NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here
PETROLEUM AGREEMENT
BY AND AMONG
GOVERNMENT OF THE REPUBLIC OF GHANA
GHANA NATIONAL PETROLEUM CORPORATION
GNPC
GNPC EXPLORATION AND PRODUCTION COMPANY LIMITED
SPRINGFIELD EXPLORATION AND PRODUCTION LIMITED
Springfield E&P
E&P
IN RESPECT OF
West Cape Three Points Block 2
2015
TABLE OF CONTENTS
ARTICLE
PAGE
1.
DEFINITIONS
2.
SCOPE OF THE AGREEMENT, INTERESTS
3
OF THE PARTIES AND CONTRACT AREA
12
3.
EXPLORATION PERIOD
16
4.
MINIMUM EXPLORATION PROGRAMME
19
5.
RELINQUISHMENT
23
6.
JOINT MANAGEMENT COMMITTEE
24
7.
RIGHTS AND OBLIGATIONS OF CONTRACTOR AND
GNPC
29
8.
COMMERCIALITY
35
9.
SOLE RISK ACCOUNT
44
10.
SHARING OF CRUDE OIL
47
11.
MEASUREMENT AND PRICING OF CRUDE OIL
55
12.
TAXATION AND OTHER IMPOSTS
58
13.
FOREIGN EXCHANGE TRANSACTIONS
61
14.
SPECIAL PROVISIONS FOR NATURAL GAS
63
15.
DOMESTIC SUPPLY REQUIREMENT (CRUDE OIL)
70
16.
17.
INFORMATION AND REPORTS: CONFIDENTIALITY
INSPECTION, SAFETY AND ENVIRONMENTAL
PROTECTION
71
76
18.
ACCOUNTING AND AUDITING
78
19.
TITLE TO AND CONTROL OF GOODS AND EQUIPMENT
80
20.
PURCHASING AND PROCUREMENT
82
21.
EMPLOYMENT AND TRAINING
83
i
ARTICLE
PAGE
22.
FORCE MAJEURE
85
23.
TERM AND TERMINATION
87
24.
CONSULTATION, ARBITRATION AND
INDEPENDENT EXPERT
91
25.
ASSIGNMENT
94
26.
MISCELLANEOUS
96
27.
NOTICE
100
ANNEX 1
-
CONTRACT AREA
ANNEX 2
-
ACCOUNTING GUIDE
ANNEX 3
-
CONFIDENTIALITY AGREEMENT
ANNEX 4
-
SAMPLE AOE CALCULATION
ii
AGREEMENT,
made
this
^day
of
by and among the Government of the Republic of Ghana
(hereinafter referred to as the "State"), represented by the Minister for Petroleum
(hereinafter referred to as the "Minister"), the Ghana National Petroleum
Corporation, a public corporation established by the Ghana National Petroleum
Corporation Act, 1983 PNDCL 64 (hereinafter referred to as "GNPC"), GNPC
Exploration and Production Company Limited, a company incorporated in Ghana
and having its registered office at Petroleum House, Harbour Road, Tema
(hereinafter referred to as "Explorco") and Springfield Exploration and Production
Limited, a private limited liability company incorporated and existing under the laws
of Ghana with its registered office and principal place of business located at F146/5,
2nd Soula Street, Labone, Accra, Ghana ("Springfield").
THIS
PETROLEUM
WITNESSES THAT:
1. All Petroleum existing in its natural state within Ghana is the property of the
Republic of Ghana and held in taist by the State on behalf of the people of
Ghana.
2. In accordance with the Petroleum Law, the Minister has prepared a reference
map showing areas of potential petroleum fields within the jurisdiction of Ghana,
divided into numbered areas and each of which is described as a "Block".
3. GNPC has, by virtue of the Petroleum Law, the right to undertake Exploration,
Development and Production of Petroleum over all Blocks declared by the
Minister to be open for Petroleum Operations.
4. GNPC is further authorised to enter into association by means of a petroleum
agreement with a contractor for the purpose of Exploration, Development and
Production of Petroleum.
5. The Contract Area that is the subject matter of this Agreement has been
declared open for Petroleum Operations by the Minister, and the State desires
to encourage and promote Exploration, Development and Production within the
Contract Area. The State assures Contractor that all of the Contract Area is
within the jurisdiction of Ghana.
6. Contractor, having the financial ability, technical competence and professional
skills necessary for carrying out the Petroleum Operations herein described,
desires to associate with GNPC in the Exploration for, and Development and
Production of, the Petroleum resources of the Contract Area.
7. Contractor shall comply with all the applicable laws of Ghana, including without
limitation any regulations, policies or directives issued by or other acts of the
Petroleum Commission pursuant to the Petroleum Commission Act, 2011 (Act
821), as the same may be amended from time to time.
8. The Parties are committed to providing qualified Ghanaian nationals
employment at all levels in the petroleum industry, including technical.
1
administrative and managerial positions, and Contractor accordingly commits
to providing and supporting a programme of training for Ghanaian nationals as
an integral part of this Agreement.
9. GNPC has aspirations of building operatorship capacity and without prejudice
to the rights of the Parties under this Agreement, Contractor is committed,
pursuant to the terms of this Agreement, to supporting GNPC to develop its
institutional capacity to enable GNPC to fulfill its aspirations.
10. The Parties are committed to providing an annual local content plan in line with
Local Content Regulations for fulfilling the applicable Ghanaian content
requirements with respect to the provision of goods and services.
NOW THEREFORE, in consideration of the mutual covenants herein contained, it is
hereby agreed and declared as follows:
Article 1
DEFINITIONS
In this Agreement:
1.1
"Accounting Guide" means the accounting guide which is attached hereto as
Annex 2 and made a part hereof;
1.2
"Additional Interest" means the additional interest of GNPC provided in Article
2.5;
1.3
"Affiliate" means any person, whether a natural person, corporation, partnership,
unincorporated association or other entity which directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common control
with a Party. For this purpose, "control" means the direct or indirect ownership of
in aggregate fifty percent (50%) or more of voting capital or voting rights of the
entitlement (directly or indirectly) to appoint a majority of the directors or
equivalent management body of, or to direct the policies or operations of the other
entity;
1.4
"Agreement" means this agreement between the State, GNPC, and Contractor,
and includes the Annexes attached hereto, as may be amended by mutual
written agreement from time to time;
1.5
"Appraisal" means operations or activities carried out pursuant to an Appraisal
Programme following a Discovery of Petroleum for the purpose of delineating the
accumulations of Petroleum to which that Discovery relates in terms of thickness
and lateral extent and estimating the quantity of recoverable Petroleum therein,
and all operations or activities to resolve uncertainties required for determination
of a Commercial Discovery;
•
1.6
"Appraisal Programme" means a programme approved by the Petroleum
Commission pursuant to Article 8.5 for the conduct of Appraisal;
1.7
"Appraisal Well" means a well drilled pursuant to an Appraisal Programme;
1.8
"Associated Gas" means Natural Gas produced from a well in association with
Crude Oil;
1.9
"Barrel" means a quantity or unit of Crude Oil equal to forty-two (42) United
States gallons at a temperature of sixty (60) degrees Fahrenheit and at fourteen
and sixty-five one-hundredths pounds per square inch at atmospheric pressure
(14.65 psia);
1.10 "Block" means an area of approximately 685 square kilometres depicted on the
reference map prepared by the Minister in accordance with the provisions of the
Petroleum Law;
1.11
"Business Day" means a day on which banks are open for business in Accra;
1.12 "Calendar Year" means a period of twelve (12) months of the Gregorian calendar,
commencing on January 1 and ending on the succeeding December 3 1 ;
1.13 "Carried Interest" means an interest held by GNPC pursuant to this Agreement in
respect of which Contractor pays for the conduct of Petroleum Operations, as set
out in this Agreement, without any entitlement to reimbursement from GNPC;
1.14 "Commercial Discovery" means a Discovery which is determined to
commercial in accordance with the provisions of Article 8 of this Agreement;
be
1.15 "Commercial Production Period" means, in respect of each Development and
Production Area, the period from the Date of Commencement of Commercial
Production until the termination of this Agreement or earlier relinquishment of
such Development and Production Area;
1.16 "Contract Area" means the area of approximately six hundred and seventy three
kilometers squared (673 km2) covered by this Agreement in which Contractor is
authorized, in association with GNPC, to explore for, develop and produce
Petroleum, which is described in Annex 1 attached hereto and made a part of this
Agreement, but excluding any portions of such area in respect of which
Contractor's rights hereunder are from time to time relinquished or surrendered
pursuant to this Agreement;
1.17 "Contractor" means, collectively Springfield and Explorco and their respective
permitted successors and assignees and each of Springfield and Explorco
individually a "Contractor Party" as the context may require;
1.18 "Contract Year" means a period of twelve (12) Months, commencing on the
Effective Date or any anniversary thereof;
1.19 "Crude Oil" means hydrocarbons which are liquid at fourteen and sixty-five onehundredths pounds per square inch at atmospheric pressure (14.65 psia) and
sixty degrees Fahrenheit (600F) and includes condensates and distillates
obtained from Natural G a s ; ^
4
1.20 "Date of Commencement of Commercial Production" means, in respect of
each Development and Production Area, the date on which production of
Petroleum under a programme of regular production, lifting and sale commences,
as defined in a Development Plan;
1.21 "Date of Commercial Discovery" means the date referred to in Article 8.15;
1.22 "Development" or "Development Operations" means the following activities
carried out in connection with a Development Plan: the design, engineering,
building and installation of facilities for Production, including drilling of
Development Wells, construction and installation of equipment, pipelines,
facilities, plants and systems, in and outside the Contract Area, which are required
for achieving Production, treatment, transport, storage and lifting of Petroleum,
and preliminary Production and testing activities carried out prior to the Date of
Commencement of Commercial Production, including all related planning and
administrative work, and may also include the construction and installation of
approved secondary and tertiary recovery systems;
1.23 "Development Costs" means Petroleum Costs incurred in Development
Operations, including costs incurred in respect of lease, purchase, or rental of
assets;
1.24 "Development and Production Area" means that portion of the Contract Area
proposed by Contractor and approved by the JMC (or proposed by GNPC if a
Sole Risk Operation pursuant to Article 9) on the basis of the available seismic
and well data to cover the areal extent of an accumulation or accumulations of
Petroleum constituting a Commercial Discovery, enlarged in area by ten percent
(10%), such enlargement to extend uniformly around the perimeter of such
accumulation;
1.25 "Development Period" means, in respect of each Development and Production
Area, the period from the Date of Commercial Discovery until the Date of
Commencement of Commercial Production;
1.26 "Development Plan" means the plan for development of a Commercial Discovery
prepared by Contractor in consultation with the JMC and approved by the Minister
pursuant to Article 8;
1.27 "Development Well" means a well drilled in accordance with a Development Plan
for producing Petroleum including wells for pressure maintenance or increasing
the Production r a t e ; ^
1.28 "Discovery" means ( i ) Existing Discoveries or ( i i ) finding witiiin a well at the end
of drilling under Exploration Operations (an) accumulation(s) of Petroleum whose
existence, until that finding, was not previously known or proven to have existed,
which is or can be recovered at the surface in a flow measurable by conventional
international petroleum industry testing methods (which, in the case of water
depths greater than four hundred (400) metres, may include Modular Formation
Dynamics Testing (also referred to as "MDT" by Schlumberger)) ( New
Discovery);
1.29 "Discovery Area" means that portion of the Contract Area, reasonably proposed
by Contractor and approved by the JMC (or proposed by GNPC if such area
occurs as a result of a Sole Risk pursuant to Article 9) on the basis of the
available seismic and well data, that covers the areal extent of the geological
structure in which a Discovery is made. A modification to the Discovery Area may
be proposed by Contractor at any time and approved by the JMC (or proposed by
GNPC to the extent permitted by Article 9, if applicable), if justified on the basis of
new information, up to the date of submission of a report under Article 8.10;
1.30 "Discovery Notice" means a written notification of Discovery to the Minister, the
Petroleum Commission, and GNPC pursuant to Article 8.1 providing information
which shall include the date of Discovery, the name and location of the well from
which the accumulation(s) have been found, the depth interval(s), estimates of
gross and net pay thickness, stratigraphy, and type of reservoir and fluids
encountered;
1.31 "Effective Date" shall have the meaning ascribed to it in Article 26.11;
1.32 "Existing Discoveries" means Odum and Banda discoveries as described in
Annex 1
1.33 "Exploration" or "Exploration Operations" means the search for Petroleum by
geological, geophysical and other methods, and the drilling of Exploration Well(s)
and Appraisal Wells, and includes any activity in connection therewith or in
preparation thereof and any relevant processing and Appraisal work, including
technical and economic feasibility studies, that may be carried out to determine
whether a Discovery of Petroleum constitutes a Commercial Discovery;
1.34 "Exploration C o s t s " means Petroleum Costs incurred, both within and outside
Ghana, in conducting Exploration Operations hereunder determined in
accordance with the Accounting Guide attached hereto as Annex 2;
1.35 "Exploration Period" means the period commencing on the Effective Date and
continuing during the time provided for in Article 3.1 within which Contractor is.
6
authorised to carry out Exploration Operations, and shall include any periods of
extensions provided for in this Agreement. The period shall terminate with
respect to any Discovery Area on the Date of Commercial Discovery in respect of
such Discovery Area;
1.36 "Exploration Phase" means any one of the Initial Exploration Period, the First
Extension Period or the Second Extension Period;
1.37 "Exploration Well" means a well drilled in the course of Exploration Operations
conducted hereunder during the Exploration Period, excluding Appraisal Wells;
1.38 "Extension Period" means either the First Extension Period or Second Extension
Period, as applicable;
1.39 "Force Majeure" means any event beyond the reasonable control of the Party
claiming to be affected by such event, which has not been brought about directly
or indirectly at its own instance or which has not been brought about directly or
indirectly at the instance of an Affiliate. Force Majeure events may include, but
are not limited to, acts of God, accidents, fires, explosions, earthquake, storm,
flood, hurricanes, tidal waves, cyclones, tornados, lightning or other adverse
weather conditions or any other natural disasters, war, acts of war, acts of
terrorism, embargo, blockade, epidemic, riot, civil disorder, or strikes;
1.40 "Foreign National Employee" means an expatriate employee of Contractor, its
Affiliates, or its Subcontractors who is not a citizen of Ghana;
1.41 "Ghana" means the territory of the Republic of Ghana and includes rivers,
streams, water courses, the territorial sea, seabed and subsoil, the contiguous
zone, the exclusive economic zone, continental shelf, the airspace, and all other
areas within the jurisdiction of the Republic of Ghana;
1.42 "Gross Negligence or Willful Misconduct" means any act, failure to act or
failure to exercise such minimum degree of care and prudence by a Party which
was in reckless disregard of or wanton indifference to the harmful consequences
that the person knew, or should reasonably have known, could result;
1.43 "Gross Production" means the total amount of Petroleum produced and saved
from a Development and Production Area during Production Operations, which is
not used by Contractor in Petroleum Operations, and is available for distribution to
the Parties in accordance with Article 10;
1.44 " Income Tax Act" means the Income Tax Act, 2015 (Act 896) as the same may
be amended from time to time >Q.
1.45 "Indigenous Ghanaian Company" means a company incorporated under the
Companies Act, 1963 (Act 179) of Ghana:
(a)
that has at least fifty-one percent (51%) of its equity owned by a citizen or
citizens of Ghana; and
(b)
that has Ghanaian citizens holding at least eighty percent (80%) of senior
management positions and one hundred percent (100%) of nonmanagerial and other positions;
1.46 "Initial Interest" means the interest of GNPC in all Petroleum
provided for in Article 2.4;
Operations
1.47 "International Best Oil Field Practice" means those practices that are generally
accepted in the international petroleum industry as good, safe, and efficient in
exploring for, developing, producing, processing, and transporting Petroleum;
1.48 "Joint Management Committee"
pursuant to Article 6.1;
(JMC) means the committee
established
1.49 "Joint Operating Agreement" or "JOA" means an agreement among all of the
Contractor Parties with respect to the Contract Area and their respective rights
and/or obligations under this Agreement, as such agreement may be amended or
supplemented from time to time;
1.50 "LIBOR" means the interest rate per annum equal to the British Bankers
Association London interbank offered rate for one (1) month U.S dollar deposits,
as published in the Financial Times London. In the event that the Financial Times
London is not published, then as published by The Wall Street Journal.
1.51 "LNG" means Liquefied Natural Gas;
1.52 "Local Content Regulations" means the Petroleum (Local Content and Local
Participation) Regulations, 2013, L.I. 2204;
1.53 "Market Price" means the market price for Crude Oil realized by Contractor under
this Agreement as determined in accordance with Article 11.7;
1.54 "Minister" has the meaning given to such term in the Preamble;
1.55 "Minimum Work Obligation" means Contractor's obligations set forth in Article
8
1.56 "Month" means a month of the Calendar Year;
1.57 "Natural Gas" means all hydrocarbons which are gaseous at fourteen and sixtyfive one-hundredths pounds per square inch at atmospheric pressure (14.65 psia)
and sixty (60) degrees Fahrenheit, and includes wet gas, dry gas, and residue gas
remaining after the extraction of liquid hydrocarbons from wet gas;
1.58 "Non-Associated Gas" means Natural Gas produced from a well other than in
association with Crude Oil;
1.59 "Operator" means Springfield or such other Party as may be jointly proposed by
Contractor and GNPC and approved by the Minister to conduct Petroleum
Operations hereunder on behalf of the Parties;
1.60 "Participating Interest" means the interest held by each Contractor Party
(expressed as a percentage) in accordance with the provisions of Article 2.11;
1.61 "Party" means each of the State, GNPC, Explorco, or Springfield, as the case
may be;
1.62 "Paying Interest" means an interest held by GNPC in respect of which GNPC
pays for the conduct of Petroleum Operations as expressly provided for in Article
2.7;
1.63 "Petroleum" means Crude Oil or Natural Gas, or a combination of both;
1.64 "Petroleum Commission" means a body established by the Petroleum
Commission Act, 2011 (Act 821) for the regulation and the management of the
utilisation of petroleum resources in the upstream sector;
1.65 "Petroleum Costs" means all expenditures made and costs incurred in
conducting Petroleum Operations hereunder determined in accordance with the
Accounting Guide attached hereto as Annex 2;
1.66 "Petroleum Law" means the Petroleum (Exploration and Production) Law, 1984
(PNDCL 84);
1.67 "Petroleum Operations" means all activities, both in and outside Ghana, relating
to the Exploration for. Appraisal of. Development, Production, handling, storage,
processing and transportation to the Delivery Point, of Petroleum contemplated.
under this Agreement and includes Exploration Operations, Development
Operations and Production Operations and all activities in connection therewith;
1.68 "Petroleum Product" means any product derived from Petroleum by any
conventional refining process;
1.69 "Pre-Award Attachment" means any order, decree, injunction or other decision
(however designated) of any court, arbitral body or other competent authority
requested by a Party and issued prior to a final arbitral award issued pursuant to
Article 24.2 of this Agreement that attaches, seizes, freezes or otherwise restricts
the use or alienation of any property (whether tangible or intangible) of the other
Party pending issuance of the final arbitral award, whether such property is in the
possession or control of a Party or of a third party;
1.70 "Production" or "Production Operations" means activities, other than
Exploration Operations or Development Operations, undertaken in order to
extract, save, treat, measure, handle, store and transport (to the Delivery Point)
Petroleum to storage and/or loading points and to carry out any type of primary,
secondary or tertiary recovery operations, including recycling, recompression,
injection for maintenance of pressure and water flooding and all related activities
such as planning and administrative work and shall also include maintenance,
repair, abandonment or decommissioning and replacement of facilities, and well
work overs, conducted after the Date of Commencement of Commercial
Production of the respective Development and Production Area;
1.71 "Production Costs" means Petroleum Costs incurred in Production Operations;
1.72 "Proposed Appraisal Programme" means a draft of a programme for the
conduct of an Appraisal to be presented to the Petroleum Commission for
approval;
1.73 "Quarter" means a period of three (3) consecutive Months, commencing January
1, April 1, July 1, or October 1, and ending March 3 1 , June 30, September 30, or
December 31, respectively;
1.74 " Security" means an irrevocable, unconditional guarantee issued by a bank or an
insurance company; or a financial and performance guarantee from a parent
company; or a standby letter of credit; or any other financial security issued in
favour of GNPC by a reputable institution acceptable to GNPC and having a credit
rating indicating that it has sufficient worth to pay its obligations in all reasonably
foreseeable circumstances;
1.75 "Sole Expert' means the person appointed to resolve a dispute pursuant to 24.910
1.76 "Sole Risk" means an operation conducted at the sole cost, risk, expense, and
liability of GNPC referred to in Article 9;
1.77 "Specified Rate" means LIBOR plus two percent (2%);
1.78 "Standard Cubic Foot" or " S C F " means the quantity of gas that occupies one (1)
cubic foot at 14.65 psia pressure and sixty (60) degrees Fahrenheit temperature;
1.79 "State" has the meaning given to such term in the Preamble;
1.80 "Subcontractor" means a third party with whom GNPC or Contractor has entered
into a contract for provisions of goods or services for, or in connection with.
Petroleum Operations;
1.81 "Termination" means termination of this Agreement pursuant to Article 24 hereof;
1.82 "Work Programme" means the annual plan for the conduct of Petroleum
Operations prepared pursuant to Articles 6.4 and 6.5; and
1.83 "Year" means a continuous twelve (12) Month period./<)
Article 2
SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT
AREA
2.1
This Agreement provides for the Exploration for, and Development and Production
of. Petroleum in the Contract Area by GNPC in association with Contractor.
2.2
Subject to the provisions of this Agreement, Contractor shall be responsible for the
execution of such Petroleum Operations as are required by the provisions of this
Agreement and, subject to Article 9, is hereby appointed the exclusive entity to
conduct Petroleum Operations in the Contract Area. In order that the Parties may
cooperate in the implementation of Petroleum Operations, GNPC, and Contractor
shall establish a Joint Management Committee to conduct and manage Petroleum
Operations.
2.3
In the event that no Commercial Discovery is made in the Contract Area or that
Gross Production achieved from the Contract Area is insufficient to fully reimburse
Contractor in accordance with the terms of this Agreement, then Contractor shall
bear its own loss; GNPC and the State shall have no obligations whatsoever to
Contractor in respect of such loss.
2.4
GNPC shall have an Initial Interest in all Petroleum Operations under this
Agreement as follows: (a) eleven percent (11%) in the case of a New Discovery
either developed alone or together with the Existing Discoveries and (b) eight
percent (8%) for Existing Discoveries developed on a standalone basis. With
respect to all Exploration Operations and Development Operations, the Initial
Interest shall be a Carried Interest. With respect to all Production Operations
GNPC's Initial Interest shall be a Paying Interest.
2.5
In addition to the Initial Interest provided for in Article 2.4, GNPC shall have the
option in respect of each Development and Production Area to acquire an Additional
Interest of up to (a) seventeen percent (17%) in the case of a New Discovery either
developed alone or together with the Existing Discoveries and (b) five percent (5%)
for Existing Discoveries developed on a standalone basis in the Petroleum
Operations in such Development and Production Area, by contributing the
corresponding proportionate share to all the Petroleum Costs incun'ed after the
Date of Commercial Discovery, in respect of such Development and Production
Area (or make arrangements satisfactory to the Contractor to that effect). With
respect to all Development Operations and Production Operations, the Additional
Interest shall be a Paying Interest. GNPC shall notify the Contractor of the exercise
of its intention to acquire the Additional Interest within ninety (90) days of the Date
12
of Commercial Discovery. GNPC and Contractor shall agree on the mode of
financing such Additional Interest.
2.6
If GNPC opts to take an Additional Interest as provided for in Article 2.5 then within
six (6) Months of the date of its election, GNPC shall reimburse the Contractor for
all expenditures attributable to GNPC's Additional Interest incurred from the Date
of Commercial Discovery to the date GNPC notifies Contractor of its election.
2.7
For the avoidance of doubt, GNPC shall only be liable to contribute to Petroleum
Costs:
(a)
incurred in respect of Development Operations in any Development and
Production Area to the extent only of any Additional Interest acquired in
such Development and Production Area under Article 2.5; and
(b)
incurred in respect of Production Operations in any Development and
Production Area both to the extent of:
i)
its eleven percent (11 %) or eight percent (8%) Initial Interest (as the
case may be) held pursuant to Article 2.4; and
ii)
any Additional Interest acquired under Article 2.5.
2.8
In the event that GNPC, having acquired the Additional Interest subsequently
wishes to dispose of it (or part of it) to a third party other than parties stipulated
under Article 25.6, GNPC shall notify Contractor of such intent and shall infonn
Contractor of the price which is to be paid by such third party for the same, and the
Contractor shall have the right for a period of thirty days from the receipt of such
notice to inform GNPC that it wishes to acquire such interest at the price notified to
it by GNPC, being the price at which it was to have been sold to the third party.
2.9
GNPC may during the Exploration Period contribute to Petroleum Operations by
providing such relevant services as may be specified by the JMC from time to time.
Prior to the provision of such services, and subject to JMC Approval, Contractor
must specify in writing whether GNPC is either to (i) be paid in cash for such
services by Contractor upon receipt of invoice from GNPC, or (ii) earn credit for the
costs of providing such services against GNPC's share, if any, of future
Development and/or Production Costs. The amount of costs to be invoiced or credit
earned by GNPC pursuant to this paragraph must be approved by the JMC prior to
provision of the relevant services, and shall be at fair market rates at which such
services could be obtained under freely competitive conditions at the time of such
approval Likewise, if the Contractor provides services, it shall earn credit for the
costs of providing such services in accordance with the Accounting Guide.
13
2.10 Upon notifying Contractor of its decision to acquire an Additional Interest pursuant
to Article2.5, GNPC may specify in the notification one or more of the following:
(a)
that notwithstanding the provisions in Article 2.6 GNPC shall elect to have
Contractor advance GNPC's total proportionate share of Development
Costs incurred in respect of the Additional Interest. Such advances shall
be reimbursed from the proceeds of the sales of GNPC's petroleum
entitlement with interest at rate no higher than (i) the weighted average rate
applicable to any third party debt financing pursuant to which the Contractor
(or its Affiliates) has financed such Additional Interest from and including
the date of the relevant expenditure to and excluding the date the Contractor
is reimbursed or (ii) the Specified Rate if Contractor has no third party debt
financing; and
(b)
notify the Contractor of any arrangements for the payment of the balance of
GNPC's total proportionate share of Development Costs.
2.11 Contractor's Participating Interest in all Petroleum Operations and in all rights under
this Agreement shall be (a) eighty nine percent (89%) in the case of New Discovery
either developed alone or together with the Existing Discoveries and (b) ninety two
percent (92%) for Existing Discoveries developed on a standalone basis, reduced
proportionately on each Contractor Party pro rata to Participating Interest, at any
given time and in any given part of the Contract Area by the exercise of the option
of Additional Interest of GNPC pursuant to Article 2.5 or the exercise of the Sole
Risk interest of GNPC pursuant to Article 9.
2.12 Notwithstanding Article 1.59, Springfield shall not later than three hundred and
sixty-five (365) days after the Effective Date, or such other additional period as may
be approved by the Minister, assign a material portion of its Participating Interest to
an entity which shall be the technical partner and joint operator of the Contract Area.
The technical partner shall be an entity with the requisite technical and financial
capability to undertake Petroleum Operations selected by Springfield, acceptable
to GNPC and approved by the Minister; provided however that GNPC's failure to
accept such proposed technical partner shall not preclude Springfield from seeking
approval from the Minister. The assignment of a Participating Interest to the
technical partner shall not constitute a 'farmout' within the meaning of Article 25.5
2.13 As of the Effective Date, the Contract Area shall cover a total of approximately six
hundred and seventy-three kilometres squared ( 673 km2), as depicted by Annex
1, and shall from time to time during the term of this Agreement be reduced
14
according to ttie tenris herein. During the temri of this Agreement, Contractor shall
pay rentals to the State for that area included within the Contract Area at the
beginning of each Contract Year according to the provisions of Article 12.1(e) below
15
Article 3
EXPLORATION PERIOD
3.1
3.2
The Exploration Period shall begin on the Effective Date and, subject to Article 22.8,
shall not extend beyond five and one-half (5/4) years unless othenwise extended by
the Minister as provided for in accordance with the Petroleum Law.
(a)
The Exploration Period shall be divided into an Initial Exploration Period of
two and one-half (2V^) years ("Initial Exploration Period") and two (2)
extension periods, the first of one and one-halfzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJ
{VA)
years and the second
of one and one-half (VA) years each (respectively, "First Extension Period"
and "Second Extension Period") and where applicable the further periods
for which provision is made hereafter.
(b)
Where Contractor has fulfilled its obligations set out in Article 4.3 before the
end of the Initial Exploration Period or, as the case may be, the First
Extension Period, and has exercised its option by applying to the Minister
in writing for an extension, the Minister will be deemed to have granted an
extension into the First Extension Period or, as the case may be, into the
Second Extension Period.
(c)
For each well drilled by Contractor or with Contractor's participation during
the Initial Exploration Period beyond those referred to in Article 4.3, the
Initial Exploration Period shall be extended by three (3) Months and the
commencement of subsequent periods shall be postponed in their entirety
accordingly.
Following the end of the Second Extension Period, subject to the provisions of
Article 3.4, Contractor will be entitled to an extension or extensions, by reference to
Article 8, of the Exploration Period as follows:
(a)
Where at the end of the Second Extension Period Contractor is drilling or
testing any well, Contractor shall be entitled to an extension for such further
period as may be reasonably required to enable Contractor to complete
such work and assess the results and, in the event that Contractor notifies
the Minister that the results from any such well show a Discovery which
merits Appraisal, Contractor shall be entitled to a further extension for such
period as may be reasonably required to carry out an Appraisal Programme
and determine whether the Discovery constitutes a Commercial Discovery;
(b)
Where at the end of the Second Extension Period Contractor is engaged in
the conduct of an Appraisal Programme in respect of a Discovery which has
not been completed, Contractor shall be entitled to a further extension for
such period as may be reasonably required to complete that Appraisal
16
Programme and determine
Commercial Discovery;
wJiettier
tlie
Discovery
constitutes
a
(c)
Where at the end of the Second Extension Period Contractor has
undertaken work not falling under paragraphs ((a) or ((b) which is not
completed, Contractor shall be entitled to a further extension following the
end of the Second Extension Period for such period as the Minister
considers reasonable for the purpose of enabling such work to be
completed;
(d)
Where pursuant to Article 8 Contractor has before the end of the Second
Extension Period, including extensions under ((a), ((b) and ((c) above, given
to the Minister a notice of Commercial Discovery, Contractor shall, if the
Exploration Period would othenwise have been terminated, be entitled to a
further extension of the Exploration Period in respect of the Discovery Area
during which it must prepare the Development Plan in respect of the
Commercial Discovery until either:
i)
the Minister has approved the Development Plan as set out in Article
8; or
ii)
in the event that the Development Plan is not approved by the
Minister as set out in Article 8 and the matter or matters in issue
between the Minister and Contractor have been referred for
resolution under 24.1, one (1) Month after the date on which the final
decision thereunder has been given.
Where at the end of the 9 month period for submission of Appraisal Programme
with respect to the Existing Discoveries, Initial Exploration Period or, as the case
may be, at the end of the First Extension Period, Contractor has failed to submit the
Appraisal Program or complete its Minimum Work Obligations as specified in
Articles 4.3((a),(b),(c) or (d) in respect of that period (including in the circumstances
contemplated in Article 4.7, but has made reasonable arrangements to remedy its
default. Contractor may apply to the Minister for further extension. The Minister
may refuse to grant or grant in his discretion an extension on the then current
applicable period subject to such reasonable terms and conditions as the Minister
may stipulate to assure performance of the work.
Save in respect of a Discovery Area:
(a)
in the circumstances and subject to the limitations set forth in Section 12(3)
of the Petroleum Law;
(b)
in a case falling within the provisions of Article 3.2(d); or
17
(c)
in circumstances where Article 22.8 applies,
subject to Article 3.5 and Article 8, nothing in Article 3.2 shall be read or construed
as requiring the extension of the Exploration Period beyond seven (7) years from
the Effective Date.
The provisions of Articles 3.2(a), 3.2(b), 3.2(c), and 3.3, so far as they relate to the
duration of the relevant Extension Period to which Contractor will be entitled, shall
be read and construed as requiring the Minister to give effect to the provisions of
Article 8 relating to the time within which Contractor must meet the requirements of
that Article.
18
Article 4
MINIMUM EXPLORATION PROGRAMME
4.1
Exploration Operations shall begin as soon as practicable and in any case not later
than sixty (60) days after the Effective Date.
4.2
GNPC shall, as soon as practicable at the request of Contractor, make available to
Contractor such records and information relating to the Contract Area as are
relevant to the performance of Exploration Operations by Contractor and are in
GNPC's possession, provided that Contractor shall reimburse GNPC for licensing
the data and for other costs reasonably incurred in procuring or otherwise making
such records and infomriation available to Contractor.
4.3
Subject to the provisions of this 3.5, in discharge of its obligations to carry out
Exploration Operations in the Contract Area, Contractor shall, during the several
phases into which the Exploration Period is divided, carry out the obligations
specified hereinafter:
(a)
Existing Discoveries
Contractor shall within a period of nine (9) months from the Effective Date
undertake an evaluation of the Existing Discoveries, and shall submit an
Appraisal Programme to the Petroleum Commission for approval and to the
Minister for information purposes.
GNPC shall, as soon as practicable following the request of Contractor,
make available to Contractor such records and infonnation relating to the
Contract Area as are relevant to undertake the evaluation and Appraisal in
respect of the Existing Discoveries.
(b)
Initial Exploration Period: Commencing on the Effective Date and
terminating two and one-half (234) years from the Effective Date.
Description of Contractor's Minimum Work Obligation:
i)
Geological and geophysical studies.
ii)
Drill one Exploration Well.
Minimum Expenditure: The minimum expenditure for the work in the Initial
Exploration Period shall be Thirty Million United States Dollars
(US$30,000,000).
19
(c)
First Extension Period: Commencing at tlie end of ttie Initial Exploration
Period and terminating one and one-halfzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFE
{VA)
Years from the expiration of
the Initial Exploration Period.
Description of Contractor's IVIinimum Worit Obligation:
i)
Geological and geophysical studies.
ii)
Drill one Exploration Well.
Minimum Expenditure: The minimum expenditure for the work in the First
Extension Period shall be Thirty Million United States Dollars
(US$30,000,000).
(d)
Second Extension Period: Commencing at the end of the First Extension
Period and temiinating one and one-half {VA) Years from the expiration of
the First Extension Period, or as may be extended under this Agreement.
Description of Contractor's Minimum Work Obligation:
i)
Geological and geophysical studies.
ii)
Drill one Exploration Well.
Minimum Expenditure: The minimum expenditure for the work in the
Second Extension Period shall be Forty Million United States Dollars
(US$40,000,000)
Work accomplished in any period in excess of the above obligations may be
applied as credit in satisfaction of obligations called for in any other period. The
fulfillment of any Minimum Work Obligation shall satisfy the corresponding
Minimum Expenditure obligation but the fulfilment of any Minimum Expenditure
obligation shall not satisfy the corresponding Minimum Obligation. Without
prejudice to Article 23.3(e), should Contractor fail to perform its Minimum Work
Obligations under Articles 4.3(a),(b),(c) or (d), as applicable. Contractor shall pay
to GNPC an amount equal to the minimum expenditure obligation, as reduced by
the value of work already performed, for the relevant Exploration Phase.
Within ninety (90) days after the Effective Date, Contractor shall provide to GNPC
Security in the amount of five million United States Dollars (US$5 million) to cover
the minimum expenditure obligation for the first 365 days from the Effective Date.
As a condition to conduct work in the subsequent years up to the end of the Initial
Period, Contractor shall also provide Security based on expenditure related to such
work. This Security shall be: (a) reduced proportionately by the work performed;
and (b) released upon completion of the Minimum Work Obligation. This provision
shall not apply where Contractor provides satisfactory security.
20
Each Exploration Well shall be drilled at a location and to an objective depth
determined by Contractor in consultation with GNPC. Except as otherwise provided
in Article 4.6 and 4.7 below, the minimum depth of each Exploration Well in Articles
4.3(b) and 4.3(c) shall be whichever of the following is first encountered:
(a)
the depth of four thousand five hundred (4,500) metres measured from the
Rotary Table Kelly Bushing (RTKB);
(b)
one hundred (100) metres below the depth at which the primary target is
first encountered; or
(c)
the depth at which Contractor encounters geologic basement; or
(d)
a depth where GNPC and Contractor agree that the well cannot be drilled
any deeper due to technical or safety issues
The minimum depth of one (1) of the obligatory Exploration Wells in Article 4.3 shall
be whichever of the following is first encountered:
(a)
The depth of four thousand five hundred (4,500) metres measured from the
Rotary Table Kelly Bushing (RTKB);
(b)
The depth sufficient to penetrate three hundred and fifty (350) metres into
the Campanian; or
(c)
The depth at which Contractor encounters geological basement.
unless GNPC consents otherwise, which consent shall not be unreasonably
withheld or delayed.
If in the course of drilling an Exploration Well Contractor concludes that drilling to
the minimum depth specified in Articles 4.5 and 4.6. above is impossible,
impracticable, or imprudent in accordance with International Oil Field Practice, then
Contractor may plug and abandon the Exploration Well, and GNPC shall have the
option of either:
(a)
waiving the minimum depth requirement, in which case Contractor will be
deemed to have satisfied the obligation to drill such Exploration Well; or
(b)
requiring Contractor to drill a substitute Exploration Well at a location
determined by Contractor in consultation with GNPC and to the minimum
depth set forth in Article 4.5 or 4.6, except that if in the course of drilling
such substitute Exploration Well Contractor establishes that drilling to the
minimum depth specified in Article 4.5 or 4.6 above is impossible.
21
impracticable or imprudent in accordance with International Best Oil Field
Practice, then Contractor may plug and abandon the substitute Exploration
Well and will be deemed to have satisfied the obligation to drill one (1)
Exploration Well.
The above option shall be exercised by GNPC within sixty (60) days from the notice
given by Contractor to GNPC of the completion of the plugging and abandonment of
the Exploration Well, and failure to exercise such option shall constitute a waiver of
the minimum depth requirement pursuant to (a) above.
8
During the Exploration Period, Contractor shall have the right to perform additional
Exploration Operations subject to the ternis of this Agreement and approval by the
JMC, including without limitation performing gravity and magnetic surveys, drilling
stratigraphic wells and performing additional geological and geophysical studies,
provided the Minimum Work Obligations are completed within the applicable period.
Provided further that Contractor may elect to perfomi such additional Exploration
Operations in the absence of approval by the JMC and the costs of such additional
Exploration Operations shall not be considered allowable Petroleum Costs.
However, such costs shall only be allowable Petroleum Costs for purposes of the
calculation of AOE if there arises a subsequent Commercial Discovery associated
with such additional Exploration Operations. Any such subsequent Commercial
Discovery shall be treated hereunder in the same manner as if such Commercial
Discovery had been made in connection with operations that were not performed
as sole risk operations including, without limitation, participation by GNPC in such
Commercial Discovery.
9
During the Exploration Period, Contractor shall deliver to GNPC and the Minister
reports on Exploration Operations conducted during each Quarter within thirty (30)
days following the end of that Quarter. Further requests for information by the
Minister under Section 9(1) of the Petroleum Law shall be complied with within a
reasonable time and copies of documents and other material containing such
information shall be provided to GNPC.
22
Article 5
RELINQUISHMENT
5.1
Except as provided in Article 5.2, 8.3, 8.6, 8.12, 8.18, 8.19, 8.20, 8.21, 8.22 and
14.9, Contractor shall relinquish portions of the Contract Area in the manner
provided hereafter:
(a)
If on or before the expiration of the First Extension Period, Contractor elects
to enter into the Second Extension Period pursuant to Article 3.1 ((a) then
subject to Article 5.2 at the commencement of the Second Extension Period
the area retained shall not exceed sixty percent (60%) of the Contract Area
as at the Effective Date (excluding the Existing Discoveries);
(b)
If at the end of nine (9) months from the Effective Date, or at the end of
expiration of any extension granted. Contractor fails to submit an Appraisal
Programme pursuant to Article 4.3(a), Contractor shall relinquish the
Existing Discoveries;
(c)
On the expiration of the Second Extension Period, Contractor shall subject
to Article 5.2 relinquish the remainder of the retained Contract Area.
5.2
The provisions of Article 5.1 shall not be read or construed as requiring Contractor
to relinquish any portion of the Contract Area which constitutes or forms part of
either a Discovery Area (excluding a Discovery Area determined by the terms of
this Agreement to neither merit Appraisal nor to be a Commercial Discovery) or a
Development and Production Area; provided, however, that if at the end of the Initial
Exploration Period or the First Extension Period, as the case may be. Contractor
elects not to enter into the First or Second Extension Period Contractor shall
relinquish the entire Contract Area, except a Discovery Area or a Development and
Production Area.
5.3
Each area to be relinquished pursuant to this Article shall be selected by Contractor
and shall be measured as far as possible in terms of continuous and compact units
of a size and shape which will permit the carrying out of Petroleum Operations in
the relinquished portions.
23
Article 6
JOINT MANAGEMENT COMMITTEE
6.1
In order that the Parties may at all times cooperate in the implementation of
Petroleum Operations, GNPC and Contractor shall not later than thirty (30) days
after the Effective Date establish a Joint Management Committee (JMC). Without
prejudice to the rights and obligations of Contractor for day-to-day management of
the operations, the JMC shall oversee, supervise and approve the Petroleum
Operations and ensure that all approved Work Programmes and Development
Plans are complied with and also that accounting for costs and expenses and the
maintenance of records and reports conceming the Petroleum Operations are
carried out in accordance with this Agreement and the accounting principles and
procedures generally accepted as Intemational Best Oil Field Practice.
6.2
The composition and distribution of functions within the JMC shall be as provided
hereinafter:
(a)
The JMC shall consist of two (2) representatives of GNPC and two (2)
representatives of the Contractor. Any Contractor Party not represented on
the JMC may appoint an observer to attend all JMC meetings and shall
receive copies of all notices and materials distributed to the members of the
JMC concurrently with the distribution of such notices and materials to the
JMC members. GNPC and Contractor shall also designate an alternate for
each of their representatives. In the case of absence or incapacity of a
member of the JMC, such alternate shall automatically assume the rights
and obligations of the absent or incapacitated member;
(b)
The chairperson of the JMC shall be designated by GNPC from amongst
the members of the JMC;
(c)
Contractor shall be responsible, in consultation with GNPC, for the
preparation of an agenda and supporting documents for each meeting of
the JMC and for keeping records of the meetings and decisions of the JMC.
GNPC shall have the right, upon reasonable notice, to inspect all records of
the JMC during business hours. Contractor shall circulate the agenda and
supporting documents for each meeting to ail representatives designated
pursuant to Article 6.2((a); and
(d)
At any meeting of the JMC three (3) representatives shall form a quorum.
For purposes of a quorum, the representative of Contractor shall be the
Contractor Party who holds the majority interest.
24
Meetings of the JMC shall be held and decisions taken as follows:
(a)
All meetings of the JMC shall be held in Accra or such other place as may
be agreed upon by members of the JMC;
(b)
The JMC shall meet at least twice per Year and at such times as the
members may agree;
(c)
A meeting of the JMC may be convened by either GNPC or the Contractor
giving not less than twenty (20) days' notice to the other or, in a case
requiring urgent action, notice of such lesser duration as the members may
agree upon;
(d)
Decisions of the JMC shall require unanimity among GNPC and Contractor
and all representatives of a Party shall vote the same way;
(e)
Any member of the JMC may vote by written and signed proxy held by
another member, so long as such member is a representative of the same
Party as the other member;
(f)
Decisions of the JMC may be made without holding a meeting if all
representatives of GNPC and Contractor notify their consent thereto in the
manner provided in Article 27;
(g)
GNPC and Contractor shall have the right to bring expert advisors to any
JMC meetings to assist in the discussions of technical and other matters
requiring expert advice;
(h)
The JMC may also establish such subcommittees as it deems appropriate
for carrying out its functions including:
I)
a technical subcommittee;
ii)
an audit subcommittee;
ill)
an accounting subcommittee; and
iv)
a contract/procurement subcommittee,
and each subcommittee shall function in an advisory capacity to the JMC or
as otherwise determined unanimously by the JMC; and
(i)
Reasonable costs and expenses as evidenced by invoices and/or receipts
related to attendance by GNPC in or outside Accra (e.g. travel,
transportation, lodging, per diem and insurance), in accordance with
applicable laws, regulations and GNPC policies and procedures shall be
borne by Contractor and treated as Petroleum Costs.
25
The JMC shall oversee Exploration Operations as follows:
(a) Not later than sixty (60) days after the Effective Date and thereafter at least
ninety (90) days before the commencement of each Calendar Year, Contractor
shall prepare and submit to the JMC for its review and approval a detailed Work
Programme and budget covering all Exploration Operations which Contractor
proposes to carry out in that Calendar Year and shall also give an indication of
Contractor's tentative preliminary exploration plans for the succeeding
Calendar Year. Where the Effective Date occurs later than June 30 in any
Calendar Year Contractor shall have the option of submitting a single detailed
Work Programme and budget covering the remaining Months of the Calendar
Year in which the Effective Date occurs and the succeeding Calendar Year;
(b) Upon notice to GNPC, Contractor may amend any Work Programme and
budget submitted to the JMC pursuant to this Article 6.4, which notice will state
why in Contractor's opinion the amendment is necessary or desirable. Any
such amendment shall be submitted to the JMC for review and approval;
(c) Every Work Programme and budget submitted to the JMC pursuant to this
Article 6.4, and every amendment thereof, shall be consistent with the
requirements set out in Article 4.3 relating to the Minimum Work Obligation for
the period of the Exploration Phase in which such Work Programme and budget
falls;
(d) Contractor shall report any Discovery to GNPC immediately following such
Discovery and shall subsequently place before the JMC for review its Proposed
Appraisal Programme. Within thirty (30) days of completion of the Appraisal
Programme a JMC meeting to discuss the results of the Appraisal Programme
shall be convened to take place before submission of the detailed Appraisal
report provided for in Article 8.10
(e) The JMC will review and approve Work Programmes and budgets and any
amendments or revisions thereto, and Proposed Appraisal Programmes and
any amendments or revisions thereto, submitted to it by Contractor pursuant to
this Article 6, and timely give such advice as it deems appropriate which
Contractor shall consider before submitting Work Programmes and budgets
and any amendments or revisions thereto for approvals required by law or this
Agreement; and
(f) After the date of the first Commercial Discovery, Contractor shall seek the
approval of GNPC's JMC representatives, which approval shall not be
unreasonably withheld, on any proposal for the drilling of any further
Exploration Well or Wells not associated with the Commercial Discovery and
26
not othenwise required to be drilled under Article 4.3. If approval is not secured
by Contractor, Contractor may nevertheless elect to drill the Exploration Well
or Wells at its sole risk and the costs of such Exploration Operations shall not
be considered allowable Petroleum Costs. However, such costs shall be
allowable Petroleum Costs for purposes of AOE if there arises a subsequent
Commercial Discovery associated with such additional Exploration Operations.
Any such subsequent Commercial Discovery shall be treated hereunder in the
same manner as if such Commercial Discovery had been made in connection
with operations that were not perfomned as sole risk operations, including,
without limitation, participation by GNPC in such Commercial Discovery.
From the Date of Commercial Discovery, the JMC shall oversee Petroleum
Operations as follows:
(a)
Within sixty (60) days after the Date of Commercial Discovery, Contractor
shall prepare and submit to the JMC for approval any revisions to its annual
Work Programme and budget that may be necessary in order to implement
the Development Plan for the remainder of that Calendar Year and, with
respect to the Contract Area (excluding the Discovery Area) for the rest of
the Exploration Period;
(b)
At least ninety (90) days before the Commencement of each subsequent
Calendar Year Contractor shall submit to the JMC for review and approval
a detailed Work Programme and budget setting forth all Development and
Production Operations which Contractor proposes to carry out in that
Calendar Year and the estimated cost thereof and shall also give an
indication of Contractor's plans for the succeeding Calendar Year; and
(c)
Within sixty (60) days of the Date of commencement of Commercial
Production and thereafter not later than one hundred and twenty (120) days
before the commencement of each Calendar Year Contractor shall submit
to the JMC for its approval an annual production schedule which shall be in
accordance with International Best Oil Field Practice, and shall be designed
to provide the most efficient, beneficial and timely production of the
Petroleum resources.
Lifting schedules for Development and Production Areas and other supplementary
agreements provided for under Article 10.7 shall be subject to JMC approval.
27
6.7
The JMC shall review all reports submitted by Contractor pursuant to this Article 6
on the conduct of Petroleum Operations.
6.8
Contractor's insurance programme and the programmes for training and technology
transfer submitted by Contractor and the accompanying budgets for such schemes
and programmes shall be subject to JMC approval.
6.9
Any contract to be entered into or awarded by Contractor for the provision of
services for Petroleum Operations must comply with the provisions of Article 20,
JMC approved relevant tendering procedures and shall be subject to approval by
the JMC.
6.10 If during any meeting of the JMC the Parties are unable to reach agreement
concerning any of the matters provided for in Articles 6.3, 6.4, 6.5, 6.6, 6.8 and 6.9
the matter shall be deferred for reconsideration at a further meeting to be held not
later than fifteen (15) days following the original meeting. If after such further
meeting the Parties are still unable to reach agreement, the matter in dispute shall
be referred to the Parties' executive management forthwith. Failing agreement
within fifteen (15) days thereafter, the matter in dispute shall, at the request of any
Party, be referred for resolution under Article 24.
6.11 For the avoidance of doubt, the concurrence or approval of JMC representatives
shall not be unreasonably withheld or delayed with respect to any proposal
submitted to the JMC.
28
Article 7
RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC
7.1
Subject to the provisions of this Agreement, Contractor shall be responsible for the
conduct of Petroleum Operations and shall perfomi its obligations in accordance
with International Best Oil Field Practice, including without prejudice to the
generality of the foregoing:
(a)
conduct Petroleum Operations diligently in accordance with International
Best Oil Field Practice, observing sound technical and engineering
practices using appropriate advanced technology and effective equipment,
machinery, materials, and methods;
(b)
take all practicable steps to ensure compliance with Section 3 of the
Petroleum Law, including ensuring the recovery and prevention of waste of
Petroleum in the Contract Area in accordance with International Best Oil
Field Practice;
(c)
prepare and maintain in Ghana full and accurate records of all Petroleum
Operations performed under this Agreement;
(d)
prepare and maintain accounts of all Petroleum Operations under this
Agreement in such a manner as to present a full and accurate record of the
costs of such Petroleum Operations, in accordance with the Accounting
Guide;
(e)
disclose to GNPC and the Minister any operating or other agreement among
the Parties that constitute Contractor relating to the Petroleum Operations
hereunder, which agreement shall not be inconsistent with the provisions of
this Agreement;
(f)
prepare and implement a programme to develop GNPC's institutional
capacity to become a competent operator. Such programme shall be
approved by the JMC;
(g)
provide and be solely responsible for the payment of all costs related or
incidental to all services, equipment and supplies necessary for the
execution of the activities to be conducted by the Contractor under this
Agreement except as othenwise provided hereunder and the related
documents;
29
(h)
prepare and submit in accordance with this Agreement for approval by the
JMC: (i) the Development Plan; and (ii) such other matters as are specified
in this Agreement as subject to approval by the JMC;
(i)
take all measures consistent with Intemational Best Oil Field Practice to: (i)
control the flow and prevent loss or waste of Petroleum; (ii) prevent any
injurious ingress of water and damage to Petroleum bearing strata; and (iii)
manage reservoir pressure;
(j)
not to flare any Natural Gas except to the extent necessary to mitigate or
prevent an emergency or for safe operations as provided in the
Development Plan;
(k)
keep the Minister, Petroleum Commission and GNPC promptly advised in
writing of ail material developments which occur, or the occurrence of which
is reasonably foreseeable, affecting or highly likely to affect Petroleum
Operations;
(I)
to take such steps in case of emergency, and make such immediate
expenditures as are necessary in accordance with Intemational Best Oil
Field Practice, environmental, industrial hygiene and safety legislation
and/or this Agreement and the related documents for the protection of
health, life, the environment and property, and to report in reasonable detail
all such steps taken and expenditures made promptly to the Minister,
Petroleum Commission and JMC;
(m)
notify promptly the Minister, Petroleum Commission and GNPC if the
Contractor becomes aware of any unusual event or circumstance occurring
in the Contract Area or such other areas where Contractor is undertaking
activities contemplated under this Agreement or the related documents that
could reasonably be expected to adversely affect the environment;
(n)
implement and administer contracts related to Petroleum Operations
entered into by Contractor with its Affiliates on an arm's-length basis; and
(o)
maintain or decommission, as appropriate, all existing facilities and assets,
and all other assets used or held for use in connection with Petroleum
Operations in accordance with Intemational Oil Field Practice, applicable
law, and this Agreement; and
(p)
perform and observe each other term, covenant and agreement of the
Contractor contained in this Agreement.
30
In connection with its performance of Petroleum Operations, Contractor shall have
the right within the terms of and pursuant to applicable law and regulations in effect
from time to time:
(a)
to establish offices in Ghana and to assign to those offices such
representatives as it shall consider necessary for the purposes of this
Agreement;
(b)
to use public lands for installation and operation of shore bases, and
terminals, harbours and related facilities, petroleum storage and
processing, pipelines from fields to terminals and delivery facilities, camps
and other housing;
(c)
to receive licenses and pennission to install and operate such
communications. Petroleum production, processing, storage facilities,
transportation facilities (to the Delivery Point) and other facilities as shall be
necessary for the efficiency of its operations;
(d)
to give first consideration to qualified Ghanaians before bringing to Ghana
such number of Foreign National Employees as shall be necessary for its
operations, including employees assigned on permanent or resident status,
with or without families, as well as those assigned on temporary basis such
as rotational employees in accordance with the Local Content Regulations;
(e)
to provide or arrange for reasonable housing, schooling and other
amenities, permanent and temporary, for its employees and to import
personal and household effects, furniture and vehicles, for the use of its
personnel in Ghana;
(f)
be solely responsible for provision of health, accident, pension, and life
insurance benefit plans of its Foreign National Employees and their families;
and such employees shall not be required to participate in any insurance,
compensation, or other employee or social benefit programs established in
Ghana;
(g)
to have, together with its personnel, at all times the right of ingress to and
egress from its offices in Ghana, the Contract Area, and the facilities
associated with Petroleum Operations hereunder in Ghana including the
offshore waters, using its owned or chartered means of land, sea and air
transportation; and
31
(h)
to engage such Subcontractors, expatriate and national, including also
consultants, and to bring such Subcontractors and their personnel to Ghana
as are necessary in order to carry out the Petroleum Operations in a skillful,
economic, safe and expeditious manner; and said Subcontractors shall
have the same rights as Contractor specified in this Article 7 to the extent
they are engaged by Contractor for the Petroleum Operations hereunder.
Provided that Contractor and its Subcontractors have complied with all of their
material obligations under this Agreement, GNPC shall use its best efforts to assist
Contractor in carrying out Contractor's obligations expeditiously and efficiently as
stipulated in this Agreement, and in particular GNPC shall use its reasonable efforts
to assist Contractor and its Subcontractors, as long as Contractor and its
Subcontractors use their reasonable efforts to appropriately complete applicable
procedures and other requirements prescribed by relevant authorities, to:
(a)
establish supply bases and obtain necessary communications facilities,
equipment, and supplies;
(b)
obtain necessary approvals to open bank accounts in Ghana;
(c)
subject to Article 21 hereof, obtain entry visas and work permits or any other
documentation that may be required from time to time for such number of
Foreign National Employees of Contractor and its Subcontractors engaged
in Petroleum Operations and members of their families who will be resident
in Ghana, and make arrangements for their travel, arrival, medical services
and other necessary amenities,
(d)
where applicable facilitate and obtain the necessary approvals for the grant
to the Contractor by the State of any extension, exemption and waiver of all
taxes, charges, customs duties, import duties and any other related
charges;
(e)
comply with Ghana customs procedures and obtain pennits for the
importation of necessary materials;
(f)
obtain the necessary permits to transport documents, samples or other
forms of data to foreign countries for the purpose of analysis or processing
if such is deemed necessary by Contractor for the purposes of Petroleum
Operations;
(g)
assist with the acquisition of any approvals or waivers required from any
State agencies or other ministerial or regulatory bodies under the direct or
32
indirect control of the State(each a "State Agency") dealing with fishing,
meteorology, navigation, environment and communications as required; in
accordance with Article 21.3, identify Ghanaian personnel as candidates for
employment by Contractor in Petroleum Operations; and
(h)
identify qualified Ghanaian personnel as candidates for employment by
Contractor in Petroleum Operations; and
(i)
procure access, on competitive commercial terms to infrastructure owned
by the State, or GNPC (or its Affiliates) or any third party, including facilities
owned or used by contractors on oil and gas blocks adjacent to the Contract
Area.
All reasonable and documented expenses incurred by GNPC in connection with
any of the matters set out in Article 7.3 shall be borne by Contractor in accordance
with this Agreement.
GNPC shall use its best efforts to render assistance to Contractor in emergencies
and major accidents, and such other assistance as may be requested by
Contractor, provided that any reasonable expenses involved in such assistance
shall be borne by Contractor in accordance with this Agreement.
Subject to the provisions of this Agreement and save for Petroleum Operations
undertaken by GNPC pursuant to Article 9, Contractor shall, during the terni of this
Contract, maintain and obtain insurance coverage for and in relation to Petroleum
Operations, for such amounts and against such risks as are customarily or
prudently insured in the international petroleum industry in accordance with modem
oilfield and petroleum industry practices, and shall within two months of the date of
policy or renewal furnish to the Minister and the Petroleum Commission, certificates
evidencing that such coverage is in effect. Such insurance policies shall cover the
interest of GNPC as additional insured and shall waive subrogation against GNPC.
The said insurance shall, without prejudice to the generality of the foregoing, cover:
(a)
loss or damage to all installations, equipment and other assets for so long
as they are used in or in connection with Petroleum Operations; provided,
however, that if for any reason the Contractor fails to insure any such
installation, equipment or assets, it shall replace any loss thereof or repair
any damage caused thereto;
(b)
loss, damage or injury caused by pollution in the course of or as a result of
Petroleum Operations;
33
(c)
loss of property or damage or bodily injury suffered by any third party in the
course of or as a result of Petroleum Operations for which the Contractor
may be liable;
(d)
any claim for which the State may be liable relating to the loss of property
or damage or bodily injury suffered by any third party in the course of or as
a result of Petroleum Operations for which the Contractor is liable to
indemnify the State;
(e)
with respect to Petroleum Operations offshore, the cost of removing wrecks
and cleaning up operations following any accident in the course of or as a
result of Petroleum Operations; and
(f)
the Contractor's and/or the Operator's liability to its employees engaged in
Petroleum Operations.
The Contractor shall require its Subcontractors to obtain and maintain insurance
pursuant to Article 7.6 relating mutatis mutandis to such Subcontractors.
Contractor shall indemnify, defend and hold the State and GNPC harmless against
all claims, losses and damages of any nature whatsoever, including, without
limitation, claims for loss or damage to property or injury or death to persons caused
by or resulting from any Petroleum Operations conducted by or on behalf of the
Contractor.
34
Article 8
COMMERCIALITY
8.1
Contractor shall submit a Discovery Notice to the Minister, the Petroleum
Commission and GNPC as soon as possible after any Discovery is made, but in
any event not later than thirty (30) days after the date any such Discovery is made.
Unless otherwise expressly provided for under this Agreement all provisions of this
Agreement which would have applied to a Discovery shall apply or be deemed to
apply mutatis mutandis to the Existing Discoveries.
8.2
As soon as possible after the analysis of the test results of such Discovery is
complete, and in any event not later than one hundred (100) days from the date of
such Discovery, Contractor shall by a further notice in writing to the Minister, the
Petroleum Commission, and GNPC, indicate whether in the opinion of Contractor
the Discovery merits Appraisal.
8.3
Where the Contractor does not make the indication required by Article 8.2 within
the period indicated or indicates that the Discovery does not merit Appraisal,
Contractor shall, subject to Article8.19, relinquish the Discovery Area associated
with the Discovery.
8.4
Where Contractor indicates that the Discovery merits Appraisal, Contractor shall
within one hundred and eighty (180) days from the date of such Discovery (or, in
the case of the Existing Discoveries, within nine (9) months from the Effective Date)
notify the Minister and submit to the Petroleum Commission for approval and to the
Minister for information purposes a Proposed Appraisal Programme to be carried
out by Contractor in respect of such Discovery. For the avoidance of doubt, unless
otherwise instructed by the Petroleum Commission, Contractor shall conduct a
separate Appraisal for each Discovery where Contractor indicates that such
Discovery merits Appraisal.
8.5
In the absence of regulations othenwise governing the process, the Petroleum
Commission and Contractor shall adhere to the procedure set forth in this Article
8.4 in connection with the submission of a Proposed Appraisal Programme. The
Petroleum Commission shall within sixty (60) days of submission of the Proposed
Appraisal Programme, give the Contractor a notice in writing stating:
35
(a)
whether the Proposed Appraisal Programme has been approved (outright
or conditionally) or not;
(b)
if not approved, any revisions or improvements required by the Petroleum
Commission to be made to the Proposed Appraisal Programme, and the
reasons therefor; or
(c)
if conditionally approved, the conditions to the approval of the Proposed
Appraisal Programme, and the reasons therefor.
(d)
If the Petroleum Commission fails to provide such notice after such sixty
(60) day period, such Proposed Appraisal Programme shall be deemed
approved.
(e)
If the Petroleum Commission notifies the Contractor that the Proposed
Appraisal Programme is not approved or the Contractor notifies the
Petroleum Commission that it does not accept the revisions or conditions
required for any approval pursuant to this Article 8.5, the Petroleum
Commission and the Contractor shall consult within thirty (30) days of the
earlier of (x) the date of the notice by the Petroleum Commission and (y)
the date such notice was due with a view to amending the Proposed
Appraisal Programme to be acceptable to both. Should the Petroleum
Commission not agree to so consult or should the Petroleum Commission
and the Contractor fail to agree changes required for such approval within
fourteen (14) days following said consultation. Contractor may notify the
Minister and request resolution. If the Minister is unable to resolve the
matter in a manner agreeable to all relevant Parties within thirty (30) days
from the date such notification was lodged, the resulting dispute arising out
of this Article 8.5 shall be resolved in accordance with Article 24.
(f)
If the Petroleum Commission has given a notice in writing pursuant to this
Article, and the Parties cannot agree on the revisions or conditions, then the
resulting dispute shall be submitted for resolution under Article 24
Where the issue in dispute referred for resolution pursuant to Article 24 is finally
decided in favour of Contractor, the Petroleum Commission shall forthwith give the
requisite approval to the Proposed Appraisal Programme submitted by Contractor,
and where the issue in dispute referred for resolution pursuant to Article 24 is finally
decided in favour of the Petroleum Commission, Contractor shall forthwith:
(a)
amend the Proposed Appraisal Programme to give effect to the final
decision rendered under Article 24, and the Petroleum Commission shall
give the requisite approval to such revised Proposed Appraisal Programme;
or
36
(b)
relinquish the Discovery Area.
8.7
Where Contractor seeks to amend an Appraisal Programme, it shall submit such
amendment to the JMC for review pursuant to Article 6.4((e) before submission to
the Petroleum Commission for approval.
8.8
Unless Contractor and the Petroleum Commission othenwise agree in any particular
case. Contractor shall have a period of two (2) years from the date of Discovery to
complete the Appraisal Programme. In the event Contractor requires a period of
more than the two (2) years to complete the Appraisal Programme, Contractor shall
submit a request to the Petroleum Commission for an extension with a firm
programme with timelines to justify the request.
8.9
Contractor shall commence Appraisal within one hundred and fifty (150) days from
the date of approval of the Appraisal Programme. Where the Contractor is unable
to commence or otherwise fails to commence Appraisal within one hundred and fifty
(150) days from the date of approval of the Appraisal Programme, GNPC shall be
entitled to exercise the option provided for in Article 9 to enable prompt Appraisal
unless Contractor has commenced Appraisal or obtained an extension of time for
such Appraisal, provided that if Contractor obtains an extension of time for such
Appraisal and has not commenced Appraisal prior to the end of such extension,
GNPC shall be entitled to exercise the option provided for in Article 9 to enable
prompt Appraisal.
8.10 Not later than ninety (90) days from the date on which said Appraisal Programme
relating to the Discovery is completed. Contractor will submit to the Minister and the
Petroleum Commission a report containing the results of the Appraisal Programme.
Such report shall include all available technical and economic data relevant to a
determination of commerciality, including, but not limited to, geological and
geophysical conditions, such as structural configuration, physical properties and the
extent of reservoir rocks, areas, thickness and depth of pay zones, pressure,
volume and temperature analysis of the reservoir fluids, preliminary estimates of
Crude Oil and/or Natural Gas reserves, recovery drive characteristics, anticipated
production performance per reservoir and per well, fluid characteristics, including
gravity, sulphur percentage, sediment and water percentage and refinery assay
pattern.
37
8.11 Not later than ninety (90) days from the date on which said Appraisal Programme
is completed Contractor shall, by a further notice in writing, inform the Petroleum
Commission and Minister whether the Discovery in the opinion of Contractor is or
is not a Commercial Discovery.
8.12 If Contractor fails to notify the Minister and the Petroleum Commission as provided
in Article 8.11 or informs the Minister that the Discovery is not a Commercial
Discovery, then subject to Article 8.19, Contractor shall relinquish such Discovery
Area; provided, however, that in appropriate cases, before declaring that a
Discovery is not a Commercial Discovery, Contractor shall consult with the other
Parties and may make appropriate representations proposing minor changes in the
fiscal and other provisions of this Agreement which may, in the opinion of
Contractor, affect the detennination of commerciality. The other Parties may, where
feasible, and in the best interests of the Parties agree to make such changes or
modifications in the existing arrangements.
8.13 If Contractor pursuant to Article 8.11 informs the Minister that the Discovery is a
Commercial Discovery, Contractor shall not later than three hundred and sixty five
(365) days thereafter, prepare and submit to the Minister, a Development Plan.
8.14 The Development Plan referred to in Article 8.13 shall be based on detailed
engineering studies and shall include:
(a)
Contractor's proposals on the delineation of the proposed Development and
Production Area and for the development of any reservoir(s), including the
method for the disposal of Associated Gas in accordance with the
provisions of Article 14;
(b)
the way in which the Development and Production of the resen/oir is
planned to be financed;
(c)
Contractor's proposals relating to the spacing, drilling and completion of
wells, the production, storage, processing, transportation, gas utilization,
delivery facilities and necessary infrastructure developments required for
the production, storage and transportation (to the Delivery Point) of the
Petroleum, including without limitation:
i)
the estimated number, size and production capacity of production
facilities if any;
38
ii)
the estimated number of Production wells;
iii)
the particulars of feasible alternatives for transportation of the
Petroleum, including pipelines;
iv)
the particulars of onshore installations required, including the type
and specifications or size thereof; and
v)
the particulars of other technical equipment required for the
operations;
(d)
the estimate of the reserves together with the estimated annual production
profiles throughout the life of the field to be developed pursuant to the
Development Plan for Crude Oil and Natural Gas from the Petroleum
reservoirs;
(e)
tie-ins with other petroleum fields where applicable;
(f)
information on operation and maintenance;
(g)
a description of technical solutions including enhanced recovery methods;
(h)
estimates of capital and operating expenditures;
(i)
the economic feasibility studies carried out by or for Contractor in respect
of alternative methods for Development of the Discovery, taking into
account:
i)
location;
ii)
(k)
ii)
water depth (where applicable);
iii)
meteorological conditions;
iv)
estimates of capital and operating expenditures; and
v)
any other relevant data and evaluation thereof;
the safety measures to be adopted in the course of the Development and
Production Operations, including measures to deal with emergencies;
environmental impact assessments as required by the applicable laws of
the Republic of Ghana in effect and as amended from time to time;
39
(I)
measures to protect the environment and a contingency plan for handling
of emergencies (including the provision and maintenance of equipment
stockpiles to respond to an emergency);
(m)
Contractor's proposals with respect to the procurement of goods and
services obtainable in Ghana;
(n)
Contractor's technology transfer plan;
(o)
Contractor's plan for training and employment of Ghanaian nationals;
(p)
the timetable for effecting Development Operations; and
(q)
a plan for decommissioning and abandonment.
8.15 The date of the Minister's approval of the Development Plan shall be the Date of
Commercial Discovery.
8.16 The Minister shall within the ninety (90) days following submission of the
Development Plan give Contractor a notice in writing stating:
(a)
whether or not the Development Plan as submitted has been approved or
conditionally approved; and
(b)
if not approved, any revisions proposed by the Minister to the Development
Plan as submitted, and the reasons thereof; or
(c)
if conditionally approved, any
Development Plan is approved.
(d)
If the Minister fails to approve the Development Plan within the ninety (90)
day time period described above, then the Development Plan shall be
deemed approved.
(e)
Where the Minister notifies the Contractor that the Development Plan is not
approved the Parties shall within a period of thirty (30) days from the date
of such notice by the Minister consult (and shall include GNPC in such
consultations) with a view to amending the Development Plan to be
acceptable to both. Should the Minister not agree to so consult or should
the Minister and the Contractor fail to agree changes required for such
approval within fourteen (14) days following said thirty (30) day period, the
40
conditions
pursuant
to
which
the
resulting dispute arising out of this Article 8.16 shall be resolved in
accordance with Article 24.
(f)
If the Minister has given a notice in writing pursuant to clause ((b) or ((c),
and the Parties cannot agree on the revisions or conditions, then the
resulting dispute shall be submitted for resolution under Article 24.
8.17 Where the issue in dispute referred for resolution pursuant to Article 24 is finally
decided in favour of Contractor, the Minister shall forthwith give the requisite
approval to the Development Plan submitted by Contractor.
8.18 Where the issue in question referred for resolution pursuant to Article 24 is finally
decided in favour of the Minister in whole or in part. Contractor shall forthwith:
(a)
amend the proposed Development Plan to give effect to the final decision
rendered under Article 24, and the Minister shall give the requisite approval
to such revised Development Plan; or
(b)
subject to Article 8.19 below relinquish the Discovery Area.
8.19 Notwithstanding the relinquishment provisions of Articles 8.3 and 8.12 above, if
Contractor indicates that a Discovery does not at the time merit Appraisal, or after
Appraisal does not appear to be a Commercial Discovery but may merit Appraisal
or potentially become a Commercial Discovery at a later date during the Exploration
Period, then Contractor need not relinquish the Discovery Area and may continue
its Exploration Operations in the Contract Area during the Exploration Period;
provided that the Contractor shall explain to the Minister and Petroleum
Commission what additional evaluations, including Exploration work or studies, are
or may be planned in order to detemnine whether subsequent Appraisal is
warranted or that the Discovery is a Commercial Discovery and the Minister shall
approve of any such non relinquishment. Such evaluations shall be performed by
Contractor according to a specific time table (which shall not exceed the time frame
specified under Article 8.20) to be approved by the JMC and Petroleum
Commission, subject to Contractor's right of eariier relinquishment of the Discovery
Area. After completion of the evaluations, Contractor shall make the indications
called for under Article 8.3 or 8.12 and either proceed with Appraisal, confirm the
Discovery is a Commercial Discovery or relinquish the Discovery Area.
8.20 In any case, if a Discovery is made in the Initial Exploration Period or First Extension
Period, the Contractor shall by the end of the subsequent phase (that is the First
41
Extension Period or Second Extension Period as ttie case may be), tal
to Appraise ttie Discovery or relinquisli such Discovery. Lil
has completed the Appraisal of a Discovery in the Initial Exploration Period or First
Extension Period, the Contractor shall by the end of the subsequent phase (that is,
the First Extension Period or Second Extension Period as the case may be), take
a decision to determine if such Discovery is a Commercial Discovery or relinquish
such Discovery. In any event, if at the end of the Exploration Period the Contractor
has neither indicated its intent to proceed with an Appraisal Programme nor
declared the Discovery to be a Commercial Discovery, then the Discovery Area
shall be relinquished.
8.21 Upon completion of an Appraisal Programme and before Contractor makes a
determination that any Discovery is not a Commercial Discovery, Contractor may
consult with the other Parties and may make appropriate representations proposing
minor changes in the fiscal and other provisions of this Agreement which may, in
the opinion of Contractor, affect the determination of a Commercial Discovery. The
other Parties may agree to make such changes or modifications in the existing
arrangements. In the event the Parties do not agree on such changes or
modifications, then subject to Articles 8.19 and 8.20, Contractor shall relinquish the
Discovery Area.
8.22 Nothing in Articles 8.3, 8.12, 8.19 or 8.20 above shall be read or construed as
requiring Contractor to relinquish:
(a)
(b)
any area which constitutes or forms part of another Discovery Area in
respect of which:
i)
Contractor has given the Minister, the Petroleum Commission and
GNPC a separate notice stating that such Discovery merits
Appraisal; or
ii)
Contractor has given the Minister a separate notice indicating that
such Discovery is a Commercial Discovery; or
any area which constitutes or fonns part of a Development and Production
Area.
8.23 For the avoidance of doubt, where Contractor makes a Discovery after the
expiration of the Exploration Period Contractor shall notify the Minister of such
42
Discovery pursuant to Article 8.1 and, subject to its rights under Article 3, surrender
such Discovery to GNPC.
8.24 In the event a field extends beyond the boundaries of the Contract Area, the
Minister may require the Contractor to exploit said field in association with the third
party holding the rights and obligations under a petroleum agreement covering the
said field (or GNPC as the case may be). The exploitation in association with said
third party or GNPC shall be pursuant to good unitization and engineering principles
and in accordance with Intemational Best Oil Field Practice. In the event Contractor
and said third party are unable to agree to the terms of unitization. Contractor shall
notify the Minister in writing and the Minister shall give appropriate directions to
Contractor and the third party or GNPC to resolve the matter in accordance with
Intemational Best Oil Field Practice.
8.25 All notices required to be submitted to the Minister under this Article 8 shall be
copied to the Petroleum Commission.
43
Article 9
SOLE RISK ACCOUNT
9.1
Subject to Contractors rights under Article 8, GNPC may notify Contractor that it
will, at its Sole Risk, commence to appraise a Discovery pursuant to Article 8.9,
provided that within thirty (30) days of such notification from GNPC, Contractor may
elect to commence to appraise that Discovery within its own Work Programme.
9.2
Where an Appraisal undertaken under Article 9 at the Sole Risk of GNPC results in
a determination that a Discovery is a Commercial Discovery, Contractor may
develop the Commercial Discovery upon reimbursement to GNPC of all expenses
incurred in undertaking the Appraisal and after arranging with GNPC satisfactory
terms for the payment of a premium equivalent to seven hundred percent (700%)
of such expenses. Such premium shall not be counted as cost of Petroleum
Operations for the purpose of the Accounting Guide. In the event that Contractor
declines to develop said Discovery, Contractor shall relinquish the Development
and Production Area established by the Appraisal Programme conducted by GNPC
under Article 9.
9.3
During the Exploration Period GNPC may, at its Sole Risk, require Contractor to
continue drilling to penetrate and test horizons deeper than those contained in the
Work Programme of Contractor or required under Article 4.5. GNPC may also at
its Sole Risk ask the Contractor to test a zone or zones which Contractor has not
included in Contractor's test programme. Notice of this shall be given to Contractor
in writing as early as possible prior to or during the drilling of the well, but in any
case not after Contractor has begun work to complete or abandon the well. The
exercise by GNPC of this right shall be in an agreed manner (such agreement not
to be unreasonably withheld or delayed by Contractor) which does not prevent
Contractor from complying with its work obligations under Article 4.3.
• 9.4
At any time before commencing such deeper drilling under Article 9.3 above
Contractor may elect to incorporate the required deeper drilling in its own
Exploration Operation, in which case any resulting Discovery shall not be affected
by the provisions of this Article 9.
9.5
Where any Sole Risk deeper drilling results in a Discovery, GNPC shall have the
right, at its Sole Risk, to appraise, develop, produce and dispose of all Petroleum
resulting from such Sole Risk deeper drilling and shall conduct such Sole Risk
operations unless GNPC proposes othenvise and Contractor agrees. Provided
44
however that if at the time such Petroleum is tested from the producing horizon in
a well, Contractor's Work Programme includes a well or wells to be drilled to the
same producing horizon, and provided that the well or wells drilled by Contractor
result(s) in a Petroleum producing well producing from the same horizon. Contractor
shall, after reimbursing GNPC for all costs associated with its Sole Risk deeper
drilling and testing in said well, have the right to include production from that well in
its total production for the purposes of establishing a Commercial Discovery, and,
if a Commercial Discovery is subsequently established, to develop, produce and
dispose of the Petroleum in accordance with the provisions of this Agreement.
9.6
Alternatively, if at the time such Petroleum is tested from a producing horizon in a
well pursuant to a Sole Risk operation. Contractor's Work Programme does not
include a well to be drilled to said horizon. Contractor has the option to appraise
and /or develop, as the case may be, the Discovery for its account under the temris
of this Agreement if it so elects within a period of sixty (60) days after such
Discovery. In such case. Contractor shall reimburse GNPC for all expenses
incurred by GNPC in connection with such Sole Risk operations, and shall make
satisfactory arrangements with GNPC for the payment of a premium equivalent to
seven hundred percent (700%) of such expenses. Such premium shall not be
considered as Petroleum Costs for the purposes of the Accounting Guide.
9.7
During the term of this Agreement, GNPC shall have the right to submit a Work
Programme to the JMC to drill, at its Sole Risk, a well(s) in the Contract Area
provided that the work intended to be done by GNPC had not been scheduled for
a Work Programme to be performed by Contractor and the exercise of such right
by GNPC and the arrangements made by GNPC for undertaking such drilling do
not prevent Contractor carrying out Petroleum Operations. Within thirty (30) days
after receipt of such notice. Contractor may elect to drill the proposed well(s) as part
of Contractor's Exploration Operations or may elect to participate in the well to be
drilled by GNPC.
9.8
In the event that a well drilled at the Sole Risk of GNPC in accordance with Article
9.7 above results in a Discovery, GNPC shall notify Contractor in writing, and GNPC
shall have the right to appraise such Discovery and develop or require Contractor
to develop, after GNPC declares a Commercial Discovery, such Discovery for a
mutually agreed reasonable service fee, so long as Contractor has an interest in
the Contract Area, GNPC taking all the interest, risk and costs and hence having
the right to all Petroleum produced from the Commercial Discovery; provided
however that Contractor has the option to appraise and/or develop, as the case
may be, the Discovery for its account under the terms of this Agreement if it so
45
elects within a period of sixty (60) days after receipt of GNPC's written notice of
such Discovery.
9.9
Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection
with such Sole Risk operations, and shall make satisfactory arrangements with
GNPC for the payment of a premium equivalent to seven hundred percent (700%)
of such expenses before exercising the option under Article 9.8. Such premium
shall not be considered as Petroleum Costs for the purposes of the Accounting
Guide.
9.10 In the event that Contractor declines to exercise its option in Article 9.8 or no
agreement is reached on the service fee an^angement as provided for in Article 9.9,
Contractor shall relinquish the Development and Production Area associated with
such Commercial Discovery.
9.11 Sole Risk operations under this Article 9 shall not extend the Exploration Period nor
the term of this Agreement and Contractor shall complete any agreed programme
of work commenced by it under this Article at GNPC's Sole Risk, and subject to
such provisions hereof as the Parties shall then agree, even though the Exploration
Period as defined in Article 3 or the term of this Agreement may have expired.
9.12 GNPC shall indemnify and hold hannless Contractor against all actions, claims,
demands and proceedings whatsoever brought by any third party or the State,
arising out of or in connection with Sole Risk operations under this Article 9 unless
such actions, claims, demands and proceedings are caused by Contractor's Gross
Negligence or Willful Misconduct.
46
Article 10
SHARING OF CRUDE OIL
10.1
Gross Production of Crude Oil from each Development and Production Area shall
(subject to a Calendar Year adjustment developed under the provisions of Article
10.6) be distributed amongst the Parties in the following sequence and proportions:
(a)
Twelve and one-half percent (1214%) in the case of a New Discovery and
ten percent (10%) for Existing Discoveries of the Gross Production of Crude
Oil shall be delivered to the State as ROYALTY, pursuant to the provisions
of the Petroleum Law. Upon notice to Contractor, the State shall have the
right to elect to receive cash in lieu of its royalty share of such Crude Oil.
The State's notice shall be given to Contractor at least ninety (90) days in
advance of each lifting period, such periods to be established pursuant to
the provisions of Article 10.6. In such case, said share of Crude Oil shall
be delivered to Contractor and it shall pay to the State the value of said
share in cash at the relevant weighted average Market Price for the relevant
period as determined in accordance with Article 11.7;
(b)
After distribution of such amounts of Crude Oil as are required pursuant to
Article 10.1(a), the amount of Crude Oil, if any, shall be delivered to GNPC
to the extent it is entitled for Sole Risk operations under Article 9;
(c)
After distribution of such amounts of Petroleum as are required pursuant to
Articles 10.1(a) and 10.1(b), the remaining Crude Oil produced from each
Development and Production Area shall be distributed to Contractor and,
subject to Article 10.1(e) below, to GNPC on the basis of their respective
interests pursuant to Article 2.
(d)
The State's AOE (as defined under Article 10.2), if any, shall be distributed
to the State out of the Contractor's share of Crude Oil determined under
Article 10.1(c). The State shall also have the right to elect to receive cash
in lieu of the AOE share of Crude Oil accorded to it pursuant to Articlel0.2.
Notification of said election shall be given in the same notice in which the
State notifies Contractor of its election to receive cash in lieu of Crude Oil
under Article 10.1(a). In such case, said share shall be delivered to
Contractor and it shall pay to the State the value of said share in cash at the
relevant weighted average Market Price for the relevant period as
determined in accordance with Article
47
(e)
Notwithstanding Articles 10.1(a) and (b), in the event that GNPC has failed
to pay any amounts due to Contractor pursuant to Article 15.2 of this
Agreement (such amounts with interest thereon in accordance with Article
26.5 being hereinafter called "Default Amounts") and for so long as any
such advances and interest thereon remain unrecovered by Contractor, an
amount of Crude Oil shall be delivered to GNPC sufficient in value to
reimburse it for its share of Production Costs paid by it to that date, until
such share of Production Costs has been fully reimbursed to it, after which
a volume of Crude Oil shall be delivered to Contractor equivalent in value
to the outstanding amounts of the aforesaid Default Amounts until such
Default Amounts are fully recovered by Contractor. The value of the Crude
Oil for the purpose of this Article 10.1(e) shall be the Market Price
determined pursuant to Article 11.7.
2 At any time the State shall be entitled to a portion of Contractor's share of Crude
Oil then being produced from each separate Development and Production Area
(hereinafter referred to as "Additional Oil Entitlements" or "AOE") on the basis of
the after-tax post-inflation-adjusted rate of return ("ROR") which Contractor has
achieved with respect to such Development and Production Area as of that time.
Contractor's ROR shall be calculated on its NCF and shall be determined
separately for each Development and Production Area at the end of each Month in
accordance with the following computation:
(a)
Definitions:
"NCF" means Contractor's net cash flow for the Month for which the
calculation is being made, and shall be computed in accordance with the
following formula:
NCF=x-y-z
where:
"x"
equals all revenues received during such Month by Contractor from
the Development and Production Area, including an amount computed by
multiplying the amount of Crude Oil taken by Contractor during such Month
in accordance with Articles 00 and 0(e), excluding such Crude Oil taken by
Contractor for payment of interest in respect of Petroleum Costs incurred
by Contractor on GNPC's behalf, by the Market Price applicable to such
Crude Oil during the Month when lifted, plus any other proceeds specified
in the Accounting Guide received by Contractor, including, without
limitation, the proceeds from the sale of any assets to which Contractor
continues to have title. For the avoidance of doubt, "x" shall not include
48
revenues from Crude Oil lifted by Contractor which is part of another Party's
entitlement (e.g. Royalty, Crude Oil relating to the State's AOE delivered to
Contractor because the State has elected to receive cash in lieu of Crude
Oil, Crude Oil purchased by Contractor from GNPC or the State) but shall
include revenues from Crude Oil owned by Contractor but lifted by another
Party (e.g. Crude Oil purchased by GNPC or the State from Contractor).
"y"
equals one-twelfthzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
(V12) of the income tax paid by the Contractor to
the State with respect to the Calendar Year in respect of the Development
and Production Area. If there are two (2) or more Development and
Production Areas, the total income tax paid by Contractor in accordance
with the Petroleum Income Tax Law shall for purposes of this calculation be
allocated to the Development and Production Area on the basis of
hypothetical tax calculations for the separate Development and Production
Areas. The hypothetical tax calculation for each Development and
Production Area shall be determined by allocating the total amount of tax
incurred for each Calendar Year by Contractor under the Petroleum Income
Tax Law to each Development and Production Area based on the ratio that
the chargeable income from a given Development and Production Area
bears to the total chargeable income of Contractor. The chargeable income
of Contractor is determined under section 2 of the Petroleum Income Tax
Law and the chargeable income of a Development and Production Area
shall be calculated by deducting from the gross income derived from or
allocated to that Area those expenses deductible under section 3 of the
Petroleum Income Tax Law which are reasonably allocable to that Area and
with respect to the Development and Production Area with the earliest date
of Commercial Production, those expenses deductible under the said
section 3 of the Petroleum Income Tax Law which are not attributable to
any Development and Production Area. A negative chargeable income for
an Area shall be treated as zero for purposes of this allocation and not more
(or less) than the total income tax paid by Contractor shall be allocated
between the Areas.
"z" equals all Petroleum Costs specified in the Accounting Guide and
expended by Contractor during such Month or with respect to abandonment
costs, those calculated in accordance with Article 12.9 or actually incurred,
as the case may be, with respect to the Development and Production Area,
including any Petroleum Costs paid by Contractor on GNPC's behalf, and
not reimbursed by GNPC within the Month, provided that all Petroleum
Costs for Exploration Operations not directly attributable to a specific
Development and Production Area shall for purposes of this calculation be
49
allocated to the Development and Production Area having the earliest date
of Commencement of Commercial Production. Where Petroleum Costs for
Exploration Operations are not directly attributable to a specific
Development and Production Area during a Month, but are directly
attributable to a subsequently delineated Development and Production
Area, then Contractor may elect either to maintain the original allocation or
reallocate such Petroleum Costs to the newly delineated Development and
Production Area to which they are directly attributable and provided further
that for the purpose of the ROR calculation Petroleum Costs shall not
include any amounts in respect of interest on loans obtained for the
purposes of canying out Petroleum Operations.
TAn", "SAn", "TAn", "YAn" and "ZAn" means First Account, Second Account,
Third Account, Fourth Account and Fifth Account, respectively, and
represent amounts as of the last day of the Month in question as determined
by the formulae in (b) below.
"FAn.i", "SAn.i", "TAn-i", "YAn-i", and "ZAn-i", respectively mean the lesser
of (i) the FAn, SAn, TAn, YAn or ZAn, as the case may be, as of the last day
of the Month immediately preceding the Month in question, or (ii) zero.
Stated othenwise, FAn-i shall equal FAn as of the last day of the Month
immediately preceding the Month in question if such FAn was a negative
number, but shall equal zero if such FAn was a positive number. Likewise,
SAn-1 shall equal SAn as of the last day of the Month immediately preceding
the Month in question if such SAn was a negative number, but shall equal
zero if such SAn was a positive number. Likewise TAn-i shall equal TAn as
of the last day of the Month immediately preceding the Month in question if
such TAn was a negative number, but shall equal zero if such TAn was a
positive number. Likewise YAn-i shall equal YAn as of the last day of the
Month immediately preceding the Month in question if such YA n was a
negative number but shall equal zero if such TAn was a positive number.
Likewise, ZAn-i shall equal ZAn as of the last day of the Month immediately
preceding the Month in question if such ZAn was a negative number, but
shall equal zero if such ZAn was a positive number. In the ROR calculation
for the first Month of Petroleum Operations, FAn-i, SAn-i, TAn-i, YAn-i and
ZAn-1 shall be zero.
"i" for the Month in question equals one (1) subtracted from the quotient of
the United States Industrial Goods Wholesale Price Index ("USIGWPI") for
the second Month preceding the Month in question (e.g. use August data
for October's computation) as first reported in the International Financial
statistics of the Intemational Monetary Fund, divided by the USIGWPI for
the same second preceding Month of the immediately preceding Calendar
50
Year as first reported inzyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
the
Intemational Financial Statistics of the
Intemational Monetary Fund. If the USIGWPI ceases to be published, a
substitute U.S. Dollar-based price index shall be used.
"n" refers to the nth Month in question.
"n-1" refers to the Month immediately preceding the nth Month
Fomiulae:
FA
FA
SA
( 0 . 1 2 5 + /•)
12
n- l
fl+
V
+
NCF
(0 175+ / ) zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFED
+ NCF
12
In the calculation of SAn an amount shall be subtracted from NCF identical
to the value of any AOE which would be due to the State if reference were
made hereunder only to the FAn.
TA „ =
TA
fl+
I
(0-225+ / )
12
+
NCF
In the calculation of TAn an amount shall be subtracted from NCF identical
to the value of any AOE which would be due to the State if reference were
made hereunder only to the FAn and SAn.
YA „ =
YA
fl
I
,
(0.275+/)^
+
NCF
J
12
In the calculation of YAn an amount shall be subtracted from NCF identical
to the value of any AOE which would be due to the State if reference were
made hereunder only to the FAn, SAn and TAn
ZA
ZA
(O . 325 + /• )
1 +
12
51
+
NCF
In the calculation of ZAn an amount shall be subtracted from NCF identical
to the value of any A O E which would be due to the State if reference were
made hereunder only to the FAn, SAn, TAn and YAn.
(c) Prospective Application:
The State's AOE measured in Barrels of oil will be as follows:
i)
If FAn, SAn, TAn, YAn and ZAn are all negative, the State's AOE for
the Month in question shall be Zero;
ii)
If FAn is positive and SAn, TAn, YAn and ZAn are all negative, the
State's AOE for the Month in question shall be equal to the absolute
amount resulting from the following monetary calculation:
Ten percent (10%) of the FAn for that Month divided by the weighted
average Market Price as determined in accordance with Article 11.7.
iii)
If both FAn and SAn are positive, but TAn, YAn and ZAn are negative,
the State's AOE for the Month in question shall be equal to an
absolute amount resulting from the following monetary calculation:
the aggregate of Ten percent (10%) of FAn for that Month plus fifteen
percent (15%) of the SAn for that Month all divided by the weighted
average Market Price as determined in accordance with Article 11.7.
iv)
If FAn, SAn and TAn are all positive but YAn and ZAn is negative, the
State's AOE for the Month in question shall be equal to the absolute
amount resulting from the following monetary calculation: the
aggregate of Tenpercent (10%) of the FAn for that Month plus fifteen
percent (15%) of the SAn for that Month plus Twenty percent (20%)
of the TAn for that Month all divided by the weighted average Market
Price as determined in accordance with Article 11.7.
v)
If FAn, SAn, TAn and YAn are all positive but ZAn is negative, the
State's AOE for the Month in question shall be equal to the absolute
amount resulting from the following monetary calculation:
the aggregate of Ten percent (10%) of the FAn for that Month plus
Fifteen percent (15%) of the SAn for that Month plus Twenty percent
(20%) of the TAn for that Month plus Twenty five percent (25%) of
the YAn for that Month all divided by the weighted average Market
Price as detemnined in accordance with Article 11.7
vi)
If FAn, SAn, TAn, YAn and ZAn are all positive, the State's AOE for the
Month in question shall be equal to the absolute amount resulting
from the following monetary calculation:
52
the aggregate of Ten percent (10%) of the FAn for that Month plus
Fifteen percent (15%) of the SAn for that Month plus Twenty percent
(20%) of the TAn for that Month plus Twenty five percent (25%) of
the YAn for that Month, plus Thirty percent (30%) of the ZAn for that
Month all divided by the weighted average Market Price as
determined in accordance with Article 11.7.
(d)
The AOE calculations shall be made in U.S. Dollars with all non-dollar
expenditures converted to U.S. Dollars in accordance with Section 1.3.5 of
Annex 2. When the AOE calculation cannot be definitively made because
of disagreement on the Market Price or any other factor in the formulae,
then a provisional AOE calculation shall be made on the basis of
Contractor's good faith estimates of such factors and such provisional
calculation shall be subject to correction and revision upon the conclusive
determination of such factors, and appropriate retroactive adjustments shall
be made.
(e)
The AOE shall be calculated on a monthly basis, with the AOE to be paid
commencing with the first Month following the Month in which the FAn, SAn,
TAn, YAn or ZAn, (as applicable) becomes positive. Because the precise
amount of the AOE for a Calendar Year, deliveries (or payments in lieu) of
the AOE with respect to a Month shall be made during such Calendar Year
based upon the Contractor's good faith estimates of the amounts owing,
with any adjustments following the end of the Calendar Year to be settled
pursuant to the procedures agreed to pursuant to Article 10.7. Final
calculations of the AOE shall be made within thirty (30) days following the
filing by the Contractor of the annual tax return for such Calendar Year
pursuant to the Petroleum Income Tax Law and this Agreement, and the
amount of the AOE shall be appropriately adjusted in the event of a
subsequent adjustment of the amount of tax owing on such term.
10.3 GNPC shall act as agent for the State in the collection of all Petroleum accruing to
the State under this Article 10 and delivery to GNPC by Contractor shall discharge
Contractor's liability to deliver the share of the State.
10.4 The State or GNPC, having met the requirements of Article 15.1, may elect, in
accordance with terms and conditions to be mutually agreed by the Parties, that all
or part of the Crude Oil to be distributed to the State or to GNPC pursuant to this
Article shall be sold and delivered by the State or GNPC to Contractor or its Affiliate
for use and disposal and in such case Contractor or its Affiliate shall pay to the
State or to GNPC, as the case may be, the Market Price for any Crude Oil so sold
53
and delivered. Market Price for purposes of this Article 10.3 shall be the amounts
actually realized by Contractor or said Affiliate on its resales of said Crude Oil in
arm's length commercial transactions, or for its other resales or dispositions of said
Crude Oil, based upon Market Price determined in the manner specified in Article
11.7(b).
10.5 Ownership and risk of loss of all Crude Oil produced from the Contract Area which
is purchased, and all of its percentage Participating Interest or other Crude Oil lifted,
by Contractor shall pass to Contractor at the outlet flange (the ("Delivery Point") of
the marine terminal or other storage facility for loading into tankers or other
transportation equipment referred to in Article 11.1
10.6 Subject to the provisions of Article 15 hereof. Contractor shall have the right freely
to export and dispose of all the Petroleum allocated and/or delivered to it pursuant
to this Article.
10.7 The Parties shall through consultation enter into supplementary agreements
concerning Crude Oil lifting procedures, lifting and tanker schedules, loading
conditions. Crude Oil metering, and the settlement of lifting imbalances, if any,
among the Parties at the end of each Calendar Year. The Crude Oil to be
distributed or othenwise made available to the Parties in each Calendar Year in
accordance with the preceding provisions of this Article shall insofar as possible be
in reasonably equal monthly quantities.
10.8 To assist in the making of the AOE calculation in accordance with Articlel 0.2, there
is attached as Annex 4 to this Agreement a worked example of the calculation using
hypothetical figures, rates and thresholds, for the purpose of illustration only.
54
Article 11
MEASUREMENT AND PRICING OF CRUDE OIL
11.1 Crude Oil shall be delivered by Contractor to storage tanks or other suitable holding
facility constructed, maintained and operated in accordance with applicable laws
and International Best Oilfield Practice. Crude Oil shall be metered or othenwise
measured for quantity and tested for quality in such storage tanks for all purposes
of this Agreement. Any Party may request that measurements and tests be done
by an internationally recognized inspection company. Contractor shall arrange and
pay for the conduct of any measurement or test so requested provided, however,
that in the case of (1) a test requested for quality purposes and/or (2) a test
requested on metering (or measurement) devices, or where the test results
demonstrate that such devices are accurate within acceptable tolerances agreed to
by the Parties or if not established by the Parties, then in accordance with
International Best Oil Field Practice, the Party requesting the test shall reimburse
Contractor for the costs associated with the test or tests.
11.2 GNPC or its authorized agents shall have the right:
(a)
to be present at and to observe such measurement of Crude Oil;
(b)
to examine and test whatever appliances are used by Contractor therefore;
and
(c)
to install a device or equipment, at GNPC's sole risk, expense and liability,
for the purpose of determining the quantity and quality of Crude Oil.
11.3 In the event that GNPC considers Contractor's methods of measurement to be
inaccurate, GNPC shall notify Contractor to this effect and the Parties shall meet
within ten (10) days of such notification to discuss the matter. Where after thirty
(30) days the Parties cannot agree over the issue, they shall refer for resolution
under Article 24 the sole question of whether Contractor's method of measuring
Crude Oil is accurate and reasonable.
Retrospective adjustments to
measurements shall be made where necessary to give effect to the decision
rendered under Article 24.
11.4 If upon the examination or testing of appliances provided for in Article 11.2 any such
appliances shall be discovered to be defective:
(a) Contractor shall take immediate steps to repair or replace such appliance;
and
55
(b) subject to the establishment of the contrary, such error shall be deemed to
have existed for three (3) Months or since the date of the last examination
and testing, whichever occurred more recently.
11.5 In the event that Contractor desires to adjust, repair or replace any measuring
appliance, it shall give GNPC reasonable notice to enable GNPC or its authorized
agent to be present.
11.6 Contractor shall keep full and accurate accounts concerning all Petroleum
measured as aforesaid and provide GNPC with copies thereof on a monthly basis,
not later than ten (10) days after the end of each Month.
11.7 The Market Price for Crude Oil delivered to Contractor hereunder shall be
established with respect to each lifting or other period as provided elsewhere in this
Agreement as follows:
(a)
on Crude Oil sold by Contractor in arm's length commercial transactions
(defined in Article 11.7((c) below), the Market Price shall be the price
actually realized by Contractor on such sales;
(b)
on sales of Crude Oil by Contractor not in an "arm's length commercial
transaction" (defined by Article 11.7((c) below), on exports by Contractor
without sale or on sales under Article 15.2, the Market Price shall be the
price detennined by reference to world market prices of comparable Crude
Oils sold in arm's length transactions for export in the major world petroleum
markets, and adjusted for oil quality, location, timing and conditions of
pricing, delivery and payment provided that in the case of sales under Article
15.2 where such sales relate to part only of Contractor's entitlement, prices
actually realized by Contractor in sales of the balance of its proportionate
share falling within Article 11.7((a) above shall be taken into account in
determining Market Price.
For purposes of this Article 11.7((b),
"comparable Crude Oils" shall mean Crude Oils of similar API gravity,
sulphur content, and acidity, and if Contractor cannot identify comparable
Crude Oils for the purposes of this Article, the Parties may agree on an
alternative method for establishing a comparable Crude Oil;
(c)
sales in "ami's length commercial transactions" shall mean sales to
purchasers independent of the seller, which do not involve Crude Oil
exchange or barter transactions, government to government transaction,
sales directly or indirectly to Affiliates, or sales involving consideration other
than payment in U.S. Dollars or currencies convertible thereto, or affected
in whole or in part by considerations other than the usual economic
incentives for commercial arm's length Crude Oil sales;
56
(d)
the price of Crude Oil shall be expressed in U.S. Dollars per Barrel, F.O.B.
the point of delivery by Contractor; and
(e)
if Crude Oils of various qualities are produced from the Contract Area, the
Market Price shall be determined separately for each type sold and/or
exported by Contractor, only to the extent that the different quality grades
remain segregated through to the point where they are sold, and if grades
of different quality are commingled into a common stream. Contractor and
GNPC shall agree on an equitable methodology for assessing relative value
for each grade of Crude Oil comprising the blend and shall implement the
agreed methodology for having the producer(s) of higher quality Crude
Oil(s) be reimbursed by the producer(s) of lower quality Crude Oil(s).
11.8 Contractor shall provide to GNPC information in accordance with Section 7 of the
Accounting Guide on each lifting which shall include the buyer of the cargo, sales
basis with respect to benchmark Crude Oil, the pricing basis, the differential, any
deductions and the Market Price determined by it for each lifting not later than thirty
five (35) days after the end of such lifting. For the purposes of this Article 11.8 the
obligations of Parties comprising Contractor shall be several.
11.9 If GNPC considers that the Market Price notified by Contractor was not correctly
determined in accordance with the provisions of Article 11.7, it shall so notify
Contractor not later than thirty (30) days after notification by Contractor of such
price, and GNPC and Contractor shall meet not later than twenty (20) days
thereafter to agree on the correct Market Price.
11.10 In the event that GNPC and Contractor fail to agree upon the commencement of
meetings for the purpose described in Article 11.9 above, the Market Price shall be
referred for determination in accordance with Article 24 of this Agreement.
11.11 Pending a determination under Article 11.10, the Market Price will be deemed to be
the last Market Price agreed or detemriined, as the case may be, or if there has
been no such previous agreement or determination, the price notified by Contractor
for the lifting in question under Article 11.7. Should the determined price be different
from that used in accordance with the foregoing then the difference plus interest at
the Specified Rate shall be paid in cash by or to Contractor, as the case may be,
within thirty (30) days of such determination.
57
Article 12
TAXATION AND OTHER IMPOSTS
12.1 Subject to applicable laws and regulations as the same may be amended from
time to time, the tax, duty, fee and other imposts that shall be imposed by the
State or any entity or any political subdivision on Contractor, its Subcontractors or
its Affiliates and shareholders in respect of work and services related to Petroleum
Operations and the sale and export of Petroleum shall include, but not be limited
to, the following:
(a)
Tax in accordance with the
time;
Income Tax Act as amended from time to
(b)
Petroleum Income tax in accordance with the provisions of the Income
Tax Act levied at the rate of thirty-five percent (35%) for the temri of this
Agreement., subject to applicable law in effect from time to time;
(c)zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA
Withholding tax at a rate of fifteen per cent (15%) shall be deducted from
payments by Contractor to a Subcontractor or Affiliate in respect of works
and services for or in connection with this Agreement.;
(d)
Withholding tax at the rate of eight percent (8%) shall be deducted from
dividends paid to shareholders;
(e)
Gains/profit arising from the sale, transfer, disposal or assignment of any
interest in this Agreement and sale of assets shall be subject to tax in
accordance with the provisions of the Income Tax Act
(f)
Payments for rental of State property, public lands or for the provisions of
specific services requested by Contractor from public enterprises;
provided, however, that the rates charged Contractor for such rentals or
services shall not exceed the prevailing rates charged to other members
of the public who receive similar services or rentals;
(g)
Surface rentals payable to the State pursuant to Section 18 of the
Petroleum Law per square kilometre of the area remaining at the
beginning of each Contract Year as part of the Contract Area, in the
amounts as set forth below:
Phase of Operation
Surface Rentals Per Annum
Initial Exploration Period
US $50 per sq. km.
First Extension Period
US $100 per sq. km.
Second Extension Period
US $100 per sq. k m . ^
58
Development & Production Area
US $200 per sq. km.
These rentals shall be pro-rated where the beginning of a Period and the end of
a Period or the creation of a Development and Production Area occurs during the
course of a Calendar Year.
(h) Taxes, duties, fees or other imposts of a minor nature.
12.2 Contractor shall not be liable for any export tax on Petroleum exported from
Ghana and no duty or other charge shall be levied on such exports. Vessels or
other means of transport used in the export of Contractors Petroleum from Ghana
shall not be liable for any tax, duty or other charge by reason of their use for that
purpose.
12.3 Subject to the local purchase obligations hereunder, Contractor and
Subcontractors may import into Ghana all plant, equipment and materials to be
used solely and exclusively in the conduct of Petroleum Operations without
payment of customs and other duties and taxes on imports save administrative
fees and charges;
PROVIDED THAT:
(a)
GNPC shall have the right of first refusal for any item imported duty
free under this Article which is later sold in Ghana; and
(b)
where GNPC does not exercise its right of purchase. Contractor
may sell to any other person subject to the relevant law in effect and as
amended from time to time.
12.4 Contractor shall not be liable to pay VAT in respect of plant, equipment and
materials, and related services supplied in Ghana, to be used solely and
exclusively in the conduct of Petroleum Operations.
12.5 Foreign National Employees of Contractor or its Affiliates, and of its
Subcontractors, shall be permitted to import Into Ghana free of import duty, their
personal and household effects in accordance with Section 22.7 of PNDCL 64;
provided, however, that no property imported by such employee shall be resold by
such employee in Ghana except in accordance with Article 12.3 zyxwvutsrqponmlkjihgfedcbaZYXWV
/Q
12.6 Subject to GNPC's rights under 19, Contractor, Subcontractors and Foreign
National Employees shall have the right to export from Ghana all items imported
duty free. Such exports shall be exempt from all customs and other duties, taxes,
fees and charges on exports save minor administrative charges.
12.7 Subject to guidelines to be issued by the Minister, the Contractor shall make
contributions to a decommission fund based on estimated costs of abandonment
in proportion to its Participating Interest. Such contributions shall be allowed as
deduction from assessable income from the year of assessment the contributions
commenced. In the year of assessment in respect of which decommission has
been completed in accordance with an approved decommission plan, the surplus
funds shall be treated as chargeable income and subject to tax. The amount left
after the tax shall be subject to Additional Oil Entitlement at the highest rate at
which the Contractor paid AOE during the period of contributions to the relevant
decommission fund. Any surplus after payment of the tax and AOE shall revert to
the Contractor.
12.8 Parties will negotiate in good faith to ensure that Contractor is afforded tax credits
for corporate taxes paid in Ghana. However no adverse effect should occur to the
economic rights of GNPC or the State.
12.9 It is the intent of the Parties that payments by Contractor of tax levied by the
Income Tax Act or any other tax imposed on Contractor qualify as creditable
against the income tax liability of each company comprising Contractor in its
jurisdiction. Should the fiscal authority involved determine that the Income Tax
Act does not impose a creditable tax, the Parties agree to negotiate in good faith
with a view to establishing a creditable tax on the precondition that no adverse
effect should occur to the economic rights of GNPC or the State.
12.10 All tax return prepared and payments made by Contractor and its Affiliates or
Subcontractors, and Foreign National Employees thereof shall be made in United
States
Dollars./
60