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Republic of Sacha (Yakut)
on the one hand
The Sacha - Austrian Joint Venture
on the other
TABLE OF CONTENTS
Object of the contract
Surrender of areas
Minimum work obligation
Discovery, estimating, commercial discovery
Apportionment of hydrocarbons extracted, recovery of costs,
Evaluation of hydrocarbons
Marketing of natural gas
Accounting and cost apportionment
Rights and obligations of TAKT
Provision of goods and services
Rights of the representatives of the Government
Joint extraction from a deposit
Taxes and levies
Promotion of natural gas projects
Currency and Bank Accounts
Ownership of assets
Liability and insurance
Transfer of shares
Secrecy and confidentiality
Language of the contract
Amendments and addenda to the contract
Entry into force
TAKT was formed on 7th June 1991 by PGO Lenaneftegasgeologija and OEMV
(JAKUTIEN) Exploration Gesellschaft m.b.H. and on l8th August 1991 was
registered by the Ministry of Finance of the RSFSR, in order to make a
fundamental contribution to the development of Yakut in the field of developing
By a decision of the Managing Board of TAKT on 10th September 1998 the Nationale
Erdoel - und Erdgasgesellschaft Sachaneftegas was included as a new founder on
the Yakut side.
Confident of the conclusion of this contract TAKT has already sunk and attested
a borehole to a final depth of 2928 m in the contractual area, reprocessed
seismic data and has interpreted 2090 km of unreprocessable seismic data.
On 21st February 1992 the law concerning natural earth resources of the Russian
Federation was published, and mentioned the conclusion of exploration and
production sharing agreements.
On 22nd December 1992 the law of natural earth resources of the Republic of
Sacha (Yakut) became effective.
On 24.12.1993 a Decree relating to matters of production sharing agreements for
the utilisation of the natural earth resources, No. 2285 was published by
The geological companies of the Republic of Sacha (Yakut) have collected and
evaluated extensive geological and geophysical data in the areas.
By disposition of the Government of the Republic of Sacha (Yakut) of 25th
January 1994 the Ministry of Industry of the Republic of Sacha (Yakut) was
empowered, to sign this contract as representative of the said Government.
On the basis of the common aim of the parties, to utilise the hydrocarbons in
the Republic of Sacha (Yakut) efficiently and on a profit-making basis, the
parties have reached agreement as follows:
this means all the activities, which are the object of
means any point at which the crude oil will be handed
over to TAKT FOB Export port.
The export port will be agreed between the parties
means Section 1 and Section 2, shown on the map in
means any part of the contractual area, marked and
indicated as such by TAKT and will also include all the
reserves of hydrocarbons of a commercial discovery.
After conclusion of the activities in accordance with
Art. 7.1 the extraction area may be extended by TAKT,
if the results of these activities indicate a greater
extension of hydrocarbons.
means the discovery of hydrocarbons regardless of the
means the hydrocarbons in accordance with Article 8
Entry into force of the
means that date on which the last approval was issued
for the validity of the contract in accordance with
means a year that begins on 1st January and ends on 31st
means crude oil of various degrees of density, asphalt,
natural gas, condensate and any other substances
containing hydrocarbons, found in the contractual area
and which can be extracted, as well as any substances,
which can be obtained therefrom, including sulphur,
helium, carbon dioxide and other hydrocarbons.
means all those costs, incurred in connection with
exploration, estimating, development and extraction,
regardless of whether these are investment costs or
operating costs, storage costs, marketing and export
costs, loan costs for outside financing, royalties,
the legally specified VAT, personnel costs including
legal levies and voluntary additional payments,
interest amounts in accordance with Art. 8 point
5 and 6, bonus in accordance with Article 29,
amounts, used for apportionment to funds set up by
TAKT as well as any further costs, listed in the
offsetting agreement. Costs also covers costs for
projects for the economic and social development
of Yakut, incurred by TAKT.
means the hydrocarbons in accordance with Article 8,
Commercial extraction: means any date, from which TATK on the basis of
delivery agreements conveys crude oil or natural
gas out of the extraction area. The date shall be
stipulated individually for each commercial discovery.
Extraction for test purposes shall not be considered
as commercial extraction.
means a discovery or strike in the contractual area,
which in the opinion of TAKT has the potential, to be
developed and extracted in the future on a financially
Party or parties:
means the Government or TAKT or both together as well
as their legal successors.
means the period from the commencement of commercial
extraction, lasting 20 years, if not extended in
accordance with Article 4.
means the Government of the Republic of Sacha (Yakut)
("RS") as the legitimate representative of RF and the
Government of the Russian Federation ("RF") as the
legitimate representative of the RF.
means the extraction interest of 8 % of the available
hydrocarbons, which will be made available to the
Government of TAKT at the handing over point or will
be paid in cash.
Standard cubic metre or
means the quantity of gas, which is necessary, to fl1 a
container of 1 cubic metre at the atmospheric pressure
of 101.325 kPA and at a temperature of 0 degrees
Hand over point:
means the point at which hydrocarbons are handed over to
the customer in accordance with delivery agreements and
means the document, attached hereto as Appendix 2 and
which contains detailed rules and regulations concerning
means this exploration and product sharing contract
including Appendices 1, 2, 3, 4, 5 and 6.
Object of the contract
2.1 The object of this contract is any activities for the exploration,
development, extraction including processing, storage, marketing,
transportation and exporting of hydrocarbons in the contractual area as
well as any auxiliary activities, connected therewith.
2.2. The Government grants TAKT thc exclusive right, during the period of
validity of the contract and in the contractual area to undertake
activities and to freely export the hydrocarbons in accordance with the
conditions of this contract. The Government does hereby guarantee that the
licences, which are necessary to carry on the activities and which are not
attached to th1s contract as Appendix 4, will be issued immediately by the
Government or its administrative sub-units. Any costs for the issue of
such additional licences shall be covered with the portion of the
Government in accordance with Article 8.7. If licences have not been
issued within one month after an application has been made by TAKT, then
the period of validity of the contract shall be extended accordingly.
2.3 The licences, necessary in accordance with Yakut and Russian legislation
for the utilisation of the natural earth resources, have been agreed
between TAKT and the Government and are attached to this contract as
3.1 The Government does hereby guarantee that Appendix 1, may be used
exclusively by TAKT for the duration of the contract. If for this purpose
the cooperation of administrative departments of the RS is necessary, then
allocation shall be effected by the Government and these departments
3.2. TAKT undertakes, to make available the following amounts to the
administrative departments of RS for projects for social development
2.5% of the costs of TAKT for searching
Up to 2% of the costs of TAKT for the development
of petroleum or natural gas deposits.
TAKT shall not make available more than US$ 30 million for such projects.
TAKT and the administrative department shall decide jointly on the projects
to be promoted.
3.3 If in the opinion of TAKT an extraction area extends beyond the contractual
area, then this area shall become part of the contractual area, if it has
not been given to another company. In this case the Government undertakes
to grant licences to TAKT, on the same conditions as apply to the original
3.4 If the partners agree, additional areas may also be included as part of the
3.5 The Government undertakes, to grant to TAKT all the rights which are
necessary for the construction of pipelines and transportation of
hydrocarbons, if such pipelines go beyond the contractual area.
3.6 If on the territory of the Republic of Sacha (Yakut) TAKT receives further
licences for searching and extraction of hydrocarbons, then TAKT may
offset the costs of each other licence with the costs of this contract.
4.1 The first exploration period shall last five years from the entry into
force of the contract. TAKT is entitled, to extend the first exploration
period by a further, second exploration period of 5 years, if tax has
fulfilled its obligations completely from the first exploration period.
TAKT must inform the Government at the latest 3 months before commencement
of the first exploration period, if TAKT wishes to move into the second
4.2 If at the latest at the end of the second exploration period an extraction
area has not been designated by TAKT, the contract shall be deemed to be
4.3 The first and/or second exploration periods shall be automatically
extended, if on the date of the end of the relevant exploration period a
borehole has in fact just be sunk. The extension shall be valid for a
period of three months, after the final depth has been reached in
accordance with the drilling plan. This extension shall not apply to the
sinking of the borehole(s) in accordance with Arts. 6.1 and 6.2.
4.4 Concerning any extraction area the contract shall remain valid for 20 years
from the commencement of commercial extraction. If in the opinion of TAKT
after the expiry of the 20 year period commercial extraction shall be
guaranteed, then TAKT shall be entitled, to extend this contract. The
freshly negotiated conditions, may not be worse than the conditions
applicable until that point in time.
TAKT shall have at least 12 months before the expiry of the production
period to notify the Government, that it is going to exercise the right to
extend the production period by as many years as the extension totals and
whether it wishes, on the basis of financial features, to freshly negotiate
parts of the contract.
If TAKT wishes a fresh negotiation, the parties shall make the greatest
efforts, before the commencement of the extension of the production period,
to come to an agreement.
4.5. If before commencement of commercial extraction the parties conclude a
natural gas delivery contract, the period of validity of which is longer
than 20 years, then the production period shall automatically last as long
and the possibility of an extension shall only arise after that.
Relinquishment of areas
5.1 If TAKT does not go into the second exploration phase, then it must
relinquish all areas with the exception of the extraction areas on the
expiry of the first exploration period.
5.2 After the expiry of the second exploration period, TAKT must relinquish all
those parts, which it has not designated as extraction areas.
5.3 During the exploration period TAKT may voluntarily give up parts of the
contractual area, but without however being released from the obligations
of the minimum work obligation.
The relinquishment of areas in accordance with this Article 5.3 shall
become legally effective 30 days after the receipt by the Government of an
5.4 At the end of the relevant exploration period TAKT will retain areas, which
are in Section 1 and/or Section 2, to the Government, which in the opinion
of TAKT are no longer worth exploration.
5.5 In accordance with standard practice throughout thc world in the petroleum
and natural gas industry as well as in accordance with the rules, which in
the RS apply to the area of environmenta1 protection and protection of the
natural earth resources, TAKT will restore the areas, which it has to hand
back in accordance with this Article 5 and on which it has carried out
survey and extraction activities.
Minimum work obligation
6.1 During the first exploration period TAKT must fulfill at least the
following work obligation:
In Section 1 TAKT shall especially carry out the following tasks:
Processing of seismic data - 850 km;
Evaluation of seismic information
Simulation and drawing up of the geological and facies maps
The sinking of a test bore with breakdown and information
concerning the subsalinary deposits.
In Section 2 TAKT shall carry out especially the following tasks:
Processing of seismic data - 820 km
Evaluation of seismic information
Technical and economic evaluation of the area on the basis of
the seismic interpretations;
On proof of the financial viability on extraction in the
opinion of TAKT -- drilling work to the extent to be
stipulated by TAKT.
Processing of seismic data - 420 km
Evaluation of seismic information
Sinking of two test holes, whereby borehole 314-2 will be
6.3 During the second exploration phase TAKT must fulfill a minimum work
obligation stipulated by TAKT.
6.4 The minimum work obligation for the first or second exploration period
shall be deemed fulfilled, if the works have been completed in accordance
with Art. 6.1 or Art. 6.2. Should TAKT not have fulfilled the minimum
work obligation in accordance with Art. 6.1 or 6.2, then TAKT shall pay to
the Government the differential amount between the amount actually expended
for the activities and the sum of US$ 30 million.
(Art. 6.1) or US$ 15 million (Art. 6.2).
After fulfillment of the relative minimum work obligation TAKT may cancel
the contract without further claims on the part of the Government.
If the works in the first exploration period exceed the scope laid down in
Article 6 Point 1 or an amount was expended which exceeds US$ 30,000,000,
then the works and amounts of money shall be charged to the minimum work
obligations of the second exploration period.
6.4 The Government recognises that, even before the entry into force of this
contract, TAKT has carried out the following geologica1 and geophysical
works and drillings, which as a result shall be recognised as partial
fulfillment of the work obligation in accordance with Art. 6.1:
sinking of borehole 314-2 and test investigation in Section 2,
Otradinsk area (final depth 2928 m)
reprocessing of 865 km seismic data and probably a further 100 km
Interpretation of 2090 km of unreprocessable seismic data.
For these works costs have been accumulated in accordance with the Table in
Appendix3. These costs may be recovered as hydrocarbons costs in
accordance with Article 8.
In addition any costs of TAKT shall be recognised as recoverable, which can
be properly proven by means of vouchers and documentation and are connected
with the works in accordance with Article 6 Point 4 as well as costs for
additional works before and after the signing of this contract.
6.5 If a drilling in accordance with Article 6.1.1 or 6.1.2 does not reach the
planned drilling target for technical reasons, then the drilling obligation
shall be considered as fulfilled, if in the opinion of TAKT every technical
possible and economically sensible efforts have been made, to reach the
7.1 Within 60 days after TAKT has made a discovery, the Government is to be
informed. After the Government has been informed TAKT may declare a
commercial discovery and designate an extraction area.
In this case TAKT shall have the possibility of carrying out studies, and
if necessary and economically justified, of effecting additional drillings
for more precise determination of all the fundamental parameters of the
deposit discovered. These activities may, but need not be carried out
during the first and second exploration period. If carried out during the
two exploration periods, the costs shall be charged to the relevant task
obligations in accordance with Article 6 Point 3.
If TAKT has not carried out the aforementioned activities in an extraction
area by the end of the second exploration period, then TAKT shall have a
further period of five years or shall be entitled to cancel the contract.
7.2 After the termination of the activities in accordance with Art. 7.1 TAKT
must within two years submit a development project to the Government, in
accordance with the International Standard of the oil industry taking into
account local features or the contract shaft be considered as canceled.
TAKT shaft be entitled, to carry out the development project including
amendments and addenda made by TAKT with the aim of commercial extraction.
The date for the commencement of the development project shall be
stipulated by TAKT based on the conclusion of delivery agreements for the
hydrocarbons to be extracted at world market prices, in convertible
currency and financially tolerable conditions or in accordance with the
existence of detailed rules and regulations in accordance with Article 17
Points 1 and 2.
Allocation of extraction
Recovery of costs
8.1 TAKT must make available any cash amounts, necessary for the completion of
the activities, and may only recover its accumulated costs from the
hydrocarbons costs. TAKT shall be entitled to freely use extracted
hydrocarbons to the extent required for the carrying out of the activities.
8.2. The extracted hydrocarbons which are not needed for carrying out the
activities ("available hydrocarbons") shall be measured at the transfer
point and shall be split up at the transfer point in accordance with
the following conditions.
8.3. 8% of the available hydrocarbons shall be made available to the Government
at the transfer point as royalty or shall be paid in cash. Royalties are
recoverable within the framework of the hydrocarbons costs.
8.4. TAKT shall be entitled to recover its accumulated costs from up to 90 ./0
of the available hydrocarbons after deduction of the royalties
("hydrocarbons costs"). The type and method of recovery of the costs
for individual cost types shall be established by TAKT.
8.5. The costs incurred through carrying out the activities up to the beginning
of commercial extraction, financed from own funds or loans not bearing
interest, shall bear interest half-yearly. The applicable interest rate
shall be the 6 month Libor for US$.
The costs for each half-year shall be totaled up at the end of the halfyear and shall bear interest at the interest rate applicable on the first
day of the half-year. The interest amounts determined for each half year
shall be added to the costs for the next half-year.
8.6. If the costs accumulated before and after commencement of commercial
extraction cannot be recovered within one year, then costs not recovered
shall be carried forward to the next year, and indeed for as long as
necessary until all costs have been recovered.
All costs not recovered in one year shall bear interest for the prior year
and the interest amounts do determined shall be added to the costs for the
next year. Loans taken up from Banks shall be excepted from bearing
8.7. Those quantities of available hydrocarbons, which are not used as
hydrocarbons costs ("hydrocarbons deposit"), shall be split up as follows
between TAKT and the Government:
Portion of the Government:
Portion of TAKT:
The total portion so determined for TAKT of hydrocarbons recovery shall be
taxed at a rate of 24%. Regardless of any change in laws, the tax rate
shall be maintained during the whole period of validity of the contract.
8.8. During a current calendar year the costs and proceeds shall be estimated on
the basis of assumptions by TAKT, which will also form the basis for the
splitting of the hydrocarbons.
Within three months after the expiry of each calendar year TAKT will
forward to the Government annual accounts, which will contain the actual
results of the year which has expired. Differences between the provisional
splitting of hydrocarbons during a current calendar year and the result of
the annual accounts must be equalised within the following calendar year.
8.9. Regulations concerning the shipment of hydrocarbons are to be agreed
between the parties hereto before commercial extraction.
Evaluation of hydrocarbons
for hydrocarbons costs, hydrocarbons recovery and tax assessment
9.1. Natural gas shall be valued at the average of the price, which was achieved
by the Government and TAKT at the transfer point in accordance with a
natural gas delivery contract during the previous quarter.
9.2. Crude oil shall be valued at the average of the export price, which was
achieved by TAKT during the previous quarter. Export price means the price
FOB export point, as would be achieved between non-bound companies and on
the basis of the triple comparison in freely convertible currency.
Deductions on account of sales or trading discounts shall be restricted by
TAKT to the internationally customary extent.
9.3. If TAKT sells crude oil to a bound company, then the average price of the
past quarter shall be determined on the basis of the quotations published
in Platt's for crude oil of comparable quality and destination.
9.4. The aforementioned rules shall be adjusted within the framework of the
annual cost recovery account to the average price actually applicable to a
Marketing of natural gas
10.1. The Government and TAKT may jointly export natural gas and for this
purpose conclude a natural gas delivery contract with one or several
10.2. If for the financial viability of a natural gas export contract the
quantities of TAKT should not be adequate, then the Government TAKT will
make the greatest possible efforts to achieve the joint sale of natural
Accounting, and costing
11.1. TAKT must keep its commercial ledgers in accordance with the
specifications of the offsetting contract, the principles
internationally recognised in the oil industry and the internal TAKT
accounting regulation. To determine the value of hydrocarbons costs
and hydrocarbons recovery, TAKT will use only the US$ as the currency.
11.2. Within 90 days from the end of a calendar year TAKT must forward to
the Government a list of the costs accumulated in connection with the
11.3. After recording commercial extraction TAKT must additionally forward a
report to the Government concerning the quantity of the extracted
hydrocarbons for the drafting of the costs.
11.4. The Government shall be entitled at its own expense to check the
annual cost accounting including the relevant documentation of TAKT
regularly for purposes of correctness. If the Government does not check
the cost accounting within 12 months from 31st December of any year in
which the costs have been incurred, then the costs shall be deemed to
have been accepted and the Government shall not be able to make any
later objections to the costs contained in the cost accounting documents.
The costs contained in the cost accounting system shall be deemed as the
basis of the cost recovery in accordance with Article 8.
11.5. If the Government has undertaken a check in accordance with Article 11.4,
the Government must make available to TAKT in writing the results of the
check within 6 months from the end of the said check.
The Government may only make the following objections:
the figures of the cost accounting are not correct;
the costs for acquired goods and services criteria are not in
accordance with Article 13.4;
Payments for goods and services are not in accordance with the
relevant contracts of the suppliers;
the quality of the goods, taking into account the market situation,
is not in accordance with the price paid.
11.6. If the Government and TAKT cannot agree on the test results, then if
necessary the international centre of experts of the International
Chamber of Trade, Paris, may be called in, in accordance with the
procedure relating to the expert report required by the Chamber.
Rights and obligations of TAKT
12.1. At the latest 30 days after the entry into force of this contract TAKT
must appoint a representative as the correspondent (interlocutor) for the
12.2. In accordance with the applicable legal situation, during the period
of validity of this contract, representatives of TAKT as well as other
persons appointed by TAKT shall at any time have free access to the
12.3. Without further approval all the machines and plants necessary for the
completion of the activities may be brought into the contractual area and
set up and operated there, provided the machines and plants, are in
accordance with the international standard.
12.4. TAKT must bear all costs connected with the activities and may only
recover these costs from the hydrocarbons costs.
12.5. TAKT shall be entitled, to use public facilities, such as roads, on
conditions which do not discriminate against TAKT compared with third
parties. Subject to the widest possible protection of nature, TAKT shall
be entitled to build roads and other traffic routes in the contractual
area, if necessary for the activities. In response to queries from the
Government TAKT shall generally permit the utilisation of these roads and
traffic routes, provided this does not restrict TAKT in its activities
and does not give rise to any additional financial burden.
12.6. For purposes of the activities in the contractual area TAKT may make use
of the raw materials which exist there, such as sand, rocks, water and
timber, in the necessary scope and on conditions which do not
discriminate against TAKT, compare with third parties,
12.7. If necessary for the activities, TAKT shall be entitled to sink water
12.8. Taking into account local features TAKT must carry out its activities in
accordance with the conditions of this contract as well as the
internationally recognised standards governing the petroleum and natural
The activities shall be carried out efficiently, safely and so as to save
costs with the aim of achieving the best financial and economic
exploitation of the deposits.
12.9. When carrying out the activities TAKT must ensure that it avoids to the
greatest extent possible:
the loss of hydrocarbons above and below the surface of the earth
damage to rock formations which carry hydrocarbons
the unintended penetration of water into rock formations carrying
environmental pollution and damage.
TAKT shall accept no liability for damage to the environment in the
contractual area, which occurred before this contract became effective.
The activities of TAKT in the field of environmental protection are
listed in Appendix 5.
12.10. TAKT must inform the Government half-yearly of the activities and
forward reports to it in accordance with the regulations of the
Government relating to statistical reports.
12.11. Within 6 months from expiry of the first or second exploration phase
TAKT will submit a geological report to the Government.
12.12. Within 6 months from the end of the contract TAKT will forward to the
Government drilling cores and other technical data, which have come into
the possession of TAKT during the period of validity of the contract.
Provision of goods and services
13.1. TAKT must make available itself or through subcontractors, who would
be selected by TAKT, all the materials, machines, plants and other
equipment as well as services for the activities.
13.2. The number and remuneration of the employees, involved in the
activities, shall be determined solely by TAKT, whereby the remuneration
must not be less than the legally stipulated minimum.
13.3. TAKT shall make every effort to ensure that the majority of the
employees are citizens of the RF and that these employees are allowed
further education specific to their trade or profession in accordance
with the directives laid down by TAKT.
13.4. For orders to subcontractors, which go above an amount of US$ 500,000
TAKT shall be obliged to instigate a tender competition. TAKT must place
the order with the company, which in the opinion of TAKT as regards
price, quality, delivery time and technical skills best satisfies the
requirements of TAKT. In the event of equality of bids or tenders,
Russian and Yakut companies must be given preference.
Rights of the representatives of the Government
14.1. Representatives of the Government shall by prior agreement with TAKT
be entitled to access at any time to the contractual area and may examine
all documents on the spot, inspect items of equipment as well as
generally observe the activities.
14.2. The access of the representatives of the Government shall be at their
own risk and expense.
They shall not have any right to intervene directly in the activities
or give instructions concerning the activities, provided the activities
are not in conflict with this contract and are in accordance with the
laws. In response to prior notice in good time of a visit of the
representatives of the Government, they will be offered the same
accommodation and subsistence possibilities as the employees of TAKT.
The number of visitors as well as their stay time shall be
agreed between the Government and TAKT.
14.3. The Government shall grant TAKT the greatest possible support in
obtaining visas, work permits and any other approvals necessary for
Yakut, Russian and foreign employees as well as employees of
Joint extraction from a deposit
15.1. If an extraction area extends beyond the borders of the contractual
area and this adjacent area has been placed with another company
within the framework of a licence agreement, the Government, if the
companies affected do not reach agreement within a reasonable deadline,
may request in writing, that this extraction area be developed
uniformly and that a joint development project be submitted.
15.2. If this development project is not submitted within a year following
a written request from the Government and the Government does not grant
any extension of this deadline, then the Government may request that an
internationally known consultancy company prepare this development
As regards the costs of the consultancy company the companies affected
must reach an appropriate agreement. If no agreement is reached, the
costs shall be borne in the ratio of the hydrocarbons reserves of the
relevant company to the hydrocarbons reserves of the whole development
15.3. All measures for the preparation and execution of the development
project shall require a contractual settlement between the companies
Taxes and levies
16.1. TAKT is obliged to pay taxes on hydrocarbons VAT recoveries and the
legally specified up to a maximum rate of 20 % in accordance with the
conditions of this contract and royalties in the form of hydrocarbons
to be delivered in accordance with Article 8 Point 3 to the Government
or in cash, valued in accordance with Article 9.
Within the framework of the development project in accordance with
Article 7 Point 2 TAKT and the Government shall reach agreement as to
whether the taxes and levies are to be paid in cash or in hydrocarbons.
In consideration thereof the Government does hereby guarantee that TAKT
shall be exempt from all other taxes, levies and fees (i.e. fees for the
transfer of the land (lease agreement)), of any kind whatsoever, during
the period of validity of this contract. The share of the Government in
hydrocarbons recoveries in accordance with Article 8 Point 7 shall cover,
in addition to other expenditure, also the expenditure described in this
This exemption from tax shall only apply to activities connected with
16.2. The Government does hereby guarantee that TAKT and its employees in
the RS and RF shall not pay any import and export duties, or any other
levies of any kind whatsoever, for goods, including goods required daily,
involved directly and indirectly with the activities. This guarantee
also applies to subcontractors appointed by TAKT.
16.3. The Government does hereby guarantee and shall not be subject to the
regulations to compulsory purchase for foreign exchange either when
importing or exporting capital.
16.4. Taxes and levies shall be paid within 30 days after the termination of
each quarter on the basis of the provisional prices and quantities.
Within 90 days from the end of a calendar year the taxes and levies
shall be established on the basis of exact prices and quantities for
the preceding calendar year.
Credits in favour of the Government or TAKT shall be settled with the
first payment of the current calendar year.
16.5. The aforementioned guarantees apply both to the currently existing and
also any future legal situation.
17.1. Should natural gas be needed to settle internal demand, then TAKT
shall conclude a natural gas delivery contract with the Government,
which will provide for the payment of TAKT in convertible currency at
an agreed price.
Taking into account Article 10 the Government and TAKT must reach an
agreement on the quantities, which are to be available to satisfy
17.2. In the event of the commercial extraction of crude oil and condensate
TAKT shall sell to the Government that part of the available crude oil
and condensate, accruing to it in accordance with Art. 8 Points 4 and 7.
As purchase price the Government does hereby undertake to make available
to TAKT the same quantity of crude oil and condensate taking into
account quality differences at the point of export. Detailed
regulations are to be agreed between the parties on conclusion of the
activities in accordance with Art. 7 Point 1.
There need not be any exchange, if the Government pays for the crude oil
and condensate in convertible currency at world market prices.
The world market price or the quantity of crude oil and condensate made
available at the point of export shall be reduced by an amount or a
quantity, which will be stipulated between the Government and TAKT and
take into account transport costs.
Promotion of natural gas projects
In accordance with the development of the natural gas potential of the RS and in
view of the activities of TAKT, working as the first Yakut-Austrian Joint
Venture searching for hydrocarbons in the RS, the Government will make the
greatest possible efforts, to allow TAKT the earliest possible connection to the
pipelines for the exporting of natural gas and produce all the necessary
documents and take all the necessary resolutions to have a positive effect on
natural gas extraction by TAKT.
Currency and Bank accounts
19.1. To calculate costs and income and to calculate the expenditure
obligation in accordance with Artic1e 6 TAKT will use US Dollars
as the currency.
19.2. To calculate expenditure in Roubles generally the rate of exchange at
which TAKT can obtain Roubles against Dollars shall apply.
19.3. To calculate income in Roubles the same rate of exchange at which TAKT
can obtain US Dollars against Roubles shall apply.
19.4. The Government guarantees TAKT the right at any time to free payments
in convertible currency from and to the RS and RF.
19.5. TAKT shall be entitled to set up and open accounts abroad at any time
for freely convertible currency and freely dispose of the cash deposited
there, without the cash having first to be transferred to the RS or RF.
19.6. TAKT shall be entitled, taking into account the applicable double
taxation agreements, to make dividend payments to its foreign
participants, as well as fulfilling loan and other monetary obligations,
without deductions of any kind whatsoever from accounts in the RS and RF
or from accounts abroad.
Ownership of assets
20.1. All assets, which TAKT acquires and the purchasing costs of which are
recoverable as hydrocarbons costs, shall transfer into the ownership
of the Government on the date on which the costs for these have been
20.2. During the period in which these assets are used for the activities,
TAKT shall have an unrestricted and free right of utilisation
20.3. On termination of the contract TAKT shall in no way be liable for the
condition of the assets.
20.4. Article 20.1 does not apply to assets leased by TAKT or provided by
Liability and insurance
21.1. In accordance with the applicable legal situation ~e assets procured
by TAKT for the activities shall be insured with insurance companies
of the RS or RF.
21.2. The conclusion of other insurance policies such as risk insurance,
operating interruption and third party liability insurance policies
as well as the usual international insurance policies for exploration
and extraction activities shall be at the discretion of TAKT.
21.3. TAKT shall be liable to the Government only for those direct damages,
caused by gross negligence or deliberately by executives of TAKT.
Liability for consequential damages, of any kind, is excluded.
21.4. TAKT undertakes, to release the Government from the claims of third
parties, the damages of which have been caused by TAKT or its
representatives, insofar as these actions were not taken in accordance
with this contract. TAKT cannot however be made liable if TAKT has no
possibility of exercising direct control in accordance with the standard
practices of the international petroleum and natural gas industry.
21.5. The Government does hereby undertake to release and exempt TAKT from
the claims of third parties, damages to which have been caused by
actions of the Government or its representatives.
Transfer of shares
22.1. Without the prior consent of the Government TAKT shall not be entitled
to transfer right and obligations under this contract either partly or
wholly to third parties.
22.2. The consent of the Government may only be refused for important
reasons, concerning the financial and social situation or for reasons of
22.3. Within 45 days after written notification by TAKT the Government must
state in writing whether any of the reasons in accordance with Article
22.2. prevail. If TAKT receives no comments, then the transfer shall be
considered as approved by expiry of the 45 day deadline. The Government
undertakes to sign the agreements to be amended as a result of the
22.4. On the basis of proceeds from the transfer of rights and obligations
under this contract TAKT need not pay any taxes or fees.
22.5. For the legal effectiveness of the transfers of rights of obligations
under this contract the consent of the Government will be adequate. An
approval in accordance with Article 32 is not necessary.
Data and confidentiality of data
23.1. During the period of validity of this contract TAKT must preserve
technical documents as well as a selection of drilling cores and other
rock samples for a reasonable period of time and at the request of the
Government make them available or allow them to be inspected by the
Government, whereby the activities of TAKT must not be prejudicially
affected by this.
23.2. TAKT shall be entitled at any time to use or evaluate parts of the
rock samples as well as other technical documents inside and outside
the RF and RS.
23.3. These rock samples and technical documents may only be passed on by
the Government and TAKT to executive, subcontractors, consultancy
companies or bound companies. It must however be guaranteed, that
these rock samples and technical documents shall be treated
confidentially, and not passed on to third parties. TAKT may also
pass on these rock samples and technical documents to companies, which
are interested in a transfer of rights and obligations from TAKT under
The prerequisite for the onward transmission is in connection with the
23.4. The obligation to maintain secrecy and confidentiality shall end on
the expiry of this contract.
23.5. All data and information relating to the contractual area, in the
possession of the Government, authorities subordinate to it or in the
possession of companies, controlled by the Government, shall be made
available within 60 days after the entry into force of this contract to
TAKT in the form of copies.
24.1. All notifications and notices, to be forwarded in accordance with this
contract or in connection with it, must be in writing and sent to the
following addresses and shall be considered as received.
a) in the case of personal hand over on being handed over, whereby the
addressee must confirm receipt;
b) in the case of a registered letter on its arrival;
c) in the event of a telex, when the telex sent bears a correct reply
endorsement of the addressee in each case at the beginning and at
the end, on the day after it is sent.
24.2. The Government and TAKT do hereby undertake to notify in advance in
good time any change in these addresses.
24.3. Notifications and notices may be made both in Russian, English or in
The recipient must always ensure translation.
Applicable law and Arbitration
25.1. The contract shall be subject to the law of tile Republic of Sacha
(Yakut) and the Russian Federation.
25.2. Any disputes arising out of this contract, which cannot be settled
amicably, shall be settled by a Court of Arbitration in accordance
with the rules of UNCITRAL (Community of the United Nations for
International Trading Law). The Court of Arbitration shall consist
of 3 members.
25.3. The Court of Arbitration must conduct its proceedings in Zurich,
25.4. The Government waives the right to plead State immunity and does
hereby subject itself to the Court of Arbitration and its decision
as well as the execution of the Arbitration decision.
Language of the contract
26.1. The Russian and German version of this contract are both equally
26.2. In the event of interpretation problems caused by translation an
independent expert is to be appointed by the parties hereto and shall be
responsible for preparing a proposal to solve the problem satisfying the
financial and economic aims and the object of the Joint Venture.
27.1. TAKT shall be released from liability for the complete or partial nonfulfillment or incorrect fulfillment of its obligations under this
contract, if these disturbances are caused by events, which are outside
the control of TAKT.
27.2. On the occurrence of the aforementioned events TAKT must immediately
inform the Government thereof in writing, but no later than fourteen
days after the occurrence thereof. The notice must give details of
the nature of the events and - if possible - an estimate of the effects
on the fulfillment of the obligations under this contract by TAKT as
well as the probab1e date for the fulfillment of these obligations.
27.3. In the event of averting or on the termination of aforementioned
events TAKT must inform the Government thereof in writing at once,
but no later than after seven days. The notice must state a time,
when the obligations under this contract shall probably be fulfilled.
27.4. On the occurrence of the aforementioned events fulfillment of the
relevant obligations under this contract by TAKT shall be postponed
by the time of the circumstances. Should these circumstances last
longer than twelve months, then TAKT and the Government shall meet
to determine the further procedure.
In accordance with Article 25 a decision shal1 be taken by the Court
of Arbitration mentioned therein concerning disputes arising due to
circumstances of force majeure.
28.1. Should individual articles of this contract or parts thereof be or
become ineffective, this shall not affect the effectiveness of the other
articles and the total contract.
28.2. The parties shall in such a case be obliged to replace the ineffective
article or its ineffective parts by an article that comes closest to the
financial purpose of the ineffective article.
TAKT undertakes to pay a bonus totaling US$ 840,000 on the entry into force of
the contract to the Government. The Government recognises that TAKT has
fulfilled this obligation on paying the same amount to Lenaneftegasgeologia as
partial remuneration for the drilling of well 314-2 and there shall therefore be
no further payments for this reason to the Government.
30.1. This contract consists of a main part, Appendix 1, Appendix 2,
Appendix 3, Appendix 4, Appendix 5 and Appendix 6, which represent
integral components of this contract.
30.2. In the event of conflicts between the main part and the appendices,
the conditions of the main part shall be given precedence.
30.3. In the event of a conflict between the licences in accordance with
Appendix 4 and the conditions of the main part of the contract, the
conditions of the main part shall be given precedence.
30.4. The rights and obligations of the parties under this contract shall
transfer to their legal successors.
30.5. The Government does hereby guarantee that on signing this contract
only those further licences for the utilisation of the contractual area
exist as listed in Appendix 6. Should there be problems in the
simultaneous utilisation of the contractual area between TAKT and other
licensees, the Government shall resolve this dispute also in view of the
overriding significance of the search for and extraction of hydrocarbons
for the development of the Republic of Sacha.
Licences, given by the Government after the signing of this contract,
shall contain a condition, providing for the preferential utilisation of
the contractual area by TAKT.
Under no circumstances however may licences be given, which have as their
object the searching for and extraction of hydrocarbons.
Amendments and addenda to the contract.
Any amendments and addenda to this contract must be in writing and in Russian
and German and may only be undertaken by agreement between the representatives
of the parties empowered for this purpose.
32.1. The Government of the RS, represented by its competent organs and the
Government of the RF, represented by its competent organs, do hereby
guarantee the rights and entitlements granted to TAKT in this contract.
The Government will hand down all the necessary documents and appoint
and instruct the subordinate authorities in such a way that in its
activities TAKT shall be able to enjoy these rights and entitlements.
The rights, obligations and guarantees of the Government shall transfer
to their relevant legal successors.
32.2. The Government shall within 30 days from the entry into force of this
contract appoint a representative, who will be empowered to receive any
notices in accordance with this contract. Notices from TAKT to this
representative shall be considered as properly sent.
Regardless of the effectiveness of the serving of notices, the
Government shall immediately notify TAKT of the receipt of such notices.
32.3. If the Government appoints a representative as a replacement for the
representative in accordance with Article 32.2. above, TAKT must be
notified of this. The appointment shall become legally effective 10 days
after receipt by TAKT of an appropriate notice.
Entry into force
This contract shall become effective after being signed by the parties and after
approval of the contract by the legislating bodies of the Republic of Sacha and
the RF. The approvals must be published.
In the name and on the instructions of
The Republic of Sacha (Yakut)
In the name and on the instructions of
In the name and on the instructions of
Appendix No. 1
Map and coordinates of the sections
Two maps with Russian place names
APPENDIX No. 2
The purpose of this offsetting agreement is to stipulate the principles of cost
recovery and the cost recovery account in connection therewith, as well as the
rules connected therewith for the costs, as Appendix 2 of the contract.
All costs from the activities of TAKT, whether costs of exploration, the
valuation and development of a discovery, or in addition costs of maintaining
the current operation, as well as costs for processing and selling hydrocarbons
and activities of TAKT connected therewith, are to be put into the KRR (cost
recovery accounting system) and may be recovered from hydrocarbons costs.
The terms used in this offsetting agreement have the same significance as in the
case of the definitions of the contract, unless additional definitions are given
Cost recovery: the method by which the costs incurred by TAKT are deducted from
the proceeds of the hydrocarbons sold by TAKT.
Cost recovery account: in short, KRR. Account into which all the costs are put
for purposes of cost recovery.
Roubles: The currency or its successor currency currently applicable in the
sovereign territory of the Government.
Participant: The owners of the shares of the TAKT Articles of Association Fund.
US-Dollars: The currency of the United States of America (USA), abbreviated to:
USD or US$ - as well as its successor currency.
3. Currency and payments
The unit of currency in which the KRR is to be conducted, is the USD. The USD
is also the currency on the basis of which cost recovery is effected, whereby
however TAKT shall be entitled at any time to choose a currency other than the
- -- Roubles and other currencies.
To pay its expenditure and obligations in the RS and RF TAKT shall use the
Rouble as currency. If payment in a currency other than the Rouble becomes
necessary inside and outside the area of the Government and is permitted, TAKT
may also pay in this other currency.
- -- Rate of exchange
For conversion of Roubles to USD and USD to Roubles the rate of
exchange stipulated in Article 19.2 and 19.3 of the contract (i.e. on
the date of signing of the contract the rate of exchange of the
"MOSCOW INTERBANK CURRENCY EXCHANGE").
To convert expenditure in Roubles but also income in Roubles of TAKT
into USD - for purposes of cost recovery accounting - TAKT shall take
an average of the Rouble rate of exchange, in accordance with Art 19.2
or 19.3 of the contract, over the current month, and adjust Rouble
transactions in this month, with the rate of exchange calculated in
this way, into USD in the KRR. If only a few Rouble transactions are
to be allocated to the current month TAKT may also use the daily rate.
In transactions in all other currencies the rate of exchange in the
KRR is to be used which corresponds to the daily rate at which thc
basic transaction became payable for TAKT. With a multiplicity of such
transactions TAKT may also form an average rate over the current
month, and at this rate put transactions into the KRR in other
currencies, related to the relevant month.
TAKT shall be entitled to independently select the type and source of financing
of its commercial activities, inside and outside the area of the Government
COST RECOVERY ACCOUNT
Cost items of the KRR are all those TAKT costs incurred by TAKT in connection
with the activities. The costs and proceeds of TAKT incurred for other reasons
are not the object of tile cost recovery and the KRR, and in addition shall not
be the object of any split of hydrocarbons recovery between the Government and
Insofar as possible and if they exist, invoices are to be used as the TAKT
vouchers for costs incurred.
1. Cost items
The following are considered as costs in the sense of the cost items of the KRR:
1.1. Materials and items of equipment
All equipment in connection with the materials and items of equipment purchased
by TAKT to complete its activities.
1.2. Labour and personnel costs
1.2.1. Personnel costs of the employees of TAKT including taxes and any
additional levies allocated to personnel to paid by companies. The earmarked
wage portions which go above the legally stipulated minimum wage portion, will
not be paid, in accordance with Article 16.1 of the contract and shall therefore
not go into the KKR either.
1.2.2. Costs for labour services of third parties
1.3.1. Costs for services acquired by TAKT from third parties.
1.3.2. Costs for services purchased from participants by TAKT within the
framework of service agreements.
1.4. Administration costs
All costs, connected with the administration of TAKT (i.e.: telephone fees,
postal charges, . . . . .).
1.5. Joint costs
1.5.1. Joint costs are costs incurred directly by the participants of TAKT in
connection with the following general services (i.e.: general management,
general consultancy and monitoring of thc total project, legal auditing,
financing and engineering services) and which are not regulated by the
corresponding service agreements.
1.5.2. The following shall be offset to TAKT by the participants of TAKT for
joint costs annually:
188.8.131.52. 10 % of the total costs of TAKT per annum for the first 30 million USD
in expenditure per annum. 8 % if this expenditure is between 30 and 50 million
USD. 5 % if the expenditure is between 50 and 100 million USD, and 3 % in the
case of annual costs over 100 million USD.
184.108.40.206. The participants of TAKT in total shall put per annum 1,400,000 USD in
the exploration phase and development phase, before commercial exploitation and
2,000,000 USD thereafter as a minimum of the joint costs in the KRR, if the
remuneration determined above in 220.127.116.11. for joint costs of the participants
exceeds the amounts listed here in USD in 18.104.22.168.
1.6. Leases, rights, bonus payments and patents.
Any leases, lease costs, bonus payments as well as payments in connection with
the acquisition and utilisation of all types of rights and patents.
1.7. Incidents (damages etc.)
Costs in connection with any types of incidents such as loss, theft, accident,
catastrophes, force majeure etc.
1.8. Insurance policies, premiums
All types of premiums and insurance policies incurred as costs by TAKT.
1.9. Legal costs and costs for approvals
Costs incurred by TAKT for legal advice, lawyers, Court proceedings, payments
imposed on TAKT by Courts etc., including costs in connection with arbitration
proceedings, as well as costs connected with the placing or acquisition of all
types of licences and approvals.
1.10. Costs for ecological expenditure.
Costs for ecological and environmental protection- related expenditure of TAKT.
TAKT can independently stipulate the scope of its ecological and environmental
protection-related expenditure and outlays.
1.11. Social Security, research and development costs
1.11.1. Costs for research financed by TAKT
1.11.2. Costs for training and further education, as well as any Social
Security payments for the employees of TAKT.
1.11.3. Costs of social, cultural and economic promotion and infrastructure
measures in favour of third parties financed by TAKT, especially however local
and regional units of the Government.
1. 11.4. Costs for social expenditure in general, as well as costs in
accordance with Art. 3.2. of the contract.
1.12. Capital costs
1.12.1. Costs of outside capital: Outside capital interest amounts, premiums,
fees, continuous expenditure and other costs of outside capital, whereby the
period of validity of the obligation entered into by TAKT with respect to the
outside capital provider (i.e. short, medium and long-term credit lines) is
insignificant. Outside capital costs may be recovered by TAKT regardless of the
periods of validity of the obligations entered into by TAKT.
1.12.2. Costs of company's own capital that is to say the interest on the funds
made available by the participants of TAKT, shall be stipulated by the rule in
accordance with Article 8.5 and Article S.6 of the contract. These own capital
costs, in accordance with Art. 8.5 and Art. 8.6 of the contract, shall be put
into the KRR as costs.
1.13. Strikes, lockouts, confiscation and non-fulfillment
Costs incurred by TAKT through strikes and lockouts, non-fulfillment by business
partners, as well as Government emergency measures, as well as costs also
incurred by TAKT in connection with the confiscation of property of TAKT such as
goods, plant, hydrocarbons, etc.
1.14. Costs of erection, maintenance and operation
Costs of erection, maintenance and operation of any items of equipment to carry
out the activities of TAKT -- including buildings and other structures, as well
as hydrocarbons stores and extraction equipment, such as tax, pipelines, the
procurement of any infrastructure for the development of a discovery of
hydrocarbons, the procurement of any infrastructure for the transportation of
hydrocarbons, and including any costs in connection with the processing of
1.15. Taxes, royalties, customs duties, other levies
All taxes, royalties, customs duties and any other levies to the Government, if
not already dea1t with in Art. 8.3 of the contract, are to be put into the KRR
1.16. Miscellaneous costs
Miscellaneous costs such as costs in connection with Bank accounts of TAKT as
well as money remittances, costs in connection with money exchange (especially
the changing of Roubles into USD and USD into Roubles), other shipping costs,
costs for repairs and maintenance works, costs of organising meetings and
conferences, travel costs, removal costs of communications equipment, computer
costs, energy and power costs, freight and storage costs, transport costs
including costs of the transportation of hydrocarbons by pipelines, liquefaction
costs of gas, costs of medical care for employees of TAKT, payment of damages,
miscellaneous tests costs, as well as any kinds of remunerations and premiums.
1.17. Initial project costs
All the costs kept in the ledgers of TAKT incurred before the signing of this
contract, may be put into the KRR of TAKT as costs after signing, in accordance
with Appendix 3 of the contract.
1.18. Other costs
Any other costs not explicitly listed in this section but incurred by TAKT in
connection with its activities.
2.1. Proceeds from the sale of hydrocarbons.
In accordance with Art. 8.4 of the contract TAKT shall recover its costs from
the proceeds from the sale of disposable hydrocarbons.
2.2. Other sales proceeds
Proceeds from the sale of goods and services purchased by TAKT, which TAKT
bought for the completion of the activities are to be deducted from the costs
listed in the KRR, provided and only insofar as they were first put into the KRR
as costs. For this purpose proceeds are to be valued at the price achieved on
the date of sale.
2.3. Proceeds from insurance policies and other premiums
Proceeds for the TAKT from insurance payments and similar payments, as well as
miscellaneous premiums, lease charges and rents - provided these proceeds are
based on the activities of TAKT -- are to be put into thc KRR as proceeds.
3. Establishment of the KRR
3.1. The KRR shall be considered as audited and confined in all points, with
the exception of the points objected to by me Government within the twelve month
deadline. Only in these points shall the KRR be considered as not confined. Up
to the final decision concerning a cost item objected to, this item shall be
considered as properly put into the KRR. If there is no final decision
concerning a cost item within two years after the putting of this item into the
KRR, this cost item shall ~n any case be properly put into the KRR after the
expiry of this two years.
3.2. If in connection with an audit or examination, areas of a participant of
TAKT are affected then the Government -- represented by the body appointed to
audit the KRR by the Council of Ministers of the RS -- may request of this
participant, the confirmation of the Auditor of the partners concerning the
proper nature of this cost item must be submitted to it. For the purpose of
examining an item of the KRR of course the Government may not directly audit the
documents of a participant. The audit is in any case to be conducted so that
completion of the activities of TAKT is not prejudiced. In the event of a
conflict the completion of the activities of TAKT shall take precedence over the
interests of an audit. In each case however TAKT must make all reasonable
efforts to cooperate to the fullest with the Government in carrying out an
4. Cost types and time schedule of the recoverable costs
The drawing up of the cost types and the time schedule of recovery shall come
solely within the liability of TAKT, and must be broken down by TAKT into the
following cost types:
A. Extraction Costs
B. Development Costs
C. Exploration costs
From the hydrocarbons costs first A, then B and finally C shall be covered.
Extraction costs are all those costs incurred through commercial extraction and
any other costs, which cannot be counted as development cost8 and exploration
Development costs are all those costs, incurred by TAKT from the date of
termination of the activities in accordance with Art. 7.1 of the contract for
the development of the discovery.
Exploration costs are all those costs to be put in the KRR, incurred by TAKT
from the entry into force of this contract up to termination of the activities
in accordance with Art. 7.1 of the contract, whereby initial project costs are
The annual costs and proceeds of TAKT shall be collated in a list of costs and
proceeds at least every 6 months. At the end of the year annua1 accounts shall
be drawn up.
APPENDIX No. 3
TAKT already made payments before this contract entered into force. These
payments mentioned in Article 6 Point 4 and in addition all the costs of TAKT,
for which proper vouchers and records can be provided and which are connected
with the works in accordance with Article 6 Point 4, are hereby recognised as
INITIAL COSTS in total:
*) This figure (the total up to 31/12/93) is not final and shall be calculated
again up to the date of entry into force of the contract.
APPENDIX No. 4
New licences for the TAKT activities
APPENDIX No. 5
Table of contents
Assessment of the condition of the environment and the effects of the
activities of the Sacha-Austrian Joint Venture TAKT on these taking into
account the environmental protection measures intended by
1.1. Nature of the environment in the sections intended for the carrying out of
the geological exploration and extraction works
1.2. Social and economic data of the sections and areas involved
1.3. Effect of the searching, exploration and extraction activities on
environment and nature
Environmental protection measures
2.1. Environmental protection measures when planning petroleum and natural gas
2.2. Environmental protection measures when carrying out the preparation works
for the drillings
2.3 Measures to protect the environment and the natural earth resources when
2.4. Prevention of environmental protection during the borehole tests and
2.5. Fulfillment of the measures to satisfy the recommendations of the mining
Supervisory Body of the RS (Y) and Point 2 of certificate No. 184 of the
authority for ecological certificates of the RS (Y)
The completion of liquidation and recultivation works in the sections with
wells to be decommissioned
Obligations of TAKT in the field of environmental
1. Assessment of the condition of the environment and the effects of the
activities of the Sacha-Austrian Joint Venture TAKT on these taking into
account the environmental protection measures intended by TAKT.
1.1. Nature of the environment in the sections intended for the carrying out
of the geological exploration and extraction work.
Section No. 1 intended for the activities of TAKT, which belongs to the
Kempenjay basin and occupies an area of 14,400 square kilometres, is
located from a geomorphological point of view in the Western part of the
Central Yakut plane.
Section No. 2, which occupies a surface area of 6,900 m2 and is in the
transitional area between the Nepsk-Botuobinsk uplift and the Patomsk
basin, is located in the area of the Lena plateau.
Both section 1 and section 2 are characterized by extensive permafrost
rock and are both in the geocryological Lena-Wilyuj area.
The occurrence of powerful high pressure areas in Winter and low pressure
areas in Summer is crucial to the condition of the atmosphere over West
Yakut. The climate of the area is therefore markedly continental with
long and cold Winters, relieved by short but relatively hot Summers.
With the monthly increase in temperatures the absolute humidity and
quantity of precipitations increase. Annually 74-80 % of precipitations
evaporate, the rest run away or seep into the sediments of the humus layer.
Pattern of the land.
The pattern of the land of both sections is a flat or slightly hilly
surface broken up by a system of shallow valleys. The relief arose mainly
through surface erosion.
The valleys are in general wide and form moors, the slopes are flat and
asymmetrical and change imperceptibly into watersheds.
Poor surface drainage leads to serious marshiness, to the formation of
lake and marsh deposits on the watersheds as well as on the slopes and
bottoms of the water runs. The patterns of relief have arisen through
temporary water runs, on the slopes of the river valleys gaps, troughs
and cones of scree or debris have developed.
Networks of rivers and hydrogeological conditions.
The network of rivers in Section No. 1 belong to the basin of the
Wiljuj river and its tributaries: Botomoyu, Chongar, Tonguyu and
Byrakan, and the one in Section No. 2 to the basin of the left hand bank
of the Lena with its tributary Nyuya and the rivers flowing into this,
namely Orto-Sala, Ulachan-Murbajy, Chotogo and Otschuguy-Murbajy.
The river valleys alternately exhibit narrows and expansions. The depth to
which the rivers cut in with average waterflow is 60 to 120 m, that of the
shallower tributaries 20 to 50 m. At the mouths of the rivers of average
depth the valleys have a canyon-type appearance and on the upper reaches
represent weakly carved marshy, trough-shaped gaps with wandering river
On 215 to 220 days the rivers are frozen up; the ice begins in the first
half of October and ends in May.
River deposits form terraces, river and stream meadows. The massiveness
of the flood sediments is 1.5 to 2.0,m, that of the first terrace located
over the meadow 2 to 4 m.
Lake and marsh formations are relatively extensive in the area and can be
found on the basins and thermokarst craters in the river valleys, on the
watersheds and on the upper regions of streams.
Most lakes have a low depth (up to 2-3 m).
The hydrogeological features of the land of both sections were determined
by the fact of them belonging to the Yakut artesian basin with continuous
permafrost rock with a solidity of 200 to 400 m.
Underground saltwater occurs in depths from 300 to 320. This is
mineralised water with a sodium chloride composition, which is under
The water occurring above the frost area is relatively extensive, but
occurs in small quantities and only briefly during the year as a fluid
A small amount of water and the relatively low reserves mean it is
impossible to use it for temporary water supply.
Both sections belong to the extensive area of permafrost rock, which
forms the upper part of the cryolith zone up to a depth of 200 to 400 m.
The profile section beneath consists up to a depth of 500 to 900 m of
rock cooled to below 0 degrees C, containing salt water and lyes.
In total the extent of the frost layer and the total cryolith zone
decreases from North to South to the Lena valley.
The annual time-dependent depth, to which the rock thaws, fluctuates
greatly in the area: with the dry sand and fine sand deposits it is
2.5 to 3.0 m, in the case of the loam and peat deposits 0.7 to 1.0 m.
In the area of the outcrops of the diabase residues it increases to 4-5 m.
Cryonegic processes and formations.
Cryogenic developments exist and occur in the relevant areas in the form
of solifluction, thermokarst, occurrences of frost and surface grooves
caused by frost.
Solifluction processes usually occur on slopes, which have an inclination
of over 2 to 3 degrees and the composition of which contains fine
sand-loamy permafrost rock containing ice. This process is particularly
active on concave, relatively humid slopes with increased drainage.
The formation of grooves by frost on the surface gives a slightly
undulating land pattern.
The rising up of the land caused by the redistribution of moisture during
freezing is the most extensive phenomenon.
The types of thermokarts depend on the occurrence and conditions and
storage of the underground ice in the mountain rock. When these sediments
thaw thermokarst basins occur, which can be split up as follows:
Meadows, river terraces located above them, watersheds with the formation
of peat, wide valleys on the upper regions of streams.
Vegetation in the development areas.
The vegetation of these areas belongs to the type of vegetation of the
Taiga subzone. The prevailing types of tree are larch and pine. For all
forest types, apart from the pine forest, there is a dense undergrowth of
birch trees, alders, and aspens. The bushes mainly consist of wild
rosemary, marsh bilberry and dwarf birch. Thc meadow vegetation is
fairly extensive and mainly occurs in the river valleys and on the lakes
in the form of sedge.
Within the two sections of TAKT the following geobotanical associations
occur: pine, larch-pine-bush-moss-lichen-forest. The floor cover
consists of lichen and green mosses.
1.2. Social and economic data of the relevant sections and areas.
The areas for the activities of TAKT are practically undeveloped from an
economic point of view. There are social-economic data available for
large areas, which concern the petroleum and geological division of the
areas, especially for the West-Wiljujsk (Section No. 1) and Predpatomsk
(Section 2) petroleum and natural gas area.
Section No. 1 - West-Wil3uisk petroleum and natural gas area.
This area is in the basin of the middle reach of the river Wiljuj.
The West-Wiljujsk petroleum and natura1 gas area extends over four
administration districts of the Republic and embraces the Eastern part
of the Suntarsk, the South Eastern part of the Njurbinsk, the Southern
half of the Verchnewiljujsk and a smaller area in the South of the
The main river Wiljuj runs 25 to 60 km in the North West of Section
No. 1. The section contains the biggest tributaries of Kempendyay,
Botomoyu, Tonguyu and Byrakan. In addition there are the smaller
tributaries, lakes and marshes. Only the river Wiljuj is navigable.
The most important settlements are Njurba, Ustje and Tojoku.
All the settlements along the Wiljuj from Ojusut to Njurba are
connected to the power supply network of the Wiljujsk power station.
Typical of thc region is the felling of timber to heat the numerous
settlements. Timber felling totals about 45,000 to 50,000 cubic metres
The only raw materials extraction company in the district is the
Kempendjaysk salt works with a capacity of 2000 tonnes per annum.
Brown coal and rock salt take first position as regards natural earth
Most freight goods are transported via the Lena and Wiljuj rivers
(the Lena is navigable 150 days, the Wiljuj for 130 days). The freight
goods collected in the Wiljuj ports are mainly transported onwards in
Winter by lorry to the relevant sites of utilisation. The "Winter roads"
are navigable from the end of December to the middle of April.
Helicopters are used for the transportation of urgent freight and to
Section No. 2 - Predpatomsk petroleum and natural gas area.
This petroleum and natural gas area occupies a narrow, but fairly lengthy
strip along the Baikal-Patomsk highland in the basin of the upper region
of the Lena and belongs to the marginal basin of the same name. Section
No. 2 is located in the North of the central part of this petroleum and
natural gas area.
The central part of the petroleum and natural gas area covers
administratively the South Eastern part of the district of Lensk, the
North Western part of the Olegminsk and a small area of the Southern part
of the Sutarsk area.
The river Lena Bows through the petroleum and natural gas area (60 km from
section No. 2). Parallel to the Lena its left hand tributary Njuja runs
in the central part of the petroleum and natural gas area. Straight
through section No. 2 flow the left hand Njuja tributaries Chotogo,
Orto-Sala and Otschchuguj-Murbajy.
The most important settlements are the City of Lensk and the towns of
Witim and Peleduj. On the Lena and the Njuja there are about 20 small
towns and settlements. The number of inhabitants is about 50,000, 10,000
of which being agricultural population.
Most freight goods are processed in the river harbour of Lensk.
The Lensk-Mirnij motorway, which is navigable throughout the year, passes
through the central section of the area.
The delivery of freight goods for the geological survey team is effected
via provisional motorways, which are only navigable in the Winter.
Freight traffic is mostly done through local and internal airlines of the
Republic. There are flight connections, between Lensk and Novosibirsk or
Irkutsk as well as between Mirnyj and Moscow.
The high voltage line 220 runs from the settlement of Chernysheskiy
(Wiljujsk power station) to the City of Lensk along the motorway.
Two natural gas, one salt and hydrobromine and construction materials
deposits have been found.
Medical and cultural facilities as well as education possibilities only
exist in the district centres of Lensk, Sutar and Verchnevilyuysk.
1.3. Effect of the searching, exploration and promotion activities on the
environment and nature.
The greatest damage to the environment and nature, occurring during
drilling activities, is the damage to the humus layer.
The latter is caused by the following works:
Construction of roads, power and water lines
Transportation of drilling equipment, materials and people on
defective and specially paved roads
Planning of locations for the setting up of drilling rigs and camps
The erection of drilling sludge and petroleum tanks.
A further important damaging factor is contamination by the fluids used
and which occur during drilling activities and tests:
Borehole flushing and cement sludges
Flushing and drilling waste
Products occurring during testing and extraction (oil, gases, system
Combustion products when operating combustion engines and boiler
Weighting material, flushing and cementation additives
Cutting and lubricating fluids
Domestic refuse and effluents
The degree of environmental pollution by effluents and other fluids and
solid waste, occurring during drilling activities, is understood to be
the amount exceeding the permissible hazardous substance concentrations
(HK) in the individual media.
The harmful substances maximum concentration is the maximum concentration,
which with the relevant substance does not exercise any direct or
indirect effect on the health condition of people or does not
prejudicially affect the hygiene conditions for the use of water. The
contaminating effect of the drilling solutions depends on the toxicity of
the ingredients and components, which are split up into the following
areas: Toxic, health toxic, total health and the like.
The values for some substances and chemicals, which are valued according
to the amount of the maximum concentrations in the individual media, are
given in Table 1.
Maximum harmful substance concentration values for the chemical substances in
the water used during drilling activities.
Table No. 1
Name of substance
Chrome-ion (C13 +)
Chrome-ion (Cr 6 +)
(- PO 4)
Sodium solicate (-03)
M= 2-3 million
M= 5 million
Carbon alkali reagent
Flotation agent T-66,
Foam remover, coagulator
in the dry residue
*) HKG - hydrocarbons in the water of effluents
HKFG - HK in the water of fishing waters
Classes of harmfulness:
- extremely harmful
- very harmfu
- moderately harmful
The quality of the drilling effluent will be valued on the basis of the
following main criteria: density, clarity, colour alkali content, proportions
of chlorine-ion (Cl -) and sulphate-ion (SO4 2 - ), general mineralisation, pH
value, content of petroleum products, suspended particles and surface-active
Pollution of the areas caused by toxic gaseous products, as arise during the
operation of combustion engines, boiler systems and during borehole tests.
The permissible maximum values for harmful substance concentrations in air are
given in Table 2.
Hydrocarbons values for chemical substances, which occur during drilling, when
operating combustion engines, boiler systems and during borehole tests, in the
Description of substance
average (mg/dm3) permiss. harmless
benzine converted to
For classes of harmfulness see Table 1.
2. Environmental protection measures
On the occasion of all the environmental measures taken by the Joint Venture
during its activities in both sections (both during exploration activities
by TAECT, as also during the operation of the developed deposits), the
following conditions shall be fulfilled:
Article 4 of tile law relating to the protection of nature in the
Republic of Sacha (Yakut), which defines the ecological status of the
Republic as an easily vulnerable, delicate region with limited
ecological capacity, where "preference is given to clean technologies
which create little or no waste and where projects which overtax the
capacity of the natural areas are forbidden".
Expert report No. 184 of the State Ecology Committee of the Ministry
for the Protection of Nature of the Republic of Sacha (Yakut) of
29th July 1993, in which it is recommended that account be taken a
all phases of planning, exploration, erection and operation of the
negative experience with regard to the effects on the environment
during development and extraction of deposits in West Siberia
Since the working programme of TAKT in the first phase provides for an
exploration period of many years, this paragraph deals in great detail
with the measures to protect nature during this period of drilling
activities by TAKT to search for oil and gas.
In the event of the search and exploration works being successful,
allowing commencement of exploitation of the discoveries, projects will
be developed for the economic development of such discoveries, the
sinking of extraction wells, the building of transport roads and the
provision and removal of pipelines, whereby these projects, will make
clear the assessment of the effects on the environment and the
environment protection measures by means of specific technical tests
on specially demarcated areas of land within the sections made
available as part of the "environmental protection" tasks.
These projects shall be submitted to the competent bodies of the
Republic of Sacha (Yakut) for harmonisation and approval, and they
will also be subjected to an ecological report.
2.1. Environmental protection measures during the planning of oil and gas
The pieces of land for the drilling rigs, the accommodation for the
drilling crews, installation and removal of pipelines as well as roads
and helicopter landing places will be selected on the basis of the site
investigations taking into account the merest technical effects on the
environment, whereby the drilling projects must be approved by the
competent environmental protection centres of the Republic.
Drilling works within bank protection areas may only be carried out if
there exists a special permit from the authorities competent for the
protection of nature and water resources.
When planning preparation works for the drilling (erection of access roads,
including the construction of bridges over waterways, ravines (gorges) and
other obstacles, work in connection with the transportation of the drilling
rig and the main construction units of the drilling equipment, planning of
the site) factors causing pollution of the soil, water and air must be
When planning for the construction of the drilling rig and the works for
sinking and liquidation (preservation) of drilling shall take into account
the following criteria:
Use of new progressive and environmental-friendly technologies when
carrying out search and exploration drillings, which have been
developed by foreign participants of the TAKT Joint Venture, of the
Austrian company OEMV.
The drawing up and preparation of extensive measures to protect the
surface and formation water (also the groundwater), of the soil and
the air against contamination by chemicals contained in drilling
flushing fluids and cement sludges, flushing waste, consumed
drilling Hushing fluids, s1udge, mineralised water and other toxic
products occurring during borehole tests.
Work to determine the permissible maximum concentration (HK) for
a new chemical substance, the use of which is planned when sinking
Solutions for the recultivation of the destroyed areas of land and
soil and their punctual handing over to the permanent user.
2.2. Environmental protection measures when undertaking the preparation works
When stipulating the drilling locations on the site a location is to be
selected, which has natural drainage of the surface water. If there are no
locations with natural drainage, then the drilling location shall be
protected by the erection of embankments, moats, permafrost strips and
artificial drainage systems against flooding. The following measures shall
be taken when preparing the drilling location on the site:
extensive avoidance of site sections with seriously frozen land,
where the ice portion totals 40 % of the total volume of the
preservation of the moss and peat cover adjoining existing ravines
and slopes to prevent the occurrence of thermo-erosion;
spreading and banking with non-swelling material (sand, sand-gravel
mixtures), when the layout of the drilling location on slopes of
seriously frozen soil with an inclination of over 10 degrees cannot
Planning of the drilling location in Autumn or Winter and only on the
condition that the depth of the frost soil is 20 to 30 cm, whereby the
fertile humus layer is to be preserved.
The delivery of materials and equipment to the drillings can only be
effected overland after the freezing of the streams, lakes and rivers.
When setting up the well site the pipelines will be laid above ground and
will be thermally insulated. In the area of drilling locations, drilling
rigs, fuel and lubricating oil stores walls of impermeable 80il shall be
To store the petroleum products and collect the old oil and flushing fluids
tanks will be installed on the drilling site. The installation of the
drilling rig, the installation of the drilling equipment and the erection
of sedimentation systems shall be effected in accordance with the
applicable and general health regulations.
The established drilling site will be surrounded by a moat, which will
prevent the penetration of draining rain and thawing water into the site.
At the bottom part of the site slope a ditch and collection tanks shall
be installed, which will collect all of the water draining from the
The rain and thawing water draining into the ditch and tanks must be
used for technical purposes.
2.3. Measures to protect the environment and the natural earth resources when
The progressive technology for deep drilling developed by the OEMV gives
a whole set of technical solutions, intended to prevent environmental
damage and open gas and oil eruptions and to avoid contamination of
surface and groundwater.
On the basis of the experience of the drilling operations of the
Republic of Sacha (Yakut) and the OEMV, a Joint Venture will take
measures to protect the environment and the natural earth resources
during drilling activities.
Where there are loose rock layers and formations which carry water,
which can be used as drinking and medical water sources, special measures
will be taken.
When sinking the wells every measure will be taken, to prevent harming
the environment, especially:
Use of environment-friendly materials;
If this is not possible, use of other media complying with every
Safe transport and storage of all materials to be used and which
The insertion of materials only in very deep layers of the earth;
The most modern sinking technology, preventing layers having any
effect on each other and penetration into the ground and
The waste occurring when sinking wells or boreholes shall be deposited by
agreement with the competent authorities at the working site.
Modern technology will be used for the sealing devices on the borehole.
To prevent oil and gas leaks and escapes during drilling and development
works, all the conditions of the Mining Supervisory Authority
(Gosgortechnadsor) applicable to such works shall be fulfilled.
2.4. Prevention of environmental pollution during borehole tests and extraction
Thanks to the most modern casing (tubbing) schemes TAKT guarantees a high
quality when sinking wells, amongst other things through an improvement of
the quality of the cementation process with me extensive use of casing
packers, centering baskets, scrapers and gas-tight threaded connections
for the casing pipes as well as the use of the most modern technologies
when dri11ing the extraction column in the area of the productive layers.
The borehole tests are effected after completion of the preparation
measures, including the installation of a E-cross and torching devices
with remote ignition and complete combustion, the erection of measuring
sections for dynamic inflow measurements as well as the installation of
metal containers for the storage of the oil the condensate and the
flushing fluid stock with guaranteed installation and measuring devices.
Before carrying out the tests thc devices above ground (aggregates and
lifting devices), the probe head equipment, the pipes for taking away the
layer fluid and natural gas as well as the containers for the flushing
fluid and the petroleum are installed and mounted in accordance with the
existing plan and the technical regulations and fire protection standards.
In the event of escapes and other oil leaks on the surface of the earth
the contaminated areas of the land are treated with absorbing materia1
(peat, sawn timber, sand). The absorption medium is removed from the
soil with the oil and used as a fuel or is taken away completely.
During the economic exploitation of the deposits enclosed and sealed
collection and conveying systems shall be used, which will prevent
contamination of the environment with the product of the drilling.
Projects for the setting up of the deposits will include the erection
of systems for the cleaning and reutilisation or removal of effluents.
2.5. Fulfillment of the measures to implement the recommendations of the State
Atomic Supervisory body of the RS (J) of 21.07.1993 and of Point 2 of
Expert Report No. 184 of the Ecology Committee of the RS (J) of 29.07.1993
2.5.1. In accordance with the recommendations of the State Atomic Supervisory
body of the RS (J) TAKT ensures during drilling activities in section
No. 2 regular observations to establish any occurrence of artificial
radionuclides in groundwater and water near the surface as well as the
possibility of determining the content of radionuclides in the extracted
products in the works for the development and extraction of hydrocarbons.
2.5.2. The possibi1ity will also be given for the extraction of underground and
surface water samples in section No. 1, in order to establish any
content of strontium-90 and Caesium-137.
3. Liquidation and recultivation works in the sections with wells to be shut
3.1. When carrying out liquidation works at the borehole safe insulation of the
oil and gas layers of layers carrying water shall be guaranteed and a
migration of fluids and gases when the permafrost soil thaws.
3.2. After dismantling of the drilling rig, the drilling tower equipment and
the provision and removal of pipes the earth contaminated by petroleum and
chemicals shall if necessary be removed.
3.3. At places where the surface of the soil is extremely compacted, loosening
shall be effected.
3.4. Walls shall be leveled and the location shall be leveled off subject to
preservation of the natural relief.
3.5. The works to restore the land shall be carried out continuously until
final conclusion. If the works cannot be carried out at once due to the
weather conditions, the deadline for this may be extended, but this must
not exceed one year from the date of termination of the works on the well.
3.6. If after recultivation the land is to be used for agricultural purposes,
works must be undertaken to produce a condition suitable for agricultural
use in accordance with the deadlines laid down in the regulation
concerning the apportionment of the land.
3.7. Reafforestation measures on the recultivated land and soil shall be
effected at the expense of TAKT by the permanent land user, to whom the
land will be returned.
3.8. The handing over of the recultivated land shall be effected by a committee
of the administration district, in which this land is located. This will
be recorded in documents.
3.9. On accepting the recultivated land, the committee will examine the quality
of the recultivation and whether the works carried out satisfy the approved
4. Obligations of TAKT in the field of environmental protection
Within the framework of its environmental protection activities TAKT shall
guarantee the following:
4.1. Training of the personnel of the Joint Venture in the area of
environmental protection, the use of the most modern environmental
protection technologies during exploration and extraction of gas and oil.
4.2. Strict monitoring as to whether the ecological conditions of the project
for the installation of wells as well as the installation and development
of the deposits are being fulfilled by the personnel.
4.3. Regular monitoring of the condition of the soil, the flora and fauna as
well as the waterways in the areas to be developed, whereby if necessary
amendments of the technological solutions selected to protect the
environment and nature shall be effected.
The Joint Venture TAKT is of the view that the statements contained in this
section document ~e fact, that the Joint Venture in its activities in the
areas made available to it in Yakut can reduce the negative effects on the
environment to a minimum and guarantee ecological safety for the areas to
be developed by the use of modem, practically waste-free drilling
APPENDIX No. 6
Licences of other companies concerning
commercial activities in
the contractual area