exploration work:
(a) Re-process 1,000 kilometers of existing 2D offshore seismic data;
(b) Re-interpret 5,150 kilometers of existing 2D offshore seismic data;
(c) Acquire a minimum of 1,000 kilometers of 2D seismic data;
(d) Acquire a minimum of 3,000 square kilometers of 3D seismic data; and
(e) Drill 7 exploration wells as follows:
(i) a minimum of 3 exploration wells in onshore areas or in areas where water depths are less than 200 meters,
(ii) a minimum of 4 exploration wells in areas where water depths are greater than 200 meters,
(iii) as new seismic data and well information are acquired Anadarko and Empresa shall have the right to shift remaining exploration well commitments between the onshore, shallow water, and deepwater areas.
In case of non-performance of any part of the exploration work commitment the minimum expenditure for this period shall be US$ 268 million.
During the second exploration period Anadarko and Empresa shall conduct the following exploration work commitment:
(a) Acquire a minimum of 2,000 square kilometers of 3D seismic data, and
(b) Drill 4 exploration wells as follows, at the sole discretion Anadarko and Empresa:
(i) in onshore areas or in areas where water depths are less than 200 meters
(ii) in areas where water depths are greater than 200 meters.
In case of non-performance of any part of the exploration work commitment the minimum expenditure for this extension period shall be US$ 197 million.
The parties shall submit any dispute arising out of or in connection with this contract which cannot be resolved by negotiation 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. The arbitration shall take place in Geneva, Switzerland, and the law of the arbitration shall be Mozambique law. The arbitration shall be conducted in the English language.
If the dispute is not between one or more parties who are nationals of an ICSID contracting state, or if for any reason ICSID refuses to register a request for arbitration or the dispute is not within the jurisdiction of ICSID, 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.
A decision in arbitral proceedings shall be binding on the parties and judgment may be entered in any court having jurisdiction for that purpose. Each of the Parties hereby irrevocably waives any defenses based upon sovereign immunity and waives any claim to immunity.
This contract, and other records, reports analyses, compilations, data, studies and other materials are confidential and except as authorized by applicable law shall not be disclosed to any third party without the prior written consent of all parties.
However, the government may disclose documentation, excluding Anadarko Mocambique Area 1 Limitada (Anadarko) and Empresa Nacional de Hidrocarbonetos, E.P. (Empresa)'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 contract area; or
(b) with the written consent of Anadarko and Empresa 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.
Restrictions on disclosure shall also 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 contract or to petroleum operations;
(b) to a subcontractor, or consultant in connection with the conduct of petroleum operations;
(c) by Anadarko or Empresa to a third party where such disclosure is essential to the safe conduct of petroleum operations;
(d) to an affiliated company;
(e) by Anadarko or Empresa 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 party to a bona fide potential assignee of an interest under this contract or an interest in any party;
(g) to a third party in connection with and for the purpose of the sale or proposed sale of petroleum from the contract 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 recognized stock exchange on which shares of the disclosing party or any of its affiliated companies are listed; or
(j) if it is already public knowledge without improper disclosure.
Any confidential information disclosed shall be done on terms that ensure it is treated as confidential by the recipient.
Well logs, maps, magnetic tapes, core and cutting samples and other geological and geophysical information obtained by Anadarko and Empresa in the course of carrying out the petroleum operations shall be submitted to the government and may not be published, reproduced or otherwise dealt with without government consent.
If there is a change in the laws of the Republic of Mozambique or a new tax is introduced, the parties may meet to agree on changes to be made to this contract. During the period starting when the change in the law comes into effect and ending when an agreement between the parties is reached, the portion of profit petroleum to which the parties would otherwise be entitled shall be adjusted so that the net revenues received by Anadarko Mocambique Area 1 Limitada and Empresa Nacional de Hidrocarbonetos, E.P. from petroleum operations are the same as they would have been if no change in the law had taken place.
These provisions shall not impose any limitation or constraint on the scope, or due and proper enforcement, of Mozambican legislation which does not discriminate against Anadarko or Empresa and provides for the protection of health, safety, labor or the environment, or for the regulation of any category of property or activity carried on in Mozambique. However, the government will at all times during the period of petroleum operations ensure that measures taken for the protection of health, safety, labor or the environment are in accordance with standards that are reasonable and generally accepted in the international petroleum industry.