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PETROLEUM AGREEMENT


BETWEEN


THE MINISTER RESPONSIBLE FOR


PETROLEUM



REPRESENTING




THE GOVERNMENT OF THE REPUBLIC


OF GUYANA




AND




CGX RESOURCES INC.




















Petroleum Agreement


Government of Guyana- Demerara PA


 TABLE OF CONTENTS


Article 1 - Definitions....................................................................................................................3


Article 2 - Agreement, the Operator, Liabilities and Indemnities...........................................9


Article 3 - Petroleum Prospecting Licence and Guarantee.....................................................11


Article 4 - Exploration Programme and Expenditure Obligation..........................................12


Article 5 - Relinquishment of Areas..........................................................................................15


Article 6 - Delegation; Co-operation between Contractor and GGMC.................................17


Article 7 - Annual Work Programme and Budget...................................................................19


Article 8 - Discovery and Development.....................................................................................20


Article 9 - Records, Reports and Information; Confidentiality.........................../.................22


Article 10 - Annual Licence Rental Charge..............................................................................25


Article 11 - Cost Recovery and Production Sharing................................................................26


Article 12 - Associated and Non - Associated Gas...................................................................28


Article 13 - Valuation of Crude Oil or Natural Gas................................................................32


Article 14 - Disposal of Production!...........................................................................................35


Article 15 - Taxation and Royalty.............................................................................................37


Article 16 - Contracts and Assignments....................................................................................41


Article 17 - Domestic Supply Obligation..................................................................................42


Article 18 - Guyana Resources...................................................................................................45


Article 19 - Employment and Training.....................................................................................46


Article 20 - Rights to Assets and Insurance..............................................................................47


Article 21 - Import Duties..........................................................................................................52


Article 22 - Foreign Exchange Control.....................................................................................53


Article 23 - Accounting and Audits...........................................................................................54


Article 24 - Force Majeure.........................................................................................................55


Article 25 - Assignment........................................................ 57


Article 26 - Sole Expert Determination and Arbitration........................................................58


Article 27 - Applicable Law.......................................................................................................61


Article 28 - Protection of the Environment..............................................................................62


Article 29 - Termination and Cancellation...............................................................................63


Article 30 - Effective Date..........................................................................................................64


Article 31 - Miscellaneous....................................................................................................... 65


Article 32 - Stability of Agreement................................ 66


Article 33 - Notices......................................................................................................................68


Annex A - Description of Contract Area


Annex B - Map of Contract Area


Annex C - Accounting Procedure


Annex D - Pre-Approved and Certified Petroleum Operations Items


Petroleum Prospecting License





i




PETROLEUM AGREEMENT


This Agreement is made on the 12th day February 2013, between the Government


of the Republic of Guyana (the “Government”), represented herein by the Minister Responsible


for Petroleum (hereinafter referred to as the “Minister”) of the One Part





and




CGX Resources Inc. (hereinafter referred to as “CGX” or “Licensee”) a Company incorporated


in the Bahamas with its registered office at Mareva House, 4 George Street, Nassau, Bahamas


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


situated at c/o Luckhoo & Luckhoo, 1 Croal Street, 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 respect to prospecting for and production of


Petroleum, and for matters 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 seised 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;


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


therewith 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) CGX has submitted to the delegatee a proposal (“the proposal”) for a Production Sharing

Agreement in respect of a certain offshore area of Guyana, on terms and conditions


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) CGX 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, CGX 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 thei-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 CGX 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 covenants and conditions herein


contained, IT IS HEREBY AGREED between the Parties as follows:










































































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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


“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 all the


voting shares;


“Agreed Interest Rate” means interest computed on a monthly basis at the rate per annum


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


States dollar deposits, as published by the Wall Street Journal, on the first Business Day


of such month being calculated, plus three (3%) percentage points;


“Agreement” means this Agreement and the Annexes hereto attached and made a part


hereof;


“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;


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


measure, measured at standard conditions of atmospheric pressure and temperature (14.7


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


degrees Fahrenheit or fifteen (15) degrees Celsius);


“Business Day” means a day on which the banks in Georgetown, Guyana are customarily


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Government of Guyana - Demerara PA


open for business.


“Calendar 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 on January 1 and ending on the succeeding December 31 provided however


that a Year of a term of a Licence shall be the period specified in section 2 (2) (b) of the


Act;


r


“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;


“Contractor” means CGX and includes its successors and permitted assignees;


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


“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, 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);


“Delegatee” shall have the meaning as assigned in Article 6.1


“Delivery Point” means in the case of Crude Oil the inlet flange of the lifting tankship; in


the case of Natural Gas shall be the sales point and the point at which custody transfers


from seller to buyer. In the case of LNG sales the Delivery Point shall be


loading flange for the LNG tanker. In the case of pipeline deliveries, the


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Petroleum Agreement


Government of Guyana - Demerara PA


shall be the inlet flange to buyer's pipeline or distribution system, or the inlet to a third


party's pipeline transporting buyer's Natural Gas. The Delivery Point for LPGs shall be


the sales point and the point at which custody transfers from seller to buyer. In the case


of LPG exports, the Delivery Point shall be the inlet loading flange for the LPG tanker or


truck. In the case of pipeline deliveries of LPGs, the Delivery Point shall be the inlet


flange to buyer's pipeline or distribution system, or the inlet to a third party's pipeline


transporting buyer's LPGs; or in any case, such other economically viable point for


export of Petroleum in the 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;


“Discovery Block” means that as defined in the Act;


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


“Effective Date” means the date on which this Agreement comes into force pursuant 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 Annex C;


“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 Petrc


multiple Petroleum Reservoirs all grouped on, or related to, th<


geological structural features or stratigraphic conditions from which


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Petroleum Agreement


Government of Guyana - Demerara PA


 produced commercially;


“General and Administrative Costs” and “Annual Overhead Charge” means the


expenditures so categorised in Annex C;


“Geologic Basement” means any igneous or metamorphic rock or any stratum in and


below 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;


r


“Government” means the Government of the Republic of Guyana and its ministries and


agencies;


“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;


“MCF” means a thousand (1000) cubic feet of natural gas.


“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 or gas well, in their natural state or residue gas remaining


after extraction of NGLs from wet gas. For purposes of this Agreement, Natural Gas


shall also include liquefiable hydrocarbons obtained from Natural Gas by condensation or


extraction, including ethane, propane, butane, pentanes and heaviers (“Natural Gas


Liquids” or “NGLs”). Liquefied methane shall not be considered an NGL, but rather


Natural Gas in the liquid state.


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


“Non-Resident Sub-Contractor” shall mean a Sub-Contractor





management of whose business are exercised outside Guyana.








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Petroleum Agreement


Government of Guyana - Demerara PA


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


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


“Parties” means the Government, CGX 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 CGX for carrying out Prospecting Operations and set forth in


Form C 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 CGX for carrying out Production Operations and set forth


in Form D of the schedule as specified in the Regulations;


“Profit Gas” has the meaning assigned in Article 11;


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


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


“Regulations” means the Petroleum (Exploration and Production) Regulations 1986;


“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 made by (i) Contractor or (ii)


Affiliated Company of Contractor to a third party for an arms-length price which is


disclosed to the Minister.


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





read as part of the provisions of such Licence.


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Petroleum Agreement


Government of Guyana - Demerara PA


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


Contractor shall be read as part of but not nullify the provisions of this Agreement and


any Licence issued to the Contractor.





















































































































































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Government of Guyana - Demerara PA


Article 2 - Agreement, the Operator, Liabilities and


Indemnities





2.1 Agreement


This Agreement constitutes an agreement made under section 10 of the Act consistent


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) CGX 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 comprising the Contractor for the conduct of Petroleum Operations which


will include, inter alia, a provision whereby the Operator agrees to conduct the


Petroleum Operations in accordance with this Agreement, the Licences and any


applicable laws of Guyana.





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.


2.4 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 In


Minister pursuant to Article 11 after title has passed to the Minister at the Deliye





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Petroleum Agreement


Government of Guyana - Demerara PA


 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 indirect, punitive or consequential damages, including but not


limited to, production or loss of profits.





























































































































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


Prospecting Licence may be renewed but not more than twice at the election of


the Contractor for consecutive periods of up to three (3) years each in accordance


with the provisions of the Act and the Regulations.





3.2 Guarantee





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


year one (1) of phase 1 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 (10%) 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 the guarantee by the Minister which is the equivalent of the excess work


previously completed but which is applicable to the subsequent work commitment phase.





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


obligation to provide a guarantee and/or bond pursuant to the Act, Regulations or this


Agreement on the part or on behalf of the Contractor.






































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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


hereunder:-


f


(a) The initial period of four (4) years shall be divided into two (2) phases. Each


phase will consist of twenty-four (24) months duration.


(i) Phase One - (24 months)


During phase one of the initial period, the Contractor shall conduct a new


marine 3D seismic survey consisting of a minimum of one thousand (1,000)


squared kilometers, process and interpret data from same.


(ii) Phase Two - (24 months)


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


Exploration Well in accordance with Article 4.2.


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 fifteen (15%)


percent of the Contract Area and renew the Petroleum Prospecting Licence for a


further period of up to three (3) years.


(b) The first renewal period of three (3) years shall be divided into two (2) phases.


Each phase will consist of eighteen (18) months duration.


(i) Phase One - (18 months)


During phase one of the first renewal period, the Contractor shall commence


to drill one (1) Exploration Well in accordance with Article 4.2.


At the end of phase one of the first renewal period, the Contractor shall 'elect


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


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


contained in any Petroleum Production Licence or commit to the work


programme in phase 2.


(ii) Phase Two - (18 months)





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Petroleum Agreement


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During phase two of the first renewal period, the Contractor shall drill one (1)


Exploration Well in accordance with Article 4.2.


At the end of the first renewal period of three (3) years, the Contractor shall elect


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


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


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


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


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


f


(c) The second renewal period of three (3) years shall be divided into two (2) phases.


Each phase will consist of eighteen (18) months duration.


(i) Phase One - (18 months)


During phase one of the second renewal period, the Contractor shall


commence to drill one (1) Exploration Well in accordance with Article 4.2.


At the end of phase one of the second renewal period, the Contractor shall elect


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


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


contained in any Petroleum Production Licence or commit to the work


programme in phase 2.


(ii) Phase Two - (18 months)


During phase two of the second renewal period, the Contractor shall drill one


(1) Exploration Well in accordance with Article 4.2.


At the end of the second renewal period of 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 conduct further exploration


activities.





(d) The 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. Contractor may conduct additional work beyond


commitment in accordance with the terms and conditions


which shall be subject to Cost Recovery.


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(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 or formation agreed with the Minister and specified in the annual work


programme, or before reaching such depth or formation:


(a) 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


(b) the Geologic Basement is encountered; or


(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 if the said


Well is abandoned owing to the said problems before reaching the Geologic


Basement, the 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 or one of the criteria listed at Articles 4.2 (b) to (d) is


satisfied.


4.3 Expenditure Obligation


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


shall be deemed to have satisfied the Contractor's minimum expenditure obligation for


that phase or period. For the avoidance of doubt, in the event the Contractor has


performed its work obligation(s) for an amount less than the amount specified in an


annual work programme and budget submitted under Article 7, Contractor shall be


deemed to have fulfilled its expenditure obligation for that phase or period. -





























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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 fifteen percent (15%) 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 j,under section


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


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


less the exclusions provided for in Articles 5.3


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








(a) comprise Blocks, as defined in the Act;





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


surrounding the Discovery Area;


(c) exclude any Production Area;





(d) be selected by Contractor so that:





(i) the area relinquished shall comprise one (1) discrete area, subject to


Minister’s discretion with respect to location, shape and size;


(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 relinquishment 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 unlicensed


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 receiving notice of the Contractor’s proposed relinquishments the


Parties cannot agree on a proposed relinquishment, the Parties 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 notifieci-tg%Mku^te;





7


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\* -to /


 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 extent) of another


subsisting Discovery Area.





5.6 If a Petroleum Prospecting Licence ceases to have effect with respect to Discovery


Blocks pursuant to section 32 (1) of the Act, such reduction in size of the Contract Area


shall be treated as an advance relinquishment under this Article and shall reduce the area


next required to be relinquished accordingly.


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


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 case may


be.






















































































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Article 6 - Delegation; Co-operation between Contractor and


GGMC








6.1 For the purposes of this Agreement, the Delegatee of the Minister shall be GGMC. The


Minister may, however , 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;


(c) to review any Development Plan submitted by the Contractor in connection with


an application for a Petroleum Production Licence pursuant to section 34 of the


Act;


(d) to ensure the maintenance and availability for inspection of operating records and





reports for Petroleum Operations in accordance with this Agreement;


(e) 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.





6.3 The Contractor and the delegate shall co-operate in good faith in the exercise of the


Minister’s functions delegated pursuant to this Article and the Contractor shall keep the


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


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 deje,


wish to make any specific proposals or revisions thereto, the delegate shall


Contractor specifying its reasons therefor; within reasonable time ti





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Petroleum Agreement


Government of Guyana - Demerara PA


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


revisions. The Contractor shall consider and take into account the proposals of the


delegate and shall attempt in good faith to reach agreement on such proposals. If the


Contractor and the delegate fail to agree within 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.


r


6.5 Nothing herein above provided shall preclude the right of the Minister to delegate any


additional function to the delegate or subject to Article 6.1 to delegate from time to time


any 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 Minister 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;





(c) approvals for security for field operations and personnel;


(d) permission for entry and exit visas and working permits for Contractor’s


employees, subcontractors and their dependents;





(e) supply reports, analyses, samples, geological, geophysical and production data


necessary to Contractor from areas inside and outside the Contract Area;





(f) approvals to export hydrocarbons, and use essential infrastructure necessary,


the economic export of hydrocarbons at normal commercial terms.








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Petroleum Agreement


Government of Guyana - Demerara PA


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;


(c) any proposed amendment shall be subject to review pursuant to Article 6.



























































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Petroleum Agreement


Government of Guyana - Demerara PA


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 to 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 License.





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 Production


Licence, the Contractor shall in consultation with GGMC, prepare and implement a


programme for training and 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.


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


or where the Minister fails to respond to or act on the aforesaid application within sixty


(60) days, the Contractor may refer the matter to a sole expert pursuant to Article 26 for


determination within sixty (60) days of appointment of such expert or such other , time


period as may be agreed between the Contractor and the Minister.





8.6 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


to Article 26 that the Contractor has made an application which meets tl





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Petroleum Agreement


Government of Guyana - Demerara PA


 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


made on terms and 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. In the event the Minister imposes policy-based


production limits on production below those consistent with maximum efficiency rates


for the field or fields, any such production limits will be imposed countrywide and shall


be allocated proportionately based upon demonstrable, verifiable field production


capacities.





8.7 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.


8.8 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.


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


maximum ten (10) years. The application for renewal shall be granted as long as the


Contractor is in good standing under the Licence.





(a) Natural Gas. In the event of any Non-Associated Gas discovery within the


Contract Area, in recognition of the fact that Natural Gas projects generally have


much longer lead times from discovery to first commercial production than is the


case for Crude Oil projects, the Minister shall grant Contractor’s request for the


maximum ten (10) year Petroleum Production License renewal so long as


Contractor is in good standing under the Licence.





(b) 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;





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








(ii) Ninety (90) calendar days following the date of the notice


Article 8.9(b)(i) to respond to or remedy the stated grounds








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Petroleum Agreement


Government of Guyana - Demerara PA


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.


(c) 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 appointed representatives, upon providing the


Contractor 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.











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Petroleum Agreement


Government of Guyana - Demerara PA


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 deal with such Petroleum Data or to disclose the same or


the contents thereof to any other person without the consent in writing of the other


Parties, such consent not to be 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 or employees of an Affiliated Company;





(bb) to consultants, professional advisers, data processing centres,


laboratories and Sub-Contractors where disclosure is essential to


work for Contractor;


(cc) to a bank or other financial institution where disclosure is essential





‘ to work or financing for Contractor or Affiliated Company of


Contractor;





(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, or by governmental order, decree,


regulation or rule, or to the extent required under any legal


proceeding or any court order binding on Contractor or Affiliated


Company of Contractor;


(ee) to bona fide prospective assignees or transferees of an interest





hereunder of the Contractor or in connection with merger,


consolidation, or 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 or


Affiliated Company 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 or


Company; /, Or---'











Page 23





Petroleum Agreement


Government of Guyana - Demerara PA


 (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 obligation hereunder with


respect to any petroleum data, information or reports which are, without


disclosure by such Party, generally known to the public.





(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.





(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


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 subject however to Article 9.2 (b).





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


shall 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 as Recoverable Contract Cost under this Agreement, shall remain the


property of the Contractor.



































Page 24





Petroleum Agreement


Government of Guyana - Demerara PA


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 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 pursuant to Article 5 as specified below. Payments under this


Article 10 shall be paid difectly into bank accounts held and controlled by GGMC. Contractor


shall verify such bank accounts and GGMC agrees to cooperate, assist and provide Contractor


any information it requires to conduct such verification.


Initial Period: US$100,000


First Renewal Period: US$100,000


Second Renewal Period: US$100,000




























































































Page 25





Petroleum Agreement


Government of Guyana - Demerara PA


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 and/or Cost Gas 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 from the value, determined in accordance with Article 13, of a volume of


Crude Oil (hereinafter referred to as “Cost Oil”) and/or Natural Gas r(“Cost Gas”)


produced and sold from the Contract Area and limited in any Month to an amount which


equals seventy-five percent (75%) of the total production from the Contract Area for such


Month excluding any Crude Oil and/or Natural Gas used in Petroleum Operations or


which is lost.


“Recoverable Contract Costs” means such costs as the Contractor is permitted to recover,


as from the date they have been incurred, pursuant to the provisions of Annex C.


11.3 To the extent that in any Month, Recoverable Contract Costs exceed the value of Cost Oil


and/or Cost Gas determined in accordance with Article 13 and/or Article 12, the


unrecoverable amount shall be carried forward and, subject to the limitation stipulated in


Article 11.2, shall be recoverable in the immediately succeeding Month, and to the extent


not then recovered, in the subsequent Month or Months.


11.4 The balance of Crude Oil and/or Natural Gas available in any Month after Recoverable


Contract Costs have been satisfied to the extent aforesaid (hereinafter referred to as


“Profit Oil” and/or “Profit Gas” as the case may be) shall be shared, between the


Government and the Contractor for each Field in the following proportions: Profit Oil,


Minister fifty-three (53%) and Contractor forty-seven percent (47%) and; Profit Gas,


Minister fifty-three (53%) and Contractor forty-seven (47%) or as otherwise negotiated


pursuant to Article 12


11.5 The quantity of Cost Oil and/or Cost Gas 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 and/or Profit Gas shall be shared


between the Government and Contractor on a Monthly basis according to their respective


entitlements as set out in Article 11.4.





11.7 To the extent that the actual quantities and costs required to determine Cost Oil and/or


Cost Gas and Profit Oil and/or Profit Gas for the Month in question are not kno\


Oil and/or Natural Gas sharing shall be calculated on an interim basis each





Page 26





Petroleum Agreement


Government of Guyana - Demerara PA


 the following:





(a) unrecovered Recoverable Contract Cost;


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


programme and budget supplemented by any other relevant documents or


information which are accepted by Contractor and Minister as being reliable


indicators of the actual position for the Month in question;


(c) estimated production for the Month in question;


(d) Crude Oil and/or Natural Gas price from the previous Month calculated.


11.8 Retroactive adjustments shall be made to the Crude Oil and/or Natural Gas entitlements


and shall be agreed with the Minister based on recalculations utilizing actual quantities of


Crude Oil and/or Natural Gas 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.


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


production as may reasonably be required by it therefor and the quantities so used or lost


shall be excluded from any calculations of Cost Oil and/or Cost Gas and Profit Oil and/or


Profit Gas entitlement.
























































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Petroleum Agreement


Government of Guyana - Demerara PA


 Article 12 - Associated and Non - Associated Gas.





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 study of the utilisation of the excess Associated Gas


of such Oil Field, such further feasibility study shall be submitted to the GGMC


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 Contractor believes 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.





(d) If the Contractor does not believe that the Associated Gas has commercial value,


but the Minister believes the Associated Gas does have commercial value, the


Government may utilize the Associated Gas 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 Government and will not


affect the amount of Cost Oil and Profit Oil due to Contractor.





(e) Expenses incurred by the Contractor in the production and use of the Associated-.;


Gas of an Oil Field as stipulated in Article 12.1 and those incurred in ce


any feasibility study on the utilisation of the excess Associated Gas








Page 28





Petroleum Agreement


Government of Guyana - Demerara PA


 charged to the development cost of the Oil Field and shall be cost recoverable.


(f) 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.





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 is of potential


commercial interest, the Contractor shall inform the Minister whether Contractor


believes such discovery is potentially commercial under the current Agreement


terms. If the Contractor believes that the fiscal terms will have to be revised in


order to economically commercialize the Non-Associated Gas discovery, the


Contractor shall propose revisions to the fiscal terms as the basis for entering into


good faith negotiations to reach mutually acceptable terms for developing the


Non-Associated Natural Gas discovery. The agreement, which shall form an


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


(i) For a period of six (6) months from the date of the notice delivered to the





Minister under Article 8.2, the Contractor and the Minister shall engage in


good faith negotiations of such revisions to Article 11 that would be


necessary in order to provide the Contractor with project economics that


will provide the Contractor with a rate of return of not less than sixteen


percent (16%). The Parties recognize that in order to achieve an


economically viable development of Non-Associated Natural Gas,


different fiscal regimes may have to be considered. In the event the


Parties cannot agree upon the necessary revisions to Article 11, a sole


expert shall be engaged pursuant to Article 26.3. Once the sole expert


renders its decision, the Contractor shall review the decision and shall


notify the Minister as to whether it shall proceed with the development of


the Non-Associated Gas discovery under the terms of the sole expert


decision. In the event the Contractor elects not to proceed, the Contractor


shall relinquish the non-Associated Gas discovery to the Government.





(ii) The time period between the notice of discovery 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, as agreed between the Parties, to


conduct an Appraisal Programme, develop a Gas market, and design and


construct facilities necessary to commercialize the Natural Gas^^pS











Page 29





Petroleum Agreement


Government of Guyana - Demerara PA


 (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 and shall be cost


recoverable as permitted under the terms of Annex C.





(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.^





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


Period pursuant to Article 12.2, 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 two hundred


thousand United States Dollars (US$200,000). The holding fee shall be refunded


to Contractor 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.





12.3 General Conditions Applicable to Natural Gas


(a) Subject to the Government’s election to take its production in kind and reserving





its rights to market its own production, the Contractor shall have the sole


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 Minister and the Contractor in accordance with Third


Party Sales principles. 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’ 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. Natural Gas Liquids (NGLs) recovered and sold shall


be valued based upon the international value of such products as published in


Platts and adjusted to reflect the fair market value of such products FOB Guyana.


In addition, the Contractor shall have the right to liquefy the Natural Gas^


as LNG and/or the right to compress the Natural Gas to accommoda








Page 30





Petroleum Agreement


Government of Guyana - Demerara PA


compressed natural gas (CNG).


(c) The Contractor shall have the right to use Natural Gas, both Associated Gas and


Non-Associated Gas, as may be required for Oil Field and Gas Field operations,


including the right to re-inject for pressure maintenance and enhanced recovery


without charge, fee or royalty.


12.4 General Conditions Related to Petroleum Operations


(a) Subject to the approvals of appropriate governmental authorities, which approvals


shall not be unreasonably withheld, the Contractor shall haver the right to


construct, operate and maintain roads, drill water wells and to place and/or


construct fixtures and installations necessary to conduct the Petroleum


Operations, including but not limited to, storage tanks, trunk pipelines, shipment


installations, pipelines, cables or similar lines, liquefaction, processing and


compression, located inside or outside the Contract Area, as well as construct,


operate and maintain or lease facilities for the transportation of Crude Oil and


Natural Gas from the Contract Area. Any required governmental approvals may


be conditional on the use by other producers of the excess capacity, if any, of


those facilities. Where the Minister and Contractor agree that a mutual economic


benefit can be achieved by constructing and operating common facilities, the


Contractor shall use its reasonable efforts to reach agreement with other producers


on the construction and operation of such common facilities.


(b) Subject to negotiations on a reasonable price and available capacity rights, the


Contractor may have access to and use of any export facility or pipeline or other


facilities or infrastructure built by the Government or by any wholly or partially


owned Guyana state enterprises on terms no less favorable than those of any other


party having access or use of such facility.


(c) Subject to negotiations as to a reasonable price and ownership interest in the


facilities, the Contractor may have the right to participate in the construction,


ownership and operation of any of the types of facilities described in sub-clause


12.4(a) above that are built by the Government or by any wholly or partially


owned state enterprises or by any third parties on terms no less favorable than


those of any other party participating therein.


























Page 31





Petroleum Agreement


Government of Guyana - Demerara PA


Article 13 - Valuation of Crude Oil or Natural Gas








13.1 For the purpose of this Agreement the value of a Barrel of Crude Oil or an Mcf of Natural


Gas 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 or


Natural Gas has been produced and sold from any Field pursuant to this


Agreement, an average price (in terms of United States dollars per Barrel or Mcf,


FOB, Delivery Point) for each Field shall be determined in respect of production


during that Calendar Month. It is understood that production from different


Fields may be of differing quality and that 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 or Natural Gas


of a given quality produced hereunder from a Field were Third Party


Sales, as hereinafter defined, the price of all Crude Oil or Natural Gas


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 or Mcfs of Natural Gas 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 or Natural Gas


of a given quality produced hereunder from a Field were Third Party


Sales, the price of all Crude Oil or Natural Gas from such Field of that


quality will be determined by the arithmetic average of:


(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


Month in which production takes place of the mean of the/mglt^dnd''" '"-





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Petroleum Agreement


Government of Guyana - Demerara PA


 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 wilbalso 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





Minister in advance for each Calendar Year and in making the


selection preference will be given to cmde oils of similar quality to


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.


(cc) In the case of Natural Gas, the Contractor and the Minister shall


agree on a methodology for valuation of Natural Gras under this


Article 13.1 (b)(ii) which represents the fair market value of such


Natural Gas FOB Guyana, taking into account composition of the


Natural Gas. This methodology will be reviewed annually and


modified if necessary.





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


(IV) for the purposes of this Article Third Party Sales of Crude Oil or Natural


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


the Contractor or an Affiliated Company of 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 (for example where an Affiliate

















Petroleum Agreement


Government of Guyana


 (bb) Crude Oil or Natural Gas exchanges, barter deals or restricted or


distress transactions, or any Crude Oil or Natural Gas transaction


which is motivated in whole or in part by considerations other than


the usual economic incentives for commercial arms length crude


oil or natural gas sales; and





(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 or


Natural Gas price shall be used.


13.3 During the first Calendar Year of production from the Contract Area the Contractor and


the Minister will meet in order to establish a provisional selection of the crude oils and an


appropriate 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 or natural gas, the calculation or the basis of


calculation of the prices and the prices 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 including but not limited to gravity, sulphur and


metal content, pour point and product yield. In the case of Natural Gas, quality of the


Natural Gas shall be determined based on its composition.












































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Petroleum Agreement


Government of Guyana - Demerara PA


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 Government is entitled pursuant to Article 11 shall be measured


and delivered to the Government at the Delivery Point and the Government shall be


responsible for all costs and risks associated with the Government'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) months before the first scheduled lifting of Crude Oil, the Contractor shall propose to


the Minister offtaking procedures to govern the method whereby the Parties will


nominate and lift their respective shares of Crude Oil. The details of such procedures


shall be discussed' and 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


forthwith notify the other Parties to that effect. Such procedures shall include


such deterrents as the 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.





14.3 The Contractor shall, if requested by the Minister, use reasonable efforts to market


abroad on competitive terms all or part of the Minister's Lifting Entitlement subject to


payment by Minister of costs normally borne by a seller in such transactions and on other


terms to be 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 seeking the Conft»etw-4a^


market the Minister’s Lifting Entitlement under this Article.


/*y -





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Petroleum Agreement ■


Government of Guyana - Demerara PA


14.4 Subject 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 Agreement free of any duty, tax or other financial impost, and to receive and


retain abroad all proceeds from the sale of such Petroleum.


14.5 The Contractor agrees to abide by the laws, regulations, orders, directives and


notifications of Guyana which shall also apply to its Affiliated Companies engaged in


Petroleum Operations in Guyana.








































































































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Petroleum Agreement


Government of Guyana - Demerara PA


Article 15 - Taxation and Royalty





15.1 Subject to Article 32, and except as provided in Article 15.2, 15.8, and except as


otherwise set forth in this Article 15.1, no tax, value-added tax, excise tax, duty, fee,


charge or other impost shall be levied at the date hereof or from time to time thereafter on


the Contractor or Affiliated Companies in respect of income derived from Petroleum


Operations or in respect of any property held, transactions undertaken or activities


performed 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 income derived from specific services


performed by the Contractor for the public or commercial enterprises and which is


unrelated to income derived from Petroleum Operations under this Agreement;


(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) under laws of general application and which


are non-discriminatory, are commercially reasonable, and do not result in a rate or


tax to Contractor in excess of those generally applicable in Guyana;


(f) (i) stamp duties, (ii) registration fees, (iii) licence fees, and (iv) any other similar


duty, fee or other impost of a minor nature, provided the above-referenced


categories are imposed under laws of general application.


15.2 Except as provided in this Article 15, 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 the requirements of those laws, in


particular with respect to filing returns, assessment of tax, and keeping and showing of


books and records.


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.














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Petroleum Agreement


Government of Guyana - Demerara PA


 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


(b) 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 as payment in full by the Contractor of Contractor's share of each of the


following levies, whatsoever the applicable rate of such levies mayr 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;





(ii) 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 other levy or


charge on income or profits which may become payable from time to time


under any 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-b).





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 (a). 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 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 individually on behalf of Contractor or


parties comprising the Contractor and other particulars customary for such certificates.





15.6 The Government's share of Profit Oil specified in Article 11 includes royalty payable by


the Contractor at the rate of one percent (1%) of Crude Oil produced and


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








Page 38





Petroleum Agreement


Government of Guyana - Demerara PA


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


(180) days following the end of each year of assessment receipts evidencing payment of


Contractor's royalty shall be furnished by the Minister to the Contractor stating the


amount and other particulars customary for such receipts.


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.


15.10 Notwithstanding any provision to the contrary in this Article, Contractor, Affiliated


Companies or Non-Resident Sub-Contractors shall be exempt from VAT during the


Exploration Period on services rendered.


15.11 Notwithstanding any provision to the contrary in this Article, the Government warrants


and agrees with the Contractor that it will procure from the Guyana Revenue Authority


(GRA) the granting of assurances in respect to the Value Added Tax Act for;


(i) The Contractor and Sub-Contractors of the company to be registered in


accordance with the relevant sections of the Value Added Tax Act; and


(ii) Upon the submission and fling of the appropriate Value Added Tax Return within


the prescribed timeframe Contractor and Sub-Contractors shall have the right to


obtain Value Added Tax refunds according to the applicable Value Added Tax


Regulations.


15.12 The Minister agrees that for the duration of the Exploration Period, and for any area


within the Contract Area where exploration activity is in progress, the provisions of


section 10(b) of the Corporation Tax Act (Cap 81:03), including any successor provisions


to section 10(b) of the Corporation Tax Act (Cap 81:03), shall not apply to the


Contractor, with respect to any payments made to any Affiliated Companies or Sub-


Contractors.


Notwithstanding any provision to the contrary in this Article, Affiliated Companies or


Non-Resident Sub-Contractors shall not be subject to the provisions of the Income Tax


Act of Guyana (Cap. 81.01) and the Corporation Tax Act of Guyana (Cap 81:03) during


the Exploration Period on income earned in Guyana for any given





Page 39





Petroleum Agreement


Government of Guyana - Demerara PA





\


Affiliated Company or Non-Resident Sub-Contractor has conducted business in Guyana


for one hundred eighty three (183) days or less on a cumulative basis in the tax year of


assessment.


15.13 There shall be no tax, duty, fee, withholding, charge or other impost applicable on


interest payments, dividends, deemed dividends, transfer of profits or deemed remittance


of profits from Contractor’s, Affiliated Companies’ or Non-Resident Sub-Contractors’


branch in Guyana to its foreign or head office or to Affiliated Companies.


15.14 The Minister agrees that for the duration of the Exploration Period, and for any area


within the Contract Area where exploration activity is in progress, the provision of


section 18(h) of the Income Tax Act (Cap. 81:01) including any successor provisions to


section 18 (h) of the Income Tax Act (Cap.81:01) shall not apply to Contractor or parties


comprising the Contractor, with respect to head office expenses paid to any Affiliate


Companies.


15.15 The Expatriate Employee of the Contractor, Affiliate companies and the Subcontractor


shall 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;


(ii) Notwithstanding any provision to the contrary in this Article, Expatriate


Employees of Contractor, Affiliated Companies or Non-Resident Sub-Contractors


shall not be subject to the provisions of the Income Tax Act of Guyana (Cap.


81.01) and shall not be liable for personal income tax in Guyana on income


earned in Guyana for any given tax year if the expatriate is physically present in


Guyana for one hundred eighty three (183) days or less on a cumulative basis in


the tax year of assessment.


15.16 Notwithstanding any provision to the contrary in this Article, assignments of any kind


between Contractor and Affiliated Companies, as well as any assignment of any kind


made in accordance with this Agreement (even to an unrelated party) a sum of


US$100,000 shall be paid to the GGMC. The transaction related to any assignment


hereunder shall be exempt from any duties or taxes, including income tax, capital gains


tax and withholding tax, payable in respect of the assignment.


Article 16 - Contracts and Assignments


16.1 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;


t


(c) any instrument by which the Contractor pledges, mortgages, encumbers or


hypothecates its interest under this Agreement or the Contract Area.


16.2 Assignments of any kind between one party comprising Contractor and its Affiliated


Company, as well as any assignment of any kind made in accordance with this


Agreement (including one to an unrelated party) shall be exempted from any duties or


taxes, including income tax, capital gains taxes and withholding tax payable in such


respect but shall be subject to a fee payable to GGMC upon approval of the assignment


for the amount of one hundred thousand United States Dollars (US$100,000).



























































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Petroleum Agreement


Government of Guyana - Demerara PA


 Article 17 - Domestic Supply Obligation





17.1 Terms for Crude Oil.


(a) If the Crude Oil requirements of the domestic market in Guyana (the “Crude Oil





Domestic Demand”) exceed the Minister's total entitlement from all Crude Oil


production in Guyana, then the Contractor shall be obliged together with any third


parties which produce Crude Oil in Guyana, to supply and sell a volume of Crude


Oil to be used for such Crude Oil requirements in Guyana, calculated on the basis


of the ratio which the Contractor's Lifting Entitlement to Crude Oil bears to the


sum of Contractor's Lifting entitlement plus the total entitlement of all other


producers in Guyana subject to Article 17.1(c). 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.


For the purpose of this Agreement, Crude Oil Domestic Demand shall consist of


those quantities of Crude Oil (i) used to produce refined products or


petrochemicals in Guyana for end use by business and residential consumers in


Guyana, or (ii) used to produce power in Guyana for end use by business and


residential customers in Guyana, the amounts for which shall be based upon


independent, verifiable government statistics. Crude Oil, refined products,


petrochemicals or fuel for power generation that are exported from Guyana shall


not be considered part of Crude Oil Domestic Demand.





(b) 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


contract entered into prior to the date of commencement of production from the


Contract Area. For the purpose of this paragraph, the term ‘‘the Crude Oil


requirements of Guyana” means the amount by which, in any Year, Crude Oil


Domestic Demand exceeds the Minister's total entitlement to all Crude Oil


produced in Guyana. The Contractor shall give the Minister notice on or prior to


April 1 of the Calendar Year 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 unless otherwise agreed. Notwithstaru;


foregoing the Contractor shall have the right to supply the total amoi


pursuant to the foregoing provisions.














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Petroleum Agreement


Government of Guyana - Demerara PA


 (c) 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, failing which


Contractor’s obligations in respect of the Domestic Supply Obligations of this


Article 17 shall be suspended until payment is made good, at which time


deliveries shall be resumed subject to any alternative commitments that may have


been reasonably entered into by Contractor to dispose of the Crude Oil during the


period of default in payment. Contractor shall recover any amount due and


unpaid by the Government, plus interest at the Agreed Interest Rate, from the


Governments Lifting Entitlement of Crude Oil. r


(d) Any sale of Crude Oil as provided for in Article 17.1(a) - (c) shall occur at the





Delivery Point or such other point as the Minister and the Contractor may


mutually agree.


(e) 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.





17.2 Terms for Natural Gas.





(a) If the Natural Gas requirements of the domestic market in Guyana (the “Natural


Gas Domestic Demand”) exceed the Minister's total entitlement from all Natural


Gas production in Guyana, then the Contractor shall be obliged together with any


third parties which produce Natural Gas in Guyana, to supply and sell a volume of


Natural Gas to be used for such Natural Gas Domestic Demand in Guyana,


calculated on the basis of the ratio which the Contractor's Lifting Entitlement to


Natural Gas bears to the sum of Contractor's Lifting entitlement plus the total


entitlement of all other producers in Guyana subject to Article 17.2(c). The


volume of Natural Gas which the Contractor shall be required to sell under this


Article shall not exceed the Contractor's share of Profit Gas. 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.





For the purpose of this Agreement, Natural Gas Domestic Demand shall consist


of those quantities of Natural Gas used for domestic residential, commercial and


industrial consumption, including fuel used for domestic power generation.


Natural Gas liquefied or compressed in Guyana for export or used as feedstock


for petrochemical exports, such as methanol and fertilizer, shall not be considered


part of Natural Gas Domestic Demand.





Any sales of Natural Gas to the domestic market shall be priced at eight


(80%) of No. 6, 1% low sulphur fuel oil price per MMBtu as publish








Page 43





Petroleum Agreement


Government of Guyana - Demerara PA


 for U.S. Gulf Coast FOB cargoes, plus freight to Georgetown. In the event of a


failure to reach agreement on the price, volume and/or terms of sale, either Party


may submit the dispute for sole expert determination pursuant to Article 26.3.


(b) The Contractor shall, in any Year, have a right to supply out of Contractor's





Lifting Entitlement the proportion of the Natural Gas 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


contract entered into prior to the date of commencement of production from the


Contract Area. For the purpose of this paragraph, the term “the Natural Gas


requirements of Guyana” means the amount by which, in any Year, Domestic


Demand exceeds the Minister's total entitlement to all Natural Gas produced in


Guyana. The Contractor shall give the Minister notice on or prior to April 1 of


the Calendar Year 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 unless otherwise agreed. Notwithstanding the foregoing the


Contractor shall have the right to supply the total amount calculated pursuant to


the foregoing provisions.





(c) The price payable for the sale of Natural Gas 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 17.2(a), failing


which Contractor’s obligations in respect of the Domestic Supply Obligations of


this Article 17 shall be suspended until payment is made good, at which time


deliveries shall be resumed subject to any alternative commitments that may have


been reasonably entered into by Contractor to dispose of the Natural Gas during


the period of default in payment. Contractor shall recover any amount due and


unpaid by the Government, plus interest at the Agreed Interest Rate, from the


Governments Lifting Entitlement of Natural Gas.


(d) Any sale of Natural Gas as provided for in Article 17.2(a) - (c) shall occur at the





Delivery Point or such other point as the Minister and the Contractor may


mutually agree.








(e) All terms and conditions for the sale of Natural Gas pursuant to this Article, shall


be specified in a contract of sale entered into between the Minister and


Contractor.




















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Petroleum Agreement


Government of Guyana - Demerara PA


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 are .commercially


competitive and 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 Year the Contractor shall provide


the Minister with a report outlining its achievements in utilising Guyanese resources


during that Calendar Year.



























































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Petroleum Agreement


Government of Guyana - Demerara PA


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, require the


Operator to employ and encourage Sub-Contractors to employ Guyanese citizens having


appropriate qualifications and experience whenever and wherever possible,.


19.3 During each year of the term of the Petroleum Prospecting License, or any renewal


thereafter the Contractor shall pay to GGMC the amounts of:


Initial Period: US$100,000


First Renewal Period: US$ 100,000


Second Renewal Period: US$100,000


for one or more of the purposes mentioned in Article 19.3 (a-d). Payments under this


Article 19.3 shall be paid directly into bank accounts held and controlled by the GGMC.


Contractor shall verify such bank accounts and GGMC agrees to cooperate, assist and


provide Contractor any information it requires to conduct such verification.


(a)


to provide Guyanese personnel nominated by GGMC with on-the-job training in


Contractor'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 at


universities, colleges or other training institutions selected by 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, professional publications,


scientific instruments or other equipment required by GGMC.

















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Petroleum Agreement


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Article 20 - Rights 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.


r


(b) Subject to Article 20.1 (c) upon expiry or termination of this Agreement in


accordance with the provisions hereof, the Contractor shall upon notification by


GGMC pursuant to Article 20.1 (d) (i):


(i) 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


not been fully recovered the provisions of Article 20.1 (b)(iii) shall apply;


(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 unrecovered 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;


(iii) equipment and other assets rented or leased by Contractor and imported in


(iv) equipment and any other assets owned or leased by a Sub-Contractor;


(v) household goods and vehicles which are the personal property of


employees of the Contractor and Sub-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 ther term of this


Agreement, 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.


(iii) 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 prevailing at the time of abandonment.


(bb) Concurrent with the submission of a Development Plan as


provided 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. The abandonment programme


and budget may be revised from time to time with the agreement of


 (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 the Minister under Article 20.1 (d)(iii)(bb) the Minister after


giving 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.


(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 approved abandonment budget by the estimated ultimate


recoverable reserves, which may be revised from


based upon the actual performance of the Field(s) and








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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.


r


(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.


(iv) Subject to Article 20.1 (c), in the event that the Government acquires any


assets pursuant to this Article, the Government shall assume all liabilities,


with respect to such assets, arising 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.


(v) 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 at all times during the term of this Agreement,


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 appropriate for Petroleum Operations in


progress in respect of but not limited to:


(i) loss or damage to all assets used in Petroleum Operations;











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Petroleum Agreement


Government of Guyana - Demerara PA


 (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 any third party in


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, rules and regulations, such


insurance may be provided through Contractor’s affiliate insurance


company.


(b) Subject to the Minister’s approval, which shall not be unreasonably withheld, the


Contractor, notwithstanding the provisions of Article 20.2(a), shall have the right


(c) to self-insure all or part of the aforementioned insurances in Article 20.2(a).


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 the international petroleum industry in accordance with good oil field practices.






























































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Article 21 - Import Duties





21.1 The Contractor, and the Sub-Contractors engaged in Petroleum Operations shall be


permitted to import, free of duty, VAT or all or any other duties, taxes, levies or imposts,


all equipment and supplies required for Petroleum Operations including but not limited to


drillships, platforms, vessels, geophysical tools, communications equipment, explosives,


radioactive sources, vehicles, oilfield supplies, lubricants, consumable items (other than


foodstuffs or alcoholic beverages or fuel), as well as all items listed on Annex D. The


aforementioned items, including but not limited to the items listed on Annex D, shall be


deemed approved and certified by the Chief Inspector to be for use solely m carrying out


Petroleum Operations. The Contractor shall give prior notification to the Minister of


Sub-Contractors engaged in Petroleum Operations.


(a) Subject to Article 21.1, and for as long as this Petroleum Agreement remains in


force the Contractor and Sub-Contractors engaged in Petroleum Operations


hereunder shall be required to pay to the relevant authority excise tax on any fuel


imports, where such imports have been certified by the Chief Inspector to be used


solely in carrying out Petroleum Operations in any area within the Contract Area,


at a rate of ten percent (10%) or the prevailing rate, whichever is lesser.


*


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 Department in


accordance with their applicable rules.


21.3 Each Expatriate Employee of the Contractor (including any Affiliated Company) and of


Sub-Contractors, who have been assigned to work in Guyana for the Contractor or its


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 and taxes 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 by


Expatriate Employees of the Contractor (including any Affiliated Company) and of Sub-


Contractors, shall be a matter for consultation with the Minister.





21.4 Each Expatriate Employee of the Contractor (including any Affiliated Company) and of


Sub-Contractors shall have the right to export from Guyana, free


and at any time, all of the items imported under Article 21.3.











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Article 22 - Foreign Exchange Control





22.1 The Contractor shall, during the term of this Agreement have the right:





(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 production payments but no payments of principal ,-or interest in


respect thereof shall be made from any source in Guyana other than the bank


accounts referred to in Article 22.1 (c);


(c) 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 Guyanese


currency, 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 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


income tax under the laws of Guyana, that Expatriate Employee shall be entitled to


receive payment of the whole or any part of his remuneration in the country injjdhfcfrte-


is normally resident.








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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 of Government pursuant to any statutory power to audit or cause to be audited the


books of the Contractor.



















































































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Article 24 - Force Majeure








24.1 Any non-performance or delay in performance, wholly or in part, 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, wholly or in part, is caused by Force Majeurei 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 acts of God, natural


phenomena or calamities, earthquakes, floods, tsunamis, epidemics, quarantines, fires,


wars declared, or undeclared, hostilities, invasions, blockades, riots, strikes, insurrection,


civil disturbances, mining of the seas, piracy, international disputes affecting the extent of


the Contract Area and any governmental action or inaction, that would prevent the


performance of an obligation or ability of the Contractor to export Petroleum (except as


provided in Article 14.5).


24.3 Where any Party is claiming suspension of its obligations on account of Force Majeure,


such Party shall promptly notify the other Parties in writing of the occurrence thereof


giving 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 Majeure, 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 allowed under this Agreement for the performance of such obligation and for


the performance of any obligation or the exercise of any right dependent thereon and to


the term of any Licence issued pursuant to this Agreement. In the event the Parties


cannot agree on whether the occurrence of the event in question is considered a “force


majeure” event, or if the Minister does not agree an additional time period should be


added, pursuant to section 43(3) of the Act, then a Party may refer the dispute to


Arbitration pursuant to Article 26, to determine the nature of the “force majeure’


and its influence on the contractual obligations of the Party concerned. The


shall have the option of terminating this Agreement without any further ot


Force Majeure exceeds one (1) year.





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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 invoke Force Majeure due to any order, regulation or written


directive of the Government which affects the Government’s performance of its


obligations under this Agreement.


































































































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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:


(a) the assignment or transfer will not adversely affect the performancemr obligations


under this Agreement;


(b) the assignment is not contrary to the interests of Guyana; or


(c) subject to (a) above, the assignment or transfer is to an 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


the Contractor under this Agreement or any Licence issued pursuant to this Agreement.


25.5 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.



































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Article 26 - Sole Expert Determination and Arbitration





26.1 The Parties shall make reasonable efforts to resolve amicably all Disputes by negotiation.


A notice of the existence of a Dispute shall be given by a Party to another Party in


accordance with Article 33. In the event that no agreement is reached within sixty (60)


days after the date on which a Party notifies the other that a Dispute exists, or such longer


period' as specifically agreed by the Parties, any Party shall have the right to have such


Dispute determined by arbitration or a sole expert as provided for in this Article 26.


26.2 Any claim, demand, cause of action, dispute, or controversy arising f out of or in


connection with this Agreement, including any question regarding its formation,


existence, validity, enforceability, performance, termination, or alleged breach


(“Dispute”) which cannot be settled amicably by negotiation shall be resolved by binding


arbitration or by a sole expert pursuant to Article 26.3, Article 26.4 or Article 26.6,


whichever applies.


26.3 Any matter required to be referred to a sole expert for determination under this


Agreement, including under Articles 5.4, 8.5, 12.2(a)(i), 13.4, and any other matter which


the Parties expressly agree in writing to refer to a sole expert, shall be referred to a sole


expert for determination, by a Party giving notice to such effect pursuant to Article 33.


The sole expert shall be appointed by agreement between the Parties, and in the event the


Parties fail to agree on the sole expert within thirty (30) days after receipt of the written


notice from any Party proposing the appointment of a sole expert, such expen shall be


appointed by the International Centre for Expertise of the International Chamber of


Commerce (“ICC”). A sole expert shall be an independent and impartial person of


international standing with relevant qualifications and experience. The expert, once


appointed, shall have no ex parte communications with any of the parties to the Dispute


concerning the expert determination or the underlying Dispute. The Parties shall


cooperate fully in the expeditious conduct of such expert determination and to provide


the expert with access to all facilities, books, records, documents, information and


personnel necessary to make a fully informed decision in an expeditious manner. The


sole expert shall act as an expert and not as an arbitrator or mediator, and shall endeavor


to resolve the Dispute within thirty (30) days of his appointment, but no later than sixty


(60) days after his appointment. The sole expert shall decide the manner in which any


determination is made, but in any event shall accept oral and/or written submissions and


arguments from the Parties. All correspondence, documentation and information


provided by a Party to the sole expert shall be copied to the other Party, and any oral


submissions to the sole expert shall be made in the presence of all Parties and each Party


shall have a right of response. 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 arbitraitpn'


pursuant to Article 26.4 or Article 26.6, whichever applies.








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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 to 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”). It is hereby stipulated that the transaction


to which this Agreement relates is an investment within the meaning of the Convention.


The Government hereby irrevocably waives any claim to immunity for itself, its agencies,


its enterprises, and any of its assets with regard to any sole expert determination or


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 a sole expert determination, or


an arbitral award rendered in an arbitration thereunder. Without prejudice to the


generality of the foregoing, the waiver of immunity shall include immunity from service


of process and immunity from jurisdiction of any competent court or any arbitration


tribunal, and immunity of any of the Government’s, its agencies’, or its enterprises’


property from execution of any sole expert determination or arbitration award or


judgment entered thereon.


26.5 If the Secretary-General of ICSID refuses to register a request for 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


appointing authority.


26.6 The seat of the arbitration proceedings pursuant to this Article 26 shall be Washington


DC, United States of America, however, hearings may be held at such other place as the


Parties may agree to in writing. The arbitration proceedings shall be conducted in the


English language.


26.7 The fees and expenses of a sole expert (as well as the charges for the use of ICSID or


other facilities) shall be borne equally by the Contractor and the Government. 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 in their award. The arbitral award shall be made and


payable in dollars of the United States of America, free of any tax or other deduction.


The award shall include interest, unless the arbitration tribunal determines that it is not


appropriate. Interest shall run from the date of any breach or violation of this Agreement.


Interest shall continue to run from the date of award until the award is paid in full.


Interest shall be calculated at the Agreed Interest Rate. The arbitrator(s) shall render a


Parties may agree.


26.8 The decision of a majority of the arbitrators shall be final and binding on all the Parties


and judgment on the award may be entered by any court of competent jurisdiction.




























































































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Article 27 - Applicable Law





27.1 This Agreement shall be governed by, interpreted and construed in accordance with the


laws of the Republic of Guyana, and, consistent with such rules of international law as


may be applicable or appropriate, including the generally accepted customs and usages of


the international petroleum industry.
































































































































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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 governed 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 In furtherance of regulation 6 of the Regulations in the conduct of Petroleum Operations


the Contractor shall take necessary and adequate precautions, in accordance with good


international petroleum industry practice, against pollution and for the protection of 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 remedy the failure and the effects thereof and shall where


pollution occurs treat or disperse it in an environmentally acceptable manner. The


Contractor shall not be obligated to remedy or clean up pollution or environmental


damage of any type that existed prior to the commencement of Petroleum Operations by


the Contractor or arises as a consequence of pre-existing environmental conditions.


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 28.4 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 necessary in accordance with good international petroleum industry practice and the


reasonable costs and expenses of such actions shall be borne by the Contractor.





























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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 effect so long as the Contractor


continues to 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, not less than sixty (60) Business Days, 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 obligations of the Parties shall cease by the termination or cancellation, but such


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 might have been commenced or continued against a Party may be


commenced or continued against it.





















































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 Article 30 - Effective Date





30.1 The Effective Date shall be the date on which this Agreement is duly signed.














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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 terms and conditions of this Agreement by both Parties. Both Parties undertake not to


take any action inconsistent with the terms and conditions of the Agreement


f


9


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.


31.3 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.


31.4 The headings of this Agreement are for convenience of reference only and shall not be


taken into account in interpreting the terms of this Agreement.


31.5 A 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 Party


shall be construed as a waiver of any other obligations or defaults whether of a like or of


a different character.


31.8 This Agreement supersedes and replaces any previous Agreement or understanding


between the Parties whether oral or written on the subject matter hereof, prior t0 t^e jate


of this Agreement.





























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Petroleum Agreement


Government of Guyana - Demerara PA


Article 32 - Stability of Agreement





32.1 Except as may be expressly provided herein, the Government shall not amend, modify,


rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel


replacement or substitution, or otherwise seek to avoid, alter, or limit this Agreement


without the prior written consent of Contractor.


32.2 After the signing of this Agreement and in conformance with Article 15, the Government


shall not increase the economic burdens of Contractor under this Agreement by applying


to this Agreement or the operations conducted thereunder any increase of or any new


petroleum related fiscal obligation, including, but not limited to, any new taxes


whatsoever, any new royalty, duties, fees, charges, value-added tax (VAT) or other


imposts.


32.3 If at any time after the signing of this Agreement there is a change in the laws of Guyana


whether through the amendment of existing laws (including the hydrocarbons law, the


customs code or tax code) or the enactment of new laws or a change having the force of


law in the interpretation, implementation or application thereof (whether the change is


specific to the Agreement, the Contractor or of general application) and such change has


a materially adverse effect on the economic benefits, including those resulting from the


fiscal regime provided by this Agreement, accruing to the Contractor hereunder during


the term of this Agreement, the Government shall promptly take any and all affirmative


actions to restore the lost or impaired economic benefits to Contractor, so that Contractor


receives the same economic benefit under the Agreement that it would have received


prior to the change in law or its interpretation, application, or implementation. The


foregoing obligation shall include the obligation to resolve promptly by whatever means


may be necessary any conflict or anomaly between this Agreement and any such new or


amended legislation, including by way of exemption, legislation, decree and/or other


authoritative acts.


32.4 In the event that Contractor’s overall economic benefits have been materially and


adversely affected by actions or changes as set forth above in Section 32.3, whether


directly or indirectly, Contractor may notify the Government in writing. The Parties


shall then meet within thirty (30) days after such notification with the objective of


reaching agreement on a remedial action to be taken by the Government, whether by


exemption, legislation, decree and/or other authoritative acts or by amendment to the


terms of the Agreement. If the Parties are unable to resolve their differences within one


hundred twenty (120) days after Contractor has issued the aforementioned notification,


then the Contractor may refer the matter to arbitration in accordance with Article 26. In


such case, the arbitral tribunal is authorized to modify the Agreement to re-establish the


economic benefits under the Agreement to Contractor described in Article 32.3, or inthe„_


event this is not possible, including for example where such dispute would not quaflly.bPS


constitute a legal dispute under Article 25 of the ICSID Convention, to award





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Petroleum Agreement


Government of Guyana - Demerara PA


 Contractor that fully compensate it for the loss of economic benefits under the





Agreement, both historical and future losses.
























































































































































'











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Petroleum Agreement


Government of Guyana - Demerara PA


Article 33 - Notices





33.1 All notices and other communications to be given under 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


Telephone 592-225-3047


Facsimile: 592-227-0084


The Company Secretary/Director


CGX Resources Inc.


Mareva House


4 George Street


Nassau, Bahamas


c/o Luckhoo & Luckhoo


1 Croal Street


Georgetown, GUYANA


Attention: CGX Resources Director


Telphone: 416-364-5569


Facsimile: 416-364-5400


33.2 Any Party may, by notice as provided hereunder to the other Parties and GGMC change


its address and other particulars for notice purposes.



































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Petroleum Agreement


Government of Guyana - Demerara PA


IN WITNESS whereof the Parties have caused their duly authorised representatives to set their


hands at the City of Georgetown, in the Republic of Guyana in the presence of one another the


day and year first above written.





Signed by The Minister Responsible For Petroleum


Representing the Government of the Republic of Guyana.








His Excellency Donald Ramotar








President of the Republic of Guyana


Signed by Director of CGX Resources Inc.











CGX





RESOURCES INC.












































A TRUE COPY of the original which


was registered in the Deeds Registry of


Georgetown, Oemerara, Guyana on the


......Day nffeU








Assistant Sworn Clerk


























page 69





Petroleum Agreement


Government of Guyana - Demerara PA


ANNEX A - DESCRIPTION OF PROSPECTING AREA








Description of area being applied for under a petroleum prospecting license


The area comprises approximately 4,000 square kilometres described herein consisting


of graticular blocks as shown on Block Reference Map attached





Latitude and Longitude Measurements are North and West respectively.





Point No. LATITUDE LONGITUDE





1 8° 40.00' N 58° 25.00' W


2 8° 40.00'N 58° 20.00' W


3 8° 35.00'N 58° 20.00’ W





4 8° 35.00'N 58° 15.00’W


• 5 8°.30' .00 N 58° 15.00'W


6 8°.30' .00 N 58°05.00' W





7 8° 25.00'N 58°05.00' W


8 8° 25.00' N 57° 50.00'W


9 8° 20.00’N 57° 50.00'W


10 8° 20.00'N 57° 40.00’ W





11 8° 15.00'N 57° 40.00' W


12 8° 15.00'N 57° 30.00' W


13 8° 10.00' N 57° 30.00'W





14 8° 10.00'N 57° 50.00' W


15 8° 05.00'N 57° 50.00' W


16 8° 05.00'N 57° 55.00' W





17 8° 00.00'N 57° 55.00' W


18 8° 00.00’ N 58° 25.00'W















































Petroleum Agreement


Government of Guyana - Demerara PA


Description of Area


The following five (5) minute by five (5) minute square graticular blocks are shown on


the Block Reference Map attached








Block J 56, 68, 69, 80 -83, 92-96, 104 -108,116 -120,128 -132,140 -144


Block K 85, 86, 97 -100, 109 -114, 121 -122, 133































































































Petroleum Agreement


Government of Guyana - Demerara PA


ANNEX B - MAP OF CONTRACT AREA


































































































































































































■ CGX DEMERARA BLOCK


«ph»(oa Unrvtrtai Trantvtrta UarealorProftdion Scale: 1:2,000,000


UnUofMtatummant intamaUonal


Maria lan of Origin e»'r'W*llofCr**rvMcfi 40 120


Lautud* of Origin Equator


Seal* Factor® Origin 0.9896


Fait* Coordinate of Origin 500,000 Mal*rt EaaHn


Datum Nil Uttar* Northing


Pro vtatonalSoutti Amt ncan 1658

















Petroleum Agreement





Government of Guyana - Demerara PA


 )


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 ANNEX C - ACCOUNTING PROCEDURE








This Annex is part of this Petroleum Agreement (hereinafter referred to as "the Agreement")
























































































































































Annex C Page





Petroleum Agreement


Government of Guyana - Demerara PA


SECTION 1 - GENERAL PROVISIONS





1.1 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:


(i) in accordance with the terms of the Agreement and this Accounting


Procedure; and


(ii) in such form as may be agreed from time to time between the Parties


wh'ich shall identify the categories of costs, expenses, expenditures and


credits classified in Sections 2 and 3 of this Annex.





(b) Pursuant to (a) above, the Contractor shall make quarterly Statements relating to


the Petroleum Operations including:


(i) Production Statement (see Section 5 of this Annex).


(ii) Value of Production and Pricing Statement (see Section 6 of this Annex).





(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).


(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 shall be employed for measurements of production of Crude Oil required


under the Agreement and this Annex. Standard cubic feet (scf) shall be erp


for measurements of production of Natural Gas required under the A^drrfi


this Annex. The language employed shall be English.








Annex C Page 2





Petroleum Agreement


Government of Guyana - Demerara PA


(b) 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 or Guyanese dollars shall be


converted into United States dollars by using the relevant foreign


exchange rate published in the Wall Street Journal on the first business


day following the Month in which the relevant transaction occurred.


(ii) Amounts received and costs, expenses and expenditures made in


Guyanese dollars or in United States dollars shall be converted from


Guyanese dollars into United States dollars or from United States dollars


into ■ Guyanese dollars on the basis of the average of the buying and


selling exchange rates between the currencies in question as determined


and published by the Bank of Guyana, prevailing on the last Business Day


of the Calendar Month preceding the Calendar Month that the relevant


transaction occurred.


(iii) 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.


1.4 Payments





(a) All payments between the Parties under the Agreement shall, unless otherwise


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 bear interest at the Agreed Interest Rate.





1.5 Audit and Inspection Rights of Government





(a) The Minister 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 Minister 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,


records and inventories, vouchers, payrolls, invoices and any other


correspondence and records necessary to audit and verify the charges,





Annex C Page 3





Petroleum Agreement


Government of Guyana - Demerara PA


 During such annual audit, examination and verification in respect of each


Calendar Year the Minister may review items previously subjected to audit in


earlier Years but such review shall:


(i) only be carried out in conjunction with the annual audit for any given


year; and





(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 Minister, 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.


(b) At 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 Minister consider that the report or reply requires further investigation





on any item therein, the Minister shall have the right to conduct further


investigation in relation to such matter within sixty (60) days of its receipt of


Contractor's reply. If within sixty (60) days of the Minister's further investigation,


the Parties are unable to agree to the disposition of the Minister's audit claim, the


claim shall 'be submitted to arbitration in accordance with Article 26 of the


Agreement.





All adjustments resulting from an audit agreed to by the Contractor and the


Minister 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 Minister is not settled to the satisfaj


the Contractor's reply as provided for above, the Contractor shall be








Annex C Page 4





Petroleum Agreement


Government of Guyana - Demerara PA


 recover any disputed amounts pending final resolution of the claim. However,


any subsequent adjustments in the Minister'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


Contractor's share of Profit Oil is insufficient to provide for the Minister's extra


entitlement including interest, the Contractor shall promptly make an equivalent


payment in United States dollars to the Minister.


(c) Without 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 maintained and


made available for inspection by the Minister 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 Minister (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


Minister.


'(e) Nothing herein above provided shall entitle the Minister or his auditors to have


access to data and records which:


(i) are subject to statutory restrictions on disclosure; • or





(ii) do not relate to Petroleum Operations; or





(iii) are not customarily disclosed in auditing practice in the international


petroleum industry; provided however, that where the Minister 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 sole cost)


from the statutory auditors of the Contractor or its Affiliated Companies,


as the case may be, certification that such charges have been levied'on a


fair and reasonable basis.




















Annex C Page 5


Petroleum Agreement


Government of Guyana - Demerara PA


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:


(a) Aerial, geophysical, geochemical, paleontological, geological, topographical and


seismic surveys and studies and their interpretation provided the data relates to the


Contract Area.


(b) Core hole drilling and water well drilling.





(c) Labour, materials or equipment, 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 discovered provided such


wells are not completed as producing wells.


(d) Facilities or allocated portions thereof used solely in support of the purposes


described in (a) (b) and (c) above.


(e) All General and Administrative Costs, Annual Overhead Charges 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) Annual amounts set forth and paid to GGMC pursuant to Article 19.3 of the


Agreement





(h) Rentals. /c/ £


(i) Licenses and other fees.





2.2 Development Costs shall consist of all expenditures incurred in:





(a) Drilling wells, which are completed as producing wells and drilling


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





Annex C Page 6





Petroleum Agreement


Government of Guyana - Demerara PA


 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 services having


no salvage value which are incurred in drilling and deepening of wells for


production purposes.


(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.


r


(e) Engineering and design studies for field facilities.


(f) All General and Administrative Costs, 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.





2.4 Service Costs


(a) 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 incurred


in such Year to purchase and/or construct said facilities as well as the annual costs


to maintain and operate the same.


(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 Minister and the Contractor.


2.5 General and Administrative Costs and Annual Overhead Charge








(a) General and Administrative Costs are 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 Guyan


otherwise charged under this Accounting Procedure, for m;





Annex C Page 7





Petroleum Agreement


Government of Guyana - Demerara PA


A1 A


 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 the Agreement is granted by the Minister


this annual charge shall be three percent (3%) of the Contract Costs including


those covered in sub-sections 2.1 through 2.5(a), incurred during the Calendar


Year. From the date of grant of the Petroleum Production Licence the Annual


Overhead Charge will be:


First US$10,000,000 of Contract Costs:


5%





Next US$20,000,000 of Contract Costs: 3%





In excess of US$30,000,000 of Contract Costs: 1%











(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 an equitable basis


otherwise agreed between the Minister and the Contractor.




































































Annex C Page 8


Petroleum Agreement


Government of Guyana - Demerara PA


 SECTION 3 - COSTS. EXPENSES, EXPENDITURES AND CREDITS OF THE


CONTRACTOR





3.1 Costs Recoverable Without Further Approval of the Minister


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, renewal or relinquishment 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 wholly dedicated to Petroleum Operations, only that pro-rata


portion of applicable wages and salaries will be charged.


(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.


(v) Reasonable travel and personal expenses of such employees including


those 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 practice of the Parties comprising the Contractor.





(vi) Any personal income taxes owing to the Republic of Guyana


employees of the Parties comprising Contractor and paid or reimbursj


a Party comprising the Contractor.








Annex C Page 9





Petroleum Agreement


Government of Guyana - Demerara PA Guytf


(C) Transportation





The cost of transportation of employees, equipment, materials and supplies


necessary for the conduct of the Petroleum Operations.


(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 2.5, in the case of services rendered to the Petroleum


Operations by an Affiliated Company, the charges will be based on actual


costs without profits. The 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 salaries, wages and related costs of employees of an Affiliated


Company that are temporarily or permanently assigned in Guyana and are


directly engaged in Petroleum Operations shall be chargeable to the


project at their actual documented cost. The salaries, wages and related


costs of employees of an Affiliated Company that are temporarily or


permanently outside of Guyana and are directly engaged in Petroleum


Operations shall be chargeable to the project at their actual documented


cost. Costs for salaries, wages and related costs shall be charged to the


project on an actual basis or at a rate based upon the average cost in


accordance with the Affiliated Company’s usual practice. The


methodology of determining rates based on average cost shall be provided


to the Government upon their request. Such rates may be reviewed at least


annually with the Minister. Reasonable actual documented expenses


(including travel costs) of those employees whose salaries and wages are


 (e) Material





(i) So far as is practicable and consistent with efficient and economical


operation, only such material or equipment shall be purchased or furnished


by the 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 minimized.


(ii) The Contractor does not warrant material beyond the supplier’s or


manufacturer’s guarantee express or implied, and 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.


(iii)


(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 imported material and, where applicable,


1 handling and transportation expenses from point of importation to


warehouse or operating site, and cost of the material in question


should not exceed those prevailing in normal arms length


transactions on the open market for material of similar quality and


supplied on similar terms 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 and invoiced at a price, which should not


exceed the price prevailing in normal arms length


transactions on the open market at the time of procurement.





(2) 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 "ET


and priced at not more than seventy-five


(75%) of the price of new material defi:


above.


Annex C Page 11








Petroleum Agreement


Government of Guyana - Demerara PA


"V,


(ii) 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%)rof 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 Condition


“B” or Condition “C”, shall be priced at a value


commensurate with its use.


(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 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


be recoverable only to the extent generally charged by competitive


companies other than an Affiliated Company of a Party


Annex C Page 12





Petroleum Agreement


Government of Guyana - Demerara PA


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 of the Agreement, 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 are 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 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.


(j) General and Administrative Costs and Annual Overhead Charge


The costs described in sub-section 2.5(a) and the charge described in sub-section


2.5(b).


(k) Pre-Contract Costs


The sum of one million dollars (US$) in respect of all costs incurred by


Contractor prior to the Effective Date.


(l) Interest and Financing Costs


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. '


(m) Abandonment Costs


3.2 Costs Recoverable only with Approval of the Minister


(a) Donations and contributions to organisations in Guyana.


(b) Expenditure on research into and development of new equipment, material and


techniques for use in searching for developing and producing petroleum which


will be of benefit to Petroleum Operations.


3.3 Costs not Recoverable under the Agreement


(a) With the exception of the sum specified in sub-section 3.1(kj, costs incurred


before the Effective Date. r


(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, other amounts paid


with regard to non-fulfillment of contractual obligations, subject to Section 3.1(g).


(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.


(f) Payments made in accordance with Article 15.4 of the Agreement.


(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 Article


20.2(a) of the Agreement.


3.4 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 Minister.


3.5 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 wi











Petroleum Agreement


Government of Guyana - Demerara PA


operation or assets were insured and the premium charged to the accounts under


the Agreement.


(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 suppliers/manufacturers or


their agents in connection with defective material the cost of which was


previously charged to the accounts under the Agreement.


(d) 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 being used in the Petroleum


Operations, the acquisition costs of which have been charged to the accounts


under the Agreement.


(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;


(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


development costs of which have been charged to the accounts under the


Agreement.


3.6 Duplication of Charges and Credits


Notwithstanding any provision to the contrary in this Accounting Procedure, it is the


intention that there shall be no duplication of charges or credits to the accounts under the


Agreement.














Annex C Page 15


Petroleum Agreement


Government of Guyana - Demerara PA


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


petroleum industry. The Contractor shall notify the Minister annually 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 Minister at least thirty (30) days written notice


of its intention to take such inventory and the Minister shall have the right to be represented


when such inventory is taken. The Contractor will state clearly the principles upon which


valuation of the inventory has been based. When an assignment of rights under the Agreement


takes place a special 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.


































































































Annex C Page 16





Petroleum Agreement


Government of Guyana - Demerara PA


SECTION 5 - PRODUCTION STATEMENT





5.1 Upon commencement of production of Petroleum from the Contract Area, the Contractor


shall submit a monthly Production Statement to the Minister 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. r


(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 stocks of Crude Oil held at the beginning of the Calendar Month


in question.


(h) 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.


5.2 The Production Statement for each Calendar Month shall be submitted to the Minister not


later than sixty (60) days after the end of such Calendar Month.


























Annex C Page 17





Petroleum Agreement


Government of Guyana - Demerara PA


SECTION 6- VALUE OF PRODUCTION AND PRICING STATEMENT





6.1 The Contractor shall, for the purposes of Article 13 of the Agreement prepare a statement


providing calculations of the value of Crude Oil and the value of the Natural Gas


produced and saved during each Calendar Month for each Field. This statement, which


shall be prepared for each quality of Crude Oil and the Natural Gas 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 and the Natural Gas made during the Calendar


Month in question. f


(b) The quantities, prices and receipts realised therefor by the Contractor as a result of


sales of Crude Oil and the Natural Gas made during the Calendar Month in


question, other than Third Party Sales.


(c) The percentage of total volume of Crude Oil sales which were Third Party Sales.


(d) The percentage of total volume of Natural Gas sales which were Third Party


Sales.


(e) Information supplied to the Minister by Contractor for the purposes of Article


13.2 of the Agreement.


6.2 The Value of Production and Pricing Statement for each Calendar Month shall be


submitted to the Minister not later than thirty (30) days after the end of such Calendar


Month.












































Annex C Page 18





Petroleum Agreement


Government of Guyana - Demerara PA


SECTION 7 - STATEMENT OF EXPENDITURE AND RECEIPTS





7.1 The Contractor shall prepare with respect to each Calendar Quarter, or on a monthly basis


if requested by the Minister in writing, 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 on a monthly basis for the period in question.


(b) Cumulative expenditure and receipts for the budget year in question.


(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.


7.2 Subject to 7.1, the Statement of Expenditure and Receipts shall be submitted to the


Minister no later than thirty (30) days after the end of such Calendar Quarter or Month as


the case may be.
































V























Annex C Page 19


Petroleum Agreement


Government of Guyana - Demerara PA


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:


(a) Recoverable Contract Costs carried forward from the previous Month, if any.


(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). t


(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) Total cumulative amount of Contract Costs to be carried forward into the next


Month.


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 (b)(iii) of the Agreement.


8.4 The Cost Recovery Statement for each Month shall be submitted to the Minister no later


than thirty (30) days after the end of such Month.



































Annex C Page 20





Petroleum Agreement


Government of Guyana - Demerara PA


SECTION 9 - END-OF-YEAR STATEMENT





9.1 The Contractor shall prepare an End-of-Year Statement. The Statement will contain


aggregated information for the Year in the same format as required in the Value of


Production and Pricing 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 each Calendar Year shall be


submitted to the Minister within one hundred and twenty (120) days of the end of such


Calendar Year.





(a) Crude Oil r


(i) In the event the domestic supply obligations under Article 17 are effected





by the Government as to Crude Oil, not later than one hundred and twenty


(120) days after the end of each Calendar Year, the Minister, acting on


behalf of the Government, shall make available to Contractor an annual


summary (the “Domestic Supply Report”) describing (a) the


Government's total entitlement from all Crude Oil production in Guyana


during the prior Calendar Year, (b) the quantity of Crude Oil actually


provided to the Government by Contractor and all third parties which


produce Crude Oil in Guyana during the prior Calendar Year, and (c) a


description of the quantities and use of all Crude Oil provided to the


Government by Contractor and all third parties which produce Crude Oil


in Guyana, including without limitation, domestic power supply from


power plant facilities, refined products for domestic consumption from


refineries, etc., and any quantities of Crude Oil, refined products,


petrochemicals or fuel for power generation that are exported from


Guyana.





(b) Natural Gas





(i) In the event the domestic supply obligations under Article 17 have been


effected by the Government as to Natural Gas, not later than one hundred


and twenty (120) days after the end of each Calendar Year, the Minister,


acting on behalf of the Government, shall make available to Contractor an


annual summary (the “Domestic Supply Report”) describing (a) the


Government's total entitlement from all Natural Gas production in Guyana


during the prior Calendar Year, (b) the quantity of Natural Gas actually


provided to the Government by Contractor and all third parties which


produce Natural Gas in Guyana during the prior Calendar Year, and (c) a


description of the quantities and use of all Natural Gas provided to the


Government by Contractor and all third parties which produce


in Guyana, including without limitation, domestic residents


and industrial consumption, fuel used for domestic power





Annex C Page 21





Petroleum Agreement


Government of Guyana - Demerara PA


 or, and any quantities of Natural Gas liquefied or compressed in Guyana


for export or used as feedstock for petrochemical exports, such as


methanol and fertilizer.









































































































































Annex C Page 22


Petroleum Agreement


Government of Guyana - Demerara PA


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.


(b) Cumulative expenditures and receipts to the end of the said Year,













































































Annex C Page 23





Petroleum Agreement


Government of Guyana - Demerara PA


V "














Vi





1 t
























































i


-1


i


ANNEX D - Pre-Approved and Certified Petroleum Operations Items


A


Acids (stimulation) - chemicals used downhole or injected in oil/gas formations


Acoustical survey equipment - including sonar, side scanning sonar, full wave form sonic loggers


Aeromagnetic recording survey systems


Air slips also known as tubing slips


All terrain vehicles (ATVs)


Automated equipment at the well head, processing plant or refinery used to monitor and control


production


B


Bags (cloth) with printed tags - used in well testing r


Bails (links)


Barrel - chemical mixing when used at the well head


Batteries - for production machinery and equipment


Batteries - geophysical when used exclusively for seismic prospecting in blasting and recording systems


Bits - drill includes PDCs, tricones


Blasting systems - used for seismic prospecting


Blowout ignition system


Blowout preventers (BOPs)


Boxes - shipping (used in well testing), core


Building - portable


Building - support - when used as weather-related protective covering for equipment such as electrical


generators or instrumentation


Buildings - that provide office or dwelling space; geologist lab trailers; skid-mounted living trailers


Bulldozers - earth moving equipment


C





Cable - electrical


Cable - wire rope


Cables - electrical (integrated into machinery)


Cables used for seismic prospecting


Calibration gas - for H2S monitors and H2S analyzers


Casing


Casing accessories


Catwalks - see Scaffolding


Cement - oilwell


Cementing equipment


Centralizers - casing attachment


Centrifuge - used to remove fine drill solids from mud systems


Chemical mixing barrel - when used at the well head


Chemical storage drums - when used at the manufacturing or processing site


Chemicals used in drilling and production operations


Chemicals used in refining operations


Choke manifold and valves


Circulating system - includes discharge and return lines


Circulating systems - includes mud tanks, mud mixers, discharge and return lines and separators


Cleaners/degreasers - includes oilfield equipment


Cloth bags with printed tags - used in well testing


Coil tubing


Coil tubing reel


Collars-drilling





Annex D Page 1





Petroleum Agreement


Government of Guyana - Demerara PA


Communication equipment - includes satellite communications equipment


Comoressors - for compression of air or natural gas


Comouters - to monitor production/drilling machinery and equipment


Consumables - consumable equipment used in drilling and production operations


Control panels - used to run generators at a well head


Core boxes


Corrosion inhibitors - added to upstream installations for preventative maintenance


Couplings


Custom software - designed for and integrated into drilling and production machinery or equipment








Data processing units used for seismic prospecting


DC electric motors (integrated) used to drive the drawworks mud pumps, or top drives, also commonly


called traction motors


Deflocculants - used in fresh water mud systems


Dehydration chemicals


Dehydrators - including mole sieve used at the well head; used during the production testing phase


Demulsifiers - used in production operations to remove water from crude oil


Density counters - spectral gamma-gamma


Detectors - flame, when used during the production testing phase as an alternative to a flare stack


Diesel power generating systems


Discharge and return lines


Dispersants - production chemicals


Distribution panel - electrical that controls the electrical distribution for the entire rig package


Dope - pipe s ^


Drifts - for casing, tubing, and line pipe f/


Drill bits, includes tricone, PDCs (Polycrystalline Diamond Compact)


Drill collar handling equipment


Drill collars - used in exploration and development drilling


Drill line spool - wire rope


Drill pipe - used in exploration and development drilling


Drill pipe handling equipment


Drill stem testing equipment - includes instrumentation


Drilling - detergent; muds; surfactants


Drilling Rigs and associated equipment - Onshore and Offshore


Drilling fluid - chemicals used to create drilling fluid (see mud)


Drills - all drills used exclusively for seismic prospecting includes heli, enviro, LIS, track, truck, buggy


Drives - top, rotary and pump


Drums - for chemical storage'when used at the manufacturing or processing site





E


EDR system (only an EDR and the embedded dedicated computer equipment that is integrated into the


unit) used at the drilling site


Electric generators and alternators


Electric logging equipment


Electrical cable - distribution panel, electrical generating systems


Electrical distribution panel


Electrical generating systems (integrated)


Electrical submersible pumps - ESP - for artificial lift of petroleum


Electrical surveying equipment


Electrical thermostats


Electromagnetic surveying equipment - includes time and frequency domain induced polarization


equipment








Annex D Page 2





Petroleum Agreement


Government of Guyana - Demerara PA


Emergency gas shut off devices


Engine oils


Engines - used for oilfield service


Equipment - hoisting


Explosives - includes those used in seismic, coring, construction


F





Field potentiometers


Filter bags - for the production machinery and equipment


Fishing tools for retrieving tools lost downhole


Fittings - includes those used in the transportation and distribution system, for example, on gathering


lines


Flame detectors - when used during the production testing phase as an alternative to a flaipe stack


Flare stacks - includes mobile flare stacks used during the production testing phase


Flare tank systems, located at the wellsite, that are directly connected to the drilling rig and are used to


control polluting emissions


Flare tanks and lines


Float equipment


Fluids - fracturing, stimulating, well servicing


Foamers - used downhole to enhance production


Forklifts


Fracturing chemicals


Fracturing equipment


Fuel gas lines - for oil and gas production machinery


Fuel storage tanks - see Tanks


Full wave form sonic loggers








Gamma-ray spectrometers


Gas - welding, acetylene, argon - when used as an inert welding gas or in repair jobs; calibration gas for


H2S monitors and H2S analyzers


Gas dehydration equipment used in processing plants or refineries up to the point where the petroleum or


natural gas is a marketable product


Gas detection monitors that detect hazardous gas and provide a warning


Gas flow equipment - when used downhole to monitor gas flow


Gas lift lines - located at a production wellsite to encourage the flow or transport of gas from the reservoir


to the surface


Gas sfiut off devices (emergency) - that are attached to a gas line and automatically shut off gas supply


Gauges-engine


Generating systems - diesel power, electrical


Gensets/generators - portable, mobile or standby alternators generators/gensets)


Geophones


Geophysical batteries - when used exclusively for seismic prospecting in blasting and recording systems


Gerorimo and escape lines


Global positioning systems used for seismic prospecting; used for creating stakeless surveys


Graders


Gradiometers - includes potassium gradiometers for radioactive methods of geophysical prosp^


Gravel - for well pads, processing plant on-site roads


Gravitational recording survey systems /^


Gravity meters


Grease


Ground penetrating radar equipment


Gunny sacks








Annex D Page 3





Petroleum Agreement


Government of Guyana - Demerara PA


Guns - perforating that are used during the production testing phase


H





Hammer wrenches


Hand held tools


Heat exchangers


Heaters - line, located at the well head to preheat gas but not line heaters on pipeline; used during the


production testing phase


Heli-drills for seismic prospecting


Hoisting equipment


Hooks and swivels - drill pipe handling equipment


Hydraulic tank


Hydraulic winches


Hydrogen sulfide - used for gas scrubbing


Hyperspectral spectrometers used for remote sensing








Imaging equipment - seismic


Incinerator - when used during the production testing phase in place of a flare stack to burn off excess


natural gas


Indicator-weight


Inductive conductivity probes used for electrical or electromagnetic surveying


infrared and hyperspectral spectrometers


Infrared spectrometers used for remote sensing


Inhibitors - corrosion added to upstream installations for preventative maintenance


Injector head that runs or retrieves the coil tubing


Instruments -


instruments or equipment for seismic prospecting


Integrated diesel power generating systems


Integrated electrical operating systems


Integrated fuel tanks - see Tanks


Integrated navigation systems used for seismic prospecting


Integrated pump units


Integrated steam heaters





L


Lab testing equipment - used for testing drilling fluids


Lab testing equipment - used for testing production fluids


Labels - for vials used in well testing


Laptop computers (see entry under Computers)


LIDAR (Light Detection and Ranging) mapping equipment used for remote sensing


Light towers or light plants


Lighting - industrial explosion proof


Lights


Lignite drilling mud or fluid


Line heaters - located at the well head to preheat gas, but not line heaters on the pipeline


Line heaters - used on pipelines, but not line heaters located at the well head for preheating gas Industry)


Line pipe


Liners used on the ground


Lines-catline, drill, flare, loadline, geronimo and escape, sandline, spool, tong


Lines - discharge, return, flare


Links (bales)











Annex D Page 4





Petroleum Agreement


Government of Guyana - Demerara PA


Liquefaction equipment - used in a processing plant or refinery to liquefy C02 so that it can be


transported and marketed


Liquid viscosifiers


Loaders - includes loaders used to move drill pipe to and from the drilling rig


Logging equipment - electric wireline


Lubricants - specialty


M


Machinery and equipment used to inject substances into a reservoir


Magnetic susceptibility meters


Magnetometers


Main - drum (also known as a drill drum)


Main drum also known as drill drum - part of the drawworks t


Maintenance tools - includes cheater bars


Manifold - choke, valve that is an integral piece of the high pressure pumping system


Manifold - choke; mud


Manufactured proppant


Measurement while drilling equipment (MWD) - used to monitor the drill bit’s downhole position


Meter skids - used in the transportation of natural gas or petroleum from the well head as they are part of


the distribution system


Mobile radios


Molecular sieve (Mole sieve pellets) - when used as a part of exempt dehydrator equipment


Monitoring equipment - that monitors or controls the operation of machinery and equipment


Monitors - hazardous gas detection monitors that provide a warning


Mooring systems - for storage vessels


Motors - includes mud motors


Motors - traction, mud


Motors - used in the production testing phase; mud motors used downhole in the drilling process


Mud - chemicals used in the creation of drilling fluid


Mud - mixers, tank, manifold, motors


Mud logging equipment and supplies


MWD (Measurement While Drilling) equipment and supplies


N


Navigation systems used for seismic prospecting; used for creating stakeless surveys


Nitrogen - used to stimulate production


Non-polarizing electrodes used for making measurements in drill holes


O





Optical sensors


P





Packers


Paint supplies


Perforating guns - used during the production testing phase


Pipe dope


Pipeline installation equipment


Pipeline coatings - cement or otherwise


Piping systems - used downhole in the production and testing phase


Pit volume totalizer (PVT) - used for monitoring the bore hole


Polarization equipment-time and frequency domain induced


Portable building


Potentiometers - field








Annex D Page 5





Petroleum Agreement


Government of Guyana - Demerara PA


Power - tongs and jaws (also see Tongs)


Power plants - includes diesel, electrical


Power tongs


Power washers


Pressure piping systems and its components - used during the production testing phase


Preventers - blowout (BOP)


Probes - inductive conductivity used for electrical or electromagnetic surveying


Production processing equipment - includes separators, compressors, tanks, flow lines, pumps and


valves


Prospecting, seismic - see seismic prospecting


Protectors - thread


Pump lines and valves that run from the mud pump to well


Pump units - includes submersible trash or sump r


Pumpjacks


Pumps - explosion proof


Pumps and motors - used in the production testing phase








Racks - pipe used in the drilling process


Radar equipment-ground penetrating, side looking aperture


Radio - phone, mobile, VHF, two-way


Radio antenna - MDS


Radioactive prospecting - scintillometers, spectral gamma-gamma density counters, geiger muller


counters, gamma-ray spectrometers, potassium gradiometers


Radioactive sources - used in wireline logging


Ram thread protectors - telescoping


Reactive welding gases - when used in a repair service


Recorder box used for seismic prospecting


Recording system used for seismic prospecting


Reel for coil tubing


Reflectance equipment used for remote sensing


Regulators - includes when used in the transportation and distribution system, for example, gathering


lines


Remote sensing equipment - includes ultraviolet lamps and reflectance, infrared and hyperspectraK^QS


spectrometers


Resistivity survey equipment used for electrical or electromagnetic surveying


Return and discharge lines of a circulating system


Rod basket


Rotary and pump drives


Rotary and pump drives


Rotary table





S


Safety valves - used for well control that are a part of the equipment on the service rig


Sand - includes sand used to stimulate well production


Satellite communications equipment


SCADA equipment - (Supervisory Control and Data Acquisition) used at the well head, processing plant


or refinery


Scintillometers


Seismic - instrumentation, drilling equipment, imaging equipment


Seismic explosives


Seismic prospecting - recording system, seismic instrumentation, geophones, cables, data processing


units








Annex D Page 6





Petroleum Agreement


Government of Guyana - Demerara PA


Seismic vessels and associated equipment


Self-potential meters used for electrical or electromagnetic surveying


Sensors - optical


Separator vessels - used during the production testing phase


Snuobing unit - composed of a blowout preventor stack, a hydraulic jack and a power unit to run the


hydraulics


Solids control equipment


Sonar - includes side scanning


Sonic loggers - full wave form


Spectral gamma-gamma density counters


Spectrometers - infrared or hyperspectral used for remote sensing, gamma ray


Spools - includes drill line spool


Spools (specialized pieces that adapt tubing to BOPs or for spacing requirements between! BOP and


wellhead)


Stabbing guides - used in the drilling process


Stirrrjlating fluids


Stimulation acids - chemicals used downhole or injected in oil/gas formations


Storage tanks - (see Tanks)


Submersible trash pump unit - used to pump drilling fluids, mud/water


Sulphur recovery equipment - used in processing plants and refineries


Survey equipment (see Global positioning systems and Navigation systems)


T


Tank battery


Tanks - flare, integrated fuel, mud or water, stand alone fuel tank fully integrated with drilling rig that


serves as the direct fuel supply for the rig


Tanks - storage - used at a refinery or processing plant


Tanks - water storage


Telecommunication equipment


Thermostats - electrical designed for use with any of the machinery or equipment on this list


Thread protectors - used in the drilling process


Time and frequency domain induced polarization equipment used for electrical or electromagnetic


surveying


Tongs - backup and integral tongs, power tongs and jaws


Tongs - power also called rotary or casing tongs, power tongs and jaws, backup and integral tongs


Tools - fishing tools for retrieving tools lost downhole


Tools - hand


Top drives - Drill Rig


Torque gauges - used in the drilling process


Towers - light


Traction motors


Travelling blocks


Tricones - drill bits


Tubing - includes coil


Tubing slips also known as air slips


Two-way radios





U


Ultraviolet lamps used for remote sensing





V


Vacujm and wash pump used to clean up around rig and wash equipment


Vacu-m tanks or systems - truck- or trailer-mounted








Annex D Page 7





Petroleum Agreement


Government of Guyana - Demerara PA


Vacuum units


Valve - outlet, manifold (integral part of the high pressure pumping system)


Valve manifold (integral part of the high pressure pumping system)


Valves - includes those used in the transportation and distribution system, for example, gathering lines


Valves - safety - used for well logging, drill stem testing or the production testing phase


Vehicles


Vessels - separator - used during the production testing phase


Vessels - supply and anchor handling for offshore petroleum operations


Vessels - for storage of crude oil (FPSO)


Vessels - Mobile Offshore Drilling Units


Vibrators used for seismic prospecting


Viscosifiers - liquid; dry polymer; concentrated


f


W


Walkways - see Scaffolding


Waste gas transmission - see Pipes


Waste management bins


Waste water treatment units - mobile


Water clarifiers - used to remove residual oil in produced water prior to disposal or re-use


Water disposal lines - includes associated machinery and equipment that are located within the


processing plant


Water storage tanks


Welding equipment and supplies


Well flow lines transporting raw product from a well to a satellite, battery, line pipe or processing plant


Well logging equipment - includes surface and downhole tools


Well testing equipment - includes surface and downhole tools


Wellhead equipment


Winches


Wireline (or slickline) unit - skid- or truck-mounted
















































































Annex D Page 8





Petroleum Agreement


Government of Guyana - Demerara PA


 )




















I