Environmental impact assessment and management plan
Oranto Petroleum Limited (Oranto) shall submit to the government an Environmental Impact Statement (EIS) prior to the commencement of exploration and production.
The National Oil Company of Liberia (NOCAL) and Oranto shall commission periodic environmental audits as required to ensure compliance with the environmental impact assessment.
Oranto Petroleum Limited (Oranto) will take all the reasonable and practical steps to:
(1) ensure the protection from contamination of strata containing potable or treatable water encountered during its work;
(2) provide an effective and safe method for the discharge or disposal of drill cuttings and drilling muds generated during drilling operations;
(3) provide an effective and safe method for the disposal of produced water and waste lubricating oils generated by its operations;
(4) Control the flow of petroleum so as to prevent avoidable waste and escape to the environment.
Oranto will also carry out all petroleum operations in accordance with the Environmental Protection and Management Laws of Liberia and consistent with good international petroleum industry practice.
Oranto shall take reasonable preventative, corrective and restorative measures to protect from pollution, contamination or damage resulting from petroleum operations to water bodies, land surfaces and the atmosphere, and rectify any pollution, contamination and damage of such water bodies, land surface and atmosphere. Oranto will undertake reasonable efforts to restore the delimited area to a state in which it was before the petroleum operations.
Oranto commits to taking all necessary precautions to prevent marine pollution in Liberian waters in support of petroleum operations. In order to prevent pollution, the National Oil Company of Liberia (NOCAL) and Oranto agree that Oranto shall conduct its petroleum operations consistent with good international petroleum industry practice environmental as may be applicable to prevent pollution and preserve the environment. NOCAL, Oranto and the Environmental Protection Agency shall meet and consider any measure, which may be necessary to preserve the environment.
Oranto Petroleum Limited may take or use the water necessary for the petroleum operations, provided that existing irrigation or navigation are not impaired and that land, house or watering places for livestock are not deprived or a reasonable quantity of water.
After giving Oranto Petroleum Limited (Oranto) notice, National Oil Company of Liberia (NOCAL) shall have the right to cause the registers and accounting books relating to the petroleum operations to be inspected and audited by its own agents or by experts of its election, and shall have a period of 4 months following the end of each calendar year to carry out those inspections or audits. NOCAL may submit its objections to Oranto for any contradictions or errors found during such inspection or audits.
Oranto Petroleum Limited shall pay to the National Oil Company of Liberia the following bonuses:
(a) US$ 3 million when the total production of crude oil from the delimited area first reaches the average rate of 30,000 barrels per day during a period of 30 consecutive days.
(b) US$ 4 million when the total production of crude oil from the delimited area first reaches the average rate of 50,000 barrels per day during a period of 30 consecutive days.
(c) US$ 6 million when the total production of crude oil from the delimited area first reaches the average rate of 100,000 barrels per day during a period of 30 consecutive days.
These bonuses shall be recoverable and shall therefore be treated as petroleum expenditure.
In place of the 15-year period set out in the regular income tax provisions of the Revenue Code for recovering the cost of tangible fixed property and intangible property, Oranto Petroleum Limited (Oranto) shall be entitled to recover the cost of this property on an asset-by-asset basis over a 5 year period at the rate of 20% per year.
For the purposes of determining Oranto’s taxable income, the for carry forward of net operating loss under the regular income tax provisions of the Revenue Code shall begin with the first tax period in which commercial production begins and shall be 7 years rather than 5.
Regardless of the legal form of organization adopted by Oranto, Oranto’s taxable income shall be determined separately for each production sharing contract or other project engaged in by Oranto in
Liberia, and Oranto shall not be permitted to consolidate income or loss of this production sharing contract or other project with that of any other.
The government, through the National Oil Company of Liberia (NOCAL), agrees to expressly exclude Section 3.4 of the Petroleum Law, (Stock Purchase by Liberians), from having any effect on this contract. The government, through NOCAL further waives all rights to require Oranto Petroleum Limited (Oranto) to make available (i) 10% of its stock or shares, and/or (ii) other stock and/or share purchase to Liberian citizens. In the event Oranto becomes a publicly traded company, then Liberian citizens shall have the option to purchase shares of Oranto made available for purchase on the stock exchange upon which Oranto may be listed, subject to applicable laws.
In order to make an impact on the social-economic development of the Liberian citizens, Oranto will make an annual contribution of US$ 1 million during exploitation period into bank accounts held and controlled by NOCAL which shall be used for social service programs such as the construction of schools, hospitals, roads etc. This contribution is in addition to the social and welfare budget payments detailed in Art.29.3. This contribution borne by Oranto shall be included in recoverable petroleum costs. All payments shall be made in accordance with protocols laid down by the Extractive Industries Transparency Initiative.
In accordance with the National Energy Policy, a Rural Energy Fund (REFUND) has been established to integrate renewable energy technologies into rural development. It is the policy of the government that oil resources be used to support the development of renewable energy resources in order to ensure energy security and sustainability upon cessation of petroleum production. Therefore Oranto shall make an annual contribution of US$ 100,000 during exploration and production through NOCAL to the REFUND.
Production Share - "Profit Oil features (triggers for variations in split - IRR, factor, production, etc .)
The quantity of crude oil from the delimited area remaining during each calendar year after Oranto Petroleum Limited (Oranto) has taken from the total production the portion necessary for the recovery of the petroleum costs shall be shared between the National Oil Company of Liberia (NOCAL) and Oranto, on a field by field basis, as follows:
From 0 to 100,000 barrels per day: 35% NOCAL, 65% Oranto
From 100,000 to 150,000: 47% NOCAL, 53% Oranto
Over 150,000: 55% NOCAL, 45% Oranto
In the case of natural gas: 30% of daily gas total production to NOCAL, 70% to Oranto.
Production Share - Cost Oil features (basis of calculation, limits on cost recovery - e.g. as % of revenue or production, capex uplift, etc.)
To recover petroleum costs, Oranto Petroleum Limited (Oranto) each calendar year may take a portion of the production in no event greater than 70% of the total production of crude oil or gas from the delimited area, or only any lesser percentage which would be necessary, to recover remaining cost. If during a calendar year the petroleum costs exceed 70% of the total production of crude oil or total production of gas from the delimited area the balance of the petroleum costs which cannot be recovered in that year shall be carried forward in the following calendar year(s) until full recovery of the petroleum costs or until the expiration of the contract.
Restrictions on transactions with affiliated parties
A project’s gain, loss, and other tax consequences in transactions with related persons are subject to Art. 1.30 and regular income tax provision of the Revenue Code concerning related persons. A transaction with respect to production between Oranto Petroleum Limited (Oranto) and a related person shall be on the basis of competitive international prices and such other terms and conditions as would be fair and reasonable had the transaction taken place between unrelated parties dealing at arms’ length. Oranto must disclose related-party transactions and contemporaneously document the manner in which prices are set in transfers to related persons. Oranto must notarize an agreement governing a related-party transaction in accordance with the law of the related person’s country of residence. The Minister shall follow OECD transfer pricing guidelines in evaluating the validity of the price set in a related party transfer.
Sales in which the buyer is an affiliated company of the seller as well as sales between entities constituting Oranto Petroleum Company will be excluded from the calculation of the market price of crude oil.
The Government, through the National Oil Company of Liberia (NOCAL), agrees to expressly exclude Section 3.7- Royalty as Tax of the Liberian Petroleum Law from being applied to or having any effect on this contract. The government, through NOCAL, further expressly waives any and all rights which require any royalty payment by Oranto Petroleum Limited on the total production of hydrocarbons from petroleum operations.
The government, through the National Oil Company of Liberia (NOCAL), agrees to expressly exclude Section 3.3 The National Oil Company’s Participation in Ownership of the Liberian Petroleum Law from being applied to this contract. The government, through NOCAL further waives any and all rights under the Liberian Petroleum Law, other laws, regulations, rules, orders, or decrees which requires the receipt of any equity interest by NOCAL in capital shares of Oranto Petroleum Company in the petroleum operations.
Oranto Petroleum Limited (Oranto) shall give preference in employment to Liberian nationals provided that they are suitably qualified and available. However, Oranto shall have the right to employ its own key personnel in appropriate positions.
Oranto Petroleum Limited and its subcontractors shall be obligated to give preference to enterprises and goods from Liberia, if conditions of proven experience, price, quality, delivery time and terms of payment are similar to those from other countries or from non-Liberian sources.
Social/human rights impact assessment and management plan
Upon commencement of the petroleum operations, Oranto Petroleum Limited (Oranto) shall provide funding for social and welfare programs in Liberia and for that purpose Oranto shall make an annual social and welfare budget payment directly to the National Oil Company of Liberia (NOCAL) of US$ 150,000 during each year of the exploration period and US$ 250,000 during each year of the exploitation period. This contribution shall be included in recoverable petroleum costs. All payments made under this contract shall be made in accordance with protocols laid down by the Extractive Industries Transparency Initiative (EITI).
Upon commencement of the petroleum operations, Oranto shall provide an annual contribution for training programs and Oranto shall make direct payment to NOCAL of an annual training budget of US$ 125,000 during each year of the exploration period and US$ 175,000 during each year of the exploitation period. Additionally, Oranto shall make an annual contribution of US$ 100,000 to the University of Liberia, paid to directly to NOCAL for subsequent payment to the University of Liberia, for the enhancement of programs in geology, mining engineering, general science and environmental studies.
Oranto Petroleum Limited (Oranto) shall have the right to build, use, operate and maintain all the petroleum storage and transportation facilities which are necessary for the production, transportation and sale of petroleum produced, pursuant to the conditions specified in this contract. Oranto may determine the route and location of any pipeline inside Liberia which is necessary for the petroleum operations, provided that it shall submit plans to the National Oil Company of Liberia for approval prior to the commencement of work.
Oranto is also authorized to build, use and maintain telephone and piping systems on land not belonging to the government, provided that Oranto pays reasonable, mutually agreed upon compensation to the landowners. These costs shall be considered recoverable and treated as petroleum costs
All works and facilities constructed by Oranto shall be built, placed, signaled. marked, fitted and preserved so as to allow at any time and in safety free passage to navigation within the delimited area. Oranto shall, in order to facilitate navigation, install the sound and optical devices approved or required by the competent authorities and maintain them in a satisfactory manner.
If Oranto Petroleum Limited has excess capacity in a pipeline or processing, transportation or storage facility built for the purposes of the petroleum operations, it may be obligated to accept the flow of petroleum coming from third party exploitations, provided that such flow shall not cause prejudice to Oranto’s operations, and provided that a reasonable tariff covering a normal remuneration shall be paid by the user.
To stimulate research in the field of hydrocarbon, most especially in continental areas, and to assist the government in its goal of achieving energy sustainability, a hydrocarbon development fund, to be managed by the National Oil Company of Liberia, has been established. Oranto Petroleum Limited shall make a total contribution of US$ 500,000.
Oranto Petroleum Limited (Oranto), during the first exploration period shall carry out a minimum work program at a cost of no less than US$ 10 million which includes:
(a) 3D Seismic Survey of 1,600 square kilometers
(b) 2D Seismic Survey of 300 kilometers; and,
(c) contingent on a successful 3D seismic acquisition program and subsequent interpretation of the data, Oranto shall make reasonable efforts to drill in the first period. In the event that such a well is drilled in the first exploration period it would satisfy the second exploration period minimum well commitment.
Oranto, during the second exploration period, shall carry out a minimum work program at a cost of no less than US$ 12 million, including a commitment to drill a minimum of 1 exploration well.
Oranto, during the third exploration period, shall carry out a minimum work program at a cost no less than US$ 15 million, including acquisition of 800 square kilometers of 3D seismic data and commitment to drill a minimum of 1 exploration well.
In order to carry out the exploration drilling in the best technical conditions in accordance with good international petroleum industry practice, Oranto shall make the expenditure required to meet the
objectives of the well work program which will include drilling and as appropriate, testing.
For any field in respect of which an exclusive exploitation authorization has been granted, Oranto shall perform, at its sole cost and its own financial risk, all the petroleum operations useful and necessary for the exploitation of the field.
In the event of any dispute between the government or the National Oil Company of Liberia (NOCAL) and Oranto Petroleum Limited (Oranto) relating this contract, the parties shall make their best effort to settle such dispute amicably. If within 3 months from the date of notice of such dispute the parties have not reached settlement, the dispute shall be referred for arbitration to the International Chamber of Commerce in accordance with its rules and regulations. The arbitration shall be held in London in the English language.
The arbitration tribunal's award shall be final. It shall be binding on the parties and shall be enforceable in any court of appropriate jurisdiction. Any party that now or hereafter has a right to claim sovereign immunity for itself waives any such immunity to the fullest extent permitted by the laws of any applicable jurisdiction.
All data, information, documents, reports and statistics including interpretation and analysis supplied by Oranto Petroleum Limited (Oranto) shall be treated as confidential and shall not be disclosed by any party without the express written consent of the other parties within the life of the exploration, appraisal, development, production or exploration authorization period.
This shall not prevent disclosure by the National Oil Company of Liberia (NOCAL) or the government to any government agency or to any advisor or consultant to NOCAL or for the purpose of complying with the government’s international obligations for the submission of statistic and related data.
Oranto may disclose information:
(a) to its affiliates, advisors or consultants;
(b) to a bona fide potential assignee or all or part of Oranto’s interest;
(c) to banks or other lending institutions for the purpose of seeking external financing of costs of the petroleum operations;
(d) to non-affiliates who shall provide services for the petroleum operations, including sub-contractors, vendors, and other service contractors, where this is essential for their provision of services.
(e) to government agencies for obtaining necessary rulings, permits, licenses' and approvals, or as may be required by applicable law or financial stock exchange, accounting or reporting practices
Any party disclosing information or providing data to a third party under these terms shall require those persons to undertake the confidentiality of such data.
This contract is executed and binding between the parties in accordance with the laws and regulations in force as of the effective date and on the basis of the provisions of all laws and regulations regarding the economic, petroleum, fiscal and financial provisions of this contract. This contract may not be amended, cancelled or modified by virtue of the adoption or amendment of any law, rule, order, decree or regulation by the government after the effective date of this contract. It may only be amended or modified by written agreement of all parties to this contract.
In the event of changes in circumstances from those existing at the effective date, that have a significant material effect on the terms of this contract, the parties can consult together. If it mutually established that such profound changes in circumstances have occurred, then the parties shall make such changes to this contract that they mutually agree are necessary. The parties shall meet in good faith to make the necessary revisions and adjustments to the contract in order to maintain such expected economic benefits to each of the parties, provided that the economic benefits to the parties shall not be reduced. The term “profound changes in circumstances" shall mean such changes in the economic conditions of the petroleum industry worldwide or in Liberia or such changes that result in such a material and fundamental alteration of the conditions and assumptions relied upon by the parties at the effective date of this contract to the effect that the overall balance of benefits reasonably anticipated by the parties will no longer be achievable.