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 PETROLEUM AGREEMENT





BETWEEN


THE MINISTER RESPONSIBLE FOR PETROLEUM

REPRESENTING


THE GOVERNMENT OF THE REPUBLIC OF GUYANA


AND


NABI OIL AND GAS INC.



 TABLE OF CONTENTS








Article 1 - Definitions.......................................................................


Article 2 - Agreement, the Operator, Liabilities and Indemnities...... ....15


Article 3 - Petroleum Prospecting Licence and Guarantee................ ...17


Article 4 - Exploration Programme and Expenditure Obligation....... ..19


Article 5 - Relinquishment of Areas..................................................... .24





Article 6 - Delegation; Co-operation between Contractor and GGMC 27


Article 7 - Annual Work Programme and Budget................................ ............................30


Article 8 - Discovery and Development................................................. ...........................31


Article 9 - Records, Reports and Information; Confidentiality............... ...........................34





Article 10 - Annual Licence Rental Charge............................................. ..........................38


Article 11 - Cost Recovery and Production Sharing................................. .........................39


Article 12- Associated and Non - Associated Natural,Gas-«,............ ..............42


Article 13 - Valuation of Crude Oil.......................i.:L.: '.'.‘.':L.'.:..V.t.2..i..2..... .......48


i J - I


Article 14 - Disposal of Production.......................L.................................. .................• 52


aitn*0*+:vts!UVtMm*trt - a ---. >


Article 15 - Taxation and Royalty............................................................... ......................55


Article 16 - Contracts and Assignments........................................... ................60


Article 17 - Domestic Supply Obligation .................61


Article 18 - Guyana Resources................ ....................63


Article 19 - Employment and Training ...................64





Guyana Geology and Mines Commission


Assistant Commi iioner - Petroleum Division


■ Signature:


'ate:


r











TABLE OF CONTENTS (Cont.)





Article 20 - Rights to Assets and Insurance..................................................... 66


Article 21 - Import Duties................................ 74


Article 22 - Foreign Exchange Control................................. 76


F Article 23 - Accounting and Audits...............................................................................................78


'L


Article 24 - Force Majeure.............................................................................................................79





Article 25 - Assignment.................................................................................................................81


P Article 26 - Sole Expert, Conciliation and Arbitration..................................................................83


I:-


Article 27 - Applicable Law............................ 86


Article 28 - Protection of the Environment....................................................................................87


Article 29 - Termination and Cancellation....................................................................................89


Article 30 - Effective Date................................................................... 91


Article 31 - Miscellaneous........................................ 92


Article 32 - Stability of Agreement...................................................................................'.............94


Article 33 - Notices........................................................................................................................95








| Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division


Signature:. . ft |


1 Date: - - g|||& M- loiA




PETROLEUM AGREEMENT


This Agreement is made on the 4 day of June 2012 between the Government of the


Republic of Guyana, represented herein by the Minister (hereinafter referred to as the ‘‘Minister or the “Government” as the case may be) of the One Part





and




Nabi Oil And Gas Inc. (hereinafter referred to as “Nabi” or “Licensee”) a Company incorporated 

the Republic of Guyana with its registered office at Lot 63 Brickdam Stabroek, Lacytown,


Georgetown Guyana and registered in Guyana under the Companies Act 1991 with its registered


address in Guyana situated at Lot 63 Brickdam, Stabroek, Georgetown, Guyana of the Other Part


WHEREAS








(1) By virtue of the Petroleum (Production) Act, Cap. 65:05, Petroleum existing in its natural


condition in strata in Guyana is vested in the State; the Petroleum (Exploration and


Production) Act, No. 3 of 1986 (hereinafter referred to as the “Act” and the Petroleum


(Exploration and Production) Regulations 1986 (hereinafter referred to as the “Regulations”


make provision with res § ^L^TJpdpction of ?e.tr.Qleurn, and. for.matiers connected therewith

 (2) The Guyana Geology and Mines Commission (hereinafter referred to as “GGMC”) a body


corporate established under the Guyana Geology and Mines Commission Act (No. 9 of 1979)


has been seized with the responsibility, inter alia, of planning and securing the development,


exploitation and management of Petroleum, as defined in the Act, in Guyana so as to ensure


for the people of Guyana the maximum benefits therefrom and for doing such things in


relation thereto;





t (3) With respect to prospecting for and producing Petroleum and for matters connected therewith


I the Act and Regulations, subject to certain limitations and conditions contained therein


authorize the Minister to grant Petroleum Prospecting Licences and Petroleum Production


Licences;


(4) Section 10 of the Act authorizes the Minister to enter into an agreement with any person with


respect to, inter alia, the. grant of a Licence, the conditions to be included in a Licence, the


procedure to be followed by the Minister while exercising any discretion conferred upon him


\


by or under the Act and the manner in which the discretion shall be exercised and any matter


incidental to or connected therewith;


(5) Nabi has submitted to the delegatee a proposal (“the proposal”) for a Production Sharing


3





[


 (6) GGMC has been authorized by the Minister to negotiate this Agreement subject to the


provisions of the Act and Regulations and to the final written approval of the Minister of its


contents and execution thereof and to assist in the administration and implementation


thereof;


(7) Nabi will have, or will acquire, the financial resources, the managerial, technical and





industrial competence and the experience to carry out Petroleum Operations and will provide


an affiliate company guarantee, in accordance with section 13 of the Act;


(8) Pursuant to the aforesaid recitals, Nabi made an application to the Minister for a Petroleum





Prospecting Licence in accordance with regulation 13 of the Regulations (as hereinafter


defined), over the area described in Annex A and shown on the map attached as Annex B,


subject to the terms and conditions herein set forth and subject to the provisions of the Act


and Regulations and Nabi has agreed by execution of this Agreement to accept the said


Licence on the said terms and conditions and provisions.








NOW, THEREFORE, in consideration of the premises and covenant


contained, IT IS HEREBY AGREED between the Parties as fol








\ Guyana Geology and Mines Commission ]


, | Assistant Commissioner


■Signature


Article 1 - Definitions








1.1 In this Agreement, unless the context otherwise requires:








“Accounting Procedure” means the procedure set out in Annex C;








“Act” means the Petroleum (Exploration and Production) Act No.3 of 1986;





“Affiliated Company” in relation to the Contractor means, a company or corporation;


(i) which is, directly or indirectly controlled by the Contractor; or


(ii) • which directly or indirectly, controls the Contractor; or





(iii) which is, directly or indirectly, controlled by a company or corporation that also,


directly or indirectly, controls the Contractor. For the purpose of this definition


“control” means the right to exercise a vote of fifty per cent (50%) or more of ail the


voting shares;





“Agreed Interest Rate” means interest compounded daily (1/365 x rate) at an annual rate


equal to the average London Interbank Offer Rate (LIBOR) for six (6) months United States


dollars quoted at 11:00 hours (11:00 a.m.) London time on the first business day of such


month by the London Office of the Bank of America or as the Parties may agree, plus three


(3) percentage points; _


 “Appraisal Programme” means a programme carried out following a discovery of Petroleum


in the Contract Area for the purpose of delineating the Petroleum Reservoir, as defined in the


Act, to which that discovery relates in terms of thickness and lateral extent and estimating the


quantity of recoverable Petroleum therein prior to declaration of commerciality;





“Appraisal Well” means a well drilled for the purpose of an Appraisal Programme:





“Article” means an Article of this Agreement;





“Associated Gas” means all Natural Gas produced from any Petroleum Reservoir of which





the predominant production is Crude Oil and includes the gas-cap which overlies and is in


contact with Crude Oil;





fBUfirel” means a quantity consisting of forty-two (42) United States gallons, liquid measure,


C;' ri Ah./jneasured at standard conditions of atmospheric pressure and temperature (14.7 lbs/sq. inch





or 1 Kg/sq. cm. absolute and corrected to a temperature of sixty (60) degrees


leit or fifteen (15) degrees Celsius) ;





GlJYA^^>^enc*ar Month” or “Month” means any of the twelve months of the Calendar Year;





"Calendar Quarter” or “Quarter” means a period of three (3) consecutive months beginning


on the first day of January, April, July or October;





“Calendar Year” or “Year” means a period of twelve (12) consecutive Months commencing


. • y; ■' vf.


on January l and ending on the succeeding December 31 provided howeverJih«t3Hifg3?*if a


term of a Licence shall he the ncrirnd Iwnecified in section -of tl


* ■' • •'


•A.


j Assistant Comn^sioner^P' roleum D Wlslon





1 Signature:


1 Date:


 “Commercial Discovery” means any discovery, which the Contractor in its sole judgement,


considers economic to develop and produce pursuant to the terms of the Agreement;





“Contract Area” means:


(i) on the Effective Date the area described in Annex A and shown on the map in


Annex B and the subject of the Petroleum Prospecting Licence granted to the


Contractor pursuant to Article 3; and


(ii) thereafter any areas which at any particular time are subject to the Petroleum


Prospecting Licence or Petroleum Production Licence(s) granted to the Contractor


under Article 8;








“Contract Costs” means Exploration Costs, Development Costs, Operating Costs, Service


Costs, General and Administrative Costs and Annual Overhead Charge;


I





“Contractor” means Nabi and includes its successors and permitted atstih





“Cost Oil” has the meaning assigned in Article 11;











“Crude Oil” or "Oil" means crude mineral oil, asphalt, ozokerite, distillates, condensates


and all kinds of hydrocarbons and bitumens, both in solid and liquid forms, whether in their





liquid state at the well head'or field separator or liquefied from produced Natural Gas by


chemical treatment, condensation or extraction;





“Delivery Point” means a point that shall be in the Discovery' Area if the parties





Guyana Geology and Mines Commission bi'ic


Assistant Commissioner ^Petroleum Division rioirivid !uu.»ioO:S • '»nbtJ*imrnbu


Signature: t .......■ _________•, Vjjr\


Dafr:


 other economically viable point for export of Petroleum in the Cooperative Republic Of


Guyana which shall be agreed to by the Contractor and the Minister;








“Development Costs” means the expenditure so categorized in Annex C;








“Development Plan” means the plan referred to in Article 8.4;








“Development Well” means any well drilled as part of a Development Plan;








“Discovery Area” means an area which is part of a Prospecting Area consisting of a


Discovery-Block or Blocks in respect of which the Minister has been informed under section





30 of the Act;


''TV'i-





“Discovery Block” means that as defined in the Act; 4^7%, >v,


' V -y tt \a\


i //kCA;





. “Discovery of Petroleum” means that as defined in the Act;








“Effective Date” means the date on which this Agreement comes into forcepursuant to


Article 30;











“Expatriate Employee” means any employee (other than a Guyanese citizen) not permanently


resident in Guyana who is engaged under a contract of service for the purpose of Petroleum





Operations;








“Exploration Costs” means those expenditures so categorized in Anne:








Jnyana Geology and Mine? Commission UP ”


Assistant Commissioner - Petroleum Division


9pm---





?ate


 “Exploration Period” means the initial period, and/or the first renewal period and/or the


second renewal period referred to in Article 4.1, as the case may be;





“Exploration Well” means a well drilled, which is not a Development Well, with the


objective of exploring for Petroleum on a geological entity (be it of structural, stratigraphic,


facies or pressure nature) to a depth or stratigraphic level specified in the work programme


for the exploration work programme;








“Field” means an area within the Contract Area consisting of a Petroleum Reservoir or


multiple Petroleum Reservoirs all grouped on, or related to, the same individual geological


structural features or stratigraphic conditions from which Petroleum may be produced


commercially;





‘General and Administrative Costs” and “Annual Overhead Charge'





so categorised in Annex C;


9





“Geologic Basement” means any igneous or metamorphic rock or any:


which the geological structure or physical characteristics of the rock-sequence do not have


the properties necessary for the accumulation of petroleum in commercial quantities and


which reflects the maximum depth at which any such accumulation can be reasonably





expected;











u


 “GGMC” means the Guyana Geology and Mines Commission, established under section 3 of


the Guyana Geology and Mines Commission Act 1979;





“GGMC Act” means the Guyana Geology and Mines Commission Act 1979;


“Licence” means the Petroleum Prospecting Licence and/or the Petroleum Production





Licence(s) or both as the context requires;


“Lifting Entitlement” means the quantity of Crude Oil to which a Party' shall be entitled in


any given period pursuant to Article 11;





“Minister” means the Minister assigned responsibility for Petroleum or where there is no


such Minister, the President;





*


“Natural Gas” or “Gas” means all hydrocarbons which at standard conditions of temperature


and pressure (60 degrees Fahrenheit or 15 degrees Celsius and 14.7 lbs/sq. in or 1 Kg/sq. cm)


\


is in a gaseous state including but not limited to wet mineral gas, dry mineral gas and casing


head gas, all substances contained therein including helium, which are produced from an oil


px gas well, in their natural state or residue gas remaining after extraction of liquid Crude Oil


from wet gas;


“Non-Associated Gas” means Natural Gas or Gas other than Associated Gas;





“Operating Costs” means those costs so categorized in Annex C;





“Operator” shall have the meaning assigned to it in Article 2.2(a);





Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division


i rw- 4 -1^7_


 “Parties” means the Government, Nabi and includes its successors and permitted assignees,





and a Party shall mean any of the Parties;





“Petroleum Operations” means Prospecting Operations and/or Production Operations, as





defined in the Act;








“Petroleum Prospecting Licence” means a Licence issued by the Government under the Act


and the Regulations to Nabi for carrying out Prospecting Operations arid set forth in Form (


of the schedule as specified in the Regulations;








“Petroleum Production Licence” means a Licence to be issued by .the Government under the


Act and the Regulations to Nabi for carrying out Production Operations and i





D of the schedule as specified in the Regulations; fS^S aNaiSskw* 'K'P'








“Profit Oil” has the meaning assigned in Article 11; _.


i ic-L:,r ’ v '


4 - - • /V , , ‘V


I t': GO rv<1 jt I • • Vit; O'. 1 ", i• V


“Recoverable Contract Costs” has the meaning assigned in Article 11;





ioninrd::P?oHucEoh)’:ReguiSSm^^6"y


‘Regulations” means the Petroleum (Exploration








‘Service Costs” means the expenditures so categorized in Annex C;








“Sub-Contractor” means any company or entity which provides services to the


Contractor in connection with Petroleum Operations;





‘Third Party Sales” means third party arms length sales transacted in foreign ex^J; ^5 ^











.’A/am Geology and Mines Commission


Assistant Commissioner - Petroleum Division 13 \ ... '■ *f Jt i'


• ■ A <^00^^


filature


CJb-i A


I f) eh 1M ^


 1.2 The words and terms used in this Agreement but not defined herein shall, if meanings have


been assigned to them under section 2 of the Act, have, for the purposes of this Agreement,





the same meanings.





1.3 The provision of this Agreement relating to the Petroleum Prospecting Licence shall be read


as part of the provisions of such Licence.





1.4 The provision of this Agreement relating to any Petroleum Production Licence shall be read





as part of the provisions of such Licence. ;








The provisions in the Act and Regulations dealing with rights and obligations of the


COmraCt°r ^ be ™ * Pan of !«»&&&££<>


_ gions of this Agreement and any





Licence issued to the Contractor. Cy











Guyana Geology and Mines Commbsion


Assistant Commissioner • Petroleum Division


j Signature: •


ipatei


Article 2 - Agreement, the Operator, Liabilities and Indemnities








2.1 Agreement


This Agreement constitutes an agreement made under section 10 of the Act consis tent with


the Act and the Regulations, and is a production sharing agreement, the objective of which is


the exploration for development and production of Petroleum in the Contract Area by the


Contractor subject to the terms hereof and the provisions of the Act and Regulations under


which the Contractor shall have an economic interest in the development of Petroleum from


the Contract Area.





2.2 The Operator


(a) Nabi shall be the Operator charged with conducting the day to day activities of the


Contractor under this Agreement. No transfer of operatorship to another Party not


comprising the Contractor shall take effect unless it has been approved by the


Minister which approval shall not be unreasonably withheld. The Minister shall be


notified of any change of operatorship to another Party comprising the Contractor in


writing.





(b) The Contractor shall provide the Minister with a memorandum summarizing the


operating arrangements between the Operator and the Contractor, including any Party





prising the Contractor for the conduct of Petroleum Operations which will


, inter alia, api^vi^kjQwhereby ,the Operator agrees ^conduct, the Petroleum


lions /fepp?da^avm^^w4.greement. the Licences and any applicable laws


Guyana. , , //M !


r.Tna °eoloW»"« Commissi,"


Assistant


Signature;


■-’Isvft?-'.


I


2.3 Liability


The duties, obligations and liabilities of the Parties comprising the Contractor under this


Agreement and under any Licence issued pursuant hereto shall be joint and several.





.4 Indemnity


The Contractor shall, at all times, keep Government indemnified against all actions, claims


and the demands that may be brought or made against Government by a third party by reason


of negligence (any act or omission or reckless disregard of harmful consequences which


results in damage to a third party) by the Contractor'or the Operator in the exercise or


purported exercise of the rights of the Contractor under the Act or the Licence, provided


however, that nothing in this Article shall require the Contractor to give the said indemnity


for any claim or demand in respect of Petroleum taken by the Minister pursuant to Article 11


after title has passed to the Minister at the Delivery Point or in respect of assets acquired by





the Minister pursuant to Article 20 from and after the date of acquisition. Liability by the


Contractor to the Government for damages in respect of Petroleum Operations under this


Agreement is limited to insurance required in accordance with Article 20.2 (a), provided


however, that the Contractor shall not be liable to the Government for indirep^iSSsp





consequential damages, including but not limited to, production or loss





Guyana G and Mines Commission


Assistant issioner • Petroleum Division


Signature:


Date: \J UtX-





16 ---


1


Article 3 - Petroleum Prospecting Licence and Guarantee





3.1 Petroleum Prospecting Licence


(a) On the date of this Agreement, the Minister, in accordance with the Act, the





Regulations and the terms of this Agreement, shall grant to the Contractor the


Petroleum Prospecting Licence for an initial period of four (4) years from the


Effective Date over the area described in Annex A and shown on the map attached as


Annex B hereto. •• \*.....?


(b) f •' ‘ ’ v’’ .J v;... .'-


Subject to Article 4 and, the other terms of this Agreement,' such Petroleum


Prospecting Licence may'be eenewed but not more than twice at the eleciiefi-«£lhe


Contractor for consecutive periods of up to four (4) years each in





provisions of the Act and the Regulations.








3.2 Guarantee


The Contractor shall on or before the sixtieth (60th) day from the Effective Date'!


one (l) of phase one (l) of the initial period in accordance with Article 4.1 (a)(i) hereunder,


and thereafter, no later than ninety (90) days after the commencement of all subsequent work


commitment periods as specified in Article 4.1, provide an affiliate company guarantee or





other form of guarantee acceptable to the Minister in the amount of ten percent (l 0%) of the


budget submitted by the Contractor, pursuant to Article 7.1, for each specific work


. commitment period. Notwithstanding the foregoing, if the Contractor exceeds its minimum


work commitment in any phase specified in Article 4.1, the completion of such work


commitment shall constitute a waiver of such proportion of the requirement of


by the Minister which is the equivalent of the excess work previously compl N&\


17


Guyana beulogy and Mines Commistio^


Assistant Commoner - Petroleum Division


I Signature; .---‘V "


Y ----- ' v Ahfyy M


Pate JiAu. Zp(^


applicable to the subsequent work commitment phase.








If the guarantees are Affiliate Company guarantees they shall be in lieu of and satisfy any r





obligation to provide a guarantee and/or bond pursu^^Sfe^^>^gblations or this





Agreement on the part or on behalf of the Contractor











Guyana Geology and Mines Commission


int Comn^ssioner • Petrc Assistant Comniissioner • Petroleum Division r ■





Signature:





! Date:


 Article 4 - Exploration Programme and Expenditure Obligation








4.1 Exploration Programme


Subject to the provisions of this Agreement, in discharge of its obligations to carry out





Prospecting Operations in the Contract Area, the Contractor shall carry out the minimum


work described herein, during the periods into which Prospecting Operations are divided


i hereunder


(a) The initial period of four (4) years shall be divided into three (3) phases. Phase one


(1) will consist of twelve (12) months duration while phase two (2) will consist of


eighteen (18) months duration and phase three(3) will consist of eighteen months


duration


(i) Phase One - (12 months)


During phase one of the initial period, the Contractor shall drill one (1)


Exploration Well to basement in the Contract Area.


At the end of phase one (1) of the initial period the Contractor shall either


relinquish Contract Area except for any discovery Area in respect of which the


y Minister is informed under section 30 of the Act, the area contained in any


0 Petroleum Production License and any other portion of the Contract Anea


Minister agrees to permit the Contractor to conduct


pa. [ration activity


or the enter phase two (2) of the initial perm


:A











Commoner- Petroleum Division | 'iotcao fiw,\1


| Signature: •


Date: ... y-'-v-r.


T"


 ( ii) Phase Two - (18 months)





During phase two (2) of the initial period, the Contractor shall conduct


studies to determine the cause(s) for any dry holes encountered during


exploration drilling in phase 1, as well as either conduct a survey to acquire a


minimum of two hundred (200) line kilometers of 2D seismic data or conduct


a stress field detection survey in the minimum amount of three hundred (300)


line kilometers or drill an Exploration Well to a minimum depth of 1500m.


At the end of phase two (2) of the initial period, the Contractor shall either





relinquish the entire Contract Area except for any Discovery Area in respect


of which the Minister is informed under section 30 of the Act, the area


contained in any Petroleum Production License and any other portions of the


Contract Area on which the Minister agrees to permit the Contractor to


conduct further exploration activity, or enter phase three (3) of the initial


period.


(iii) Phase three - (18 months)


During phase three (3) of the initial period the Contractor shall drill one (1)


Exploration Well to a minimum depth of 1500m. At the end of the initial





period of four (4) years, the Contractor shall elect either to relinquish the


entire Contract Area or subject to Article 5 relinquish (25%) twenty five


percent of the Contract Area and renew the ting Licence


for a further period of up to, three (3) year:





Guyana Geology and Mines Commission


Assistant Commissioner ■ Petroleum Division 20


Signature: ---/■


! .Date: Ra¬


 (b) The first renewal period of up to three (3) years shall constitute phases agreed to


from friendly discussions between the Contractor and Minister, in each of which


the Contractor shall conduct a programme of work as agreed to from discussions


between the Contractor and Minister but which must include as a minimum, the





drilling of one (1) Exploration Well within the first eighteen months of the first


renewal period.





the end of the first renewal period of up to three (3) years, the Contractor shall


either to relinquish the Contract Area except for any Discovery- Area in


'ect of which the Minister is informed under section 30 of the Act and the area


ontained in any Petroleum Production Licence or subject to Article 5, relinquish





twenty percent (25%) of the Contract Area and renew the Petroleum Prospecting


Licence for a second period of up to three (3) years.


(c) The second renewal period of up to three (3) years, shall be divided into phases as


agreed to from friendly discussions between the Contractor and the Minister in


each of which the Contractor shall conduct a programme of work as agreed to





from discussions between the Contractor and Minister.


At the end of the second renewal period of up to three (3) years, the Contractor


shall relinquish the entire Contract Area except for any Discovery Area in respect





of which the Minister is informed under section 30 of the Act, the area contained





in any Petroleum Production Licence and any other portion of the Contract Area


on which the Minister agrees to permit the Contractor to





Guyana Geology and Mines Commission 21


Assistant Commissioner -JWoleum Division


Signatures


'JU If *3( 3>


 exploration activities.





(d) 1 he minimum work commitment for a given phase or period referred to in Article


4.1 (a), (b) and (c) may be .undertaken in an earlier.phase or period in whole or in





part and in such a case the work commitment with respect to the subsequent


period shall be deemed to be satisfied accordingly in whole or in part as the case


may be.





(e) Subject to Article 24 herein and section 43 of the Act, the Minister may extend any





Exploration Period pursuant to a showing of good cause by the Contractor.








4.2 No Exploration Well drilled by the Contractor shall'be treated as discharging any obligation





of the Contractor to drill such Exploration Well unless either it has been drilled to the depth





W'.^c-C S qfXvOr formation agreed with the Minister and specified in the annual work programme, or before


A\


fe%4iing such depth or formation:


the Contractor has expended on such well and any substitute well drilled pursuant to





Article 4.2 (d) below the amount for such work commitment in the budget submitted


by the Contractor and approved by the Minister as specified in Article 7.1; or





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V « J f UIV 'JVOIVE.IW -L-/ 1J V/UUUUliLUl V-l , W1.





(c) a Discovery is made and the Minister is informed thereof; or


(d) insurmountable technical problems are encountered which, in accordance with good





oilfield practice, make further drilling impractical, provided that


abandoned owing to the said problems before reaching the Geolc


rf


Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division





I Signature:


i Date ■AAA.


 Contractor shall drill a substitute well in the Contract Area to the same minimum





depth as aforesaid unless otherwise agreed with the Minister or until the amount in


Article 4.2 (a) less any amounts actually expended on the abandoned well is reached


r or one of the criteria listed at Articles 4.2 (b) to (d) is satisfied.


L





4.3 Expenditure Obligation





The sum actually spent in-fulfillment of the work obligation in a specific phase or period


Article 5 - Relinquishment of Areas





5.1 If prior to the end of the initial period of the Petroleum Prospecting Licence issued to the


Contractor under Article 3.1, an application is made by the Contractor for renewal of the


Licence under section 24 (1) of the Act, the Contractor shall relinquish at the end of the


initial period an area equal to at least twenty percent (25%) of the original Contract Area less


the exclusions provided for in Article 5.








5.2 If prior to the end of the first renewal period of the Petroleum Prospecting Licence an


.....application is made by the Contractor for a second renewal of the Licence under section





24(1) of the Act, the Contractor shall then relinquish at the end of this first renewal period an


kea equal to at least twenty (25%) of the original Contract Area less the exclusions provided


in Articles, 5.3-r.....





The. areas to be relinquished pursuant to Articles 5.1, and 5.2 shall:


, -Jia)-r:-.ue»..eoiflprise Blocks, as defined in the Act;


exclude any Discovery Area together with a reasonable area of protective acreage


(b)


surrounding the Discovery Area;


(C)


exclude any Production Area;


(d) be selected by Contractor so that:


(i) the area relinquiske^Lsh^ll comprise one (1) discrete area, having regard to





any repr ^Minister with respect to location, shape and


size;





ouyana Geology and Mines Commission


1 Assistant Corjfmissioner^- Petroltum DMsIon


5-vv-- | Signature:





1 Date: j ut (i d


 (ii) the Blocks to be retained for and during the first renewal period pursuant to


Articles 5.1 and 5.2 shall constitute one (1) discrete area unless otherwise


agreed to by the Minister.


5.4 In the event that an area or areas cannot be identified for reiinquishnient in accordance with





this Article without including in such area or areas in whole or in part a subsisting Discovery


Area or Production Area or the Minister is of the opinion that the area(s) to be relinquished


will not enable licensing separately or jointly with contiguous unlicenced areas then the


Minister and Contractor shall consult together with a view to agreeing on the area(s) to be


relinquished in the light of the circumstances then prevailing. If after sixty (60) days from-


. . . _ , bfiJsysoloeO hr..


receiving notice of the Contractor s|progo§qdre^mqmshnaepts,](qe Eqrj,ie^ gannot agree on a


proposed relinquishment, the Partie| shall-refer- the matter to a sole expert pursuant to Article


26. <==•.■ ~ ' -• - ~ - ■ ■ " • -








5.5 For the purpose of this Article, a Discovery Area shall not include any Discovery Block'


which relates to a Discovery in respect of which the Contractor has notified the Minister that


the Discovery is not of potential commercial interest pursuant to section 31 (1) of the Act,





unless such Discovery Block forms a part (and only to that extentj/^^^hd^stj^isting





Discovery Area. /K /








5.6 If a Petroleum Prospecting Licence ceases to have effect with respect rh^Discdvep/BlQ^Ks





pursuant to section 32 (l)-of the Act, such reduction in size of the Cont:


treated as an advance relinquishment under this Article and shall reduGedb&'mre‘ &


v-C





Guyana Geology and Mines Commission


Commissioner * Petrc Assistant ComnySsloner * Petroleum Division 25 >. f


Signature


i Date:


required to be relinquished accordingly.


5.7 Without prejudice to the obligations undertaken in Article 4, the Contractor may at any time


during the period of the Petroleum Prospecting Licence, on giving the Minister no less than


three (3) months notice in writing of its intention to do so, relinquish any Block or Blocks in





the Contract Area pursuant to section 28 of the Act and in accordance with Articles 5.4 and


5.5. Any such relinquishment shall count towards any subsequent mandatory


relinquishments required under Articles 5.1, 5.2 or 5.3 above as the i








i \ r


\ A / * /


Guyana Geology and Mines Commission Gijy^AA


: Assistant Commissioner - Petroleum Division


1 Signature:















































---r !■ Vb YgfdwALe.ttsyup -{


'nos i ammo


noirMO mualo c 1


Article 6 - Delegation; Co-operation between Contractor and GGMC








6.1 The Minister may, subject to the provisions of the Act, or any other law delegate any person


to exercise and perform any of his functions under this Agreement and anything done by the


delegate in pursuance of the delegation shall have the same validity and effect as it would


have if done by the Minister.





6.2 The Minister also hereby authorizes GGMC to perform, inter alia the following functions:


(a) to monitor the Petroleum Operations carried out by the Contractor;


-(b)' to review any proposed exploration work programme and budgets presented by


Contractor under Article 7 and any Appraisal Programme presented by the Contractor


under Article 8;


to review any Development Plan submitted by the Contractor in connection with an


plication for a Petroleum Production Licence pursuant to section 34 of the Act;


to ensure the maintenance and availability for inspection of operating records and


ports for Petroleum Operations in accordance with this Agreement;


to ensure the accounting procedures specified in Annex C of this Agreement are


followed;


(f) to ensure compliance with the provisions of this Agreement, Petroleum Act and





Regulations.


 delegate advised of all activities taking place during the course of Petroleum Operations and


shall provide the delegate with all available information relating to Petroleum Operations as


the Minister or the delegate may reasonably require. Towards this end the delegate and the


Contractor shall meet at regular intervals, but at least once every six (6) months, to review





the progress and results of the Petroleum Operations and to discuss the work programme and


other activities to be undertaken in the ensuing months.





6.4 With respect to the matters to be reviewed pursuant to Article 6.2, should the delegate wish


to make any specific proposals or revisions thereto, the delegate shall so notify the Contractor


specifying its reasons therefor; within reasonable time thereafter the Contractor and the


delegate shall meet and endeavour to agree on the proposals or revisions. The Contractor





'ftvjhall consider and take into account the proposals of the delegate and shall attempt in good





ith to reach agreement on such proposals. If the Contractor and the delegate fail to agree


J”thin sixty (60) days of submission by the Contractor, the exploration work programme and





budget (including as appropriate any minimum work programme to be undertaken pursuant


to Article 4) submitted pursuant to Article 7 and the Appraisal Programme (except in the


case of Gas to which the provision of Article 12 shall apply) submitted pursuant to Article 8





(revised in accordance with any amendments or additions thereto agreed by the delegate and





the Contractor) shall be deemed adopted.





6.5 Nothing herein above provided shall preclude the right of the MinisterAe^d'elegate any


additional function to the delegate or subject to Article 6.1 to delega^f^r^tj^^^tTfafydux





Guyana Geology and Mine? Commission 28


Assistant Commissioner - Pej^oleumDMslon


Signatures--- ’ ' "/ A


1 --- u ---


 functions, including those herein contained, to any other agency of Government. A


delegation shall not increase the obligations or liabilities of the Contractor and notice of any


delegation shall be given promptly to the Contractor.








6.6 Any approvals required by the Minister or delegates of the b linister shall not be unreasonably


withheld. If the Contractor requests required approval from the Minister or delegates of the


Minister, such approval shall be deemed as granted if no response is provided within sixty


■(60) days of the request.


6.7 The Minister and the delegate shall, upon request, either provide to the Contractor or assist


the Contractor in obtaining the assistance required for Contractor to fulfill requirements of


the contract including but not limited to the following:


(a) approvals issued by Government agencies or local government institutions which are


required to conduct hydrocarbon operations, including approvals necessary to import


goods and services free from duties and taxes;


(b) approvals for easements and right-of-way to enable Contractors to conduct


operations;


approvals for security for field operations and personnel;


V^\


l \ Permission for entry and exit visas and working permits for Contractor’s employees,


ibcontractors and their dependents;


supply reports, analyses, samples, geological, geophysical and production data


Article 7 - Annual Work Programme and Budget








7.1 Within sixty (60) days after the Effective Date, the Contractor shall prepare and submit to the


Minister in detail a work programme and budget, setting forth the Prospecting Operations,


which the Contractor proposes to carry out (including, as appropriate, any minimum work


obligations to be undertaken pursuant to Article 4) during the remaining portion of the


Calendar Year. In subsequent years no less than one (1) month before the beginning of the


Calendar Year, the Contractor shall prepare and submit to the Minister a work programme


and budget setting forth Petroleum Operations which the Contractor proposes to conduct


during the upcoming Calendar Year.


7.2 The Contractor may, for good cause, amend the details of any work programme or budget


submitted to the Minister pursuant to Article 7.1 provided that:


(a) notice of the details of the reasons for the amendments is given to the Minister;


(b) such amendments shall .not have the effect of reducing the minimum work


obligations undertaken under Article 4 without the prior consent in writing of the


Minister;


























30


 Article 8 - Discovery and Development





8.1 Where, pursuant to section 30 of the Act, notice has been given to the Minister of a


Discovery in the Contract Area, the Contractor shall forthwith inform the Minister of the


steps it proposes to take te- satisfy the requirements of section 30 (1) (a) (iii) of the Act.


8.2 Where the Contractor, pursuant to section 31 (1) of the Act, has informed the Minister that,





in its opinion, the Discovery is of potential commercial interest, the Contractor shall, as soon


as practicable thereafter, submit, for the consideration of the Minister, its proposals for an


Appraisal Programme to meet the requirements of section 30 (1) (b) of the Act.


8.3 Where an Appraisal Programme has been adopted by the Contractor pursuant to Article 8.2,





the Minister may, on application by the Contractor pursuant to section 31 (2) of the Act,


stating reasons therefor, extend the period within which application may be made by the


Contractor for a Petroleum Production Licence.





8.4 Where the Contractor has made an application to the Minister for a Petroleum Production





Licence in respect of any part of the Contract Area in accordance with section 34 (1) of the


Act, such application shall be accompanied by the proposals required under section 34 (3) of


the Act (hereinafter referred to as “the Development Plan”) and shall satisfy the provisions of





section 36 of the Act and the Regulations. The Development Plan shall provide that not later





than six (6) months after the grant of the first Petroleum Produc^ ontractor


shall in consultation with GGMC, prepare and implement


r****V»»*. .ua>


| esniN


; Guyana Geology and Mines Commission I r55'viO mus.'otjss ,


31


1 Assistant Commissioner - Petroleum Division


; Signature:


>*te; TA >4


employment of Guyanese nationals in each phase and level of Petroleum Operations and for


the development of management and technical skills for the safe and efficient conduct of


Petroleum Operations.





Where the Minister considers that the application has not met the requirements of Article 8.4,


he shall so notify the Contractor within sixty (60) days of receipt of the application, and


GGMC and Contractor shall meet to discuss the application with a view to ensuring that the


requirements of Article 8.4 are met. In the event that the Parties are unable to agree on


amendments to the application to meet such requirements within sixty (60) days from the


of aforesaid application (or such longer period as the Parties shall agree), or where the


ster fails to respond to or act on the aforesaid application within sixty (60) days, the


ractor may refer the matter to a sole expert pursuant to Article 26 for determination


:hin sixty (60) days of appointment of such expert or such other time period as may be





agreed between the Contractor and the Minister.





Where the Minister considers that the aforesaid application has met the requirements of


Article 8.4 he. shall, within sixty (60) days of receipt thereof, so notify the Contractor. In


such event or where in the event of a dispute it is determined by the sole expert pursuant to


Article 26 that the Contractor has made an application which meets the requirements of


Article 8.4, provided the Contractor is not in default under this Agreement, the Minister shall


grant, within sixty (60) days of such notification or determination as the case may be, to


. Contractor, a Petroleum Production Licence (in the Form D of the schedule as specified in


the Regulations) over the area for which the application has been mac


*and Mines Commit"1








SJWtt


i


conditions consistent with this Agreement and the Act and Regulations which will enable the


Contractor to'carry on Petroleum Operations in the Production Area in accordance with the


Development Plan wherein the level of production set shall be consistent with the maximum


efficient rate of production which conforms to sound reservoir engineering principles in


accordance with good international petroleum industry practice.


While the Contractor holds a Petroleum Prospecting Licence or has made an application


pursuant to Article 8.4 and in accordance with section 34 (1) of the Act, the Minister shall


not grant a Petroleum Production Licence in respect of all or part of the Contract Area or area


covered by such application (whether on a geographical or geological basis) to any third


party.


Where the Contractor pursuant to section 31 (1) of the Act has served notice on the Minister


that in its opinion a Discovery made in the Contract Area is not of potential commercial


interest, the provisions of section 32 (1) of the Act shall apply.


The Contractor may apply for a renewal of a Petroleum Production Licence for a maximum


ten (10) years. The Minister shall not refuse to grant the renewal of a Petroleum Production


Licence under section 40(1) of the Act without first providing the Contractor;


(a) Notice stating the grounds of the intended refusal; and


Article 9 - Records. Reports and Information: Confidentiality








9.1 Records, Reports and Information


(a) The Contractor shall, at all times while this Agreement is in force, maintain and





submit to the Minister in accordance with the provisions of the Act and the


Regulations, the Petroleum Production Licence and this Agreement, full and accurate


reports, records, returns and accounts of Petroleum Operations in the Contract Area.





(b) All data, well logs, maps, magnetic tapes, cuts of cores and cutting samples and all





other geological and geophysical information obtained by the Contractor in the


course of carrying out Petroleum'Operations hereunder and all geological, technical,


financial and economic reports, studies and analyses generated in relation thereto


(hereinafter referred to as “Petroleum Data”) shall be submitted to the Minister in


accordance with the Regulations.


The Contractor may freely export for processing or laboratory examination or


analysis samples or other original materials constituting Petroleum Data, provided





that samples equivalent in size and quality or, where such material is capable of


reproduction, copies of equivalent quality have first been delivered to the Minister.


(d) Petroleum Data shall be the joint property of the Minister and the Contractor but





shall become the sole property of the Minister with respect to any area which ceases


to be part of the Contract Area, whether as result of relinquishment, or expiry,





surrender or termination of a Licence or otherwise in accordance with the Act, from


the date on which such area ceases to be part, of the Contract Area.


(e) The Minister, through duly appoirited-represerifatives, upon provi^j ib&wtoi'


Guyana Geology and Mines Commission


i Assistant Commissioner ^-P^roleum DMsion ,


j Signature:---


1


 with at least seven (7) days notice, shall be entitled to observe the Petroleum


Operations conducted by the Contractor at his sole cost and expense and at all


reasonable times to inspect all assets, records and data kept by the Contractor relating





to such Petroleum Operations. In the exercise of such rights under this paragraph the


Minister shall not unduly interfere with the Contractor's Petroleum Operations under


this Agreement.


(f) Nothing in this Article shall be construed as requiring the Contractor or any of the


Parties comprising the Contractor to disclose any of its proprietary technology or that


of its Affiliated Companies which is not acquired in the course of Petroleum





Operations under this Agreement.





9.2 Confidentiality


(a) All Petroleum Data, information and reports obtained or prepared by the Contractor


hereunder shall, so long as they relate to any part of the Contract Area, be treated as


• <* *


confidential and each of the Parties undertakes not to publish, reproduce or otherwise


eal with such Petroleum Data or to disclose the same or the contents thereof to any


er person without the consent in writing of the other Parties, such consent not to





unreasonably withheld, provided however, that subject to Article 9.2 (b), this


Article shall not:


(i) prevent disclosure by the Contractor:


(aa) to an affiliated company for the purpose of carrying out Petroleum





Operations: ^__---


//JOS


(bb) to consultants, professional advisers*.,,,data proc^h^AmiBds/^v..


"***"""*^


; Guyana Geology and Mines Commission 3S / ----\


Assistant Comnfissroner • Petroleum DM*lon


Signature: ±


jWSrjq. 3 .y /


Pate: . v


 laboratories and Sub-Contractors in connection with the Petroleum





Operations;


(cc) to a bank or other financial institution in connection with financing


for Petroleum Operations;


(dd) to the extent required by any applicable law or the regulations of any





stock exchange upon which the shares of the Contractor or an


affiliated company are quoted;


fee) to bona fide prospective assignees or transferees of an interest


hereunder of the Contractor or in connection with a sale of stock of


the Contractor or an affiliated company thereof;


(ff) in connection with data trades;


(gg) of data information and reports already known to the Contractor prior


to the Effective Date; or





(hh) of data, information and reports acquired independently from a third


party that represents that it has the right to disseminate such data at


the time it is acquired by the Contractor;


(ii) prevent disclosure pursuant to section 4 of the Act, provided however that


neither the Minister nor Contractor shall disclose Petroleum Data relating to


any area subject to a Licence to a competitor of the Contractor, without the


prior written consent of the other Party; or


(iii) be construed as imposing on any Party any obligati





to any petroleum data, information or report;


Guyana Geology and Mines ColWnls^f generally known to the publi


Assistant Commissioner - Petroleum Division


Signature:


■ Date:


 (b) Any petroleum data, information or reports disclosed by the Contractor pursuant to


this Article shall be disclosed on terms which ensure that the data, information or


■ reports aforesaid are treated as confidential by the recipient (except for disclosures





made pursuant to Article 9.2 (a) (i) (dd) and prompt notice of all disclosures shall be


given to the Minister.





p*?:,


V (c) All petroleum data which becomes the sole property of the Minister pursuant to


Article 9.1 (d) shall continue to be treated as confidential by the Contractor for a


L period of one (1) year from the date on which it became the sole property of the


Minister, but may be used by the Contractor in connection with data trades with the


prior written consent of the Minister, such consent not to be unreasonably withheld


r subject however to Article 9.2 (b). - -------------------------------


| flCfcfeMO ;,,,r


r (d) Where a Licence ceases to be in force with respect to any area, the Contractor shall


f ~ ”* '....... ' " '>.


deliver to the Minister originals of all petroleum data and other information relating





to such area pursuant to regulation 26 of the Regulations provided however that, on


application duly made to him pursuant to regulation 28 of the Regulations, the


Minister shall permit the Contractor to retain copies of petroleum data and





information relating to the Contract Area subject to Article 9.2 (b).





(e) Notwithstanding the provisions of Article 9.1 (d), all the Contractor’s proprietary


technology, except technology for which the cost of development has been approved


























37


 Article 10 - Annual Licence Rental Charge








The Contractor shall on the Effective Date of the Petroleum Prospecting Licence or the date of grant


of any Petroleum Production Licence as the case may be and, thereafter, so long as the said Licence


remains in force, on each anniversary date thereof, pay without demand to the Government an





annual Licence rental charge of ten thousand United States of America Dollars(US$ 10,000) in


each year in respect of the Contract Area for the entire Exploration Period and such payments shall


apply to those areas remaining after taking into account any relinquishments














... Geology and Mines Commission


sustant Commissioner * Petroleum Division





ignature:


‘•ntc: A T-€> '•>












































] noii^'nfwK-


i wirtvW -i.c-: '■ ' • "•'S'.


1


1. ____________________


I








38


Article 11 - Cost Recovery and Production Sharing








11.1 ■ Subject to the terms and conditions of this Agreement, the Contractor shall bear and pay all


Contract Costs incurred in carrying out Petroleum Operations and shall recover Contract


Costs only from Cost Oil as herein provided.


11.2 All Recoverable Contract Costs incurred by the Contractor shall, subject to the terms and


conditions of any agreement relating to Non-Associated Gas made pursuant to Article 12, be


recovered Rom the value, determined in accordance with Article 13, of a volume of Crude


Oil (hereinafter referred to as “Cost Oil”) produced and sold from the Contract Area and


limited in any Month to an amount which equals seventy percent (70%) of the total


production from the Contract Area for such Month excluding any Crude Oil used in


Petroleum Operations or which is lost. Pursuant to Article 13 herein, where the fair market


price for Crude Oil has been valued below US$100 per barrel, the Cost Oil in any month


shall be seventy five percent (75%), all other conditions pertaining to the Article 11.2


remaining the same. “Recoverable Contract Costs” means such costs as the Contractor is





permitted to recover, as from the date they have been incurred, pursi


Annex C.





11.3 To the extent that in any Month, Recoverable Contract Costs exce<





determined in accordance with Article 13, the unrecoverable amo;





forward and, sub tipulated in Article 11.2, shall be recoverable in the





immediately sue td extent not then recovered, in the subsequent





Month or Month





39


 11.4 The balance of Crude Oil available in any Month after Recoverable Contract Costs have been


satisfied to the extent aforesaid (hereinafter referred to as “Profit Oil”) shall be shared





between the Government and The Contractor for each Field in the following proportions:





Contractor fifty percent (50%) and Minister fifty percent (50%). Profit Oil shall be shared


between Government and Contractor for each field in the proportion Contractor forty five





percent (45%) and Minister fifty five percent (55%) whenever, the production rate of Crude


Oil is equal to or exceeds fifty thousand (50,000) barrels of oil per day.





11.5 The quantity of Cost Oil actually utilized in satisfying the Recoverable Contract Costs may





be allocated by the Contractor to production from any Field or Fields.


11.6 Subject to the provision of Article 14, the Profit Oil shall be shared between the Government





and Contractor on a Monthly basis according to their respective entitlements as set out in





Article 11.4.








fo the extent that the actual quantities and costs required to determine Cost Oil and Profit





pihfor the Month in question are not known, Crude Oil sharing shall be calculated on an





basis each Month using the following:


unrecovered Recoverable Contract Cost;





(b) estimated current Recoverable Contract Cost by reference to the agreed





work programme and budget supplemented by any c





information which are accepted by Contractor and





r- ’". . ;ndicfltw?-qf tbc actual position for the Month in quest


Guyana Geology and Mines Commission








40


 1


< ---* -■•(e) estimated production for the Month in question;


1 _ ....______ . _______---


........ ““ “ (d).........Crude Oil price from the previous Month calculated.





11.8 Retroactive adjustments shall be made to the Crude Oil entitlements and shall be agreed with


the Minister based on recalculations utilizing ac'ual quantities of Crude Oil produced and


saved and Recoverable Contract Costs. Any revised entitlements shall be made, subject to





any applicable lifting agreements, as soon as practicable after such elements have definitely


been determined.








r- 11.9 The Contractor shall have the right to use in any Petroleum Operations as much of the


os ,c?£. v...


production as may reasonably be required by it therefor and the quar^jfs


shall be excluded from any calculations of Cost Oil and Profit Oil <£nti^le|


\


r


I Ass,Jtant Cw"(^s/oner vPetmU ?kSl°n 1


r





~LQ('





l


[


























41


 Guyana Geology and Mines Commb$k>n


Article 12 - Associated and Non - Associated Gas. Assistant Ccrtimissioner • Petnoltum Division


■ilru......B'M


Ue: LoCF


12.1 Associated Gas








(a) The Associated Gas produced from any Oil Field within the Contract Area shall be


with priority used for the purposes related to the operations of production and


production enhancement of Oil Fields, such as Gas injection, Gas Lifting and power


generation.


(b) Based on the principle of full utilisation of the Associated Gas, and with no


impediment to normal production of Crude Oil, a plan of utilisation of the


Associated Gas shall be included in the Development Plan of each Oil Field. If


there is any excess Associated Gas in the Oil Field after utilisation pursuant to


Article 12.1 (a) the Contractor shall carry out a feasibility study regarding the


utilisation of such excess Associated Gas of such Oil Field. Such feasibility study, if


carried out before submission of the Development Plan of an Oil Field, shall be


included in the Development Plan. In the event that the,Contractor conducts a


further feasibility studybf the utilisation of the excess Associated Gas of such Oil.


.......


Field, such further feasibility .study shall be submitted to the G.GMC for review and


discussion. If the excess' Associated Gas in any Oil Field is utilized, the





construction of facilities for such utilisation and the production of excess Associated


Gas shall be carried out while a Petroleum Production Licence continues in force.


(c) If the Parties agree that the excess Associated Gas of an Oil Field has no commercial


value, then such Gas shall be disposed of by the Contractor, provided that there is no


impediment to normal production of the Crude Oil, in the most economic manner





consistent with good international petroleum industry practice.


(d) If either Party to the Agreement considers unilaterally that


42


 of an Oil Field has commercial value, such Associated Gas may be utilised by that


Party, provided there is no impediment to normal production of Crude Oil. All


handling from the point of separation of Crude Oil shall be at the sole risk and


expense of the Party utilising such Associated Gas and will not affect the amount of


Cost Oil and Profit Oil due to the other party to the Agreement.


(e) If the Parties agree that excess Associated Gas of an Oil Field has commercial value,





the Contractor shall be entitled, but not required, to make further investment to utilise


such excess Associated Gas subject to terms at least as attractive as those established


for Crude Oil in Article 11 including, but not limited to, cost recovery for such


further investment. If the Contractor believes improved terms are necessary, the


Parties shall carry out friendly negotiations in a timely manner to find a new solution


to the utilisation of the said excess Associated Gas and reach an agreement in writing.





Expenses incurred by the Contractor in the production and use of the Associated Gas


an Oil Field as stipulated in Article 12.1 and those incurred in carrying out any


asibility study on the utilisation of the excess Associated Gas shall be charged to





the development cost of the Oil Field.





12.2 Non - Associated Gas


(a) When the Contractor in accordance with Article 8.2 has informed the Minister of any


Non - Associated Gas discovery within the Contract Area that i^^jj^t^ntial^





commercial interest, the Parties shall promptly





1 Guyana Geblogy-and Mines Commission 43 noteMO tnusl


/ Assistant Commissioner -

i Aweffy 1


/ 67 ... ('i’V i - -


r>ate:


 reach agreement on the additional terms necessary for commercial development and


production of the discovery. The agreement, which shall form an annex to this





Agreement, shall be based on and include the following principles:


(i) The time period between the notice of disco very provided for in section 31(1)


of the Act and the application for grant of a Petroleum Production Licence


shall be extended pursuant to section 31 (2) of the Act, if necessary, to provide





reasonable time to conduct an Appraisal Programme and to develoo a Gas


market.


(ii) The Petroleum Production Licence shall be extended as may be required to


allow for commitment of the reserves for the life of the Gas project and





consistent with the terms for marketing that may be negotiated with the


buyers of the Gas.


(iii) The cost recovery rate and the Contractor’s profit Gas share shall be


negotiated by the Parties taking into consideration the actual conditions in the


Gas Field and the markets for such Gas so that the Contractor shall be able to'





obtain an economic benefit acceptable to the Contractor.





If the Parties fail to reach an agreement within four (4) years after the date of





commencement of negotiations the Government shall have the right


unilaterally to put up the Gas Field for bidding but shall keep as confidential





the substance of any previous and future negotiations unde. with


Contractor. In such case, Contractor shall be entitled





jyana Geology and Mines Commission I


ssistant Commissioner • Petroleum DWWon 44


xgnature: •


Oate: id^ygig.


 bidding.








(b) Following the signature of the agreement herein the Contractor shall work out an


Appraisal Programme for the discovered Gas Field according to the terms and


conditions determined in the said agreement and submit it to the GGMC for review


pursuant to Article 6.4. The Contractor shall carry out the Appraisal Programme


which was reviewed and agreed upon with GGMC. The expenses incurred in


carrying out the said Appraisal Programme by the Contractor shall be charged to the


Exploration Costs of the Contract Area.








(c) After completion of the Appraisal Programme of a Gas Field, the Contractor shall


submit a report on the Appraisal Programme to GGMC for its review and discussion.


If the Contractor decides that a Gas Field is non - commercial, the corresponding


area covered by the Gas Field may be retained in the Contract .Area during the


^xploration Period. However, at the expiration of the Exploration Period, if the


tractor still considers the said Gas Field non - commercial, the area covered by


said Gas Field shall be excluded from the Contract Area. With respect to a Gas


ield which has potential commercial value but has not been developed because the


market and consuming facilities are not available, the period during which the Gas


Field is retained in the Contract Area shall be extended at the request of the





Contractor. Such extended period, however, shall not be more than five (5)


consecutive Contract Years after the date of expiration of the Explor^i^krSr^^Ax


hereunder. In case the time necessary for the market to develop/A


// • - p--- ' J'Mirffj r>ric


; CuFar’» Geology and Mines Commission 45 vvlO c





; A»«tant Comn^sione^^0|n


ignature:


'atf


 consuming facilities to be constructed for the Gas Field exceeds such extended period


Contractor shall then have the right to request from the Minister a grant of further


extended period.


Prior to expiration of the Exploration Period, if the Parties agree that any commercial





Gas Field needs to be reappraised because of some favourable factors, the Contractor





shall work out and submit a new evaluation report on the Gas Field and submit it to





the GGMC for its review pursuant to Article 6.4 and any expenses incurred in doing





so shall be cost recoverable.








(d) ' If the Contractor retains a Gas Field beyond the expiration of the Exploration Period


pursuant to Article 12.2 (c), the Contractor shall pay to the Minister at the


commencement of each year of the retention period an annual rental to be arrived at


through friendly negotiations but which shall be no less than Fifty Five Thousand


United States Dollars (US$55,000). The holding fee shall be applied on a pro rata


daily basis in the event the Contractor relinquishes the Gas Field or declares such Gas


discovery to be a commercial discovery prior to the end of such year.





General Conditions Applicable to Natural Gas





(.a) The Contractor shall have the primary responsibility for marketing all the available


Natural Gas from the Contract Area and for negotiating for the sale thereof on a joint


basis at fair market prices and terms common to both the Min








. Guyana Geology and Mines Commission 46








1 Date: -u>is


 The Contractor will pursue markets both within and outside Guyana and seek to


market Natural Gas to the highest realization outlets after deduction of transportation


costs. The Contractor will seek to recognize Natural Gas’s potential value at the


international value of alternative fuels in the end user market of the buyers.








(b) The Contractor shall have the right, but not the obligation, to process Natural Gas for


& /


conversion to liquids, chemicals or similar Gas utilisation projects and Contractor


shall have the right to dispose of the liquids or products therefrom. The Contractor


shall have the right to process Natural Gas for recovery of the liquids contained


therein and such liquids sold shall be treated as Crude Oil. The Parties shall carry out





friendly negotiations to reach agreement on the valuation of such liquids when the


Contractor submits a proposal for such development. The agreement shall be based





on principles for valuation of Crude Oil provided in Article 13, taking into


consideration the specific components of the liquids recovered from the Natural Gas.








^D^)^y>JTie Contractor shall have the right to use Natural Gas, both Associated Gas and Non-


, v A"---'---N-’/rN,


VVoV


■t / _ ^ss^ciated Gas, as may ^&-re^ir®d^r Oil Field and Gas Field operations, including


iht to re-inje^[j§£ :e and enhanced recovery without charge.





royalty.








I <*uyan, Gooluj, and Mines Commit


;.. .:H‘





•NT- Nw


X . -'v. - '■ "’ate:


47


 Article 13 - Valuation of Crude Oil





13.1 For the purpose of this Agreement the value of a Barrel of Crude Oil shall be the average fair


market price determined as follows:





(a) as soon as practicable after the end of each Calendar Month in which Crude Oil has


been produced and sold from any Field pursuant to this Agreement, an average price





(in terms of United States dollars per Barrel, FOB, Delivery Point) for each Field


ijAV. -v-> \ \sl


Y5^\ shall be determined in respect of production during that Calendar Month. It is





nderstood that production from different Fields may be of differing quality arid that


■k J separate average prices may accordingly be determined for any Calendar Month in


respect of production from each Field;


(b) the prices aforesaid shall be determined as follows:





(i) in the event that fifty percent (50%) or more of the total volume of sales by


the Contractor during the Calendar Month of Crude Oil of a given quality





produced hereunder from a Field were Third Party Sales, as hereinafter


defined, the price of all Crude Oil from such Field of that quality shall be


deemed to be the simple arithmetic average price actually realised, calculated


by dividing the total receipts from all such sales calculated FOB the Delivery





Point by the total number of Barrels of Crude Oil sold from such Field in


such sales;


(ii) in the event that less than fifty percent (50%) of the total volume of sales by


the Contractor during the Calendar Month of Crude Oil of a given quality





produced hereunder from a Field were Third Party Sales, the price of all


Crude Oil from such Field of that quality will be determined by^kurisjtbpE^i^qU-.,


I noiirirnrn


| r.okivK’* (flu average of:. ^


,3uyanaG66logyand Hines Commission 48


1 Assistant Commissioner - Petroleum DWWon


Signature: ■


■ ... T£1X


(aa) The simple arithmetic average price actually realised in the Third


Party Sales during the Calendar Month of such Crude Oil produced


hereunder, if any, calculated by dividing the total receipts from all


such sales calculated FOB at the Delivery Point by the total number


of barrels of Crude Oil sold in such sales from such Field; and


(bb) The simple arithmetic average price per barrel at which one or more


crude oils of similar quality to the Crude Oil are being sold, such


price being determined by calculating the average for the Month in


which production takes place of the mean of the high and low FOB


price or prices for each day of those crude oils as quoted in Platts


Crude Oil Market Wire daily publication. In the event that Platt's





ceases to be published or is not published for a period of thirty (30)


consecutive days then the Parties shall agree on an appropriate


alternative publication.


In determining the final price, account shall be taken of any





differences between the Crude Oil and the crude oils quoted in Platt's,


for quality, API gravity, sulphur, pour point, product yield as well as


differences in quantity, delivery time, payment and other contract


terms to the extent known. Allowance will also be made to take


account of the market area into which the Crude Oil is sold should it


be different from the area used for Platt's.





The selected crude oils will be agreed between Contractor and the


 )





Crude Oil from the relevant Field.





The arithmetic average aforesaid will be determined by the


percentage volume of total sales of Crude Oil by Contractor that are,


and that are not, as the case may be, Third Party Sales during the





Calendar Month in question.


(iii) all such prices will be adjusted to FOB Delivery Point.


(iv) for the purposes of this Article Third Party Sales of Crude Oil made by the


Contractor shall include any Third Party Sales made by the Contractor on the


Minister's behalf pursuant to Article 14 but shall exclude:


(aa) sales, whether direct or indirect through brokers or otherwise, of any





seller to any Affiliated Company of such seller, unless at





demonstrably arms length price;


(bb) Crude Oil exchanges, barter deals or restricted or distress





transactions, or any Crude Oil transaction which is motivated in


whole or in part by considerations other than the usual economic





incentives for commercial arms length crude oil sales;


(cc) Government to government sales.








13.2 Contractor shall be responsible for determining the relevant prices in accordance with this


Article. The calculation, basis of calculation and the price arrived at, shall be supplied to the


Minister and shall be subjected to agreement by the Minister before it is finally determined.


Pending final determination the last established average Crude Oil price shall be used.





13.3 During the first Calendar Y ear of production fror


Minister will meet in order to establish a provi











Signatures


tes




appr°priate mechanism for the purposes of giving effect to Article 13.1 (b)(ii) above. This


selection will be reviewed annually and modified if necessary.


13.4 In the event of any difference or dispute between the Contractor and the Minister


concerning selection of the crude oils, the calculation or the basis of calculation of the prices


and the piices arrived at or generally about the manner in which the prices are determined


according to the provisions of this Article, the matter or matters in issue shall finally be


resolved by a sole expert appointed pursuant to Article 26,3.





13.5 For the purposes of this Article, in determining the “quality” of a Crude Oil regard shall be


given to all relevant characteristics inp-lu mited to gravity, sulphur and metal


content, pour point and product yis

















■ Guyana Geology and Mines Commission


I Assistant Commissioner • Petroleum Division


| Signature: ---,/irlr.





1 Date ipry


























51 | aajniM bn* X20l: A) msyuD


| -w......


-----------------„ .....


 Article 14 - Disposal of Production








14.1 Each of the Parties shall have the right to take in kind at the Delivery Point and separately


dispose of its share of the total quantities of production available under this Agreement. The


Contractor shall have the right to use as much production as may be needed in any Petroleum





Operations within the Contract Area and also within the transportation and terminal system.


In the event of third party usage of the transportation terminal systems the quantities so used


or lost outside the Contract Area shall be proportionate to aggregate use of that transportation


and terminal system. All quantities so used or lost shall be excluded from any calculations of





entitlement pursuant to Article 11. The quantity of production to which the Minister is


entitled pursuant to Article 11 shall be measured and delivered to the Minister at the Delivery


Point and the Minister shall be responsible for all costs and risks associated with the


Minister's lifting Entitlement from and after the Delivery Point.





14.2 Within twelve (12) months after the Minister's approval of a Development Plan, or within a


later period as may be agreed between the Parties but in any event no longer than three (3)


Tf ^months before the first scheduled lifting of “Crude Oil,' the’Contractor shall propose to the


.:> . ■- \ Minister off taking procedures to govern the method whereby the Parties will nominate and


: 1 \ \ f...........


lift/their respective shares of Crude Oil. The details of such procedures shall be discussed


d agreed upon between Minister and Contractor. The major principles of such procedures





shall include the following:


(a) Lifting shall be carried out so as to avoid interference with Petroleum Operations.





(b) In the event that any Party shall find itself unable for any reason to lift such quantities


of Crude Oil as are to be lifted in accordance with procedures it shall


the other Parties to that effect. Such procedures shall include





Guyana Geology arid Mines Commission 52


’ Assistant Commissioner - DWWon


Signature:


» a*


 Parties may agree, to prevent a Party from delaying the lifting of any quantities of


Crude Oil not so lifted, to a later period.


(c) In the absence of any agreement to. the contrary between the Parties, the Contractor


and the Minister shall share in each type of grade of Crude Oil in proportion to their


respective Lifting Entitlement.





f


l. 14.3 The Contractor shall, if requested by the Minister, use reasonable efforts to market abroad on





I competitive terms all or part of the Minister's Lifting Entitlement subject to payment by


r Minister of costs normally borne by a seller in such transactions and on other .terms to be


v_ agreed including an agreed marketing fee in respect thereof. The Minister shall provide the


Contractor with at least six (6) months notice before changing between receiving payments


in kind as provided under Article 14.1 and sqekmg;;the Contractor tq rnarket the Minister’s





--- f


Lifting Entitlement under this Article. { - .........








L 14.4 Subj ect to the provisions of Article 17 hereof, the Contractor shall have the right to export at


the export point chosen for this purpose all Petroleum to which it is entitled under this





L_ Agreement free of any duty, tax or o ther financial impost, and to receive and retain abroad all


proceeds from the sale of such Petroleum.


[





14.5 All Guyana’s export laws, regulations, orders, directives and notification


will apply, as these relate to export destinations. The Contractor agrees to


laws, regulations, orders, directives and notifications whi


its Affiliated


r Companies engaged in Petroleum Operations in Guyj


L


53





| Guyana Geology and Hines Commission


r Assistant G onvfnisiioner - Petrol leum Division


. Signature! r ■


'TAi^i r i no i "5


 In connection with the above, the Minister shall concurrently with the Effective Date and





thereafter from time to time advise Contractor of such destinations to which exports of Crude





Oil, shall be.contrary to the said regulations, orders, directives and notifications.





The Contractor shall be free always to sell and /or deliver Petroleum to third parties in the


United States of America, Brazil and Trinidad and Tobago. Contractor's terms of sale to





third parties shall contain a stipulation that the regulations, orders, directives and





notifications as set forth in .Article 14.5


shall apply.

















Guyana Geology and Mines Commission


Assistant Comnmssioner - Petroleum Division





Signature:


Date:

















i


J























... 1


Article 15 - Taxation and Royalty





15.1 Except as provided in Article 15.2 and 15.8 and except as otherwise set forth in this Article


15.1, no tax, value-added tax, duty, fee, charge or other impost shall be levied at the date


hereof or from time to time thereafter on the Contractor in respect of income derived from


Petroleum Operations or in respect of any property held or thing done for any purpose


authorised or contemplated hereunder other than:


(a) subject to the provisions of Article 21, import duties at the rates specified from time


to time in the Customs Act (Cap. 82:01);


(b) taxes, duties, fees or other imposts for specific services rendered on request or to the


public or commercial enterprises generally;


(c) rent due to Government in respect of any land rights granted or assigned to the


Contractor;


(d) annual licence rental charges due under Article 10;


(e) subject to Article 15.7, local government rates or taxes (being rates or taxes not


calculated by reference to income) not in excess of those generally applicable in


Guyana;


(f) stamp duties, registration fees, licence fees and any other tax, duty, fee or other


impost of a minor nature.





15.2 Contractor, Affiliated Companies, Sub-Contractors and individuals who are expatriates shall


be subject to the income tax laws of Guyana, including, the Income Tax Act of Guyana (Cap.


81:01) and the Corporation Tax Act of Guyana (Cap. 81:03) and shall separately comply, with”

















Alai


 15.3 The taxable income of the Contractor arising in each year of assessment under this





Agreement for purposes of the income tax laws of Guyana, (including the Income Tax Act


and the Corporation Tax Act referred to in Article 15.2) shall include the amounts of





Contractor's income tax and corporation tax paid pursuant to Article 15.4.


15.4 The Minister hereby agrees:





(a) that a sum equivalent to the tax assessed pursuant to Article 15.2 and 15.3 will be





paid by the Minister to the Commissioner General, Guyana Revenue Authority on


behalf of the Contractor and that the amount of such sum will be considered income





of the Contractor; and





that the appropriate portion of the Government's share of Profit Oil delivered in





accordance with the provisions of this Agreement shall be accepted by the Minister


| las payment in full by the Contractor of Contractor's share of each of the following


!;> 4 / * /


J levies, whatsoever the applicable rate of such levies may be, which the Minister shall


then pay on behalf of the Contractor under Article 15.4 (a) to the Commissioner





General, Guyana Revenue Authority:


(i) the share of royalty -payable by Contractor pursuant to Article 15.6;





(u) the Contractor's share of the income taxes imposed by the laws of Guyana,





including, but not limited to, income tax imposed by the Income Tax Act and





corporation tax imposed by the Corporation Tax Act and payable at the date


hereof, or from time to time thereafter, and any othemlev^^rrcharge on


 laws, acts, statutes, regulations or orders by the Government; and


(iii) any other similar charge imposed and payable in respect of Petroleum


Operations at the date hereof, or from time to time hereafter, except charges





of the type specified in Article 15.1 (a-d).








15.5 The Contractor shall provide the Minister with the Contractor’s income tax returns to be


submitted by the Minister to the Commissioner General, Guyana Revenue Authority so the


Minister can pay income tax on behalf of the Contractor as provided under Article 15.4 fa).


On such returns, the Minister shall note that he is paying the income taxes on behalf of the





Contractor, so that the Commissioner General, Guyana Revenue Authority can properly


prepare the receipts required under this Article 15.5. Within one hundred and eighty (180)


days following the end of each year of assessment, the Minister shall furnish to Contractor


■ *1,


proper tax certificates in Contractor's name from the Commissioner General, Guyana





Revenue Authority evidencing the payment of the Contractor's income tax under the Income


Tax Act and corporation tax under the Corporation Tax Act. Such certificates shall state the





amount of tax paid and other particulars customary for such certificates.








15.6 The Government's share of Profit Oil specified in Article 11 includes royi


Contractor at the rate of one percent (l%) of Crude Oil produced and s





the Minister, pursuant to Article 14 of his share of Profit Oil equival


constitute payment of such royalty in kind. Within one hundred and


following the end of each year of assessment receipts evidencing payment


| Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division


TPPROVED


Signature: . -Of \


 J





1


royalty shall be furnished by the Minister to the Contractor stating the amount and other -1


particulars customary for such receipts. ~j








15.7 Subject to the conditions of section 49 of the Act, the Minister may remit in whole or in part,


or defer payment of any royalties payable by Contractor.








15.8 Nothing in this Agreement shall be construed to place an obligation on the Government to


file a tax return declaring its share, of production or profit share or to regard such profit share





as income within the meaning of section 5 of the Income Tax Act (Cap 81:01) or section 4 of


the Corporation Tax Act (Cap 81:03)


15.9 The Minister hereby agrees that the Contractor shall be exempted from the Property Tax Act





pursuant to section 51 of the Act and any other act which amends or replaces in part or in


whole the Property.Tax Act.





J





inister agrees that for the duration of the Exploration Period, and for any area within


ontract Area where exploration activity is in progress, the provisions of section 10(b) of


Corporation Tax Act (Cap 81:03) shall not apply to the Contractor, with respect to any J


payments made any Affiliated Companies or Sub-Contractors. The Affiliated Companies or


Sub-Contractor shall, however, be subject to withholding tax in accordance with provisions


of section 39 (8) of the Income Tax Act (Cap 81:01), with respect to profits remitted or


deemed remitted to its head office.


 be liable to pay personal income tax in Guyana on income earned in Guyana. Guyana


(represented herein by the Minister) shall cause the proper authorities to issue appropriate tax


certificates to expatriate employees when required.


(i) if an expatriate employee is liable to pay income tax in Guyana on income earned in


Guyana, such expatriate employee shall pay such income tax at a rate equal to the





current income tax rate of Guyana.





15.12 An Order shall be made giving effect to theprf^ cle in statutory form and


ZdS,


language as specified in section 51 ofthe#\c














Guyana Geology and Mines Commission


Assistant Commissioner - Petr< Petroleum Division


Signature: ---X





Date:


Article 16 - Contracts and Assignments








6.1 The Contractor shall, upon request, provide to the Minister copies of:


(a) contracts with respect to the sale or disposal of Petroleum (including invoices issued


thereunder);


(b) any deed of assignment of an interest of the Contractor under this Agreement





pursuant to Article 25;


(c) any instrument by which the Contractor pledges, mortgages, encumbers or





hypothecates its interest under this Agreement or the Contra








Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division nouAurn


noiitviO






































60


Article 17 - Domestic Supply Obligation








17.1 If the requirements of the domestic market in Guyana exceed the Minister's total entitlement


from all Crude Oil production in Guyana, then the Contractor if requested by the Minister,


■ <0 -■■■ ’A:


shall sell Crude Oil in Guyana on the basis of the ratio which the Contractor's Lifting


Entitlement bears to the sum of Contractor's Lifting entitlement plus the total entitlement of


all other producers in Guyana subject to Article 17.3. The volume of Crude Oil which the


Contractor shall be required to sell under this Article shall not exceed the Contractor's share





of Profit Oil. The Minister shall give the Contractor notice on or prior to April 1 of the year


preceding the Calendar Year in which the Government will have the said requirement and the


term' of the supply shall be on a Calendar Year basis unless otherwise agreed.








17.2 The Contractor shall, in any Year, have a right to supply out of Contractor's Lifting


Entitlement the proportion of the Crude Oil requirements of Guyana that the quantity





produced from the Contract Area bears to the total production at the time in Guyana to the


extent that such requirement is not satisfied from any.eontractentered into prior to the date of


' ‘ -----------


< floi;*'' «n t .......


enceinent of production from the Contract Area. For the purpose of this paragraph, the


4 ** " ............ , , ;


Crude Oil requirements of Guyana” means the amount by which, in any Year,


-mu -n._


emand exceeds the Minister's total entitlement to all Crude Oil produced in


e Contractor shall give the Minister notice on or prior to April 1 of the Calendar





preceding the Calendar Year in respect of which Contractor wishes to exercise the


aforesaid right and the term of the supply shall be on a Calendar Year basis unlej^


61





\ / /


x v


V


 agreed. Notwithstanding the foregoing the Contractor shall have the right to supply the total


amount calculated pursuant to the foregoing provisions.





17.3 The price payable for the sale of Crude Oil pursuant to this. Article shall be paid in United


States dollars (or other currency as may be agreed) at a place specified by the Contractor


within thirty (30) days of receipt of the Contractor's invoice by the Minister, and shall be


determined in accordance with Article 13. All sums overdue shall bear interest at the Agreed


Interest Rate.


1 7.4 Any sale of Crude Oil as provided for in Article 17.1 and 17.2 shall occur at the Delivery


Point or such other point as the Minister and the Contractor may mutually agree.





12.5 All terms and conditions for the sale of Crude Oil pursuant to this Article, shall be specified


in a contract of sale entered into between the Minister and Contractor








Guyana Geology and Mines Commission


Assistant Commfrlloner • Petroleum DWiskm


Signature: X


r--- ^ ±


Article 18 - Guyana Resources





18.1 In the conduct of Petroleum Operations pursuant to this Agreement the Contractor shall


require that the Operator give preference to:


(a) the purchase of Guyanese goods and materials, provided that such goods and


materials are available on a timely basis of the quality and in the quantity required by


Operator at competitive prices; and


(b) the employment of Guyanese Sub-Contractors in so far as they satisfy the Operator's


financial and technical requirements and meet the requirements of Article 18.1 (a).


18.2 The Contractor shall establish appropriate tender procedures for the acquisition of goods,


materials and services which shall ensure that Guyanese suppliers and Sub-Contractors are


given adequate opportunity to compete for the supply of goods and services.


18.3 Within ninety (90) days after the end of each Calendar Y ear the Contractor shall provide the


 Article 19 - Employment and Training





19.1 Subject to the requirements of any law relating to immigration, Government shall provide the


necessary work permits and other approvals required by the Contractor for employment of


Expatriate Employees in Guyana for the purpose of Petroleum Operations.








19.2 Without prejudice to the right of the Contractor to select employees and determine the


number thereof in the conduct of Petroleum Operations, the Contractor shall, to the


maximum extent practicable, employ, require the Operator to employ and encourage


Sub-Contractors to employ Guyanese citizens having appropriate qualifications and


experience.





19.3 During each year of the term of the Petroleum Prospecting Licence, or any renewal thereafter


the Contractor shall make available to GGMC the amount of five thousand United States


Dollars (US$5,,000) for one or more of the following purposes mentioned in Article 19.3 (a-








o provide Guyanese personnel nominated by GGMC with on-the-job training in


ontractor's operations in Guyana and overseas and/or practical training at


institutions abroad, particularly in the areas of logistical planning for undertaking


Petroleum Operations, seismic acquisition and interpretation, economic analysis,





petroleum accounting and contract administration;





(b) to send qualified Guyanese personnel selected by GGMC on courses not exceeding


one year at universities, colleges or other training institutions mutually^;








Guyana Geology and Mines Commission 64


Assistant Commissioner -J’etroleym Division


------


Signature:-


--- sA 1 '


 Contractor and GGMC;





(c) to send Guyanese personnel selected by GGMC to conferences and seminars related


to the petroleum industry; •


(d) to purchase for GGMC advanced technical books, professioxi^k^'^^





scientific instrument- or other equipment required by GGMC./C^














Guyana Geology and Mines Commission


Assistant Commissioner >£etroleum Division


Signature:


Date






























































r ---


65 ! fs-i>h<5ry??fK*D


1 trir - -


\


I


g‘ ... w ^


f


ii


i


 Article 20 - Mights to Assets and Insurance








20.1 Rights to Assets


(a) The Contractor shall have the right to use free of charge assets previously installed by


the Contractor in relinquished areas which are required for its operations in the


remaining portion of the Contract Area provided that in the event of re-licencing of


the relinquished area, such licence shall exclude the aforesaid assets.


(b) Subject to Article 20.1 (cj) .upon expiry dr termination, of this Agreement in


accordance with the provisions hereof, the Contractor shall upon,.notification by


*';QGMC pursuant to Article - . r . Ar ' .. id.:


deliver to the Minister, free of charge, in good order and condition, (fair wear


and tear excepted) all installations, works, pipelines, pumps, casings, tubings,


engines and other equipment, machinery or assets of a fixed or permanent


nature constructed, used or employed by the Contractor or the Operator in the


Contract Area;


(ii) deliver to the Minister, free of charge, any fixed assets relating to Petroleum


Operations outside the Contract Area and movable assets owned by the


Contractor or Operator and used or employed in connection with Petroleum





Operations and located in Guyana for which costs have been fully recovered


in accordance with Annex C herein; where costs have noL-been~hjll}





recovered the provisions of Article 20.1 (b)(iii) shall apndSfef/"^





\ Guyana Qeology and Mines Commission 66


] Assistant Commissioner - Petroleum Division


Signature;1


 (iii) sell to the Minister any other assets owned by the Contractor or Operator and


used or employed by the Contractor or Operator in the Contract Area or


elsewhere in Guyana in connection with Petroleum Operations at a price


equivalent to the unrecoverable cost of the assets.


(c) The above provisions of Article 20.1 (b) shall not apply to:





(i) assets which are still required by the Contractor or Operator for use in respect


of an area in Guyana subject to another petroleum agreement at the time of


expiry or termination of this Agreement;


(ii) equipment and other assets rented or leased by Contractor in Guyana;





equipment and other assets rented or leased by Contractor and imported in


Guyana for use in Petroleum Operations and subsequently exported





therefrom;


equipment and any other assets owned or leased by a Sub-Contractor;





(v) household goods which are the personal property of employees of the


Contractor;


(vi) equipment and assets otherwise not owned by Contractor or Operator.





(d) The Contractor shall notify the Minister of all assets acquired as provided in section 4


of Annex C to this Agreement.


(i) At least six (6) Calendar Months before expiry of thete:





67


Guyana Geology and Mines Commission


Assistant CommissionerMPetroleum Division


Signatures LkL


rv.A


within three (3) Calendar Months following notice of termination of this


Agreement or promptly following cancellation of all Licences, GGMC shall


notify the Contractor of the assets to be delivered or sold to the Government,


(ii) Subject to the terms and the provisions of this Article, the Contractor shall


not, within one (1) year of the date upon which it estimates that termination


of this Agreement will occur, remove from the Contract Area or sell any


assets of a fixed or permanent nature which might be deliverable to the


Government under this Article without the consent of the Minister, such


consent not to be unreasonably withheld.


Abandonment Programme and Budget





(aa) Within sixty (60) days after the expiration of the term of this


Agreement or the sooner relinquishment of some or all of the


Contract Area, the Contractor shall carry out to the Minister’s


satisfaction an abandonment programme agreed with the Minister for


all installations and pipelines provided by Contractor under this


Agreement that the Minister elects not to have delivered up to him in


accordance with Article 20.1(b). With respect to the area being


relinquished and/or facilities thereon, such abandonment programme


shall comply with and be limited to internationally accepted standards


 in Article 8.4, the Contractor shall submit for the Minister’s approval


a proposed abandonment programme and budget covering all such


installations and pipelines provided by Contractor under this


Agreement.


(cc) The Minister shall act without unreasonable delay in reaching a


decision on the Contractor’s proposal under Article 20.1 (d)(iii)(bb)


and may approve or modify or impose conditions thereon. Before


modifying or imposing conditions on the proposal, the Minister shall


notify the Contractor of the proposed modification or conditions and


give the Contractor the opportunity to make written representations


within sixty (60) days thereafter about the proposed modifications or


conditions. After taking into consideration such representations the


Minister and the Contractor shall make their best efforts to mutually


agree on the proposed modifications or conditions of the


abandonment programme and budget. In the event that the Minister


and Contractor cannot mutually agree on the proposed abandonment


programme and budget, either Party may by written notice to the





other Party propose that the dispute be referred for determination in


accordance with the provisions of Article 26.


(dd) In the event that the Contractor does not present a timely proposal to


 thirty (30) days notice to the Contractor of his intention to do so, may


prepare an abandonment programme and budget for the Contract Area


if the Contractor does not present a proposal by the end of the thirty


(30) day period. When the Minister has so prepared the abandonment





programme and budget, it shall have the same effect as if it


had been submitted by the Contractor and approved by the Minister.


) J (ee) Contractor shall have the right on an annual basis to propose a revised


abandonment programme and budget. Such proposal shall be subject


to the approval process in Article 20.1(d) (iii) (cc). Any revisions to


the abandonment programme and budget shall result in a revision to





the guarantee referred to in Article 20.1(d) (iii) (hh).


(ff) All funds required to carry out the approved abandonment programme


shall be made available by Contractor when the costs for


abandonment are incurred.


(gg) All costs included in the approved abandonment programme and


budget shall be recoverable as operating costs on a unit of production





basis commencing during the period when the abandonment


programme and budget is approved. The amount to be recovered in a





respective period shall be calculated by dividing the apnmv<


,/^qSR


abandonment budget by the estimated units of prb


produced and sold by the Contractor between ff£





[ Guyana Geology and Mines Commission ;


Assistant .Commissioner - Petroleum Division


Commissioner - Peti


Signature e: ---


Date: \s> \ "S


 Minister’s approval and the anticipated date of abandonment and


multiplying the result by the units produced in the period.





(hh) Contractor shall deliver to the Minister within seven (7) days after the


date the abandonment programme and budget are approved an





undertaking from Contractor’s immediate parent company stating that


such parent company shall ensure provision of financial and technical


resources necessary to conduct the approved abandonment


programme. The amount of the financial undertaking shall be equal


to the amount recovered under Article 20.1(d)(iii)(gg) less any


amounts spent under the approved abandonment programme.





(ii) Notwithstanding the provisions of Article 20.1 (d)(iii)(ff), in the event


the Minister elects to have all or a portion of the facilities delivered


up to him in accordance with Article 20.1 (b), the Contractor shall pay


the Minister at the time of transfer the amounts stipulated in the latest


approved abandonment budget for the transferred facilities. Upon





transfer and receipt of the funds, the Minister shall assume all


responsibilities for the transferred facilities and their abandonment


and shall hold the Contractor harmless against any liability with


respect thereto accruing after the date of such transfer to the Minister,


to Article 20.1 (c), in the event


(iv) Subject


V-.: acquires any assets pursuant to this Article,





71


; Guyana and Mines Commission


> Assistant mssioner -.£eqroieum Division


I :


•: Signal;


 assume all liabilities, with respect to such assets, ansing from and





after the date of acquisition and shall not direct the Contractor to


remove or abandon any such assets pursuant to regulation 9 (l)(a) of


the Regulations. The Government shall indemnify and hold


Contractor harmless for any and all costs and claims which may arise


from the use or abandonment of any asset from and after the date of


acquisition by the Government.


Assets not acquired by the Government pursuant to this Article may





be sold or otherwise freely disposed of by the Contractor subject to


Article 21.2 and the Regulations.





20.2 Insurance


(a) The Contractor shall effect and, at all times during the term of this Agreement,


maintain for Petroleum Operations hereunder insurance as required by applicable


laws, rules, and regulations and of such type and in such amount as is customary in





the international petroleum industry in accordance with good oil field practice in





respect of but not limited to:


(i) loss or damage to all assets used in Petroleum Operations;


(ii) pollution caused in the course of Petroleum Operations for which the


Contractor or the Operator may be held responsible;





(iii) loss or damage to property or bodily injury suffered by a:


Guyana baology and Mines Commission 72


Assistant Conynlssipner - Petroleum Division


C-----


the course of Petroleum Operations for which the Contractor may be


liable to provide an indemnity pursuant to Article 2.4;


(iv) the Contractor's and/or Operator's liability to its employees engaged in





Petroleum Operations.


To the extent permitted by applicable laws, mies and regulations, such insurance may


be provided through Contractor’s affiliate insurance company.





(b) The Contractor shall require the Operator to carry and to endeavour to have its





Sub-Contractors carry insurance of such type and in such amount as is customary in





temational petroleum industry in accordance with good oil fief














^ ^ ,y






































?oi«h'iu ° j;71


73 3|"-?


Article 21 - Import Duties











-ll The Contractor, and the Sub-Contractors engaged in Petroleum Operations, subject to Article


21.1 (a) hereunder, shall be permitted to import, free of duty or other taxes or imposts,


machinery, equipment, vehicles, materials, supplies, consumable items (other than foodstuffs


or alcoholic beverages or fuel), and movable property, where imports in any of rhe said





categories have been certified by the Chief Inspector to be for use solely in carrying out





Petroleum Operations. The Contractor shall give prior notification to the Minister of


Sub-Contractors engaged in Petroleum Operations.





Subj ect to Article 21.1, and for as long as this Petroleum Agreement remains in force





x \ the Contractor and Sub-Contractors engaged in Petroleum Operations hereimder shall





be required to pay to the relevant authority a ten percent (10%) consumption tax on


j •>* :.-‘I::f- . j: .. :"

any fuel imports, where such, imports have been certified by the Chief Inspector to be


i . - o *'*. v ‘ 5 “v . !





used solely in carrying out Petroleum Operations in any area within the Contract Area.








21.2 Subject to Article 20, any of the items imported into Guyana may, if no longer required for





Petroleum Operations hereunder, be freely exported at any time by the importing party,


without the payment of any export duty or impost; provided, however, that on the sale or





transfer by the importer of any such item to any person in Guyana (other than the


Government) import duty shall be payable by the importer on the value thereof at the date of


such sale or transfer as determined by the Customs and Excise Depa





with their applicable rules.





Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division 74


21.3 Each Expatriate Employee of the Contractor (including any Affiliated Company) and of





Sub-Contractors shall be permitted, subject to the limitations and conditions set out in the


Customs Act, to import into Guyana free of import duty within six (6) months on first arrival


his personal and household effects including one (1) motor vehicle; provided, however, that


no property so imported by the employee shall be sold by him in Guyana except in





accordance with Government regulations and upon the payment of the prescribed customs





duties. Any importation or replacement of motor vehicles shall be a matter for consultation


Minister ^ \


with the











fyana Geology and MmesCommlss}^


Assistant Con,i^jone^jwofeum 0J^ I


Signature;'---/' '. |


~>ate: 2£±J>


Article 22 - Foreign Exchange Control





11 i The Contractor shall, during the term of this Agreement have the right:


LLA





(a) to retain abroad all foreign exchange obtained from the export sales of Contractor's


Petroleum and to remit and retain abroad all foreign exchange earned from sales of


Petroleum or assets in Guyana;





(b) to finance Petroleum Operations hereunder in any currency through any combination


of equity, inter-affiliate or third party loans, inter-company open accounts, or





x production payments but no payments of principal or interest in respect thereof shall


e made from any source in Guyana other than the bank accounts referred to in


^Article 22.T (c); / ;• l ie \





to open and.maintain bank accounts denominated in Guyanese dollars and/or United


States dollars in Guyana and freely dispose of the sums deposited therein without'any


restriction; provided the said accounts are credited only with sums deposited in


foreign currency or with the proceeds of the sale of foreign currency being credits





relating to or derived from Petroleum Operations;


(d) to open and maintain bank accounts in any foreign currency outside Guyana which


may be credited without restriction and freely dispose of any sums deposited therein


without restriction and without any obligation to convert into Guyana currency any


part of the said amounts, save that such accounts shall not be credited with the


proceeds of the sale of any Guyanese currency without the consent of the Bank of


Guyana;





(e) to purchase and, with the approval of the Bank of Guyana, to sell Guwi





Guyana Geology and Mines Commission 76


Assistant Commissioner - Petroleum Division


Signature:


n.,.: ttW ytQ'i


 through the authorized banks, without discrimination, at the rate of exchange


determined by the Bank of Guyana for authorized banks at the time of purchase or


sale.





22.2 Expatriate Employees of the Contractor or of Affiliated Companies and of Sub-Contractors


engaged in Petroleum Operations shall not be subjected to all Exchange Control Regulations


that may be in effect from time to time. Expatriate Employees of the Contractor and Sub-





Contractors shall be entitled to remit freely abroad any portion of their salaries paid in


Guyana and any investment income that may be earned on the portion of their salaries paid in


Guyana.


22.3 Where Contractor, Affiliated Company or Sub-Contractor by notice in writing to the


Commissioner General, Guyana Revenue Authority has guaranteed the full and proper


discharge by an Expatriate Employee engaged in Petroleum Operations of his liability to


r income tax under the laws of Guyana, that Expatriate Employee shall be entitled to receive


i














r





1








St





L-j





77


i


Article 23 - Accounting and Audits





23.1 The Contractor shall be responsible for maintaining accounting records relating to Petroleum


Operations under this Agreement in accordance with the Accounting Procedures set out in


Annex C hereto.


23.2 The Minister shall have the right to audit the accounting records of the Contractor in respect


of Petroleum Operations in accordance with Accounting Procedure.


23.3 Nothing in this Article shall be construed as limiting the right of Government or any officer


• to audit or cause to be audited the books of











Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division


Signature! a





T7^"----




















78


Article 24 - Force Maieure





24.1 Any non-performance or delay in performance by any Party hereto or any of its obligations


under this Agreement or in fulfilling any condition of any Licence granted to such Party or in


meeting any requirement of the Act or Regulations and any Licence issued thereunder, shall,


except for the payment of monies due by Government to Contractor or monies due to


Government under section 43 (4) of the Act (unless such failure to pay is prevented by any


action of the Government), not be a breach of this Agreement, the Licence or the Act and





Regulations if and to the extent that such non-performance or delay is caused by Force


Majeure as defined in this Article.





24.2 In this Article, the term “Force Majeure” shall mean any event beyond the reasonable control





of the Party claiming to be affected by such event which has not been brought about at its


instance and which has caused such non-performance or delay in performance and, without


limitation to the generality of the foregoing, includes natural phenomena or calamities,


epidemics, fires, wars declared or undeclared, hostilities, invasions, blockades, riots, strikes,





insurrection, civil disturbances, mining of the seas, international disputes affecting the extent


of the Contract Area and any governmental action that would prevent the performance of an





obligation or ability of the Contractor to export Petroleum (except asj^ ‘TskArticle


14.5).








24.3 Where any Party is claiming suspension of its obligations on accord


Parties in writin8 of 1116 000


| (104? M 79


1





t‘ Guyana Geology and Mines Commission \ :-*r


j Assistant Commissioner -j^troleum Division


 particulars of the Force Majeure and obligations affected. Each Party shall promptly notify


the other Parties as soon as the Force Majeure has been removed or no longer prevents it


from carrying out its obligations hereunder:








24.4 Where a Party is prevented from exercising any rights or performing any obligations under


this Agreement due to a Force Maj eure, the Minister hereby agrees pursuant to section 43 (3)


of the Act, subject to the proviso therein, that a period of additional time necessary for





restoration of damages caused during a Force Majeure delay shall be added to the time


-g o A ""--^allowed under this Agreement for the performance of such obligation and for the


.S' ^ Sr


ormance of any obligation or the exercise of any right dependent thereon and to the term


Licence issued pursuant to this Agreement. The Contractor shall have the option of





nating this Agreement without any further obligation if Force Majeure exceeds one (1)











24.5 Without prejudice to the other provisions of this Article, the Parties shall meet to discuss the


consequences of the Force Majeure and the course of action to be adopted in the


circumstances.








24.6 The Government shall not i Ic&Mqieure due to any order, regulation or written





directive of the Govemm/Str Government’s performance of its obligations


/ J


under this Agreement.











Guyana Geolojgy and Mines Commission





Assistant Comrrifssioner - Petroleum Division


80 Signature:


-.......

 Article 25 - Assignment








25.1 Subject to the regulation 20 of the Regulations the Contractor shall not assign, or transfer in


whole or in part, any of its rights, privileges, duties or obligations under this Agreement, or





any Licence issued pursuant to this Agreement, to any person, firm or corporation, without


the prior written consent of the Minister.








25.2 The Minister shall give his consent under Article 25.1 where:





the assignment or transfer will not adversely affect the performance or obligations


j ..... ;


jder this Agreement; j •«-*< 1


* i


assignment is not contrary to the interests .of.Guyana; or--.*- -..: ---. _;r i


ect to (a) above, the assignment or transfer is to an approved Affiliated Company.








25.3 In the event that the Minister does not give his consent or does not refuse a request for an





assignment or transfer by Contractor within sixty (60) days of receipt of such request,


consent shall be deemed to have been given by the Minister.








25.4 Any assignment made pursuant to this Article shall bind the assignee to all the terms and


conditions hereof and the terms and conditions of any Licence issued





pursuant to this Agreement unless otherwise agreed, and as a condition to any assignment,





the assignee shall provide an unconditional undertaking to the Minister to assume all





obligations by this Agreement or any Licence issued pursuant to this


/A?


Agreement, hC


! Guyana Geology and Mines Commbsion


81 'tZ/Xh I Assistant Commissioner- Petroleum Division


S. Ai*-


\ -■« \


i Date: .





to An application for assignment or transfer of a Licence shall be made in accordance with Form





E of the schedule specified in the Regulations. The applicant shall submit such additional





information relating to the intended assignee which the Minister may reasonably require to


enable him to dispose of the application.


























Guyana Geology and Mines Commission


Assistant Comrrflssioner - Petroleum Division





Signature:





Date:


Article 26 - Sole Expert. Conciliation and Arbitration








26. i The Parties shall use their best efforts to settle amicably all disputes arising put.of orf elating


to this Agreement.





26.2 Except for matters referred to in Articles 8,12, and 13 and any other matter which the Parties


agree to refer to a sole expert, any dispute arising out of or relating to this Agreement which


cannot be settled amicably may be submitted by any Party to arbitration pursuant to Article





26.4 or Article 26.6, whichever applies.


26.3 The sole expert referred to in Article 26.2 shall be appointed by agreement between the


Parties, and in the event the Parties fail to agree on the sole expert within sixty (60) days after


receipt of the writtenmotice horn any Party proposing the appointment of a sole expert, such


expert shall be appointed by the Minister of the Institute of Petroleum of the United


Kingdom. The decision of the sole expert on matters referred to him shall be final and


binding on the Parties. The Parties shall refer any dispute arising out of or relating to such


expert decision, including enforcement thereof, to arbitration pursuant to Article 26.4 or


Article 26.6, whichever applies.


26.4 Subject to the provisions herein, the Parties hereby consent to submit to the International


Centre for the Settlement of Investment Disputes (ICSID) any dispute relating to or arising


out of this Agreement for settlement by arbitration pursuant to the rules of the Convention on





the Settlement of Investment Disputes between States and Nationals of Other States





(hereinafter referred to as the “Convention”). The Government hereby irrevi


j'


__ 83


; Guyana Geology and Mines Commission \ ■ r-


i Assistant Confrnissioner ^Pfitroleum Division ,ov.


; Signature;,rji i,,


--'7xmwrr


' Date: M 'z£lh2:---


 any claim to immunity with regard to any arbitration pursuant to this Article 26 and to any





proceedings to recognise or to enforce this Article 26 or any proceeding to recognise or





enforce an arbitral award rendered in an arbitration thereunder. Without prejudice to the


,^.\enerality of the foregoing, the waiver of immunity shall include immunity from service of


ocess and immunity from jurisdiction of any competent court, and immunity of any of the


Government’s property from execution of any arbitration award or judgement entered


thereon.








26.5 Subject to Article 26.6, prior to submitting a dispute for arbitration a Party may submit the


dispute to conciliation under the Convention by a sole conciliator to be appointed by


agreement 'of the Parties. If the Parties fail to agree on a conciliator in accordance with the


Convention the dispute may be submitted for arbitration. No arbitration proceedings shall be


instituted while conciliation proceedings are pending.








26.6 If the Secretary-General of ICSID refuses to register a request for conciliation or arbitration


or if a tribunal of arbitrators constituted pursuant to Article 26.4 above determines that a


dispute is outside of ICSID’s jurisdiction, either Party may request arbitration of the dispute


before three arbitrators pursuant to the Arbitration Rules of the United Nations Commission


on International Trade Law (UNCITRAL). The American Arbitration Association shall


administer the arbitration under the UNCITRAL Arbitration Rules and shall act as the





appointing authority when the UNCITRAL Arbitration Rules call for an appo.





Guyana Geology and Mines Commission 84


Assistant Commissioner • Petroleum Division





Signature:-


Pate:


26.7 If the Secretary-General of ICSID refuses to register a request for conciliation and neither


party has requested arbitration under the UNCITRAL Arbitration Rules pursuant to Article


26.6 above, either Party may request conciliation pursuant to the UNCITRAL Conciliation


Rules prior to submitting the dispute to arbitration.


26.8 Conciliation or arbitration proceedings pursuant


pouK'iO /nusiowH • •• •nc

Washington DC, United States of America, or Port-of- Spain, Trinidad, and conducted in the


English language. The Parties shall select the locatiopfr om between .the above mentioned


options, and failing agreement between them, the arbitrator(s) shall make such selection in


their stead.





26.9 The fees and expenses of a sole expert or conciliator (as well as the charges for the use of


ICSID or other facilities) shall be borne equally by the Contractor and the Minister. Each


Party shall bear any other expenses it incurs in connection with expert or conciliation





proceedings. In the case of arbitration proceedings, the arbitrators shall assess the expenses


incurred by the Parties, the fees and expenses of the arbitrators, the charges for the use of the


facilities and any other costs related to the arbitration and shall decide by whom such costs


shall be paid. The arbitrator(s) shall render a decision within six (6) months after having


been appointed.








26.10 The decision of a majority of the arbitrators shall be final and bindj


. / a


- shall be enforceable in any court of competent jurisdiction. M


/ A/





| Guyana Geology and Mines Commission


Assistant Coi mrbissioner - Petr, ;oleum Division 85


f Signature


11«: M2


 1


Article 27 - Applicable Law











27.1 This Agreement shall be governed by, interpretedaniGes^med in accordance with the laws


]


of the Cooperative Republic of Guyana.





3








\ -sf \■w/'kj ]


Guyana Geology and Mines Commission \ /


Assistant CcHfTmlssjonar - Petroleum Division


Signature:





1


Date:














/■ ]








n





Article 28 - Protection of the Environment








28.1 In accordance with the Environmental Protection Act, 1996, the Contractor shall obtain an


environmental authorization as required from the Environmental Protection Agency and


comply with the provisions of that Environmental Protection Act in relation to any activity of


this Agreement that is gdvemed by that Environmental Protection Act.


28.2 The Contractor is precluded from initiating any exploration or development activity on those


areas outside of the Contract Area which the Environmental Protection Agency may


determine to be sensitive or protected.





28.3





Contractor shall take necessary and adequate precautions;, in accordance!-with'good


international petroleum industry practice, against pollution and the


environment and the living resources of the rivers and sea.


28.4 If the Contractor's failure to comply with the provisions of Article 28.1 results in pollution or


damage to the environment, riverain or marine life or otherwise, the Contractor shall take all


reasonable measures in accordance with good international petroleum industry practice to


28.5 The Contractor shall notify the Minister forthwith in the event of any emergency or accident


arising from Petroleum Operations affecting the environment and shall take such action as


may be prudent and necessary in accordance with good international petroleum industry


practice in such circumstances.


28.6 If the Contractor does not act promptly pursuant to Article 28.2 so as to control or clean up


any pollution within a reasonable period specified by the Minister, the Minister may, after


giving the Contractor reasonable notice in the circumstances, take any actions which are

















."T-*
































88





! ' '


Article 29 - Termination and Cancellation








29.1 This Agreement shall be deemed to have been terminated if the Petroleum Prospecting


Licence granted to the Contractor pursuant to Article 3 and every Petroleum Production


Licence granted to the Contractor under Article 8 has either expired or, under and in


accordance with the Act and any relevant provision of this Agreement, been surrendered by


the Contractor or lawfully cancelled by the Minister pursuant to section 42 of the Act but


save as aforesaid, shall continue in full force and-effeetsO'longns-the Gontractor.continues to


1 flwfaimmoD ftiy.M bus ysob :,0 zasyiiO f


hold any of the said Licences.








29.2. Should any issue arise between the Parties as to whether the Contractor is in default and such


- issue cannot be amicably settled by consultation between the Parties and a dispute thereon is


, referred for resolution pursuant to Article 26, this Agreement and the said Licences shall


continue in force pending resolution of such dispute.








29.3 Pursuant to section 42 of the Act, the Minister shall not cancel a Licence on the basis of


default unless the Minister has, by notice served on the licensee, given not less than thirty


(30) days notice of such intention and the basis of default. In the notice the Minister shall


specify a reasonable date before which the licensee may submit a written response or remedy


the default.








29.4 On termination of this Agreement, or cancellation of any Licence as aforesaid, the rights and


 termination, or cancellation shall not affect any right of action existing or liabilities incurred





by a Party before the date of termination or cancellation, and any legal proceedings that








mighthave beQM0jftn^TCsa>OT'W^inued against a Party may be commenced or continued


.......WJ&Swx


against it.




















Guyana Geology and Mines Commission


Assistant Commissioner ■ Petroleum Division


Signature:


Date: -tflbU 4- tai ^







































































90


Article 30 - Effective Date











The Effective. Date shall be the date on which this Agreement is duly signed.


30-1




















Guyana Geot and Mines Commission


Assistant issioner - Petroleum Division


S7--


Signature:


Date:











A'dV































































































f :sos

91


 Article 31 - Miscellaneous








31.1 The Government assures the Contractor that the Contract Area lies entirely within the


. territorial limits of Guyana and that Guyana has sovereignty-over such area... The





Government shall continue to assert its right to the entire Contract Area and seek to resolve


current or future claims, if any, by other States that impugn any portion of the Contract Area.


The Government shall also use its best efforts to permit due observance of the erms and


conditions of this Agreement by both Parties. Both Parties undertake not to take any action





inconsistent with the terms and condition's of the Agreement


31.2 This Agreement shall not be amended or modified in any respect except by written





agreement entered into by all the Parties which shall state the date upon which the


amendment or modification shall become effective.








51.3 In the event of any conflict between any provisions in the main body of this Agreement and


any provisions in the Annexes, the provision in the main body shall prevail.





\"Tpe headings of this Agreement are for convenience of reference only and shall not be taken


Ksi


o account in interpreting the terms of this Agreement.





gZaA reference to the singular in this Agreement includes a reference to the plural and vice


versa.








31.6 The provisions of this Agreement shall inure to the benefit of and be binding upon the Parties


and their permitted assignees and successors in interest.





31.7 No waiver by any Party of any one or more obligations or defaults by any other


construed as a waiver of anv other obligations or defaults whether of a lik








Guyana Geology and Mines Commission 92


Assistant Commissionef- Petroteym Division


Signature^,


 i


t











character.





f





v_ 31.8 This Agreement supersedes and replaces any previous Agreement or understanding between





i














L








1 Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division





' Signature: ■■■ < ■ ■ » 7"





r Date:






















































































I


b->























93


Article 12 - Stability of Agreement








32.1 Government shall not, following the Effective Date, unilaterally increase the contractual


obligations of the Contractor under this Agreement or'diminish the contractual rights of the


Contractor hereunder as such obligations and rights exist as of the Effective Date. If any


level of the Government promulgates new or amended laws, decrees or regulations, which


negatively impacts the Contractor’s economic benefits, the Parties shall promptly make


revisions and adjustments to this Agreement as necessary to maintain the Contractor’s




































































94


Article 33 - Notices








33.1 All notices and other communications to be givemunder this Agreement shall be deemed to


have been made properly if delivered in person in writing, mailed with charges prepaid or


sent by facsimile, by one Party to the other at their respective addresses in Guyana as set


forth below and copied to their overseas addresses. Any such notice or communication given


as aforesaid shall be deemed to have been given and received at the time of delivery (if


delivered by hand or by courier) or at the time of receipt (if transmitted by facsimile):





The Minister Responsible for Petroleum


c/o Guyana Geology And Mines Commission


Upper Brickdam, Stabroek,


P.O. BOX 1028, Georgetown,


GUYANA.


Attention: Commissioner, GGMC





Facsimile: 592-225-3047


The Company Secretary/Director


NAJBI OIL AND GAS INC.


c/o Lot 63 Brickdam, Stabroek, Georgetown,


GUYANA


Attention: Rafael S. Nabi





Facsimile: 592-227-1095











Geology and Mines Commission


|. rt-. 1 - . . -■ :?Af . Atar»t Commissioner - Petroleum DWhion


i $


, iqK> j rture:


? inn


_ ^ ^ m _ .......... _ . \ |


95


 Any Party may, by notice as provided hereunder to the other Parties and GGMC change its





address and other particulars for notice purposes.














IN WITNESS wnereoi tne ranies nave caused meir auiy aurnorised. represer


at the City of Georgetown, in the Republic of Guyana in the presence





first above written.








Signed by The Minister Responsible For Petroleum





Representing the Government of the Republic of GuyanX. *'


\




















His Excellency DONALD RAMOTAJR


President of the Republic of Guyana.














Signed by Company Secretary/Director of NABI OIL


AND GAS INC.




















axy Sefcretary/Directbr


S. Na|bi [








Guyana Geology and Mines Commission


Assistant Corhmissioner -.Petroleum Division


A TRUE COPY of the ordinal which Signature: -


was registered in the Deeds Registry of Date: . ---M Jvw


Georgetown, Oe'merara, Guyana on the


Day 96





rio,i NN-


 r





ANNEX A


DESCRIPTION OF PROSPECTING AREA _


L.


Description of area to be granted under Petroleum Prospecting Licence pursuant to Article 3 of the





Petroleum Agreement.


The area comprises approximately 2592 sq. km described herein consisting of graticular blocks identified


herein shown on Block Reference Map attached.





Latitude and Longitude Measurements are North and West respectively.





POINT NO. LATITUDE LONGITUDE


1 06° 50.00' N 58° 10.00'W


2 06° 50.00’ N 57° 55.00'W


3 06° 45.00' N 57° 55.00' W


4 06° 45.00' N 57° 50.00' W


U 5 06° 40.00' N 57° 50.00’W





6 06° 40.00’ N 57° 45.00' W


7 06° 35.00’ N 57° 45.00' W


8 06° 35:00'N 57° 40.00' W


9 06° 30.00' N 57° 40.00' W


10 06° 30.00' N 57° 35.00'W


11 06° 20.00' N 57° 35.00' W


■ :f 12 06° 20.00' N 58° 10.00 'W


- AxTji





k





n j Guyana Geology and Mines Commission





; Asstetant ComrrvrJsfoner - Petroleum Div.i ion


t Signature: s:---_


r


* Date: 'zoi y





i


 DESCRIPTION OF PROSPECTING AREA (CONT’D)





The following five (5) minute by five (5) minute square graticular blocks' describe the area. These blocks





are shown on the Map attached





Block W Full blocks35, 36, 47, 48, 59, 60, 71,72,83, 84,95. 96


BlockX Full blocks 25, 37. 38, 49-51, 61-64, 73-77,85-89 /V '














Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division





Signature:


Date: J L~C-7 u. ■7^1




































































11


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20 40 60


fOH JURTHBR IN IrOftlt A71 OH i


“Si. Karen Livan Commissioner Ag. t


KJtomefei-s Guyana Geology & Minos Commission


upper 8ric'

Scale: 1:1,000,000 ItL: (S92J 226*3047


S’Boara (692)225-2662


PA& 1592) 2274Mi


email: 7.crnm!S3ioaBr@gpmc.^;.0'/


webGiTE: AV/.v.fjgmc gov.gy


























t Signature --------- ■ *- ^


\ *ar>


 •V


\ Guyana Geology and Wines Commission1





Assistant Commissioner - Petroleum Division





t Signature: ---





Pate:


 Section 1








GENERAL PROVISIONS








El Definitions


For the purpose of this Accounting Procedure the terms used herein which are defined in the


Agreement or in the Act shall have the same meaning when used in this Accounting Procedure.








1.2 Documentation Required to be Submitted by the Contractor








(a) The Contractor shall keep the accounts, operating records, reports and statements





relating to the Petroleum Operations:








in accordance with the terms of the Agreement and this Accounting


Procedure; and








in such form as may be agreed from time to time between the Parties which





shall identify the categories of costs, expenses, expenditures and credits


cl assified in Sections 2 and 3 of this Annex.








i - \ j


\ /


‘ VAt^nr Commissioner


/CL) I








ate?


 (b) Pursuant to (a) above, the Contractor shall make quarterly_Statements relating to the


Petroleum Operations including:








r


(i) Production Statement (see Section 5 of this Annex).





cn








(ii) Value of Production and Pricing Statement (see Section 6 of this Annex).


r~.)


ff: '








(iii) Statement of Expenditures and Receipts (see Section 7 of this Annex).








(iv) Cost Recovery Statement (see Section 8 of this Annex).








(v) End-of-Year Statement (see Section 9 of this Annex).








r'- (vi) Budget Statement (see Section 10 of this Annex).











1.3 Language, Units of Account and Exchange Rates











(a) Accounts shall be maintained in Guyanese dollars and United States dollars;


however, the United States dollars accounts will prevail in case of conflict. Barrels


shaill be employed for measurements of production of Crude Oil required under the





r* Agreement and this Annex. Standard cubic feet (scf) shall be employed for





measurements of production of Natural Gas required undpr-the-A-greement and this


r*


Annex. The language employed shalLbe English.


» no, fhf . '$>


-r inovancl Minesc°mmfest°n jj J:


u >TtUr j 1 m \ \


i Guyana Ge0'0S*r petroleUm DNWon V \ :


1 Assistant Comm ■ ■ : >


l Signature: ■


L

Date:


 Should there be any gain or loss from exchange of currency, it will be credited or


charged to the accounts under the Agreement.


(c) (i) Amounts received and costs, expenses and expenditures made in currencies


other than United States dollars and Guyanese dollars shall be converted into


United States dollars by using the relevant cross rate published in the


Exchange Cross Rate table of the Financial Times, London edition, on the


first business day for the Month in which the relevant transaction occurred.


Amounts received and costs; expenses and expenditures made in Guyanese


(ii)


dollars or in United States dollars shall be converted from Guyanese dollars


into United States dollars or from United States dollars into Guyanese dollars


n. on the basis of the average weekly buying and selling exchange rates between


the currencies in question as determined and published by the Bank of


Guyana at the time that the relevant transaction occurred.





The actual exchange rates applied in accordance with sub-section 1.3 (c) (ii)


above and, where relevant, sub-section 1.3 (c) (i) above, shall be identified in


the relevant Statements required under sub-Section 1.2 (a) of this Annex.


 agreed, be made in United States dollars and through a bank designated by the


receiving Party.








(b) All sums due under the Agreement during any Calendar Month shall, for each day


such sums are overdue during such Month, and thereafter, bear interest at the Agreed


Interest Rate.








1.5 Audit and Inspection Rights of Government








(a) The President shall have the right to audit upon ninety (90) days written notice, at his


sole cost and expense, accounts and records of the Contractor, maintained hereunder


with respect to each Calendar Year within two (2) years from the end of each such


Year. For purposes of auditing, the President may audit, examine and verify, at


reasonable times during normal business hours but not more than once per Calendar


Year, all charges and credits relating to the Contractor's activities under the





Agreement and all books of accounts, accounting entries, material records and


inventories, vouchers, payrolls, invoices and any other documents, correspondence


and records necessary to audit and verify the charges and credits. During such annual


audit, examination and verification in respect of each Calendar Year the President


may review items previously subjected to audit in earlier Years but such review shall:








nly be carried out in^prmmction with the annual audit in any given Year;








Assistant Commissioner •


I Signature: ■


i Date: UJ -s u -Ml


 (ii) subject to Section 1.5 (b), no sooner than twelve (12) months following the


previous audit thereof; and





(iii) only be for the purposes of verifying a matter arising in a later period, which





relates to the earlier Year(s) in question or as specified in Section 1.5 (b).








In conducting such audits, the auditors may physically examine at the sole cost and


expense of the President, property, facilities and stocks used in Petroleum Operations





wherever located. Such examinations shall take place at reasonable times during


normal business hours upon fifteen (15) days prior notice.








>Yt the conclusion of each audit, the Parties shall endeavour to settle outstanding


matters and a written report will be issued to the Contractor within sixty (60) days of


the conclusion of such audit. The report shall include all claims arising from such





audit.











The Contractor shall reply to the report in writing as soon as possible and in any event


not later than sixty (60) days following receipt of the report indicating acceptance or


rejection of the audit claim and in the case of a rejection showing explanations


thereof.








Should the President consider that the report or reply requires further investigation on





any item therein, the President shall have the right to conduct a





} Guyana Geology and Mines Commission


Assistant Commissioner etroleum Division m :;eY',wY


^qLy i


ignature: re \ yy.


1 Oate:


 relation to such matter within sixty (60) days of its receipt of Contractor's reply. If


within sixty (60) days of the President's further audit, the President's audit claim is not


settled, the claim shall be submitted to arbitration in accordance with Article 26 of the





Agreement.


All adjustments resulting from an audit agreed between the Contractor and the





President conducting the audit shall be reflected promptly in the accounts by the


Contractor and any consequential adjustments in Crude Oil entitlements shall also be





made promptly.





In the event that an audit claim by the President is not settled to the' President's


; -i


satisfaction by the Contractor's reply as provided for above, the Contractor shall be


$


entitled to recover any disputed amounts pending final resolution of the claim.


However, any subsequent adjustments in the President's share of Profit Oil following








resolution of the claim shall be repaid with interest, at the Agreed Interest Rate as a


first claim from Contractor's share of future Profit Oil. In the event that the





. . v ■„


Contractor's share of Profit Oil is insufficient to provide for the President's extra





Jement including interest, the Contractor shall promptly make an equivalent





t in United States dollars to the President.











ithout prejudice to the finality of matters as described in sub-sections 1.5 (a) and





1.5(b) all documents referred to in those sub-sections shall be maintemC&t





Guyana Geology and Mines Commission | nofreimruoD q ,


Assistant Commissioner - Petroleum Division


Signature:


• / ■


1 Date: *•' 1*«» M- VMM*-* • Vi


’*>-«*<* THO,***r**---,


i


 available for inspection by the President for two (2) years following their date of


issue providing, however, that where issues are outstanding with respect to an audit,





the Contractor shall maintain documents for a longer period until the issues are


resolved. . ... ........ .








(d) The Contractor may require that audits hereunder of accounts and records maintained





by Affiliated Companies of the Operator, other than any Affiliated Company of the


Operator which is conducting a substantial part of the Petroleum Operations on


behalf of the Contractor be conducted either by the Operator's statutory auditors


working under the instruction of the President (provided such appointment is





accepted by the statutory auditors), failing which, by an independent firm of auditors


of international standing to be approved by the President.








, ^Nothing herein above provided shall entitle the President or his auditors to have


\


cess to data and records which:








(i) are subject to statutory restrictions on disclosure; or


(ii) ' do not relate to Petroleum Operations; or





( i i t \ P, TP Y\ Pit PI •Qff' o ri I x d i o n I a c a ri in ondifmrr nroAfiAQ i r~i mt ar-n O +1 /'A O I f-ha info r-rx otiAno 1


V LliJ clx uv/i N-'UtocwjLii.a.i iiy uuciuoou m cluiVAiLiAA^ m xrx'*/ xj-xuv^x xaCalawaxcaa





petroleum industry; provided however, that where the President or his


auditors seek confirmation that charges subject to restricted access under (a),





(b) and (c) above have been properly charged under this Agreement and


Accounting Procedure, they shall be entitled to seek (at their:


f the Contractor or its Affiliated C


Guyana - „,;<«ioner - Petroleum Division


Assistant Comp'IS





1 Signature: , j x


j Guyana Geology and Mines Commission


| Assistant Commiasioner * Petroleum Division





' Signature


 Section 2








CLASSIFICATION, DEFINITION AND ALLOCATION OF COSTS,


EXPENSES AND EXPENDITURES








All costs, expenses and expenditures relating to the Petroleum Operations referred to in Section 3


shall be classified, defined and allocated as follows:


2.1 _ Exploration Costs are all direct and allocated indirect expenditures incurred in the search for


Petroleum in an area, which is or was, at the time when such costs were incurred, in the


Contract Area, including:








yd Aefial, geophysical, geochemical, paleontological, geological, topographical and


'Seismic surveys and studies and then interpretation provided the data relates to the


iA


tL \


Contract Area.








/Core hole drilling and water well drilling.





(c) Labour, materials and services used in drilling Exploration and Appraisal Wells with


the object of finding Petroleum or for the purposes of appraising the extent of


producible reservoirs already disco vered’pfovided such wells, are not completed as





producing wells. {


 (e) All General and Administrative Costs and Annual Overhead Charge and all Service


Costs allocated to Exploration Costs.





(f) Any other Contract Costs incurred in the search for and appraisal of Petroleum after





the Effective Date.








(g) Training Costs set forth in Article 19.3 of the Agreement. , _























2.2 Development Costs shall consist of all expenditures incurred in:





(a) Drilling wells, which are completed as producing wells and drilling wells for


purposes of producing from a producible reservoir whether these wells are dry or





producing, and drilling wells for the injection of water or gas to enhance Recovery of


Petroleum.








(b) Completing wells by way of installation of casing or equipment or otherwise after a


well has been drilled for the purpose of bringing the well into use as a producer or as


a well for the injection of water or gas to enhance recovery of petroleum.








(c) Intangible drilling costs such as labour, consumable material and send


salvage value which are incurred in drilling and deepening of





j"Guyana Commission


< Assistant C<-nunJ#?p>nar - Petroleum Division


, ■ • •

I'd) The costs of field facilities such as pipelines, flow lines, production and treatment


units, wellhead equipment subsurface equipment, enhanced recovery systems,


offshore platforms, petroleum storage facilities, export terminals and piers, harbours


and related facilities and access roads for production activities.


(e) Engineering and design studies for field facilities.


(f) All General and Administrative Costs and .Annual Overhead Charges and all Service


Costs allocated to Development Costs.


2.3 Operating Costs are all expenditures incurred in the Petroleum Operations, which are other


than Exploration Costs, Development Costs, General and Administrative Costs and Annual


Overhead Charge and Service Costs. The balance of General and Administrative Costs and


Service Costs not allocated to Exploration Costs or Development Costs shall be allocated to


Operating Costs.


. m











these are direct and indirect expenditures in support of the Petroleum Operations





including but not limited to warehouses, piers, marine vessels, vehicles, motorised





rolling equipment, aircraft, fire and security stations, workshops, water and sewage





plants, power plants, housing, community and recreational facilities and furniture,





tools and equipment used in these activities and safety and security services. Service





Costs in any. Calendar Year shall include the total costs incurr





operate the same.


nines


- Fetroreii/r* DiAv--


11


(b) All Service Costs will be allocated to Exploration Costs, Development Costs and


Operating Costs in accordance with standard industry accounting practice or on an


equitable basis otherwise agreed between the President and the Contractor.


2• 5 General and Administrative Costs and Annual Overhead Charge


l r*"'r-uA‘a••<»-•» J -•» - . *v/>


(a) General and Administrative Costs afe all general and administrative costs in respect


of the local office or offices including but not limited to supervisory, accounting and


employee relations services, but which are not otherwise recovered.








(b) An Annual Overhead Charge for services rendered outside Guyana and not otherwise


charged under this Accounting Procedure, for managing the Contractor's activities


under the Agreement and for staff advice and assistance including but not limited to


financial, legal, accounting and employee relations services. For the period from the





Effective Date until the date on which the first Petroleum Production Licence under





.Agreement is granted by the President this annual charge shall be two percent





sM?* " (polof the Contract Costs, including those covered in sub-section 2.5 (a), incurred'





J f the Calendar Year. From the date of grant of the Petroleum Production;


Of /fcence the annual overhead charge will be:


three percent (3%) of the first US$5 million of annual Contract Cost, plus two


percent (2%) of the next US$5 million annual Contract Cost, plus one percent (1 %)


of the next US$5 million annual Contract Cost, plus one half of one percent (0.5%)





of the next US$20 million of annual Contract Cost, nt(l%) of annual


Contract Cost in excess of US$35 million.-


----Cornnni^'O


Guyana Geology * petroleurn Division | f


3 \i .ttfMVSS


| Assistant ComntjA'0 ^ .---, { \ "pv:


1 \ . \ / 'A'.)


Signature: \ : “ / /■





12


 (c) All General and Administrative Costs and .Annual Overhead Charge will be allocated


to Exploration Costs, Development Costs and Operating Costs in accordance with





standard industry accounting practice or on artajatu ai/ ba,sis otherwise agreed


between the President and the Contractor/^-














' ■ . A-c'ngy and Mines Commission


Commissioner - Pecroleum Division


































































































13


 Section 3





COSTS, EXPENSES, EXPENDITURES AND CREDITS


OF THE CONTRACTOR





3.1 Costs Recoverable Without Further Approval of the President





Subject to the provisions of the Agreement, the Contractor shall bear and pay the following


costs and expenses in respect of the Petroleum Operations. These costs and expenses will be


classified under the headings referred to in Section 2. They are all recoverable as Contract


Costs by the Contractor under the Agreement.


(a) Surface Rights











This covers all. costs attributable to the acquisition, renewarAr^flW^tti^kfhent of


surface rights acquired and maintained in force for the Contract Area including any


amounts payable pursuant to Article 10 of the Agreement.





(b) Labour and Associated Labour Costs








(i) Gross salaries and wages including bonuses of the employees of the Parties


comprising the Contractor directly engaged in the Petroleum Operations,


irrespective of the location of such employees, it being understood that in the


case of those personnel only a portion of whose time is whollyyd^^qj®d}t^


Petroleum Operations, only that pro-rata portion of appli/g&I


I Guyana Geology and Mines Commission ie charged.


' Wsistanf ComrnKsioner • PctrcMlWgfciWiU







-’ate:


 (ii) Costs regarding holiday, vacation, sickness and disability payments


applicable to the salaries and wages chargeable under (i) above.





(iii) Expenses or contributions made pursuant to assessments or obligations





imposed under the laws of the Republic of Guyana which are applicable to


cost of salaries and wages chargeable under (i) above.








(iv) Cost of established plans for employees' life insurance, hospitalisation,


pensions, and other benefits of a similar nature customarily granted to the


employees of the Parties comprising the Contractor.





A>S R y ,ChK Reasonable travel and personal expenses of such employees including those


/(■v \X\made for travel and relocation of the Expatriate Employees assigned to the





\ Republic of Guyana all of which shall be in accordance with the normal


(ractice of the Parties comprising the Contractor.





Any personal income taxes owing to the Republic of Guyana by employees of


the Parties comprising Contractor and paid or reimbursed by a Party


comprising the Contractor.
































15


 (d) Charges for Services





(i) Third Party Contracts


The actual costs of contracts for technical and other services entered into by


the Contractor for the Petroleum Operations, made with third parties other


than Affiliated Companies of the Contractor are recoverable; provided that


the prices paid by the Contractor are competitive with those generally charged


by other international or domestic suppliers for comparable work and


services.


(ii) Affiliated Companies








Without prejudice to the charges to be made in accordance with sub-section


5, in the case of services rendered to the Petroleum Operations by an


iliated Company, the charges will be based on actual costs without profits,


ie charges will be no higher than the usual prices charged by the Affiliated


^^/Company to third parties for comparable services under similar terms and


conditions elsewhere and will be fair and reasonable in the light of prevailing





international oil industry practice and conditions. The Contractor will, if


requested by the President, specify the amount of the charges, which


constitutes an allocated proportion of the general material, management,


technical and other costs of the Affiliated Company and the amount, which is


y the direct cost of providing the services concerned. If necessary, certified


evidence regarding the basis of prices charged may be





--------™^^^-...---au4ker-S'-0'f;:the“Affili'ated Company in relation theret&i^


Guyana Geology and Mines Commission ^ /k7


Assistant Comnfrts'fionar - Petroleum Division j


Signatur e:«


' Date: 16


 (e) Material








(i) So far as is practicable and consistent with efficient and economical





operation, only such material or equipment shall be purchased or fiimished by


tiie Contractor for use in the Petroleum Operations as may be required for use





in the reasonably foreseeable future and the accumulation of surplus stocks


shall be avoided.





(ii) In case of defective material or equipment, any adjustment received by the





Contractor from the suppliers/manufacturers or their agents will be credited





to the accounts under the Agreement.








(a) Except as provided in (b) below, material purchased by the





Contractor for use in the Petroleum Operations shall be valued to





include invoice price less trade and cash discounts (if any), purchase





and procurement fees plus freight and forwarding charges between





point of supply and point of shipment, freight to port of destination,





insurance, taxes, custom duties, consular fees, other items chargeable





against wifcable, handling and





transpor




















17


 from point of importation to warehouse or operating site, and its costs


should not exceed those prevailing in normal arms length transactions


on the open market at the time of procurement.





(b) Material purchased from Affiliated Companies of the Parties


comprising Contractor shall be charged at the prices specified at (1)


and (2) hereof.





(1) New Material (Condition "A")








Shall be valued at the invoiced price, which should not exceed








the price prevailing in normal arms length transactions on the





open market at the time of procurement.








'* f V »


Used Material (Conditions "B"and "C")








(i) Material which is in sound and serviceable condition





and is suitable for reuse without reconditioning shall





be classified as Condition "B" and at not more than





seventy-five percent (75%) of the new *











Guyana Geoloj


i Assistant Comrr


i Signature:


Hr ' <





18""


 Material, which cannot be classified as Condition "B"





but which


(a) after reconditioning will be further serviceable


for original function as good second-hand


material (Condition "B"), or








(b) is serviceable for original function but not


suitable for reconditioning; shall be classified


as Condition "C" and priced at not more than


fifty percent (50%) of the current price of new


material (Condition "A") as defined in (1)


above. The cost of reconditioning shall be


charged to the reconditioned material provided


that the Condition "C" material value plus the


cost of reconditioning does not exceed the


value of Condition "B" material.








(iii) Material, which cannot be classified as


or Condition “C”, shall be


commensurate with its use.


19





 (iv) When the use of material is temporary and its service





to the Petroleum Operations does not justify the





reduction in price as provided for in (2) (ii) hereof,





such material shall be priced on a basis that will result





in a net charge to the accounts under the Agreement





'''vjptr consistent with the value of the service rendered.








(f) Rentals. Duties and Other Assessments


All rentals, taxes, levies, charges, fees, contributions and any other assessments and


charges levied by the Government in connection with the Petroleum Operations and


paid directly by the Contractor. . , *


(g) Insurance and Losses


Insurance premium and cost incurred for insurance pursuant to Article 20 provided


that if such insurance is wholly or partly placed with an Affiliated Company of the


Parties comprising the Contractor, such premium and costs shall be recoverable only


to the extent generally charged by competitive insurance companies other than an


Affiliated Company of a Party comprising the Contractor. Costs, losses and damages


.incurred to the extent not made good by insurance, are recoverable, including costs,


losses or damages resulting from the indemnities in Article 2





20


 unless such costs, losses or damages have resulted solely from an act of willful


misconduct or gross negligence of the Contractor.





(h) Legal Expenses








All costs and expenses of litigation and legal or related services necessary or


expedient for the procuring, perfecting, retention and protection of the Contract Area


and in defending or prosecuting lawsuits involving the Contract Area or any third


«' party claim arising out of activities under the Agreement or sums paid in respect of


legal services necessary or expedient for the protection of the interest of the Parties-





tire recoverable. Where legal services are rendered in such matters by salaried or


^ /regularly retained lawyers of the Contractor or an Affiliated Company of the Parties


comprising Contractor, such compensation will be included instead under sub-section


guyaH^.


3.1(b) or 3.1(d) above as applicable.





(i) Training Costs








All costs and expenses incurred by the Contractor in training of Guyanese personnel


and such other amounts as may be expended on training under Article 19 of the





Agreement.


I











r


The costs described in sub-section 2.5(a) and the charge described in sub-section


IT 2.5(b).





(k) Pre-Contract Costs





The sum of three thousand United States dollars (US$3,000.) in respect of a!! costs


r incurred by Contractor prior to the Effective Date.





r (l) Interest and Financing Costs








r


L





Interest, expenses and related fees incurred on loans raised by the Parties comprising


the Contractor for Petroleum Operations and other financing costs provided that such


expenses, fees and costs are consistent with market rates.








r




















Commission paid to intermediaries by the Contractor.


(c) Expenditure on research into and development of new equipment, material and


techniques for use in searching for developing and producing petroleum which will


rv-F pfit tn Ppfrnlpnm Onpr^+innQ











(a) ’ With the exception of the sum specified in sub-section 3.1 (k), costs incurred before


the Effective Date.


(b) Petroleum marketing or transportation costs of Petroleum beyond the Delivery Point.


(c) Amounts paid under Article 3.2 of the Agreement, if any, and, subject to Section


3.1(g) any other amounts paid with regard to non-fulfilment of contractual


obligations.


(d) Costs of arbitration and the sole expert in respect of any dispute under the


Agreement.


(e) Fines and penalties imposed by Courts of Laws of the Co-operative Republic of


Guyana.


(g) Costs incurred as a result of willful misconduct or gross negligence of the Contractor


or failure to insure where insurance is required pursuant to the Agreement or where


the Contractor has elected to self-insure.


Other Costs and Expenses














Other costs and expenses not covered or dealt with in the provisions of this Section 3 and


which are incurred by the Contractor in the conduct of the Petroleum. Operations are


recoverable subject to the approval of the President.





Credits under the Agreement





The net proceeds of the following transactions will be credited to the Accounts under the


Agreement and shall reduce the amount of Contract Costs, which the Contractor is entitled to


recover from Cost Oil, by a corresponding amount:


(a) The net proceeds of any insurance or claim in connection with the Petroleum


Operations or any assets charged to the accounts under the Agreement when such


operation or assets ^^g^gs^g^and the premium charged to the accounts under the


Agreement.





1 /


\ 4- \ / 4- ! fcL!na ** «n« 5^53331


\r %'


V f®5"' c°m'f I:


S•.'-’ A? ?’





1 Date; ......... 7-0’ 4


 (b) Revenue received from third parties for the use of property or assets the cost of which


has been charged to the accounts under the Agreement.





(c) Any adjustment received by the Contractor from the suppiiers/manufacturers or their


agents in connection with defective material the cost of which was previously





charged to the accounts under the Agreement.





Rentals, refunds or other credits received by the Contractor which apply to any


charge which has been made to the accounts under the Agreement, including any


costs and expenses previously charged to the accounts pursuant to sub-section 3.1(h)


and which have been successfully recouped from legal proceedings but excluding any





award granted to the Contractor under arbitration or sole expert proceedings referred


to in sub-section 3.3(d) above.





(e) The value at the time of export of inventory materials subsequently exported from the


Co-operative Republic of Guyana without beingfrsdd in the Petroleum Operations.














(f) The proceeds from the sale or exchange by the Contractor of materials, equipment,


plant or facilities, the acquisition costs of which have been charged to the accounts


under the Agreement, including such items sold to the Government; ^____.,T|.


^rgjs





Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division


Commissioner - Pe


Signature:--j- 25


Date:,.


(g) The proceeds, from the sale of Petroleum Data which relates to the Contract Area





provided that the acquisition costs of such rights and information have been charged


to the accounts under the Agreement;











(h) The proceeds derived from the sale or licence of any intellectual property the
































Notwithstanding any provision to the contrary in this Accounting Procedure, it is the


rt-


intention that there slj^iWs^mduplication of charges or credits to the accounts under the


Agreement.





j Guyana Geology and Mines Commission


Assistant Commissioner - Petroleum Division


Signature, IttSSfflr





! Date:

















‘ : '»il.


 Section 4








RECORDS AND VALUATION OF ASSETS








The Contractor shall maintain detailed records of property in use for the Petroleum Operations in


accordance with normal practice in exploration and production activities of the international


petroleupi industry. At annual intervals the Contractor shall notify the President in writing of all





assets acquired and all assets disposed of during the preceding twelve (12) months. At reasonable


intervals but at least once a year with respect to moveable assets and once every three (3) years with


respect to immovable assets, inventories of the property under the Agreement shall be taken by the


Contractor. The Contractor shall give the President at least thirty (30) days written notice of its





intention to take such inventory and the President shall have the right to be represented when such


inventory is taken. The Contractor will state clearly the principles upon which valuation of the


inyeritbt^’.Ms been based. When an.assignrhent of rights under the Agreement takes place a special





l • ......


inventory may be taken by the Contractor at the request of the assignee provided that the costs of


such.inventory are borne by the assignee.





1 yyana Geology and Mines Commission^ i


; sststant C troleum Division a


S ignature:


 Section 5








PRODUCTION STATEMENT





Upon commencement of production of Petroleum from the ContracNilJ^A+t^Orttractor


shall submit a monthly Production Statement to the President showing the following


information separately for each Field and in aggregate for the Contract Area.





(a) The gross quantity of Crude Oil and Natural Gas produced.


(b) The quantities of Crude Oil and Natural Gas used for the purpose of carrying on


Petroleum Operations including drilling and Production Operations and pumping to


Field storage. ■


i :


i


(c) Quantities of Crude Oil-and-Natural Gas lost; -


(d) The quantities of Natural Gas flared.








(e) The quantity of Crude Oil produced and saved.





(f) The quantity of Natural Gas produced and saved.





(g) The quantity of stoc.^r^.Hjde Oil held at the beginning of the Calendar Month in


question. /<&"'■


Guyana Geology and Mines Commission


Assistant Commissioner • Petroleum Division


... , H 28 J Signature:


/ Date: ---


00 The quantity of stocks of Crude Oil held at the end of the Calendar Month in


question.





(i) The number of days in the Month during which Petroleum was produced from each


Field.


(j) The average daily production rate for each Field, calculated in accordance with


Article 11.6 of the Agreement.


j*








Section 6


rn


I





m VALUE OF PRODUCTION AND PRICING STATE


i vs ,





m 6.1 The Contractor shall, for the purposes of Article 13 of the Agreement prepare a statement


I


r providing calculations of the value of Crude Oil produced and saved during each Calendar





m Month for each Field. This statement, which shall be prepared for each quality of Crude Oil


t


produced from the Contract Area, shall contain the following information:








(a) . • The quantities, prices and receipts realised therefor by the Contractor as a result of


; Third Party Sales of Crude Oil made during the Calendar Month in question.


r


I


(b) The quantities, prices and receipts realised therefor by the Contractor as a result of





sales of Crude Oil made during the Calendar Month in question, other than Third


Party Sales.





r? (c) The percentage volume of total sales.


i








P (d) Relevant information available to or obtainable by the Contractor for the purposes of


I Article 13 of the Agreement.


r 6.2 The Value of Production and Pricing Statement for each Calendar Month shall be submitted








 Section 7








STATEMENT OF EXPENDITURE AND RECEIPTS








The Contractor shall prepare with respect to each Calendar Month a Statement of





Expenditure and Receipts under the Agreement. The Statement will distinguish between


Exploration Costs, Development Costs and Operating Costs consistent with the individual





categories specified in Sections 2 and 3 herein and will separately identify major items of


expenditures within these categories. The statement will show the following:











( a) Actual expenditures and receipts for the Month in question.











(b) Cumulative expenditure and receipts for the budget year in qn








(c) Cumulative expenditures and receipts since the Effective Date








(d) Latest forecast of cumulative expenditures to year end.








(e) Variations between budget forecast and latest forecast, with explanations thereof.








The Statement of Expenditure and Receipts for each Calendar Month shall t>


the President no later than thirty (30) days after the end of such Month.








[<3:.,-.f'cilogy and Mines Commission


f As-sista»>« Com ionsr • Petroleum Division





| Si jjoa-tu !*■*■<





Date: 31 J fioHOviv


I . .


i ••











Section 8








COST RECOVERY STATEMENT








8.1 The Contractor shall prepare with respect to each Calendar Month a Cost Recovery


Statement containing the following information:











r (a) Recoverable Contract Costs carried forward from the previous Month, if any.


i


W'


(b) Recoverable Contract Costs for the Month in question.








(c) Total Recoverable Contract Costs, which is that cost at sub-section 8.1 (a) plus that


cost at sub-section 8.1 (b).








(d) Quantity and value of Cost Oil taken and disposed of by the Contractor for the Month


in question.











(e) Contract Costs recovered for the Month in question.





F'«





(f) Total cumulative^amotijit of Contract Costs to be carried forward into the next


Month.








m


Guyana Geology and Mines Commission


Assistant Commi(




Signature:


Date: ...


r i


32


8.2 The information to be submitted under Section 8.1 (d) and (e) above shall be given in





separate statements for each Field, so as to indicate together, the Contractor's total allocation





of Cost Oil as required under Article 11 of the Agreement








8.3 The Cost Recovery Statement to be submitted under sub-section 8.1 shall identify the


unrecovered cost of assets for the purpose of Article 20.1 (a)(iii) of the Agreement.


 Section 9








m. END-OF-YEAR STATEMENT





m


i'; * The Contractor shall prepare an End-of-Year Statement. The Statement will contain aggregated


i • information for the Year in the same format as required in the Value of Production and Pricing


FT] Statement, Cost Recovery Statement and Statement of Expenditures and Receipts but will be based





on actual quantities of Petroleum produced and expenses incurred. The End-of-Year Statement for


pz%


each Calendar Year shall be submittSrK^SYt within one hundred and twenty (120) days of


-r, the end of such Calendar Year, /a?


(


n





A/ j Guyana Geoir r* Mi \ i.)





., ,vv, ,..Y-”VE | Signature:


I Date:




















r:\

















34


 Section 10








BUDGET STATEMENT


10.1 The Contractor shall prepare an annual budget pursuant to Article 7 of the Agreement (the


“Budget Statement”). The Budget Statement will distinguish between Exploration Costs,





Development Costs and Operating Costs consistent with the individual categories specified


in Sections 2 and 3 and will show the following:


(a) Forecast expenditures and receipts under the Agreement for the Calendar Year.


















































30