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STRATEGIC ALLIANCE AGREEMENT
BETWEEN
NIGERIAN PETROLEUM DEVELOPMENT
COMPANY LIMITED
AND
ATLANTIC ENERGY DRILLING CONCEPTS
NIGERIA LIMITED
FOR
THE DEVELOPMENT AND PRODUCTION OF
OML 30
THIS AGREEMENT is made this 35^ day of ........... 2011 BETWEEN
NIGERIAN PETROLEUM DEVELOPMENT COMPANY LIMITED, a company
incorporated under the laws of the Federal Republic of Nigeria whose registered
office is at 62, Sapele Road, Benin City (hereinafter referred to as “NPDC” which
expression shall where the context so admits, include its successors and assigns)
of the one part;
AND
ATLANTIC ENERGY DRILLING CONCEPTS NIGERIA LIMITED, a company
incorporated under the laws of the Federal Republic of Nigeria whose registered
office is at 50D Glover Road, , Lagos (hereinafter referred to as “ATLANTIC ”
which expression shall, where the context so admits, include its successors and
assigns) of the other part.
WHEREAS the Federal Government of Nigeria (Government) has granted consent
vide a Deed of Assignment dated 21st April, 2011 for the Nigeria National
Petroleum Corporation (NNPC) to assign its fifty five per cent (55%) equity interest
in the Contract Area to NPDC;
WHEREAS ATLANTIC has offered to carry NPDC's equity interest share of
Petroleum Operation Costs and provide technical expertise as and when
required in relation to Petroleum Operations in the Contract Area;
WHEREAS Government in consideration of the huge capital outlay and other
resources required for Petroleum Operations in the aforementioned assets has
approved that NPDC enter into a strategic alliance with ATLANTIC for the
provision of funding and technical expertise;
WHEREAS NPDC and ATLANTIC warrant that they have the right, power and
authority to enter Into this Agreement;
WHEREAS ATLANTIC represents that it has technical competence, professional
skills and funds (both local and foreign) necessary to support NPDC in Petroleum
Operations for the Contract Area and has agreed to provide the funds for
carrying out Petroleum Operations and further agreed to support NPDC with
technical expertise.
NOW THEREFORE in consideration of the premises and mutual covenants herein
contained, the Parties hereby agree as follows:
SAA_0ML 30_NPDC_ATLANT1C_2011 Page 2
ARTICLE 1
1.0 DEFINITIONS
1.1 In this Agreement, including the recitals and the Annexes attached hereto
unless the context otherwise requires, words and expressions used shall
bear the meanings stated herein:
"Accounting Procedure" means, the rules and procedures set forth in Annex “C"
attached hereto and forming part of this Agreement;
“Affiliate or Affiliated Company" means, a company or other entity that controls
or is controlled by a Party, or a company or other entity which controls or is
controlled by a company or other entity which controls a Party; and for the
purpose of this definition, ‘'control" means, ownership by one company or entity
of at least fifty-one per cent (51 %} of:
(a) the voting stock, if the other company is a company issuing stock; or
(b) the controlling rights or interest if the other entity is not a company.
“Available Crude Oil" means, the Crude Oil won, saved and allocated to NPDC
from the Contract Area.
"Available Natural Gas" means, the non associated nalural gas won, saved and
allocated to NPDC from the Contract Area.
"Barrel" means, a quantity or unit of Crude Oil, equal to forty-two (42) United
States gallons at the temperature of sixty degrees (60°) Fahrenheit at normal
atmospheric pressure.
"Barrels of Oil Equivalent" or "BOE" means, the amount of energy equivalent
contained in a barrel of crude oil {5.8 X 10 BTU).
"BCF" means, billion cubic feet of Natural Gas.
"Budget" means, the cost estimate of items included in Work Programme.
SM.0ML 30_NPDCLATLANTIC_2011 Page 3
“CAPEX” means, the costs referred to in Article II, paragraph 2 of Annex "C" of
this Agreement.
“Agreement" means, this Strategic Alliance Agreement including the Annexes
attached hereto.
“Contract Area" means, the area covered by Oil Mining Lease 30 and any
subdivisions arising therefrom in compliance with the relinquishment provisions of
Paragraph 12 of the first schedule to the Petroleum Act. The Coordinates of the
Contract Area is as described in Annex “A” hereto.
“Companies Income Tax" or “CIT" means, the tax obligations arising from the
utilization of natural gas as defined in the Companies Income Tax Act Cap C20
LFN 2004, as amended (CITA)
“Contract Year" means, a period of twelve (12) consecutive calendar months
from the Effective Date of this Agreement or from the anniversary of the Effective
Date.
“Cost OH" means, the quantum of Available Crude Oil allocated to the Parties to
enable the Parties to generate the proceeds to recover their respective costs
incurred in carrying out Petroleum Operations under this Agreement.
“Cost Gas" means, the proceeds realized from the sale of Natural Gas produced
from the Contract Area to enable the Parties recover their respective costs
incurred in carrying out Petroleum Operations with respect to non associated
gas under this Agreement.
“Crude Oil" means, mineral oil in its natural state before it has been refined or
treated (excluding basic sediments and water or other foreign .substances).
“Crude Oil Proceeds" means, the amount in U.S. Dollars determined by
multiplying the Official Selling Price by the number of Barrels of Available Crude
Oil lifted by either Party.
"Development" means. Petroleum Operations undertaken in the Contract Area
for the purpose of putting the Contract Area into production pursuant to anv
development programme approved in accordance with Article 9 hereof.
SAAOML 30.NPDC.ATIANTIC.2011 Page 4
to
"Development Costs" means, the cost of developmental activities which
includes but is not limited to drilling, completing, capping, plugging and
abandoning, appraisal, development, water injection or gas injection wells, the
construction and installation of facilities and equipment required for the
production, storage, transportation and delivery and evacuation of Crude Oil
and Natural Gas as well as the installation of secondary recovery facilities.
Development Costs shall also include cost incurred during Incremental
Production activities.
"Effective Date1’ means, the date of the execution of this Agreement by the
Parties hereto being the day and year first above written.
“Financial Year" means, a period of twelve (12) calendar months from the lsl
January to the 31st December.
"Fixed Assets" means, immovable property and includes movable property,
which has been affixed, installed, constructed or attached to immovable
property as part of the facilities utilised for carrying out Petroleum Operations.
“Foreign Exchange" means, currency other than that of Nigeria that is
acceptable to both NPDC and ATLANTIC.
“Gross Negligence" means, any act or failure to act by the Operator or
ATLANTIC which was intended to cause or which was in reckless disregard or
wanton indifference to the harmful consequence that the Operator or ATLANTIC
knew or should have known such act or Failure would have on (a) safety of life or
property or (b) Petroleum Operations or (c) books and accounts particularly oil
industry accounting standards and procedures.
“Incremental Production" means, monthly production of Crude Oil or Natural
Gas over and above Proven, Developed and Producing reserves attributable to
capital contributions by ATLANTIC .
“LIBOR" means, the seven-day term London Inter-Bank Offer Rate for U.S. Dollars
for similar amounts to the sums in question, quoted by Barclays Bank in London at
11:00 a.m. on the first business day of the relevant period.
"Operating Committee" means, the Committee established by NPDC and
ATLANTIC to carry out the functions set out in Article 7 of this Agreement.
SAA.OML 30_NPDC_ATLANTIC_2011 0 Page 5
“Market Price" means, official selling price in a given month of the Crude Oil and
non associated Natural Gas produced from the Contract Area in US Dollars per
Barrel, shall be related to Dated Brent + Differential (NNPC) in accordance with
the NNPC's monthly published price for the different grades of Crude Oil.
“MCF" means, million cubic feet of Natural Gas.
"Dated Brent" means, the average of Platt's mid-range quotations of Dated Brent
crude as published by Platts Crude Oil marketwire.
"Differential" means, the monthly premium as published by NNPC.
The applicable pricing shall be on either Prompt, Advanced or Deferred basis.
"Prompt basis" shall be five (5) consecutive published quotations after the bill of
lading date with the bill of lading date as day zero.
“Advanced valuation" shall be five (5) consecutive published quotations with the
fifth day before the bill of lading day i.e. the bill of lading day is day six.
"Deferred pricing option" shall be five (5) consecutive published quotations with
the 14th day after the bill of lading date as day one i.e. the bill of lading date is
day zero.
However, each Party's preferred option must be indicated at close of work (4.00
pm) of the sixth (6th) working day before the first day of the laycan. In case either
Party's preferred option is not advised to the Operator by close of work of the 6,h
working day prior to the first day of the laycan, the Prompt option will apply in
the valuation of that Party's lifting.
For Natural Gas it shall be US Dollars /MCF according to the gas pricing
regulations.
“Natural Gas" means, all gaseous hydrocarbons produced in association with
Crude Oil or from reseivoirs which produce gaseous hydrocarbons.
"Natural Gas Proceeds" means, the amount in U.S. Dollars agreed between the
Parties and any off taker of Natural Gas.
SAA 0ML30 NPDC_ATLANTtC_2011 Page 6
"Operator" means, any operator appointed to carry out Petroleum Operations in
the Contract Area.
"Party" means, NPDC or ATLANTIC.
"Parties" means, both NPDC and ATLANTIC.
"Petroleum Operations" means, all Crude Oil and Natural Gas Development and
Production Operations, processing, transportation and Crude Oil terminal
activities for or with respect to the Contract Area.
"Petroleum Operations Costs" means, expenditures made and obligation
incurred in carrying out Petroleum Operations as determined in accordance with
this Agreement and the Accounting Procedure.
"Petroleum Profit Tax" or "PPT" means, the tax obligations arising from the
Petroleum Operations as defined In the Petroleum Profit Tax Act Cap PI3 LFN
2004, as amended (PPT Act).
"Production Costs" means, all costs incurred in carrying out Production
Operations.
"Production Operations" means, all operations carried out subsequent to
Development in order to produce, treat, store, convey and deliver Crude Oil and
Natural Gas from wells, platforms and facilities to a refinery, terminal or other
utilisation or marketing point.
"Profit Oil" means, the balance of Available Crude Oil after the allocation of
Royalty Oil, Cost Oil and Tax Oil.
"Profit Gas" means, the balance of Available Natural Gas after the allocation of
Royalty Gas, Cost Gas and Tax Gas.
"Proven, Developed and Producing" or "PDP" or "PI Developed" means, the
monthly production forecast attached to this Agreement attributable to the
Proved, Developed and Producing reserves from the Contract Area of 155.9
Million Barrels.
SAA.OML 30_NPDC_ATLANT!C_2011 Page 7
"Quarter" means, the time interval from: January 1st to March 315‘ inclusive, April
lsl to June 30lh inclusive, )sl July to 30lh September inclusive, October 1st to
December 31s' inclusive.
"Term of Agreement" means, the period referred to in Article 3.
"Royalty" means, the amount payable pursuant to the Petroleum Act and
Petroleum (Drilling and Production) Regulations Cap P10 LFN 2004, as amended.
"Royalty Oil" means, the quantum of Available Crude Oil allocated to NPDC
which will generate an amount of proceeds equal to the actual payment of
Royalty.
"Royalty Gas" means, the quantum of Available Natural Gas allocated to NPDC
which will generate an amount of proceeds equal to the actual payment of
Royalty.
"Tax Oil" means, the quantum of Available Crude Oil allocated to NPDC which
will generate an amount of proceeds equal to the actual payment of PPT.
"Tax Gas” means, the quantum of Available Natural Gas allocated to NPDC
which will generate an amount of proceeds equal to the actual payment of CIT.
"U.S. Dollars" means the currency of the United States of America.
"Willful Misconduct” means, in relation to the Operator or ATLANTIC, an
intentional, conscious, reckless and wanton disregard of:
(a) any material provision of this Agreement; or
(b) any substantial part of the Work Programme as contained in Article 9.
But shall not include an intentional and conscious disregard of either (a) or |b)
above, if the same relates to safeguarding of life, property or Petroleum
Operations.
"Work Programme" means, for the applicable period a statement itemizing the
Petroleum Operations to be carried out in the Contract Area.
m
SAA.OMt 30_NPDC_ATLANTIC_2011 Page 8
2P Reserves" means, those reserves as described in Annex H.
H 2C Reserves" means, those reserves as described in Annex H.
ARTICLE 2
ENTRY FEE
2.1 NPDC acknowledges ATLANTIC 's obligation to pay $0.30/bbl and
$0.010/Mcf of the 2P Reserves to NPDC as an entry fee for participation in
the development of Reserves of 451.6 Million Barrels of Crude Oil as
• contained in Annex H to this Agreement. In the event of a change to the
2P Reserves by the Parties or by a report from an independent auditor
appointed by the Parties, the Parties agree that the entry fee may be
adjusted.
2.2 The entry fee shall be paid Seventy (70) days after NPDC has been legally
assigned interest in the OML by the Minister and the complete divestment
of all other OML interest holders apart from NNPC.
2.3 No later than 70 days prior to the commencement of the Work
Programme for the capture of 2C contingent resources of [....] as
contained In Annex H to this Agreement, ATLANTIC shall pay 'NPDC a
further sum of $0.30/bbl and $0.010/Mcf of the 2C Reserves as an entry fee
for participation in the development of 2C Reserves. If ATLANTIC fails to
make payment within the stated period, ATLANTIC shall not be entitled to
participate in the development of the 2C Reserves, in the event of a
change to the 2C Reserves by the Parties or by a report from an
independent auditor appointed by the Parties, the Parties agree that the
entry fee may be adjusted.
2.4 The entry fee shall not be recoverable as Cost Oil or Cost Gas.
2.5 This Agreement shall commence upon the payment of the entry fee by
ATLANTIC.
ARTICLE 3
DURATION OF THE AGREEMENT
3.1 This Agreement shall remain in full force and effect until the cumulative
production from the Contract Area has reached the 2P reserves of 451.6
SAA.OML 30_NPDC_ATLANT1C.2011 Page 9
Cb
Million Barrels of Crude Oil attached as Annex H to this Agreement,
thereafter, this Agreement shall terminate. Upon payment of the entry fee
referred to in Article 2,3, the Agreement shall be renewed on the same
terms and conditions with respect to the capture of the 2C Reserves of
[....] as contingent reserves.
3.2 If new producible reserves are added to the volumes referred to in Article
3.1, the duration of this Agreement shall, subject to new terms and
conditions agreed upon by the Parties, be extended till the full recovery of
such new reserves.
3.3 Subject to mutual agreement of the Parties this Agreement may be
terminated whenever it appears evident that the cumulative production
referred to in Article 3.1 hereinabove cannot be economically attained.
ARTICLE 4
RIGHTS AND OBLIGATIONS OP THE PARTIES
4.1 In accordance with this Agreement ATLANTIC shall:
(a) subject to Article 8.1 and in accordance with the approved Work
Programme and Budget, provide all the funds required for NPDC’s
55% share of Petroleum Operation Costs in respect of the Contract
Area;
(b) deliver to NPDC, within seventy (70) days from the Effective Date, a
parent company guarantee from SPOG PETROCHEMICAL NIGERIA
LIMITED Limited in the form set out in Annex G covering the total
amount of the minimum disbursement required to meet NPDC’s
fifty five percent (55%) share of Petroleum Operation Costs for the
full Development of the Contract Area and additional funds which
ATLANTIC may be obliged to provide in accordance with- Article
8.2;
(c) shall carry out an agreed annual training programme in
accordance with Article 14 hereof;
(d) provide training facilities for NPDC/NNPC staff with an annual sum
of Three Hundred and Fifty Thousand US Dollars ($350,000)for a Jt*'
period of five (5) years from the Effective Date, which amount shall pm
SAA_OML30_NPDC_ATLA.NT1C.2011 Page 10
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be paid in January of each year into an account of and in the
name of NPDC;
(e) be subject to ail Nigerian laws, orders and regulations applicable to
Petroleum Operations;
(f) respect all the rights concerning industrial property and indemnify
and hold NPDC harmless from and against all claims, loss, damage
or action arising out of or resulting from, violation of such rights;
(g) not to transfer or assign any rights acquired and obligations
undertaken by ATLANTIC under this Agreement without prior
written consent of NPDC, which consent shall not be unreasonably
withheld;
(h) indemnify and hold harmless NPDC its servants, agents and
representatives from and against all losses, fees {including legal '
fees and expenses) of whatsoever kind and nature which NPDC
may suffer or be compelled to pay to employees, representatives
or agents of ATLANTIC as a consequence of any final decision
given by a Nigerian court except where actions or failure to act on
the part of NPDC or its employees, agents or representatives
contributed to the losses, in which case such costs as are
attributable to the action or failure on the part of NPDC shall be
recoverable by ATLANTIC ;
(i) have the right to lift, in accordance with Annex and freely
export and retain abroad the receipts from the sale of its share of
Available Crude Oil and Available Natural Gas subject to Article
10;
(j) have full access, at all reasonable times during usual business hours
to all books, records, inventories and accounts of any kind or
nature maintained by Operator in relation to Petroleum
Operations;
(k) have the right of access to the Contract Area at all reasonable
times to inspect and observe Petroleum Operations of every kind
and character carried on in the Contract Area. OPERATOR shall
provide NPDC with necessary facilities to gain such access
provided that the provision of such facilities shall not unduly
interfere with the conduct of Petroleum Operations hereunder;
SAA.OML 30_NPDC_ATLANTIC_2011 Page 11
(I) have the right to nominate pursuant to Article 6 of this Agreement,
professional staff to occupy defined functional positions in the
agreed organizational structure for Petroleum Operations for as
long as this Agreement subsists;
4.2 In accordance with this Agreement, NPDC shall:
(a) furnish ATLANTIC with copies of all geophysical, geological, drilling,
well, production.
(b) furnish ATLANTIC with cash call request and other data and
information relating to the Contract Area;
(c) ensure the renewal of the Oil Mining Lease under the Petroleum
Act CAP P10 LFN 2004, as amended, and
(d) have a right of first refusal in the event ATLANTIC wishes to assign
any interest under this Agreement to a third party.
Article 5
POWERS AND OBLIGATIONS OF THE OPERATOR
5.1 NPDC shall be designated as the Operator of the Contract Area subject
to the direction of the Operating Committee. NPDC shall undertake the
following duties:
(a) conduct all Petroleum Operations with utmost good faith and in a
good workmanlike manner in accordance with good industry
practice and all applicable laws and regulations;
(b) maintain full and accurate records of all Petroleum Operations
performed under this Contract;
(c) be always mindful in the conduct of its operations of the rights
and overall interests of Nigeria;
SAA.0ML 30_NPDC_ATLANT!C_2011 Page 12
to
(d) give preference to such goods and services which are available in
Nigeria and can be rendered by Nigerian citizens provided they
meet the required specifications and are competitive in price;
(e) For the purpose of arriving at Profit Oil and Profit Gas, carry out the
estimated and final PPT calculation In accordance with the PPT
Act and submit same on a timely basis to ATLANTIC for record
purposes;
(f) Allocate to each Party the right to lift, in accordance with Annex
«<£«<.
(g) give to ATLANTIC full access, at all reasonable times during usual
business hours to ail books, records, inventories and accounts of
any kind or nature maintained relating to Petroleum Operations,
provided that the Party gives the Operator not less than seven (7)
days prior notice in writing;
(h) give ATLANTIC the right of access to the Contract Area at all
reasonable times to inspect and observe Petroleum Operations of
every kind and character carried on in the Contract Area.
Operator shall provide ATLANTIC with necessary facilities to gain
such access provided that the provision of such facilities shall not
unduly interfere with the conduct of Petroleum Operations
hereunder;
(i) consult freely with and make full and frank disclosure to ATLANTIC
concerning Petroleum Operations and keep them currently
advised of all matters of importance arising in connection
therewith;
0) except as otherwise provided in this Agreement or as may be
authorized by the Operating Committee, NPDC shall not permit or
suffer any lien or other encumbrance to be filed or to remain
against any material, physical equipment, real or personal
property thereon or related thereto, nor against Crude Oil and
Natural Gas produced and saved as a result of its operations
hereunder, unless such lien is imposed by a Court of competent
jurisdiction;
(k) have the right to assign and retain such technical, administrative
and supervisory personnel as deployed to it and consultants as
SAA_OML 30_NPDC_ATLANTIC_2011 Page 13
CA
may be necessary for the conduct of Petroleum Operations,
subject to approval of the Operating Committee;
(I) keep accurate records and books of accounts with respect to
Petroleum Operations, which shall be available during normal
business hours to ATLANTIC'S authorized representatives. Such
records and books shall comply with Annex "C" and generally
accepted Accounting Principles and Procedure and with due
regard to the requirements of the laws and regulations;
(m) promptly provide ATLANTIC with copies of all Operating
Committee approvals for any expenditure, when requested by
ATLANTIC;
(n) not without the written approval of the Operating Committee
dispose of, sell, or re-export any property of such historic cost
exceeding One Hundred Thousand Naira (N 100,000.00) per unit or
batch or such other value as may, from time to time, be
determined by Operating Committee. Notwithstanding the
provision herein, NPDC shall furnish ATLANTIC quarterly returns of
all items of property disposed of regardless of value;
(o) utilize in Petroleum Operations, equipment exclusively owned and
made available by a Party and the charges thereafter to the
operations shall be as specified In the Accounting Procedure;
(p) Litigation and settlement of claims in connection with the
Contract Area, or Petroleum Operations shall be conducted for
and on behalf of the Parties
(q) by Operator subject to supervision of the Operating Committee;
provided however, that Operator shall have authority to settle
claims and litigation not exceeding $4300,000.00 (Three Hundred
Thousand Naira) or the foreign currency equivalent without the
approval of Operating Committee. Operator, however, shall
promptly report any such aforesaid settlement to ATLANTIC.
Operator shall notify ATLANTIC of any process served upon it or of
any process it intends to serve in any action in relation to
Petroleum Operations. Nothing contained in this Article shall
preclude ATLANTIC from acting on its own behalf (and at its own
expense) if, in its opinion, it considers such action advisable or
necessary to protect its particular interest hereunder. However,
ATLANTIC shall not pursue a course of action contrary to the
course of action then being undertaken for the Petroleum
Operations with respect to such litigation.
SAA_0ML 30_NPDC_ATLANTIC_2011 Page 14
ARTICLE 6
PARTICIPATION OF ATLANTIC IN PETROLEUM OPERATIONS
Operator shall ensure efficient conduct of Petroleum Operations in the Contract
Area. To this effect, Operator shall utilize professionals seconded by ATLANTIC
pursuant Article III (4) of Annex B.
ARTICLE 7
OPERATING COMMITTEE
7.1 A Operating Committee shall be established within thirty (30) days from
the Effective Date of this Agreement for the purpose of providing orderly
direction on all matters pertaining to Petroleum Operations and Work
Programme. The powers and duties of the Operating Committee shall
include but not be limited to the following:
a) the revision, amendment and approval of all proposed Work
Programme and Budget;
b) the revision, amendment and approval of any proposed
recommendations made by either Party or by any sub-Committee,
with respect to Petroleum Operations;
c) ensuring that Operator canies out the decisions of the Operating
Committee and also to ensure that Petroleum Operations is
conducted in accordance with the relevant Nigerian laws;
d) the revision or approval of the sale or disposal of any items or
movable property relating to Petroleum Operations in accordance
with the provisions of this Agreement;
e) resolution of all audit observations;
f) the consideration of periodic performance in respect of approved
Work Programme and Budget;
g) review of the award of contracts for Petroleum Operations with
individual value of Five Hundred Thousand United States Dollars
(U$D$ 500,000} and above;
h) approval of qualified contractors and subcontractors list;
i) any other matters relating to Petroleum Operations.
SAA.0ML 30_NPDC_ATLANTIC_2011 Page 15
7,2 (a) The Operating Committee shall consist of eight (8) persons
appointed by the Parties as follows:
NPDC - 4
ATLANTIC - 4
(b) Each Party shall designate by notice in writing to the other Party,
the names of its representatives to serve as members of the
Operating Committee as provided in Article 7.2(a) hereof and their
respective alternates, which, members or alternates shall be
authorised to represent that Party with respect to the decisions of
the Operating Committee. Such notice shall give the names, titles
and addresses of the designated members and alternates.
(c) At least fourteen (14) days prior to each scheduled Operating
Committee meeting, the secretary (Secretary) shall notify members
of the meeting and deliver to each member an agenda of matters
with briefs to be considered during each meeting. Matters which
are not delivered within the period stated shall not be considered
unless otherwise agreed by the Operating Committee. However,
no agenda shall be required in the event of an emergency
meeting.
(d) Either Party may change any of its respective members or
alternates from time to time by notifying the other Party in writing
not less than ten (10) days in advance of the effective date of such
change.
(e) NPDC shall appoint the chairman (Chairman) of the Operating
Committee. ATLANTIC shall appoint the Secretary who shall have
no voting rights. The Secretary shall keep minutes of all meetings
and records of all decisions of the Operating Committee. The
minutes of each meeting shall be approved by the Operating
Committee at the next meeting and signed by the Chairman and
Secretary and copies thereof delivered to each Party.
7.3 Unless otherwise agreed by the Parties, the Operating Committee
shall meet at the Operator's office once every three (3) calendar
months or at such other intervals or venue as may be agreed by the
Operating Committee. The quorum for any meeting of the
Operating Committee shall consist of three (3) representatives of
NPDC and three (3) representatives of ATLANTIC. The Chairman or
his alternate and the ATLANTIC'S Managing Director or his alternate
must be present at every Operating Committee meeting for a
quorum to be formed.
SAA_0ML 30_NPDC_ATLANTIC_2011 Page 16
7.4(a) Except as otherwise expressly provided in this Agreement all
decisions of the Operating Committee shall be reached by the
unanimous vote of the Parties. If unanimity is not obtained on any
matter (including any matter pertaining to a Work Programme or
Budget) proposed to the Operating Committee, then the Operating
Committee shall meet again to attempt to resolve such matter not
later than fourteen (14) days after the meeting in which the
proposed matter was rejected by a negative vote. Any portion of
such proposal that is not rejected shall insofar as possible be carried
out. At least seven (7) days prior to such second meeting, the Party
casting the dissenting vote shall provide to the other Party in writing
in reasonable detail the reasons for such dissenting vote. If such
written reasons are not provided at least seven (7) days prior to such
second meeting, then the proposal shall be deemed approved. In
such second meeting the agenda shall comprise such written
reasons as provided by the dissenting Party. If unanimity is not
obtained in the second meeting, then the Operating Committee
shall meet a third time within fourteen (14) days after the second
meeting. If unanimity is not obtained during the third meeting then
NPDC and ATLANTIC may agree to appoint an independent
qualified expert to advice on the matter, which advice shall be
binding on the Parties. In the event of failure of the Parties to agree
to the appointment of the said expert the provisions of Article 23
shall apply.
(b) The Parties shall be bound and abide by each decision of the
Operating Committee duly made in accordance with the provisions
of this Agreement.
7.5 The Operating Committee shall establish technical sub-committee and
any other advisory sub-committees from time to time as it considers
necessary such as finance and budget and legal/services sub¬
committees:
(a) Each sub-committee established pursuant to this Article 7.5 shall be
given terms of reference by the Operating Committee and shall be
subject to such direction and procedures as the Operating
Committee may give or determine.
(b) The Operating Committee shall appoint the members of the sub¬
committees which shall comprise equal representation from the
Parties. The chairmen and the secretaries of the sub-committees
shall be appointed by the Operating Committee.
SAA.OML 30_NPDC_ATLANT1C_2011 Page 17
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(c) The deliberations and recommendations of any sub-committee
shall be advisory only and shall become binding and effective
upon acceptance by the Operating Committee.
ARTICLE 8
FUNDING OF PETROLEUM OPERATIONS
8.1 ATLANTIC shall provide all the funds required for NPDC's 55% share of
Petroleum Operation Costs, subject to Article 8.2 and in accordance with
approved Work Programme and Budget. A review of the Work
Programme shall be carried out by the technical sub-committee subject
to approval of the Operating Committee within fifty (50) days from the
Effective Date to estimate the capital investments for the Development.
Based on this review the Operating Committee shall within seven (7) days
approve the amount for the capital investments, which shall be covered
by the parent company guarantee.
8.2 The costs incurred by the Parties in carrying out Petroleum Operations shall
be recovered by the Parties through Cost Oil or Cost Gas, in accordance
with Article 10 and the Accounting Procedure as set out in Annex *C\
8.3 All bank transactions shall be made through bank accounts opened and
maintained by NPDC exclusively for the Petroleum Operations.
8.4 NPDC shall open and maintain project bank account(s) exclusively for
funding Petroleum Operations and shall procure that ATLANTIC shall
have unlimited inquiry and audit mandate and a right to copies of all
information and transactional documents including all accounts records
and balances as they occur from bank accounts and project bank
accounts referred to in Articles 8.3 and 8.4.
8.5 If additional Development Costs are required to add facilities not included
in the development programme, including but not limited to in-fill well,
secondary recovery facilities, additional processing facilities, deeper wells
and artificial lift, ATLANTIC shall provide NPDC’s share of Petroleum
Operations Costs required to carry out such additional development
activities.
8.6 The additional capital investments referred to in Article 8.5 hereof shall be
recovered by ATLANTIC through Cost Oil and Cost Gas in accordance
with Article 10 and the Accounting Procedure, and ATLANTIC shall be ^
SAA_0ML 30 NPDC ATLANTIC_2011 Page 18
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entitled to receive a share of Profit Oil and Profit Gas over the additional
production as provided for in Article 10.2 hereof.
8.7 ATLANTIC shall bear all losses associated with funding NPDC's 55% share
of Petroleum Operations under this Agreement.
ARTICLE 9
DEVELOPMENT PROGRAMME AND BUDGETS
9.1 Operator shall submit to the Operating Committee for approval within 60
days of the Effective Date, the development plan which shall include the
development programme and relevant Budget appropriately
apportioned into yearly phases.
9.2 At the meetings of the Operating Committee to consider and approve
the Work Programme and Budget for each year, Operator shall submit a
report on organizational structure to be utilized -for conduct of Petroleum
Operations in accordance with Annex B. During such meetings, Operator
shall report on the actual performance of the organizational structure for
the previous year.
9.3 The Development plan shall include the Work Programme and Budget,
apportioned into quarterly phases, to be carried out under the
Development plan during the remainder of the financial year. In respect
of subsequent financial years, the Work Programme and Budget shall be
submitted not later than 31s1 August of the preceding financial year. Such
Work Programme and Budget shall comprise all requisite services
including, but not limited to, environmental studies, drilling and
completion programmes, construction and assembling of field installations
and equipment, as may be necessary to permit the production, storage,
transportation and delivery of Crude Oil and Natural Gas from the
Contract Area. The Development programme and Budget shall be
detailed as necessary.
9.4 Operator shall submit to Operating Committee any revision of the annual
Development programme and Budget. Any such revision of the approved
Development Budget shall be made by agreement of the Operating
Committee, in the event of emergency or extraordinary circumstances
that require immediate action. Operator may take actions it deems
necessary to protect life and property and the interest of the Parties and
shall promptly notify the Parties in writing within forty-eight (48) hours
SAA.OML 30_NPDC_ATLANTIC_2011 Page 19
a
notwithstanding the provisions of this Article 9.4 any cost so incurred shall
be recoverable.
ARTICLE 10
RECOVERY OF PETROLEUM OPERATIONS COSTS AND CRUDE OIL AND NATURAL
GAS ALLOCATION
lO.l Crude Oil and Natural Gas Allocation
The allocation of Available Crude Oil and Available Natural Gas shall be
in accordance with Annex “C", Annex "D" and this Article 10, as follows:
(a) Royalty Oil and Royalty Gas shall be allocated to NPDC in such
quantum as will generate an amount of proceeds equal to NPDC’s
Royalty applicable to the Contract Area.
(b) Cost Oil and Cost Gas shall be allocated to NPDC in such quantum
as will generate an amount of proceeds sufficient to recover the
following:
I. Un-depreciated costs associated to Capital Costs as
defined in the Accounting Procedures incurred prior to
execution of this Agreement shall be allocated to NPDC:
II. Development Costs and Production Costs related to the
Production of PI Developed reserves as agreed in the
production profile attached hereto as Annex H shall be
allocated to ATLANTIC ;
III. Incremental Investment (Development Costs and Production
Costs), made by ATLANTIC shall be recovered from
incremental volumes (i.e. the monthly production from 2P
reserves less the PI Developed reserves as indicated in the
production profile attached hereto as Annex H) shall be
allocated to ATLANTIC .
Costs expended in United States Dollars will be recovered in United
States Dollars through Cost Oil allocation and Cost Gas proceeds;
costs expended in currencies other than United States Dollars will
be converted to United States Dollars at the last available
exchange rate and recovered through Cost Oil and Cost Gas
allocation.
SAA OML 30 NPDC ATLANTJC_2011 Page 20
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(c) Tax Oil and Tax Gas shall be allocated to NPDC in such quantum as
will generate an amount of proceeds equal to the PPT [and CIT]
liability relevant to the production in the Contract Area.
(d) Profit Oil being the balance of Available Crude Oil after deducting
Royalty Oil, Cost Oil and Tax Oil and Profit Gas being the balance
of Available Natural Gas after deducting Royalty Gas, Cost Gas
and Tax Gas respectively shall be shared by the Parties pursuant to
the Accounting Procedure as follows:
Profit Oil and Profit Gas attributable to un-depreciated costs
associated to Capital Costs incurred prior to execution of
this Agreement as indicated in the production profile
attached hereto as Annex H shall be allocated in the
following ratio:
NPDC - Ninety per cent (90%)
ATLANTIC -Ten per cent (10%)
II. Up to the full recovery of Development Costs by ATLANTIC
Profit Oil shall be allocated in the following ratio:
NPDC - Forty per cent (40%)
ATLANTIC - Sixty per cent (60%)
Thereafter, Profit Oil shall be allocated in the following ratio:
NPDC - Seventy per cent (70%)
ATLANTIC - Thirty per cent (30%)
III. Up to the full recovery of Development Costs related to the
contingent resources development. Profit Oil shall be
allocated in the following ratio:
NPDC - Forty per cent (40%)
ATLANTIC - Sixty per cent (60%)
SAA.0ML 30_NPDC_ATLANTIC_2011 Page 21
Thereafter, Profit Oil shall be allocated in the following ratio:
NPDC - Seventy per cent (70%)
ATLANTIC - Thirty per cent (30%)
iv. Up to the full recovery of Development Costs regarding non
associated gas by ATLANTIC, Profit Gas shall be allocated in
the following ratio:
NPDC-Thirty per cent (30%)
ATLANTIC - Seventy per cent (70%)
Thereafter, Profit Gas shall be allocated in the following ratio:
NPDC - Seventy per cent (70%)
ATLANTIC - Thirty per cent (30%)
v. Up to the full recovery of the Development Costs for the
development of contingent resources. Profit Gas shall be
allocated in the following ratio:
NPDC - Thirty per cent (30%)
ATLANTIC - Seventy per cent (70%)
Thereafter, Profit Gas shall be allocated in the following ratio:
NPDC - Seventy per cent (70%)
ATLANTIC - Thirty per cent (30%)
10.3 Each Party shall take in kind, lift and dispose of its allocation of Cost Oil,
and Profit Oil in accordance with the Lifting Procedure (Annex D).
The PPT and Tax Gas payable under this Agreement represents the
NPDC's tax obligations as Concessionaire. ATLANTIC'S tax obligations
which shall be paid under CITA shall be paid by ATLANTIC from its profit.
SAA.0ML 30_NPDC_ATLANTIC_2011 (A Page 22
10.4 Either Party may at the request of the other, lift the other Party's Cost Oil
and Profit Oil pursuant to Article 10.1 and the lifting Party shall within thirty
(30) days transfer to the account of the non-lifting Party the proceeds of
the sale to which the non-lifting Party is entitled. Overdue payments shall
bear interest at the annual rate of three (3) months LIBOR.
10.5 Either Party may, with the consent of the other Party, purchase any
portion of the other Party’s respective allocation of Cost Oil and Profit Oil
from the Contract Area.
10.6 Parties shall meet on a monthly basis as may be agreed to reconcile
all Crude Oil allocated and lifted during the period as per Annex "E".
ARTICLE 11
VALUATION OF AVAILABLE CRUDE OIL
11.1 Available Crude Oil shall be valued in accordance with the following
procedures:
(a) On the commencement of production from new reservoirs, NPDC
shall engage the services of an independent laboratory of good
repute to determine the assay of the new Crude Oil.
(b) When a new Crude Oil stream is produced, liftings shall be made
for a trial marketing period of three (3) calendar months or the
period required to lift the first three (3) cargoes, whichever is
shorter. During the trial marketing period NPDC shall:
(i) collect samples of the new Crude Oil upon which the assay
shall be performed as provided in Article 11.1 (a) above;
(ii) determine quality and yield pattern of the new Crude Oil;
(iii) share in the marketing such that each Party markets
approximately their proportionate share of the new Crude
Oil, notwithstanding the fact that a Party's share of Available
Crude Oil may be lifted in the process; payments thereafter
shall be made in accordance with Article 10.5;
SAA_0ML 30_NPDC_ATIANTIC_2011 Page 23
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(iv) exchange information regarding the marketing of the new
Crude Oil including documents which verify the sales price
and terms of each lifting;
(v) apply the actual Free On Board (F.O.B.) sales price to
determine the price of each lifting. Such F.O.B. sales pricing
for each lifting shall continue after the trial marketing period
until a valuation of the new Crude Oil has been completed
but in no event shall it be longer than ninety (90) days after
conclusion of the trial marketing period.
(c) As soon as practicable but in any event not later than sixty (60)
days after the end of the trial marketing period. Operator shall
review the assay, yield, and actual sales data. Operator shall
present a proposal for the valuation of the new Crude Oil. A
valuation method either spot related or any other method
acceptable to the Parties shall be established for determining the
price for each lifting of Available Crude Oil. Such valuation method
shall be in accordance with the Official Selling Price published by
NNPC or relevant government authority. It is the intention of the
Parties that such prices shall reflect the true market value of the
new Crude Oil. The valuation method determined hereunder
(including the product yield values) shall be mutually agreed within
thirty (30) days from the aforementioned meeting failing which;
determination of such valuation shall be referred to an
independent consultant.
(d) upon the conclusion of the trial marketing period, the Parties shall
be entitled to lift their share of Available Crude Oil pursuant to
Article 10 and the Lifting Procedure.
(e) when a new Crude Oil stream is produced from the Contract Area
and is co-mingled with an existing Crude Oil produced in Nigeria
which has an established Official Selling Price basis then such basis
shall be applied to the extent practicable for determining the
Official Selling Price of the new Crude Oil. Operating Committee
shall meet and decide on any appropriate modifications to such
established valuation basis which may be required to reflect any
change in the market value of the Crude Oil as a result of co¬
mingling.
SAA.OML 30_NPDC_ATLANTICJ2011 Page 24
11.2 If in the opinion of either Party an agreed price valuation method fails to
reflect the market value of the Crude Oil produced in the Contract Area,
then such Party shall propose to the other Party modifications to such
valuation method once in every six (6) months but in no event more than
twice in any year. The Parties shall then meet within thirty (30) days of such
proposal and mutually agree on any modifications to such valuation
within thirty (30) days from such meeting failing which, determination of
such valuation shall be referred to an independent consultant.
ARTICLE 12
PAYMENTS
12.1 In each accounting period, enough Crude Oil shall be allocated to meet
Cost Oil obligations and enough Natural Gas proceeds shall be made
available to meet Cost Gas obligations.
12.2 The method of payment of any sum due from ATLANTIC to NPDC and
vice versa shall be in accordance with the prevailing guidelines of the
Federal Ministry of Finance of Nigeria, the Central Bank of Nigeria and in
accordance with Annex C.
12.3 Unless otherwise provided herein, any payments which NPDC is required
to make to ATLANTIC or which ATLANTIC is required to make to NPDC
pursuant to this Agreement shall be made within forty five (45) days
following the end of the month in which the obligation to make such
payments occurs. Overdue payments shall bear interest at the annual
rate of three (3) months LIBOR.
12.4 If any of the Parties engages in activities or business outside Petroleum
Operations, the cost of the facilities, assets and personnel, if any, used for
such business or activities shall not be chargeable to the operations.
ARTICLE 13
UTILISATION OF NATURAL GAS
13.1 NPDC's share of Natural Gas proceeds from the Contract Area pursuant
to Development shall be shared in accordance with Article 10. The field
development programme shall address gas utilization for the Contract
Area and shall be subject to the approval of the Operating Committee.
SAAOML 3CLNPDC_ATLANT1C_2011 Page 25
ch
13.2 Notwithstanding the provisions of Article 13.1 hereof, the associated
Natural Gas produced with Crude Oil may be utilized at no cost to the
operations as fuel for Production Operations, gas recycling, secondary
recovery by gas injection, gas lift, or any other economical secondary
recovery schemes, stimulation of wells or artificial lifts necessary for the
Contract Area's full Development. Such usage shall be with the prior
written consent of NPDC, such consent shall not be unreasonably
withheld.
13.3 The Development plan to be approved pursuant to Article 9.1 will contain
plans to use Natural Gas both for operational and commercial purposes,
to meet the objective of zero flaring.
13.4 In the event that gas is flared in the course of production, the penalty shall
be treated as part of Production Cost.
ARTICLE 14
TRAINING OF NPDC PERSONNEL
I4.l Each year ATLANTIC shall submit a detailed programme for training for
the following year in respect of NPDC and NNPC personnel. The final
training programme shall be mutually agreed by the Parties and shall
reflect any specific requirement of NPDC for implementation by ATLANTIC.
14.2 Costs and expenses incurred by ATLANTIC in training NPDC and NNPC
personnel, both on the job training and work attachment, shall be
included in Development Costs or Production Costs, depending on the
period at which the relevant costs are incurred and recovered through
Cost Oil and Cost Gas.
14.3 ATLANTIC shall also provide for training facilities, in accordance with
Article .4.1 (d)
SAA.OML 30_NPDC_ATUNTIC_2011 Page 26
ARTICLE 15
SUB-CONTRACTORS
15.1 Within ninety (90) days of the Effective Date and at the commencement
of every financial year or as may be required at any other time, Operator
shall prepare and submit to Operating Committee for approval, a list of
contractors and sub-contractors who may, as Petroleum Operations
demand, be invited by Operator to bid for contracts.
15.2 Subject to the provisions of this Article 15.5, Operator has the right upon
the prior approval of Operating Committee to engage contractors and
sub-contractors for performing services which Operator is obliged to
perform under the terms of this Contract. Such services, however, shall be
performed for and on behalf of Operator who shall remain directly
responsible for the performance of these services. Such contracts/ sub
contracts shall be in the name of Operator.
15.3 (a) . Approval shall not be required for contracts whose price is less than
One Hundred Thousand (100,000) United States Dollars or its
equivalent in Naira or other currencies;
(b) Operator shall promptly deliver to Operating Committee a copy of
each of the contracts referred to in this Article 15.3 following the
execution thereof.
15.4 Notwithstanding the provision of this Article 15 all contract awards shall be
by competitive tendering process.
15.5 In any event, for contracts whose contract price is equal to or exceeds
One Hundred Thousand (100,000) United States Dollars or the equivalent in
Naira, or other currencies. Operator shall select its contractors from the list
of approved qualified contractors as provided for in Article 15.1 hereof
and such selection shall be by means of' competitive bidding with
preference being given to Nigerian persons and entities, as provided for in
Annex F of this Contract. The contract recommendation shall be
considered and approved by the Operating Committee.
15.6 Subject to Article 15.4 hereof, Operator shall, wherever possible, utilize/
extend for Petroleum Operations existing/valid contracts/agreements with
ATLANTIC and/or ATLANTIC'S Affiliates by direct negotiations subject to
prior approval of the Operating Committee.
SAA.OML 3 0_N PD C_ ATL ANTI C_2 011 Page 27
ARTICLE 16
BOOKS AND ACCOUNTS. AUDIT AND OVERHEAD CHARGES
16.1 Books and Accounts
Operator shall keep complete books of accounts for which they are
responsible which shall be consistent with modern petroleum industry and
generally accepted accounting principles and procedures. The statutory
books and accounts of this Agreement shall be kept in Naira and United
States Dollars. All other books of accounts as may be considered
necessary shall be kept in columnar form in both Naira and United States
Dollars. Officials of ATLANTIC shall have access to such books and
accounts during business hours.
16.2 Audits
ATLANTIC and its external auditors shall have the right to inspect and
audit the books and accounts relating to this Agreement for any year by
giving thirty (30) days written notice to the Operator. Operator shall
facilitate the work of such inspection and auditing, provided, however,
that the costs of such inspection and auditing shall be met by ATLANTIC,
and provided also that if such inspection and auditing have not been so
carried out within three (3) years following the end of the year in
question, the books and accounts relating to such year shall be deemed
to be accepted by the Parties as satisfactory. Any exception must be
made in writing ninety (90) days following the end of such audit and
failure to give such written notice within such time shall establish the
correctness of the books and accounts.
ARTICLE 17
TAXES. ROYALTIES. RATES AND DUTIES
17.1 Customs duties and other duties levied on imports and services by reason
of Operator's activities in performing Development and Production
Operations hereunder, pursuant to Articles 8.1 and 8.2 shall be regarded
as Development Costs and Production Costs, as the case may be and
shall be recovered by the Parties in the manner provided for in this
Agreement.
SAA OML 30 NPDC ATLANTIC_2011 Page 28
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17.2 Taxes due on ATLANTIC’S income, in accordance with CITA shall be borne
by ATLANTIC and shall not under any circumstances be reimbursable to
ATLANTIC .
17.3 NPDC shall pay its share of PPT and Royalty arising from the production of
Crude Oil won and saved in the Contract Area.
17.4 The Official Selling Price as advised by the relevant government authorities
and established by this Agreement shall be used in determining NPDC's
share of PPT and Royalty in respect of Available Crude Oil and Available
Natural Gas produced and lifted from the Contract Area.
17.5 ATLANTIC shall take all the necessary steps to ensure that the taxes which
ATLANTIC must pay in accordance with this Article 17 shall be accurately
paid, as and when due.
ARTICLE 18
INSURANCE
18.1 All property acquired under the provisions of this Agreement shall be
adequately insured with an insurance company of good repute in the
name of NPDC with limits of liability not less than those required by
Nigerian laws and regulations. The premium for such policies shall be
included in Petroleum Operations Costs.
18.2 In case of loss of or damage to property, indemnifications paid by the
insurance companies shall be entirely received by NPDC for which
prompt report shall be made to Operating Committee not later than
seventy two (72) hours. The amount so received shall be lodged in an
account of and in the name of NPDC that it shall nominate. Operating
Committee shall determine whether the lost or damaged property should
be repaired, replaced or abandoned. If the decision of Operating
Committee is to repair or replace with the proceeds from such
indemnification, NPDC shall immediately replace or repair such lost or
damaged property. In the event that the loss or damage is attributable
to NPDC’s Gross Negligence such cost of replacement or repair shall be
borne by NPDC.
18.3 NPDC shall take out and maintain an insurance policy covering any and
all damages caused to third parties as a direct or indirect result of
Petroleum Operations in the name of NPDC. NPDC shall defend and hold
ATLANTIC harmless from damages and losses caused to third parties as a
SAA.OML 3CLNPDCJVTLANT1CL2011 Page 29
consequence of NPDC's Gross Negligence or Willful Misconduct in the
performance of this Article.
18.4 All insurance policies under this Article 18 shall be based on good
international petroleum industry practice and shall be taken out in the
Nigerian market except for those risks for which NPDC cannot obtain
coverage in Nigeria which shall be taken out abroad, to the extent
required by law.
18.5 In entering into contracts with any sub-contractor for the performance of
Petroleum Operations, NPDC shall require such sub-contractor to take
adequate insurance in accordance with Article 18.1 and 18.3 above and
to properly indemnify the Parties for any damage done and to properly
indemnify and hold the Parties harmless against claims from third parties.
18.6 NPDC shall maintain other insurance policies in the name of NPDC and
ATLANTIC required under Nigerian law.
ARTICLE 19
CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS
19.1 The Parties shall keep information mutually exchanged and all plans,
maps, drawings, designs, data, scientific, technical and financial reports
and other data and information of any kind or nature relating to
Petroleum Operations including any discovery of hydrocarbons as strictly
confidential, at all times, and shall ensure that their entire or partial
contents shall under no circumstances be disclosed by the Parties in any
announcement to the public or to any third party without the other Party’s
prior written consent.
The provisions of this Article 19 shall not apply to disclosure to:
(a) sub-contractors. Affiliates, assignees, auditors, legal advisers,
provided that such disclosures are required for the effective
performance of the aforementioned recipients' duties related to
Petroleum Operations':
(b) comply with statutory obligation or the requirements of any
governmental agency in which case NPDC will notify ATLANTIC
of any information so disclosed,
SAA.OML 30_NPDC_ATLANTIC_201'1 Page 30
(c) finance institutions involved in the provision of finance for the
operations hereunder provided, in all such cases, that the
recipients of such data and information agree in writing to keep
such data and information strictly confidential,
(d) a third party for the purpose of negotiating an assignment of
interest hereunder provided such third party executes an
undertaking to keep the information disclosed confidential.
19.2 Parties shall take all necessary measures in order to make their employees,
agents, representatives, proxies and in the case of NPDC, sub-contractors
comply with the same obligations of confidentiality provided for in this
Article 19.
19.3 The provisions of this Article 19 shall not be voided by the expiry or
termination of this Agreement on any grounds whatsoever and these
provisions constitute a continuing obligation and accordingly the
restrictions arising therefrom shall be in force at all times.
19.4 The Parties shall use their best endeavours to ensure that their servants,
employees, agents and in the case of NPDC, subcontractors shall not
make any reference in public or publish any notes in newspapers,
periodicals or books nor divulge, by any other means whatsoever any
information on the activities under NPDC’s responsibility, or any reports,
data or any facts and documents that may come to their knowledge by
virtue of this Agreement, without the prior written consent of the other
Party.
19.5 NPDC shall submit to ATLANTIC copies of all statutory reports and
information for submission to Government and other statutory bodies.
ARTICLE 20
FORCE MAJEURE
20.1 Any failure or delay on the part of either Party in the performance of its
obligations or duties under this Agreement shall be excused to the extent
attributable to Force Majeure. A Force Majeure situation shall include
delays, defaults or inability to perform under this Agreement due to any
event beyond the reasonable control of either Party. Such event may be,
but is not limited to, any act, event, happening, or occurrence due to
natural causes; and acts or perils of navigation, fire, hostilities, war
(declared or undeclared), blockade, labour disturbances, strikes, riots,
insurrection, civil commotion, quarantine restrictions, epidemics, storms,
SAAOML 30.NPDC.ATLANTIC.2011 Page 31
floods, earthquakes, accidents, blowouts, lightning, and acts of or orders
of Government.
20.2 If operations are delayed, curtailed or prevented by Force Majeure, then
the time for carrying out the obligation and duties thereby affected, and
obligations hereunder, shall be extended for a period equal to the period
thus involved.
20.3 The Party whose ability to perform its obligations is so affected shall
promptly notify the other Party thereof not later than forty-eight (48) hours
after the establishment of the start of Force Majeure stating the cause,
and the Parties shall do all that is reasonably within their powers to remove
such cause.
ARTICLE 21
LAWS AND REGULATIONS
21.1 This Agreement shall be governed by and construed in accordance with
the laws of the Federal Republic of Nigeria and any dispute arising
therefrom shall be determined in accordance with such laws.
21.2 In the event that any enactment of or change in the laws or regulations
of Nigeria or any rules, procedures, guidelines, instructions, directives, or
policies, pertaining to the Agreement introduced by any government
department or parastatals or agencies occurs subsequent to the Effective
Date of this Agreement which materially and adversely affects the rights
and obligations or the economic benefits of Parties, the Parties shall use
their best efforts to agree to such modifications to this Agreement as will
compensate for the effect of such changes. If the Parties fail to agree on
such modifications within a period of ninety (90) days following the date
on which the change in question took effect, the matter shall thereafter
be referred at the option of either Party to arbitration under Article 22
hereof. Following arbitrator's determination, this Agreement shall be
deemed forthwith modified in accordance with that determination.
SAA OML 30 NPDC ATLANTIC_2011 Page 32
to
ARTICLE 22
ARBITRATION AND CONCILIATION
22.1 If a difference or dispute arises between NPDC and ATLANTIC
concerning the interpretation or performance of this Agreement, and if
the Parties fail to settle such differences or dispute by amicable
agreement, then either Party may serve on the other a demand for
arbitration. Within thirty (30) days of such demand being served, each
Party shall appoint an arbitrator and the two arbitrators thus appointed
shall within a further thirty (30) days appoint a third arbitrator and if the
arbitrators do not agree on the appointment of such third arbitrator, or if
either Party fails to appoint the arbitrator to be appointed by it, such an
arbitrator or third arbitrator shall be appointed by the Head of the
Nigerian branch of Chartered Institute of Arbitrators in accordance with
the provision of the Arbitration and Conciliation Act Cap A18 LFN 2004.
Notice of the intention to apply to the Chartered Institute of Arbitrators
shall be given in writing by the applicant Party, to the other Party, and
when appointed, the third arbitrator shall convene meetings and act as
chairman thereat. If an arbitrator fails or is unable to act, a successor shall
be appointed by the respective Party or by the arbitrators in the event the
chairman must be succeeded. The arbitration award shall be binding
upon the Parties and the expenses shall be borne by the Parties in such
proportion and manner as may be provided in the award. The venue of
the arbitration shall be anywhere in Nigeria as agreed by the Parties.
ARTICLE 23
REPRESENTATIONS AND WARRANTIES
23.1 In consideration of the entering into this Agreement, the Parties warrant as
follows:
(a) that they have the power to enter into and perform this Agreement
and have taken all necessary action to execute, deliver and
perform the Agreement in accordance with the terms herein
contained.
(b) the execution, delivery and performance of this Agreement by the
Parties will not contravene in any respect, any of the provisions of:
SAA.OML 30_NPDC.ATLANTIC.2011 Page 33
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r;rrr;!'T^yr[7fr^r^p':rrT^”‘v'.’'’''‘’^ns'
(J) any law or regulations or order of any government authority.
Agency or Court applicable to or by which the Parties may
be bound.
[2] any mortgage, agreement or other undertaking or
instrument to which they are a party or which is binding
upon them or any of their respective revenues or assets.
(c) In addition to the above, ATLANTIC further warrants that:
(1) full disclosure has been made to NPDC prior to the Effective
Date of all facts in relation to ATLANTIC and its financial
condition and affairs as is material and ought properly to be
made known to NPDC; and
(3) has the requisite funds both in foreign and local currencies
to carry out NPDC’s 55% share of Petroleum Operations
under the Contract Area.
(dj The representations and warranties set out above shall survive the
execution of this Agreement.
ARTICLE 24
TERMINATION
24.1 NPDC shall be entitled to terminate this Agreement if any of the following
events occur:
(aj ATLANTIC defaults in the performance of its material obligations
set forth in Article 4.1(a).
(bj ATLANTIC defaults in the performance of its obligations as set forth
in, 4.1 (b) of this Agreement.
(c) ATLANTIC assign its rights and interests under this Agreement
without prior written notice and prior written consent of NPDC.
SAA.OML 30„NPDC_ATLANTIC_2011 Page 34
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(d) ATLANTIC is adjudged insolvent bankrupt or to have made
restitution to its creditors by a Court of competent jurisdiction in
Nigeria.
(e) ATLANTIC liquidates or terminates its corporate existence.
(f) There is a breach of ATLANTIC'S parent company guarantee.
(g) The disposal of ATLANTIC'S rights and interests under this Agreement
through the sale of its parent company;
(h) The attainment of 451.6 Million Barrels subject to Article 3.1.
24.2 Termination for any of the events specified in this Article 24.1 (c-i) above;
shall be with immediate effect and NPDC may by written notice to
ATLANTIC declare the Agreement terminated.
24.3 If the cause for termination is an event specified in Article 24.1 (a) and (b),
NPDC may give written notice thereof to ATLANTIC to remedy such
default within a period not less than thirty (30) working days of receipt of
NPDC's notice. If upon the expiration of such period such default has not
been remedied or removed, the Agreement shall automatically
terminate.
24.4 Except such rights of ATLANTIC that may have accrued prior to the date
of termination, ATLANTIC'S rights shall cease upon termination of this
Agreement. Such termination shall take place without prejudice to any
other rights or remedies which may be available to either Party.
SAA.OML30.NPDC.ATLANTIC_2011 Page 35
ARTICLE 25
NOTICES
25.1 Any notices required to be given by either Party to the other shall be in
writing and shall be deemed to have been duly given if sent and
received by e-mail, mail, fax, telegram or cable (confirmed by mail) or
registered post to, or hand delivered at the following registered offices:
NIGERIAN PETROLEUM DEVELOPMENT COMPANY LIMITED,
62, SAPELE ROAD,
BENIN CITY, NIGERIA
ATLANTIC :
ATLANTIC ENERGY DRILLING CONCEPTS NIGERIA LIMITED,
50D GLOVER ROAD,
IKOYI, LAGOS, NIGERIA.
25.2 Either Party shall notify the other promptly of any change in the above
address.
SAA.OML 30_NPDC_ATLANTIC_2011 Page 36
ARTICLE 26
GENERAL PROVISIONS
26.1 In consultation with ATLANTIC , NPDC shall obtain and pay for all
necessary permits or authority for the use of any patent, device,
instrument and the like not belonging to NPDC, necessary for the
operations and such cost shall be paid for by ATLANTIC and recovered
through Cost Oil. NPDC agrees to defend after consultation with ATLANTIC
, all legal proceedings brought against it or ATLANTIC claiming
infringement of a patent on any method or equipment selected or
furnished by NPDC or in its performance of the obligations under this
Agreement, provided NPDC notifies ATLANTIC promptly in writing of any
such infringement or claim against it and ATLANTIC gives NPDC authority,
information and assistance for the defense or assistance in defense of
such proceeding. ATLANTIC may be represented by its own counsel and
may participate in proceedings to which it and NPDC are defendants,
provided however that NPDC shall control the defense thereof.
26.2 This Agreement is drawn up in the English Language and the affairs of the
Agreement shall be conducted in the English Language.
26.3 Except as provided in Articles 3, 24 and 26.9, this Agreement shall not be
terminated, amended or modified in any respect except by mutual
consent in writing of the Parties hereto.
26.4 The title of this Agreement, the sequence and headings of the Articles of
this Agreement have been adopted for identification and reference
purposes only, and do not and shall not affect the meaning or
interpretation of this Agreement.
26.5 If at any time, any provision of this Agreement is or becomes illegal,
invalid, or unenforceable in any respect under the laws of any relevant
jurisdiction, neither the legality, validity or enforceability of the remaining
provisions nor the legality, validity or enforceability of such provisions
under any other laws, shall in any way be affected or impaired thereby
and the remaining provisions of this Agreement shall be construed and
enforced as if the Agreement did not contain such invalid, illegal or
unenforceable provisions.
26.6 This Agreement together with attached Annexes shall constitute the entire
agreement between the Parties in respect of the transaction
contemplated herein and shall supersede all previous arrangements.
SAA.OML 30_NPDC_ATLANTIC_2011 Page 37
promises, agreements, correspondences, etc. made in relation to this
Agreement.
ATLANTIC hereby represents and warrants that they have not engaged
and shall not engage any person,' firm or company as a commission
agent for purposes of this Agreement and that they have not given or
offered to give (directly or Indirectly) to any person any bribe, gift,
gratuity, commission or other thing of value, as any inducement or reward
for doing or forbearing to do any action or take any decision in relation to
this Agreement or for showing or forbearing to show favour or disfavour to
any person in relation thereto.
26.7 ATLANTIC further represent they have not either directly or indirectly give
to any person, director, employee, representative or agent of the other
Party or any Government official any commission, fee, rebate, gift or any
entertainment of significant cost or value and shall not procure the
services of any commission agent or other third party to give any such gift,
fee, reward, concession, bribe, entertainment of significant cost or value
or anything of a similar nature, for the purposes of influencing or inducing
positively or adversely the execution of this Agreement or the doing of any
act in connection with this Agreement.
26.8 If ATLANTIC or any of their personnel, representatives, agents or sub¬
contractors gives or offers to give (directly or indirectly) to any person any
such inducement or reward or anything of value, the other Party may
terminate this Agreement immediately without prior notification. It is
hereby expressly stated that the termination of this Agreement under this
provision shall not be deemed a.breach of the Agreement and shall not
give rise to any claim for cost or compensation or loss of profit on the part
of the other Party.
26.9 NPDC agrees to indemnify, keep indemnified and hold harmless ATLANTIC
against any costs, decommissioning liabilities and environmental liabilities
of whatsoever nature and howsoever arising and any costs, expenses,
liabilities or other charges incurred as a result of or in connection with any
termination, dismissal or redundancy of any person employed or engaged
by NPDC arising prior to the Effective Date.
26.10 In the event that ATLANTIC acquires a participating interest in the OML,
Parties shall negotiate and execute a joint operating agreement ("Joint
Operating Agreement" or "JOA") to govern their relationship in the OML.
SAA.OML 3(LNPDC_ATLANTIC_2011 Page 38
IN WITNESS WHEREOF THE PARTIES herein have caused this agreement to be
executed the day and year first above written.
Signed for and on behalf of NIGERIAN PETROLEUM DEVELOPMENT COMPANY
LIMITED by:
Signature:....
Nam.:.................
D.,i0™«ore..............bi/Z££3rfL.
In the presence of;
Signature:...,
firphrmw, /9‘ 0~
Name:..........................................................................
Designation:...^..^..:.....^
Signed for and on behalf of ATLANTIC ENERGY DRILLING CONCEPTS NIGERIA
LIMITED by:
Signature:. '
Designation:.. ...................
In the presence of:
Signature:... QJJA
Name:. C&'-ycb-'-........tfipjii.................
SAA.OML 30_NPDC_ATLANT1C_2011 % a Page 39
i-v«WS!W^ 1 -V! ,y‘"f- __________-
ANNEX A
(INSERT COORDINATES OF OML 301
SAA_OML30_NPDC_ATLANTIC_2011 Page 40A
ANNEX B
TO THE STRATEGIC ALLIANCE AGREEMENT BETWEEN NPDC AND ATLANTIC FOR THE
DEVELOPMENT AND PRODUCTION OF CRUDE OIL AND NATURAL GAS FROM QML 30
DATED THIS ....................................................
ARTICLE I
APPLICATION
1. This Annex "B" defines the obligations of NPDC to ATLANTIC in the conduct of
Petroleum Operations.
2. In the event of a conflict between the terms of this Annex “B" and the
Agreement the terms of the Agreement shall prevail.
3. This Annex “B” may be amended from time to time by mutual consent of the
Parties.
ARTICLE II
DEFINITIONS
1. The definitions contained in this Agreement shall apply to any and all purposes in
this Annex “B" and shall have the same meanings.
2. "Operator” shall be as defined in the Agreement.
ARTICLE III
CONDUCT OF PETROLEUM OPERATIONS
1. The Parties acknowledge that the two main objectives to be achieved
through this Agreement are:
(a) the funding of NPDC’s 55% share of Petroleum Operation Cost in relation
to the Contract Area: and
(b) the conduct of Petroleum Operations and training of NNPC/NPDC staff.
SAA_OML30_NPDC_ATLANT1C_2011 Page 40B
2. NPDC shall conduct Petroleum Operations through its own staff and
professionals seconded by ATLANTIC who shall occupy well defined
and mutually agreed positions. The manning level and tenure of
secondment shall be agreed by the Parties.
3. ATLANTIC shall give one month prior written notice of de-secondment
of any personnel. Any agreed replacement personnel shall work with
de-seconded staff for a reasonable handover period.
4. The position of Head of Pipelines and Facilities and Head of Gas
Marketing shall each be manned by a ATLANTIC nominee for training
and capacity building of NPDC personnel for a maximum period of
three (3} years after which such position shall revert to NPDC.
ARTICLE IV
RIGHTS AND DUTIES OF OPERATOR
1. In the conduct of Petroleum Operations, Operator shall:
(a) perform Petroleum Operations in accordance with the provisions
of this Agreement;
(b) carry out the decisions of the Operating Committee;
(c) conduct all Petroleum Operations in a diligent, safe and efficient
manner in accordance with good and prudent oil field practices
generally followed by the international petroleum industry;
(d) prepare and submit to the Operating Committee the proposed
Work Programme and Budgets as provided in Article 8 of the
Agreement;
(e) acquire ail permits, consents, approvals, surface or other rights
which may be required for or In connection with the conduct of
Petroleum Operations;
(f) permit the representatives of ATLANTIC to have at all reasonable
times and at their own risk and expenses reasonable access to the
Petroleum Operations with the right to observe such Petroleum
Operations;
(g) prepare and furnish such reports, records and information as may
be required pursuant to the Agreement;
(h) take all necessary and proper measures for the safety or the
protection of life, health, environment, and property in the case of
an emergency; provided, however, Operator shall promptly notify
ATLANTIC of the details of such emergency and measures.
SAA.OML 30_NPDC.ATLANTIC_.2011 Page 41
ARTICLE V
INFORMATION SUPPLIED BY OPERATOR
Operator shall consult freely with, and shall make full and frank disclosure to
ATLANTIC concerning Petroleum Operations and keep them currently advised
of all matters of importance arising in connection therewith.
Operator shall promptly furnish ATLANTIC with the following reports and data in
hard and digital copies as available and compiled from Petroleum Operations.
(a) raw stack data and final stack and migrated seismic data (after
routine and special processing), associated velocity and
navigation data in a mutually agreed standards format for 20
seismic and in digital format only for 3D seismic;
(b) final geological and geophysical maps, evaluation reports,
prospect listings and reports including representative interpreted
sections and work station files where appropriate;
(c) well proposals, location reports, site sutvey reports and drilling
programmes prior to or concurrent with Government filing or at
such earlier time as may be specified by the Agreement;
(d) daily (seven days a week) drilling progress reports to include basic
drilling information and weekly drilling summary reports to include
an estimate of cumulative cost. Mudlog data, MWD and other
similar data gathered during drilling to be forwarded after
validation by Operator;
(e) all well logs at mutually agreed scales and format together with
data on plugging, coring, testing, deviation surveys, velocity
surveys and samples;
(f) intermediate and final geotechnical reports, drill stem and well
test reports, core analysis reports and final well reports;
(g) provide ATLANTIC with daily production figures;
(h) weekly production summary and engineering activity reports;
(i) monthly reports on engineering studies, development schedules
and progress reports on development projects, which shall at
least, depict the status of each such project from inception to
date, its cumulative costs to date and the commitments taken;
SAA_OML 3 0_N P D C_ATL A NTIC_2 Oil Page 42
(j) monthly reports on production with performance data listed by
field, wells and reservoir;
(k) annual reserves reports including proved developed reserves;
(l) long term production forecasts submitted with the annual Work
Programme and Budget on a yearly basis with the budget year
shown on a quarterly basis;
(m) prompt reports on well developments of significance such as
blowout and prompt notice of special events of importance to the
Petroleum Operations, such as fire, accident, sabotage or acts of
God involving loss of life or serious property damage, strikes and
riots, changes in production level affecting quota or relevant
government actions. Such reports or notices shall be given by
telex, telefax, telephone or equivalent means and confirmed in
writing;
(n) copies of accounting reports;
(o) a quarterly report detailing and comparing approved budgeted
amounts to actual amounts with an explanation for significant
variations;
(p) copies of all reports relating to Petroleum Operations (including
safety performance statistics and incident report) furnished by
Operator to the Government;
(q) other reports as frequently as is justified by the activities or as
instructed by the Operating Committee;
(r) a monthly report on key operating performance data with a
summary of all Petroleum Operations with updated schedules of
events. These should include safety and environmental statistics,
oil spills, produced water discharged, flaring volumes and related
data. One such report shall be an annual summary and should
include summary statistics reported on a monthly basis and a
discussion of significant events during the year including current
programmes, current and emerging issues, status of regulatory
compliance parameters used to monitor performance, plans and
objectives for the coming year;
(s) as soon as available, on request, an individual set of washed or
unwashed well drill cutting samples or access to cuttings if
insufficient samples exist; and
(t) as soon as available, allotments of core, formation water, and
hydrocarbons or access to samples if insufficient amounts remain
after Operator’s analyses.
SAA.OML 30_NPDC.ATLANT1C.2011 Page 43
(u) Operator shall promptly supply io ATLANTIC as soon as available :
(i) a copy of all logs and surveys made including a complete
log, electrical or otherwise, of each well from surface to final
depth;
(ii) a copy of all drill stem tests and analytical reports including,
without limitation, bottom hole or recombined fluid sample
analyses, descriptions of core and cuttings, samples and
analyses, Crude Oil and or Natural Gas analyses and any
and all data obtained and interpretations thereof;
(iii) a copy of the plug-back record in the event that any will or
part thereof is abandoned;
(iv) a copy of the final geological report and the drilling,
completion and work over report on all wells;
(v) copies of all geological and geophysical surveys and
reports, maps relating to drilling proposals and final well
reports made by the Operator or its contractors;
(vi) field and well performance data;
(vii) monthly statements of Petroleum won and saved from the
Contract area including Crude Oil and Natural Gas stocks
and tanker loadings;
(viii) weekly well progress reports which include, for the week
concerned, a brief description of the work performed, the
interval drilled, the type and depth of formation penetrated,
the size and landed depth of any casing, the type and
results of any tests made and such other well information
and data as each Party may, from time to time, reasonably
specified; and
(ix) such additional reports as ATLANTIC may require including
a copy of all reports on technical studies and research
conducted or commissioned by Operator in respect of
Petroleum Operations.
(x) Copies of major contracts for the execution of Petroleum
Operations as may be requested by ATLANTIC.
SAA.OML 30„NPDC_ATLANTIC_2011 Page 44
ANNEX C
TO THE STRATEGIC ALLIANCE AGREEMENT BETWEEN NPDC AND ATLANTIC FOR
THE DEVELOPMENT AND PRODUCTION OF CRUDE Oil AND NATURAL GAS
FROM OML 30
DATED THIS
ACCOUNTING PROCEDURE
ARTICLE 1
GENERAL PROVISIONS
1. Definitions
This Accounting Procedure attached to and forming a part of the Agreement is
to be followed and observed in the performance of either Party's obligations
thereunder. The defined terms appearing herein shall have the same meaning
as is ascribed to them in the Agreement.
2. Accounts and Statements
NPDC shall keep accounting records and books as provided under Article 16.1
of the Agreement in accordance with generally accepted accounting
principles consistent with modern petroleum industry practices and
procedures.
All original books of accounts together with original supporting documentation
shall be kept and maintained in Nigeria in compliance with ail Nigerian laws and
regulations.
3. Other
In the event of a conflict of the terms of this Procedure and the Agreement, the
terms of the Agreement shall prevail.
ARTICLE II
PETROLEUM OPERATIONS COSTS
Petroleum Operations Costs shall be defined as all costs, expenses paid and
obligations incurred by the Operator in carrying out Petroleum Operations and
shall consist of {1} Non-Capital Costs, and (2) Capital Costs.
SAA.0ML 3 0_N PD C_ATLANTI C_2 Oil Page 45
1. Non-Capital Costs
“Non-Capital Costs" means, those Petroleum Operations Costs incurred that are
chargeable to the current year’s operations. Non-Capital Costs include, but are
not limited to the following:
(a) General office expenses - office, services and general
administration services pertaining to Petroleum Operations including
but not limited to, services of legal, financial, purchasing, insurance,
accounting, computer, and personnel department,
communications, transportation, rental of specialized equipment,
charitable contributions and approved community related
expenses.
(b) Labour and related costs - salaries and wages, including bonuses,
of employees of the Parties who are directly engaged in the
conduct of Petroleum Operations, whether temporarily or
permanently assigned, irrespective of the location of such
employee including but not limited to, the costs of employee
benefits, customary allowances and personal expenses incurred
under each Party’s practice and policy and amounts imposed by
applicable Governmental authorities which are applicable to such
employees. These costs and expenses which shall be disclosed to
the Parties shall include:
(i) Cost of established plans for employee group life insurance,
hospitalization, pension, retirement, savings and other
benefit plan;
(ii) Cost of holidays, vacations, sickness and disability benefits;
(iii) Cost of living, housing and other customary allowances;
(iv) Reasonable personal expenses which are reimbursable
under each Party's standard personnel policies;
(v) Obligations imposed by Governmental authorities;
(vi) Cost of transportation of employees, other than as provided
in paragraph (c) below, as required in the conduct of
Petroleum Operations; and
m
SAA.OML 30_NPDC_ATLANrnC_2011 to Page 46
(vii) Charges in respect of employees temporarily engaged in
Petroleum Operations which shall be calculated to reflect
the actual costs thereto during the period or periods of such
engagement.
( c) Employee relocation costs - costs for relocation, transportation and
transfer of employees of the Parties engaged in Petroleum
Operations including, but not limited to the cost of freight and
passenger service of such employees' families and their personal
and household effects together with meals, hotel and other
expenditures related to such transfer incurred with respect to:
(i) employees of the Parties within and or outside Nigeria,
including expatriate employees, engaged in Petroleum
Operations;
(ii) transfer to or from Nigeria for engagement in Petroleum
Operations;
(iii) relocation costs and other expenses incurred in the final
repatriation or transfer of each Party's employees and
families.
Provided always that:
a) such relocations are pre-approved by the Operating
Committee;
b) relocation costs incurred in moving an employee and his
family beyond his point of origin, established at the time
of his transfer to the project, in Nigeria will not be
recoverable as Petroleum Operations Cost, and
c} no charge shall be made to the Petroleum Operation
with respect to the expenses incurred in the final
repatriation or transfer of the expatriate employees and
families to other areas outside of the Contract Area.
(iv) Nigerian employees on training assignments outside Nigeria.
(d) Services provided by third parties - cost of professional,
technical, consultation, utilities and other services procured
from third party sources pursuant to any contract or other
arrangements between such third parties and the Operator for
the purpose of Petroleum Operations.
SAA.OML 30_NPDC_ATLANT1C_2011 Page 47
&
(e) Legal expenses - All costs or expenses of handling, investigating,
asserting, defending, and settling litigation or claims arising out
of or relating to Petroleum Operations or necessary to protect or
recover property used in Petroleum Operations including, but
not limited to, legal fees, court costs, arbitration costs, cost of
investigation or procuring evidence and amounts paid in
settlement or satisfaction of any such litigation, arbitration or
claims in accordance with the provision of the Agreement.
(f) Services provided by Affiliates of the Parties - professional,
administrative, scientific, technical services for the direct benefit
of Petroleum Operations including, but not limited to, services
provided by the exploration, production, legal, financial,
purchasing, insurance, accounting and computer services
departments of such Affiliates. Charges for providing these
sen/ices shall reflect the actual cost only and must be consistent
with international market prices and shall not include any
element of profit.
(g) Insurance premiums and settlements - premiums paid for
insurance normally required to be carried for the Petroleum
Operations together with all expenditures incurred and paid in
settlement of any and all losses, claims, damages, judgments,
and other agreed expenses.
(h) Duties and taxes - all duties and taxes, fees and any
Government assessments, including but not limited to, gas flare
charges, license fees, customs duties, and any other payments
to the Government, other than taxes due on ATLANTIC ’s
income.
(k) Intangible drilling costs - expenditures for labour, fuel, repairs,
maintenance, hauling and supplies and materials (not
including, casing and other well fixtures) which are for or
incidental to drilling, cleaning, deepening or completing wells
or the preparation thereof incurred in respect of:
(i) determination of well locations, geological, geophysical,
topographical and geographical surveys for site evaluation
preparatory to drilling including the determination of near
surface and near sea bed hazards, cleaning, draining and
leveling land, road-building and the laying of foundations,
1. drilling, shooting, testing and cleaning wells, and
2. erection of rigs and tankage assembly and installation of
pipelines and other plan and equipment required in the
SAAOML 30_NPDC_ATLANTIC_2011 Page 48
preparation or drilling of wells producing Crude Oil and
Natural Gas.
(l) Geological and geophysical surveys - labour, materials and services used
in aerial, geological, topographical, geophysical and seismic surveys
incurred in connection with Petroleum Operations.
(m) Operating expenses - labour, materials and services used in day to day oil
and gas well operations, oil and gas field production facilities operations,
secondary recovery operations; storage, transportation, delivery and
marketing operations; and other operating activities, including repairs,
well workovers, maintenance and related leasing or rental of all materials,
equipment and supplies.
(n) Exploration and appraisal drilling - all expenditures incurred in connection
with exploration drilling and the drilling of appraisal wells and drilling of
development wells, including costs incurred in respect of casing, well
cement and well fixtures.
(o) Abandonment/Decommissioning - a provision for all expenditures
incurred in connection with the plugging of wells; the removal and
disposal of equipment and facilities including well heads, processing and
storage facilities, platforms, pipelines, transport and export facilities, roads,
buildings, wharves, plants, machinery, fixtures, the restoration of sites and
structures including the payment of damages to property lessors. The
expenditures will be estimated on the basis of technical studies by the
Operator and shall be approved by the Operating Committee. Annual
budget provisions for such expenditure shall be made after full recovery of
all Development Cost or at the expiration of three (3) years whichever
comes first taking into account the relationship between estimated total
abandonment cost and anticipated remaining production reserves from
the Contract Area. Following establishment of such funds, yearly
contributions from Cost Oil and Cost Gas shall be made into an account
to be opened and maintained by NPDC. Any balance on the fund after
total abandonment shall revert to NPDC.
Capital Costs
“Capital Costs" means, without limitations, expenditures which are subject to a
Capital Allowance under the PPT Act. Such expenditures normally have a useful
life beyond the year incurred and include but are not limited to the following:
(a) Plant expenditures - expenditures in connection with the design,
construction and installation of plant facilities (including machinery,
fixtures, and appurtenances) associated with the production and
processing of Crude Oil and Natural Gas (except such costs properly
allocable to intangible drilling costs) including offshore platforms,
SAA.OML 30_NPDC_ATLANTICJ2011 Page 49
secondary or enhanced recovery systems, gas injection, water disposal,
expenditures for equipment, machinery and fixtures purchased to
conduct Petroleum Operations such as office furniture and fixtures, office
equipment, automotive equipment, petroleum operational aircraft,
construction equipment, miscellaneous equipment.
(b) Pipeline and storage expenditures ~ expenditures in connection with the
design, installation, construction of pipeline, transportation, storage and
terminal facilities associated with Petroleum Operations including tanks,
metering and export lines.
(c) Building expenditures - expenditures incurred in connection with the
construction of buildings, structures or works of a permanent nature
including workshops, warehouses, offices, roads, wharves, furniture and
fixtures related to employee housing and recreational facilities and other
tangible property incidental to construction.
(d) Drilling expenditures - expenditures for tangible goods in connection with
drilling wells such as casing, tubing, surface and sub-surface production
equipment, flow lines, instruments; costs incurred in connection with the
acquisition of rights over the Contract Area pursuant to paragraph 1 (d) {i)
of the Second Schedule of the PPT Act except any bonuses paid under
Article 2 of the Agreement.
(e) Pre-Production expenditures - all costs (including those otherwise falling
within Non-Capital Costs described in paragraph 1 of this Article II)
incurred before the first accounting period relevant to PPT calculation.
(f) Material inventory - cost of material purchased and maintained as
inventory items solely for Petroleum Operations subject to the following
provisions:
i) The Operator shall source and purchase any materials
required for Petroleum Operations, including those required
in the foreseeable future. Inventory stock levels shall take
account of the time necessary to provide the replacement,
emergency needs and similar considerations.
ii) Materials purchased by the Operator for use in Petroleum
Operations shall be valued so as to include invoice price
(less prepayment discounts, cash discounts, and other
discounts if any) plus freight and forwarding charges
between point of supply and point of destination but not
included in the invoice price, inspection costs, insurance,
customs fees and taxes, on imported materials required for
this Agreement.
SAA_OML 30_NPDC_ATLANTIC_2011 Page 50
to
iii) Materials not available in Nigeria supplied by ATLANTIC or
from its Affiliates' stocks shall be valued at the current
competitive cost in the international market.
iv) The Operator shall maintain physical and accounting
controls of materials in stock in accordance with general
practice in the international petroleum industry. The
Operator shall make a total inventory at least once a year.
Each Party may however carry out partial or total inventories
at its own expense, whenever it considers necessary,
provided such exercise does not unreasonably disrupt
Petroleum Operations.
ARTICLE III
COMPUTATION OF ROYALTY AND PPT
1. The Operator shall compute the amount of Royalty payable by NPDC
pursuant to Article 17 of this Contract. Such amounts shall be computed
as provided under the Petroleum Act, CAP PI0 LFN 2004 and the
Petroleum Profits Tax Act, CAP P13 LFN 2004 ("PPT Act") and the provisions
of this Agreement. For purposes of Article IV of this Accounting Procedure,
Operator shall compute the Royalty payment in a given month based on
the prevailing fiscal value of the Crude Oil and/or Natural Gas produced
during the second preceding month. The applicable Royalty rate shall be
in accordance with the applicable legislation.
2(a) The Operator shall compute the PPT payable by NPDC pursuant to Article
17 of the Agreement in accordance with the provisions of the PPT Act and
any prevailing Government fiscal incentives.
(b) The PPT rate is currently 65.7% for the first five (5) years from the
commencement date.
ARTICLE IV
ACCOUNTING ANALYSES
1. A monthly accounting analysis in the form of Schedule C-l attached to
this Accounting Procedure shall be prepared by the Operator and
furnished to ATLANTIC within sixty (60) days of the end of the period
covered by such analysis for consideration and approval.
2. The Market Price and the quantities actually lifted by the Parties shall be
used to compute the proceeds as reflected in Section A of each
Schedule C-1 and the allocation of such proceeds in the categories
SAA.OML 30_NPDC_ATLANTIC_20ll Page 51
described under Article 10.2 of this Agreement shall be reflected in
Section B thereof.
3. The allocation of the quantity of Available Crude Oil and Available
Natural Gas shall be in accordance with the percentages in Article 10 of
this Agreement and the provisions of the Allocation Procedure.
4. The priority of allocation of the total proceeds for each period shall be as
follows:
(a) Royalty Oil/Royalty Gas,
(b) Cost Oil/Cost Gas,
(c) Tax Oil/Tax Gas
(d) Profit Oil/Profit Gas.
5. The amount chargeable to and recoverable from Royalty Oil/Royalty Gas,
Cost Oil/Cost Gas, Tax Oil/Tax Gas to be entered in Section B of Schedule
C-l shall be determined as follows:
(a) Royalty Oil/Royalty Gas - The sum of royalties payable during such
month,
(b) Cost Oil/Royalty Gas - The Petroleum Operations Costs applicable
to such month for purposes of Cost Oil and/or Cost Gas as follows:
(i) Non-Capital Costs shall be the amount recorded in the
books and accounts of the Operator for such month In
accordance with this Accounting Procedure.
(ii) Capital Costs recorded in the books and accounts of
Operator shall be recoverable in full and chargeable in
equal installments over a five (5) year period or the
remaining life of this Agreement, whichever is less.
Amortization of such costs shall be in accordance with the
method prescribed under the Second Schedule of the PPT
Act, or over the remaining life of this Agreement, whichever
is less.
(iii) Qualifying Pre-Production Costs for the Contract Area shall
be in accordance with the PPT Act and CITA as applicable.
(c) Tax Oil/Tax Gas - The sum of the PPT or CIT payable for such month
as provided under Article III (2) of this Accounting Procedure, for
purposes of Tax Oil/Tax Gas.
$AA_0ML 30 NPDC ATLANTIC_2011 Page 52
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(d) Any carryover from previous months as provided under paragraph
6 of this Article.
6. Any amounts chargeable and recoverable in excess of the allocation of
proceeds for the month to Royalty Oil/Royalty Gas, Cost Oil/Royalty Gas
and Tax Oil/Tax Gas shall be carried forward to subsequent months.
Carryovers shall be determined as follows:
(a) A Royalty Oil/Royalty Gas value carryover results when the
proceeds for such month are insufficient for recovery of the Royalty
Oil/Royalty Gas due for the month.
(b) A Cost Oil/Cost Gas value carryover results when the proceeds
remaining after allocating a portion of the Proceeds to Royalty
Oil/Royalty Gas is insufficient for recovery of Cost Oil/Royalty Gas
due for the month.
(c) A Tax Oil/Tax Gas value carryover results when the Proceeds
remaining after allocating a portion of the Proceeds to Royalty
Oil/Royalty Gas and Cost Oil/Cost Gas are insufficient for recovery
of the Tax Oil/Tax Gas due for the month.
7. Profit Oil/Profit Gas results where Proceeds remain after allocations to
Royalty Oil/Royaity Gas, and Cost Oil/Cost Gas and Tax Oil/Tax Gas
pursuant to paragraph 5 of this Article IV. Profit Oil shall be allocated and
Profit Gas shall be shared by the Parties in accordance with Article 10 of
this Agreement.
A computation of Profit Oil/Profit Gas shares in the form of Schedule C-2
attached to this Accounting Procedure shall be submitted monthly.
ARTICLE V
OTHER PROVISIONS
1(a). For as long as the conduct of Petroleum Operations subsists, the
Operator shall open and keep a project development bank
accountfs) exclusively for this Agreement where all funds remitted
by ATLANTIC shall be deposited for the purpose of meeting
Petroleum Operations Costs subject to the provisions of Article 8.1
of the Agreement. For purposes of keeping the books of accounts,
any Foreign Currency remitted by ATLANTIC into Nigeria shall be
converted into Naira at the monthly exchange rates advised by
the Central Bank of Nigeria.
SAA.0ML 30_NPDC_ATLANTIC_2011 Page 53
ih
Mb) The Operator shall also open and maintain a Production
Operations account to receive proceeds of Cost Oil allocated to
1(c) finance Production Operations
NPDC shall open and maintain an abandonment account to
receive Cost Oil/Cost Gas allocated to finance abandonment and
decommissioning costs.
2. The Operator shall prepare financial accounting and budget
statements in accordance with the agreed reporting format. The
Operator shall report on the cumulative production in the Contract
Area in the Form on Schedule C-3 attached.
3. Invoices not duly certified by both Parties as part of Petroleum
Operations cost shall not be admitted into records and accounts
for the purposes of cost recovery.
Schedule C-1
Monthly Accounting Analysis
Month of
Section A - lifting Summary
Lifting Crude RP/Market Volume Proceed Proceeds Received By:
Date Type Price Bbls sU$$
US$/Bbl NPDC ATLANTIC
»
Totals
(?/
SAA.OML 30_NPDC_ATLANTIC_2Oil Page 54
Section B - Allocation of Proceeds - Expressed in U.S. Dollars
CATEGORY PRIOR MONTH CURREN RECOVERABLE .
CARRYOVER MONTH THIS
CHARGES MONTH
Royalty
Oil/Royalty
Gas
Cost Oil/
Cost Gas
Tax Oil/
Tax Gas
NPDC Profit
Oil/
'Profit Gas
ATLANTIC
Profit
Oil/
Profit Gas
Totals
SAA.OML 30_NPDC_ATLANTIC_2Oil Page 55
Schedule C-2
Profit Oil/Profit Gas Shares
Month of_____
Section A - Total Production for the Month Section B - Total Profit for the Month
Field_Total Net Barrels/Mcf Category _US|_
____ Proceeds ___
__ Royalty Oil/Rovaltv Gas_
_ Cost Oil/Cost Gas_
_ Tax Oil/Tax Gas__
_ Profit Oil/Profit Gas_
Section C - Calculation of Profit Oil/Profit Gas Shares
Barrels/Day Monthly production % of Total Monthly Monthly Profit
Profit Share NPDC ATLANTIC Produced for Barrels
Production US$ Profit Profit
month US$ $
SAA_OML 30_NPDC_ATLANTIC_2011 Page 56
SCHEDULE C-3
Cumulative Production Analysis
Section A - Monthly Production
Crude/Gas Planned Planned Cumulative Actual Production Actual
Type Production Cumulative
For Month For Quarter For Month For Quarter
Bbls/Mcf Bbls/Mcf Bbls/Mcf Bbls/Mcf
BBIs/Mcf Bbls/Mcf Bbls/Mcf Bbls/Mcf
Totals
SECTION B - Cumulative Production
Crude/Gas Type Cumulative Previous Quarter Cumulative
Production Cumulative Production to
For Quarter Bbls/Mcf Production B/F date Bbls/Mcf
Bbls/Mcf
TOTALS
SECTION C - Cumulative Production/Liftings/Storages
Crude/Gas Type Cumulative Cumulative Liftings in Storage
Production
TOTALS
SAA.OML 3 0_N P D C_ATL A NTI C_2 Oil Page 57
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ANNEX D
To The STRATEGIC ALLIANCE AGREEMENT Between NPDC and ATLANTIC
Dated Q.5&.. ikuA. 11
ALLOCATION PROCEDURE
ARTICLE I
APPLICATION
1. This Allocation Procedure (“this Procedure") sets out the methods for the
allocation of Available Crude Oil from the Contract Area and the Parties
shall allocate all lifting of Available Crude Oil in accordance with this
Procedure and the Agreement.
2. In the event of a conflict between the terms of this Annex and this
Agreement, the terms of this Agreement shall prevail.
3. The procedures set forth herein may be amended from time to time by
agreement of the Parties.
ARTICLE II
1. The words and expressions defined in this Agreement when used herein
shall have the meaning ascribed to them in this Agreement. In addition,
the following words shall have the meanings set forth below:
(a) "Current Quarter" means, the calendar quarter within which the
relevant Schedules are prepared and submitted;
(b) “Forecast Quarter" means, the first calendar quarter succeeding
the Current Quarter;
(c) "Lifting Allocation" means, the quantity of Available Crude Oil
which each Party has the right to take in kind, lift and dispose of in
accordance with Article 10 of the Contract;
(d) “Off Take Quantity" means, the quantity of Natural Gas which the
Parties have the right to dispose off in accordance with Article 10
of this Agreement.
eBBa-sasasssssagHBasBssaes
SAAJ3ML 30_NPDC_ATIANTIC_2011 Page 58
i
(e) "Primary Nomination" means, written statement issued by each
Party to the other at least twenty-five (25) days prior to the
commencement of each quarter declaring the volume by grade
of its estimated Lifting Allocation and Off take Quantity which the
Party desires to lift or off take during the Forecast Quarter;
(f) “Proceeds Imbalance" means, the difference between each
Party’s Proceeds to which it is entitled and the Proceeds which
each Party has actually received, as reflected in each quarter’s
Schedule D-2 of this Annex.
ARTICLE IN
LIFTING ALLOCATION
1. On or before September 30 of every year. Operator shall advise ATLANTIC
of its forecast of the Available Crude Oil and to be produced by grades
during each month of the first six (6) months of the next ensuing year.
2. On or before March 31 of every year, Operator shall advise ATLANTIC of its
forecast of Available Crude Oil and Available Natural Gas fo be produced
during each month of the six (6) months commencing July 1, of the year,
3. Thirty-five (35) days before commencement of production from the Contract
Area and thereafter thirty-five (35) days prior to the beginning of the
Forecast Quarter, Operator shall notify ATLANTIC the estimated Lifting
Allocation and Off Take Quantity which can be produced and made
available for disposal during the Forecast Quarter. Such estimated Lifting
Allocation and Off Take Quantity shall take into account any Proceeds
Imbalance for the quarter first preceding the Current Quarter and any
estimated Proceeds Imbalance for the Current Quarter computed in
accordance with paragraph 3 of Article IV. Such notice shall be in the form
of Schedule D-l attached hereto indicating the estimated quantities of
Royalty Oil/Royalty Gas, Tax Oil/Tax Gas, Cost Oil/Cost Gas and Profit
Oil/Profit Gas, each Party's estimated Lifting Allocation and Off Take
Quantity, the estimated Realizable Price used to prepare such estimated
Lifting Allocation.
4. Not later than twenty-five (25) days before the beginning of Forecast
Quarter, each Party shall notify the other of its Primary Nomination of
Available Crude Oil which it intends to lift during the Forecast Quarter which
shall not exceed its estimated Lifting Allocation. Such notice shall include the
SAA.OML 30_NPDC.ATLANTIC_ 2Oil Page 59
information described in Article IV, paragraph 1 of this Annex D -
Nomination, Ship Scheduling and Lifting Procedure.
5. The estimated Market Price to be used by Operator to prepare Schedule D-l
(Estimated Quarterly Lifting Allocation) shall be the Market Price.
6. Each Party shall be obliged to lift its own allocation in accordance with the
Nomination, Ship Scheduling and Lifting Procedure (Annex E). In the event
that one Party lifts the other Party's allocation, pursuant to Article 10.5 of this
Agreement the lifting Party shall pay to the non-lifting Party the applicable
proceeds pursuant to Article 10.5 of this Agreement. In such case, the non¬
lifting Party shall be treated for all other purposes under this Agreement as
though it had lifted the allocation itself.
ARTICLE IV
On or before thirty-fifth (35) day prior to the last day of the Current Quarter,
the Lifting Allocation for the first preceding quarter thereto shall be
computed and the Proceeds Imbalance determined and agreed to by
NPDC in the form of Schedule D-2 attached hereto. Section A of such
Schedule D-2 shall be based on the actual liftings made by the Parties and
the Proceeds therefrom. For the actual liftings of the months in the quarter
Schedule C-l (of the Accounting Procedure) shall be utilized.
2. On or before thirty-fifth (35) day prior to the last day of the Current Quarter,
the Proceeds Imbalance for the Current Quarter shall be estimated, taking
into account the actual Proceeds Imbalance computed for the first
preceding quarter under paragraph l of this Article IV.
3. The Proceeds Imbalance for the first preceding quarter computed under
paragraph 1 above and the estimated Proceeds Imbalance for the
Current Quarter computed under paragraph 2 above shall be taken into
account by the Parties by debiting or crediting such Proceeds Imbalances
to each Party's share of the estimated Lifting Allocation reflected in
Schedule C-l of Annex "C" for the Forecast Quarter field by dividing the
respective Proceeds Imbalance by the Market Price applicable for the
period in question.
4. Notwithstanding the reports required to be kept by Operator pursuant to
Article IV in Annex E, Operator shall keep complete records of all liftings. At
the end of each quarter, the Parties will meet to reconcile the Lifting
Allocations and the actual lifting with a view to making adjustments as
appropriate. If any disagreement arises with respect to such reconciliation,
the area of disagreement shall be mutually resolved by the Parties, in
SAAJ5ML 3 0_N PDC_ATLANTIC_2011 Page 60
accordance with the official records of the Ministry of Petroleum
Resources.
5. All Lifting Allocations and actual lifting shall be audited at the end of
each calendar year by a mutually acceptable independent auditor.
SCHEDULE D-1
ESTIMATED QUARTERLY LIFTING ALLOCATION
_ QUARTER f - V_
SECTION A - ESTIMATED TOTAL PROCEEDS
Crude Type Estimated Estimated RP Estimated
Lifting Volume US$/Bbl Proceeds US$
Bbls
Totals
SAA OML30_NPDCJ\TLANTIC_2011 Page 61
$
SECTION B - ALLOCATION OF ESTIMATED PROCEEDS - EXPRESSED IN U.S.DOLLARS
CATEGORY PRIOR MONTH ESTIMATED RECOVERABLE ALLOCATION OF
CARRYOVER QUARTER THIS MONTH EST. PROCEEDS:
CHARGES
NPDC
ATLANTIC
Royalty Oil/
Royalty Gas
Cost Oil/
Cost Gas
Tax Oil/
Tax Gas
NPDC Profit
Oil/
Profit Gas
ATLANTIC
Profit
Oil/
Profit Gas
Totals
Prior Quarter's Proceeds Imbalance (over) Under
Current Quarter's Estimated Proceeds Imbalance
(Over)/Under
Estimated Proceeds Allocation For Quarter
SAA.OML 30_NPDC_ATLANTIC_2011 Page 62
SECTION C -ESTIMATED LIFTING ALLOCATION
Crude Type NPDC Allocation ATLANTIC Allocation
Proceeds Bbls Proceeds Bbls
/
SAA.OML 30_NPDC_ATLANTIC_2011 Page 63
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SCHEDULES D-2
ACTUAL QUARTERLY LIFTINGS ALLOCATION
QUARTER (_1
SECTION A - LIFTING SUMMARY
Crude Volume Proceeds Proceeds Received By Proceeds Received
Type (Bbls) (US$) NPDC By ATLANTIC
Totals
I SAA.OML 3 0_N PDC.ATLANTI C_2011 Page 64
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ANNEX E
To The Strategic Alliance Agreement Between NPDC and ATLANTIC Dated...
UNIFORM NOMINATION. SHIP SCHEDULING AND LIFTING PROCEDURE
ARTICLE I
APPLICATION
1. This Annex E sets out the procedure for the nomination, ship
scheduling and lifting of Available Crude Oil from the Contract
Area.
2. Pursuant to Article 10.2 of the Contract, NPDC and the ATLANTIC
shall
have the right to nominate, lift and separately dispose of their
agreed share of Available Crude Oil produced and saved from the
Contract Area.
3. The procedures set herein may be amended from time to time by
agreement of the Parties.
4. In the event of a conflict between the terms of this Annex E and the
Agreement, the terms of this Agreement shall apply.
ARTICLE II
DEFINITION AND TERMINOLOGY
2. Words and expressions in this Annex shall have the meanings ascribed to
them in the Agreement. In addition, the following words shall have the
following meanings:
(a) "Available Production" means, the quantity of petroleum which can
be efficiently and economically produced and saved from the
producing wells subject to any limitations imposed by Government
or other technical limitations resulting from operations.
(b) "Available Monthly Scheduling Quantity" means, each Party's share
of the Available Production for the calendar month plus Opening
Stock.
SAA.0ML 30_NPDC_ATLANTIC_2011 Page 65
(c) "Actual Production" means, the quantity of petroleum which is
produced and saved from the Contract Area on a
monthly/quarterly basis.
(e) "Combined Lifting Schedule" means, the lifting programmes of the
Parties for a given calendar month/quarter as prepared by
Operator and agreed to by the Parties.
(f) "Commercial Production Quota" means, the quantity of Crude Oil
from time to time fixed or advised by NNPC as the permissible
quantity that may be produced from the Contract Area on a
crude stream basis for a particular month/quarter.
(g) "Opening Stock" means, the balance of each Party's available
monthly scheduling quantity carried forward to the succeeding
month after each month's lifting. The quantity includes
credits/debits accruing to each Party after reconciliation of
available production with lifting. This quantity is same as closing
stock for the current month.
(h) (g)"Primary Nomination” means, a written statement issued by
each Party to Operator at least twenty-five (25) days prior to the
commencement of each calendar month of its proposed lifting
schedule based on its share of commercial production quota plus
opening stock by grade.
(i) "Technical Allowable" means, the quantity of petroleum
determined and advised to Operator by DPR as being the
maximum quantity of Crude Oil that may be technically produced
from the Contract Area on a well by well basis for a particular
period.
(j) "Combined Monthly Lifting Schedule" means a lifting programme
made and advised to each Party by Operator based on each
Party’s Primary Nomination and lifting entitlement.
ARTICLE 111
PRODUCTION/NOTICE OF AVAILABILITY
1. Operator shall ensure the production of the aggregate volume of Crude
Oil nominated by the Parties as provided in this Agreement.
2. In the event that Available Crude Oil is segregated into two or more
grades the provisions of this Annex E shall apply separately to each such
grade, to the extent that distribution on such a basis is impracticable,
separate arrangement for sharing of such Available Crude Oil shall be
agreed upon by the Parties.
SAAJDML 30_NPDC_ATLANTIC_2011 Page 66
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3. On or before September 30 of every year, Operator shall advise ATLANTIC
of its forecast of the Available Production to be produced by grades
during each month of the first six (6) months of the next ensuing year.
4. On or before March 31 of every year, Operator shall advise ATLANTIC of
its forecast of the Available Production to be produced by grades during
each month of the six months commencing July 1 of the year.
5. Where for operational reasons Operator cannot exactly produce at the
anticipated Commercial Production Quota, Operator shall notify
ATLANTIC promptly of any required changes exceeding 2% of the
quantities originally notified. In any event, when the actual production for
the month/quarter is known, each Party's share will be determined in line
with the procedures contained in Article VI herein.
6. Twenty-five (25) days before the commencement of production from the
Contract Area and thereafter not later than twenty-five (25) days before
the beginning of each month, each Party shall notify Operator of its
Primary Nomination of Available Crude Oil which it intends to lift during
the ensuing month, which shall not exceed its monthly allocation of
Commercial Production Quota plus Opening Stock.
7. At the end of each month or quarter, as may be agreed, Parties will meet to
reconcile Available Monthly Scheduling Quantities with actual Available
Crude lifted and adjustments made where necessary. All entitlements shall
be audited at the end of each calendar year by a mutually acceptable
independent auditor.
8. Operator shall keep complete records of all liftings and provide same to
ATLANTIC in accordance with Articles III & IV of this Annex "E".
ARTICLE IV
THE OPERATOR'S REPORTS
1. Operator shall, not more than fifteen (15) working days after the end of
each calendar month, and quarter, prepare and furnish to ATLANTIC a
written statement showing in respect of the month and quarter
respectively:
a) Each Party's share of Opening Stock.
b) Each Party’s share of Commercial Production Quota/Available Crude
Oil:
c) Actual Crude Oil quantity lifted by each Parly.
SAA.OML 30_NPDC_ATLANTIC_2011 Page 67
d) Quantity of Crude Oil in Stock for each Party at the end of the said
calendar month or quarter;
e) Any production losses attributable to Crude Oil, condensate or
associated gas used in Petroleum Operations.
f) Cumulative production.
2. In the event ATLANTIC disagree with any of Operator's reports, the area
of disagreement shall be mutually resolved by the Operating Committee.
Operator shall thereafter prepare a revised report to reflect the changes
agreed.
3. Operator shall send consistent statistical data to the different reporting
bodies and should adhere to agreed formats of reporting.
ARTICLE V
SCHEDULING DETAILS
1. Scheduling Notification - At least twenty-five (25) days prior to the
beginning of a calendar month, each Party shall notify Operator of its
proposed tanker schedule for that calendar month specifying the
following:
(a) A loading date range of ten (10) days for each tanker lifting;
(b) The desired parcel size for each lifting in Barrels, subject always to
change within a range of plus or minus five percent (5%) by the
Party so nominating:
(c) The tanker’s name or To Be Named (TBN) for each tanker lifting.
Tanker nominations made as TBN shall be replaced at least five (5)
working days prior to the accepted date range, unless a shorter
time is acceptable to Operator; and
(d) Documentation instructions shall be given for each lifting not later
than four (4) days prior to the first day of the accepted date range
for the tanker in question.
4. Tanker Substitution - Either Party may substitute another tanker to lift its
nominated volume of Crude Oil provided such substituted tanker has the
same arrival date range as the originally scheduled tanker and all other
provisions of this Annex E are compiled with.
3. Overlapping Date Ranges - In the event the Combined Lifting Schedule
contains overlapping accepted date ranges, the tanker which gives its
Notice of Readiness (NOR) and has provided all documentation and
SAAOML 3 0_N P D C_ATLANTIC_2 Oil Page 68
obtained clearances first within such accepted date ranges shall be
loaded first, unless urgent operational requirements dictate otherwise in
which case demurrage shall be borne by Petroleum Operations and
charged to Petroleum Operations Costs.
4. Confirmation of lifting Schedules - At least fifteen (15) days prior to the
beginning of a calendar month Operator shall either confirm the feasibility
of the proposed month, lifting schedules or, alternatively, advice
necessary modifications to such schedules. Such confirmation which shall
be in the form of Combined Lifting Schedule should include a loading
date range of two (2) days for each lifting, the first day being the earliest
date of arrival and the second day being the latest date of arrival.
Operator shall use its best endeavors to accommodate each Party's
Primary Nomination.
5. Operational Delays - The Parties recognize that occasionally
environmental and technical problems in the Contract Area may cause
delays and/or disruptions in the Combined Lifting Schedule. Operator
shall promptly notify ATLANTIC of such delays and/or disruptions, and
the projected termination of each of such delays and/or disruptions and
advise ATLANTIC of the revised Combined Lifting Schedule. In the event
such notification does not allow for a revised Combined Lifting Schedule
on the part of the Parties, then any resultant costs will be charged to
Petroleum Operation Costs.
6. Estimated Delayed Arrival of a Tanker - Whenever it becomes apparent
that a tanker will not be available as scheduled or will be delayed, the
Party nominating such tanker shall notify the> other Party of the
circumstances and expected duration of the delays. Upon assessing the
impact that the delay will have upon the Combined Lifting Schedule and
production during the current and/or next month, Operator shall make
appropriate revision(s) to the Combined Lifting Schedule to avoid
disruption in production. In the event that any Party fails to lift its
nominated share of production in any month due to circumstances
beyond the Party's control, in maintaining the lifting schedule, that Party
shall have the right during the following quarter to lift the said un-lifted
quantities to the extent reasonably possible.
7. Tanker Standards - All tankers nominated for lifting by any Party pursuant to
this Annex E shall conform to the international regulations and standards
concerning size, equipment, safety, maintenance and the like adopted by
Operator for the terminal in question and by the appropriate government
authority. Failure of a tanker to meet such standards shall not excuse the
nominating Party from the applicable consequences provided in the
Agreement. Operator shall keep ATLANTIC advised as to the current
Regulations and standards in use at the terminals operated by the Operator.
8. Destlnotion of Crude Oil - Operator shall at all times disclose the destination
of the Crude Oil lifted under this Agreement. fC
SAA.OML 3 0_N P D C_ATL ANTIC.2 Oil Page 69
ARTICLE VI
PRODUCTION DECREASES/INCREASES SUBSEQUENT TO NOMINATION
1. Production decreases occurring after lifting nominations have been
scheduled and not resulting from the fault of either Party shall be shared
by the Parties in proportion to their respective share of production.
2. Production increases occurring after lifting nominations have been
confirmed by Operator shall be shared by the Parties, in proportion to their
respective share of production.
3. To the extent that field operations permit a Party shall have the right to
adjust its nomination during a month following confirmation of lifting
schedule provided that the nominations, entitlements and lifting of the
other Party are not affected thereby without their express written consent.
Adjusted nomination shall always be within the limits of the Party's
allocated portion of the Commercial Production Quota plus Opening
Stock.
4 For the avoidance of doubt each Party's agreed share shall be based on
Actual Production.
ARTICLE VII
DELIVERY TERMS AND CONDITIONS
1. Tanker Notification - The Parties shall report or cause the tankers
nominated for lifting pursuant to this Annex E to report by e-mail/
radio/telex to the Operator of each tanker’s Scheduled arrival date and
hour as follows:
(a) Seven (7) days before estimated time of arrival (ETA) or upon
clearing at last port if there is less than seven (7) days steaming
time before ETA;
(b) Seventy-two (72) hours before ETA;
(c) Forty-eight (48) hours before ETA;
(d) Twenty-four (24) hours before ETA; and
(e) At any other time(s) between the seventy-two (72) hours notice,
forty-eight (48) hours notice and twenty-four (24) hours notice when
ETA is to be revised by more than twelve (12) hours from that most
recently notified or after that twenty-four (24) hours notice when
ETA has to be revised by more than one-half hour.
Parties shall also cause such tanker so nominated, or their agent, to report
by radio/telex/e-mail to the Nigerian Government Port Health Official at
SAA.OML 30_NPDC_ATLANTIC_2011 Page 70
the port at least seventy-two (72) hours before each tanker’s scheduled
arrival date giving the tanker’s name, call sign, ETA at the port(s), cargo
tonnage to be loaded, number of crew and health status, whether or not
a doctor is on board and a request for "Free Pratique".
2. Notice of Readiness - Upon arrival at the designated safe anchorage at
the port or upon the time of boarding of the Mooring master, whichever is
earlier, the Master of the tanker shall give Operator a NOR by radio or by
letter, as appropriate, confirming that the tanker is ready to load cargo,
berth or no berth. Laytime, as herein provided, shall commence upon the
expiration of six (6) running hours after receipt by the loading terminal of
such notice, or upon the tanker's completion of mooring at the sea
loading terminal, whichever first occurs. However, where delay is caused
to the tanker getting into berth after giving NOR for any reason over which
neither Operator nor the loading terminal has control, such delay shall not
count as used laytime. In addition, time used by tanker while proceeding
to berth or awaiting entry and Free Pratique by customs after the
expiration of six (6) running hours free time, shall not count as used laytime.
3. Early Tanker Arrival - Notwithstanding the provisions of Article VII (2)
above, if the tanker arrives and tenders NOR to load prior to its agreed
date range. Operator shall endeavor to load such tanker on arrival or as
soon thereafter as possible and laytime shall only commence when
loading of the tanker commences. If, however, Operator is unable to
accept such tanker for loading prior to the agreed date range, Operator
shall endeavour to load such tanker on arrival or as soon thereafter as
possible and laytime shall commence ai 0600 hours, local time on the first
day of the agreed date range or when loading commences, whichever
occurs first.
4. Late Tanker Arrival - If tanker arrives and tenders NOR to load after its
accepted date range and other tankers (having arrived during their
accepted date-range), are either loading or waiting to load, the loading
of such tanker shall be governed by the earliest availability of crude and
loading slot and best endeavour laytime shall commence only when
loading commences.
5. Laytime - Operator shall be allowed laytime in running hours equal to
one-half of the voyage laytime permitted under Worldscale or such other
freight scale that is issued in replacement thereof, for loading a full cargo
and pro rata thereof for a part cargo, with a minimum of eighteen (18)
hours, Sundays and holidays included. Any delay due to the fault of the
tanker or its facilities to load cargo within the time allowed shall not count
as used laytime. If rules of the Owner of the vessel or Regulations of
Government or appropriate government agencies prohibit loading of the
cargo at any time, the time so lost shall not count as used laytime. Time
consumed loading or discharging ballast or discharging slops shall not
count as used laytime. Laytime shall continue until hoses have been
disconnected. Laytime allowed for loading a full cargo is "36 Running
SAA.OML 3 0_N P DC_ATLAN T1 C_2 Oil Page 71
Hours" with a provision for pro-rating the laytime in the case of vessels
loading part cargo. When a vessel is loading one parcel only and
operations commence ahead of the acceptance date there is no
demurrage involved unless the vessel completes cargo after the
permissible laytime, commencing 0001 hours on the agreed acceptance
date. In cases where a vessel loads more than one parcel and more than
one acceptance date is awarded, then demurrage will not count unless
the total loading is completed after the expiry of the permissible laytime
for the last parcel, counting from 0001 hours on the last acceptance date.
6. Demurrage - If Operator is unable to load within the time allowed.
Operator shall apply demurrage per running hour (pro rata for a part
thereof) for laytime exceeding the allowed laytime as specified herein.
The rate of demurrage will be calculated by multiplying the time by the
Average Freighi Rate Assessment (AFRA) as determined by the London
Tanker Brokers Panel. In the event such determination is no longer
available, a freight rate assessment shall be mutually agreed by the
Parties; which rate shall be appropriate in relation to the size of the tanker
and in demurrage rate according to tanker size as specified in the
Worldwide Tanker Nominal Freight Scale or such other freight scale that is
issued in replacement thereof. If however, demurrage shall be incurred
by reason of fire, storm, explosion, or by strike, picketing, lockout,
stoppage or restraint or labour difficulties, or disturbances or by
breakdown of machinery or equipment in or about the loading terminal,
the rate of demurrage as calculated in accordance with the above shall
be governed by Force Majeure and shall not attract any demurrage.
Demurrage claims must be notified within ninety (90) days from Bill of
Lading date.
7. Change of Berth - Operator shall have the right to shift any vessel from
one berth to another. Charges of running lines on arrival at and leaving
the berth, wharfage and dockage charges at that berth and any other
extra port charges or port expenses incurred by reason of such shifting at
Operator's request shall be borne by Petroleum Operations Costs and
shall count as used laytime. If, however, it is necessary to shift the vessel
from the berth because of breakdown of the tanker, machinery or other
deficiency of the vessel or its crew, the resulting expenses shall be borne
by the Party whose Crude Oil is being lifted. The time consumed in such
circumstances, shall not count as used laytime. However, the vessel shall
lose its regular turn in berth. When the vessel is ready to recommence
loading, it shall so advise Operator and await its turn for reberthing and
such time after notice is given shall not count as used laytime.
8. Tanker Departure - Tanker shall vacate the berth upon disconnection of
the hoses and thereafter go to anchor awaiting documentation. The Party
that scheduled such tanker shall indemnify Operator for any direct loss or
damage incurred as a result of tanker's failure to vacate the berth
promptly including such loss or damage as may be incurred due to
SAA.0ML 30_NPDC_ATLANTIC_2011 Page 72
resulting delay in the docking of the tanker awaiting the next turn to load
at such berth.
9. Loading Hoses - Hoses for loading shall be furnished by Operator and shall
be connected and disconnected by the tanker's crew under the
supervision of a suitably qualified Ship’s Officer acting on the advice of
the Operator's Mooring Master.
10 Partial Cargo- Should Operator supply less than full cargo for any reasons,
the tanker shall not be required to proceed to sea until all of her tanks are
filled with a combination of cargo and ballast as will place her in a
seaworthy condition.
ARTICLE Vill
CRUDE OIL QUANTITY AND MEASUREMENT
1. Certification - The quantity and origin of each shipment of Crude Oil shall
be determined by the appropriate government authority at the loading
terminal and set forth in the standard "Certificates of Quantity, Quality
and Origin". Each Party shall have the right to designate a representative
at its own expense, who shall have the right to witness the determination
of quantity, quality and origin. All reasonable facilities shall be supplied by
Operator as necessary, to such Party’s representatives at the Port to
enable such representatives to witness the measurements taken at the
loading terminal and the taking of the sample to be used to the
representative of the Party.
2. Acceptance of Certificate - If the Party in question does not appoint a
representative or if such representative appointed as aforesaid agrees
with the Certificate of Quantity, Quality and Origin of a shipment of Crude
Oil (in which event he shall so indicate by signing the Certificate of
Quantity, Quality and Origin), such determinations shall be final and
binding on the Parties.
3. Dispute on Certificate - If the determination of quantity, quality and origin
by the appropriate government authority has not been approved by such
a representative in accordance with Article VIII (2) above and dispute
arises concerning the quantity, quality and origin of Crude Oil, recourse
shall be had to a mutually agreed independent expert to resolve the
dispute on the basis of his expertise. Claims about quantity and or quality
of the Crude Oil delivered shall be notified within forty-five (45) days from
Bill of Lading date. The expert shall be selected on the basis of his special
knowledge of the subject matter in this regard and shall be appointed by
mutual agreement of the Parties. Such expert shall file his conclusions
within thirty (30) days after his date of appointment. Any conclusions of
SAA.OML 30_NPDC_ATLANTIC_2011 Page 73
such expert shall be binding upon the Parties. The cost incurred on the
services of such expert shall be shared equally by the Parties. Pending the
determination of the dispute, the tanker may sail, unless the Parties agree
otherwise.
4. Quantity Determination - The quantity of Crude Oil lifted shall be
determined at the time of loading on the basis of gauging the terminal
tanks before and after the lifting of such Crude Oil, or otherwise by meter
readings installed on the loading line from the tanks, as approved by
appropriate government authority. The quantity in Barrels of-Crude Oil
determined pursuant to the foregoing procedure shall be corrected to a
temperature of sixty degree Fahrenheit (60°F) in accordance with the
most currently published ASTM-IP Petroleum Measurement Tables. A copy
of the conversion calculation, if any, shall be submitted to the lifting Party
through its representative. In addition, the Basic Sediment and Water
("BS&W") content, determined in accordance with Article Vlll (5) hereof,
shall be deducted from the quantity loaded, for purposes of preparing
the Bill of Lading for such shipment and for the purpose of substantiating
claims about quantity and quality. Any substantiated loss of Crude Oil
occurring in transit between the point of such determination and delivery
point shall be borne by Petroleum Operations Cost provided such losses
do not result due to differences in method of determining BS&W between
the loading and discharge terminals. For differences occurring where
same method of determination at both points are used, provisions of
Article Vlll (3) above shall apply. The retained sample shall be used in
determining such loss claims.
5. Quality Determination - The determination of API Gravity and BS&W
content shall be made of each shipment of Crude Oil. BS&W content and
API Gravity shall be determined according to standard international
practices acceptable to the relevant Government authorities.
6. Samples - A sample of each shipment of Crude Oil shall be taken. The
sample shall be sealed and retained by Operator for a maximum of ninety
(90) days. The lifting Party or its representative shall have the right to
receive one (1) gallon sealed sample of the Crude Oil loaded which shall
be placed on board the tanker, if so requested.
SAAJDML 30_NPDC-ATLANTIC_2011 Page 74
C6
ANNEX F
TO THE STRATEGIC ALLIANCE AGREEMENT BETWEEN NPDC AND ATLANTIC
Dated I
PROCUREMENT AND PROJECT IMPLEMENTATION PROCPDIIPFS
ARTICLE 1
APPLICATION
1. These Procurement and Project Implementation Procedures
(“Procedures") shall be followed and observed in the performance of
either Party's obligations under the Agreement. Words and expressions
defined under the Agreement when used herein, shall have the
meanings ascribed to them in the Agreement. In the event of a
conflict between the terms of these Procedures and the Agreement,
the terms of the Agreement shall prevail.
2. These Procedures shall be applicable to all contracts and purchase
orders whose values exceed the respective limits set forth in Article 15
of the Agreement and which, pursuant thereto, require the prior
concurrence of the Operating Committee. These Procedures may be
amended from time to time by the Parties.
3. Operator shall have the authority, subject to any limitations or
restrictions established by the Operating Committee to enter into any
contract or place any purchase order in its own name for the
performance of services or the procurement of facilities, equipment,
materials or supplies, provided that:
(a) Prior approval of the Operating Committee shall be obtained for all
foreign contracts and foreign purchase orders awarded to third
parties where the cost exceeds One Hundred Thousand U.S. Dollars
($100,000.00);
(b) Prior approval of the Operating Committee shall be obtained for all
local contracts and purchase orders where the cost exceeds Ten
Million Naira (N 10,000,000.00);
(c) The amounts set forth in Article 15 of this Agreement will be
reviewed by the Operating Committee whenever it becomes
apparent to either Party that such limits create unreasonable
constraints on Petroleum Operations. In the event of a significant
change in the exchange rate of Naira to U.S. Dollar compared to
that which existed on the Effective Date, the Operating Committee
shall review the limits sets forth in Article 15;
SAA.0ML 30_NPDC_ATLANTIC_2011 Page 75
(d) Such contracts shall be entered into, and such purchase orders
shall be placed with third parties which in Operator's opinion are
technically and financially able to properly perform their
obligations;
(e) Approved procedures customary to the industry for securing
competitive prices shall prevail;
(f) Operator shall give preference to sub-contractors that are
companies organized under the laws of Nigeria to the maximum
extent possible provided they meet the required standards.
(g) Operator shall give preference to such goods which are
manufactured or produced in Nigeria or services rendered by
Nigerians provided they meet specifications and standards.
(h) In such cases of replenishment of stock and or procurement of
long lead items, approved tendering process will be followed.
ARTICLE II
PROJECT IMPLEMENTATION PROCEDURE
2.1 Operator realizing the need for a project or contract to which these
Procedures apply pursuant to Article 1.3 herein above, shall introduce it as
part of the proposed Work Programme and Budgets to be developed
and submitted to the Operating Committee pursuant to Article 7 of this
Agreement.
(a) Operator shall provide adequate information with respect to the
project including, without limitation, the following:
(i) clear definition of the necessity and objectives of the project;
(ii) Scope of the project; and
(iti) Cost estimate thereof.
(b) Operator shall transmit the project proposal along with all related
documentation to the Operating Committee for consideration.
(c) The Operating Committee shall consider the proposal and the
recommendations and shall take decision on the matter in
accordance with Article 7 of this Agreement.
2.2 The project as approved pursuant to Article 2.1 above shall form part of
the Work Programme and Budget for the Petroleum Operations. Such
approval shall also constitute authorizations by the Operating Committee
SAA.OML 30_NPDC_ATLANTIC_2011 Page 76
<1.
to Operator to initiate contracts and purchases relevant to the project
proposal, subject to the provisions of Article 15 of this Agreement.
2.3 The resources for the project design, supervision, and management shall
first be drawn from the Parties available in-house expertise, if the Operator
approves, such may be performed by a Party's Affiliate under the
approved budget for the project. Competent Nigerian
Engineering/Design companies shall be given priority over others by the
Operating Committee for such project.
2.4 After approval of the project/budget, Operator shall prepare and transmit
to ATLANTIC complete details of the project including, without limitation,
the following:
(a) Project definition;
(b) Project specification;
(c) Flow diagrams;
(d) Projects implementation schedule showing all phases of the project
including without limitation, engineering design,
material/equipment procurement, inspection, transportation,
fabrication/construction, installation, testing and commissioning;
(e) Major equipment specifications;
(f) Cost estimate of the project;
(g) An activity status reports.
The Operating Committee shall consider the proposal and the
recommendations and shall take decision on the matter in accordance with
Article 7 of this Agreement for approval.
ARTICLE III
CONTRACT TENDER PROCEDURE
3.1 The following tender procedure shall apply to work/services/supply not
directly undertaken by a Party or its Affiliate:
(a) Operator shall maintain a list of approved sub-contractors for the
purposes of contracts for Petroleum Operations, (the "Approved
Contactors’ List") which shall be approved from time to time by the
Operating Committee. Each Party shall have the right to nominate
sub-contractors to be included/deleted in the list. NPDC and
SAA OML 30 NPDC ATLANTIC.2011 Page 77
Ch
...... ............ ................... ........... (............... .-pp;.....■ ■■■]'■ • ■■■; -f55’’Tl"1”THt'"
ATLANTIC shall be responsible for pre-qualifying any sub¬
contractor to be included in the Approved Contractor’s List.
(b) Sub-contractors included in the Approved Contractors' List shall be
both local and/or overseas sub-contractors or entities. Where
regulations require, they shall be registered with the DPR.
(c) Operator shall issue invitations to bid to prospective sub-contractors
thereafter. Contract specifications shall be in English and in a
recognized format used in the international petroleum industry.
(d) Operator shall within its limits in Article 15 establish a tender
committee who shall be responsible for pre-qualifying bidders,
sending out bid invitations, receiving and evaluating bids,
determining successful bidders to whom contracts shall be
awarded.
3.2 Analyses and recommendations of bids received and opened by the
tender committee shall be presented by Operator to the Operating
Committee for approval before a contract is signed with the selected
contractor.
3.3 Prospective vendors/sub-contractors for work estimated in excess of one
hundred thousand U.S. Dollars ($100,000.00) shall submit the commercial
summary of their bids to Operator in three properly sealed envelopes to
the Operator and the Operator shall forward one of the sealed envelope
to ATLANTIC for record purposes.
3.4 In all cases in which an offshore sub-contractor or its Nigerian Affiliate is
invited to bid, a Party shall make full disclosure to the other Party of its
relationship, if any, with such sub-contractors.
3.5 These Procedures may be waived and Operator may negotiate directly
with the sub-contractor and promptly inform the other Party of the
outcome of such negotiations in the following cases:
(a) emergency situations; and
(b) in work requiring specialized skills, or when special circumstances
warrant, upon the approval of the Operating Committee.
SAA_0ML 30_NPDC.ATLANT!CJZ011 Page 78
&
ARTICLE IV
GENERAL CONDITIONS OF CONTRACTS
4.1 The payment terms shall provide, without limitation, that:
(a) A minimum of 10% of contract price shall be heid as a retention fee
until after the end of a guarantee period agreed with the sub
contractor which shall vary between six months and twelve
months, depending on the project, with the exception of drilling
and seismic data acquisition, well surveys and other such services;
provided that, a sub contractor may be given the option to
provide other guarantee equivalent to the 10% retention fee such
as letter of credit or performance bond; and
(b) Provisions shall be made for appropriate value added tax as may
be applicable.
4.2 The governing law of all agreements signed with sub- contractors shall be
Nigerian law for work to be carried out within Nigeria and to the extent
feasible, for work outside Nigeria.
4.3 Nigerian law shall apply to sub contractors performing in Nigeria and, as
far as practicable; they shall use Nigerian resources both human and
material.
4.4 All contracts shall include a provision whereby the sub contractor shall
hold Operator harmless and indemnify Operator from and against all
liabilities, losses, damages and claims resulting from claims and suits by
third parties.
4.5 Each sub-contractor shall provide for early termination upon notice and
Operator shall use all reasonable endeavors to obtain a termination
provision with minimal penalty.
4.6 Contractor shall provide, in the case of a foreign sub-contractor, that the
local part of the work, in all cases, shall be performed by contractor’s
local subsidiary.
SAA.OML 30_NPDC_ATLANTIC_2011. Page 79
ARTICLE V
MATERIALS AND EQUIPMENT PROCUREMENT
5.1 A Party may, through own in-house or a Party's parent company, procure
materials and equipment subject to conditions set forth in this Article 5.
5.2 The provisions of this Article 5 shall not apply to lump sum or turnkey
contracts/projects.
5.3 In ordering the equipment/materials, Operator shall obtain from
vendors/manufacturers such rebates/discounts and such
warranties/guarantees that such vendors/manufacturers normally offer,
and all rebates, discounts, guarantees and all other grants and
responsibilities shall be for the benefit of Petroleum Operations.
5.4 Operator shall:
(a) By means of established policies and procedures ensure that its
procurement efforts provide the best total value, with proper
consideration of quality, service, price, delivery and operating costs
to the benefits of Petroleum Operations;
(b) Maintain appropriate records, which shall be kept up to date,
clearly documenting procurement activities;
(c) Provide quarterly and annual inventory of materials in stock;
(d) Provide a quarterly listing of excess materials in its stock list to
ATLANTIC ; and
(e) Check the excess material listings from other companies, to identify
materials available in the country prior to initiating any foreign
purchase order.
5.5 Operator shall initiate and maintain policies and practices which provide
a competitive environment/climate amongst local and/or overseas
suppliers. Competitive quotation processes shall be employed for all local
procurement where the estimated value exceeds the equivalent of one
hundred thousand U.S. Dollars ($100,000.00).
(a) Fabrication, wherever practicable shall be done locally. To this
effect, Operator recognizes and shall accommodate local offers at
a premium not exceeding 10%.
(b) Subject to Article 3.1 (a) herein, Operator shall give preference to
Nigerian indigenous sub-contractors in the award of contracts.
Contracts within the agreed financial limit of Operator shall be
awarded to only competent Nigerian indigenous sub-contractors.
SAA_0ML 30_NPDC.ATLANTIC_2Oil Page 80
Where there are no Nigerian indigenous sub-contractors possessing
the required skill/capability for the execution of such contracts,
Operator shall notify ATLANTIC accordingly.
5.6 Analyses and recommendations of competitive quotations of a value
exceeding the limits established in Article 15 of this Agreement shall be
transmitted to the Operating Committee for approval before a contract
or purchase order is issued to the selected vendor/manufacturer.
5.7 Pre-inspection of rig, equipment/stock materials of reasonable value shall
be jointly carried out at factory site and quay before shipment at the
request of either Party.
ARTICLE VI
PROJECT MONITORING
6.1 Operator shall provide a project report monthly to ATLANTIC .
6.2 For major projects exceeding one hundred thousand U.S. Dollars
($100,000.00) or equivalent, Operator shall provide to ATLANTIC a
detailed quarterly report which shall include:
(a) Approved budget total for each project:
(b) Expenditure on each project;
(c) Variances and explanations;
(d) Number and value of construction change orders;
(e) Bar chart of schedule showing work in progress and work already
completed and schedule of miles-stones and significant .events;
and
(f) Summary of progress during the reporting period, summary of
existing problems, if any, and proposed remedial action,
anticipated problems, and percentage of completion.
6.3 Each Party shall have the right to send its own representatives to assess
the project based on the report.
6.4 In the case of an increase in cost in excess of 10% on the project.
Operator shall promptly notify ATLANTIC and obtain necessary budget
approval.
6.5 Not later than six (6) months following the physical completion of any
major project whose cost exceeds one hundred thousand U.S. Dollars
SAA.0ML 30_NPDC_ATLANTIC_2011 Page 81
($100,000.00) or equivalent, Operator shall prepare and deliver to
ATLANTIC a project completion report which shall include the following:
(a) Cost performance of the project In accordance with the work
breakdown at the commencement of the project;
(b) Significant variations in any item or sub-items;
{c) Summary of problems and unexpected events encountered during
the project; and
(d) List of excess project materials.
SAA.OML 30„NPDC_ATLANTIC_2011 Page 82
ANNEX G
TO THE STRATEGIC ALLIANCE AGREEMENT BETWEEN NPDC AND ATLANTIC
AFFILIATE COMPANY GUARANTEE
Parent Company Guarantee
To: Nigerian Petroleum Development Company Limited.
62, Sapele Road,
Benin City,
Nigeria.
Guarantee from SPOG PETROCHEMICAL NIGERIA LIMITED (hereinafter referred to
as “the Guarantor1’) of the performance by ATLANTIC (hereinafter referred to as
“the Obligor") of the obligor’s obligations following the execution of the Strategic
Alliance Agreement (hereinafter referred to as the “Agreement") dated
........2011 and made between NPDC and Obligor under the Agreement.
Pursuant to the said Agreement and the performance of the obligations therein,
the Guarantor will directly and indirectly benefit from the said Agreement,
wherein the Guarantor hereby agrees and covenants as follows:
1. The Guarantor unconditionally and irrevocably guarantees to NPDC the
performance of all the obligations of the Obligor, its Nigerian affiliate,
which is organized under the laws of the Federal Republic of Nigeria and
any and all its successors and assigns under the Agreement.
2. Subject to Article 8.5 of the Agreement and the terms of this Guarantee,
the Guarantor shall unconditionally fulfill the obligations of the Obligor
under the Agreement forthwith upon receiving written notice from NPDC.
3. The Guarantor absolutely, irrevocably and unconditionally guarantees to
NPDC the full, due and punctual payment to NPDC by Obligor of all
monies which Obligor is or shall become obliged to pay to NPDC pursuant
to the Agreement (the “Obligations") and, subject to the other provision
of this Guarantee, irrevocably and unconditionally agrees to indemnify
and hold harmless NPDC (but only to the extent of the Guaranteed
Amount) in respect of any and all failure by Obligor to pay such monies
PROVIDED always that the maximum aggregate liability of Guarantor
under this Guarantee shall not exceed [ ] million US ([ ]) (the
“Guaranteed Amount"!.
SAA.0ML 30_NPDCj\TLANTlC_2011 Page 83
4. This Guarantee shall terminate on the fifth (5th) anniversary of the date on
which the Agreement is terminated or otherwise expires (whichever is
earlier).
5. No document proof or other action other than herein is necessary as a
condition of the Guarantor honoring any and all unfulfilled obligations of
the Obligor pursuant to the provisions of the Agreement. The Guarantor
therefore waives any right to require as a condition of its obligations
hereunder that presentment or demand be made upon Obligor.
6. Neither the Guarantor nor NPDC may assign or transfer (whether by way
of security or otherwise) this Guarantee nor any interest or obligation in or
under this Guarantee without the prior written consent of NPDC or the
Guarantor respectively. Any purported assignment or transfer that is not in
accordance with this Clause 6 shall be void. Subject to the foregoing this
Guarantee shall be binding upon and ensure to the benefit of and be
enforceable by the respective successors, assigns and transferees of
Guarantor and NPDC.
7. This Guarantee embodies the entire understanding between the
Guarantor and NPDC and supersedes all prior arrangements and
understandings relating to the subject matter hereof.
8. The obligations of the Guarantor hereunder shall in no way be affected or
impaired by reason, and the Guarantor, waives its right to prior notice, of
the happening from time to time of any of the following:
i. extensions (whether or not material) of the time for performance of all
or any portion of the Obligations;
ii. the modification or amendment in any manner (whether or not
material) of the Agreement or the Obligations;
iii. any failure, delay or lack of diligence on the part of NPDC, or any
other person or entity to enforce, assert or exercise any right, privilege,
power or remedy conferred on NPDC or any other person or entity
under the Agreement or at law or any action on the part of NPDC or
such other person or entity granting indulgence or extension of any
kind; and
iv. a change of status, composition, structure or name of Obligor,
including, without limitation, by reason of bankruptcy, liquidation,
insolvency, merger, dissolution, consolidation or reorganization.
9. With the prior written consent of NPDC, which consent shall not be
unreasonably withheld, this Guarantee may be replaced by a guarantee
or guarantees in substantially similar form made by a guarantor of equal
or better creditworthiness.
SAAJDML 30_NPDC_ATLANTIC_2011 Page 84
r *•
10. This Guarantee may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
document.
The Guarantor shall make payment in US Dollars and without deductions
n.
to NPDC immediately by making available funds of all sums due
hereunder within ten (10) business days of written demand for the same
by NPDC (which demand shall set forth the basis and the calculation of
the amount for which demand is made and which shall in the absence of
manifest error be conclusive).
The Guarantor warrants that this Guarantee is its legally binding obligation
12.
enforceable in accordance with its terms and further warrants that all
necessary consents and authorizations for the giving and implementation
of this Guarantee have been obtained.
13. If a difference or dispute arises between the Guarantor and NPDC,
concerning the interpretation or performance of this Guarantee, and if the
parties fail to settle such difference or dispute by amicable agreement,
either Party may serve on the other a demand for arbitration.
13.1 Within thirty (30) days of such demand being served, each Party to
this Guarantee shall appoint an arbitrator and the two arbitrators
thus appointed shall within a further thirty (30) days appoint a third
arbitrator, who shall be of a nationality which is different from that
of the parties and of the arbitrators (the nationality of a company
shall be deemed to be that of the country under the laws of which
it and/or its owners are incorporated). If the arbitrators do not
agree on the appointment of such third arbitrator, or if either Party
fails to appoint the arbitrator to be appointed by it, such arbitrator
or third arbitrator shall be appointed by the Chief Judge of the
Federal High Court, Abuja on the application of the other Party
(notice of the intention to apply having been duly given in writing
by the applicant Party to the other Party). The third arbitrator when
appointed shall convene meetings of the arbitration panel and act
as chairman. If an arbitrator refuses or neglects to act or is
incapable of acting or dies, a new arbitrator shall be appointed in
his place and the above provisions of appointing arbitrators shall
govern the appointment of any such new arbitrator or arbitrators.
13.2 The arbitral award shall be binding upon the parties to this
Guarantee. The Arbitration and Conciliation Act Cap A18, LFN,
2004 shall apply to this Guarantee and the award rendered by the
arbitrators may be entered in a court having jurisdiction thereof.
Each Party shall pay Its own attorney’s fees and costs.
13.3 The venue of the arbitration shall be anywhere in Nigeria as ma>
agreed by the parties.
SAA.0ML 30.NPDC_ATLANT1C.2011 Page 85
&
14. All notices required or permitted shall be in writing and shall be deemed
given when delivered in person, or, if sent by facsimile or other means of
electronic transmission on the second business day following transmission,
or if mailed on the second business day after being consigned to Federal
Express or similar courier, at the address for notice provided below:
To the Guarantor:
SPOG PETROCHEMICAL NIGERIA LIMITED
50D Glover Road
Ikoyj, Lagos
Nigeria
To NPDC:
Nigerian Petroleum Development Company Limited
62, Sapeie Road,
Benin City,
Nigeria
15. This Guarantee shall in ail respects be governed by and construed in
accordance with, the laws of the Federal Republic of Nigeria.
FOR AND ON BEHALF OF:
Name:
Title:
SAAJ3ML 30_NPDC_ATLANTIC_2Q11 Page 86
to
•■wsrrTjs"*- ~ TSpJaFr-rna?.
A
if
ANNEX H
TO THE STRATEGIC ALLIANCE AGREEMENT BETWEEN NPDC AND ATLANTIC
Dated ,/A^Vy, I. -
PRODUCTION PROFILE FOR THE CONTRACT AREA
SAA.OML 30_NPDC_ATLANTIC_2011 Page 87
to