NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here
CONCESSION AGREEMENT
FOR
ETROLEUM EXPLORATION AND EXPLOITATION
BETWEEN
THE ARAB REPUBLIC OF EGYPT
AND
GANOUB EL-WADI HOLDING PETROL
COMPANY
AND
QUADRA EGYPT LIMITED
IN
NUQRA AREA BLOCK-1
GANOUB EL WADI
A.R.E.
INDEX
ARTICLE
TITLE
PAGE
Definitions
v
VI
VII
VIII.
IX
X
XI
XI1
XI11
XIV
xv
XVI
XVII
XVIII
XIX
XX
XXI
XXII
XXIII
XXIV
xxv
XXVI
XXVII
5
5
Annexes to the Agreement
10
Grant of Rights and Term
11
Work Program and Expenditures During
Exploration Period
21
Mandatory and Voluntary Relinquishments 27
Operations After Commercial Discovery
29
Recovery of Costs and Expenses and
Production Sharing
32
Title to Assets
53
Bonuses
54
55
Office and Service of Notices
Saving of Petroleum and Prevention of Loss 56
Customs Exemptions
57
Books of Account: Accounting and Payments60
Records, Reports and Inspection
61
Responsibility for Damages
63
Privileges of Government Representatives 63
Employment Rights and Training of Arab
Republic Of Egypt Personnel
64
Laws and Regulations
65
Stabilization
67
Right of Requisition
68
Assignment
69
Breach of Agreement and Power to Cancel 70
Force Majeure
72
Disputes and Arbitration
73
Status of Parties
75
Local Contractors and Locally Manufactured
Material
75
Arabic Text
2
XXVIII
XXIX
General
Approval of the GOVERNMENT
ANNEXES TO THE CONCESSION
AGREEMENT.
Annex " A " Boundary Description of the Concession Area
Annex " B "
Annex " C "
Annex " D "
Annex " E "
Annex " F "
78
Illustrative Map showing Area Covered
80
Letter of Guarantee
81
Charter of Operating Company
83
Accounting Procedure
87
Map of the National Gas Pipeline Grid System
THE ARAB REPUBLIC OF EGYPT
AND
GANOUB EL-WADI HOLDING PETROLEUM COMPANY
AND
QUADRA EGYPT LIMITED
IN
NUQRA AREA "BLOCK 1"
GANOUB EL WADI
A. R.E.
This Agreement made and entered on this
day of
2003, by and between the ARAB REPUBLIC OF EGYPT (hereinafter
referred to variously as "A.R.E." or as the "GOVERNMENT"),
GANOUB EL-WADI HOLDING PETROLEUM COMPANY, a legal
entity created by Prime Minister Decree No. 1755 of 2002, and
pursuant to Law No. 203 of 1991 and its amendments (hereinafter
referred to as "GANOPE") and QUADRA EGYPT LIMITED (A limited
company incorporated under the laws of England in Virgin Islands,
hereinafter referred to as
QUADRA
or
as
IICONTRACTOR'I).
I
11
"
WHEREAS, all minerals including petroleum, existing in mines and
quarries in A.R.E., including the territorial waters, and in the seabed
subject to its jurisdiction and extending beyond the territorial waters,
are the property of the State; and
WHEREAS, GANOPE has applied for an exclusive concession for
the exploration and exploitation of petroleum in and throughout the
area referred to in Article II, and described in Annex " A and shown
approximately on Annex "B", which are attached hereto and made
part hereof (hereinafter referred to as the "Area") ; and
WHEREAS, "QUADRA" agrees to undertake its obligations provided
hereinafter as a CONTRACTOR with respect to the Exploration,
development and production of petroleum in
NUQRA AREA
f
"BLOCK-I" ,
-.
WHEREAS, the GOVERNMENT desires hereby to grant such
Concession; and
-,
.
,
-
.
.
.
- .
.
WHEREAS, the Minister of Petroleum pursuant to the provisions of
Law No. 86 of 1956,. may enter into a concession agreement with
GANOPE, and with QUADRA as a CONTRACTOR in the said Area.
NOW, THEREFORE, the parties hereto agree as fdllows:
ARTICLE I
.
--
DEFINITIONS
(a) "Exploration" shall include such geological, geophysical,
aerial and other surveys as may be contained in the
approved Work Programs and Budgets, and the drilling of
such shot holes, core holes, stratigraphic tests, holes for
the discovery of Petroleum or the appraisal of Petroleum
discoveries and other related holes and wells, and the
PI-~rchase
or acquisition of such supplies, materials, services
and equipments therefore, all as may be contained in the
approved Work Programs and Budgets. The verb "explore"
means the act of conducting Exploration.
(b) "Development" shall include, but not be lirr~itedto, all the
operations and activities pursuant to approved Work
Programs and Budgets under this Agreement with respect
to:
(i)
the drilling, plugging, deepening, side tracking, redrilling, completing, equipping of development
wells and the changing of the status of a well, and
(ii) design,
engineering,
construction,
5
installation,
servicing and maintenance of equipments, lines,
systems facili,l:ies, plants and related operations to
produce and operate said development wells,
taking, saving,
treating, handling, storing,
transporting and
delivering Petroleum, repressuring, recycling and other
secondary
recovery projects, and
(iii) transportation, storage and any other ;work or
activities necessary or ancillary to the 'activities
specified in (i) and (ii).
(c) "Petroleum" nieans Liquid Crude Oil of various densities,
asphalt, Gas, casing head gas and all other hydrocarbon
substances that may be found in, and produced, or
otherwise obtained and saved from the Area under this
Agreement, and all substances that may be extracted
therefrom.
(d) "Liquid Crude Oil" or "Crl-lde Oil" or "Oil" means any
hydrocarbon produced from the Area which is in a liquid
state at the wellhead or lease separators or which is
extracted from the Gas or casing head gas in a plant. Such
liquid state shall exist at sixty degrees Fahrenheit (60'~)
and atmospheric pressure of 14.65 PSIA. Such term
includes distillate and condensate.
(e) "Gas" means natural gas both associated and nonassociated, and all of its constituent elements produced
from any well in the Area (other than Liquid Crude Oil) and
all non-hydrocarbon substances therein. Said term shall
include residual gas, that Gas remaining after removal of
LPG.
(f) "LPG" means liquefied petroleum gas, which is a mixture
principally of butane and propane liquefied by pressure and
temperature.
( g ) A "Barrel" shall consist of forty-two (42) United States
gallons, liquid measure, corrected to a temperature of sixty
gallons, liquid measure, corrected to a temperature of sixty
degrees Fahrenheit (60'~) at atmospheric pressure of 14.65
PSIA.
(h)
( I ) "Commercial Oil Well" means the first well on
any geological feature which after testing for a
period of not more than thirty (30) consecutive
days where
practical, but in any event in
accordance with sound and accepted industry
production practices, and verified by GANOPE,
is found to be capable of producing at the
average rate of not less than eight hundred (800)
Barrels of oil per day (BOPD). The date of
discovery of a "Commercial Oil Well" is the date
on which such well is tested and completed
according to the above.
(2)
(i)
"Commercia,l Gas Well" nieans the first well on
any geological feature which after testing for a
period of not more than thirty (30) consecutive
days where
practical, but in any event in
accordance with sound and accepted industry
production practices and verified by GANOPE,
is found to be capable of producing at the
average rate of not less than ten million
(10,000,000) standard cubic feet of Gas per day
(MMSCFD). The date of discovery of a
"Commercial Gas Well" is the date on which
such well is tested and completed according to
the above.
"A.R.E." means ARAB REPUBLIC OF EGYPT ,"EGPC"
means Egyptian General Petroleum Corporation, "Egas"
means Egyptian Gas Holding Company.
(j) "Effective Date" means the date on which the text of this
Agreement is signed by the GOVERNMENT, GANOPE and
CONTRACTOR, after the relevant Law is issued.
(k)
-
(1)
"Year" means a period of twelve (12) months
according to the Gregorian Calendar.
(2) "Calendar Year" means a period of twelve (12)
months according to the Gregorian Calendar
being 1st January to 31st December.
(I)
"Financial Year" means the GOVERNMENT'S financial
year according to the laws and regi~lationsof the A.R.E.
(m) "Tax Year" means the period of twelve (12) months
according to the laws and regulations of the A.R.E.
(n) An "Affiliated Company" means a company:
(i) of which the share capital, conferring a majority of
votes at stockholders' meetings of such company, is
owned directly or indirectly by a party hereto; or
(ii) which is the owner directly or indirectly of share
capital conferring a majority of votes at stockholders'
meetings of a party hereto; or
(iii)of which the share capital conferring a majority of
votes at stockholder's meetings of such company and
the share capital conferring a majority of votes at
stockholders' meetings of a party hereto are owned
directly or indirectly by the same company.
..#F'
(0) "Exploration Block" shall mean an area, the corner points of
which have to be coincident with three (3)minutes by three (
3 ) minutes latitude and longitude divisions, according to the
International Grid System where possible or with the
existing boundaries of the Area covered by this Concession
Agreement as set out in Annex " A .
-
-
(p) "Development Block" shall mean an area, the corner points
of which have to be coincident with one ( 1 ) minute by one
( 1 ) minute latitude and longitude divisions, according to
the International Grid System where possible or with the
existing boundaries of the Area covered by this Concession
Agreement as set out in Annex " A .
(q) "Development Lease(s)" shall mean the Development Block
or Blocks covering the geological structure capable of
production, the corner points of which have to be coincident
with one (1) minute by one (1) minute latitude and longitude
divisions according to the International Grid System where
possible or with the existing boundaries of the Area covered
by this Concession Agreement as set out in Annex " A .
(r) "Agreement" shall mean this Concession Agreement and its
Annexes.
(s) "Gas Sales Agreement" shall mean a written agreement
between GANOPE and CONTRACTOR (as sellers) and
GANOPE or EGPC or The Egyptian Natural Gas Holding
Conipany "EGAS" or mutually agreed third party (as buyer),
which contains the terms and conditions for Gas sales from
a Development Lease entered into pursuant to Article VII
(el.
(t)
"Standard Cubic Foot" (SCF) is the amount of Gas
necessary to fill one (1) cubic foot of space at atmospheric
pressure of 14.65 PSlA at a base temperature of sixty
degrees Fahrenheit (60' F).
ARTICLE II
ANNEXES TO THE AGREEMENT
Annex " A is a description of the Area covered and affected by this
Agreement, hereinafter referred to as the "Area".
Annex "B" is a provisional illustrative map on the scale of
1:2,000,000 indicating the Area covered and affected by this
Agreement and described in Annex " A .
Annex "C"
is the form of a letter of guarantee to be submitted
day before the time of
by CONTRACTOR to GANOPE one (I)
signature by the Minister of Petroleum of this Agreement, for the sum
of
two millions U.S. Dollars ($2,000,000) guaranteeing the
execution of CONTRACTOR'S rrrir~imum Exploration obligations
hereunder for the initial
two ( 2 ) years Exploration period. In
case CONTRACTOR extends the initial Exploration Period for Two
(2) additional periods of three (3) years each, each in accordance
with Article Ill (b) of this Agreement, a similar Letter of Guarantee
shall be issued and be submitted by CONTRACTOR on the day the
CON-TRACTOR exercises its option to extend. The first such Letter
of Guarantee shall be for the sum of four million U.S. Dollars
($4,000,000) and the second such Letter of Guarantee shall be for
the sum of five million U.S. Dollars ($5,000,000) less in both
instances any excess expenditures of the preceding Exploration
period permitted for carry forward in accordance with Article IV (b)
third paragraph of this Agreement. Each of the three Letters of
Guarantee shall remain effective for six (6) months after the end of
the relevant Exploration period for which it has been issued except as
it may be released prior to that time in accordance with the terms
thereof.
Annex "D" is the form of a Charter of the Operating Company to be
formed as provided for in Article VI hereof.
System established by the Government.
-
-
The point of delivery for gas shall be agreed upon by GANOPE and
CONTRACTOR under a Gas Sales Agreement, which point of
delivery shall be located at the flange cor~nectingthe development
lease pipeline to the nearest point on the National Gas pipeline Grid
System as depicted in Annex "F" or as otherwise agreed by GANOPE
and CONTRACTOR.
Annexes "A", "B", "C", "D","E" and "F" to this Agreement are hereby
made part hereof, and they shall be considered as having equal force
and effect with the provisions of this Agreement.
ARTICLE Ill
GRANT OF RIGHTS AND TERM
The GOVERNMENT hereby grants GANOPE and CONTRACTOR
subject to the terms, covenants and conditions set out in this
Agreement, which insofar as they are contrary to or inconsistent with
any provisions of Law No. 66 of 1953, as amended, shall have the
force of Law, an exclusive concession in and to the Area described
in Annexes "A" and "B".
(a) The GOVERNMENT shall own and be entitled, as
hereinafter provided to a royalty in cash or in kind of ten
percent (10%) of the total quantity of Petroleum produced
and saved from the Area during the Development period
including renewal. Said royalty shall be borne and paid by
GANOPE and
shall not be the obligation of
CONTRACTOR. The payment of royalties by GANOPE
shall not -be deemed to result in income attributable to the
(b) An initial Exploration period of two ( 2 ) years shall start
from the Effective Date. Two (2) successive extensions to
the initial Exploration period, each of three ( 3 ) years, shall
be granted to CONTRACTOR at its option, upon not less
than thirty (30) days prior written notice to GANOPE, such
notice to be given not later than the end of the then current
period, as may be extended pursuant to the provisions of
Article V (a), and subject only to its having fulfilled its
obligations hereunder for that period. This Agreement shall
be terminated if neither a Commercial Oil Discovery nor a
Commercial Gas Discovery is established by the end of the
eighth (8) year of the Exploration period, as may be
(a).The election by
extended pursuant to Article V
GANOPE to undertake a sole risk vent1.1t-e under paragraph
(c) shall not extend the Exploration period nor affect the
terrnina.tion of this Agreement as to CONTRACTOR.
(c) Commercial Discovery:
(i)A Commercial Discovery - whether of Oil or Gas - may
consist of one producing reservoir or a group of
producing reservoirs which is worthy of being
developed commercially.
After discovery of a
Commercial Oil or Gas Well CONTRACTOR shall,
unless otherwise agreed upon with GANOPE,
undertake as part of its Exploration program the
appraisal of the discovery by drilling one or more
appraisal wells, to determine whether such discovery is
worthy of being developed commercially, taking into
consideration the recoverable reserves, production,
pipeline and terminal facilities required, estimated
Petroleum prices, and all other relevant technical and
economic factors.
(ii) The provisions laid down herein postulate the unity
and indivisibility of the concepts of Commercial
p
r
-
7
Discovery and Development Lease. They shall
apply uniformly to Oil and Gas unless otherwise
s~ecified.
(iii) CONTRACTOR shall give notice of a Commercial
Discovery to GANOPE irr~niediately after the
discovery is considered by CONTRACTOR to be
worthy of commercial development but in any event
with respect to a Commercial Oil Well not later than
thirty (30) days following the conipletion of the
second appraisal well or twelve (12) months
following the date of the discovery of the Commercial
Oil Well, whichever is earlier or with respect to a
Commercial Gas Well not later than twenty four (24)
months following the date of the discovery of the
Commercial Gas Well (unless GANOPE agrees that
such period may be extended) except that
CONTRACTOR shall also have the right to give such
notice of Commercial Discovery with respect to any
reservoir or reservoirs even if the well or wells
thereon are not "Commercial" within the definition of
"Comniercial Well" if, in its opinion, a reservoir or a
group of reservoirs, considered collectively, could be
worthy of commercial development.
CONTRACTOR may also give a notice of a Commercial Oil
Discovery in the event it wishes to undertake a Gas Recycling
Project.
.
.
A notice of Com.merciai Gas Discovery shall contain all
detailed particulars of the discovery and especially the area of
Gas reserves, the estimated production potential and profile
and field life.
Within sixty (60) days following receipt of a notice of a
Commercial Oil or Gas Discovery, GANOPE and
CONTRACTOR shall meet and review all appropriate data
with a view to mutually agreeing upon the existence of a
Commercial Discovery. The date of Commercial Discovery
shall be the date GANOPE and CONTRACTOR jointly agree
in writing that a Commercial Discovery exists.
-,
i'
(iv) If Crude Oil is discovered but is not deemed by
CONTRACTOR to be a Commercial Oil Discovery under the
above provisions of this paragraph (c), GANOPE shall one
(1) month after the expiration of the period specified above
within which CON-TRACTOR can give notice of a
Commercial Oil Discovery, or thirteen (13) mdnths after the
completion of a well not considered to be a "~ommercialOil
Well", have the right, following sixty (60) days notice in
writing to CON-TRACTOR, at its sole cost, risk and expense,
to develop, produce and dispose of all Crude Oil from the
geological feature on which the well has been drilled. Said
notice shall state the specific area covering said geological
feature to be developed, the wells to be drilled, the
production
facilities to be installed and GANOPE's
estimated cost thereof. Within thirty (30) days after receipt of
said notice CONTRACTOR may, in writing, elect to develop
such area as provided for in 'the case of Corr~mercial
Discovery hereunder. In such event all terms of this
Agreement shall continue to apply to the specified area.
If CONTRACTOR elects not to develop such area, the
specific area covering said geological feature shall be
set aside for sole risk operations by GANOPE, such area
to be mutually agreed upon by GANOPE and
CONTRACTOR on the basis of good petroleum industry
practice. GANOPE shall be entitled to perform or in the
event Operating Company has come into existence, to have
Operating Company perform such operations for the
account of GANOPE and at GANOPE's sole cost, risk and
expense. When GANOPE has recovered from the Crude
Oil produced from such specific area a quantity of Crude Oil
equal in value to three hundred percent (300%) of the cost
it has incurred in carrying out the sole risk operations,
CONTRACTOR shall have the option, only in the event
there has been a separate Commercial Oil Discovery,
elsewhere within the Area, to share in further development
and production of that specific area upon paying GANOPE
one hundred percent (100%) of such costs incurred by
Such one hundred percent (100%) payment shall not be
recovered by CONTRACTOR. Immediately following such
payment the specific area shall either (i) revert to the status
of an ordinary Development Lease under this Agreement
and thereafter shall be operated in accordance with the
terms hereof; or (ii) alternatively, in the eveit that at such
time GANOPE or its Affiliated Company is conducting
Development operations in the area at its sole expense and
GANOPE elects to continue operating, the area shall
remain set aside and CONTRACTOR shall only be entitled
to its production sharing percentages of the Crude Oil as
specified in Article VII (b). The sole risk Crude Oil shall be
valued in the manner provided in Article VII (c). In the
event of any termination of this Agreement under the
provisions of Article Ill (b), this Agreement shall, however,
continue to apply to GANOPE's operations of any sole risk
venture heremder, although such Agreement shall have
been terminated with respect to CONTRACTOR pursuant to
the provisions of Article Ill (b) .
(d) Conversion to a Development Lease:
(ii) Following a Commercial Oil Discovery or a Commercial
Gas Discovery the extent of the whole area capable of
production to be covered by a Development Lease shall
be mutually agreed upon by GANOPE and
CONTRACTOR and be subject to the approval of the
Minister of Petroleum. Such area shall be converted
automatically into a Development Lease without the
issue of any additional legal instrument or permission.
-
(iii) Following the conversion of an area to a Development
Lease based on a Commercial Gas Discovery(or upon
the discovery of Gas in a Development Lease granted
following a Commercial Oil Discovery), GANOPE and
CONTRACTOR shall endeavor with diligence to find
adequate markets capable of absorbing the production
(iv) of Gas and with respect to the local market , GANOPE
shall advise CONTRACTOR of the potential outlets for
such Gas and the expected annual schedule of
demand. Thereafter, GANOPE and CONTRACTOR
shall meet with a view to assessing whether the outlets
for such Gas and other relevant factors warrant the
development and production of the Gas and in case of
agreement the Gas thus made available shall be
disposed of to GANOPE or EGPC or EGAS under a
long-term Gas Sales Agreement in accordance with
and subject to the conditions set forth in Article VII .
(v) The Development period of each Development Lease
shall be as follows:
(aa)ln respect of a Commercial Oil Discovery,
twenty
(20) years from the date of such
Commercial
Discovery plus the Extension
Period (as defined below) provided that, in the
event that, subsequent to the conversion of a
Corrrniercial Oil Discovery into a Development
Lease, Gas is discovered in the same
Development Lease and is used or is capable of
being used locally or for export hereunder, the
period of the Development Lease shall be
extended only with respect to such Gas, LPG
extracted from such Gas and Crude Oil in the
form of condensate produced with such Gas for
twenty (20) years from the date of first deliveries
of Gas locally or for export plus the Extension
Period (as defined below) provided that the
duration of such Development Lease based on a
Commercial Oil Discovery may not be extended
beyond thirty-five (35) years from the date of
such Commercial Oil Discovery, unless
otherwise agreed upon between GANOPE and
CONTRACTOR.
CONTRACTOR
shall
immediately
notify
GANOPE of any Gas Discovery but shall not
be required to apply for a new Development
Lease in respect of such Gas.
(bb)ln respect of a Commercial Gas Discovery, twenty
(20) years from the date of first deliveries of Gas
locally or for export plus the Extension ;Period (as
defined below) provided that, if subsequent to the
conversion of a Commercial Gas Discovery into a
Development Lease, Crude Oil is discovered in the
same Development Lease, CON'rRACTOR's share of
such Crude Oil from the Development Lease (except
LPG extracted from Gas or Crude Oil in the form of
condensate produced with Gas) and Gas associated
with such Crude Oil shall revert entirely to GANOPE
upon the lapse of twenty (20) years from the date of
such Crude Oil Discovery plus the Extension Period
(as defined below).
(bb)Notwithstanding, anything to the contrary under
this Agreement, the duration of a Development
Lease based on a Commercial Gas Discovery
shall in no case exceed thirty-five (35) years
from the date of such Corr~niercial Gas
Discovery , unless otherwise agreed upon
between GANOPE and CONTRACTOR and
subject to the approval of the Minister of
Petroleum.
CONTRACTOR shall immediately notify GANOPE of
any Oil Discovery but shall not be required to apply for
a new Development Lease in respect of such Crude
Oil. The " Extension Period" shall niean a period of
five (5) years which may be elected by CONTRACTOR
upon six (6) months written request sent by
CONTRACTOR to GANOPE prior to the expiry of the
relevant twenty (20) year period supplemented by
technical studies including evaluation of production,
expected levels of production during extension period,
CONTRACTOR'S obligations and relevant economic
consideration. This extension period is subject to the
approv I of the Minister of Petroleum.
A
(e) Development operations shall upon the issuance of a
Development Lease granted following a Comnlercial Oil
Discovery, be started promptly by Operating Company and
be conducted in accordance with good oil field practices
and accepted petroleum engineering principles, until the
field is considered to be fully developed, it being understood
that if associated gas is not utilized, GANOPE and
CONTRACTOR shall negotiate in good faith on the best way
to avoid impairing the production in the interests of the
parties.
In the event no Commercial Production of Oil in regular
shipments or Gas deliveries from any Development Block
within four (4) years from the date of the commercial
discovery, or from the date of first Gas deliveries for local or
export , such Development Block shall immediately be
relinquished, unless there is a Commercial Oil or Gas
discovery in the Development Lease. Each Development
Block in a Development Lease being partly within the radius
of drainage of any producing well in such Development
Lease shall be considered as participating in the
Commercial Production referred to above .
Development operations in respect of Gas and Crude Oil in
the form of condensate or LPG to be produced with or
extracted from such Gas shall, upon the signature of a Gas
Sales Agreement or corr~mencementof a scheme to dispose
of the Gas, whether for export as referred to in Article VII or
otherwise, be started promptly by Operating Company and
be conducted in accordance with good gas field practices
and accepted petroleuni engineering principles and the
provisions of such agreement or scheme. In the event no
Commercial Production of Gas is established in accordance
with such Gas Sales Agreement or scheme, the
Development Lease relating to such Gas shall be
relinquished, unless otherwise agreed upon by GANOPE.
If, upon application by CONTRACTOR it is recognized by
GANOPE that Crude Oil or Gas is being drained from the
Exploration
block under
this Agreement into a
Development Block on an adjoining concession area held
by CONTRACTOR, the Block being drained shall be
considered as participating in the Commercial, Production of
the Development Block in question and the Block being
drained shall be converted into a Development Lease with
the ensuing allocation of costs and production (calculated
from the Effective Date or the date such drainage occurs,
wlichever is later) between the two Concession Areas.
The allocation of such costs and production under each
Concession Agreement shall be in the same portion that the
recoverable reserves in the drained geological structure
underlying each Concession Area bears to the total
recoverable reserves of such structure underlying both
Concession Areas.
The production allocated to a
concession area shall be priced according to the concession
agreement covering that concession area.
CONTRACTOR shall bear and pay all the costs and
expenses required in carrying out all the operations under
this Agreement but such costs and expenses shall not
include any interest on investment. CONTRACTOR shall
look only to the Petroleum to which it is entitled under this
Agreement to recover such costs and expenses. Such costs
and expenses shall be recoverable as provided in Article
V11. During the term of this Agreement and its renewal, the
total production achieved in the conduct of such operations
shall be divided between GANOPE and CONTRACTOR in
accordance with the provisions of Article VI I.
(1)
(2)
Unless otherwise provided, CONTRACTOR
shall be subject to Egyptian income tax laws
and shall comply with the requirements of
such laws with respect to the filing of returns,
the assessment of tax, and keeping and
showing of books and records.
ACTOR'S
annual
income
for
Egyptian income tax purposes under this
Agreement shall be an amount calculated
as follows:
The total of the sums received by CONTRACTOR from the
sale or other disposition of all Petroleum acquired by
CONTRACTOR pursuant to Article VI I (a) and (b);
Reduced by:
(i)
The costs and expenses of CONTRACTOR;
(ii)
The value as determined according to Article
VII (c), of GANOPE's share of the Excess
repaid to GANOPE
Cost Recovery Petrole~~m
in cash or in kind, if any,
Plus:
An amount equal to CONTRACTOR'S Egyptian income
taxes grossed up in the manner shown in Article VI of
Annex "E" .
For purposes of above tax deductions in any Tax Year,
Article VII (a) shall apply only in
respect of
classification of costs and expenses and rates of
anlortization, without regard to the percentage
limitation referred to in the first paragraph of Article VII
(a) (1). All costs and expenses of CONTRACTOR in
conducting the operations under this Agreement which
are not controlled by Article VII (a) as above qualified
shall be deductible in accordance with the provisions
of the Egyptian Income Tax Law.
(3) GANOPE shall assume, pay and discharge, in the name
and
on behalf of CONTRACTOR, CONTRACTOR'S
Egyptian income tax out of GANOPE's share of the
Petroleum produced and saved and not used in operations
under Article VII. All taxes paid by GANOPE in the name
and on behalf of CONTRACTOR shall be considered
income m O N T R A C T O R
-
to CONTRACTOR the proper official
receipts evidencing the payment of CONTRACTOR'S
Egyptian income tax for each- ax Year within ninety (90)
days following the receipt by GANOPE of CONTRACTOR'S
tax declaration for the preceding Tax Year. Such receipts
shall be issued by the proper Tax Authorities and shall state
the amount and other particulars customary for such
receipts.
(5) As used herein, Egyptian Income Tax shall be inclusive of
all income taxes payable in the.A.R.E. (including tax on tax)
such as the tax on income from movable capital and the tax
on profits from commerce and industry and inclusive of
taxes based on income or profits including all dividends,
wi'tt- holding with respect to shareholders and other
taxes irr~posed by the GOVERNMENT of A.R.E. on the
distribution of income or profits by CONTRACTOR.
(6) In calculating its A.R.E. income taxes, GANOPE shall be
entitled to deduct all royalties paid by GANOPE to the
GOVERNMENT and CONTRACTOR'S Egyptian income
taxes paid by GANOPE on CONTRACTOR'S behalf.
ARTICLE IV
WORK PROGRAM AND EXPENDITURES
DURING EXPLORATION PERIOD
(a) CONTRACTOR shall corlimence Exploration operations
hereunder not later than six (6) months after the Effective
Date. GANOPE shall make available for CONTRACTOR'S
use all seismic, wells and other Exploration data in
GANOPE's possession with respect to the Area as
GANOPE is entitled to so do.
(b) The initial Exploration period shall be two ( 2 ) years.
CONTRACTOR may extend this Exploration period for two(2)
successive extension periods each of three ( 3 ) years , in
accordance with Article Ill (b), each of which upon at least
thirty (30) days prior written notice to GANOPE, subject to its
expenditure of its minimum Exploration obligations and of its
fulfillment of the drilling obligations hereunder; for the then
current period.
-
CON-TRACTOR shall spend a rninimuni of two niillion U.S. Dollars
($2,000,000) on Exploration operations and activities related thereto
during the initial two (2) years Exploration period; provided that
CONTRACTOR shall acquire geophysical survey, processing,
reprocessing and evaluation studies. For the first three (3) years
extension period that CONTRACTOR elects to extend beyond the initial
Exploration period , CONTRACTOR shall spend a minimum of four
rrrillion U.S. Dollars ($4,000,000) and for the second three ( 3 ) years
extension period 'that CONTRACTOR elects to extend beyond the
three ( 3 ) year first extension period, CONTRACTOR shall also
spend a minimum of five million U.S. Dollars. ($5,000,000) During each
of the first and second extension periods that CONTRACTOR elects to
extend beyond the initial Exploration period, CONTRACTOR shall drill
two (2 ) wells in each.
Should CONTRACTOR spend more than the minimum amo~int
required to be expended or dl-ill more wells than the minimum
required to be drilled or other surveys than the mininiun~required
during the initial two (2) years Exploration period, or during the first
extension period, the excess may be subtracted from the minimum
amount of money required to be expended by CONTRACTOR or
minimum number of
wells required to be drilled during any
succeeding Exploration period(s) , as the case may be.
. .
-
In case CON-TRACTOR surrenders its Exploration rights under this
Agreement as set forth above before or at the end of the second
(2nd)year of the initial Exploration period, having expended less than
the total sum of two million ($2,000,000) U.S. Dollars, on Exploration
or in the event at the end of the second (2nd) year, CONTRACTOR
has expended less than said sum in the Area, an amount equal
A
-
tween the said two million ( $2,000,000) U.S.
unt actually spent on Exploration shall be paid
by CONTRACTOR to GANOPE at the time of surrendering or within
six (6) months from the end of the second (2"d) year of the initial
Exploration period, as the case may be. Any expenditure deficiency
by CONTRACTOR at the end of any additional period for the reasons
above noted shall similarly result in a payment byCONTRACTOR to
GANOPE of such deficiency. Provided this Agreement is still in force
as to CONTRACTOR, CONTRACTOR shall be entitled to recover
any such payments as Exploration Expenditure in the manner
provided for under Article VII in the event of Commercial Production.
Without prejudice to Article Ill (b), in case no Commercial Oil
Discovery is established or no notice of Corr~niercialGas Discovery
is given by the end of the eighth (8" ) year, as may be extended
pursuant to Article V (a) or in case CONTRACTOR surrenders the
Area under this Agreement prior to such time, GANOPE shall not
bear any of the aforesaid expenses spent by CONTRACTOR.
(c) At least four (4) months prior to the beginning of each
Financial Year or at such other times as may mutually be
agreed
to
by
GANOPE
and
CONTRACTOR,
CONTRACTOR shall prepare an Exploration Work Program
and Budget for the Area setting forth the Exploration
operations which CONTRACTOR proposes to carry out
during the ensuing Year.
The Exploration Work Program and Budget shall be
reviewed by a joint committee to be established by
GANOPE and CONTRACTOR after the Effective Date of
this Agreement. This Committee, hereinafter referred to as
the "Exploration Advisory Comn~ittee",shall consist of six
(6) members, three (3) of whom shall be appointed by
GANOPE and three (3) by CONTRACTOR. The Chairman
of the Exploration Advisory Committee shall be designated
by GANOPE froni aniong the members appointed by it.
The Exploration Advisory Committee shall review and give
such advice as it deems appropriate with respect to the
proposed Work Program and Budget. Following review by
the Exploration Advisory Committee, CONTRACTOR shall
make such revisions as CONTRACTOR deems appropriate
and submit the Exploration Work Program qnd Budget to
GANOPE for its approval.
- .
Following such approval, it is further agreed ,that:
(i) CONTRACTOR shall not substantially revise or modify
said Work Program and Budget nor reduce the
approved budgeted expenditure without the approval
of GANOPE;
(ii)ln the event of emergencies involving danger of loss of
lives or property, CONTRACTOR may expend such
additional unbudgeted amounts as may be required to
alleviate such danger. Such expenditure shall be
considered in all aspects as Exploration Expenditure
and shall be recovered pursuant to the provisions of
Article VI I hereof.
(d) CONTRACTOR shall advance all necessary funds for all
materials, equipments, supplies, persorrnel administration
and operations pursuant to the Exploration Work Program
and Budget and GANOPE shall not be responsible to bear
or repay any of the aforesaid costs.
(e) CONTRACTOR shall be responsible for the preparation and
performance of the Exploration Work Program which shall
be implemented in a workmanlike manner and consistent
with good industry practices.
Except as is appropriate for the processing of data,
specialized laboratory engineering and development studies
thereon, to be made in specialized centers outside A.R.E.,
nd geophysical studies as well as any other
24
studies related to the performance of this Agreement, shall
be made in the A.R.E.
CONTRACTOR shall entrust the management of
Exploration operations in the A.R.E. to its technically
competent General Manager and Deputy General Manager.
l
The names of such Manager and Deputy ~ e d e r aManager
shall, upon appointment, be forthwith notified to the
GOVERNMENT and to GANOPE. The General Manager
and, in his absence, the Deputy General Manager shall be
entrusted by CONTRACTOR with sufficient powers to carry
out immediately all lawful written directions given to them by
the GOVERNMENT or its representative under the terms of
this Agreement. All lawful regulations issued or hereafter to
be issued which are applicable hereunder and not in conflict
with this Agreement shall apply to CONTRACTOR.
(f)
CONTRACTOR shall supply GANOPE, within thirty (30)
days from the end of each calendar quarter, with a
Statement of Exploration activity showing costs incurred by
CONTRACTOR during such quarter. CONTRACTOR'S
records and necessary supporting documents shall be
available for inspection by GANOPE at any 'time during
regular working hours for three (3) months from the date of
receiving each statement.
Within the three (3) months from the date of receiving such
Statement, GANOPE shall advise CONTRACTOR in writing
if it considers:
(1)
that the record of costs is not correct; or
(2)
that the costs of goods or services supplied
are not in line with the international market
prices for goods or services of similar quality
supplied on similar terms prevailing at the
time such goods or services were supplied,
provided however, that purchases made and
services performed within the A.R.E. shall be
subject to Article XXVl;or
(3)
that the condition of the materials furnished by
CONTRACTOR does not tally with their prices;
;
or
(4)
that the costs incurred are not reasonably
required for operations.
CONTRACTOR shall confer with GANOPE in connection
with the- problem thus presented, and the parties shall
attempt to reach a settlement which is mutually satisfactory.
Any reimbursement due to GANOPE out of the Cost
Recovery Petroleuni as a result of reaching agreement or of
an arbitral award shall be promptly made in cash to
GANOPE, plus simple interest at LlBOR plus two and half
percent (2.5 %) per annum from the date on which the
disputed amount(s) would have been paid to GANOPE
according to Article VII (a) (2) and Annex "E" of this
Agreement (i.e., the date of rendition of the relevant Cost
Recovery Statement) to the date of payment. The LlBOR
rate applicable shall be the average of the figure or figures
published by the Financial Times representing the mid-point
of the rates (bid and ask) applicable to one month U.S.
Dollars deposits in the London lnterbank Eurocurrency
Market on each fifteenth (15th) day of each month occurring
between the date on which the disputed amount(s) would
have been paid to GANOPE and the date on which it is
settled.
If the LlBOR rate is available on any fifteenth (15th) day but
is not published in the Financial Times in respect of such
day for any reason, tlie LlBOR rate chosen shall be that
offered by Citibank N.A. to other leading banks in the
London lnterbank Eurocurrency Market for one month U.S.
Dollar deposits.
If such fifteenth (15th) day is not a day on which LlBOR
rates are quoted in the London lnterbank Eurocurrency
Market, the LIBOR rate to be used shall be that quoted on
the next following day on which such rates are quoted.
If within the time limit of the three (3) month period provided
for in this paragraph, GANOPE has not advised
CONTRACTOR of i t s objection to any Statement, such
Statement shall be considered as approied. j
'P
-
-
(g) CONTRACTOR shall supply all funds necessary for its
operations in the A.R.E. under this Agreement in freely
convertible currency froni abroad. CONTRACTOR shall
have the right to freely purchase Egyptian currency in the
amounts necessary for its operations in the A.R.E. from any
bank or entity authorized by the GOVERNMENT to conduct
foreign currency exchanges.
(h) GANOPE is authorized to advance to CONTRACTOR the
Egyptian currency required for the operations under this
Agreement against receiving from CONTRACTOR an
equivalent amount of U.S. Dollars at the official A.R.E. rate
of exchange, such amol-~ntin U.S. Dollars shall be deposited
in a GANOPE account abroad with a correspondent bank of
the National Bank of Egypt, Cairo. Withdrawals from said
account shall be used for financing GANOPE's and its
Affiliated Companies' foreign currency requirements subject
to the approval of the Minister of Petroleum.
ARTICLE V
MANDATORY AND VOLUNTARY RELINQUISHMENTS
(a)
MANDATORY:
At the end of the second (2"d ) year after the Effective Date
shall
relinquish
to
the
hereof,
CONTRACTOR
GOVERNMENT a total of twenty five percent (25%) of the
original Area on the Effective date not then converted to a
Development Lease or Leases. Such relinquishment shall
be in a single unit of whole Exploration Blocks not converted
to Developnient Leases unless otherwise agreed upon
between GANOPE and CONTRACTOR so as to enable the
relinquishment requirements to be precisely fulfilled.
At the end of the fifth ( 5th ) year after the Effective Date
hereof,
CONTRACTOR
sliall
relinquish to
the
GOVERNMENT an additional twenty five petcent (25%) of
the original Area on the Effective date not then converted to
a Development Lease or Leases. Such relinquishment shall
be in a single unit of whole Exploration Blocks not converted
to Development Leases unless otherwise agreed upon
between GANOPE and CONTRACTOR so as to enable the
relinquishment requirements to be precisely fulfilled.
Without prejudice to Articles Ill and XXlll and the last three
paragraphs of this Article V (a), at the end of the eighth (8" )
year of the Exploration period, CONTRACTOR shall
relinquish the remainder of the Area not then converted to a
Development Leases.
It is understood that at the time of any relinquishment the
areas to be converted into Development Leases and which
are subrr~ittedto the Minister of Petroleum for his approval
according to Article Ill (d) shall, subject to such approval, be
deemed converted to Development Leases.
CONTRACTOR shall not be required to relinquish any
Exploration Block or Blocks on which a Commercial Oil or
Gas Well is discovered before the period of time referred to
in Article Ill (c) given to CONTRACTOR to determine
whether such Well is a Commercial Discovery worthy of
Development or to relinquish an Exploration Block in
respect of which a notice of Commercial Gas Discovery has
been given to GANOPE subject to GANOPE's right to
agree on the existence of a Commercial Discovery pursuant
to Article Ill (c), and without prejudice to the requirements of
Article Ill (e).
In the event at the end of the initial Exploration period or
either of the two successive extensions of the initial
Exploration period, a well is actually drilling or testing,
CONTRACTOR shall be allowed up to six (6) months to
enable it to discover a Commercial Oil or Gas Well or to
establish a Conimercial Discovery, as the case may be.
However, any such extension of up to six (6) months shall
reduce the length of the next succeeding Expl~rationperiod,
as applicable, by that amount.
(b)
VOLUNTARY:
CONTRACTOR may, voluntarily, during any period
relinquish all or any part of the Area in whole Exploration
Blocks or parts of Exploration Blocks provided that at the
time
of such voluntary relinquishment its Exploration
obligations under Article IV (b) have been satisfied for such
period.
Any relinquishments hereunder shall be credited toward the
mandatory provisions of Article V (a) above .
Following
Commercial
Discovery,
GANOPE
and
CONTRACTOR shall mutually agree upon any area to be
relinquished thereafter,
except for 'the relinquishnient
provided for above at the end of the total Exploration
period.
ARTICLE VI
OPERA1-IONS AFTER COMMERCIAL DISCOVERY
(a) On Cow~mercialDiscovery, GANOPE and CONTRACTOR
may form in the A.R.E. an operating company pursuant to
Article VI (b) and Annex (D) (hereinafter referred to as
"Operating Company") which company shall be named by
mutual agreenient between GANOPE and CONTRACTOR
and such name shall be subject to the approval of the
Minister of Petroleum. Said con-lpany shall be a private
sector company. Operating Company shall be subject to the
laws and regulations in force in the A.R.E. to the extent that
such laws and regulations are not inconsistent with the
provisions of this Agreement or the Charter of Operating
Company.
i
P
However, Operating Company and CONTRACTOR shall, for
the purpose of this Agreement, be exempted from the
following laws and regulations as now or hereafter amended
or substituted:
- Law No. 48 of 1978, on the employee regulations of
public sector companies;
-
Law No. 159 of 1981, proniulgating the law on joint
stock companies, partnership limited by shares and
limited liability companies;
-
Law No. 97 of 1983 promulgating the law concerning
public sector orgar~izationsand companies;
-
Law No. 203 of 1991 prom~~lgating
the law on public
business sector companies; and
-
Law No. 88 of 2003 promulgating the law of Central
Bank,
banking organization and currency.
organizationj
'
(b) The Charter of Operating Corr~panyis hereto attached as
Annex "DM. Within thirty (30) days after 'the date of
Commercial Oil Discovery or within thirty (30) days after
signature of a Gas Sales Agreement or commencement of a
scheme to dispose of Gas (unless otherwise agreed upon
by GANOPE and CONTRACTOR), the Charter shall take
effect and Operating Company shall automatically come into
existence without any further procedures. The Exploration
Advisory Committee shall be dissolved forthwith upon the
coming into existence of the Operating Company.
(c) Ninety (90) days after the date Operating Company comes
57-
into existence in accordance with paragraph (b) above, it
shall prepare a Work Program and Budget for further
Exploration and Development for the remainder of the year
in which the Conimercial Discovery is made; and not later
than four (4) months before the end of the current Financial
Year (or such other date as may be agreed upon by
fou( (4) months
GANOPE and CONTRACTOR) and
preceding the conimencenient of each succeeding Financial
Year thereafter (or such other date as may be agreed upon
by GANOPE and CONTRACTOR), Operating Company
shall prepare an annual Production Schedule, Work
Prograni and Budget for further Exploration and
Development for the succeeding Financial Year. The
Production Schedule, Work Program and Budget shall be
submitted to the Board of Directors for approval.
(d) Not later than the twentieth (20th) day of each month,
Operating Company shall furnish to CONTRACTOR a
written
estimate of its total cash requirements for
expenditure for the first half and the second half of the
succeeding nionth expressed in U.S. Dollars having regard
to the approved Budget. Such estimate shall take into
consideration any cash expected to be on hand at month
end.
Payment for the appropriate period of such month shall be
made to the correspondent bank designated in paragraph
(e) below on the first (1st) day and fifteenth (15th) day
respectively, or the next following business day, if such day
is not a business day.
(e) Operating Company is authorized to keep at its own
disposal abroad in an account opened with a correspondent
bank of the National Bank of Egypt, Cairo, the foreign funds
advanced by CONTRACTOR. Withdrawals from said
account shall be used for payment for goods and services
acquired abroad and for transferring to a local bank in the
A.R.E. the required amount to meet the expenditures in
Egyptian Pounds for Operating Company in connection with
its activities under this Agreement.
Within sixty (60) days after the end of each Financial Year,
Operating Company shall submit to the appropriate
exchange control authorities in the A.R.E. a statement, duly
certified by a recognized firm of auditors, showing the funds
credited to that account, the disbursements made out of
that account and the balance outstanding at the end of the
Year.
If and for as long during the period of production operations
there exists an excess capacity in facilities which can not
during the period of such excess be used by the Operating
Company , GANOPE shall use the excess capacity if it so
desires without any financial or operational disadvantage to
the CONTRACTOR or Operatirlg Company.
ARTICLE VII
RECOVERY OF COSTS AND EXPENSES AND
PRODUCTION SHARING
(a)
(1)
Cost Recovery Petroleum:
Subject to the auditing provisions under this
Agreement, CONTRACTOR shall recover
quarterly all costs, expenses and expenditures
in respect of all the Exploration, Developn~ent
and related operations under this Agreement
to the extent and out of forty percent (40%)
of all Petroleum produced and saved from all
Development
Leases within the Area
hereunder and not used in Petroleum
operations. Such Petroleum is hereinafter
referred to as "Cost Recovery Petroleum".
For the purpose of determining the
classification of all costs, expenses and
expenditl-~resfor their recovery, the following
terms
shall apply:
/
*.
1.
"Exploration Expenditures" shall mean all
costs and expenses for Exploration and
the related portion of indirect expenses
and overheads.
2.
"Development Expenditures" shall dean
all costs and expenses for Development
(with the exception
of Operating
Expenses) and the related portion of
indirect expenses and overheads.
3.
"Operating Expenses" shall mean all
costs, expenses and expenditures made
after initial Corr~mercialProduction, which
costs, expenses and expenditures are not
normally depreciable.
However, Operating Expenses shall include workover, repair and
maintenance of assets but shall not include any of the following:
sidetracking, redrilling and changing of the status of a well,
replacement of assets or part of an asset, additions, improvements,
renewals or major overhauling that extend the life of the asset.
Exploration Expenditures, Development Expenditures and Operating
Expenses shall be recovered from Cost Recovery Petroleum in the
following manner:(i) "Exploration
Expenditures",
including
those
accumulated prior to the commencement of initial
Commercial Production, which for the purposes of this
Agreement shall mean the date on which the first
regular shipment of Crude Oil or the first deliveries of
Gas are made , shall be recoverable at the rate of
twenty five percent (25 %) per annum starting either in
the Tax Year in which such expenditures are inc~irred
and paid or the Tax Year in which initial Commercial
Production commences, whichever is the later date.
"Development Expenditures", including those
accumulated prior to the comniencernent of initial
Commercial Production which for the purposes of
this Agreement shall mean the date on which the
first regular shipment of Crude Oil or the first
niade,
shall
be
deliveries of Gas
are
recoverable at the rate of twenty f i v i percent
(25%) per annum starting either in the ~ a x ~ e ina r
which such expenditures are incurred and paid or
the Tax Year in which initial Commercial
Production commences, whichever is the later
date.
(iii) "Operating Expenses", incurred and paid after the
date of initial Commercial Production, which for the
purposes of this Agreement shall mean the date
on which the first regular shipment of Crude Oil or
the first deliveries of Gas are made, shall be
recoverable either in the Tax Year in which such
costs and expenses are incurred and paid or the
Tax Year in which initial Commercial Production
occurs, whichever is the later date.
(iv)To the extent 'that, in a Tax Year, costs, expenses
or expenditures recoverable per paragraphs (i), (ii)
and (iii) preceding, exceed the value of all Cost
Recovery Petroleum for such Tax Year, the excess
shall be carried forward for recovery in the next
succeeding Tax Year(s) until fully recovered, but in
no case after the termination of this Agreement, as
to CONTRACTOR.
(v) The recovery of costs and expenses, based upon
the rates referred to above, shall be allocated to
each quarter proportionately (one fourth to each
quarter). However, any recoverable costs and
expenses not recovered in one quarter as thus
allocated, shall be earl-ied forward for recovery in
(2) Except as provided in Article VII (a) (3) and Article VII (e) (1),
CONTRACTOR shall each quarter be entitled to take and own
all Cost Recovery Petroleum, which shall be taken and
disposed of in the manner determined pursuant to Article VII
(e). To the extent that the value of all Gost Recovery
Petroleum [as determined in Article VI I (c)] exc'eeds the actual
recoverable costs and expenditures, including any carry
forward under Article VII (a) (1) (iv), to be recovered in that
quarter, then the value of such Excess Cost Recovery
Petrole~~m
shall be divided between CONTRACTOR and
GANOPE in the manner set forth in Article VII (b) 1. (i) below
and Ganopels share shall be paid either (i) in cash by
CONTRACTOR to GANOPE in .the manner set forth in Article
IV of the Accounting Procedures contained in Annex "En or (ii)
in kind.
(3)Ninety (90) days prior - t o the commencement of each
Calendar Year GANOPE shall be entitled to elect by notice in
writing to CONTRACTOR to require payment of up to one
hundred percent (100%) of GANOPE's share of Excess Cost
Recovery Petroleum in kind. Such payment will be in Crude
Oil from the Area F.O.B. export terminal or other agreed
delivery point provided that the amount of Crude Oil taken by
GANOPE in kind in a quarter shall not exceed the value of
Cost Recovery Crude Oil actually taken and separately
disposed of by CONTRACTOR from the Area during the
previous quarter. If GANOPE's entitlement to receive payment
of its share of Excess Cost Recovery Petrole~~m
in kind is
limited by the foregoing provision, the balance of such
entitlement shall be paid in cash.
(b)
Production Sharing
(1)The remaining sixty percent (60%)of the
Petroleum shall be divided between GANOPE and
the CONTRACTOR according to the following
shares: Such shares shall be taken and disposed
of pursuant to Article VII (e):
--
-
Crude Oil produced and
saved under this Agreement
and not used in Petroleum
operations. Barrels oil per day
(BOPD)(quarterly average).
That portion or increment
less than 25,000 BOPD
25,000 BOPD and above
GANOPE
SHARE
.'
CONTRACTOR
SHARE
(percent )
(70 %)
(percent )
( 3 0 %)
(80%)
(20%)
GANOPE
SHARE
CONTRACTOR
SHARE
( percent)
(65 %)
( percent )
( 35 %)
(75%)
(25%)
(ii) Gas and LPG
.,
.
.
.
.
.
.
Gas and LPG produced and
saved under this Agreement
and not used in Petroleun~
operations (SCFD)
(quarterly average)
Less than 150 MMSCFIday
150 MMSCFIday and above
(2)After the end of each contractual year during the term
of any Gas Sales Agreement entered into pursuant to
Article VII (e), GANOPE and CON-TRACTOR (as
sellers) shall render to GANOPE or EGPC or EGAS
(as buyer) a statement for an amount of Gas, if
any , equal to the amount by
which the
quantity of Gas of
which GANOPE or EGPC
or EGAS (as buyer) has taken delivery falls below
seventy five percent (75%) of the Contract quantities
of Gas as established by the applicable Gas Sales
Agreement (the "Shortfall"), provided the Gas is
available. Within sixty (60) days of receipt of the
E or EGPC or EGAS (as
buyer)
shall
Pay
GANOPE
and
CONTRACTOR (as sellers) for the amount of the
Shortfall, if any. The Shortfall shall be included in
GANOPE1sand CONTRACTOR'S entitlement to Gas
pursuant to Article VII (a) and Article VII (b) in the
fourth (4th) quarter of such contractual ye&.
Quantities of Gas not taken but to be paid for shall be
recorded in a separate "Take-or-Pay Account ".
Quantities of Gas ("Make Up Gas") which are
delivered in subsequent years in excess of seventy
five percent (75%) of the contract quantities of Gas
as established by the applicable Gas Sales
Agreement, shall be set against and reduce
quantities of Gas in the "Take-or-Pay" account to the
extent thereof and, to that extent, no payment shall
be due in respect of such Gas. Such Make Up Gas
shall not be included in CONTRACTOR'Sentitlement
to Gas pursuant to Article VII
(a) and (b).
CONTRACTOR shall have no rights to such Make
Up Gas.
If at the end of any Contract year ,GANOPE and
CONTRACTOR (as sellers) fail to deliver seventy five percent
(75%) of the annual contract quantity as defined in the Gas
Sales Agreement with GANOPE or EGPC or EGAS (as
buyer), the difference between seventy five percent (75%) of
the annual contract quantity and the actual gas quantity
delivered shall be referred to as the "Deliver- or- Pay Shortfall
Gas". GANOPE or EGPC or EGAS (as buyer) shall have the
right to take a quantity of Gas equal to Deliver-or- Pay the
Shortfall Gas and such quantity shall be priced at ninety
percent (90%) of the Gas price as defined in the Gas Sales
Agreement . The mechanism for the delivery-or-pay concept
will be determined in the Gas Sales Agreement.
- .
The percentages set forth in Article VII (a) and (b) in
respect of LPG produced from a plant constructed
and operated by or on behalf of GANOPE and
CONTRACTOR shall apply to all LPG available for
delivery.
-.
,
(c) Valuation of Petroleum:
(I)
Crude Oil:
(i)The Cost Recovery Crude Oil to which
CONTRACTOR is entilled hereunder shall be
valued by GANOPE and CONTRACTOR at
"Market Price" for each calendar quarter.
(ii) "Market Price" shall mean the weighted
average prices realized from sales by
GANOPE or CONTRACTOR during the
quarter, whichever is higher, provided that
the sales to be used in arriving at the
weighted average(s) shall be sales of
comparable quantities on comparable credit
terms in freely convertible currency from
F.O.B. point of export sales to non-affiliated
corlipanies at arm's length under all Crude
Oil sales contracts then in effect, but
excluding Crude Oil sales contracts
involving barter and,
(1) Sales, whether direct or indirect,
through brokers or otherwise, of
GANOPE or CON-TRACTOR to
any Affiliated Company.
(2) Sales involving a quid pro quo
other than payment in a freely
convertible currency or motivated
in whole
or
in
part
by
considerations other than the usual
economic
incentives
for
corr~niercialarm's length crude oil
sales.
,,.
.,iat in the case of "C.I.F."
sales, appropriate deductions shall be made
for transport and insurance charges to
calc~~late
the F.O.B. point of export price;
and always taking
into account the
appropriate adjustment for quality of prude
Oil, freight advantage or disadvantage of
port of loading and other
appropriate
adjustments. Market Price shall be
determined separately for each Crude Oil or
Crude Oil mix, and for each port of loading.
(iv) If during any calendar quarter, there are no
and/or
such
sales
by
GANOPE
CONTRACTOR under the Crude Oil sales
contracts
in effect,
GANOPE and
CONTRACTOR shall mutually agree upon
the Market Price of the barrel of Crude Oil
to be used for such quarter, and shall be
guided by all relevant and available
evidence including current prices in freely
convertible currency of leading crude oils
produced by major oil producing countries
(in the Arabian Gulf or the Mediterranean
Area), which are regularly sold in the open
market according to actual sales contracts
terms but excluding paper sales and sales
promises where no crude oil is delivered, to
the extent that such sales are effected
under such terms and conditions (excluding
the price) not significantly different from
those under which the crude oil to be
valued, was sold, and always taking into
consideration appropriate adjustments for
crude oil quality, freight advantage or
disadvantage of port of loading and other
appropriate adjustments, as the case may
be, for differences in gravity, sulphur, and
other factors generally recognized by sellers
and purchasers, as reflected in crude prices,
-. . ,.,.iety (90) days insurance
premiums, ~ ~ n u s ufees
a l borne by the seller,
and for credit terms in excess of sixty (60)
days, and the cost of loans or guarantees
granted for the benefit of the sellers at
prevailing interest rates.
i
It is the intent of the Parties that the value of
the Cost Recovery Crude Oil shall reflect
the prevailing market price for such Crude
Oil.
(v) If either GANOPE or CONTRACTOR
considers that the
Market Price as
determined under sub-paragraph (ii) above
does not rel'lect the prevailing Market Price
or
in
the
event
GANOPE
and
CONTRACTOR fail to agree on Market
Price for any Crude Oil produced under this
Agreement for any quarter within fifteen (15)
days after the end thereof, any party
may
elect at any time thereafter to
submit to a single arbitrator the question,
what single price per barrel, in the
arbitrator's judgment, best represents for the
pertinent quarter 'the Market Price for the
Crude Oil in question. The arbitrator shall
make his determination as soon as possible
following the quarter in question. His
determination shall be final and binding
upon all the parties. 'The arbitrator shall be
selected in the manner described below.
In 'the event GANOPE and CONTRACTOR
fail to agree on the arbitrator within thirty
(30) days from the date any party notifies
the other that it has decided to submit the
determination of the Market Price to an
arbitrator, such arbitrator shall be chosen by
the appointing authority designated in
Article XXlV (e), or such
other appointing authority with access to
such expertise
as may be agreed to
between GANOPE and CONTRACTOR,
with regard to the qualifications for
arbitrators set forth below, upon written
application of one or both of GANOPE and
CONTRACTOR. Copy of such application
by one of them shall be promptly sent to the
other.
., ,,,
VVILII
'The arbitrator shall be as nearly as possible
a person with an established reputation in
the international petroleum industry as an
expert in pricing and marketing crude oil in
international commerce. The arbitrator shall
not be a citizen of a country which does not
have diplomatic relations with both the
A.R.E., Canada & England. He may not be,
at the time of selection, employed by, or an
arbitrator or consultant on a continuing or
frequent basis to, the American Petroleum
Institute,
the
Organization
of the
Petroleum Exporting Countries or the
Exporting
Organization of Arab Petrole~~m
Countries, or a consultant on a continuing
basis to GANOPE, CONTRACTOR or an
Affiliated Company of either, but past
occasional
consultation
with
such
companies,
with
other
petroleum
companies, governmental agencies or
organizations shall not be a ground for
disqualification. He may not have been, at
any tinie during the two (2) years before
selection, an employee of any petroleum
agency or
company or of any goverr~n~ental
organization.
z.d,,,,,
person decline or be
unable to serve as arbitrator or should the
position of arbitrator fall vacant prior to the
decision called for, another person shall be
chosen in the same manner provided in this
paragraph. GANOPE and CONTRACTOR
shall share equally the expenses b f the
arbitrator.
The arbitrator shall make his determination
in accordance with the provisions of this
paragraph, based on the best evidence
available to him. He will review oil sales
contracts as well as other sales data and
inforniation but shall be free to evaluate the
extent to which any contracts, data or
information is substantiated or pertinent.
Representatives
of
GANOPE
and
CONTRACTOR shall have the right to
consult with the arbitrator and furnish him
written materials provided the arbitrator may
impose reasonable limitations on this right.
GANOPE and CONTRACTOR each shall
cooperate with the arbitrator to the fullest
extent and each shall insure such
cooperation of its trading companies. The
arbitrator shall be provided access to crude
oil sales contracts and related data and
information which
GANOPE
and
CONTRACTOR
or
their trading
companies are able to make available and
which in the judgment of the arbitrator might
aid the arbitrator in making a
valid
determination.
(vi) Pending Market Price agreement
GANOPE and
CONTRACTOR
determination
by the arbitrator,
by
or
as
~~,arket
Price agreed for the
quarter preceding the quarter in question
shall remain temporarily in effect. In the
event either GANOPE or CON'TRACTOR
should incur a loss by virtue of the
temporary continuation of the Market, Price
of the previous quarter, it shall promptly be
reimbursed such loss by the other party plus
simple interest at the LlBOR plus two and
one - half percent (2.5%) per annum rate
provided for in Article IV (f) from the date on
which the disputed amount(s) should have
been paid to the date of payment.
,,
(2)Gas and LPG
(i)The Cost Recovery and Production Sharing Gas Price
will be agreed upon between CON-TRACTOR and
GANOPE or EGPC or EGAS after the Corr~mercial
Discovery and before converting an area to a
development lease(s) according to the average
prevailing gas price of the Mediterranean region at that
time . Except gas for export (LNG), where production
sharing gas price will be at net back price .
(ii)The Cost Recovery and Production Shares of (LPG)
produced from a plant constructed and operated by
or on behalf of GANOPE and CONTRACTOR shall
be separately valued for Propane and Butane at the
outlet of such LPG plant according to the following
formula (unless otherwise agreed between GANOPE
and CONTRACTOR):
PLPG =0.95 PR - (J X 0.85 X
F
)
6
42.96 X 10
Where
PLPG = LPG price (separately determined for
Propane and Butane) in U.S. Dollars
per metric ton.
i
e
PR =The average over a period of a month of
the figures representing the mid-point
between the high and low prices in U.S.
Dollars per metric ton quoted in "Platt's
LPGaswire" during such month
for
Propane and Butane FOB Ex-RefIStor.
West Mediterranean.
J = BTU's removed from the Gas stream by the
LPG plant
per nietric ton of LPG
produced.
F = a value in U.S. Dollars per metric ton of the
crude oil of Gulf of Suez Blend "FOB Ras
Shukheir" A. R.E. calculated by referring to
"Platt's Oilgram Price Report" during a
month under the heading "Spot Crude Price
Assessment for Suez Blend". 'This value
reflects the total averages of the published
low and high values for a Barrel during
such month divided by the number of days
in such month for which such values were
quoted. The value per metric ton shall be
calculated on the basis of a conversion
factor to be agreed upon annually between
GANOPE and CONTRACTOR.
In the event that "Platt's LPGaswire" is
issued on certain days during a month but
not on others, the value of (PR) shall be
calculated using only those issues which
are published during such month. In the
event that the value of (PR) can not
be determined because "Platt's LPGaswire"
.-..YlluJ at all during a month,
GAAOPE and CONTRACTOR shall meet
and agree to the value of (PR) by
reference to other published sources. In the
event that there are no such other published
sources or if the value of (PR) cannot be
determined pursuant to the foregohg for
any other reason , GANOPE and
CONTRACTOR shall meet and agree the
value of (PR) by reference to the value of
LPG (Propane and Butane) delivered FOB
from the Mediterranean Area.
Such valuation of LPG is based upon
delivery at the delivery point specified in
Article VII (e) (2) (iii).
(d)
(iii)
The prices of Gas and LPG so calculated
shall apply during the same month.
(iv)
The Cost Recovery and Production Shares
of Gas and LPG disposed of by GANOPE
and CONTRACTOR other than to GANOPE
or EGPC or EGAS pursuant to Article VII (e)
shall be valued at their actual realized price.
Forecasts:
Operating Company shall prepare (not less than ninety
(90) days prior to the beginning of each calendar
semester following first regular production) and furnish in
writing to CONTRACTOR and GANOPE a forecast
setting out a total quantity of Petroleum that Operating
Company estimates can be produced, saved and
transported hereunder during such calendar semester in
accordance with good oil and gas industry practices.
Operating Company shall endeavor to produce each
calendar semester the forecast quantity. The Crude Oil
~anksor offshore loading facilities
constructed, maintained and operated according to
Government Regulations, by Operating Company in
which said Crude Oil shall be metered or otherwise
measured for royalty, and other purposes required by this
Agreement.
Gas shall be handled
by Operating
Company in accordance with the provisions of Article VII
(e)
(e) Disposition of Petroleum:
-
age
(I)
GANOPE and CONTRACTOR shall have the right and
the obligation to separately take and freely export or
otherwise dispose of, currently all of the Crude Oil to
which each is entitled under Article VII (a) and (b).
Subject to payment of SI-lms due to GANOPE under
Article VII (a) (2) and Article IX, CONTRACTOR shall
have the right to remit and retain abroad all funds
acquired by it including the proceeds froni the sale of its
share of Petroleum.
Notwithstanding anything to. the contrary under this
Agreement, priority shall be given to meet the
requirements of the A.R.E.
market
from
CONTRACTOR'S share under Article VII ( b ) of the
Crude Oil produced from the Area and GANOPE shall
such Crude Oil
have the preferential right to p~~rchase
at a price to be determined pursuant to Article VII ( c )
. The amount of Crude Oil so purchased shall be a
portion of CONTRACTOR'S share under Article VII (b).
Such amount shall be proportional to CONTRACTOR'S
share of the total production of crude oil from the
concession areas in the A.R.E. that are also subject to
GANOPE's preferential right to purchase. -The payment
for such purchased amount shall be made by GANOPE
in U.S. Dollars or in any other freely convertible
currency rerr~itta
ble by CONTRACTOR abroad.
It is agreed upon that GANOPE shall notify
CONTRACTOR, at least forty-five (45) days prior to the
beginning of the Calendar Semester, of the amount to
be purchased during such semester under this Article
(2) With respect to Gas and LPG produced from the
Area:
(i)Priority shall be given to meet the requirements of
the local market as determined by GANOPE.
(ii) In the event that GANOPE or EGPC or EGAS is to be
the buyer of Gas, the disposition of Gas to the local
markets as indicated above shall be by virtue of long
term Gas Sales Agreements to be entered into
between GANOPE and CONTRACTOR (as sellers)
and GANOPE or EGPC or EGAS (as buyer).
GANOPE and CON-TRACTOR (as sellers) shall have
the obligation to deliver Gas to the following point
where such Gas shall be metered for sales, royalty,
and other purposes required by this Agreement:
(a) In the event no LPG plant is constructed to
process such Gas, the delivery point shall be
at the flange connecting the Lease pipeline to
the nearest point on the
National Gas
Pipeline Grid System as depicted in Annex
"F" hereto, or as othewise agreed
by
GANOPE and CONTRACTOR.
(b) In the event an LPG plant is constructed to
process such Gas, such Gas shall, for the
purposes of valuation and sales, be metered
at the inlet to such LPG Plant. However,
notwithstanding the fact that the metering
shall take place at the LPG Plant inlet,
CONTRACTOR shall through the Operating
Company build a pipeline suitable for transport
of the processed Gas from the LPG Plant
outlet to the nearest point on the National Gas
Pipeline Grid System as depicted in Annex
"F" hereto, or otherwise agreed by GANOPE
.- , -1R. Such pipeline shall be
owned in accordance with Article Vlll (a) by
GANOPE, and its cost shall be financed and
recovered by CONTRACTOR as Development
Expenditures pursuant to Article VII.
(iii) GANOPE and CON'TRACTOR shall! consult
together to determine whether to buildpan LPG
plant for
recovering LPG from any Gas
produced hereunder. In the event GANOPE and
CONTRACTOR decide to build such a plant,
the plant shall, as is appropriate, be in the
vicinity of the point of delivery as determined in
Article II and Article Vll(e)2(ii). The delivery of
LPG for, royalty and other purposes required by
this Agreement shall be at the outlet of the LPG
plant. The costs of any such LPG plant shall be
recoverable in accordance with the provisions of
this Agreement unless the Minister of Petroleum
agrees to accelerated recovery.
(iv) GANOPE or EGPC or EGAS (as buyer) shall have
the option to elect, by ninety (90) days prior written
notice to GANOPE and
CONTRACTOR (as
sellers), whether payn~entfor the Gas which is
subject to a Gas Sales Agreement between
GANOPE and CONTRACTOR (as sellers) and
GANOPE or EGPC or EGAS (as buyer) and LPG
produced from a plant constructed and operated
by or on behalf of GANOPE and CONTRACTOR,
as valued in accordance with Article VII (c), and to
which CONTRACTOR is entitled under the Cost
Recovery and Production Sharing provisions of
Article VII, of this Agreement, shall be made (1) in
cash or (2) in kind.
Payments in cash shall be made by GANOPE or
EGPC or EGAS (as buyer) at intervals provided
for in the relevant Gas Sales Agreement in U.S.
Dollars, remittable by CONTRACTOR abroad.
. ...,
311dllbe calculated by converting
the value of Gas and LPG to which
CONTRACTOR is entitled into equivalent barrels
of Crude Oil to
be taken concurrently by
CONTRACTOR from the Area, or to the extent that
such Crude Oil is insufficient, Crude ,Oil from
CONTRACTOR'S other concession are& or such
other areas as may be agreed. Such Crude Oil
shall be added to the Crude Oil
that
CONTRACTOR is otherwise entitled to lift under
this Agreement. Such equivalent barrels shall be
calculated on the basis of the provisions of Article
VII (c) relating to the valuation of Cost Recovery
Crude Oil.
.
#U
Provided that:
(aa) Payment of the value of Gas and LPG shall
always be made in cash in U.S. Dollars
remittable by CONTRACTOR abroad to the
extent that there is insufficient Crude Oil
available for conversion as provided for
above;
(bb) Payment of the value of Gas and LPG shall
always be made in kind as provided for above
to the extent that payments in cash are not
made by GANOPE.
Payments to CONTRACTOR (whether in cash or
kind), when related to CONTRACTOR'S Cost
Recovery Petroleum, shall be included in
CONTRACTOR'S Statement of Recovery of
Costs and of Cost Recovery Petroleum referred
to in Article IV of Annex "E" of this Agreement.
(v) Should GANOPE or EGPC or EGAS (as buyer)
fail to enter into a
long-term Gas Sales
Agreement with GANOPE and CONTRACTOR
(as sellers) within four (4) years from a notice of
Commercial Gas Discovery pursuant to Article
J N T R A C T O R shall have the
right to take and freely dispose of the qaantity of
Gas and LPG in respect of which the notice of
Commercial Discovery is given by exporting
such Gas and LPG.
(vi) The proceeds of sale of CONTR~CTOR'S
share of Gas and LPG disposed of pursuant to
the above sub-paragraph (v) may be freely
remitted or retained abroad by CONTRACTOR.
(vii) In the event GANOPE and CON'TRACTOR
agree to accept new Gas and LPG producers
to join in an ongoing export project, such
producers shall have to contribute a fair and
equitable share of the investment made.
(viii) (aa)Upon the expiration of the four (4) year
period referred to in Article VII (e) (2)
(v), CON-TRACTOR shall have the
obligation to exert its reasonable efforts
to find an export market for Gas
reserves.
(bb)ln the event at the end of the four (4)
years period referred to under Article
Vll (e) (2) (v), CONTRACTOR and
GANOPE have not entered into a Gas
Sales Agreement, CONTRACTOR shall
retain its rights to such Gas reserves for
a further period of up to four (4) years,
subject to Article VII (e) (2) (viii)(cc),
during which period GANOPE shall
attempt to find a market for Gas
reserves.
(cc) In the event that CONTRACTOR is
not
exporting
the Gas and
CONTRACTOR has not entered into
-
sales Agreement pursuant to
Article VII (e) (2) prior to the expiry of
eight
(8)
years
from
CONTRACTOR'S
notice
of
Commercial
Gas
Discovery,
CONTRACTOR shall surrender the
Gas reserves in respect of whbh
such notice has been given.
It
being
understood
that
CONTRACTOR shall, at any time
prior to the expiry of such eight ( 8 )
years
period , surrender the
Gas reserves, if
CONTRACTOR
is
not exporting the Gas and
CONTRACTOR does not accept an
offer of a Gas Sales Agreement from
GANOPE wiGtt- in six (6) months 'from
the date such offer is made provided
that the Gas Sales Agreement
offered to CONTRACTOR shall take
into. consideration the relevant
techr~ical and economic factors to
en.able a commercial contract
including :
-
A sufficient delivery rate.
- Delivery pressure to enter the National Gas
Pipeline Grid System at the point of delivery.
-
-
Delivered Gas quality specifications not
more stringent than those imposed or
required for the National Gas Pipeline
Grid System.
The Gas
Agreement .
prices as specified in this
(dd) In the event that CONTRACTOR has not
entered into a Gas Sales Agreement
pursuant to Article VII (e) (2)or otherwise
found an acceptable scheme for conimercial
disposal of such Gas , at the time of the
expiration of eight ( 8 ) years from
CONTRACTOR'S notice of Commercial
Discovery of Gas or failing agreement with
GANOPE on gas disposal at the expiration
of eight ( 8 ) years , CONTRACTOR shall
surrender to GANOPE such Develo~ment
Lease (s) in which Gas discovery is mide.
(ix) CON-TRACTOR shall not be .obligated to
surrender a Development Lease based on a
Commercial Gas Discovery, if Crude Oil has
been discovered in commercial quantities in
the same Development Lease.
(f)
Operations:
If following the reversion to GANOPE of any rights to
Crude Oil hereunder, CON-TRACTOR retains rights to
Gas in the same Development Lease, or if, following
surrender of rights to Gas hereunder, CONTRACTOR
retains rights to Crude Oil in the same Development
Lease, operations to explore for or exploit the Petroleum,
the rights to which have reverted or been surrendered
(Oil or Gas as the case may be) may only be carried out
by Operating Company which shall act on behalf of
GANOPE alone, unless CONTRACTOR and GANOPE
agree otherwise.
g)
Tanker Scheduling:
At a reasonable time prior to the commencement of
Commercial Production GANOPE and CONTRACTOR
shall meet and agree upon a procedure for scheduling
tanker liftings from the agreed upon point of export.
ARTICLE Vlll
TITLE TO ASSETS
(a)GANOPE shall become the owner of all CONTRACTOR
acquired and owned assets which assets were charged to
Cost Recovery by CONTRACTOR in connection with the
operations carried out by CONTRACTOR 'or Operating
Company in accordance with the following:
(1) Land shall become the property of GANOPE as soon
as it is purchased.
(2) Title to fixed and movable assets shall be transferred
automatically and gradually from CONTRACTOR to GANOPE
as they become subject to recovery in accordance with the
provisions of Article VII; however the full title to fixed and
movable assets shall be transferred automatically from
CONTRACTOR to GANOPE when its total cost has been
recovered by CONTRACTOR in accordance with the
provisions of Article VII or at the time of termination of this
Agreement with respect to all assets chargeable to the
operations whether recovered or not, whichever first occurs.
The book value of the assets created during each calendar
quarter shall be communicated by CONTRACTOR to
GANOPE or by Operating Company to GANOPE and
CONTRACTOR within thirty (30) days of the end of each
quarter.
(b) During the term of this Agreement and the renewal period
GANOPE, CONTRACTOR and Operating Company are
entitled to the full use and enjoyment of all fixed and
movable assets
referred to above in connection with
operations hereunder or under any other
Petroleum
agreement
entered into by the Parties.
ConCeSn
Proper
accounting
adjustment
shall
be
made.
CONTRACTOR and GANOPE shall not dispose of the same
except with agreement of the other.
- ,
.,
-
(c) CONTRACTOR and Operating Company may freely import
into the A.R.E., use therein and freely export>atthe end of
such use, machinery and equipments which t6ey either rent
or lease in accordance with good industry practices, including
but not limited to the lease of computer hardware and
software.
ARTICLE IX
BONUSES
(a)
CON-TRACTOR shall pay to GANOPE the sum of two
millions and half U.S. Dollars ($2,500,000) as a
production bonus when the daily production rate .from
the Area first reaches the rate of twenty five thousands
(25,000) Barrels of oil or 150 MMSCF per day. Payment
will be made within fifteen (15) days thereafter.
(b) CONTRACTOR
shall also pay to GANOPE the
additional sum of five millions U.S. Dollars ( $5,000,000)
as a production bonus when the daily production rate
from the Area first reaches the rate of fifty thousand
(50,000 ) Barrels of oil or 250 MMSCF per day. Payment
will be made within fifteen (15) days thereafter.
(c)
CONTRACTOR shall pay to GANOPE as a bonus
the sum of five millions U.S. Dollars ($5,000,000) upon
approval to enter into five (5) years extension period
pursuant to Article Ill paragraph (d) (3) (bb) .
(d) All the above mentioned bonuses shall in no event be
recovered by CONTRACTOR.
-
d
-
(e) In the event that GANOPE elects to develop any part of the
Area pursuant to the sole risk provisions of Article Ill (c)
(iv), production from such sole risk area shall be
considered for the purposes of this ~ r t i c l kIX only if
CONTRACTOR exercises its option to share in such
production, and only from the initial date of sharing.
(f)
Gas
shall
be
taken
into account
for
purposes
of determining
the daily production
IX a & b by
rate from the Area
under Article
converting daily Gas delivered into equivalent barrels of
daily Crude Oil production in accordance with the
following formula:
MSCF x H x 0.167 = equivalent barrels of Crude Oil
where
MSCF = one thousand Standard Cubic Feet of Gas.
H
= the number of million British Thermal
Units (BTU's per MSCF).
ARTICLE X
OFFICE AND SERVICE OF NOTICES
CONTRACTOR shall maintain an office in A.R.E. at which notices
shall be validly served.
The General Manager and Deputy General Manager shall be
entrusted by CONTRACTOR with sufficient power to carry out
-
-/
immediately all
local written directions given to them by the
-.
Government or its
representatives under the terms of this
Agreement. All lawful regulations issued or hereafter to be issued
which are applicable
hereunder and not in conflict with this
Agreement shall apply to the duties and activities of the General
Manager and Deputy General Manager.
-
All matters and notices shall be deemed to be vdlidly served which
are delivered to the office of the General Manager or which are sent
to him by registered mail to CONTRACTOR'S office in the A.R.E.
L
A
-- ,
- .
-,
-.
-.
All matters and notices shall be deemed to be validly served which
are delivered to the office of the Chairman of GANOPE or which are
.sent to him by registered mail at GANOPE's main office in Cairo.
ARTICLE XI
- .
- .
SAVING OF PETROLEUM AND PREVENTION OF LOSS
(a) Operating Company shall take all proper measures,
according to generally accepted methods in use in the oil
and gas industry to prevent loss or waste of Petroleum
above or under the ground in any form during drilling,
producing, gathering, and distributing or storage operations.
The GOVERNMENT has the right to prevent any operation
on any well that it might reasonably expect would result in
loss or damage to the well or the Oil or Gas field.
(b) Upon completion of the drilling of a productive well,
Operating Company shall inform the GOVERNMENT or its
representative of the time when the well will be tested and
.the production rate ascertained.
(c) Except in instances where multiple producing formations in
the same well can only be produced economically through a
single tubing string, Petroleun~shall not be produced from
A
multiple oil bearing zones through one string of tubing at the
same time, except with the prior approval of the
GOVERNMENT or its representative, which shall not be
unreasonably withheld.
>
-.
(d) Operating Company shall record data regarding the
.,
quantities of Petroleum and water produced ;monthly from
each Development Lease. Such data shall be sent to the
GOVERNMENT or its representative on the special forms
provided for that purpose within thirty .(30) days after the
data are obtained. Daily or weekly statistics regarding the
production from the Area shall be available at all
reasonable tinies for examination by authorized
representatives of the GOVERNMENT.
=
-
A
-
(e) Daily drilling records and the graphic logs of wells must
show the quantity and type of cement and the amount of any
other materials used in the well for the purpose of protecting
Petroleum, gas bearing or fresh water strata.
(f) Any substantial change of mechanical conditions of the well
after its completion shall be subject to the approval of the
representative of the GOVERNMENT.
ARTICLE XI1
CUSTOMS EXEMPTIONS
(a) GANOPE, CONTRACTOR, and Operating Company shall
be permitted to import and shall be exempted from customs
duties, any taxes, levies or fees (including fees irr~posedby
Ministerial Decision No. 254 of 1993 issued by the
Minister of Finance, as now or hereafter a.mended or
substituted) of any nature
and from the importation rules with respect to the
importation of machinery, equipment, appliances, materials,
P@/
<-
/=
33'd
57
I'
27-'
-
items, means of transport and transportation (the exemption
from taxes and duties for cars shall or~lyapply to cars to be
used in operations), electric appliances, air conditioners for
offices, field housing and facilities, electronic appliances,
computer hardware and software, as well as spare parts
required for any of the in- ported items, all subject to a duly
approved
certificate
issued
by the
responsible
representative nominated by GANOPE for 4uch purpose,
which states that the imported items are required for
conducting the operations pursuant to this Agreement .
Such certificate shall be final and binding and shall
automatically result in the importation and the exemption
without any further approval, delay or procedure.
(b) Machinery, equipment, appliances and means of transport
GANOPE1s,
and
transportation
imported
by
CONTRACT0 R's and Operating Company's contractors
and sub-contractors temporarily engaged in any activity
pursuant to the operations which are the subject of this
Agreement, shall be cleared under the "Temporary Release
System" without payment of customs duties, any taxes,
levies or fees (including fees imposed by Ministerial
Decision No. 254 of 1993 issued by the Minister of Finance,
as now or hereafter amended or substituted) of any nature
,upon presentation of a duly approved certificate issued by a
GANOPE responsible representative nominated by
GANOPE for such purpose which states, that the imported
items are required for conducting the operations pursuant to
this Agreement. Items (excluding cars not to be used in
operations) set out in Article XI1 (a) imported by GANOPE's,
CONTRACTOR'S and Operating Company's contractors
and sub-contractors for the aforesaid operations, in order
to be installed or used permanently or consumed shall meet
the conditions for exemption set forth in Article XI1 (a) after
being duly certified by an GANOPE responsible
representative to be used for conducting operations
pursuant to this Agreement.
(c) The expatriate employees of CONTRACTOR, Operating
contractors and su b-contractors shall
58
CS
-_./
.-
+
I
-
not be entitled to any exemptions from customs duties and
other ancillary taxes and charges except within the limits of
the provisions of the laws and regulations applicable in the
A.R.E. However, personal household goods and furniture
(including one (I)
car) for each expatriate err~ployee of
CONTRACTOR andlor Operating company shall be cleared
under the "Temporary Release System" (without payment of
any customs duties and other ancillary :taxes) upon
presentation of a letter to the appropriate customs
authorities by CONTRACTOR or Operating Company
approved by a GANOPE responsible representative that the
imported items are irr~ported for the sole use of the
expatriate employee and his family, and that such imported
items shall be re-exported outside the A.R.E. upon the
repatriation of the concerned expatriate employee.
(d) Items imported into the A.R.E. whether exempt or not exempt
from customs duties and other ancillary taxes and charges
hereunder, may be exported by the importing party at any
time after obtaining GANOPE's approval, which approval
shall not be unreasonably withheld, without any export
duties, taxes or charges or any taxes or charges from which
such items have been already exenipt, being applicable.
Such items may be sold within the A.R.E. after obtaining the
approval of GANOPE which approval shall not be
unreasonably withheld. In this event, the purchaser of such
items shall pay all applicable customs duties and other
ancillary taxes and charges according to the condition and
value of such items and the tariff applicable on the date of
sale, unless such items have already been sold to an
Affiliated Compa~iyof CONTRACTOR, if any, or GANOPE,
having the same exemption, or unless title to sucli items
(excluding cars not used in operations) has passed to
GANOPE.
In the event of any such sale under this paragraph (d), the
proceeds from such sale shall be divided in the following
manner:
CONTRACTOR shall be entitled to reimbursement of its
unrecovered cost, if any, in such items and the excess, if any,
59
,
--,+
-
(e) The exemption provided for in Article XI1 (a) shall not apply to
any imported items when items of the same or substantially
the same kind and quality are manufactured locally meeting
CONTRACTOR'S and/or Operating Company's specifications
for quality and safety and are available for timely purchase
and delivery in the A.R.E. at a price not higher than ten
percent (10%) of the cost of the imported! item, before
customs duties but after freight and insurance costs if any
have been added.
(f) CONTRACTOR, GANOPE and their respective buyers shall
have the right to freely export the Petroleum produced from
the Area pursuant to this Agreement; no license shall be
required, and such petroleum shall be exerr~ptedfrom any
customs duties, any taxes, levies or any other imposts in
hereunder.
respect of the export of Petrole~~m
ARTICLE Xlll
BOOKS OF ACCOUNT : ACCOUNTING AND PAYMENTS
(a) GANOPE, CONTRACTOR and Operating Company shall
each maintain at their business offices in the A.R.E. books of
account, in accordance with the Accounting Procedure in
Annex "EMand accepted accounting practices generally used
in the petroleum industry, and such other books and records
as may be necessary to show the work perfornied under this
Agreement, including the amol-~ntand value of all Petroleum
produced and saved hereunder. CONTRACTOR and
Operating Company shall keep their books of account and
accounting records in United States Dollars.
Operating Company shall furnish to the GOVERNMENT or its
representatives monthly returns showing the amount of
Petroleum produced and saved hereunder. Such returns shall
be prepared in the form required by the GOVERNMENT, or its
representative and shall be signed by the General Manager or
by the Deputy General Manager or a duly designated deputy
and delivered to the GOVERNMENT or its representative
within thirty (30) days after the end of the month covered in
.->'
<+
1141r
/
I-
-
(b) The aforesaid books of account and other books and records
referred to above shall be available at all reasonable times for
inspection by duly authorized representatives of the
GOVERNMENT.
(c) CONTRACTOR shall submit to GANOPE a Profit and Loss
Statement of its Tax Year not later than four (4) months
after the commencement of the following Taxiyear to show
its net profit or loss from the Petroleum operations under
this Agreement for such Tax Year.
CONTRACTOR shall at the same time submit a year-end
Balance Sheet for the same Tax Year to GANOPE. The
Balance Sheet and financial statements shall be certified by
an Egyptian certified accounting firm.
ARTICLE XIV
RECORDS, REPORTS AND INSPECTION
(a) CONTRACTOR and/or Operating Company shall prepare
and, at all times while 'this Agreement is in force, maintain
accurate and current records of its operations in the Area.
CONTRACTOR and/or Operating Company shall furnish the
GOVERNMENT or its representative, in conformity with
applicable regulations or as the GOVERNMENT or its
representative may reasonably require information and data
concerning its operations under this Agreement. Operating
Corr~panywill perform the functions indicated in this Article
XIV in accordance with its role as specified in Article VI.
(b) CONTRACTOR and/or Operating Company shall save and
keep for a reasonable period of time a representative portion
of each sample of cores and cuttings taken from drilling wells,
to be disposed of, or forwarded to the GOVERNMENT or its
representative in the manner directed by the GOVERNMENT.
All samples acquired by CONTRACTOR and/or Operating
Company for their own purposes shall be considered available
for inspection at any reasonable time by the GOVERNMENT
or its represen
a
-.' ( c ) Unless otherwise agreed to by GANOPE, in case of exporting
.-53-
48
+xp-
s"'
-
any rock samples outside A.R.E., samples equivalent in size
and quality shall, before such exportation, be delivered to
GANOPE as representative of the GOVERNMENT.
(d) Originals of records can only be exported with the permission
of GANOPE; provided, however, that magnetic ,tapes and any
other data which must be processed or analyied outside the
A.R.E. may be exported if a monitor or a comparable record, if
available, is maintained in the A.R.E. and provided that such
exports shall be repatriated to A.R.E. promptly following such
processing or analysis on the understanding that they belong
to GANOPE.
(e) During the period CONTRACTOR is conducting the
Exploration
operations, GANOPE's duly authorized
representatives or employees shall have the right to full and
conc~pleteaccess to the Area at all reasonable times with the
right to observe the operations being conducted and to
inspect all assets, records and data kept by CONTRACTOR.
GANOPE's representative, in exercising its rights under the
preceding sentence of this paragraph (e), shall not interfere
with CONTRACTOR'S operations. CONTRACTOR shall
provide GANOPE with copies of any and
all
data
(including, but not limited to, geological and geophysical
reports, logs and well surveys) information and interpretation
of such data, and other information in CONTRACTOR'S
possession.
For the purpose of obtaining new offers, the GOVERNMENT
andlor GANOPE may, after the eight (8) years of the
Exploration period or the date of termination of this
Agreement, whichever is the earlier, show any other party
uninterpreted basic geophysical and geological data (such
data to be not less than one ( I ) year old unless
CONTRACTOR agrees to a shorter period, which agreement
shall not be unreasonably withheld) with respect to the Area,
62
A
/' /'
^-"
.pp"
2
L.
provided that the GOVERNMENT and/or GANOPE may at
any time show another party such data directly obtained over
or acquired from those parts of the Area which
CONTRACTOR has relinquished as long as such data is at
least one (I)
year old.
7.
.
ARTICLE XV
i
>
RESPONSIBILITY FOR DAMAGES
-
CONTRACTOR shall entirely and solely be responsible in law toward
third parties for any damage caused by CONTRACTOR'S Exploration
operations and shall indemnify the GOVERNMENT and/or GANOPE
against all damages for which they may be held liable on account of
any such operations. CONTRACTOR should respect and adhere to
all current and future laws and decrees of environment and
antiquities issued and applied in Arab Republic of Egypt.
.,
ARTICLE XVI
-.
PRIVILEGES OF GOVERNMENT REPRESENTAl'IVES
Duly authorized representatives of the GOVERNMENT shall have
access to the Area covered by this Agreement and to the Operations
conducted thereon. Such representatives may examine the books,
registers and records of GANOPE, CONTRACTOR and Operating
Company and make a reasonable number of surveys, drawings and
tests for the purpose of enforcing this Agreement. They shall, for this
purpose, be entitled to make reasonable use of the machinery and
instruments of CONTRACTOR or Operating Company on the
condition that no danger or impediment to the operations hereunder
shall arise directly or indirectly from such use. Such representatives
shall be given reasonable assistance by the agents and employees of
CONTRACTOR or Operating Company so that none of the activities
shall endanger or hinder the safety or efficiency of the operations.
CONTRACTOR or Operating Company shdll offer such
representatives all privileges and facilities accorded to its own
employees in the field and shall provide them, free of charge, the use
of reasonable office space and of adequately furnished housing while
they are in the field for the purpose of facilitating the objectives of this
Article. Without prejudice to Article XIV (e) any and all
information obtained by the GOVERNMENT or its representatives
under this Article XVI shall be kept confidential with respect to the
Area.
ARTICLE XVll
EMPLOYMENT RIGHTS AND TRAINING OF
ARAB REPUBLIC OF EGYPT PERSONNEL
(a) It is the desire of GANOPE and CONTRACTOR that
operations hereunder be conducted in a business-like and
efficient manner.
(1)The expatriate administrative, professional and
technical personnel employed by CONTRACTOR or
Operating
Company and the personnel of its
contractors for the
conduct of the operations
hereunder, shall be granted a residence as provided
for in Law No. 89 of 1960 as amended and
Ministerial Order No. 280 of 1981 as amended, and
CONTRACTOR agrees that all immigration,
passport, visa and err~ploymentregulations of the
A.R.E., shall be applicable to all alien employees of
CONTRACTOR working in the A.R.E.
(2) A minimum of twenty-five percent (25%) of the
combined
salaries and wages of each of the
expatriate administrative, professional and technical
personnel employed by CON'TRACTOR or Operating
Company shall be
paid monthly in Egyptian
Currency.
(b) CONTRACTOR and Operating Company shall each select its
employees and determine the number thereof, to be used for
operations hereunder.
-
-
-.
-
.
>
(c) CONTRACTOR, shall after consultation with GANOPE,
prepare and carry out specialized training programs for all its
A.R.E. employees engaged in operations hereunder with
respect to applicable aspects of the petroleum industry.
CONTRACTOR and
Operating Company undertake to
replace gradually their non-executive expaJriate staff by
qualified nationals as they are available.
(d) During any of the Exploration phases, CONTRACTOR shall
give mutually agreed numbers of GANOPE employees an
opportunity to attend and participate in CONTRACTOR'S and
CON'rRACTOR's Affiliated Cornparries training programs
relating to Exploration and Development operations. In the
event that the total cost of such programs is less than fifty
thousand (50,000) United States Dollars in any Financial Year
during such period, CONTRACTOR shall pay GANOPE the
amount of the shortfall within thirty (30) days following the
end of such Financial Year. However, GANOPE shall have
the right that said amount (U.S.$50,000) allocated for training,
be paid directly to GANOPE for such purpose.
ARTICLE XVI1.I
LAWS AND REGULATIONS
(a) CONTRACTOR and Operating Company shall be subject to
Law No. 66 of 1953 (excluding Article 37 thereof) as aniended
by Law No. 86 of 1956 and the regulations issued for the
implementation thereof, including the regulations for the safe
and efficient performance of operations carried out for the
execution of this Agreement and for the conservation of the
petroleum resources of the A.R.E. provided that no
regulations, or modification or interpretation thereof, shall be
contrary to or inconsistent with the provisions of this
Agreement.
,
r.
..
+'
-.
-
a-
the provisions of the Law ,No. 4 of 1994 concerning the
environment and its executive regulation as may be amended
, as well as any laws or regulations may be issued ,
concerning the protection of the environment
(c) Except as provided in Article Ill (g) for Income Taxes,
GANOPE, CONTRACTOR and Operating Cot-jlpany shall be
exempted from all taxes and duties, whether imposed by the
GOVERNMENT or municipalities including among others,
Sales Tax, Value Added Tax and Taxes on the Exploration,
Development, extracting, producing, exporting or transporting
of Petroleum and LPG as well as any and all withholding
taxes that might otherwise be imposed on dividends, interest,
technical service fees, patent and trademark royalties, and
similar items. CONTRACTOR shall also be exempted from
any tax on the liquidation of CONTRACTOR, or distributions
of any income to the shareholders of CONTRACTOR, and
from any tax on capital.
(d) The rights and obligations of GANOPE and CONTRACTOR
under, and for the effective term of this Agreement shall be
governed by and in accordance with the provisions of this
Agreement and can only be altered or amended by the
written mutual agreement of the said contracting parties in
the same procedures by which the original Agreement has
been issued .
(e)The contractors and sub-contractors of CONTRACTOR and
Operating Company shall be subject to the provisions of this
Agreement which affect them. Insofar as all regulations which
are duly issued by the GOVERNMENT apply from time to
time and are not in accord with the provisions of this
Agreement, such regulations shall not apply to
CONTRACTOR, Operating Company and their respective
contractors and sub-contractors, as the case may be.
(f) GANOPE, CONTRACTOR, Operating Company and their
respective contractors and sub-contractors shall for the
professional stamp duties, imposts and levies iniposed by
syndical laws with respect to their documents and activities
hereunder.
(g) All the exemptions from the application of the A.R.E. laws or
regulations granted to GANOPE, CONTRACTOR, the
Operating Company, their contractors and sub-contractors
under this
Agreement shall include such laws and
regulations as presently in effect or hereafter amended or
substituted.
ARTICLE XIX
STABILIZATION
In case of changes in existing legislation or regulations
applicable to the conduct of Exploration, Development and
production of Petroleum, which take place after the Effective
Date, and which significantly affect the economic interest of
this Agreement to the detriment of CONTRACTOR or which
imposes on CONTRACTOR an obligation to remit to the
A. R. E. the proceeds from sales of CONTRACTOR'S
Petroleum, CONTRACTOR shall notify GANOPE of the
subject legislative or regulatory measure. In such case, the
Parties shall negotiate possible modifications to this
Agreement designed to restore the economic balance thereof
which existed on the Effective Date.
The Parties shall use their best efforts to agree on
amendments to this Agreement within ninety (90) days from
aforesaid notice.
These amendments to this Agreement shall not in any event
diminish or increase the rights and obligations of
CONTRACTOR as these were agreed on the Effective Date.
Failing agreement between the Parties during the period
referred to above in this Article XIX , the dispute may be
]Bar
F
submitted
to arbitration, as provided in Article XXlV of this
Agreement.
ARTICLE XX
RIGHT OF REQUISITION
(a) In case of national emergency due to war or imminent
expectation of war or internal causes, the GOVERNMENT
may requisition all or part of the production from the Area
obtained hereunder and require Operating Company to
increase such production to the utmost possible maximum.
The GOVERNMENT may also requisition the Oil and/or Gas
field itself and, if necessary, related facilities.
(b) In any such case, such requisition shall not be effected
except after inviting GANOPE and CONTRACTOR or their
representative by registered letter, with acknowledgement of
receipt, to express their views with respect to such
requisition.
(c) The requisition of production shall be effected by Ministerial
Order. Any requisition of an Oil and/or Gas field, or any
related facilities shall be effected by a Presidential Decree
duly notified to GANOPE and CONTRACTOR.
(d) In the event of any requisition as provided above, the
GOVERNMENT shall indemnify in full GANOPE and
CONTRACTOR for the period during which the requisition
is maintained, including:
(I) All damages which result from such requisition; and
(2)
.
F
Full repayment each month for all Petroleum
extracted by the GOVERNMENT less the
royalty share of such production.
However, any damage resulting from enemy attack is not within the
meaning of this paragraph (d). Payment hereunder shall be made to
CONTRACTOR in U.S. Dollars remittable abroad. ;The price paid to
CONTRACTOR for Petroleum taken shall be calculated in
accordance with Article VII (c).
ARTICLE XXI
..
ASSIGNMENT
-
<
*
>
(a) Neither GANOPE nor CONTRACTOR may assign to a
person, firm or corporation, in whole or in part, any of its
rights, privileges, duties or obligations under this Agreement
either directly or indirectly without the written consent of the
Goverrlment and in all cases priority shall be given to
GANOPE if it so desire to obtain the interest intended to be
assigned.
(b) To enable consideration to be given to any request for such
consent, the following conditions must be fulfilled:
(1) The obligations of the assignor deriving from this
Agreement must have been duly fulfilled as of the
date such request is made.
The instrument of assignment must include
provisions stating precisely that the assignee is
bound by all
covenants contained in this
Agreement and any modifications or additions in
writing that up to such time may have been made.
A draft of such instrument of assignment shall be
submitted to GANOPE for review and approval
before being formally executed .
(c) Any assignment, sale, transfer or other such conveyance
niade pursuant to the provisions of this Article XXI shall be
n
7
-*
7
./.
-/'
-.
free of any transfer, capital gains taxes or related taxes,
charges or fees including without limitation, all Income Tax,
Sales Tax, Value Added Tax, Stamp Duty, or other Taxes or
similar payments.
(d)As long as the assignor shall hold any interest under this
Agreement, the assignor together with the assignee shall be
jointly and severally liable for all duties and! obligations of
CONTRACTOR under this Agreement.
BREACH OF AGREEMENT AND POWER TO CANCEL
.
*
-.
-
,
(a) The GOVERNMENT shall have the right to cancel this
Agreement by Order or Presidential-Decree, with respect to
CONTRACTOR, in the following instances:
(1)lf it knowingly has submitted any false statements to the
GOVERNMENT which were of a material consideration
for the execution of this Agreement;
(2)lf it assigns any interest hereunder contrary to the
provisions of Article XXI;
(3) If it is adjudicated bankrupt by a court of competent
jurisdiction;
(4) If it does not comply with any final decision reached as
the result of court proceedings conducted under Article
XXIV(a);
(5) If it intentionally extracts any mineral other than
Petroleum not authorized by this Agreement or without
the authority of the GOVERNMENT, except such
extractions as may be unavoidable as the result of the
operations conducted hereunder in accordance with
accepted petroleum industry practice and which shall
be notified to the GOVERNMENT or its representative
as soon as possible; and
L
,
-,
-
>
(6) If it commits any material breach of this Agreement or
of the provisions of Law No. 66 of 1953, as amended by
Law No. 86 of 1956, which are not contradicted by the
provisions of this Agreement.
Such cancellation shall take place without prejudice to
any rights which may have accrued to the
GOVERNMENT
against
CO.NTRACTOR
in
accordance with the provisions of this Agreement, and,
in the event of such cancellation, CONTRACTOR, shall
have the right to remove froni the Area all its personal
property.
(b) If the GOVERNMENT deems that one of the aforesaid causes
(other than a force majeure cause referred to in Article XXIII)
exists to cancel this Agreement, the GOVERNMENT shall
give CONTRACTOR ninety (90) days written notice personally
served on CONTRACTOR'S General Manager in the legally
official manner and receipt of which is acknowledged by him
or by his legal agents, to remedy and remove such cause; but
if for any reason such service is impossible due to
unnotified change of address, publication in the Official
Journal of the GOVERNMENT of such notice shall be
considered as valid service upon CONTRACTOR. If at the
end of the said ninety (90) day notice period such cause has
not been remedied and removed, this Agreement may be
canceled forthwith by Order or Presidential Decree as
aforesaid; provided however, that if such cause, or the failure
to remedy or remove such cause, results from any act or
omission of one party, cancellation of this Agreement shall be
effective only against that party and not as against any other
party hereto.
ARTICLE XXlll
FORCE MAJEURE
(a) The non-performance or delay in performance by GANOPE
and CON'TRACTOR, or either of them of any obligation under
this Agreement shall be excused if, and to the extent that,
such non-performance or delay is caused by: force majeure.
The period of any such non-performance or delay, together
with such period as may be necessaryfor the restoration of
any damage done during such delay, shall be added to the
time given in this Agreenient for the performance of such
obligation and for the performance of any obligation
dependent thereon and consequently, to the term of this
Agreement, but only with respect to the block or blocks
affected.
(b) "Force Majeure" within the meaning of this Article XXIII, shall
be any order, regulation or direction of the GOVERNMENT of
the ARAB REPUBLIC OF EGYPT, or with respect to
CON-TRACTOR, the Government of England whether
promulgated in the form of a law or otherwise or any act of
God, insurrection, riot, war, strike, and other labor
disturbance, fires, floods or any cause not due to the fault or
negligence of GANOPE and CONTRACTOR or either of
them, whether or not similar to the foregoing, provided that
any such cause is beyond the reasonable control of GANOPE
and CONTRACTOR, or either of them.
(c) Without prejudice to the above and except as may be
otherwise provided herein, the GOVERNMENT shall incur no
responsibility whatsoever to GANOPE and CONTRACTOR, or
either of them for any damages, restrictions or loss arising in
consequence of such case of force majeure except a force
majeure caused by the order, regulations or direction of the
GOVERNMENT of the ARAB REPUBLIC OF EGYPT.
(d)If the force majeure event occurs during the initial Exploration
period or any extension thereof and continues in effect for a
period of six (6) months CONTRACTOR shall have the option
upon ninety (90) days prior written notice to GANOPE to
terminate its obligations hereunder without further liability of
any kind.
ARTICLE XXlV
DISPUTES AND ARBITRATION,
(a) Any dispute, controversy or claim arising. out of or relating to
this Agreement or the breach, terminqtion or invalidity thereof,
between the GOVERNMENT and the parties shall be
referred to the jurisdiction of the appropriate A. R. E. Courts
and shall be finally settled by such Courts.
(b) Any dispute, controversy or claim arising out of or relating to
this Agreement, or breach, termination or invalidity thereof
between GANOPE and CONTRACTOR shall be settled by
arbitration in accordance with the Arbitration Rules of the
Cairo
Regional Center for International Commercial
Arbitration (the Center) in effect on the date of this
Agreement. The award of the arbitrators shall be final and
binding on the parties.
(c) The number of arbitrators shall be three (3).
(d) Each party shall appoint one arbitrator. If, within thirty (30)
days after receipt of the claimant's notification of the
appointment of an arbitrator the respondent has not notified
the claimant in writing of the name of the arbitrator he
appoints, the claimant may request the Center to appoint the
second arbitrator.
(e) The two arbitrators thus appointed shall choose the third
arbitrator who will act as the presiding arbitrator of the
tribunal. If within thirty (30) days after the appointment of the
< >
-,
-
-
2
second arbitrator, the two arbitrators have not agreed upon
the choice of the presiding arbitrator, then either party may
request the Secretary General of the Permanent Court of
Arbitration at the Hague to designate the appointing
authority. Such appointing authority shall appoint the
presiding arbitrator in the same way as a sole arbitrator
would be appointed under Article 6.3 of the UNCITRAL
Arbitration Rules. Such presiding arbitrator' shall be a
person of a nationality other than the A.R.E. or England
and of a country which has
diploniatic relations with
both A.R.E. and England and who shall have no economic
interest in the Petroleum business of the signatories hereto.
(f) Unless otherwise agreed by the parties to the arbitration, the
arbitration, including the making of the award, shall take place
in Cairo, A.R.E.
(g) The decision of a majority of the arbitrators shall be final and
binding upon the Parties and the arbitral award rendered shall
be final and conclusive. Judgment on the arbitral award
rendered, may be entered in any court having Jurisdiction or
application may be made in such court for a judicial
acceptance of the award and for enforcement, as the case
may be.
(h) Egyptian Law shall apply to the dispute except that in the
event of any conflict between Egyptian Laws and this
Agreement, the provisions of this Agreement (including the
arbitration provision) shall prevail. The arbitration shall be
conducted in both English and Arabic languages.
(i)
GANOPE and CONTRACTOR agree that if, for whatever
reason, arbitration in accordance with the above procedure
cannot take place, or is likely to take place under
circumstances for CONTRACTOR which could prejudice
CONTRACTOR'S right to fair arbitration, all disputes,
controversies or claims arising out of or relating to this
Agreement or the breach, termination or invalidity thereof
shall be settled by ad hoc arbitration in accordance with the
les in effect on the Effective Date.
UNCITRAm
ARTICLE XXV
STATUS OF PARTIES
(a) The rights, duties, obligations and liabilities jn respect of
GANOPE and CONTRACTOR hereunder shall'be several and
not joint or collective, it being understood that this Agreement
shall not be construed as constituting an association or
corporation or partnership.
(b) CONTRACTOR shall be subject to the laws of the place
where it is incorporated regarding its legal status or creation,
organization, charter and by-laws, shareholding, and
ownership.
CONTRACTOR'S shares of capital which are entirely held
abroad shall not be negotiable in the A.R.E. and shall not be
offered for public subscl-iption nor shall be subject to the
stamp tax on capital shares nor any tax or duty in the A.R.E.
CON'TRACTOR shall be exempted from the application of
Law No. 159 of 1981 as amended.
(c) In case CONTRACTOR consists of more than one member,
all CONTRACTOR Members shall be joir~tlyand severally
liable for the performance of the obligations of
CONTRACTOR under this Agreement.
ARTICLE XXVl
LOCAL CONTRACTORS AND
LOCALLY MANUFACTURED MATERIAL
CONTRACTOR or Operating Company, as the case may be, and
their contractors shall:
75
(a)Give priority to local contractors and sub-contractors, including
GANOPE's Affiliated Compar~iesas long as their performance
is comparable with international performance and the prices of
their services are not higher than the prices of other
contractors and sub-contractors by more than ten percent
(I
0%).
(b)Give preference to locally manufactured material, equipment,
machinery and consumables so long as their quality and time
of delivery are comparable to internationally available
material, equipment, machinery and consumables. However,
such material, equipment, machinery and consumables may
be imported for operations conducted hereunder if the local
price of such items at CONTRACTOR'S or Operating
Company's operating base in A.R.E. is more than ten percent
(10%) higher than the price of such imported items before
customs duties, but after transportation and insurance costs
have been added.
ARABIC TEXT
The Arabic version of this Agreement $hall, before the courts of
A.R.E. be referred to in c~ngtrulngorinterpreting this Agreement;
provided however , that in any erbltration pursuant to Article XXlV
herein above between GANOPE and CONTRACTOR the
English and Arabic versions .sh@11both be referred to as having
equal force in c~nstruingor interpreting the Agreement.
ARTICLE XXVlll
GENERAL
-
\
.,
The headings or titles to each of the Articles to this Agreement are
solely for the convenience of the parties hereto and shall not be used
with respect to the interpretation of said Articles.
7!
ARTICLE XXlX
APPROVAL OF THE GOVERNMENT
This Agreenient shall not be binding upon any of the parties hereto
unless and until a law is issued by the competent authorities of the
A.R.E. authorizing the Minister of Petroleum to sign this Agreement
and giving this Agreement full force and effect of law notwithstanding
any countervailing Governmental enactment , and the Agreement is
signed by the GOVERNMENT, GANOPE, and CONTRACTOR
6 b 2 3 ~ k
GANOUB EL-WADI HOLDING PETROLEUM COMPANY
JL-dp '
BY: -
I
-
ANNEX "A"
CONCESSION AGREEMENT
BETWEEN
THE ARAB REPUBLIC OF EGYPT
AND
GANOUB EL-WADI HOLDING PETROLEUM COMPANY
AND
QUADRA EGYPT LIMITED
IN
NUQRA
AREA
A.R.E.
Boundary Description of the concession Area
Annex "6" is an illustrative map scaled 1:2,000,000 showing the Area
covered and affected by this Agreement..
The Area measures approximately 30027 squared Kilometers East of
Nile River. It is composed of all or part of 1135 Exploration Blocks
defined on a 3min. by 3min. grid . Using Latitude 26' North and
Longitude 34' East as reference lines as shown in Annex B .
It is to be noted that the delineation lines of the individual Exploration
Blocks in Annex " B " are intended to be only illustrative and
provisional and may not show accurately their true position in relation
to existing monuments and geographical features . The Area is
bounded by a group of straight lines .
Coordinates of the corner point of the Area are given in the following
table which forms an integral part of Annex "A"
BOUNDARY COORDINATES
OF NUQRA AREA BLOCK 1
GANOUB EL WADI
IN A.R.E.
i
Point
*I
2
3
4
5
6
7
8
9
10
11
12
13
* I4
*
*
Latitude
North
26' 00' 00"
26' 00' 00"
24' 35' 00"
24' 35' 00"
24' 27' 00"
24' 27' 00"
23' 45' 00''
23' 45' 00"
23' 15' 00"
23' 15' 00"
23' 52' 00"
23' 52' 00"
23' 58' 00"
23' 58' 00"
Longitude
East
App. 32' 48'
33' 40'
33' 40'
33' 47'
33' 47'
34' 17'
34' 17'
34' 30'
34' 30'
33' 40'
33' 40'
33' 33'
33' 33'
App. 32' 55'
Due
00"
00"
00"
00"
00"
00"
00"
00"
00"
00"
00"
00"
00"
00"
East to Point 2
South to Point 3
East to Point 4
South to Point 5
East to Point 6
South to Point 7
East to Point 8
South to Point 9
West to Point 10
North to Point 11
West to Point 12
North to Point 13
West to Point 14
Point 1 is Located at the intersection of Lat 26 0 00' 00" with the
Nile River east bank at the following Approximate coordinates Lat
26 O 00' 00" N Long 32 O 48' 00" E
Point 14 is Located at the intersection of Lat 23O 58' 00" with the
Naser Lake east bank at the following Approximate coordinates
Lat 23O 58' 00" N Long 32O 55' 00" E
ANNEX "6"
Map of Concession Agreement
Nuqra Area Block- 1
Ganoub El Wadi - A.R.E
33'00'
ANNEX "B"
CONCESSION AGREEMENT
Between
A.R.E. And Ganoub EL Wadi Holding
Petroleum Company
AND
QUADRA EGYPT LIMITED
rN
Nuqra Area Block-1 Ganoub El Wadi
A.R.E
Scale 1 :2,000,000
ANNEX "C"
LETTER OF GUARANTEE
Letter of Guarantee No. --- (Cairo ------------ 200--), GANOUB ELWADI HOLDING PETROLEUM COMPANY.
Gentlemen,
i
The undersigned, National Bank of Egypt as Guarantor, hereby
guarantees to GANOUB EL-WADI HOLDING
PETROLEUM
COMPANY( hereinafter referred to as " GANOPE " ) to the limit
of two millions ($ 2,000,000 ) U.S. Dollars , the performance by
"QUADRA EGYPT LIMITED "
(hereinafter referred to as
"CONTRACTOR") of its obligations required for Exploration
operations to spend a minimum of two millions ($ 2,000,000 ) U.S.
Dollars during the initial two (2) years of the Exploration period
under Article IV of that certain Concession Agreement (hereinafter
referred to as the "Agreement") covering that Area described in
Annexes "A" and "6" of said Agreement, by and between the Arab
Republic of Egypt (hereinafter referred to as "A.R.En), GANOPE and
CONTRACTOR, dated ------- .
It is understood that this Guarantee and the liability of the Guarantor
hereunder shall be reduced quarterly, during the period of
expenditure of said two millions ( $ 2,000,000) U.S. Dollars by the
amount of money expended by CONTRACTOR for such Exploration
operations during each such quarter. Each such reduction shall be
established by the joint written statement of CONTRACTOR and
GANOPE.
In the event of a claim by GANOPE of non-performance or surrender
of the Agreement on the part of CONTRACTOR prior to fulfillment of
said minimum expenditure obligations under Article IV of the
Agreement, there shall be no liability on the undersigned Guarantor
for payment to GANOPE unless and until such liability has been
established by written statement of GANOPE setting forth the
amount due under the Agreement.
(1) This Letter of Guarantee will become available only provided
that the Guarantor will have been informed in writing by
CONTRACTOR and GANOPE that the Agreement between
CONTRACTOR, A.R.E. and GANOPE has become effective
according to its terms, and said Guarantee shall become
effective on the Effective Date of said Agreement.
(2) This Letter of Guarantee shall in any event automatically expire:
( ) years and six (6) months after
the date it becomes effective, or
(b) At such time as the total of the amounts
shown on
quarterly joint statements of
GANOPE and CONTRACTOR equals or
exceeds the amount of said minimum
expenditure obligation, whichever is earlier.
(a)
(3) Consequently, any claim, in respect thereof should be made
to the Guarantor prior to either of said expiration dates at the
latest accompanied by GANOPE's written statement, setting
forth the amount of under-expenditure by CONTRACTOR to
the effect that:
(a) CONTRACTOR has failed to perform its expenditure
obligations referred to in this Guarantee, and
(b) CONTRACTOR has failed to pay the expenditure
deficiency to GANOPE.
Please return to us this Letter of Guarantee in the event it does not
become effective, or upon the expiry date.
Yours Faithfully,
Manager : ...................................
ANNEX "DM
ANNEX "D"
CHARTER OF OPERATING COMPANY
ARTICLE I
A joint stock company having the nationality of the ARAB REPUBLIC
OF EGYPT shall be formed with the authorization of the
GOVERNMENT in accordance with the provisions of this Agreement
referred to below and of this Charter.
The Corr~panyshall be subject to all laws and regulations in force in
the A.R.E. to the extent that such laws and regulations are not
inconsistent with the provisions of this Charter and the Agreement
referred to below.
ARTICLE II
'The name of the Operating Company shall be mutually agreed upon
between GANOPE and CONTRACTOR on the date of the
Commercial Discovery and shall be subject to the approval of the
Minister of Petroleum.
ARTICLE Ill
The Head Office of Operating Company shall be in the A.R.E. in
Cairo.
ARTICLE IV
The object of Operating Company is to act as the agency through
which GANOPE and CONTRACTOR, carry out and conduct 'the
Development operations required in accordance with the provisions
by and
of the Agreement signed on the ------ day of
between the ARAB REPUBLIC OF EGYPT, GANOUB EL-WADI
HOLDING PETROLEUM COMPANY and CONTRACTOR covering
Petroleum operations in Nuqra Area Block-I , described therein.
-me------------
Operating Company shall be the agency to carry out and conduct
exploration operations after the date of Commercial Discovery
pursuant to Work Programs and Budgets approved in accordance
with the Agreement.
Operating Company shall keep account of all costs, expenses and
expenditures for such operations under the termsiof the Agreement
and Annex "E" thereto.
Operating Conipany shall not engage in any business or undertake
any activity beyond the performance of said operations unless
otherwise agreed upon by GANOPE and CONTRACTOR.
ARTICLE V
The authorized capital of Operating Company is twenty thousand
Egyptian Poundsdivided into five thousand shares of common stock
with a value of four Egyptian Pounds per share having equal voting
rights, fully paid and non-assessable.
GANOPE and CONTRACTOR shall each pay for, hold and own,
throughout the life of Operating Company, one half (112) of the capital
stock of Operating Company provided that only in the event that
either party should transfer or assign the whole or any percentage of
its ownership interest in the entirety of -the Agreement, may such
transferring or assigning party transfer or assign any of the capital
stock of Operating Company and, in that event, such transferring or
assigning party (and its successors
and assignees) must
transfer and assign a stock interest in Operating Company equal to
the transferred or assigned whole or percentage of its ownership
interest in the entirety of the said Agreement.
ARTICLE VI
Operating Company shall not own any right, title, interest or estate in
or under the Agreement or any Development Lease created
thereunder or in any of the Petroleum produced from any Exploration
Block or Development Lease thereunder or in any of the assets,
equipment or other property obtained or used in connection
therewith, and shall not be obligated as a principal for the financing
or performance of any of the duties or obligations of either GANOPE
or CONTRACTOR under the Agreement. Operating Company shall
not make any profit from any source whatsoever.
ARTICLE VII
Operating Company shall be no more than an agent for GANOPE
and CONTRACTOR. Whenever it is indicated herein that Operating
Company shall decide, take action or make a proposal and the like, it
is understood that such decision or judgment is the result of the
decision or judgment of GANOPE, CONTRACTOR or GANOPE and
CONTRACTOR, as may be required by the Agreement.
ARTICLE VIII
Operating Company shall have a Board of Directors consisting of
eight (8) members, four (4) of whom shall be designated by GANOPE
and the other four (4) by CONTRACTOR. The Chairman shall be
designated by GANOPE and shall also be a Managing Director.
CON-TRACTOR shall designate the General Manager who shall also
be a Managing Director.
ARTICLE IX
Meetings of the Board of Directors shall be valid if a majority of the
Directors are present and any decision taken at such meetings must
have the affirmative vote of five (5) or more of the Directors; provided,
however, that any Director may be represented and vote by proxy
held by another Director.
ARTICLE X
General meetings of the Shareholders shall be valid if a majority of
the capital stock of Operating Company is represented thereat. Any
decision taken at such meetings must have the affirmative vote of
Shareholders owning or representing a majority of the capital stock.
ARTICLE XI
-<
..,
The Board of Directors shall approve the regulations covering the
terms and conditions of employment of the personnel of Operating
Company employed directly by Operating Company and not assigned
thereto by CONTRACTOR and GANOPE.
The Board shall, in due course, draw up the BY-Laws of Operating
Company, and such By-Laws shall be effective upon being approved
by a General Meeting of the Shareholders, in accordance with the
provisions of Article X hereof.
ARTICLE XI1
Operating Company shall come into existence within thirty (30) days
after the date of Commercial Oil Discovery or within thirty (30) days
after signature of a Gas Sales Agreement or commencement of a
scheme to dispose of Gas, as provided for in the Agreement (unless
otherwise agreed by GANOPE and CONTRACTOR).
The duration of Operating Company shall be for a period equal to the
duration of the said Agreement, including any renewal thereof.
The Operating Company shall be wound up if the Agreement
to above is terminated for any reason as provided for therein.
GANOUB EL-WADI HOLDING PETROLEUM COMPANY
The Board of Directors shall approve the regulations covering the
terms and conditions of employment of the personnel of Operating
Company employed directly by Operating Company and not assigned
thereto by CONTRACTOR and GANOPE.
of sOperating
The Board shall, in due course, draw up the ~ ~ - i a w
Company, and such By-Laws shall be effective upon being approved
by a General Meeting of the Shareholders, in accordance with the
provisions of Article X hereof.
ARTICLE XI1
Operating Company shall come into existence within thirty (30) days
after the date of Commercial Oil Discovery or within thirty (30) days
after signature of a Gas Sales Agreement or commencement of a
scheme to dispose of Gas, as provided for in theAgreement (unless
otherwise agreed by GANOPE and CONTRACTOR).
The duration of Operating Company shall be for a period equal to the
duration of the said Agreement, including any renewal thereof.
The Operating Company shall be wound up if the Agreement referred
to above is terminated for any reason as provided for therein.
QUADRA EGYPT LIMITED
GANOUB EL-WADI HOLDING PETROLEUM COMPANY
By
:---.................................................
ANNEX "EM
ACCOUNTING PROCEDURE
ARTICLE I
!
GENERAL PROVISIONS
(a)
Definitions:
The definitions contained in Article I of the Agreement shall apply
to this Accounting Procedure and-have the same meanings.
(b)
Statements of activity:
( I ) CONTRACTOR shall, pursuant to Article IV of this
Agreement, and until the coming into existence of the
Operating Company - in accordance with Article VI of the
Agreement - render to GANOPE within thirty (30) days of
the end of each calendar quarter a Statement of Exploration
Activity reflecting all charges and credits related to 'the
Exploration Operations for that quarter summarized by
appropriate classifications indicative of the nature thereof.
(2) Following its coming into existence, Operating Conipany
shall render to GANOPE and CONTRACTOR within fifteen
(15) days of the end of each calendar quarter a Statement
of Development and Exploration Activity reflecting all
charges and credits related to the Development and
Exploration operations for that quarter summarized by
appropriate classifications indicative of the nature thereof,
except that items of controllable material and unusual
charges and credits shall be detailed.
(c)
Adjustments and Audits:
( I ) Each quarterly Statement of Exploration Activity pursuant
to Article I (b) (1) of this Annex shall conclusively be
presumed to be true and correct after three (3) months
following the receipt of each Statement by GANOPE unless
within the said three (3) months GANOPE takes written
exception thereto pursuant to Article IV (f) of the
Agreement. During the said three (3) month period
supporting documents will be available for inspection by
GANOPE during all working hours.
!
CONTRACTOR will have the
same audit rights on
Operating Company Statements as GANOPE under this
sub-paragraph.
(2) All Statements of Development and Exploration Activity for
any calendar quarter pursuant to Article I (b) (2) of this
Annex, shall conclusively be presumed to be true and
correct three (3) months following the receipt of such
Statement, unless within the said three (3) months period
GANOPE or CONTRACTOR takes written exception
thereto. Pending expiration of said three (3) months
GANOPE or CONTRACTOR or both of them shall have the
right to audit Operating Company accounts, records and
supporting documents for such quarter in the same manner
as provided in Article IV (f) of the Agreement.
(d) C,urrency Exchange:
CONTRACTOR'S books for Exploration and Operating
Company's books for Development and Exploration, if any,
shall be kept in the A.R.E. in U.S. Dollars. All U.S. Dollars
expenditures shall be charged in the amount expended. All
Egyptian Pounds expenditures shall be converted to U.S.
Dollars at the applicable rate of exchange issued by the
Central Bank of Egypt on the first day of the month in which
expenditures are recorded, and all other non-U.S. Dollars
expenditures shall be translated to U.S. Dollars at the
buying rate of exchange for such currency as quoted by
National Westminster Bank Limited, London at 10.30 a.m.
G.M.T., on the first day of the month in which expenditures
are recorded. A record shall be kept of the exchange rates
used in translating Egyptian Pounds or other non-U.S
Dollars expenditures to U.S. Dollars.
(e)
Precedence of Documents:
In the event of any inconsistency or conflict.!between the
provisions of this Accounting Procedure and the provisions
of the Agreement treating the same subject differently, then
the provisions of the Agreement shall prevail.
(f)
Revision of Accounting Procedure:
By
mutual
agreement
between
GANOPE
and
CONTRACTOR, this Accounting Procedure may be revised
time in the light of future
in writing from time to
arrangements.
(g)
No Charge for lnterest on Investment:
lnterest on investment or any bank fees, charges or
commissions related to any bank guarantees shall not at
any time be charged as recoverable costs under the
Agreement.
ARTICLE II
COSTS, EXPENSES AND EXPENDITURES
Subject to the provisions of the Agreement, CONTRACTOR shall
alone bear and, directly or tl-trough Operating Company, pay the
following costs and expenses, which costs and expenses shall be
classified and allocated to the activities according to sound and
generally accepted accounting principles and treated and recovered
in accordance with Article VII of this Agreement:
(a)
Surface Rights:
All direct cost attributable to the acquisition, renewal or
relinquishment of surface rights acquired and maintained in
force for the Area.
(b)
Labor and Related Costs:
(1) Salaries and Wages of CONTRACTOR'S or Operating
Company's employees, as the case may be, directly
engaged in the various activities under the Agreement
including salaries and wages paid to geologists and other
employees who are temporarily assigned to and employed
in such activities. Such salaries and wages to be certified
by a certified public accounting firm.
Reasonable revisions of such salaries and wages shall be
effected to take into account changes in CONTRACTOR'S
policies and amendments of laws applicable to salaries. For
the purpose of this Article II (b) and Article II (c), salaries
and wages shall mean the assessable amounts for A.R.E.
Income Taxes, including the salaries during vacations and
sick leaves, but excluding all the amounts of the other items
covered by the percentage fixed under (2) below.
(2) For expatriate employees permanently assigned to Egypt:
1.
All allowances applicable to salaries and wages;
2.
Cost of established plans; and
3. All travel and relocation costs of such
expatriate employees and their
families
to
and from
the
employee's country or point of
origin at the time ofemployment, at
the time of separation, or as a
result of transfer from one location
to another and for vacation
(transportation costs for employees
and their farr~ilies,transferring from
the A.R.E. to another location
other than their country of origin
shall not be charged to A.R.E.
Operations).
I
Costs under this Article II ( b ) ( 2 ) shall be deemed to be equal
to fourty seven percent (47%) of basic salaries and wages paid for
such expatriate persor~nelincluding those paid during vacations and
sick leaves as established in CONTRACTOR'S international policies,
chargeable under Article II (b) (I), Article 11 (i), Article II (k) (1) and
Article II (k)(3) of this Annex.
However, salaries and wages during vacations, sick leaves and
disability are covered by the foregoing percentage. The percentage
outlined above shall be deemed to reflect CONTRACTOR'S actual
costs as of the Effective Date with regard to the following benefits,
allowances and costs :I.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Housing and Utilities Allowance.
Commodities and Services Allowance.
Special Rental Allowance .
Vacation Transportation Allowance.
Vacation Travel Expense Allowance.
Vacation Excess Baggage Allowance.
Education Allowances (Children of
Expatriate Employees).
Hypothetical U.S. Tax Offset (which
results in a
reduction of the
chargeable percentage).
Storage of Personal Effects.
Housing Refurbishment Expense.
Property Management Service Fees.
Recreation Allowance.
Retirement Plan.
Group Life Insurance.
Group Medical Insurance.
Sickness and Disability.
Vacation Plans Paid (excluding
Allowable
Vacation
Travel
Expenses).
i
Savings Plan.
Educational Assistance.
Military Service Allowance.
F.I.C.A.
Workman's Corr~pensation.
Federal and State Unemployment Insurance.
Personnel Transfer Expense.
National Insurance.
Any other Costs, Allowances and
Benefits of a like
nature as
established in CONTRACTOR'S
International Policies.
$
The percentages outlined above shall be reviewed at
intervals of three (3) years from the Effective Date and at
such time CONTRACTOR and GANOPE will agree on
new percentages to be used under this paragraph.
Revisions of the percentages will take into consideration variances
in costs and changes in CONTRACTOR'S international policies which
change or exclude any of the above allowances and benefits.
The revised percentages will reflect as nearly as possible
CONTRACTOR'S actual costs of all its established allowances and
benefits and of personnel transfers.
(3) For expatriate employees temporarily assigned to Egypt
all allowances, costs of established plans and all travel
relocation costs for such expatriates as paid in
accordance with
CONTRACTOR'S international
policies. Such costs shall not include any administrative
overhead other than what is mentioned in Article II (k)
(2) of this Annex.
(4) Costs of expenditure or conatributionsmade pursuant to
law or assessment imposed by Governmental authority
which are applicable to labor cost of salaries and wages
er
II (b) (I), Article II (b) (2), Article
as provided ~ ~ n dArticle
II (i), Article II (k) (1) and Article II (k) (3) of this Annex.
(c) Benefits, allowances and related costs of national
employees :
Bonuses, overtime, customary allowances and benefits on
a basis similar to that prevailing for oil compar~ies
operating in the A.R.E., all as chargeable under Article II
(b) (I), Article II (i), Article II (k) ( I ) and Article II (k) (3) of
this Annex. Severance pay will be charged at a fixed rate
applied to payrolls which will equal an amount equivalent
to the maximum liability for severance payment as
required under the A.R.E. Labor Law.
(d)
Material
Material, equipment and supplies purchased or furnished as
such by CONTRACTOR or Operating Company.
(1) Purchases:
Material, equipment and supplies purchased shall be at
the price paid by CONTRACTOR or Operating
Corr~panyplus any related cost and after deduction of
all discounts actudlly received.
(2) Material Furnished by CONTRACTOR:
Material required for operations shall be purchased
directly
whenever
practicable,
except
that
CONTRACTOR may furnish such material from
CONTRACTOR'S or CONTRACTOR'S
Affiliated
Companies stocks outside the A.R.E. under the
following conditions:
1.
New Material (Condition "A")
New Material transferred from
Contractor's or
Contractor's
Affiliated Companies warehouse or
other properties shall be priced at
cost, provided that the cost of
material supplied is not higher than,
international prices for material ofsimilar quality supplied on similar
terms, prevailing at the time such
material was supplied.
2.
Used Material (Conditions "B" and "C")
a)Materiall which is in sound and
serviceable condition and is
suitable
for
reuse
without
reconditior~ingshall be classed as
Condition "B" and priced at seventy
- five percent (75%) of the price of
new material.
b) Material which cannot be classified
as Condition "B" but which is
serviceable for original function but
substantially not suitable for
reconditioning, shall be classed as
Condition "C" and priced at fifty
percent (50%) of the price of new
material.
c) Material which cannot be classified
as Condition "B" or Condition "C"
shall be priced at a value
commensurate with its use.
d)Tanks,
buildings
and
other
equipment involving erection costs
shall be charged at applicable
percentage of knocked - down new
price.
(3)
Warranty of Materials Furnished by CONTRACTOR
CONTRACTOR does not warrant the material furnished beyond
or back of the dealer's or manufacturer's Guarantee; and in case
of defective material, credit shall not be recorded until adjustment
has been received by CONTRACTOR from manufacturers or their
agents.
6
(e)
Transportation and Employee Relocation Costs:
(1) Transportation of eql-ripment, materials and supplies
necessary for the conduct of CONTRACTOR'S or Operating
Company's activities.
(2) Business travel and transportation expenses to the extent
covered by established policies of CONTRACTOR or with
regard to expatriate and national employees, as incurred
and paid by, or for, employees in the conduct of
CONTRACTOR'Sor Operating Company's business.
(3) Employees transportation and relocation costs for national
employees to the extent covered by established policies.
(f)
Services:
(1) Outside services: The costs of contracts for consultants,
services and utilities procured from third parties.
(2) Cost of services performed by GANOPE or by
CONTRACTOR, or their Affiliated Companies in facilities
inside or outside the A.R.E. Regular, recurring, routine
services, such as interpreting magnetic tapes and/or other
analyses, shall be performed and charged by GANOPE
and/or CONTRACTOR or their Affiliated Companies at an
agreed contracted price. Major projects involving
engineering and design services shall be performed by
GANOPE and/or CONTRACTOR or
their Affiliated
Companies at a negotiated contract amount.
(3) Use of GANOPE's, CONTRACTOR'S or their Affiliated
Companies' wholly owned equipment shall be charged at
a rental rate commensurate with the cost of ownership
and operation, but not in excess of competitive rates
currently prevailing in the A.R.E.
I
(4) CONTRACTOR'S and CONTRACTOR'S Affiliated
Companies' rates shall not include any administrative or
overhead costs other than what is mentioned in Article II
(k) (2).
(g)
Damages and Losses:
All costs or expenses, necessary to replace or repair damages
or losses incurred by fire, flood, storm, theft, accident or any
other cause not controllable by CONTRACTOR or Operating
Company through the exercise of reasonable diligence.
CONTRACTOR or Operating Company shall furnish GANOPE
and CON'TRACTOR written notice of damages or losses
incurred in excess of ten thousand ($A0,000) U.S. Dollars per
occurrence, as soon as practicable after report of the same has
been received by CONTRACTOR or Operating Company.
(h)
Insl.~ranceand Claims:
The cost of any public liability, property damage and other
insurance against liabilities of CONTRACTOR, Operating
Company and/or the parties or any of them to their
employees and/or outsiders as may be required by the
laws, rules and regulations of the GOVERNMENT or as the
parties may agree upon. The proceeds of any such
insurance or claim collected, less the actual cost of making
a claim, shall be credited against operations.
If no insurance is carried for a particular risk, in accordance
with good international oil field practices, all related actual
expenditures incurred and paid by CONTRACTOR or
Operating Company in settlement of any and all losses,
claims, damages, judgments and any other expenses,
including legal services.
(i)
Indirect Expenses:
Canip overhead and fac'ilities such as shore base,
warehouses, water systems, road systems, salaries and
expenses of field
supervisory personnel, field clerks,
assistants, and other general employees indirectly serving
the Area.
(j)
Legal Expenses:
All costs and expenses of litigation, or legal services
othewise necessary or expedient for the protection of the
Area, including attorney's fees and expenses as hereinafter
provided, together with all judgments obtained against the
parties or any of them on account of the operations under
the Agreement, and actual expenses incurred by any party
or parties hereto in securing evidence for the purpose of
defending against any action or claim prosecuted or urged
against the operations or the subject matter of the
Agreement. In the event actions or claims affecting the
interests hereunder shall be handled by the legal staff of one
or more of the parties hereto, a charge commensurate with
cost of providing and furnishing such services may be made
to operations.
(k)
Administrative Overhead and General Expenses:
(1)While CON-TRACTOR is conducting Exploration
operations, the cost of staffing and maintaining
CONTRACTOR'S head office in the A.R.E. and/or other
offices established in the A.R.E. as appropriate other than
field offices which will be charged as provided in Article II
(i), and excepting salaries of employees of CONTRACTOR
who are temporarily assigned to and directly serving on the
Area, which will be charged as provided in Article II (b) of
this Annex.
(2) CONTRACTOR'S administrative overhead outside the A. R. E.
applicable to Exploration operations in the A.R.E. shall be
charged each month at the rate of five percent (5%) of total
Exploration expenditures, provided that i o administrative
overhead of CONTRACTOR outside the A.R.E. applicable to
A.R.E. Exploration operations will be charged for Exploration
operations conducted by Operating Conlpany. No other direct
charges as such for CONTRACTOR'S administrative overhead
outside the A.R.E. will be applied against the Exploration
obligations. Exarr~plesof the type of costs CONTRACTOR is
incurring and charging hereunder due to activities under this
Agreement and covered by said percentage are:
1. Executive - Time of executive officers.
2. Treasury - Financial and exchange problems.
3. Purchasing - Procuring materials, equipment and supplies.
4. Exploration and Production-Directing, advising and controlling
the entire project.
5. Other departments such as legal, comptroller and engineering
which contribute time, knowledge and experience to the
operations.
The foregoing does not preclude charging for direct service
under Article II (f) (2) of this Annex.
(3)While Operating Company is conducting operations,
Operating Company's personnel engaged in general clerical
and office work, supervisors and officers whose time is
generally spent in the main office and not the field, and all
employees generally considered as
general and
administrative and not charged to other types of expense
will be charged to operations. Such expenses shall be
allocated each month between Exploration and
Development operations according to sound and practicable
accounting methods.
..
- ,
(I)
All taxes, duties or levies paid in the A.R.E. by
CONTRACTOR or Operating Company with respect
to this Agreement other than those covered by Article Ill
(g) (1) of the Agreement.
.,
.,
-
Taxes:
(m) Continuing CONTRACTOR Costs:
i
.
Costs of CONTRACTOR activities required under the
Agreement and incurred exclusively in the A.R.E. after
Operating Company is formed. No sales expenses incurred
outside or inside the A.R.E. may be recovered as a cost.
(n)
Other Expenditures:
Any costs, expenses or expenditures, other than those
which are covered and dealt with by the foregoing
provisions of this Article II, incurred by CONTRACTOR or
Operating Company under approved Work Programs and
Budgets.
ARTICLE Ill
INVENTORIES
(a)
Periodic Inventories, Notice and Representation:
At reasonable intervals as agreed upon by GANOPE and
CONTRACTOR inventories shall be taken by Operating
Company of the operations materials, which shall include all
such materials, physical assets and construction projects.
Written notice of intention to take inventory shall be given
by Operating Company to GANOPE and CONTRACTOR at
least thirty (30) days before any inventory is to begin so that
GANOPE and CON-TRACTOR may be represented when
any inventory is taken. Failure of GANOPE and/or
CONTRACTOR to be represented at an inventory shall bind
them to accept the inventory taken by Operating Company,
who shall in that event furnish the party not represented
with a copy #thereof.
(b)
Reconciliation and Adjustment of Inventories:
Reconciliation of inventory shall be made
by
CONTRACTOR and GANOPE, and a list of overages and
shortages shall be jointly
determined by Operating
Company and CONTRACTOR and GANOPE,and the
inventory adjusted by Operating Company.
ARTICLE IV
COST RECOVERY
(a) Statements of Recovery of Costs and of Cost Recovery
Petroleum:
CON-TRACTOR shall, pursuant to Article VII of the
Agreement, render to GANOPE as prorr~ptlyas practicable
but not later than fifteen (15) days after receipt from
Operating Company of the Statements for Development
and Exploration Activity for the
calendar quarter a
Statement for that quarter showing:
1. Recoverable costs carried forward from the previous
quarter, if any.
2. Recoverable costs incurred and paid during the
quarter.
3. Total recoverable costs for the quarter (1) + (2).
4. Value of Cost Recovery Petroleum taken and
separately disposed of by CONTRACTOR for the
quarter.
5. Amount of costs recovered for the quarter.
6. Amount of recoverable costs carried into the
succeeding quarter, if any.
7. Excess, if any, of the value of Cost Recovery
Petroleum taken and separately disposed of by
CONTRACTOR over costs recovered for the quarter.
(b)
Payments:
If such Statenlent shows an amount due GANOPE,
payment of that amount shall be made in U.S. Dollars by
CONTRACTOR with the rendition of such Statement. If
CONTRACTOR fails to make any such bayment to
GANOPE on the date when such payment is due, then
CONTRACTOR shall pay interest of two and one half
percent (2.5%)
per annum higher than the London
Interbank Borrowing Offered Rate (LIBOR) for three
(3) months U.S. Dollars deposits prevailing on the date
such interest is calculated. Such interest payment shall
not be recoverable.
(c)
Settlement of Excess Cost Recovery Petroleum:
GANOPE has the right to take its entitlement of Excess
Cost Recovery Petroleum under Article VII (a) (2) of the
Agreement in kind during the said quarter . A settlement
shall be required with the rendition of such Statements in
case CONTRACTOR has taken more than its own
entitlement of such Excess Cost Recovery Petroleum.
(d)
Audit Right:
GANOPE shall have a period of twelve (12) months from
receipt of any Statement under this Article IV in which to
audit and
raise objection to any such Statement.
GANOPE and CONTRACTOR shall agree on any
required adjustments. Supporting documents
and
accounts will be available to GANOPE during said twelve
(12) months period.
ARTICLE V
CONTROL AND MAJOR ACCOUNTS
(a)
Exploration Obligation Control Accounts:
CONTRACTOR will establish an Exploration Obligation
Control Account and an offsetting contra accoint to control
therein
the total amount of Exploration expenditures
reported on Statements of activity prepared per Article I (b)
(1) of this Annex, less any reductions agreed to by
GANOPE and CONTRACTOR following written exceptions
taken by a non-operator pursuant to Article I (c) (1) of this
Annex, in order to determine when minimum Exploration
obligations have been met.
(b)
Cost Recovery Control Account:
CONTRACTOR will establish a Cost Recovery Control
Account and an off-setting contra account to control
therein the amount of cost remaining to be recovered, if
any, the amount of cost recovered and the value of
Excess Cost Recovery Petroleum, if any.
(c)
Major Accounts:
For the purpose of classifying costs, expenses and
expenditures for Cost Recovery as well as for the purpose of
establishing when the minimum Exploration obligations have
been met, costs, expenses and expenditures shall be recorded
in major accounts including the following:
-
Exploration Expenditures;
Development Expenditures other
than Operating Expenses;
Operating Expenses;
Necessary sub-accounts shall be used.
Revenue
accounts
shall
be
maintained
by
CONTRACTOR to the extent necessary for the control of
recovery of costs and the treatment of Cost Recovery
Petroleum.
ARTICLE VI
TAX IMPLEMENTA'TION PROVISIONS
It is understood that CONTRACTOR shall be subject to
Egyptian lncome Tax Laws except as otherwise provided in the
Agreement, that any A.R.E. lncome Taxes paid by GANOPE on
CONTRACTOR'S behalf
constitute additional income to
CONTRACTOR, and this additional income is also subject to A.R.E.
income tax, that is "grossed up".
"CONTRACTOR'S annual income", as determined in Article Ill (g) (2)
of this Agreement, less the amount equal to CONTRACTOR'S
grossed-up Egyptian income tax liability, shall be CONTRACTOR'S
"Provisional Income".
The "gross-up value" is an amount added to Provisional lncome to
give "Taxable Income", such that the grossed-up value is equivalent
to the A.R.E. lncome Taxes.
THEREFORE:
Taxable l ncome = Provisional l ncome plus Grossed-up Value
and
Grossed-up Value = A.R.E. lncome Tax on Taxable Income.
If the "A.R.E. lncome Tax rate", which means the effective
or composite tax rate due to the various A.R.E. taxes levied
on income or profits, is constant and not dependent on the
-
level of income, then:
Grossed-up Value = A.R.E. income tax rate
TIMES Taxable Income.
Combining the first and last equations above
Grossed-up Value=
Provisional income X Tax Rate
1 - Tax Rate
where the tax rate is expressed as a decimal.
The above computations are illustrated by the following
numerical example. Assuming that the Provisional lncome is
$10 and the A.R.E. lncome Tax rate is forty percent (40%),
then the Grossed-up Value is equal to:
'Therefore:
Provisional income
Plus Grossed-up Value
Taxable lncome
Less: A.R.E. lncome Taxes at 40%
CON-TRACTOR'S Inconie after taxes
ANNEX "F'
MAP OF NATIONAL GAS PIPELINE GRID SYSTEM
MEDITERRANEAN
WESTERN
SEA
DESERT
'0
GAS PROCESSING FACILITIES -..----.
PRODUCERS PIPELIhTS
IM D E R CAPACITY
)
-NATIONAL GAS PlPELlXE