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 PETROLEUM AGREEMENT


AMONG





GOVERNMENT OF THE REPUBLIC OF GHANA





























GHANA NATIONAL PETROLEUM CORPORATION




































































IN RESPECT OF


EAST CAPE THREE POINTS CONTRACT AREA











September, 2013


 Contents





Page





ARTICLE 1 DEFINITIONS...............................................................................................................


ARTICLE 2 SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT


AREA..................................................................................................................................g


ARTICLE 3 EXPLORATION PERIOD,...:.....................................................'.............................................13


i ARTICLE 4.MINIMUM EXPLORATION PROGRAMME...........................................................................15


ARTICLE 5 RELINQUISHMENT..........................................................................................................19


« ARTICLE 6 JOINT MANAGEMENT COMMITTEE ....................................;.......................................20


. ARTICLED RIGHTS AND OBLIGATIONS OF-CONTRACTOR AND GNPC......................................... 24


v ARTICLE 8 COMMERCIALLY'..............................................................................................................26


ARTICLE 9 SOLE RISK ACCOUNT..........................................................................;..............................31


ARTICLE 10 SHARING OF CRUDE OIL..................................................................................................33


ARTICLE T1; MEASUREMENT AND PRICING OF CRUDE OIL......................!...............X...........38


'-ARTICLE. 12 TAXATION AND OTHER IMPOSTS..............................................................................41


ARTICLE 13 FOREIGN EXCHANGE TRANSACTIONS .............................................................43


ARTICLE 14 SPECIAL PROVISIONS. FOR NATURAL GAS ...................................................................45


. ARTICLE 15 DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)......................................................50


ARTICLE 16 INFORMATION AND REPORTS - CONFIDENTIALITY.....................................................51


■ ARTICLE,17 INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION......................................54


ARTICLE 18 ACCOUNTING AND AUDITING..........................................................................................56


ARTICLE 19 TITLE TO AND CONTROL OF GOODS AND EQUIPMENT....................................•......- 58


ARTICLE 20 PURCHASING AND PROCUREMENT...............................................................................59


ARTICLE 21. EMPLOYMENT AND TRAINING.........................................................................60


ARTICLE 22 FORCE MAJEURE...............................................................................................................61


ARTICLE 23 TERM AND TERMINATION......................,..........................................................................62


ARTICLE24 CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT 65


ARTICLE 25 ASSIGNMENT .........................;....................................................... 67


ARTICLE 26 MISCELLANEOUS........................................................................... 68


ARTICLE 27 NOTICE 71





ANNEX 1 CONTRACT AREA


ANNEX 2 ACCOUNTING GUIDE


ANN EX'3 SAMPLE Or AOE CALCULATION


ANNEX 4 FORM OF CONFIDENTIALITY AGREEMENT


.ANNEX 5 ESCROW AGREEMENT


THIS PETROLEUM AGREEMENT, made this [•] day of [.] 2012 by and among the Government of the


. Republic of Ghana (hereinafter referred to as “The State"), represented by the Minister for Energy


(hereinafter referred to as the "Minister"), the, Ghana National Petroleum Corporation, a public


corporation established by the Ghana National Petroleum Corporation Act, 1983 PNDCL 64 (hereinafter


referred to as “GNPC"), and Cola Natural Resources Ghana Limited, a company existing under the Law


of the British Virgin Island (BVI) and having its registered office in Ghana with branch registration number


ET000422012 (hereinafter referred to as “CNR”) and Medea Development Limited, a company existing


under the Law of the. British .Virgin Island (BVI) and having its registered office in Ghana with branch


registration number ET000442012 (hereinafter referred to as "Medea").'


The companies named above, and their respective successors and assignees (if any), may sometimes


individually be referred to as “Party" and collectively as "Parties".


WITNESSES THAT:


1.All Petroleum existing in its natural state within Ghana is the property of the Republic of Ghana


and held in trust by the State on behalf of the people of Ghana. ■


•2. In accordance with the Petroleum Law, the Minister has prepared a reference map showing areas


, . . . .of potential petroleum fields within.the jurisdiction of Ghana, divided into numbered .areas and


each of which is described as a "block". • •


,3. GNPC has by virtue of the Petroleum. Law the right to undertake Exploration, Development and


Production of Petroleum over all blocks declared by the Minister to be open for Petroleum


Operations. ■ . . v : '


4. GNPC is further authorised to enter into association by means of a Petroleum Agreement with a


contractor for the purpose of Exploration, Development and Production of Petroleum.


5. ..The Contract Area that is the subject matter of this Petroleum Agreement has been declared


open for Petroleum Operations by the Minister and the State desires to encourage and promote.;


Exploration, Development and Production within the Area. The State assures Contractor that all


of Area is within the jurisdiction of Ghana.


6. Contractor, having the financial ability, technical competence and professional skills necessary for


carrying out the Petroleum Operations herein described, desires to associate with GNPC in the


. Exploration for, and Development and Production of, the Petroleum resources of the Area.


, 7, , Contractor shall .comply-with all applicable laws of Ghana as in effect from time to time including ■


, ••• .without limitation any regulations or directives issued by’or Other acts of the Petroleum


---- ----Commission -pursuant to’ the Retro,'eurm Commission Act, 2011 (Act 821) as required by


applicable law from time to time.


8. GNPC has aspirations of building operatorship capacity within a period of fifteen (1.5) years from


. the Effective Date of this Agreement. Without prejudice to the rights of Operator under this


■ ^Agreement, .Contractor is committed to.supporting GNPC to develop its institutional capacity to -


enable GNPC to fulfill its aspirations.


9.. The Parties are committed to providing Ghanaian nationals employment at all levels in the


- Petroleum industry, including technical, administrative and managerial, positions, and Contractor


. . accordingly commits, to. providing and: supporting an adequate : programme of training for


; ■ Ghanaian nationals as an integral part of this Agreement.


10. The Parties are committed to providing, an. annual locai content plan for fulfilling the applicable


.. Ghanaian content requirements with respect to the provision of goods and services.


NOW THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agreed and


declared as follows:





ARTICLE 1


DEFINITIONS


In this Agreement:





1.1 “Accounting Guide”means the accounting guide which is attached hereto as Annex 2 and made


a part hereof;


1.2 “Additional Interest" means the additional interest of GNPC provided in Article 2.5;








1.3 .. ... “Affiliate" means .any. person, whether a natural person, corporation, partnership, unincorporated i.,


association or other entity:


A


(a) in which one of the Parties hereto.or one of the companies comprising Contractor directly


or indirectly hold more,than fifty percent (50%) of the share capital or voting rights;


(b) which holds, directly o.r indirectly more than fifty percent (50%) of the share capital or


voting/ights in a Party hereto or of the companies comprising Contractor; ; 


■ . (c). -in which the share capital or voting rights are directly dr indirectly and to an extent more \k


than fifty . percent (50%) held by a company or companies holding directly or indirectly


mere, than fifty percent (50%) of the share capital or voting rights in a Party hereto; or ‘ ^


(d) , . which, holds directly five percent (5%)-or more of the share capital:'or voting rights in |


Contractor; I





1.4 . “Agreement':' means this Agreement between the State, GNPC and Contractor,'and includes the I


Annexes attached hereto in each case, as amended from time to time;


is


1.5 “Appraisal” means operations or activities carried out following a Discovery of Petroleum for the ;


purpose of delineating the accumulations of Petroleum to which that Discovery relates'in terms of |


thickness and lateral extent and estimating .the quantity of recoverable Petroleum therein and all : I


operations or activities to resolve all uncertainties required for determination of commerciality of a 1


Discovery; Ji





.1.6 “Appraisal ..Programme", means -a: programme, submitted to the Petroleum Commission for the f


conduct of Appraisal; / .




1.7 “Appraisal:Well” means a well drilled pursuant to an Appraisal Programme;





1.8 “Associated Gas" means Natural Gas produced from a well in association with Crude Oil;


1,9 “Barrel'.1 means a quantity, or unit of Crude Oil equal to forty-two (42) United States gallons at a





temperature of sixty (60) degrees Fahrenheit and at fourteen and sixty-five one-hundredths per


square inch at atmospheric (14.65 psia) pressure; ‘





1.10 “Block" means an area of approximately 685 square kilometres as depicted on the reference


map prepared by the Minister in accordance with the provisions of the Petroleum Law;


1.11


“Budget” means a statement prepared in accordance with the Accounting Guide indicating 1 ,


expenditures to be made in accordance with an accompanying .Work Programme; ( -j








2


 1.12 “Business Day” means a day on which banks are open for business in London, New York and


Accra;


1.13 . "Calendar Year" means the period of twelve (12) months of the Gregorian calendar, commencing


on January 1 and ending on the succeeding December 31;


1.14 “Carried Interest" means an interest held by GNPC pursuant to this Agreement in respect of


which Contractor pays for the conduct of Petroleum Operations without any entitlement to


reimbursement from GNPC other than for GNPC’s Carried Interest share of the costs of


Production Operations;


1.15 "Commercial Discovery" means a Discovery which is determined to be commercial in


accordance with the provisions of Article 8 of this Agreement;


1.16 "Commercial Production Period" means in respect of each Development and Production Area


the period from the Date of Commencement of Commercial Production until the termination of


this Agreement or earlier relinquishment of such Development and Production Area;


1.17 "Consideration” means aggregate cash consideration, plus the fair‘market price of any other


consideration,;payable-by any party. For purposes of determining required approvals, the value of


.Project Contracts and/or amendments thereto, denominated in currencies other than U.S. Dollars


..-••• ■. shall be .translated into U.S. Dollars in accordance with Section 1.3 of the Accounting Guide;


1.18 “Contract Area” means the area covered by this Agreement in which Contractor is authorised in


association with GNPC to explore for, develop and produce'Petroleum, which is described in


. Annex 1 attached hereto (which Annex is made a part of this Agreement), but excluding any


■ . portions of such, area in respect of which Contractor’s rights hereunder are from time to time


relinquished or surrendered pursuant to this Agreement;


1.19 . "Contract-Award Period” means (a) if the earlier of the Project Contracts contemplated by


Article (6.10(c) is awarded between January 1 and June 30 of any Contract Year; the period from


January 1 of such Contract Year through June 30 of the following Contract Year, and-(b) if the


earlier, of the Project Contracts contemplated in Article 6.10(c) is awarded between Jply 1 and


, December 31 of any Contract Year, the period from July 1 of such Contract Year through


December 31 of the following Contract Year;


1.20 "Contract Year" means a period of twelve (12) calendar months^ commencing on the Effective


Date or any anniversary thereof;


1.21 . ■ “Contractor1'means CNR and Medea and/or their respective successors and assignees;


1.22 • "Crude Oil” means hydrocarbons which are liquid at fourteen arid sixty-five one-hundredths per


square inch at atmospheric (14.65 psia) pressure and sixty (60) degrees Fahrenheit and includes


condensates and distillates obtained from Natural Gas;


1.23 . /'Date of Commencement of Commercial Production" means,' in rdspebt Of each Development


- . and Production Area, the date on which production of Petroleum under a programme of regular


production, lifting and sale commences as defined in a Development Plan;


1.24 “Date of Commercial Discovery” means the date referred to in Article 8.13;


1.25 “Day” means a day in the Gregorian calendar;





1.26 "Delivery Point" has the meaning as per Article 10.5;





3


 1.27 .■ "Development” or "Development Operations" means the following activities carried out in


connection with a Development Plan: the building and installation of facilities for Production, and


• includes drilling of Development Wells, construction and installation of equipment, pipelines,


.facilities, plants and. systems, in and. outside the -Contract Area, which are required for achieving


. Production, treatment, transport, storage,and lifting of Petroleum, and preliminary Production


... activities carried, out prior to the Date of Commencement of Commercial Production, and includes


„ , • all,.related planning and administrative work, and may also include the construction and


installation of approved secondary and tertiary recovery systems;





1.28 , “Development Costs" means Petroleum Costs incurred in Development Operations;





1.29, "Development and Production .Area” means .that portion of the Contract Area reasonably


> determined by.Contractor in consultation,with the JMC {or by GNPC if a Sole Risk Operation


pursuant to Article 9) on the basis of the available seismic and well data to cover the areal extent


.of an,accumulation or accumulations of Petroleum constituting a Commercial Discovery, enlarged


... ,, .in area by ten percent (10%:), such enlargement:to extend uniformly around the perimeter of such


accumulation; ■ ■ - -





1.30 ,. "Development Period" means, in respect of each Development and Production Area, -the period-


.from the ', Date \ of’ Commercial, Discovery , until the Date of Commencemeht ofc, Commercial


Production; ‘


: ’ ’ ... •wap-’ -


1.31 "Development Plan" rr^ans the plan for development of a Commercial Discovery prepared by


.. . Contractor in consultation with the Joint Management Committee and approved by the Minister


pursuant to Article 8;


1.32 ... “Development Well” means a well drilled in. accordance with a Development Plan for producing


, . Petroleum including wells for pressure maintenance or for increasing the Production rate;


1.33 . “Discovery;1 :;.means. finding within a well at the end of drilling during'Exploratiori Operations, one


o.r, more :accumulations:of Petroleum.,the existence of which, until that finding; was unproved by


. drilling, and which .can be or, is recovered at the surface ina flow measurable-by'Conventional ■"•


international, petroleum industry, testing methods:(and in the case of water depths greater than


four hundred (400) metres including Modular Formation Dynamics Testing (also referred to as


“MDT” by Schlumberger));


1.34 < "Discovery Area" means that portion of the Contract Area, determined by JMC (or by GNPC if a


■’ Sole, Risk Operation pursuant to.Article 9) ,on the basis of the available seismic and well data to


, cover the areal extent of the geological structure in which a Discovery is made. A Discovery Area-


■rnay be-modified at,any time, by JMC (or by GNPC if applicable), if justified on thej^asjs of. new .


<:,■ ■ information, but.may not be. modified after the date of completion of the AppraisdF Programme


.and submission of a report as provided under Article 8.8;


1,35. "Discovery Date” means the date on which a Discovery Notice is issued;


1.36 . “Discovery .Notice!’ means a notification to-the Minister, Petroleum Commission and GNPC,


; providing information which shall include, the, name and location of the well from which the


accumulation(s)have been found,- the depth interval(s), estimates of gross and net pay


thicknesses, stratigraphy, and type of reservoir and fluids encountered;


1.37 "Effective Date" shall have the meaning ascribed to it in Article 26.6;





1.38 “Escrow Account” means the escrow account established in accordance with the Escrow


Agreement;








4


1.39 “Escrow Agent” means the party designated as the escrow agent pursuant to the Escrow


Agreement and approved by GNPC;


1.40 “Escrow Agreement” means the escrow agreement to be entered into among Contractor, the


State, GNPC and Escrow Agent, substantially in the form of Annex 5;


1.41 "Existing Project Contract" means a Project Contract existing at the time of a relevant Project


Contract Amendment, as previously amended, supplemented or otherwise modified;


1.42 "Exploration" or “Exploration Operations” means the search for Petroleum by geological,


geophysical and other methods and the drilling of Exploration Well(s) and includes any activity in


connection therewith or in preparation thereof and any relevant processing and Appraisal work,


including technical and economic feasibility studies, that may be carried out to determine whether


a Discovery of Petroleum constitutes a Commercial Discovery; ‘


1.43' “Exploration Costs" means all expenditures made and costs incurred both within and outside


Ghana, in conducting Exploration Operations hereunder determined in accordance with the


Accounting Guide attached hereto as Annex 2;


1.44 ■ ‘'Exploration Period" means the period commencing bn the Effective Date and continuing during


: the-time provided for in Article 3.1 Within which Contractor is authorised to carry out Exploration


Operations and shall include any periods of extensions provided for in this Agreement. The


period shall terminate with respect to any Discovery Area on the Date of Commercial Discovery in


respect of such Discovery Area; ' - •'


1.45 “Exploration Well" means a well drilled in the course of Exploration Operations conducted


hereunder during the Exploration Period, but does not include an Appraisal Well; - ’


1.46 “Extension Period" means any of the First Extension Period or Second Extension Period;


1.47 "First Extension Period" has the meaning given to such term in Article 3:1(e); ’


1.48 “Force Majeure” means any event beyond the reasonable control of the Party/'claiming to be


affected by such event which has not been brought about directly or indirectly affis own instance,


or which has not been brought about directly or indirectly at the instance of an Affiliate, provided


that the State shall not be considered for this purpose an Affiliate of GNPC. Force Majeure events


may include, but are not limited to, earthquake, storm, flood, lightning or other adverse weather


conditions, war, terrorism, embargo, blockade, riot or civildisorder;;. ;


.1.49 • "Foreign National Employee" means an expatriate employee'of Contractor, its1 Affiliates, or its


Sub-contractors who is not a citizen of Ghana;...... ..... ..........:---.................. ---


1.50 “Ghana" means the territory of the Republic of Ghana and'includes rivers, streams, water


courses, the territorial Sea, seabed and subsoil, the contiguous zone, the exclusive economic


zone, continental shelf, the airspace and all other areas within the jurisdiction of Ghana;


1.51 "Gross Production” means the total amount of Petroleum produced and saved from a


Development and Production Area during Production Operations which is not used by: Contractor


in Petroleum Operations and is available for distribution to the Parties in accordance with Article


10; ... . J


1.52 “Gross Negligence" means any act or failure to act (whether sole, joint or concurrent) which was


in reckless disregard to, harmful consequences such person or entity knew or should have


known, such act or failure would have on another person or entity;








5


1.53 “Indigenous Ghanaian company" means a company incorporated under the Companies Act


(Act 179) of Ghana:


(a) : „ having at feast fifty-one percent of its equity owned by a citizen or citizens of Ghana; and


(b) ; where practical, having Ghanaian citizens holding at least eighty percent of senior





.management positions and one hundred percent of non-managerial and other positions;


1.54 "initial Exploration Period" has the meaning given to such term in Article 3.1(a);


1.55 ."Initial Interest" .means the interest of GNPC in all Petroleum Operations provided for in


Article 2.4;





1.56 "International Good Oil Field Practice” means all those uses and practices that are generally


accepted in the international petroleum industry as good, safe, economical and efficient in


exploring for, developing, producing, processing and transporting Petroleum; "


1.57 “Joint Management Committee” or “JMC" >means the committee established pursuant to


Article 6.1 hereof;


1.58 "LIBOR”,.means*, the rate which the Ghana-. International Bank, London! or ’ifcthe Ghana


• International Bank, -London, ceases to-exist, then as published in the Financial Times certifies to


be the.London Interbank offered rate (LIBOR) in .the London Interbank Eurodollar market on thirty


(30) day deposits, in effect ort the-last Business Day of the last respective preceding Month,. In


the event.that neither the Financial Times nor, the Wall Street Journal are published, the Parties


, shall-endeavour to agree on a source of certification for LIBOR in reference to market practice. If


the Parties are unable to agree on a source of certification for LIBOR, any Party may refer the


matter to a Sole Expert .for certification. If the; aforesaid rate is contrary, to any ,applicable usury,'


law, the rate of interest to be charged shall be the maximum rate permitted by such applicable


law;. '


1.59 "Major Contract" means a Project • Contract under which, the Consideration exceeds


US$10,000,000;





1.60 ■ ■ “Market Price" means the market price for Crude Oil realized by Contractor under this Agreement


as determined in accordance with Article 11.7 hereof;


1.61 “Market Related Services" means any services, including the provision of assets, provided by an


• . \ Affiliate of a Contractor Party which in the ordinary course of business provides such services'on


.■ -van arm’s-length third party basis to the market generally; >■'•' . - ' v ■- s ""


1.62 “Material Contract Amendment" means a Project Contract Amendment, or any series of Project


Contract Amendments that involves:





(a) for Project. Contract Amendments of any Existing Project Contracts other than Major


Contracts: an increase to the Consideration payable under such contract by the


Contractor (or any Affiliate, agent or other third party acting on behalf of the Contractor)


■ . which would make such Existing Project Contract a Major Contract; or -





(b) . for Project Contract Amendments-of any Existing Project Contracts: that are Major


’ Contracts: Consideration in excess of US$10,000,000;


1.63 "Minister” means Minister for Energy;





1.64 “Month” means a month of the Calendar Year;


S'





1.65 “Natural Gas" means all hydrocarbons which are gaseous at fourteen and sixty-five one-


hundredths per square inch at atmospheric (14.65 psia) pressure and sixty (60) degrees


Fahrenheit temperature and includes wet gas, dry gas and residue gas remaining after the


extraction of liquid hydrocarbons from wet gas;


1.66 "Non-Associated Gas" means Natural Gas produced from a well other than in association with


Crude Oil;


1.67 “Operator" means Medea, or the person'as may be jointly proposed by the Parties and approved


by the Minister, being either GNPC or a Contractor Party to conduct Petroleum Operations on


behalf of the Parties;


1.68 "Participating Interest" of the Contractor means the interest held by Contractor as per


. Article 2.10;


1.69 "Party" means the State, GNPC or Contractor, as the case may be;


1.70 "Paying Interest" means an interest held by GNPC in respect of which GNPC pays for the


conduct of Petroleum Operations as expressly provided for in Article 2.5;


1.71 .'.--^“Petroleum"means Crude Oil or Natural Gas or a combination of both; •


1.72 "Petroleum- Commission" means a body established by an Act of Parliament (Petroleum


Commission. Act, 2011) for the regulation and the management of the utilization of petroleum


resources in the upstream sector;


1.73 "Petroleum Costs" means all expenditures made and costs incurred-in conducting Petroleum


■ Operations hereunder determined in accordance with the Accounting Guide attached hereto as


Annex 2; ' ^ ^





1.74 "Petroleum Income Tax Law” means the Petroleum Income Tax Law, 1987 (PNDCL 188), as


the same may be amended from time to time; ; ••


1.75 "Petroleum Law” means the Petroleum (Exploration and Production) Law, 1984 (PNDCL 84), as


■ the same may be amended from time to time;


1.76 "Petroleum Operations” means all activities, both in and outside Ghana, relating to the


■ : . . - Exploration for, Appraisal- of, Development,- Production, handling, storage,., processing and


transportation of Petroleum contemplated under this Agreement and includes Exploration


- Operations, Appraisal Programme, Development Operations and Production Operations and all


---activities in connection therewitlvr------------------------------. :________________________ _______________________________________________





1.77 ; "Petroleum Product” means any product derived from Petroleum by any refining or other


process;





1.78 “Pre-Award Attachment" means any order, decree, injunction or other decision (however


denominated) of any court, arbitral body or other competent authority requested by a Party and


issued prior to a final arbitral award issued pursuant to Article 24 of this Agreement that attaches,


seizes, freezes or otherwise restricts the . use or alienation of any property (whether tangible or


intangible) of the other Party pending issuance.of the final arbitral award, whether such property


is in the possession or control of a Party or of a third party;





1.79 “Production" or “Production Operations" means activities other than Exploration Operations or


Development Operations undertaken in order to extract, save, treat, measure, handle, store and


transport Petroleum to storage and/or loading points and to carry out any type of primary,


secondary or tertiary operations, including recycling, recompression, injection for maintenance of


-. pressure and water flooding and all related activities such as planning and administrative work


and shall also include maintenance, repair, abandonment or decommissioning and replacement


.. of facilities, and well workovers; in -every case, conducted after the Date of Commencement of


Commercial Production of the respective Development and Production Area;


1.80 “Production Costs” means Petroleum Costs incurred in Production Operations;


1.81 “Project Contract" means a contract between the Contractor (or any Affiliate, agent or other third


party acting on behalf of the Contractor) and any other person or entity for the performance of


Petroleum Operations hereunder or under, any related agreement, but shall exclude contracts


solely for the transport, processing or sale of Petroleum after the Delivery Point;


1.82 , “Project Contract Amendment" means an amendment, supplement or other modification of any


Project Contract (including any change order, or similar discretionary modification of any Project


Contract jn. connection with the implementation.or administration thereof), or any series of such


amendments, supplements or other modifications;


1.83 “Quarter" means a period of three (3) Months, commencing January 1, April *1, July 1 or


... October 1 and ending March 31,. June.30, September 30, or December 31, respectively;


.1.84 ; “Rate of Return" has the meaning given in Article 10; .•. . -





1.85 . “Second.Extension Period" has the meaning given to such term in Article 3.1(a);


1.,S6- “Sole Expert" means the person appointed to resolve a dispute pursuant to Article 24 hereof;


1.87 ;; “Sole,Risk" means an operation conducted at the sole cost, risk and expense' of GNPC referred


to in Article 9;


1.88 "Specified. Rate” means LIBOR plus two percent (2%);


1.89 ■ ■. “Standard Cubic Foot" or "SCF” means the quantity of gas that occupies one (1) cubic foot at


14.65 psia pressure and sixty (60) degrees Fahrenheit temperature;


1.90 "State" means the Government of the Republic of Ghana;


,1.9t "Subcontractor" has the meaning means a third party with whom GNPC or the Contractor has


. •; enteredinto-aGontract for the provision of goods or services for or in connection with Petroleum


Operation


1.92 ■; "Termination" means termination of this Agreement pursuant to Article 23 hereof; altd'


1.93 . "Work Programme" means the annual, plan-for the conduct of Petroleum Operations prepared


■ pursuant to Articles 4.3, 6.4 and 6.5 herein.


 ARTICLE 2


SCOPE OF THE AGREEMENT, INTERESTS OF THE PARTIES AND CONTRACT AREA





2.1 This.Agreement provides for the Exploration for.and Development and Production of Petroleum in


the Contract Area by GNPC in association with Contractor.


2.2 Subject to the provisions of this Agreement, Contractor shall be responsible for the execution of





such Petroleum Operations as are required by the provisions of this Agreement and subject to


Article 9, is hereby appointed the exclusive entity to conduct Petroleum Operations in the


Contract Area. GNPC shall at all times participate in the management of Petroleum Operations


and in order that the Parties may cooperate in the implementation of Petroleum Operations,


GNPC and Contractor shall establish a Joint Management Committee, to conduct and manage


Petroleum Operations. '


2.3 In the event that no Commercial Discovery is made in the Contract Area, or that Gross Production


achieved from the Contract Area is insufficient fully to reimburse Contractor in accordance with


the terms of this Agreement, then Contractor shall bear its own loss; GNPC and the State shall


■ have no obligations whatsoever to Contractor in respect of such loss.


2,4' -vGNPC shall-have ten percent (10%)- Initial: Interest in all "Petroleum Operations under this





Agreement. With respect to all Exploration and Development Operations GNPC’s Initial Interest


shall be a Carried Interest. With respect to all Production Operations GNPC's Initial Interest shall


be a Paying Interest.





2.5 In addition to the Initial Interest provided for in Article 2.4 above, GNPC shall have the option in


. respect of each Development and Production Area to acquire an Additional Interest of up-to*" •


■ ■ 17.5% in the Petroleum Operations in such Development and Production Area. In the event that'


GNPC exercises such option, GNPC shall contribute the corresponding proportionate share to all


•. the Development and- Production Costs incurred after the Date1 Of Commefciar Discovery, •iiiP'


respect of such Development and Production Area, (or make arrangements satisfactory to


Contractor to that effect). GNPC shall,notify Contractor of the exercise of its option to acquire all©


Additional Interest within ninety (90) days of the Date of Commercial Discovery. If GNPC opts to’*?


take an Additional Interest as provided for in Article 2.5 then within six (6) Months of the date of


its election, GNPC shall reimburse Contractor for all expenditures attributable to GNPC’s


Additional Interest and incurred from the Date of Commercial Discovery to the date GNPC notifies


Contractor of its election..





■- 2.6 , For lhe avoidance of doubt GNPC shall only be liable to contribute to.Petroleum Costs:





(a) , incurred in respect of Development.Operations in any Development and Production Area


and to the extent only of any Additional Interest acquired in such Development and


Production Area under Article 2.5 above; and


(b) incurred in respect of Production' Operations in any Development and Production Area





both to the extent of:





(i) its ten percent (10%) Initial Interest; and





(ii) any Additional Interest acquired in such Development and Production Area


under Article 2.5 above.





2.7 . GNPC may during the Exploration Period contribute to the seismic and exploratory drilling


programmes as specified in Article 4.3 by providing relevant services to be approved within the











<


JMC. Upon completion of the-work associated with said contribution, GNPC shall earn credit for


the costs incurred toward its share, if any, of Development Costs, should it elect to hold an


Additional Interest pursuant to Article 2.5.above. Such credit shall carry interest at the Specified


Rate, annually from, the respective dates, such contributed costs were incurred until they are


utilised as credits toward GNPC’s Additional Interest pursuant to Article 2.5 above. If during the


Exploration Period GNPC has earned such credit and if GNPC elects not to hold an Additional


Interest or no Commercial Discovery is made in the Contract Area, Contractor shall reimburse


GNPC in an amount equivalent to the credit within sixty (60) days following the end of the


Exploration period or Contractor's relinquishment of the entire Contract Area, whichever occurs


. first. The actual amount of any credit earned by GNPC shall be the fair market rates as approved


by the JMC at which such services could be obtained under freely competitive conditions.


Upon notifying Contractor,of its decision to acquire an Additional interest pursuant to Article 2.5,


GNPC may at the same time:


(a) - elect to have Contractor advance part or all of GNPC’s total proportionate. share of


■ ■ . ’ Development Costs as they are incurred, including such Costs as will already have been


incurred from the Date of Commercial Discovery and which are reimbursable under


Article 2.7; provided that Contractor, shall be entitled to limit, its obligation tQ^advance the


, portion of GNPC’s total proportionate share of such costs to an undivided.ten percent


■ ■ (10%) share. Such advances shall,be,reimbursed with, interest at the Specified Rate from


. -the proceeds, of the-sales, of GNPC’s. entitlement after recovery.of,Produejpn.Costs as:


provided in Article, 10; , ■>***.-•■


■(b) , notify the Contractor and mutually agree in good faith and in accordance with


Article 2.8(c) below the arrangements for the payment of the balance of,GNPC’s total


i proportionate share of Development Costs with repayment terms (i.e.;.p.eriod of payment)


, no worse than those which Contractor has for financing its share of Development Costs


■ and at levels that are not more, than the net proceeds of sales referred to in Article 2.8(a),


, Where.any such arrangements are made for the payment of GNPC’s total proportionate


' share of Development Costs, Contractor may require that the difference between the


-Specified Rate Under this .Agreement and the rate that applies to Contractor for its


, . - financing shall be reimbursed pursuant to Article 2.8(c); and . . ..


(c) to the extent that GNPC’s share of Development Costs are advanced by Contractor


pursuant to Article 2.8(a) (such share being the “Financed Additional Interest"),


repayment shall occur on the following terms:





(i) on,or before the 30th day following the month ,in ..which GNPC receives at the


.delivery point its Financed Additional Interest.share of productioBaisGNPC.shall


pay to Contractor an amount calculated as follows: .... »*■, ■





RPm = the lesser of (PQm.i x IOPm.i x FAI) x 40% and FAIP


60





Where:





RPm means the amount of repayment of the Development Costs of GNPC


which have been advanced by Contractorj which is payable on or before


the 30th day of a month;


PQm.-i means the- production quantity from the . lands which are the subject of





this Agreement in the month prior to the month in which repayment is to


be made less State Royalty;











10


 lOP.^ means the international oil price (as determined in accordance with


Article 10) in the month prior to the month in which repayment is to be


made;





FAI means the Financed Additional Interest of GNPC.


FAIP means Development Costs advanced by Contractor





(d) If reimbursement of GNPC’s proportionate share of Development Costs from the





applicable Development and Production Area is not achieved before Termination of


Petroleum Operations for that Development and Production Area, then Contractor shall


notify GNPC of such event and GNPC shall make payment to the Contractor in US


Dollars of the outstanding amount of such advances to be reimbursed by GNPC together


with the Specified Rate and the increment under Article 2.8(a) if any within the 180 days


of such notice from Contractor.





2.9, Contractor’s Participating Interest' in all Petroleum Operations and in all rights under this


Agreement shall be reduced proportionately at any given time and in any given part of the


Contract Area by the exercise of the option of Additional Interest of GNPC pursuant to Article 2.5


or the Sole Risk Interest of GNPC pursuant to Article 9.


■ ?‘2,-10 Subject*foArticle,25 the transfer or disposal of all'or part of the Contractors Participating Interest, ;'•••


whether directly. or indirectly by assignment, merger, consolidation or sale of stock or other


conveyance, other than with or to an Affiliate shall be subject to.the following procedure:





(a) Once the Contractor and a proposed transferee (a third party or a Party) have fully


negotiated the final terms and conditions of a transfer, such final terms and conditions


shall be promptly disclosed in full detail to GNPC and the State in a notice from the


transferor. GNPC shall have the right to acquire the Participating Interest from the y


transferor on the same terms and conditions agreed to by the proposed5transferee if,;*


within thirty (30) Days of transferor’s notice, GNPC delivers to the transferor a counter-


■ notice that it accepts the agreed terms and conditions of the transfer without reservations#


or conditions. If GNPC does not deliver such counter-notice', the transfer to' the proposed#-


j transferee may be made, subject to the other provisions of this Agreement and the laws


) and regulations, under terms and conditions no more favourable to the transferee than


those set forth in the notice to GNPC and the State, provided that the transfer shall be


concluded within one hundred and eighty (180) Days from the date of the notice plus


• such reasonable additional period as may be required to secure requisite approvals. ,


■ - (b) ■ In the event that a Contractor's proposed transfer of part or all of its Participating Interest -


- j-----------------------involves- eoRsideration-other-than-eash-or-involves other properties included in a wider -


. transaction then the Participating Interest (or part thereof) shall be allocated at a


■ ' reasonable and justifiable cash value by the transferor in any notification to the State and


GNPC. The State and/or GNPC may satisfy the requirements of this Article 2.10(b) by


agreeing to pay such cash value in, lieu of the consideration payable in the said proposed .


transfer, provided that such cash value may be disputed by the State or GNPC. In the


. event of any dispute between the transferor and the State or GNPC as to the cash value


of any consideration paid, the Parties shall meet at a mutually convenient time and place


to attempt to resolve the dispute and to agree upon a cash valuation. In the event the


Parties fail to reach agreement within ninety (90) calendar days from the date on which


such notification is received by GNPC or the State from the transferor, Article 24 of this


Agreement shall apply.





2.11 As of the'Effective Date, the Contract Area shall cover a total of approximately 1560 Sq km as


■ depicted by Annex land shall from time to time during the Term of this Agreement be reduced


according to the terms herein. During the term of the Agreement, Contractor shall pay ratals to


■ ' 11


the State for that Area included within the Contract Area at the beginning of each Contract Year


according to the provisions of Article 12.1 (c) below.



























































' 3f«Sr'





iii*;#.;- -














































































































12


 ARTICLE 3


EXPLORATION PERIOD





The Exploration Period shall begin on the Effective Date and shall not extend beyond seven (7)


years except as provided for in accordance with the Petroleum Law.


(a) The Exploration Period shall be divided into an Initial Exploration Period of 3.0 (three)





years ("Initial Exploration Period") and two (2) optional Extension Periods of 1.5 (one


point five) years each (respectively “First Extension Period" and "Second Extension


Period") and where applicable the further periods for which provision is made hereafter.


The Contractor has the right to convert the Second Extension Period of 1.5 (one point


five) years into a Period of 2.5 (two point five) years with the commitment of drilling


• 2 (two) exploration wells and to conduct geological and geophysical studies for a


Minimum Expenditure of 40.000.000 US$ (Forty Million US Dollars). This right of


conversion may be exercised at the time that Contractor applies for the Second


Extension Period.








■■(b) Where Contractor has fulfilled its obligations set out in Article 4.3 before the end of the


Initial Exploration Period or, as the case may be, the First Extension Period, and has


■■■ '. ' ■:; • exercised its option by applying to the Minister in writing for an extension, the Minister will'


■'"■' be deemed to have granted an extension into the First or, as the case may be, into the


Second Extension Period.








(c) For each well drilled by Contractor or with Contractor’s participation during the Initial


Exploration Period beyond those referred to in Article 4.3, the Initial Exploration Period


• shall be extended by three (3) Months and the commencement of subsequent periods.


shall be postponed in their entirety accordingly.





Following ! the end of the Second Extension Period, subject to the provisions of Article 3.4, <;


Contractor will be entitled to an extension or extensions, by reference to Article 8, of the.


Exploration Period as follows:





(a) ■ Where at the end of the Second Extension Period Contractor is drilling or testing any


well,. Contractor shall be entitled to an extension for such further period as may be


' reasonably required to enable Contractor to complete such work and assess the results


■ and, in the event that Contractor notifies the Minister that the results from any such well


show a Discovery which merits Appraisal, Contractor shall be entitled to a further


extension for such period as may be reasonably required to carry out an Appraisal


■-------.....Programme and determine whether the Discovery constitutes a Commercial Discovery;





(b) ■ Where at the end of the Second Extension Period Contractor is engaged in the conduct


of an Appraisal Programme in respect of a Discovery which has not been completed,


• Contractor shall be entitled to a further extension following the end of the Second


Extension for such period as may be. reasonably required to complete that Appraisal


Programme and determine whether the Discovery constitutes a Commercial Discovery;'


(c) Where at the end of the Second Extension Period Contractor has undertaken work not


falling under paragraphs (a) or (b) which is not completed, Contractor will be entitled to a


further extension following the end of the Second Extension Period for such period as the


Minister considers reasonable for the purpose of enabling such work to be completed.





(d) Where pursuant to Article 8 Contractor has before the end of the Second Extension


Period, including extensions under (a), (b) and (c) above, given to the Minister a notice of


 Commercial Discovery, Contractor shall, if the Exploration Period would otherwise have


been terminated, be entitled to a further extension of the Exploration Period in respect of


• the Discovery Area during which it must prepare the Development Plan in respect of the


Commercial Discovery until either: ’ ' ?


(i) the Minister has approved the Development Plan as set out in Article 8, or





(ii) . : in the event that the Development Plan is not approved by the Minister as set out


in Article 8 and the matter or matters in issue between the Minister and


■ Contractor have been -referred for resolution under Article 24, one (i) Month after ■


the date on which the final decision thereunder has been given.





3.3 . Where at the end of the Initial Exploration Period or, as the case may be, at the end of the First


• ■ • . Extension Period Contractor has failed to complete its obligations as specified in Article 4 in


respect.of that period, but has made reasonable arrangements to remedy its default during the


First or, as the case-may be, the Second Extension Period, Contractor shall be entitled to an


extension subject to such reasonable terms and conditions as the Minister may stipulate to


assure performance of the work.


3.4 Save in respect of a Discovery Area:


■ ■ . --(a) •' iin the ciroumstances and subject to the limitations set forth in Section 12' (3) of the


Petroleum Law; or


• • ■ (b) in a case falling within the provisions of Article 3.2(d) above,


nothing in Article 3.2 above shall be read or construed as requiring or permitting the


extension of the Exploration Period beyond seven (7) years from the Effective Date


except for reasons of Force Majeure.


3.5 The provisions-of Articles-3.2(a), :(b)j' (c) and

relevant extension: period to which Contractor will be entitled shall be read and construed as


requiring the Minister to give effect to the provisions of Article 8 relating to the time within which


Contractor must meet the requirements of said Article.
























































14


 I











I











ARTICLE 4


MINIMUM EXPLORATION PROGRAMME





4.1 Exploration Operations shall begin as soon as practicable and in any case not later than sixty (60)


days after the Effective Date.





4.2 At the request of Contractor after the Effective Date, GNPC shall make available to Contractor


such records and information relating to the Contract Area as are relevant to the performance of


Exploration Operations by Contractor and are in GNPC’s possession, provided that Contractor


shall reimburse GNPC for licensing the data and for other costs reasonably incurred in procuring


or otherwise making such records and information available to Contractor.


4.3 Subject to the provisions of this Article, in discharge of its obligations to carry out Exploration


Operations in the Contract Area, Contractor shall during the several phases into which the


Exploration Period is divided carry out the obligations specified hereinafter:


(a) Initial Exploration Period: Commencing on the Effective Date and terminating at the end


of the third (3ra) Contract Year.





■ ■ > Description of Contractor's Minimum Work Obligations:


(i) Acquire 1200 Sq km of 3D seismic data;





(ii) Conduct geological and geophysical studies;





(iii) Drill one (1) exploration well. ' •


Minimum Expenditure Obligation: Contractor’s minimum expenditure for the Work in the


1 Initial Exploration Period shall be US$25,000,000 (Twenty Five Million US Dollars). ' v;^4


• . - , ■ ■■• •■■■■■■ ' ■ ; ‘ : '#


As evidence of the Contractor’s financial capability, during the Initial Exploration Period#


the Contractor will establish a funded Escrow Account in accordance with the Escrow'4''


Agreement. Not less than thirty (30) Days following the ratification of this Agreement by


the Parliament of Ghana, the Parties shall execute the Escrow Agreement and Contractor


shall ensure that the Escrow Account is established and contains funds equal to at least


the amount of the Minimum Expenditure Obligation in the Initial Exploration Period.


Evidence of the establishment and funding of the Escrow Account will be given to GNPC.


-------------- ---Funds-from the Escrow Account shall be spent only in respect of Petroleum Operations.---


Withdrawal of funds from the Escrow Account shall occur in accordance with the Escrow


Agreement.





If there remains a balance in the Escrow Account at the end of the Initial Exploration


Period, and the Contractor has not fully performed the Minimum Work Obligation as


specified in Article 4.3(a) (or any extension under Article 3.3 or otherwise), GNPC shall be


entitled to demand from the Escrow Agent the remaining balance of the Escrow Account.


If there remains a balance in the Escrow Account at the end of the Initial Exploration


Period (or any extension under Article 3.3 or otherwise), and the Minimum Work


Obligation as specified in Article 4.3(a) has been performed, then in accordance with the


Escrow Agreement, Contractor is entitled to demand from the Escrow Agent the


remaining balance of the Escrow Account.





i





1 15


(b) First Extension Period: Commencing at the end of the Initial Exploration Period and


terminating eighteen (18) months later.


Description of Contractor's Minimum Work Obligation:


(i) Conduct geological and geophysical studies;


(ii) Drill one (1) exploration well.


Minimum Expenditure Obligation: Contractor’s minimum Expenditure for the Work in the


First Extension Period shall be US$20.000.GOO (Twenty Million US Dollars).


(c) Second Extension Period: Commencing at the end of the First Extension Period and


terminating eighteen (18) months later.


-Description of Contractor's Minimum Work Obligations:


(i) Conduct geological and geophysical studies;


(ii) Drill one (1) exploration well.


Minimum Expenditure Obligation: Contractor’s Minimum- Expenditure for’Work in the


Second Extension Period shall be US$20,000,000 (Twenty Million US Dollars). ..


(d) Contractor has the right to convert the Second Extension Period of 1.5 years to a Period


of 2.5 years with the commitment of one additional exploration well and with a Minimum


. Expenditure for the work in the Second Extension Period of US$40,000,000 (Forty Million


US Dollars). .


(e) Work accomplished in any period in excess of the above obligations may be applied as


credit in satisfaction of obligations called for in any other Period. The fulfillment of any


, -Minimum---Work- Obligation shall relieve Contractor of the corresponding Minimum


Expenditure Obligation, but the fulfillment of any Minimum Expenditure Obligation shall


not relieve Contractor of the corresponding Minimum Work'Obligation.


No Appraisal Wells drilled or seismic surveys carried out by Contractor as part of an Appraisal


Programme undertaken pursuant to Article 8 and no expenditure incurred by Contractor in


carrying out such Appraisal Programme shall be treated as discharging the Minimum Work


Obligations under Article 4.3 above.


The seismic programme in Article 4.3(a), when combined with existing data, shall be such as will


enable a study of the . regional geology of the Contract Area and the preparation of a report


thereon with appropriate maps, cross sections and illustrations, as well as a geophysical survey


of the Contract Area which, when combined with existing data, shall provide:


(a) a minimum seismic grid adequate to define prospective drill sites over prospective


closures as interpreted from data available to Contractor; and


(b) a seismic evaluation of structural and stratigraphic conditions over the remaining portions


of the Contract Area.


Each Exploration Well shall be drilled at a location and to an objective depth determined by


Contractor in consultation with GNPC. Except as otherwise provided in Articles 4.7 and 4.8


■below, the minimum depth of each obligatory Exploration Well shall be whichever of the following


is first encountered:


(a) the depth of 2000 metres measured from the Rotary Table Kelly Bushing (RTKB);


(b) the depth at which Contractor encounters geologic basement.


(c) the depth at which a Discovery is made and tested.


The minimum depth of one (1) of the obligatory Exploration Wells in Article 4.3 shall be whichever


of the following is first encountered:


(a) the depth of 2400 meters measured from the Rotary Table Kelly Bushing (RTKB);


(b) • the depth sufficient to penetrate 100 meters into the lower Cretaceous (Aptian Albian); or


(c) the depth at which Contractor encounters geological basement


If in the course of drilling an Exploration Well the Contractor concludes that drilling to the


minimum depth specified in Article 4.6 or 4.7 above is impossible, impracticable or imprudent in


accordance with accepted international Petroleum industry drilling and engineering practice, then


Contractor may plug and abandon the Exploration Well and GNPC shall have the option of either:


(a) waiving the minimum depth requirement, in which case Contractor will be deemed to


have satisfied the obligation to.drill.such Exploration Well; or


(b) requiring Contractor to drill a substitute Exploration Well at a location determined by


Contractor in consultation with GNPC and to the minimum depth set forth in Article 4.6


or 4.7, except that if in the course of drilling such substitute Exploration Well Contractor


establishes that drilling to the minimum depth specified in Article 4.6 or 4.7 above is


impossible, impracticable or imprudent in accordance with accepted Petroleum industry


drilling and engineering practice, then Contractor may plug and abandon the substitute


Exploration Well and will be deemed to have satisfied the obligation to drill one (1).'


Exploration Well.


The above option shall be exercised by GNPC within thirty (30) days from the notice given by*


Contractor to GNPC of the completion of the plugging and abandonment of the Exploration Well,'


and failure to exercise such option shall constitute a waiver of the minimum depth requirement


pursuant to (a) above.


Should option b) be exercised by GNPC then the Initial Exploration Period, First Extension Period


and Second Extension Period as applicable shall be extended by the Minister for such period of


time reasonably required by Contractor to drill the substitute Exploration Well including the time


necessary for consultation and preparation with GNPC.---..................---------------------------------------------


During the Exploration Period, Contractor shall have the right to perform additional Exploration


Operations subject to the terms of this Agreement, applicable law and approval by the JMC,


including without limitation performing gravity and magnetic surveys, drilling stratigraphic wells


and performing additional geological and geophysical studies, provided the Minimum Work


Obligations are completed within the applicable period and provided further that Contractor may


elect to perform such additional Exploration Operations in the absence of approval by the JMC


but only in the event of-a subsequent Commercial Discovery associated with such additional


Exploration Operations shall the costs of such Exploration Operations be considered allowable


Petroleum Costs for AOE purposes. Any such subsequent Cofnmercial Discovery shall be


treated hereunder in the same manner as if such Commercial Discovery had been made in


connection with operations that were not performed as sole risk operations, including, without


limitation, participation by GNPC in such Commercial Discovery.


4.10 During the Exploration Period, Contractor shall deliver to GNPC and the Minister reports on


Exploration Operations conducted during each Quarter within thirty (30) days following the end of


that Quarter. Further requests for information by the Minister under Section 9(1) of the Petroleum


Law shall be complied with within a reasonable time and copies of documents and other material


containing such information shall be provided to GNPC.


4.11 Upon Contractor decision not to exercise its option for a First Extension Period or Second


Extension Period, Contractor is relieved from any further Work Obligation relevant to any


subsequent Period as established under Article 4.3 above.





























































































































18


 ARTICLE 5


RELINQUISHMENT





5.1 Except as provided in Articles 5.2, 8.4, 8.9, 8.17, 8.18, 8.19 and 14.7 Contractor shall relinquish


portions of the Contract Area in the manner provided hereafter.


(a) If on or before the expiration of the Initial Exploration Period, Contractor elects to enter


into the First Extension Period pursuant to Article 3.3 then subject to Article 5.2 at the


commencement of the First Extension Period the area retained shall not exceed eighty


percent (80%) of the Contract Area as at the Effective Date;


(b) If on or before the expiration of the First Extension Period, Contractor elects to enter into


the Second Extension Period pursuant to Article 3.3 then subject to Article 5.2 at the


commencement of the Second Extension Period the Area retained shall not exceed sixty


percent (60%) of the Contract Area as of the Effective Date unless Contractor has


converted the Second Extension Period undertaking the commitment of a second


exploration well in which case Article 5.1(a) applies;


(c) On the expiration of the Second Extension Period, Contractor shall subject to Article 5,2


relinquish the remainder of the retained Contract Area.





5.2 The provisions of Article 5.1 shall not be read or construed as requiring ContractoV to relinquish


any portion of the Contract Area which, constitutes or forms part of either a Discovery Area


(excluding a Discovery Area determined by the terms of this Agreement to neither merit Appraisal


nor to be commercial) or a Development and Production Area; provided, however, that if at the


end of the Initial Exploration Period or the First Extension Period, as the case may be, Contractor


elects not to enter into the First or Second Extension Period Contractor shall relinquish the entire


Contract Area except for any Discovery Area; provided, further, that provision shall have been


made for the decommissioning, abandoning, removing or eliminating movable and immovable


assets acquired or used by the Contractor in such relinquished part of the Contract Area.





5.3 Each area to be relinquished pursuant to this Article shall be selected by Contractor and shall be


\ measured as far as possible in terms of continuous and compact units of a size and shape which


will permit the carrying out of Petroleum Operations in the relinquished portions.





I








1





























}








19











(


}


ARTICLE 6


JOINT MANAGEMENT COMMITTEE


In order that the Parties may at all times cooperate in the implementation of Petroleum





Operations, GNPC and Contractor shall not later than thirty (30) days after the Effective Date


establish a Joint Management Committee (JMC). Without prejudice to the rights and obligations


of Contractor for day-to-day management of the operations, the JMC shall oversee and supervise


the Petroleum Operations and ensure that all approved Work Programmes and Development


Plans are complied with and also that accounting for costs and expenses and the maintenance of


records and reports concerning the Petroleum Operations are carried out in accordance with this


Agreement and the accounting principles and procedures generally accepted in the international


Petroleum industry.


The composition of and distribution of functions within the JMC shall be as provided hereinafter.


,

, representatives of Contractor. GNPC and Contractor shall also designate a substitute or


alternate for each member. In the case of absence or incapacity of a member of the


JMC, such alternate shall automatically assume the rights and obligations.of the absent


or incapacitated member.


(b) ' The Chairperson of the JMC shall be designated by GNPC from amongst the members of


the JMC.


(c) Contractor shall be responsible in consultation with GNPC for the preparation of agenda


.....and supporting documents for each meeting of the JMC and for keeping records of the


.... meetings and decisions of the JMC. GNPC shall have the right to inspect all records of


' the JMC at any time. Contractor shall circulate the agenda and supporting documents for


each meeting to all members and the substitutes or alternates designated pursuant to


Article 6.2(a) above.


(d) At any meeting of the JMC four (4) representatives shall form a quorum provided that two


{2) of such representatives shall be representatives of GNPC and two (2) of such


representatives shall be representatives of the Contractor.


Meetings of the JMC shall be held and decisions taken as follows.


(a)


All meetings of the JMC shall be held in Accra or such other place as may be agreed


upon by members of the JMC.


(b) The JMC shall meet at least twice yearly and at such times as the members may agree.







days’ notice to the other or, in a case requiring urgent action, notice of such lesser


(d) duration as the members may agree upon.


Decisions of the JMC shall require unanimity.





(e) Any member of the JMC may vote by written and signed proxy held by another member;.


<0 . Decisions of the JMC may be made without holding a meeting if all representatives of


both Parties notify their consent thereto in the manner provided in Article 27.








20


 (g) GNPC and Contractor shall have the right to bring expert advisors to any JMC meetings


to assist in the discussions of technical and other matters requiring expert advice.


(h) The JMC may also establish such subcommittees as it deems appropriate for carrying


out its functions including:


(i) a technical subcommittee;





(ii) an audit subcommittee;





(iii) an accounting subcommittee; and


(iv) a contract and procurement subcommittee.





(i) Costs and expenses related to attendance by GNPC in or outside Accra, (e.g. travel,


transportation, lodging, per diem and insurance) in accordance with applicable laws,


regulations and GNPC policies and procedures shall be borne by Contractor and treated


as Petroleum Cost.


(j) GNPC shall provide documentary evidence of such costs and expenses.





6.4 The JMC shall oversee Exploration Operations as follows:


(a) Not later than ninety (90) days before the commencement of each Calendar Year,





Contractor shall prepare and submit to the JMC for its review and approval a detailed


Work Programme and Budget covering all Exploration Operations which Contractor


proposes to carry out in that Calendar Year and shall also give an indication of


Contractor's tentative preliminary exploration plans for the succeeding Calendar Year.


Where the Effective Date occurs later than 30 June in any Calendar Year Contractor shall


have the option of submitting a single detailed Work Programme and Budget covering the


remaining months of the Calendar Year in which the Effective Date occurs and the


succeeding Calendar Year.





(b) Upon notice to the Minister and GNPC, Contractor may amend any Work Programme 'or


Budget submitted to the JMC pursuant to this Article which notice will state why in


Contractor's opinion the amendment is necessary or desirable. Any such amendment


shall be submitted to the JMC for review and approval.





(c) Every Work Programme submitted to the JMC pursuant to this Article 6.4 and every


revision or amendment thereof shall be consistent with the requirements set out in


'1 ---.....Article'4;3" relatirrg 'to'Minimum Worlcand ■Expenditure'-forthe period of the Exploration


Period in which such Work Programme or Budget falls.





(d) Contractor shall report any Discovery to GNPC immediately following such Discovery and


the Contractor shall place before the JMC for review its Appraisal Programme prior to


submission thereof to the Petroleum Commission, a copy of which submission shall also


be sent to the Minister for informational purposes. Within thirty (30) days of completion of


the Appraisal Programme a JMC meeting to discuss the' results of the Appraisal


Programme shall be convened to take place before submission of the detailed Appraisal


report provided for in Article 8.8.





(e) The JMC will review Work Programmes and Budgets and any amendments or revisions


thereto, and Appraisal Programmes and any amendments or revisions thereto, submitted


to it by Contractor pursuant to this Article 6, and timely give such advice as it deems


appropriate which Contractor shall consider before submitting the Work Programmes and





21 4A


 Budgets or Appraisal Programmes, as applicable, for approvals required by. law or


pursuant to this Agreement.





(f) After the date of the first Commercial Discovery, Contractor shall seek the concurrence of


GNPC's JMC representatives, which concurrence shall not be unreasonably withheld, on


any proposal for the drilling of an Exploration Well or Wells not associated with the


Commercial Discovery and not otherwise required to be drilled under Article 4.3. If


concurrence is not secured by Contractor, Contractor may nevertheless elect to drill the


Exploration Well or Wells but only in the event of a subsequent Commercial Discovery


associated with the Well or Wells shall the costs of such Well or Wells be considered


Petroleum Costs for AOE purposes and deductible cost for Ghana income tax purposes.


Any such subsequent Commercial Discovery shall be treated hereunder in the same


manner as if such Commercial Discovery had been made in connection with operations


that were not performed as sole risk operations, including, without limitation, participation


by GNPC in such Commercial Discovery. If-


1


6.5 From the Date of Commercial Discovery the JMC shall have supervision of Petroleum Operations


as follows:


(a) Within sixty (60) days after the Date of Commercial Discovery Contractor shall prepare





and submit to the JMC for approval any revisions to its annual Work Programme and


Budget that may be necessary for the remainder of that Calendar Year anddor the rest of


the Exploration Period.


. . M- ..


(b) At least ninety (90) days before the Commencement of each subsequent Calendar Year


Contractor shall submit to the JMC for review and approval a detailed Work Programme


and Budget setting forth all Development and Production Operations which Contractor


; proposes to carry out in that Calendar Year and the estimated cost thereof and shall also


, give an indication of Contractor’s plans for the succeeding Calendar Year.


(c) Within sixty (60) days of the Date of. Commencement of Commercial Production and





thereafter not later than one hundred and twenty (120) days before the commencement


of each Calendar Year Contractor shall submit to the JMC for its approval an annual


production schedule which shall be in accordance with International Good Oilfield


Practice, and shall be designed to provide the most efficient, beneficial and timely


production of the Petroleum resources. I





6.6 Lifting schedules for Development and Production Areas shall be subject to JMC approval. ; !j





6.7 The JMC shall review all of Contractor's reports on the conduct of the Petroleum Operations.





6.8 Contractor’s insurance programme and the programmes for training and technology transfer


submitted by Contractor and the accompanying budgets for such schemes and programmes shall


be subject to JMC approval.





6.9 Except as otherwise agreed in writing by the parties, the JMC shall have exclusive authority and


discretion to:





(a) review and approve tender procedures, including without limitation determining the terms


and conditions of competitive tender procedures, reasonable pre-qualification criteria for


bidders and the forms of contract therefor and certifying the winner of such tenders;





(b) where required in accordance with such approved tender procedures:


My '





Pd ;


22











i


i


 (i) review and approve the award of all Major Contracts and contracts for Market


Related Services;


(ii) review and approve all Material Contract Amendments; and





(iii) acting through a contract and procurement subcommittee: (1) review and


approve the award of all Project Contracts (other than Major Contracts) under


which the Consideration exceeds US$1,000,000; (2) review and approve any


Project Contract Amendments related thereto; and (3) review and comment on


the compliance of any such Project Contract with any local content requirements


of this Agreement or of Ghanaian law in effect from time to time;








(c) appoint such other subcommittees as it shall deem appropriate, each such subcommittee


having such authority as is delegated to it by the JMC in accordance with this Agreement


and related documents; and


(d) consider and rule upon any other procurement or contract award matter under this


Agreement,


-4


provided that all matters coming before the JMC pursuant to this Article 6.9 shall be presented


and decided separately from decisions with respect to prpposed modifications of the


Development Plan or proposed annual Work Programmes and Budgets (or amendments thereto)


pursuant to Article 6.4.


6.10 Contractor shall provide GNPC ten (10) Business Days’ prior written notice of the award of a


Project Contract when such award:


(a) has not been approved by the JMC or the contract and procurement subcommittee, as


applicable;


(b) does not result from a JMC-approved tendering process; a


(c) would result In the award of more than one Project Contract with the same vendor or


Affiliates of such vendor for (i) the same, substantially similar or interchangeable goods,


or (ii) the same, substantially similar or equivalent services, within the same Contract


Award Period and, in such case, would result in the aggregate value of such Project


Contracts exceeding the thresholds for Major Contracts.


In the event that such a notice is required, such.....notice shall set out the commercial, financial,


technical or operational reason for which the Contractor believes that the award of a separate


contract to the same vendor is justified, without prejudice to GNPC's right to review such reasons.


6.11 If during any meeting of the JMC the Parties are unable to reach agreement concerning any of


the matters provided for in Article 6.5, 6.6, 6.7, 6.8 and 6.9, the matter shall be deferred for


reconsideration at a further meeting to be held not later than fifteen (15) days following the


original meeting. If after such further meeting the Parties are still unable to reach agreement, the


matter in dispute shall be referred to the Parties forthwith. Failing agreement within fifteen (15)


days thereafter, the matter in dispute shall, at the request of any Party, be referred for resolution


under Article 24.7 utilizing a pendulum arbitration process if the Parties agree such process is


appropriate in the circumstances, and the relevant exploration period shall be extended for the


duration of the dispute resolution process.











23


 ARTICLE 7


RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC





7.1 Subject to the provisions of this Agreement, Contractor shall be responsible for the conduct of


Petroleum Operations and shall perform its obligations in a workmanlike manner, with due care


and expedition and in accordance with International Good Oil Field Practice, including without


prejudice to the generality of the foregoing:





{a) conduct Petroleum Operations with utmost diligence, efficiency and economy, in pjf


accordance with best international Petroleum industry practices, observing sound |


technical and engineering practices using appropriate advanced technology and effective f


equipment, machinery, materials and methods;


1


(b) take all practicable steps to ensure compliance with Section 3 of the Petroleum Law; |


including ensuring the recovery and prevention of waste of Petroleum in the Contract -


Area in accordance with best international Petroleum industry practices; |


$|


}f.


■(c) prepare and maintain in Ghana full and accurate records of all Petroleum Operations f,


performed under this Agreement;


(d) prepare and maintain accounts of all operations under this Agreement in such a manner I


as to present a full and accurate record of the costs of such Petroleum Operations, in


accordance with, the Accounting Guide; and I





(e) disclose to GNPC and the Minister any operating or other agreement among the Parties


that constitute Contractor relating to the Petroleum Operations hereunder, which


agreement shall not be inconsistent with the provisions of this Agreement.





7.2 In connection with its performance of Petroleum Operations, Contractor shall have the right within


the terms of and pursuant to applicable law and regulations:





(a) to establish offices in Ghana and to assign to those offices such representatives as it


shall consider necessary for the purposes of this Agreement;


(b) to use public lands for installation and operation of shore bases, and terminals, harbours





and related facilities, petroleum storage and processing, pipelines from fields to terminals


and delivery facilities, camps and other housing;


■(c) to receive licenses and permission to install and operate such communications and


transportation facilities as shall be necessary for the efficiency of its operations;





(d) to bring to Ghana, provided there are no Ghanaian citizens with the requisite skill and


experience, such number of Foreign National Employees as shall be necessary for its


operations, including employees assigned on permanent or resident status, with or


without families, as well as those assigned on temporary basis such as rotational


employees;


(e) to provide or arrange for reasonable housing, schooling and other amenities, permanent


and temporary, for its employees and to import personal and household effects, furniture


and vehicles, for the use of its personnel in Ghana;





(f) to be solely responsible for provision of health, accident, pension and life insurance


benefit plans on its Foreign National Employees and their families; and such employees





24 c




















I


 shall not be required to participate in any insurance, compensation or other employee or


social benefit programs established in Ghana;


(g) to have, together with its personnel, at all times the right of ingress to and egress from its





offices in Ghana, the Contract Area, and the facilities associated with Petroleum


Operations hereunder in Ghana including the offshore waters, using its owned or


chartered means of land, sea and air transportation;


(h) to engage such Subcontractors, expatriate and national, including also consultants, and


to bring such Subcontractors and their personnel to Ghana as are necessary in order to


carry out the Petroleum Operations in a skillful, economic, safe and expeditious manner;


and said Subcontractors shall have the same rights as Contractor specified in this


Article 7.2 to the extent they are engaged by Contractor for the Petroleum Operations


hereunder.


7.3 GNPC shall assist Contractor in carrying out Contractor’s obligations expeditiously and efficiently





as stipulated in this Agreement, and in particular GNPC shall assist the Contractor Parties, and


the relevant Subcontractors as long as they appropriately complete applicable procedures and


other requirements prescribed by relevant authorities to:


(a) establish supply bases and obtain necessary communications facilities, equipment and


supplies;





(b) obtain necessary approvals to open bank accounts in Ghana;


(c) subject to Article 21 hereof, obtain entry visas and work permits or any other


documentation that may be required from time to time for such number of Foreign


National Employees of Contractor and its Subcontractors engaged in Petroleum


Operations and members of their families who will be resident in Ghana, and make


arrangements for their travel, arrival, medical services and other necessary amenities;





(d) obtain permits for the importation of necessary materials;


(e) obtain the necessary permits to transport documents, samples or other forms of data to


foreign countries for the purpose of analysis or processing if such is deemed necessary


for the purposes of Petroleum Operations;


(f) contact Government agencies dealing with fishing, meteorology, navigation and


communications as required; and


------(g)----------identify qualified Ghanaian personnel as candidates for employment by Contractor in





Petroleum Operations; and procure access on competitive commercial terms for the


storage, processing, transportation and/or marketing of Petroleum produced under this


Agreement through facilities owned by the State, GNPC (or its Affiliates) or any third


party.





7.4 All reasonable and documented expenses incurred by GNPC in connection with any of the


matters set out in Article 7.3 above shall be borne by Contractor,


7.5 GNPC shall grant assistance to the Contractor in emergencies and major accidents, and such


other assistance as may be requested by Contractor, provided that any reasonable expenses


involved in such assistance shall be borne by Contractor.











25


 ARTICLE 8


COMMERCIALITY





8.1 Contractor shall submit a Discovery Notice to the Minister, Petroleum Commission and GNPC as


soon as possible after any Discovery is made, but in any event not later than thirty (30) days after


the date any such Discovery is made.


8.2 As soon as possible after the analysis of the test results of such Discovery is complete and in any


event not later than one hundred (100) days from the date of such Discovery, Contractor shall by


a further notice in writing to the Minister and Petroleum Commission indicate whether in the


opinion of Contractor the Discovery merits Appraisal.


8.3 Where the Contractor does not make the indication required by Article 8.1 above within the period


indicated or indicates that the Discovery does not merit Appraisal, Contractor shall, subject to


Article 8.18 and 8.20 below, relinquish the Discovery Area associated with the Discovery.


8.4 Where Contractor indicates that the Discovery merits Appraisal, Contractor shall within one


hundred and eighty (180) days from the date of such Discovery submit to the Petroleum


Commission for approval and to the Minister for information purposes an Appraisal Programme to


be carried out by Contractor in respect of such Discovery. For the avoidance of doubt unless


otherwise instructed by the Minister, Contractor shall conduct a separate Appraisal for each


Discovery where Contractor indicates that such Discovery merits Appraisal.


8.5 In the absence of regulations of general application otherwise governing the process, the


Petroleum Commission and the Contractor shall adhere to the following procedure in connection


with the submission for approval of an Appraisal Programme. The Petroleum Commission shall


within thirty (30) days of submission of the Appraisal Programme, give the Contractor a notice in


writing stating:


(a) whether or not the Appraisal Programme has been approved or conditionally approved;


(b) any revisions or improvements required by the Petroleum Commission to be made to the


proposed Appraisal Programme, and the reasons thereof; or


(c) if conditionally approved, the conditions for approval of the proposed Appraisal


Programme.





If the Petroleum Commission does not provide such notice after the thirty (30) day time period


described above then the Appraisal Programme shall be deemed not approved. In the event of


any dispute arising out this Article 8.5, Contractor may lodge a complaint with the Minister within


thirty (30) days after receipt of such notice or the date deemed not approved, as applicable. If


such dispute is not resolved by the Minister within thirty (30) days from the date such complaint


was lodged, such dispute shall be resolved in accordance with Article 24.


If the Petroleum Commission has not given a notice in writing pursuant to this Article, then the


arbitration panel shall determine whether the Petroleum Commission’s failure to give such notice


was reasonable and lawful. If the Petroleum Commission has given a notice in writing pursuant to


this Article, and the Parties cannot agree on the revisions or conditions, then the arbitration panel


shall determine whether the Petroleum Commission's giving such revisions or conditions


proposed was reasonable and lawful.














26


 8.6 Where Contractor seeks to amend an approved Appraisal Programme, it shall submit such


amendment to the JMC for review pursuant to Article 6.4(e) before submission to the Petroleum


Commission for approval.





Unless Contractor and the Minister otherwise agree in any particular case, Contractor shall have


a period of two (2) years from the date of Discovery to complete the Appraisal Programme.


8.7 In the event Contractor requires a period of more than the two (2) years to complete the Appraisal





Programme, Contractor shall submit a request to the Minister for an extension with a firm


programme with timelines to justify the request. Contractor shall commence the Appraisal


Programme within one hundred and fifty (150) days from the date of approval of the Appraisal


Programme by the Petroleum Commission. Where the Contractor is unable to commence


Appraisal within one hundred and fifty (150) days from the date of approval of the Appraisal


Programme by the Petroleum Commission, GNPC shall be entitled to exercise the option


provided for in Article 9.1 to enable prompt Appraisal, provided however that after Contractor


actually embarks on Appraisal work or obtains an extension of time for such work this option may


not be exercised.





8.8 Not later than ninety (90) days from the date on which said Appraisal Programme relating to the


Discovery is completed Contractor will submit to the Minister and the Petroleum Commission a


. report containing the results of the Appraisal Programme. Such report shall include all available


; technical and economic data relevant to a determination of commerciality, including, but not


limited to, geological and geophysical conditions, such as structural configuration, physical


• properties and the extent of reservoir rocks, areas, thickness and depth of pay zones, pressure,


volume and temperature analysis of the reservoir fluids; preliminary estimates of Crude Oil and/or


Natural Gas reserves; recovery drive characteristics; anticipated production performance per


reservoir and per well; fluid characteristics, including gravity, sulphur percentage, sediment and


water percentage and refinery assay pattern.


8.9 Not later than ninety (90) days from the date on which said Appraisal Programme is completed





Contractor shall, by a further notice in writing, inform the Minister whether the Discovery in the


opinion of Contractor is or is not a Commercial Discovery. *


8.10 If Contractor fails to notify the Minister as provided in Article 8.1 or informs the Minister that the


Discovery is not commercial, then subject to Article 8.19, Contractor shall relinquish such


Discovery Area; provided, however, that in appropriate cases, before declaring that a Discovery is


not commercial, Contractor shall consult with the other Parties and may make appropriate


representations proposing minor changes in the fiscal and other provisions of this Agreement


which may, in the opinion of Contractor, affect the determination of commerciality. The other


1 Parties may, where feasible, and in the best interests of the Parties agree to make such changes


_____________or modifications in the existing .arrangements__________________________________________________________________________________________-.....................-...................


') 8.11 If Contractor pursuant to Article 8.9 informs the Minister that the Discovery is a Commercial


Discovery, Contractor shall not later than one hundred and eighty (180) days thereafter, prepare


and submit to the Minister a Development Plan.


8.12 The Development Plan referred to in Article 8.11 shall be based on detailed engineering studies


)


1 and shall include;


l





(a) Contractor's proposals for the delineation of the proposed Development and Production


Area and for the development of any reservoir(s), including the method for the disposal of


(b) Associated Gas in accordance with the provisions of Article 14.4;





} the way in which the Development and Production of the reservoir is planned to be


financed;





*


27


Contractor's proposals relating to the spacing, drilling and completion of wells, the


production, storage, processing, transportation and delivery facilities required for the


production, storage and transportation of the Petroleum, including without limitation:


(i) the estimated number, size and production capacity of production platforms if


any;


(ii) the estimated number of Production Wells;


(iii) the particulars of feasible alternatives for transportation of the Petroleum,


including pipelines;


(iv) the particulars of onshore installations required, including the type and


specifications or size thereof; and


(v) -the particulars of other technical equipment required for the operations;


the estimated production profiles for Crude Oil and Natural Gas from the Petroleum


reservoirs

treated as a failure to carry out the terms of the Development Plan);


tie-ins with other petroleum fields where applicable;


information on operation and maintenance;


a description of technical solutions including enhanced recovery methods;


estimates of capital and operating expenditures;


the economic feasibility studies carried out by or for Contractor in respect of alternative


methods for Development of the Discovery, taking into account:


(i) location;


(ii) water depth (where applicable);


(iii) meteorological conditions;


(iv) estimates of capital and operating expenditures; and


(v) any other relevant data and evaluation thereof;


the safety measures to be adopted in the course of the Development and Production


Operations, including measures to deal with emergencies;


the necessary measures to be taken for the protection of the environment;


Contractor's proposals with respect to the procurement of goods and services obtainable


in Ghana;





Contractor's technology transfer plan





Contractor's plan for training and employment of Ghanaian nationals;





the timetable for effecting Development Operations; and


(р) a plan for decommissioning and abandonment.


8.13 The date of the Minister’s approval of the Development Plan shall be the Date of Commercial


Discovery.


8.14 The Minister shall within sixty (60) Days following submission of the Development Plan give


Contractor a notice in writing stating:





(a) whether or not the Development Plan as submitted has been approved or conditionally


approved;


(b) any revisions proposed by the Minister to the Development Plan as submitted, and the


reasons thereof; or


(с) if conditionally approved, any conditions pursuant to which the Development Plan is


approved.





If the Minister has not approved the Development Plan within ninety (90) Days following the


submission of the Development Plan by the Contractor and thirty (30) days following a second


notice from Contractor requesting the Minister’s approval, such Development.Plan shall be


deemed not approved.


8.15 Where the Development Plan is not approved by the Minister as provided under Article 8.14





above, the Parties shall within a period , of thirty (30) days from the date of the notice by the


Minister as referred to under Article 8.14 above meet to agree on the revisions or conditions


proposed by the Minister to the Development Plan. In the event of failure to agree to the


proposed revisions or conditions, within fourteen (14) days following said meeting any matters in


dispute between the Minister and the Contractor shall be referred for resolution in accordance


with Article 24.7. Any arbitration commenced pursuant to such Article may utilize a pendulum


arbitration process if the Parties agree such process is appropriate in the circumstances. The


relevant exploration period shall be extended for the duration of the dispute resolution process. If


the Minister has not given a notice in writing pursuant to Article 8.14, then the arbitration pane!


shall determine whether the Minister's failure to give such notice was reasonable and lawful. If the


Minister has given a notice in writing pursuant to Article 8.14(b) or 8.14(c), and the Parties cannot


agree on the revisions or conditions, then the arbitration panel shall determine whether the


Minister’s giving such revisions or conditions proposed was reasonable and lawful.


8.16 Where the issue in dispute referred for resolution pursuant to Article 24 is finally decided in favour


of Contractor the Minister shall forthwith give the requisite approval to the Development Plan


submitted by Contractor.





8.17 Where the issue in question referred for resolution pursuant to Article 24 is finally decided in


favour of the Minister, Contractor shall forthwith:


(a) amend the proposed Development Plan to give effect to the final decision rendered under


Article 24, and the Minister shall give the requisite approval to such revised Development


Plan; or


(b) subject to Article 8.19 below relinquish the Discovery Area.





8.18 Notwithstanding the relinquishment provisions of Articles 8.2 and 8.10 above, if Contractor


indicates that a Discovery does not at the time merit Appraisal, or after Appraisal does not appear


to be a Commercial Discovery but may merit Appraisal or potentially become a Commercial


Discovery at a later date during the Exploration Period, then Contractor need not relinquish the ^


Discovery Area and may continue its Exploration Operations in the Contract Area during the r





29


Exploration Period; provided that the Contractor shall explain to the Petroleum Commission or the if


Minister as applicable what additional evaluations, including Exploration work or studies or


marketing studies, are or may be planned in order to determine whether subsequent Appraisal is


warranted or that the Discovery is commercial. Such evaluations shall be performed by


Contractor according to a specific time table approved by the JMC, subject to its right of earlier il


relinquishment of the Discovery Area. After completion of the evaluations, Contractor shall make i


the indications called for under Article 8.4 or 8.9 and either proceed with Appraisal, confirm


commerciality or relinquish the Discovery Area. In any case, if a Discovery is made in the Initial


Exploration Period or First Extension Period, the Contractor shall by the end of the subsequent


phase (that is the First Extension Period or Second Extension Period as the case may be), take a


decision -to appraise the Discovery or relinquish such Discovery. Likewise, if the Contractor has i;


completed the Appraisal of a Discovery in the Initial Exploration Period or First Extension Period,


the Contractor shall by the end of the subsequent phase (that is, the First Extension Period or


Second Extension Period as the case may be), take a decision to determine commerciality or





relinquish such Discovery. If at the end of the Exploration Period the Contractor has neither


indicated its intent to proceed with an Appraisal Programme nor declared the Discovery to be a


Commercial Discovery, then the Discovery Area shall be relinquished.





8.19 Upon completion of an Appraisal Programme and before Contractor makes a determination of


non-commerciality; Contractor may consult with the other Parties and may make, appropriate


representations proposing minor changes in the fiscal and other provisions of this Agreement


which may, in the opinion of Contractor, affect the determination of commercially.^'The other


Parties may, agree to make such changes or modifications in the existing arrangements. In the \


event the Parties do not agree on such changes or modifications, then subject to Articles 8.18


and 8.20, Contractor shall relinquish the Discovery Area.





8.20 Nothing in Articles 8.4, 8.10, 8.17 or 8.18 above shall be read or construed as requiring


Contractor to relinquish: ®





(a) any area which constitutes or forms part of another Discovery Area in respect of which: III


n


•(i) Contractor has given the Minister a separate notice stating that such Discovery


merits Appraisal; or if


11


(ii) Contractor has given the Minister a separate notice indicating that such *


Discovery is a Commercial Discovery; or j


(b) any area which constitutes or forms part of a Development and Production Area. II j





8.21 In the event a field extends beyond the boundaries of the Contract Area, the Minister, may require p


the Contractor to exploit said field in association with the third party holding the rights and j I


obligations under a petroleum agreement covering the said field (or GNPC as the case may be).


The exploitation in association with said third party or GNPC shall be pursuant to good unitization


and engineering principles and in accordance with best international petroleum industry practices.





8.22 For the avoidance of doubt, where Contractor makes a Discovery after the expiration of the


Exploration Period Contractor shall notify the Minister of such Discovery pursuant to Article 8.1


and surrender such Discovery to GNPC.


























30














i


;











ARTICLE 9


SOLE RISK ACCOUNT





9.1 (a) The exercise by GNPC of its Sole Risk rights under this Article 9 shall be performed in a


manner which does not prevent Contractor from complying with its Minimum Work


Obligations under Article 4.3, an Appraisal Programme or a Development Plan and, in the


event that GNPC has nominated Contractor and Contractor has agreed to perform the


Sole Risk operations on behalf of GNPC, shall include a financing plan satisfactory to


Contractor.





(b) GNPC shall not conduct any Sole Risk Operations within the boundaries of a Development


and Production Area or a Discovery Area (except as contemplated in Article 8.7),


provided that GNPC may conduct the drilling of a well on a Sole Risk basis to:


(i) a deeper formation than the forrnation(s) from which production is expected to


occur from a Development and Production Area or a Discovery Area, or





(ii) a shallower formation than the formation(s) from which production is expected to


occur from a Development and Production Area or a Discovery Area and to a


reservoir which has not been penetrated by a non-Sole Risk well,


in either case without affecting rights of the Parties to the formation(s) from which


production is expected to occur from a Development and Production Area or a Discovery


Area.





9.2 Where an Appraisal undertaken under Article 9.1 above at the Sole Risk of GNPC results in a


determination that a Discovery is a Commercial Discovery, Contractor may develop the


Commercial Discovery, upon reimbursement to GNPC of all expenses incurred in undertaking the


Appraisal and after arranging with GNPC satisfactory terms for the payment of a premium


equivalent to seven hundred per cent (700%) of such expenses. Such premium shall not! be


reckoned as cost of Petroleum Operations for the purpose of the Accounting Guide. In the event


that Contractor declines to develop said Discovery, Contractor shall relinquish the Development


and Production Area, established by the Appraisal Programme conducted by GNPC under


Article 9.1.





9.3 During the Exploration Period GNPC may, at its Sole Risk, require Contractor to continue drilling


to penetrate and test horizons deeper than those contained in the Work Programme of Contractor


or required under Article 4, GNPC may also at its Sole Risk ask the Contractor to test a zone or


“..................‘"' zones"which Contractor has not included in Contractor’s test programme. Notice of this shall be


given to Contractor in writing as early as possible prior to or during the drilling of the well, but in


any case not after Contractor has begun work to complete or abandon the well. The exercise by


GNPC of this right shall be in an agfeed manner which does not prevent Contractor from


complying with its work obligations under Article 4.3.


9.4 At any time before commencing such deeper drilling Contractor may elect to embody the required


drilling in its own Exploration Operation, in which case any resulting Discovery shall not be


affected by the provisions, of this Article.


9.5 Where any Sole Risk deeper drilling results in a Discovery, GNPC shall have the right, at its Sole


Risk, to appraise, develop, produce and dispose of all Petroleum from that deeper horizon and


shall conduct such Sole Risk operations unless GNPC proposes otherwise and Contractor


agrees. Provided however that if at the time such Petroleum is tested from the producing horizon





31


in a well, Contractor's Work Programme includes a well or wells to be drilled to the same


producing horizon, and provided that the well or wells drilled by Contractor results) in a


Petroleum producing well producing from the same horizon, Contractor shall, after reimbursing


GNPC for all costs associated with its Sole Risk deeper drilling in said well, have the right to


include production from that well in its total production for the purposes of establishing a


-Commercial Discovery, and, if a Commercial Discovery is subsequently established, to develop,


produce and dispose of the Petroleum in accordance with the provisions of this Agreement.


‘9.6 . Alternatively, if at the time such Petroleum is tested from a producing horizon in a well pursuant to


a Sole Risk operation Contractor's Work Programme does not include a well to be drilled to said


horizon, Contractor has the option to appraise and /or develop, as the case may be, the


Discovery for its account under the terms of this Agreement if it so elects within a period of sixty


(60) days after such Discovery. In such case, Contractor shall reimburse GNPC for all expenses


incurred by GNPC in connection with such Sole Risk operations, and shall make satisfactory


arrangements with GNPC for the payment of a premium equivalent to seven hundred percent


(700%) of such expenses.


9.7 During the term of this Agreement, GNPC shall have the right, at its Sole Risk, and upon six (6)


months prior notice to Contractor, to drill one (1) or two <2) wells per Calendar Year within the


Contract Area provided that the work intended to be done by GNPC had not been scheduled for a


Work Programme to be performed by Contractor and the exercise of such right by GNPC and the


arrangement made by GNPC for undertaking such drilling do not prevent Contractor from


satisfying its work obligations. Within thirty (30) days after receipt of such notice Contractor may


elect to drill the required well or wells as part of Contractor’s Exploration Operations.


9.8 In the event that a well drilled at the Sole Risk of GNPC in accordance with Article 9.7 above


results in a Discovery, GNPC shall have the right to appraise and develop as the case may be or


require Contractor to develop, after GNPC declares a Commercial Discovery, such Commercial


Discovery for a mutually agreed service fee, so long as Contractor has an interest in the Contract


Area, GNPC taking all the interest risk and costs and hence having the right to all Petroleum


produced from the Commercial Discovery, provided however that Contractor has the option to


appraise and/or develop, as the case may be, the Discovery for its account under the terms of


this Agreement if it so elects within a period of sixty (60) -days after receipt of GNPC’s written


notice of such Discovery.


9.9 . Contractor shall reimburse GNPC for all expenses incurred by GNPC in connection with such


Sole Risk operations, and shall make satisfactory arrangements with GNPC for the payment of a


premium equivalent to seven hundred percent (700%) of such expenses before exercising the


option under Article 9.7 above. Such premium shall not be reckoned as Petroleum Costs for the


purposes of the Accounting Guide.


9.10 In the event that Contractor declines to develop the Commercial Discovery or no agreement is


reached on the service fee arrangement as provided for in Article 9.8 above, Contractor shall


relinquish the Development and Production Area associated with such Commercial Discovery.


9.11 Sole Risk operations under this Article 9 shall not extend the Exploration Period nor the term of


this Agreement and Contractor shall complete any agreed programme of work commenced by it


under this Article at GNPCs Sole Risk, and subject to such provisions hereof as the Parties shall


then agree, even though the Exploration Period as defined in Article 3 or the term of this


Agreement may have expired.





9.12 GNPC shall indemnify and hold harmless Contractor against all actions, claims, demands and


proceedings whatsoever brought by any third party or the State, arising out of or in connection


with Sole Risk operations under this Article 9, unless such actions, claims, demands and


proceedings are caused by Contractor’s negligence or wilful misconduct.





32


 ARTICLE 10


SHARING OF CRUDE OIL





Gross Production of Crude Oil from each Development and Production Area shall (subject to a


Calendar Year adjustment developed under the provisions of Article 10.7) be distributed amongst


the Parties in the following sequence and proportions:


(a) ten percent (10%) of the Gross Production of Crude Oil shall be delivered to the State as


ROYALTY, pursuant to the provisions of the Petroleum Law. Upon notice to Contractor,


the State shall have the right to elect to receive cash in lieu of its royalty share of such


Crude Oil. The State’s notice shall be given to Contractor at least ninety (90) days in


advance of each lifting period, such periods to be established pursuant to the provisions


of Article 10.7 below. In such case, said share of Crude Oil shall be delivered to


Contractor and it shall pay to the State the value of said share in cash at the relevant


weighted average Market Price for the relevant period as determined in accordance with


Article 11.7;


(b) After distribution of such Royalty as required pursuant to Article 10.1(a), an amount of


Crude Oil, shall be delivered to GNPC to the extent it is entitled for Sole Risk operations,


if any, under Article 9;


(c) After distribution of such amounts of Crude Oil as are required pursuant to


Articles 10.1(a) and 10.1(b) and the remaining Crude Oil produced from each


Development and Production Area shall be distributed to Contractor and, subject to


Article 10.1(e) below, to GNPC on the basis of their respective Participating Interests


pursuant to Article 2;


(d) The State's AOE (as hereinafter defined), if any, shall be distributed to the State out of


the Contractor's share of Crude Oil determined under Article 10.1(d). The State; shall also


have the right to elect to receive cash in lieu of the AOE share of Crude Oil accorded to it


pursuant to Article 10.2 below. Notification of said election shall be given in 'the same


notice in which the State notifies Contractor of its election to receive cash in lieu of Crude


Oil under Article 10.1(a) above. In such case, said Crude Oil share shall be delivered to


Contractor and it shall pay to the State the value of said share in cash at the relevant


weighted average Market Price for the relevant period as determined in accordance with


Article 11.7; and


(e) In the event that GNPC has failed to pay any amounts due to Contractor pursuant to


-------------- -- Aftiele--15"2--oHhiS"-Agreement-(such-amountS“with interest thereon in accordance with


Article 26.4 being hereinafter called "Default Amounts”) and for so long as any such


advances and interest thereon remain unrecovered by Contractor, an amount of Crude


Oil shall be delivered to GNPC sufficient in value to reimburse for its share of Production


Costs paid by it to that date, if any, until such share of Production Costs has been fully


reimbursed to it, after which a volume of Crude Oil shall be delivered to Contractor


equivalent in value to the outstanding amounts of the aforesaid Default Amounts until


such Default Amounts are fully recovered by Contractor. The value of the Crude Oil for


the purpose of this Article 10 shall be the Market Price determined pursuant to


Article 11.7.


At any time the State shall be entitled to a portion of Contractor's share of Crude Oil then being


produced from each separate Development and Production Area (hereinafter referred to as


"Additional Oil Entitlements” or "AOE”) on the basis of the after-tax inflation-adjusted rate of


return ("ROR") which Contractor has achieved with respect to such Development and Production


Area as of that time. Contractor’s ROR shall be calculated on its NCF and shall be determined





33


separately for each Development and Production Area at the end of each Month in accordance


with the following computation:


(a) Definitions:





"NCF” means Contractor’s net cash flow for the Month for which the calculation is being





made, and shall be computed in accordance with the following formula:


NCF = x-y-z








where





"x" equals all revenues received during such Month by Contractor from the Development


and Production Area, including an amount computed by multiplying the amount of Crude


Oil taken by Contractor during1 such Month in accordance with Articles 10.1(c)


and 10.1(e); excluding such Crude Oil taken by Contractor for payment advances and of


interest in respect of Petroleum Costs incurred by Contractor on GNPC’s behalf as well


as the Default Amount (if any), by. the Market Price applicable to such Crude Oil during


the Month when lifted, plus any other proceeds specified in the Accounting Guide


received by Contractor, including, without limitation, the proceeds from the sale of any


assets to which Contractor continues to have title. For the avoidance of doubt, “x” shall


not include revenues from Crude Oil lifted by Contractor which is part of another Party's


entitlement (e.g. Royalty, AOE Oil delivered to Contractor because the State has elected


to receive cash in lieu of Crude Oil, Crude Oil purchased by Contractor from GNPC or the


State) but shall include revenues from Crude Oil owned by Contractor but lifted by


another Party (e.g. Crude Oil purchased by GNPC or the State from Contractor).


“y" equals one-twelfth (1/12) of the income tax paid by the Contractor to the State with


respect to the Calendar Year in respect of the Development and Production Area. If


there are two (2) or more Development and Production Areas, the total income tax paid


by Contractor in accordance with the Petroleum Income Tax Law 1987 shall for purposes


of this calculation be allocated to the Development and Production Area on the basis of


hypothetical tax calculations for the separate Development and Production Areas. The


hypothetical tax calculation for each Development and Production Area shall be


determined by allocating the total amount of tax incurred for each Calendar Year by


Contractor under the Petroleum Income Tax Law to each Development and Production


Area based on the ratio that the chargeable income from a given Development and


Production Area bears to the total chargeable income of Contractor. The chargeable


income of Contractor is determined under section 2 of the Petroleum Income Tax Law


and the chargeable income of a Development and Production Area shall be calculated by


deducting from the gross income derived from or allocated to that Area those expenses


deductible under section 3 of the Petroleum Income Tax Law which are reasonably


allocable to that Area. A negative chargeable income for an Area shall be treated as zero


for purposes of this allocation and not more (or less) than the total income tax paid by


Contractor shall be allocated between the Areas.





“z" equals all Petroleum Costs specified in the Accounting Guide and expended by


Contractor during such Month with respect to the Development and Production Area,


including any Petroleum Costs paid by Contractor on GNPC’s behalf, and not reimbursed


by GNPC within the Month, provided that all Petroleum Costs for Exploration Operations


not directly attributable to a specific Development and Production Area shall for purposes


of this calculation be allocated to the Development and Production Area having the


earliest date of Commencement of Commercial Production; and provided further that for


the purpose of the ROR calculation Petroleum Costs shall not include any amounts in


respect of interest on loans obtained for the purposes of carrying out Petroleum


Operations.





34


 "FAn", “SAn”, "TAn” , “YAn'' and "ZAn” means First Account, Second Account, Third


Account, Fourth Account and Fifth Account, respectively, and represent amounts as of


the last day of the Month in question as determined by the formulae in (b) below.





“FAn-1”, “SAn.i''. “TAn-i”, "YAn.i” and “ZAnY', respectively, mean the lesser of (i) the FAn,


SAn, TAn, Yan or ZAn, as the case may be, as of the last day of the Month immediately


preceding the Month in question, or (ii) zero. Stated otherwise, FAn-i shall equal FAn as


of the last day of the Month immediately preceding the Month in question if such FAn was


a negative number, but shall equal zero if such FAn was a positive number. Likewise,


SAn-i shall equal SAn as of the last day of the Month immediately preceding the Month in


question if such SAn was a negative number, but shall equal zero if such SAn was a


positive number. Likewise TAn.i shall equal TAn as of the last day of the Month


immediately preceding the Month in question if such TAn was a negative number, but


shall equal zero if such TAn was a positive number. Likewise YAn.-i shall equal YAn as of


the last day of the Month immediately preceding the Month in question if such YAn was a


positive number. Likewise, ZA^ shall equal ZAn as of the last day of the Month


immediately preceding the Month in question if such ZAn was a negative number, but


shall equal zero if such ZAn was a positive number. In the ROR calculation for the first


Month of Petroleum Operations, FAn.1t SAn.!, TAn.i, YAn-i and ZAn.i shall be zero.


“i" for the Month in question equals one (1) subtracted from the quotient of the United





States Industrial Goods Wholesale Price Index ("USIGWPI") for the Month second


preceding the Month in question as first reported in the International Financial statistics of


the International Monetary Fund, divided by the USIGWPI for the same second preceding


Month of the immediately preceding Calendar Year as first reported in the International


Financial Statistics of the International Monetary Fund. If the USIGWPI ceases to be


published, a substitute U.S. Dollar-based price index shall be used.


"n" refers to the nth Month in question.





“n-1" refers to the Month immediately preceding the nth Month


(b) Formulae:





FAn = NCF











SAn = + ---NCF





In the calculation of SAn an amount shall be subtracted from NCF identical to the value of


any AOE which would be due to the State if reference were made hereunder only to the


FAn.





TAn = + NCF





In the calculation of TAn an amount shall be subtracted from NCF identical to the value of


any AOE which would be due to the State if reference were made hereunder only to the


FAn and SAn.





.





35


 In the calculation of YAn an amount shall be subtracted from NCF identical to the value of


any AOE which would be due to the State if reference were made hereunder only to the


FAn, SAn and TAn.


ZAn = (^h-i(i + C03^4~0))+ NCF








In the calculation of ZAn an amount shall be subtracted from NCF identical to the value of


any AOE which would be due to the State if reference were made hereunder only to FAn,


SAni TAn and YAn..





(c) Prospective Application:


The State’s AOE measured in barrels of oil will be as follows:


{]) If FAn, SAn, TAn , YAn and ZAn are all negative, the State’s AOE for the Month in


question shall be zero;


(ii) If FAn is positive and SAn, TAn, YAn and ZAn are all negative, the State’s AOE for


the Month in question.shall be equal to the absolute amount resulting from the


■following monetary calculation: 12.5% of the FAn for that Month divided by the


weighted average Market Price as determined jn accordance with Article 11.7.


(iii) If both FAn and SAn are positive, but TAn, YAn and ZAn are negative, the State's


AOE for the Month in question shall be equal to an absolute amount resulting


from the following monetary calculation: the aggregate of 12.5% of FAn for that


Month plus 15.0% of the SAnfor that Month all divided by the weighted average


Market Price as determined in accordance with Article 11.7.


(iv) If FAn, SAn and TAn are all positive but both YAn and ZAn is negative, the State’s


AOE for the Month in question shall be equal to the absolute amount resulting


from the following monetary calculation: the aggregate of 12.5% of the FAn for


that Month plus 15.0% of the SAn for that Month plus 17.5% of the TAn for that


Month all divided by the weighted average Market Price as determined in


accordance with Article 11.7.


(v) If FAn, SAn, TAn, YAn and ZAn are all positive but ZAn is negative, the State’s


AOE for the Month in question shall be equal to the absolute amount resulting


from the following monetary calculation: the aggregate of 12.5% of the FAn for


that Month plus 15.0% of the SAn for that Month plus 17.5% of the TAn for that


Month plus 22.5% of the YAn for that Month all divided by the weighted average


Market Price as determined in accordance with Article 11.7.


(vi) If FAn, SAn, TA„, YAn and ZAn are all positive, the State's AOE for the Month in


question shall be equal to the absolute amount resulting from the following


monetary calculation: the aggregate of 12.5% of the FAn for that Month plus 15%


of the SAn for that Month plus 17.5% of the TAn for that Month plus 22.5% of the


YAn for that Month plus 27.5% of YAn for that Month all divided by the weighted


average Market Price as determined in accordance with Article 11.7.


(d) The AOE calculations shall be made in U.S. Dollars with all non-dollar expenditures


converted to U.S. Dollars in accordance with Section 1.3.6 of Annex 2. When the AOE


calculation cannot be definitively made because of disagreement on the World Market


Price or any other factor in the formulae, then a provisional AOE calculation shall be


made on the basis of best estimates of such factors, and such provisional calculation





36


 shall be subject to correction and revision upon the conclusive determination of such


factors, and appropriate retroactive adjustments shall be made.





(e) The AOE shall be calculated on a Monthly basis, with the AOE to be paid commencing


with the first Month following the Month in which the FAn, SAn, TAn, YAn or ZAn, (as


applicable) becomes positive. Because the precise amount of the AOE for a Calendar


Year cannot be determined with certainty until after the end of that Calendar year,


deliveries (or payments in lieu) of the AOE with respect to a Month shall be made during


such Calendar Year based upon the Contractor's good faith estimates of the amounts


owing, with any adjustments following the end of the Calendar Year to be settled


pursuant to the procedures agreed to pursuant to Article 10.7 below. Final calculations of


the AOE shall be made within thirty (30) days following the filing by the Contractor of the


annual tax return for such Calendar year pursuant to the Petroleum Income Tax Law, and


the amount of the AOE shall be appropriately adjusted in the event of a subsequent


adjustment of the amount of tax owing on such term. In case of excess payment by the


Contractor of the relevant AOE applicable to said Calendar Year said difference shall be


made good in the next following Month either through Crude Oil or cash.


10.3 GNPC shall act as agent for the State in the collection of all Petroleum accruing to the State


under this Article and delivery to GNPC by Contractor shall discharge Contractor's liability to


deliver the share of the State.


10.4 The State or GNPC, having met the requirements of Article 15.1, may elect, in accordance with


terms and conditions to be mutually agreed by the Parties, that all or part of the Crude Oil to be


distributed to the State or to GNPC pursuant to this Article shall be sold and delivered by the


State or GNPC to Contractor or its Affiliate for use and disposal and in such case Contractor or its


Affiliate shall pay to the State or to GNPC, as the case may be, the Market Price for any Crude


Oil so sold and delivered. Market Price for purposes of this Article 10.4 shall be the amounts


. actually realized by Contractor or said Affiliate on its resales of said Crude Oil in arm's length


commercial transactions, or for its other resales or dispositions of said Crude Oil, based upon


world market prices determined in the manner specified in Article 11.7(b). ;■


10.5 Ownership and risk of loss of all Crude Oil produced from the Contract Area, allocated to


Contractor shall pass to Contractor at the outlet flange (“Delivery Point") of thi marine terminal


or other storage facility for loading into tankers or other transportation equipment referred to in


Article 11.1.


10.6 Subject to the provisions of Article 15 hereof, Contractor shall have the right freely to export and


dispose of all the Crude Oil allocated and/or delivered to it pursuant to this Article 10.


10.7---The Parties shall through consultation enter into supplementary agreements concerning Crude


Oil lifting procedures, lifting and tanker schedules, loading conditions, Crude Oil metering, and the


settlement of lifting imbalances, if any, among the Parties at the end of each Month. The Crude


Oil to be distributed or otherwise made available to the Parties in each Calendar Year in


accordance with the preceding provisions of this Article shall insofar as possible be in reasonably


equal monthly quantities.


10.8 To assist in the making of the AOE calculation in accordance with Article 10.2, there is attached


as Annex 3 to this Agreement a worked example of the calculation using hypothetical figures,


rates and thresholds, for the purpose of illustration only




















37


 ARTICLE 11


MEASUREMENT AND PRICING OF CRUDE OIL





11.1 Crude Oil shall be delivered by Contractor to storage tanks or other suitable holding facilities


constructed, maintained and operated in accordance with applicable laws and good oilfield


practice. Crude Oil shall be metered or otherwise measured for quantity and tested for quality in


such storage tanks for all purposes of this Agreement. Any Party may request that


measurements and tests be done by an internationally recognised inspection company.


Contractor shall arrange and pay for the conduct of any measurement, or test so requested


provided, however, that in the case of (1) a test requested for quality purposes and/or (2) a test


requested on metering (or measurement) devices, or where the test demonstrates that such


devices are accurate within acceptable tolerances agreed to by the Parties or if not established


by the Parties, then in accordance with generally accepted international Petroleum industry


practice, the Party requesting the test shall reimburse Contractor for the costs associated with the


test er tests.





11.2 GNPC or its authorized agents shall have the right:


(a) to be present at and to observe such measurement of Crude Oil;


(b) to examine and test whatever appliances are used by Contractor therefore; and


, (c) to install devices or equipment for the purpose of determining the quantity and quality of


Crude Oil provided that such devices or equipment do not interfere with those actually


utilized by the Operator.


11.3 In the event that GNPC considers Contractor’s methods of measurement to be inaccurate GNPC


shall notify Contractor to this effect and the Parties shall meet within ten (10) days of such


notification to discuss the matter. Where after thirty (30) days the Parties cannot agree over the


issue they shall refer for resolution under Article 24 the sole question of whether Contractor's


method of measuring Crude Oil is accurate and reasonable. Retrospective adjustments to


measurements shall be made where necessary to give effect to the decision rendered under


Article 24.


11.4 If upon the examination or testing of appliances provided for in Article 11.2 above any such


appliances shall be discovered to be defective:


(a) Contractor shall take immediate steps to repair or replace such appliance; and


(b) subject to the establishment of the contrary, such error shall be deemed to have existed


for three (3) Months or since the date of the last examination and testing, whichever


occurred more recently.


11.5 In the event that Contractor desires to adjust, repair or replace any measuring appliance, it shall


give GNPC reasonable notice to enable GNPC or its authorised agent to be present.


11.6 Contractor shall keep full and accurate accounts concerning all Petroleum measured as aforesaid


and provide GNPC with copies thereof on a monthly basis, not later than ten (10) days after the


end of each Month.





11.7 The Market Price for Crude Oil delivered to Contractor hereunder shall be established with


respect to each lifting or other period as provided elsewhere in this Agreement as follows:








38


(a) on Crude Oil sold by Contractor in “arm's length commercial transactions” (defined in


Article 11.7(c) below), the Market Price shall be the price actually realized by Contractor


on such sales;


(b) other sales of Crude Oil by Contractor not in an arm’s length commercial transaction, on


exports by Contractor without sale or on sales under Article 15.2, the Market Price shall


be determined by reference to world market prices of comparable Crude Oils sold in


arm’s length transactions for export in the major world petroleum markets, and adjusted


for oil quality, location, timing and conditions of pricing, delivery and payment; provided


that in the case of sales under Article 15.2 where such sales relate to part only of


Contractor's entitlement, prices actually realized by Contractor in sales of the balance of


its proportionate share falling within Article 11.7(a) above shall be taken into account in


determining Market Price. For purposes of this Article 11.7(b), "comparable Crude Oils”


shall mean Crude Oils of similar API gravity, sulphur content and acidity, and if


Contractor cannot identify comparable Crude Oils for the purposes of this Article, the


Parties may agree on an alternative method for establishing a comparable Crude Oil.


(c) sales in “arm’s length commercial transactions” shall mean sales to purchasers


! independent of the seller, which do not involve Crude Oil exchange or barter


transactions, government to government transaction, sales directly or indirectly to


Affiliates, or sales involving consideration other than payment in U.S. Dollars or


currencies convertible thereto, or affected in whole or in part by considerations other than


the usual economic incentives for commercial arm's length Crude Oil sales;


(d) the price of Crude Oil shall be expressed in U.S. Dollars per barrel, F.O.B. the Delivery


Point by Contractor;


(e) if Crude Oils of various qualities are produced from the Contract Area, the Market Price


shall be determined separately for each type sold and/or exported by Contractor only to


the extent that the different quality grades remain segregated through to,the point where


they are sold, and if grades of different quality are commingled into a .common stream,


Contractor and GNPC shall agree on an equitable methodology for assessing relative


value for each grade of Crude Oil comprising the blend and shall imples.nn.ent the agreed


methodology for having the producer(s) of higher quality Crude Oil(s) be reimbursed by


the producer(s) of lower quality Crude Oil(s);.


11.8 Contractor shall provide to GNPC (for use by the State and GNPC) information in accordance


with Section 7 of the Accounting Guide on each lifting which shall include the buyer of the cargo,


sales basis with respect to Benchmark crude oil, the pricing basis, the differential, any deductions


and the Market Price determined by it for each lifting not later than thirty five (35) days after the


_______________________end. of such lifting. For the. purpo.se.S- Q.Lth.is.Article .11.8 the obiigation of. Contractor shalI be joint


and several. Where Contractor comprises more than one person, each such person shall provide


to GNPC the information required by this Article 11.8.


11.9 If GNPC considers that the Market Price notified by Contractor was not correctly determined in


accordance with the provisions of Article 11.7 above, it shall so notify Contractor not later than


thirty (30) days after notification by Contractor of such price, and GNPC and Contractor shall


meet not later than twenty (20) days thereafter to agree on the correct Market Price.


11.10 In the event that GNPC and Contractor fail to agree upon the commencement of meetings for the


purpose described in Article 11.9 above, the Market Price shall be referred for determination in


accordance with Article 24 of this Agreement.


11.11 Pending a determination under Article 11.10, the Market Price will be deemed to be the last


Market Price agreed or determined, as the case may be, or if there has been no such previous


agreement or determination, the price notified by Contractor for the lifting in question under





39


Article 11.8. Should the determined price be different from that used in accordance with the


foregoing then the difference plus interest at the Specific Rate as stated in Article 26.54 shall be


paid in cash by or to Contractor, as the case may be, within thirty (30) days of such


determination.




















S'





















































































































































40


 ARTICLE 12


TAXATION AND OTHER IMPOSTS





12.1 Subject to applicable laws and regulations as the same may be amended from time to time, the


tax, duty, fee and other imposts that shall be imposed by the State or any entity or any political


subdivision on Contractor, its Subcontractors or its Affiliates in respect of works and services


related to Petroleum Operations and the sale and export of Petroleum shall include but not limited


to the following:


(a) Taxes in accordance with the Petroleum Income Tax Law 1987 (PNDC L188) and


income tax shall be levied at the rate of thirty-five percent (35%);


(b) Notwithstanding Article 12.1(a), tax in respect of income and/or gain (in either case,


calculated in accordance with Ghanaian law) resulting from the direct or indirect sale,


transfer or assignment of:





(i) a partial or the entire interest in this Agreement;





(ii) assets acquired or used in Petroleum Operations under this Agreement; or


(iii) shares of Contractor,


at the rate determined by Ghanaian law in effect at the time of the sale, transfer or


assignment;


(c) Payments for rental of Government property, public lands or for the provisions of specific


services requested by Contractor from public enterprises; provided, however, that the


rates charged Contractor for such rentals or services shall not exceed the prevailing rates


charged to other members of the public who receive similar services or rentals;


(d) Surface rentals payable to the State pursuant to Section 18 of the Petroleum Law per


square kilometre of the Contract Area remaining at the beginning of each Contract Year


as part of the Contract Area, in the amounts as set forth below.


Phase of Operation Surface Rentals Per Annum


Initial Exploration Period US $50 per sq. km.


- 1st Exfensidn'Pefiod US $100 per sq. km.


2nd Extension Period US $100 persq. km.


Development & Production Area US $200 per sq. km.


These rentals shall be pro-rated where the beginning of a Period and the end of a Period


or the creation of a Development and Production Area occurs during the course of a


Calendar Year.


12.2 Save for withholding tax at the rate provided for under applicable law from the aggregate amount


due to a resident Subcontractor or non-resident Subcontractor, Contractor shall not be obliged to


withhold any amount in respect of tax from any sum due from Contractor to any Subcontractor in


respect of work and services for or in connection with this Agreement





41


12.3 Contractor shall not be liable for any export tax on Petroleum exported from Ghana and no duty


or other charge shall be levied on such exports. Vessels or other means of transport used in the


export of Contractors Petroleum from Ghana shall not be liable for any tax, duty or other charge


by reason of their use for that purpose.


12.4 Subject to the local purchase obligations hereunder, Contractor and Subcontractors may import


into Ghana all plant, equipment and materials to be used solely and exclusively in the conduct of


Petroleum Operations without payment of customs and other duties and taxes on imports save


administrative fees and charges;


PROVIDED THAT:


(a) GNPC shall have the right of first refusal for any item imported duty free under this


Article which is eventually later sold in Ghana; and


(b) where GNPC does not exercise its right of purchase Contractor may sell to any other


person subject to the relevant law.


12.5. Contractor shall not be liable to pay VAT in respect of plant, equipment and materials, and related


services supplied in Ghana, to be used solely and exclusively in the conduct of Petroleum


Operations. ■3®





12.6 Foreign National Employees of Contractor or its Affiliates, and of its Subcontractors, shall be


permitted to import into Ghana free of import duty their personal and household effects in


accordance with Section 22.7 of PNDCL 64;-provided, however, that no property imported by


such employee shall be resold by such employee in Ghana except in accordance with


Article 12.2.


12.7 Subject to GNPC’s rights under Article 19, Contractor, Subcontractors and Foreign National


• Employees shall have the right to export from Ghana all items imported duty free pursuant to


Article 12.4. Such exports shall be exempt from all customs and other duties, taxes, fees and


charges on exports save minor administrative charges.


12.8 Parties will negotiate in good faith to ensure that Contractor is afforded tax credits for corporate


taxes paid in Ghana. However no adverse effect should occur to the economic rights of GNPC or


the State.


12.9 The Ghana Income Tax law applicable generally to individuals who are not employed in the


Petroleum industry shall apply in the same fashion and at the same rates to employees, of


Contractor, its Affiliates and its Subcontractors provided, however, that .Foreign National


Employees of Contractor, its Affiliates and its Subcontractors shall be exempted from the income


tax and withholding tax liabilities unless they are resident in Ghana for more than thirty (30)


continuous days or sixty (60) days in aggregate in any Calendar Year.


12.10 Subject to guidelines to be issued by the Minister, Contractor shall make contributions to a


decommission fund based on estimated costs of abandonment in proportion to its Participating


Interest. Such contributions shall be allowed as deduction from assessable income from the year


of assessment the contributions commenced. In the year of assessment in respect of which


decommission has been completed in accordance with an approved decommission plan, the


surplus funds shall be treated as chargeable income and subject to tax. The amount left after the


tax shall be subject to Additional Oil Entitlement at the highest rate at which the Contractor paid


AOE during the period of contributions to the relevant decommission fund. Any surplus after


payment of the tax and AOE shall revert to the Contractor.











42


 ARTICLE 13


FOREIGN EXCHANGE TRANSACTIONS





The provisions of this Article 13 shall be subject to applicable legislation governing foreign exchange


transactions in Ghana in force from time to time.


13.1 Contractor shall for the purpose of this Agreement be entitled to receive, remit, keep and utilise


freely abroad all the foreign currency obtained from the sales of the Petroleum assigned to it by


this Agreement or purchased hereunder, or from transfers, as well as its own capital, receipts


from loans and in general all assets thereby acquired abroad. Upon making adequate


arrangements with regard to its commitment to conduct Petroleum Operations, Contractor shall


be free to dispose of this foreign currency or assets as it deems fit.


13.2 Contractor shall have the right to open and maintain in Ghana bank accounts in foreign currency


and Ghanaian currency. No restriction shall be made on the import by Contractor in an


authorised manner of . funds assigned to the performance of the Petroleum Operations and


Contractor shall be entitled to purchase Ghanaian currency through authorised means, without


discrimination, at the prevailing rate of exchange; provided, however, that such prevailing rate


applicable to Contractor hereunder for all transactions for converting Ghanaian currency into U.S.


Dollars, and vice versa, shall be at a buying or selling, as the case may be, rate of exchange not


less favourable to Contractor than that quoted by the State or its foreign exchange control


authority to any person or entity on the dates of such conversion (excepting those special rates


provided by the State to discretely defined groups for special, limited purposes).


13.3 Contractor shall be entitled to convert in an authorised manner into foreign currencies of its


choice funds imported by Contractor for the Petroleum Operations and held in Ghana which


exceeds its local requirements at the prevailing rate of exchange referred to in Article 13.2 and


remit and retain such foreign currencies outside Ghana.


13.4 In the event of resale by Contractor or its Affiliate of Crude Oil purchased from the State or


GNPC, the State or GNPC shall have the right to. request payment for such sales of its share of


production to Contractor or its Affiliate to be held in the foreign currency in which the resale


transaction took place or in U.S. Dollars.


13.5 Contractor shall have the right to make direct payments outside of Ghana from its home offices


abroad, and elsewhere, to its Foreign National Employees, and to those of its Subcontractors and


suppliers 'not resident in Ghana’ (as that term is defined in Section 160 of the Internal Revenue


Act 2000 (Act 592)) for wages, salaries, purchases of goods and performance of services,


------------whether imported into Ghana or supplied or performed therein for Petroleum Operations carried


out hereunder, in accordance with the' provisions of this Agreement, in respect of services


performed within the framework of this Agreement, and such payments shall be considered as


part of the costs incurred in Petroleum Operations. In the event of any changes in the location of


Operator’s home or other offices, Operator shall so notify GNPC and the State.


13.6 All payments which this Agreement obligates Contractor to make to GNPC or the State, including


income taxes, shall be made in United States Dollars, except as requested otherwise pursuant to


Article 13.4 above. All payments shall be made by telex transfer in immediately available funds to


a bank to be designated by GNPC or the State, and reasonably accessible to Contractor by way


of its being able to receive payments made by Contractor and give a confirmation of receipt


thereof, or in such other manner as may be mutually agreed.


13.7 All payments which this Agreement obligates GNPC or the State to make to Contractor shall be


made in United States Dollars. All payments shall be made by electronic transfer ( or in such





43


other manner as may be mutually agreed) in immediately available funds to a bank to be


designated by Contractor, and reasonably accessible to GNPC or the State by way of its being


able to receive payments made by GNPC or the State and give confirmation of receipt thereof.




































































































































































44


 ARTICLE 14


SPECIAL PROVISIONS FOR NATURAL GAS





PART I - GENERAL


All Natural Gas produced by Contractor in association with GNPC under this Agreement shall be the


property of GNPC in accordance with the provisions of Section 16.2 of the Petroleum Law, subject to


Parts III and IV of this Article.


14.1 Contractor shall have the right to use Natural Gas produced from any Development and


Production Area for Petroleum Operations within the Contract Area such as reinjection for


pressure maintenance and/or power generation at no cost.


14.2 Contractor shall not flare nor vent Natural Gas except:


(a) to the extent provided for in an approved Development Plan;


(b) during production testing operations;


(c) when required for operational safety and the safety of persons engaged in Petroleum


Operations in accordance with international Petroleum industry practice;


(d) as otherwise authorised by the Minister.


14.3 Contractor shall have the right to extract and dispose of liquid hydrocarbons pursuant to the


provisions of this Agreement relating to Crude Oil. Residual Natural Gas remaining after the


extraction of liquid hydrocarbons is subject to the provisions of this Article 14.


PART II -ASSOCIATED GAS


14.4 All gas produced in association with Crude Oil is the property of GNPC. The Development Plan of


each Development and Production Area shall include a plan, if any, of utilization for the


Associated Gas.


14.5 if Contractor considers that production, processing and utilisation of Associated Gas from any


Development and Production Area is non-economic, GNPC or any State appointed agency, body


or subcontractor shall have the option to offtake all Associated Gas not used as reinjection for


pressure maintenance and/or power generation pursuant to Article 14.2 and/or not utilized


..........^othetwise as^perArticle H^ at the'^butlet flange of fhe gas-oil separator ~on the crude oil


production facility at its sole risk for its own use. GNPC and Contractor shall work together to


develop the appropriate interface between Associated Gas infrastructure owned by the State


and/or GNPC and Contractor’s proposed Development Plan to that end shall include:


(a) an assessment of the facilities necessary for the delivery to GNPC of such Associated


Gas; and





(b) a plan for the reinjection of Associated Gas into the reservoir if needed for pressure


support; and


(c) a plan for power generation; and





(d) a plan for any other utilization.





45


14.6 The decision of GNPC as to whether or not to exercise the option provided for in Article 14.5


above shall be made in a timely manner. In making such decision and in its subsequent conduct


GNPC shall avoid the prevention of or delay by the Operator to the orderly start up or


continuation of the production of Crude Oil as envisaged in the approved Development Plan.


14.7 If GNPC or any State appointed agency, body or subcontractor elects to offtake Associated Gas


under Article 14.5 above, GNPC shall be responsible for any additional facilities, other than those


as per Article 14:5 above, needed for the delivery of the Associated Gas to GNPC, provided that:


(a) if Contractor subsequently wishes to participate in GNPC’s gas utilisation programme, it


shall reimburse GNPC for the costs of such facilities plus a premium of three hundred


percent {300%) of costs; or


(b) if Contractor subsequently develops a gas utilisation programme and requires the use of


GNPC’s gas facilities, Contractor shall pay GNPC an agreed fee for such use. Provided


■there is excess capacity, GNPC shall allow access to such gas facilities on a non-


discriminatory basis, at a reasonable market-based fee. In the absence of a market-


based fee, the fee shall reflect levels that are calculated to yield a return bn invested


capital comparable to similar circumstances in the upstream gas industry.


If Contractor considers that it may be economic to produce Associated Gas for sale, the provision


of Articles 14.11,14.12 and Part IV below shall apply to such Associated Gas


PART III - NON-ASSOCIATED GAS


14.8 Contractor shall have the right to commercialize a Discovery of Non-Associated Gas in the


Contract Area in accordance with the provisions of this Agreement. Except as otherwise provided


in this Agreement, the terms applicable to a Discovery as provided under Article 8 of this


Agreement shall apply to a Discovery of Non-Associated Gas.


14.9 Where Contractor submits notice pursuant to Article 8.1 indicates that the Discovery does not at


that time merit Appraisal but may merit Appraisal or additional evaluation at a later date during


the Exploration Period or during the initial period under a new Agreement made pursuant to


Article 14.16 below, then Contractor need not submit a proposed Appraisal Programme at that


time but instead shall indicate what other studies or evaluations (in accordance with a definite


time-table) may be warranted before an Appraisal Programme is undertaken. Where Contractor's


Notice indicates that the Discovery will not merit Appraisal at any time during the Exploration


Period or during the initial period under a new Agreement made pursuant to Article 14.16, then


Contractor shall relinquish the rights to the Non-Associated Gas within that Discovery Area.


14.10 Not later than ninety (90) days from the date on which the Appraisal Programme relating to a


Discovery is concluded, Contractor shall submit to the Minister a report containing the results of


the Appraisal Programme (the "Appraisal Report”). The Appraisal Report may conclude that the


Discovery merits commercial assessment. If the Appraisal Report concludes that the Discovery


merits commercial assessment, Contractor shall submit to the Minister within thirty (30) days from


the date of submission of the Appraisal Report, a programme incorporating a specific timetable


for conducting such commercial assessment for approval by the Minister. If the Minister


approves this programme, such commercial assessment shall be conducted within the


Exploration Period, provided that a minimum residual period of at least 2 years is available or, if


applicable, during the initial, period under a new Agreement made pursuant to Article 14.16


Notwithstanding the above, the Minister may approve the conduct of other studies or evaluation,


in accordance with a specific timetable, which may be warranted before a commercial


assessment is undertaken, if Contractor notifies the Minister that commercial assessment of the


Discovery is not warranted at that time but the Discovery may merit such assessment at a later


date during the Exploration Period or during the initial period under a new Agreement.








46


 14.11 The purpose of the commercial assessment shall be to study the uses to which production from


the Discovery Area separately, can be devoted and whether involving exports or domestic


utilization. As part of the assessment, the Parties shall also pursue discussions on the required


contractual arrangements for disposition of the Natural Gas to GNPC. Contactor may undertake


the Gas commercialization project at a level that will facilitate the achievement of the Contractor's


rate of return, and shall use the State’s gas infrastructure if available.


14.12 Contractor may consult with the Minister and GNPC and may make appropriate representations


proposing changes in the fiscal and other provisions of this Agreement which may, in the opinion


of Contractor, affect the above determinations made pursuant to Articles 14.9 and 10. The


Minister and GNPC may, where feasible and in the best interests of the Parties, agree to make


such changes or modifications in the existing arrangements/Agreements.





PART IV - NATURAL GAS PROJECTS





14.13 If at any time during the commercial assessment Contractor informs the Minister in writing that


the Discovery can be produced commercially, it shall within 180 days (one hundred and eighty)


submit to the Minister and to GNPC its proposals for an agreement relating to the development of


the Discovery on the principles set forth in this Part IV of Article 14. The State and GNPC


undertake on receipt of such notice to negotiate in good faith with Contractor with a view to


reaching agreement on terms for such production. Any such agreement will be based on terms


and fiscal requirements which shall be no less favorable to Contractor than those provided for in


Article 10 and Article 11, as applicable, and which take full account of the legitimate interest of the


State as the resource owner.


14.14 If at any time during the commercial assessment Contractor has identified a market for the Non-


Associated Gas or any part thereof that can be saved without prejudice to an LNG export project,


the Parties shall proceed in good faith to negotiate the appropriate contractual arrangements for


the disposition of the Natural Gas. In the event of said market for such Gas, Contractor shall


receive for delivery its share of the Natural Gas at a price to be agreed in good faith between


GNPC and Contractor, taking into account among other things, the cost of finding and developing, ^,


the Natural Gas, a reasonable return on exploration and development investment and the uses j,


which will be made of the Natural Gas.


14.15 In the event of a Discovery of Natural Gas in the Contract Area which is to be developed and





commercially produced, the provisions of this Agreement in respect to interests, rights and


obligations of the Parties regarding Crude Oil shall apply to Natural Gas, with the necessary


changes in points of detail, except with respect to specific provisions in this Agreement


concerning Natural Gas and different or additional provisions concerning Natural Gas which may


be agreed by the Parties in the future.





(a) The system for the allocation of Natural Gas among the Parties shall follow the same


general format as Article 10.1 provides for Crude Oil, with the exception that the royalty to


be delivered to the State on Natural Gas shall be at the rate of five (5%) for the Natural


Gas destined to the domestic market and 10% for Natural Gas to be exported as LNG;





(b) The Parties recognise that projects for the Development and Production of Natural Gas


are generally long-term in nature, for both the project developers and the customers who


purchase the Natural Gas. Substantial investments and dedication of facilities require


long-term commitments on both sides. This Agreement, being for a specific term of


years, may not cover the length of time for which customers in given cases will require


commitments on the part of the Parties to this Agreement to deliver their respective


shares of the output. Accordingly the Parties agree to consider undertaking such


commitments where reasonably required for the efficient and viable development of a


Natural Gas project. It is recognized that, unless otherwise agreed or a new Petroleum


Agreement pursuant to Article 14.16 has been entered into by the Parties hereto,


47 4/











S








/


 B>.








J!


Contractor will have no right or interest in the project or the Natural Gas produced and [1


delivered after the term of this Agreement has expired.


(c) In the event that Contractor or an Affiliate by mutual agreement with GNPC and the State


constructs facilities to receive Natural Gas from the Development and Production Area for


further processing or for use as a feedstock or fuel in order to convert such a Natural Gas


into one or more commercially marketable products, the Contractor shall be entitled to


pay GNPC or the State for such gas the price, if any, paid by the State or GNPC under


Article 14.14. M




available for Natural Gas production possibilities, including project financing; however, 1


each Party shall remain free to finance externally its share of such facilities to the extent it I!


14.16 (a) prefers to do so. P





Where Contractor has during the. continuance of the Exploration Period made a 'fj


Discovery of Non-Associated Gas but has not before the end of the Exploration Period


declared that Discovery to be commercial, the State and GNPC will, if Contractor so


requests, enter into a new Petroleum Agreement with Contractor in respect of the


Discovery Area to which that Discovery relates.


(b) The State and GNPC shall not be under any obligation to enter into an Agreement


pursuant to Article 14.16 above, unless before the end of the Exploration Period J


Contractor has carried out an.Appraisal Programme in respect of that Discovery pursuant [j:


to Article 14,10 and submitted to the Minister a report thereon pursuant to Article 14.10,


or has commenced an Appraisal Programme and has notified the Minister of reasonable


arrangements to undertake and complete such an Appraisal Programme during the


period provided for in (c) (i) below.


(c) A Petroleum Agreement entered into pursuant to Article 14.16:


{i) shall, unless the Discovery in respect of which the Agreement has been made is





declared by Contractor to be a Commercial Discovery, continue in force for an !!


initial period not exceeding three (3) years; I!


(ii) shall, in the event that the Discovery is declared by Contractor to be a


Commercial Discovery;





(A) continue in force for an aggregate period not exceeding 25 (twenty-five)


years


(B) include, or be deemed to include, all the provisions which, mutatis ! i


mutandis, would have applied to a Commercial Discovery of Non-


Associated Gas pursuant to Article 14.15 if Contractor had declared such


Discovery to be a Commercial Discovery under this Agreement;


(iii) shall contain in respect of the initial period or of any renewal period details of the


evaluations or studies (in accordance with a specific timetable) which Contractor


proposes to undertake in order to determine or keep under review the


commerciality of the Discovery; and





(iv) shall confer on GNPC pre-emptive rights in respect of the Gas contained in the


reservoir to which the Discovery relates substantially in the form of the provisions


hereinafter set out in this Article 14.16(e) below.








48


(d) Where Contractor has not, before the end of the initial period of a new Petroleum


Agreement, declared the Discovery to be commercial and the Minister has in his


discretion determined that further evaluation or studies may be required before the


Discovery can be declared commercial, the right of Contractor to retain the Discovery


Area shall continue for a further period not exceeding in the aggregate three (3) years.


The right of Contractor to retain the Discovery Area aforesaid shall be secured by the


renewal of the Agreement referred to in Article 14.16 or where necessary by a new


Agreement entered into by the Parties for that purpose.


(e) (i) Where Contractor has not declared the Discovery to be a Commercial Discovery,


if GNPC has identified a domestic market for the Gas contained in the reservoir


to which the Discovery relates, or any part thereof, it may at any time during the


initial period or the aggregate period referred to in 14.16(d) above serve on


Contractor a notice giving particulars of the quantities of Gas required to serve


that market and the price offered; and on the basis of the procedure detailed in


Article 9, exercise the right referred to in this Article 14.16(c)(iv) above.


(ii) Within three (3) months from the receipt of a notice as aforesaid Contractor may


declare the Discovery to be commercial and in accordance with the Petroleum


Agreement and the Petroleum Law prepare and submit to the Minister a


Development Plan for the production of the Gas in association with GNPC.


(iii) if Contractor has not, within the period of three (3) months aforesaid, declared


the Discovery to be commercial, GNPC may at its Sole Risk develop the


Discovery and in that event the Contractor shall cease to have any rights in


respect of the Gas in the reservoir required for that purpose.


14.17 For the purpose of calculating the State’s royalty share on Natural Gas (either for the domestic


market 5% or 10% for export); if the State elects to take its royalty on Natural Gas in cash, the


value of such Natural Gas shall be the actual price realized by the Contractor, less transportation,


processing, compression and marketing costs which shall be in accordance with the principles


indicated in Article 11.




































































49


 ARTICLE 15


DOMESTIC SUPPLY REQUIREMENTS (CRUDE OIL)





15.1 Crude Oil for Consumption in Ghana (in this Article called the “Domestic Supply Requirement”)


shall be supplied, to the extent possible, by the State and GNPC from their respective


entitlements under this Agreement and under any other contract for the production of Crude Oil in


Ghana.


15.2 Contractor, subject to Article 15.1 shall be obliged together with any third parties which produce


Crude Oil in Ghana within 3 months’ notice from the State, to supply a volume of Crude Oil to be


used for such Domestic Supply Requirements, calculated on the basis of the ratio of Contractor’s


entitlement to Crude Oil under Article 10.1(e)(c) to the sum of the similar entitlements of all such


third parties and provided that Contractor's obligation to supply Crude Oil for purposes of meeting


the Domestic Supply Requirement shall not exceed the total of Contractor’s said entitlement


under this Agreement.


15.3 The State shall-purchase any Crude Oil supplied by Contractor pursuant to this Article at the


weighted average Market Price determined under Article 11.7 for the Month of delivery, and the


State shall pay such prices in accordance-with Article 13.7 within thirty (30) days after receipt of


invoice, failing which Contractor's obligations in respect of the Domestic Supply,-Requirement


under this Article 15 shall be suspended'until payment is made good, at which time deliveries


shall be resumed subject to any alternative commitments that may have been reasonably entered


into by Contractor to dispose of the Domestic Supply Requirement Crude Oil during the period of


default in payment.


15.4 The calculation of the Domestic Supply Requirement shall be done on a Calendar Year basis,


broken down by Month. The calculation shall-begin with the determination of the quantities of


Crude Oil required for Consumption in Ghana in each relevant Month (the “Monthly Domestic


Consumption") during the applicable Calendar Year.


15.5 “Consumption" shall for- purposes of this Article consist of the total Crude Oil consumed in


Ghana, Crude Oil processed in Ghana and the Crude Oil equivalent of Crude Oil derived


products imported for consumption in Ghana.



























































50


 ARTICLE 16


INFORMATION ANQ REPORTS - CONFIDENTIALITY





16.1 Contractor shall keep GNPC regularly and fully informed of operations being carried out by


Contractor under this Agreement and provide GNPC with all information, data, (film, paper and


digital forms), samples, interpretations and reports, (including progress and completion reports)


including but not limited to the following:


(a) processed seismic data and interpretations thereof;


(b) well data, including but not limited to electric logs and other wireline surveys, and mud


logging reports and logs, oil or hydrocarbon samples, samples of cuttings and cores and


analyses made therefrom;


(c) any reports prepared from drilling data or geological or geophysical data, including maps


or illustrations derived therefrom;


(d) well testing and well completion reports;


(e) reports dealing with location surveys, seabed conditions and seafloor hazards and any


other reports dealing with well, platform or pipeline locations;


(f) reservoir investigations and estimates regarding reserves, field limits and economic


evaluations relating to future operations;


(g) daily, weekly, monthly and other regular reports on Petroleum Operations;





(h) comprehensive final reports upon the completion of each specific project or operation;


(i) contingency programmes and reports on safety and accidents;


(j) procurement plans, subcontracts and contracts for the provision of services to Contractor;





(k) for such subcontracts and contracts for the provision of services to Contractor


(i) bid documents and their evaluation reports


(ii) a statement showing the values, executing companies, award and completion


............ ....... ....................dates.....~~.............................................. ........ ...... ......................................'....... .........................


Data shall be provided on film, paper and in digital format as available in an acceptable format to


GNPC. In respect of the reports, including text and graphics, paper and digital copies shall be


submitted.


16.2 Contractor shall have the right to retain for its own use in connection with the conduct of


Petroleum Operations under this Agreement copies of data, well logs, maps, magnetic tapes,


other geological and geophysical information, portions of core samples and copies of reports,


studies and analyses, referred to in Article 16.1.


16.3 Not later than ninety (90) days following the end of each Calendar Year, Contractor shall submit


to GNPC a report covering Petroleum Operations performed in the Contract Area during such


Calendar Year. Such report shall include, but not be limited to:


(a) a statement of the number of Exploration Wells, Appraisal Wells and Development Wells


drilled, the depth of each such well, and a map on which drilling locations are indicated;


(b) a statement of any Petroleum encountered during Petroleum Operations, as well as a


statement of any fresh water layers encountered and of any other minerals discovered; 1


(c) a statement of the quantity of Petroleum produced and of all other minerals produced


therewith from the same reservoir or deposit;


(d) a summary of the nature and extent of all exploration activities in the Contract Area;


(e) a general summary of all Petroleum Operations in the Contract Area; and


(f) a statement of the number of employees engaged in Petroleum Operations in Ghana,


identified as Ghanaian or non-Ghanaian. Contractor will inform the latter that details as


to nationality are required by GNPC and that Contractor is available to assist them to


supply that information.


16.4 All data, information and reports including interpretation and analysis supplied by Contractor


pursuant to this Agreement shall be treated as confidential and shall not be disclosed by


Contractor to any other person without the express written consent of the other Parties. However


subject to Article 16.6, below GNPC shall have the right to disclose data, information and reports


including interpretation and analysis in respect of Petroleum Operations to any other person.


16.5 The provisions of Article 16.4 above shall not prevent disclosure by Contractor:


(a) to its Affiliates, advisers or consultants;


(b) to a Bona Fide Potential Assignee (i.e. a company in respect of which Contractor’s


reputable and international financial advisor has written a letter addressed to Contractor


and copied to GNPC confirming that in the opinion of said financial advisor, that company


has the financial wherewithal and technical competence to meet the obligations


associated with the interest being offered/sought; and has considered the potential


acquisition at a sufficiently senior level within its organisation in order for it to be regarded


as a genuine potential purchaser of such interest)of all or part of Contractor’s Interest


hereunder provided GNPC is given prior notice of such potential assignee, and subject to


approval of the State, and GNPC for the disclosure (not to be unreasonably withheld);


(c) to Banks or other lending institutions for the purpose of seeking external financing of


costs of the Petroleum Operations;


(d) to non-Affiliates who shall provide services for the Petroleum Operations, including


Subcontractors, vendors and other service contractors, where this is essential for their


provision of such services, and provided GNPC is notified about such disclosure;


(e) to governmental agencies for obtaining necessary rulings, permits, licenses and


approvals, or as may be required by applicable law or financial stock exchange,


accounting or reporting practices, and provided GNPC is given prior notice of such


disclosure; or


(f) to the extent necessary in any Arbitration Proceedings or proceedings before a Sole


Expert or in proceedings before any Court;


(g) with respect to data, etc., which already through no fault of the disclosing Party, is in the


public domain.





52


16.6 Any Party disclosing information or providing data to any third party under this Article 16 shall


require such persons to observe the confidentiality of such data by executing a confidentiality


agreement in the form attached hereto as Annex 4.


16.7 Public statements and press releases regarding the Petroleum Operations undertaken under this


Agreement shall be issued jointly by the Contractor and GNPC, and the Parties shall agree on the


timing and wording of such statements and releases to the public. Where, however, a Party is


required to make a public announcement or statement under the applicable laws, rules or


regulations of any government, legal proceedings or a stock exchange having jurisdiction over


such Party or any of its Affiliates, to the extent permitted by law, that Party shall inform the other


Party of such requirement and submit the text of the proposed announcement or statement for


comment and/or approval. Should a Party fail to respond for more than five (5) days (or such


shorter period as may be reasonable in the event of an emergency or disaster or required to


enable the disclosing party to comply with applicable law or regulation) to request for the approval


of a public statement or announcement for such purposes, such failure shall be deemed approval


of the request.


16.8 Subject in all cases to the terms of any technical services agreements, all intellectual property


rights to any and all inventions, discoveries or improvements made or conceived in connection


with Petroleum Operations either through a Contractor Party’s employees, contractors (including


the Contractor Parties), sub-contractors, secondees, GNPC’s employees or otherwise, shall be


jointly owned by GNPC and Contractor.


16.9 Notwithstanding any provision to the contrary in this Agreement, if a Contractor Party or an


Affiliate of a Contractor Party has used its own confidential information, proprietary intellectual


property or technology in Petroleum Operations then, subject to GNPC (or its successors or


permitted assignees) entering into a usual and customary non-disclosure and licensing


agreement (which such agreement shall be on terms that are commercially reasonable under. the


circumstances), such Contractor Party or its Affiliate shall provide GNPC (or its successors or


permitted assignees) with rights to use such confidential information, proprietary intellectual


property or technology in other operations of GNPC (or its successors or permitted assignees)


outside of the Contract Area. The terms and conditions of the foregoing rights will be providec&for


in separate agreements to be agreed between GNPC (or its successors or permitted assignees)


and such Contractor Party or its relevant Affiliate. Further, GNPC (or its successors or permitted


assignees) and such Contractor Party or its relevant Affiliate will enter into a usual and customary


confidentiality agreement relating to confidential information disclosed to GNPC (or its successors


or permitted assignees) pursuant to any such licensing agreements, which confidentiality


agreement shall restrict, inter alia, GNPC (or its successors or permitted assignees) from making


, disclosure of such information to such Contractor Party’s oil and gas industry conipetitors.


















































53


ARTICLE 17


INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION


17.1 . GNPC shall have the right of access to all sites and offices of Contractor and the right to inspect


all buildings and installations used by Contractor relating to Petroleum Operations. Such


inspections and audits shall take place in consultation with Contractor and at such times and in


such manner as not unduly to interfere with the normal operations of Contractor.


17.2 Contractor shall take all necessary steps, in accordance with best international Petroleum


industry practice, to perform activities pursuant to the Agreement in a safe manner and shall


comply with all requirements of applicable law, including labour, health safety and environmental


laws and regulations issued by the Environmental Protection Agency of Ghana and other relevant


Government agencies.


17.3 Contractor shall provide an effective and safe system for disposal of water and waste oil, oil base


mud and cuttings in accordance with applicable laws and best international Petroleum industry


practice', and shall provide for the safe completion or abandonment of all boreholes and wells.


17.4 Contractor shall exercise its rights and carry out its .responsibilities under this Agreement in


accordance with best international Petroleum industry practice, and shall take steps in such


manner as to: !


(a) result in minimum ecological damage or destruction;


(b) control the flow and prevent the escape or the avoidable waste of Petroleum discovered


in or produced from the.Contract Area;


(c) prevent damage to Petroleum-bearing strata;


(d) prevent the entrance of water through boreholes and wells to Petroleum-bearing strata,


except for the purpose of secondary recovery;


(e) prevent damage to onshore lands and to trees, crops, buildings or other structures; and


(f) avoid any actions which would endanger the health or safety of persons.


17.5 In the event of a release of Petroleum or other materials on the seabed, in the sea, on land or in


fresh water, or if Contractor's operations result in any other form of pollution or otherwise cause


harm to fresh water, marine, plant or animal life, Contractor shall, in accordance with applicable


laws and best international Petroleum industry practice, promptly take all necessary measures, in


accordance with best international Petroleum industry practice, to control the pollution, to clean


up Petroleum or other released material, or to repair, to the maximum extent feasible, damage


resulting from any such circumstances. If such release or pollution results from the negligence or


wilful misconduct of Contractor, the cost of subcontract clean-up and repair activities shall be


borne by Contractor and shall not be included as Petroleum Cost under this Agreement.


17.6 Contractor shall notify GNPC immediately in the event of any emergency or major accident or


major release of materials into the environment (and promptly in the event of any other accident


or release of materials into the environment) and shall take such action as may be prescribed by


GNPCs emergency procedures and by best international Petroleum industry practices.


17.7 Contractor does not act promptly so as to control, clean up or repair any pollution or damage,


GNPC may, after giving Contractor reasonable notice in the circumstances, take any actions





54


which are necessary, in accordance with applicable laws and best international Petroleum


industry practice and the reasonable costs and expenses of such actions shall be borne by


Contractor and shall, subject to Article 17.5 be included as Petroleum Costs.


fW


<7



























































































































































55


 ARTICLE 18


ACCOUNTING AND AUDITING





18.1 Contractor shall maintain, at its offices in Ghana, books of account and supporting records in the


manner required by applicable law and accepted accounting principles generally used in the


international Petroleum industry and shall file reports, tax returns and any other documents and


any other financial returns which are required by applicable law.


18.2 In addition to the books and reports required by Article 18.1 Contractor shall maintain, at its office


in Ghana, a set of accounts and records relating to Petroleum Operations under this Agreement.


Such accounts shall be kept in accordance with the requirements of the applicable law and


accepted accounting principles generally used in the international Petroleum industry.


18.3 The accounts required by Articles 18,1 and 18.2 shall be kept in United States Dollars or such


other currency as GNPC and Contractor may agree.


18.4 Contractor will provide GNPC with quarterly and annual financial statements and summaries of


the Petroleum Costs incurred under this Agreement.


18.5 GNPC shall review all financial statements submitted by the Contractor as required by this


Agreement, and shall signify its provisional approval or disapproval of such statements in writing


within ninety (90) days of receipt failing which the financial statements as submitted by Contractor


shall be deemed approved by GNPC; in the event that GNPC indicates disapproval of any such


statement, the Parties shall meet within fifteen (15) days of Contractor’s receipt of the notice of


disapproval to review the matter.


18.6 Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall have the right at its


own expense and upon giving reasonable notice in writing to Contractor to audit the books and


accounts of Con tractor relating to Petroleum Operations within two (2) years from the submission


by Contractor of any report of financial statement. GNPC shall not, in carrying out such audit,


interfere unreasonably with the conduct of Petroleum Operations. Any such audit shall be


undertaken by an independent auditing firm and shall be completed within nine (9) months after


commencement. Contractor shall provide all necessary facilities for auditors appointed


hereunder by GNPC including working space and timely access to all relevant personnel,


records, files and other materials. If GNPC desires verification of charges from an Affiliate,


Contractor shall obtain for GNPC or its representatives an audit certificate to this purpose from


the statutory auditors of the Affiliate concerned. Copies of audit reports shall be provided to the


Contractor and GNPC. Any unresolved audit claim resulting from such audit, upon which


Contractor and GNPC are unable to agree shall be submitted to the JMC for decision which must


be unanimous. In the event that a unanimous decision is not reached in respect of any audit


claim, then such unresolved audit claim shall be submitted for resolution in accordance with


Article 24. Subject to any adjustments resulting from such audits, Contractor’s accounts and


financial statements shall be considered to be correct on expiry of a period of two (2) years from


the date of their submission unless before the expiry of such two year period GNPC has notified


Contractor of any exceptions to such accounts and statements.


18.7 Nothing in this Article shall be read or construed as placing a limit on GNPC's access to


Contractor's books and accounts in respect of matters arising under Article 23.4(a).


18.8 In the event of any changes in location of Operator’s home office, Operator shall so notify GNPC


and the State.











56


18.9 Petroleum Costs incurred with respect to the Contract Area shall have no bearing on allowable or


non-allowable costs under any other contract area or Contractor’s eligibility or otherwise for


deductions in computing Contractor’s net income from Petroleum Operations for income tax


purposes in any other contract area. Similarly, Petroleum Costs incurred in any other contract


area shall have no bearing on allowable or non-allowable costs in respect of the Contract' Area or


Contractor’s eligibility or otherwise for deductions in computing Contractor's net income from


Petroleum Operations for income tax purposes in respect of the Contract Area,
























































































































































57


 ARTICLE 19


TITLE TO AND CONTROL OF GOODS AND EQUIPMENT





19.1 GNPC shall be the sole and unconditional owner of:





(a) Petroleum produced and recovered as a result of Petroleum Operations, except for such


Petroleum as is distributed to the State and to Contractor pursuant to Article 10 or Article


14 hereof;


(b) all physical assets other than those to which Article 19.3 or 19.4 apply, which are


purchased; installed, constructed or Used by Contractor in Petroleum Operations as from


the time that:





(i) the full cost thereof has been recovered in accordance with the provisions of the


Accounting Guide; or





(ii) this Agreement is terminated and Contractor has not disposed of such assets


prior to such termination, whichever occurs first.





19.2 Contractor shall have the use of the assets referred to in Article 19.1(b) for purposes of its


operations under this Agreement without payment provided that Contractor shall remain liable for


maintenance, insurance and other costs associated with such use. Where Contractor has failed


to keep any such asset in good working condition (normal wear and tear excepted), GNPC shall


have the right to recover the cost of repair or replacement of such assets from Contractor.


Contractor shall indemnify GNPC against all losses, damages, claims or legal action resulting


from Contractor's use of such assets, if and in as far as such losses, damages, claims or legal


actions were directly caused by Contractor's Gross Negligence or wilful misconduct.


19.3 Equipment or any other assets rented or leased by Contractor which is imported into Ghana for


use in Petroleum Operations and subsequently re-exported therefrom, which is of the type


customarily leased for such use in accordance with international petroleum industry practice or


which is otherwise not owned by Contractor shall not be transferred to GNPC. No equipment or


assets owned or leased by a Subcontractor shall by reason of the provisions of this Article 19 be


deemed to be transferred to GNPC.


19.4 All assets acquired by Contractor which are not affected by the provisions of Article 19.1(b) above


may, where required for further Petroleum Operations, be retained by GNPC for such operations


provided that GNPC shall thereby be liable to pay a reasonable and mutually agreed fee for such


use, and shall bear the cost of repair or replacement upon failure to keep such assets in good


working condition (normal wear and tear excepted), and further provided that Contractor does not


require such assets for its Petroleum Operations.


19.5 Upon the termination of Petroleum Operations in any Area, Contractor shall give GNPC the


option to acquire any movable and immovable assets used for such Petroleum Operations and


not affected by the provisions of Article 19.1(b) at a reasonable and mutually agreed price, always


provided that Contractor does not require such assets for Contractor’s Petroleum Operations in


the Contract Area.


19.6 All assets which are not affected by Article 19.1(b) nor subject to Article 19.4 or 19.5 above, and


all subcontractor equipment, may be freely exported by Contractor or its Subcontractor,


respectively, at its discretion.


 ARTICLE 20


PURCHASING AND PROCUREMENT





20.1 Subject to all applicable laws to which it is subject, the Contractor, its subcontractors or other


entities which cooperate with them shall:


(a) acquire materials, equipment, machinery and consumer goods produced or provided in


Ghana by an Indigenous Ghanaian company in Ghana which are of the same or


approximately the same quality as foreign materials, equipment, machinery and


consumer goods and which are available for sale and delivery in due time at prices which


are no more than ten percent higher than the imported items including transportation and


insurance costs and custom charges due;


(b) contract local Ghanaian service provided by Indigenous Ghanaian company to the extent


to which the services they provide are similar to those available on the international


market and their prices when subject to the same tax charges are no more than ten


percent higher than the prices charged by foreign contractors for similar services.


20.2 For the purposes of Article 20.1, price comparisons shall be made on a c.i.f. Accra- delivered


basis.






















































































59


 ARTICLE 21


EMPLOYMENT AND TRAINING





21.1 In order to establish programmes-to train Ghanaian personnel for work in Petroleum Operations


and for the transfer of management and technical skills required for the efficient conduct of


Petroleum Operations, Contractor shall make the following payments to GNPC:




Year;


(b) Technical Support of US$1,000,000 {One Million US Dollars) within thirty days following


the Effective Date of this Agreement, and US$2,000,000 following approval by the


Minister of a Development Plan following the first declaration of Commercial Discovery.


21.2 All payments pursuant to Articles 21.1(a) and (b) above shall be paid by Contractor by wire


transfer to a designated GNPC account within thirty (30) days of receiving an invoice from the


GNPC. The invoice shall state the amount due and purpose for such payment. All payments


' under Articles 21.1(a) and(b) above shall qualify for deduction against income tax under the


Income Tax law and shall be considered Petroleum Costs. ' £


21.3 Where qualified Ghanaian personnel are available for employment in the conduct of Petroleum


Operations, Contractor shall ensure that as far as reasonably possible opportunities for the


employment of such personnel shall be provided. For this purpose, Contractor shall from time to


time submit to GNPC an employment plan stating the foreseeable number of persons (and the


required professions and technical capabilities) prior to and during the conduct of Petroleum


Operations. GNPC shall be given the opportunity to provide the qualified personnel for


engagement according to the said plan.


21.4 Contractor shall, if so requested by GNPC, provide opportunities for a mutually agreed number of


personnel nominated by GNPC to be seconded to the Contractor, as applicable, for on the job


training or attachment in all phases of its Petroleum Operations under a mutually agreed


secondment contract. Such secondment contract shall include continuing education and short


industry courses mutually identified as beneficial to the secondee. Cost and other expenses


connected with such assignment of GNPC personnel shall be borne by the Contractor and


considered as Petroleum Costs.





21.5 Contractor shall regularly provide to GNPC information and data relating to worldwide Petroleum


science and technology, Petroleum economics and engineering available to Contractor, and shall


assist GNPC personnel in every way to acquire knowledge and skills in all aspects of the


Petroleum industry.





21.6 It is agreed that there will be no disclosure or transfer of any documents, data, know-how,


technology or other information owned or supplied by Contractor, its Affiliates, or non-Affiliates, to


third parties without Contractor’s prior written consent, and then only upon agreement by the


recipients to retain such information in strict confidence.


























60


 ARTICLE 22


FORCE MAJEURE





22.1 The failure of a Party to fulfill any term or condition of this Agreement, except for the payment of


monies, shall be excused if and to the extent that such failure arises from Force Majeure,


provided that, if the event is reasonably foreseeable such party shall have prior thereto taken all


appropriate precautions and all reasonable alternative measures with the objective of carrying out


the terms and conditions of this Agreement. A Party affected by an event of Force Majeure shall


promptly give the other Parties notice of such event and also of the restoration of normal


conditions.





22.2 'A Party unable by an event of Force Majeure to perform any obligation hereunder shall take all


reasonable measures to remove its inability to fulfill the terms and conditions of this Agreement


with a minimum of delay, and the Parties shall take all reasonable measures to minimise the


consequences of any event of Force Majeure.


22.3 Any period set herein for the completion by a Party of any act required or permitted to be done


under the terms of this Agreement, shall be extended for a period of time equal to that during


which such Party was unable to perform such actions as a result of Force Majeure, together with


such time as may be required for the resumption of Petroleum Operations.








/





'i

















*






























































61


 K


/?;vt


?{


1 j











ARTICLE 23


TERM AND TERMINATION





23.1 Subject to this Article 23 the term of this Agreement shall be twenty-five <25) years commencing


from the Effective Date.





23.2 Unless this Agreement has been earlier terminated, all rights and obligations of the Parties shall


cease and this. Agreement shall terminate at the end of the term provided for in Article 23.1,


above,





.23.3 Termination of this Agreement shall result upon the occurrence of any of the following:





(a) the relinquishment or surrender of the entire Contract Area;


(b) the termination of the Exploration Period including extensions pursuant to Article 3





without notification by Contractor of commerciality pursuant to Article 8 in respect of a


Discovery of Petroleum in the Contract Area, provided however Termination shall not


occur while Contractor has the right to .evaluate a Discovery for Appraisal or


commerciality and/or propose a Development Plan pursuant to Article 8 or Article 14, or


once a Development Plan has been approved, nor when the provisions of’Articles 8.13


through 8.19 are applicable; \ .f





(c) if, following a notice that a Discovery is a Commercial Discovery the Exploration Period


terminates under Article 3 without a Development Plan being approved, provided


however that Termination shall not occur when the provisions of Articles 8.13 through


8.19 are applicable; or





(d) the failure of Contractor through any cause other than Force Majeure, to commence f


preparations with respect to Development Operations pursuant to Article 8.11. i





23.4 Pursuant to procedures described in Article 23.5 below GNPC and/or the State may terminate |


this Agreement upon the uncorrected occurrence of any of the events (or failures to act listed) I


below: ■


, I


(a) the submission by Contractor to GNPC of a written statement which Contractor knows or |


should have known to be false, in a material particular; or the release by Contractor to |


any print or electronic media or to a stock exchange of a written statement regarding the


Petroleum Operations in Ghana in breach of Article 16.7 and in a form which Contractor |


knows or should have known to be false in a material particular provided that in the event


of intent on the part of Contractor to cause serious damage to GNPC or the State, a ^


period for remedy of such false statement shall not be given; ,t





(b) the assignment or purported assignment by Contractor of this Agreement contrary to the


provisions of Article 25 hereof;





(c). the insolvency or bankruptcy of Contractor, the entry by Contractor into any agreements


or composition with its creditors, taking advantage of any law for the benefit of debtors or


Contractor's entry into liquidation, or receivership, whether compulsory or voluntary,


which in itself provides evidence that the obligations of Contractor hereunder will not be


performed. Provided that if Contractor is more than one Party, then the insolvency or


bankruptcy of one Contractor Party shall not lead to a termination of the Agreement if the


other Contractor Party will assume all of the interest and the corresponding rights and


obligations of the defaulting Contractor Party under this Petroleum Agreement. In such a





62


case, GNPC shall have the right to acquire a share of the interest of the defaulting


Contractor Party proportionate to the total of GNPC's Initial Interest and Additional


Interest (if it has been exercised by GNPC prior to the bankruptcy or insolvency of the


Contractor Party), provided that such proportionate share shall not be carried or financed


by Contractor, GNPC may exercise this right by notice to all Contractor Parties within


thirty (30) days following insolvency or bankruptcy of the defaulting Contractor Party,


GNPC’s written notice shall state the percentage share of the interest of the defaulting


Contractor Party which GNPC proposes to acquire, which shall not exceed a percentage


share which is the product of the defaulting Contractor Party’s share and the total of


GNPC's Initial Interest and Additional-Interest (if it has been exercised or is exercisable


by GNPC) prior to bankruptcy or insolvency of the defaulting Contractor Party). Upon


exercise by GNPC of its rights-pursuant to this Article 23.4(c), GNPC shall execute all


appropriate transfers, assignments, novations and joint operating agreements which were


in place as between or among the Parties.If the other Contractor Party in assuming the


interest of the defaulting Contractor elects to assign, the whole or part of, the assumed


interest to a third party such assignment shall be subject to GNPC's pre-emptive right


. under Article 2.10;


• (d) • the intentional extraction by Contractor of any material of potential economic value other


than as authorised under this Agreement, or any applicable law. Where, however, in the


course of Petroleum Operations conducted in accordance with accepted international


Petroleum industry practice, Contractor unavoidably extracts any mineral, Contractor


shall immediately notify the Minister and surrender such mineral to the State;


(e) failure by Contractor


(i) ' to fulfill its Minimum Work Obligations pursuant to Article 4:3; save where the


Minister has waived the default;


(ii) . to carry out an approved Appraisal Programme undertaken by Contractor


pursuant to Article 8* unless Contractor notifies GNPC and the Petroleum


Commission that the Appraisal Programme should be amended and submits


said amendment to the Petroleum Commission for its approval; or


(iii) to carry out the terms of an approved Development Plan.


(f) failure by Contractor to comply with any of its material obligations pursuant to Article 7.1


and any other material obligation under this Agreement;


(g) failure by Contractor to make any payment of any sum due to GNPC or the State


_____________________________________pursuant.....to this-..Agreement within-4hirty-(3Q) days-after receiving notice thatsuch


payment is due; or


(h) failure by Contractor to comply with any decisions reached as a result of any arbitration


proceedings conducted pursuant to Article 24 hereof.


23.5 If GNPC and/or the State believe an event or failure to act as described in Article 23.4 above has


occurred, a written notice shall be given to Contractor describing the event or failure. Contractor


shall have thirty (30) days from receipt of said notice to commence and pursue remedy of the


event or failure cited in the notice. If after said thirty (30) days Contractor has failed to commence


appropriate remedial action, GNPC and/or the State may then issue a written Notice of


Termination to Contractor which shall become effective thirty (30) days from receipt of said Notice


by Contractor unless Contractor has referred the matter to arbitration. In the event that


Contractor disputes whether an event specified in Article 23.3 or Article 23.4 has occurred or


been remedied,- Contractor may, any time up to the effective date of any Notice of Termination


refer the dispute to arbitration pursuant to Article 24 hereof. If so referred, GNPC and/or the


State may not terminate this Agreement in respect of such event except in accordance with the


terms of any resulting arbitration award as provided for in Article 24.


23.6 Upon Termination of this Agreement, all rights of Contractor hereunder shall cease, except for


such rights as may at such time have accrued, and without prejudice to any obligation or liability


imposed or incurred under this Agreement-prior to Termination and to such rights and obligations


as the Parties may have under applicable law.


23.7 Upon Termination of this Agreement or in the event of an assignment of all the rights of


Contractor, all-wells and associated facilities.shall be left in a state of good repair in accordance


with applicable laws and best international Petroleum Industry practice.














































































































64


 ARTICLE 24


CONSULTATION, ARBITRATION AND INDEPENDENT EXPERT


24.1 Except in the cases specified in Article 26.2(d) any dispute arising between the State and GNPC





or either of them on one hand and Contractor on the other hand in relation to or in connection


with or arising out of any terms and conditions of this Agreement shall be resolved by consultation


and negotiation among senior personnel authorized by each. In the event that no agreement is


reached within thirty (30) days after the date when either Party notifies the other that a dispute or


difference exists within the meaning of this Article or such longer period specifically agreed to by


the Parties or provided elsewhere in this Agreement, any Party shall have the right subject to


Article 24.8 to have such dispute or difference finally settled through international arbitration


• under the auspices' of the International Chamber of Commerce (the "ICC") and adopting the


Rules of Arbitration of the International Chamber of Commerce (the “ICC Rules”) in effect on the


date on which the proceeding is instituted, which ICC Rules are deemed incorporated by


reference into this Article 24, save as otherwise provided herein. The failure or refusal to submit


to arbitration in accordance with this Article and/or the seeking of any Pre-Award Attachment by


any Party shall be deemed a breach of this Agreement by such Party; In the event of a breach of


this Article, each non-breaching Party shall, without prejudice to any other remedies, be entitled


to recover from each breaching Party all costs and expenses, including reasonable attorneys'


fees, that such non-breaching Party was thereby required to incur.


24.2 The tribunal shall consist of three (3) arbitrators. Each Party to the dispute shall appoint one (1)





arbitrator and those so appointed shall designate a chairman arbitrator. If a Party’s arbitrator


and/or the chairman arbitrator is/are not appointed within the periods provided in the rules


referred to in Article 24.1 above, such Party’s arbitrator and/or the chairman arbitrator shall at the


request of any Party to the dispute be appointed by the ICC International Court of Arbitration in


accordance with the ICC Rules.





24.3 No arbitrator shall be a citizen of the home country of any Party hereto, and shall not have any


economic interest or relationship with any such Party.


24.4 The arbitration proceedings shall be conducted in Geneva, Switzerland or at such other location


as selected by the Parties unanimously. The proceedings shall be conducted in the English


language.


24.5 If the opinions of the arbitrators are divided on issues put before the tribunal, the decision of the


majority of the arbitrators shall be determinative. The award of the tribunal shall be final and


binding upon the Parties and enforceable by the Parties in whose favour the award is made. Each


.......of the Republic of Ghana and GNPC hereby irrevocably agree that to the extent that such party,


has any right of immunity from any legal proceedings whether in Ghana, England or elsewhere in


connection with or arising from terms and conditions of this Agreement, including immunity from


service of process, immunity from jurisdiction or judgement or any arbitration tribunal, immunity


from execution of judgement or tribunal award, such party hereby expressly and irrevocably


waives any such immunity and agrees not to assert or invoke any such rights or claim in any such


proceedings whether in Ghana, England or elsewhere; provided, however, that the provisions


hereof shall not constitute a waiver by any Party of any right that it now or hereafter has to claim


sovereign immunity for itself or any of its assets in respect of any effort to confirm, enforce, or


execute any Pre-Award Attachment.


24.6 The right to arbitrate disputes arising out of this Agreement shall survive the termination of this


Agreement.





24.7 In lieu of resorting to arbitration, the Parties to a dispute arising under this Agreement, including


the Accounting Guide, which such Parties by mutual written agreement consider appropriate, may





65


be referred for determination, by a sole expert to be appointed by agreement of the Parties who is


a recognised specialist with respect to the subject of the dispute (a "Sole Expert”). In such case,


the Parties shall agree on the terms of reference for such proceeding, the schedule of


presentation of evidence and testimony of witnesses, and other procedural matters. When


establishing the terms of reference of the sole expert, the Parties may assess whether '.pendulum


arbitration' would be appropriate in the circumstances. The decision of the Sole Expert shall be


final and binding upon the Parties/ The Sole Expert shall have ninety (90) days after receipt of all


submissions to decide the case, subject to any extensions mutually agreed to by the Parties to


i the dispute. Upon failure of the Sole Expert to decide the matter within such time, any Party shall


have the right to have such dispute or difference settled through arbitration under the foregoing


provisions of this Article 24.


24.8 Except as set forth in Article 24.1, each Party to a dispute shall pay its own counsel and other


costs; however, costs of the arbitration tribunal shall be allocated in accordance with the decision


of the tribunal.: The costs and fees of the Sole Expert shall be borne equally by the Parties to the


dispute.


24.9 Any arbitration or Sole Expert proceeding pursuant to this Agreement shall be conducted in


■ accordance with the ICC Rules or the ICC Rules for Expertise (as applicable) in effect on the date


on which the proceeding is instituted. %


24.10 In the event of a matter being referred for resolution under this Article 24; any obligations of the


Parties relating specifically and directlyto such matter shall (unless otherwise mutually agreed by


the Parties) be suspended, without liability to any Party until said matter has been resolved


pursuant to this Article 24.


24.11 Neither the State and/or GNPC, on the one hand, and the Contractor, on the other hand, shall be


held liable to the other for any consequential, special, indirect or punitive damages (including loss


of profit or loss of production) arising directly or indirectly out of or in relation or in connection to


this Agreement, regardless of cause or fault.







































































66


 ARTICLE 25


ASSIGNMENT


25.1 No interest in this Agreement shall be assigned by a Contractor Party directly or indirectly in


whole or in part, without the prior written consent of GNPC, which consent shall not be


unreasonably withheld or delayed, and the Minister. GNPC and/or the Minister may impose such


reasonable conditions upon the giving of consent under this Article as may be deemed by GNPC


or the Minister appropriate in the circumstances.


25.2 Any assignment of this Agreement shall bind the assignee as a Party to this Agreement to all the


terms and conditions hereof unless otherwise agreed and as a condition to any assignment


Contractor shall provide an unconditional undertaking by the assignee to assume all obligations


assigned by Contractor under this Agreement.


25.3 Where in consequence of an assignment hereunder Contractor is more than one person:


(a) : any operating or other Agreement made among Contractor Parties and relating to the


Petroleum Operations hereunder shall be disclosed to GNPC and the Minister and shall


not be inconsistent with the provisions of this Agreement;


(b) an operating agreement shall be established by the JMC to regulate the conduct of


Petroleum Operations thereafter, including cash-calls and the limits of authority;


(c) no change in the scope of the operations may take place without the prior approval in


writing of GNPC which approval shall not be unreasonably delayed of withheld; and


(d) , the duties and obligations of Contractor hereunder shall be joint and several except those


relating to the payment of income tax pursuant to Article 12 which shall be the several


obligation of each such person.


25.4 GNPC’s acquisition of an Additional Interest under Article 2 or a Sole Risk Interest pursuant to


Article 9 shall not be deemed to be an assignment within the meaning of this Article 25.


















































67


 ARTICLE 26


MISCELLANEOUS





26.1 This Agreement and the relationship between the State and GNPC on one hand and Contractor


on the other shall be governed by and construed in accordance with the laws of the Republic of


Ghana in effect from time to time.





26.2


{a) The .State confirms that it will accord to the Contractor treatment consistent with the P


minimum standard of treatment required to be accorded to foreign investors under ill


customary international law.





(b) Without prejudice to the rights and obligations of the parties under the Agreement, in the


event that.after the Effective Date any applicable Law, Rule, Decree, or Regulation of the


Republic of Ghana is made or amended, that makes further observance of the original


terms and conditions of the contract impossible or that has a material adverse effect on


. the rights, obligations and . benefits hereunder, the Parties shall, if the Contractor so


requests, meet as soon as possible to negotiate possible modifications to the Agreement


as provided under clauses (c) and (d). -s? }l-l


(c) Where a Party considers that a significant change in the circumstances prevailing at the





time the Agreement was entered into, has occurred affecting the economic balance of the


Agreement, the Party affected hereby shall notify the other Parties in writing of the


claimed change with a statement of how the claimed change has affected the relations


between the Parties.





(d) The other Parties shall indicate in writing their reaction to such representation within a


period of three (3) Months of receipt of such notification and if such significant changes


are established by the Parties to have occurred, the Parties shall meet to engage in j.-i


negotiations and shall effect such changes in, or rectification of, these provisions as they


may agree are necessary to restore the relative economic balance of the Parties. lii





26.3 This Agreement may not be modified, amended, altered or supplemented except upon the


execution and delivery of a written agreement executed by the Parties. No waiver by any Party of


any of its rights hereunder shall be construed or implied, but shall be binding on such Party only if


made specifically, expressly and in writing.





26.4 Except for payment obligations arising under the Petroleum Income Tax Law, any Party failing to


pay any amounts payable by it under this Agreement (including the provisions of Annex 2) on the


respective dates on which such amounts are payable by such Party hereunder shall be obligated


to pay interest on such unpaid amounts to the Party to which such amounts are payable. The


rate of such interest (“Specific Rate") with respect to each day of delay during the period of such


nonpayment shall be LIBOR plus three percent (3%). Such interest shall accrue from the


respective dates such amounts are payable until the amounts are duly paid. The Party to whom


any such amount is payable may give notice of nonpayment to the Party in default and if such


amount is not paid within fifteen (15) days, after such notice, the Party to which the amount is


owed may, in addition to the interest referred to above, seek remedies available pursuant to


Article 24.





26.5 (a) The rights and obligations under this Agreement of the State and GNPC on the one hand


and Contractor on the other shall be separate and proportional and not joint. This


Agreement shall not be construed as creating a partnership or joint venture, nor an


 association or trust (under any law other than the Petroleum Law), or as authorising any


. Party to act as agent, servant or employee for any other Party for any purpose


i whatsoever except as provided in Article 10.3.


(b) The duties and obligations of each Party constituting Contractor hereunder shall be joint





and several and it is recognised that each such Party shall own and be responsible for its


undivided Interest in the rights and obligations of Contractor hereunder; provided,


however, that the following payments shall be the separate obligation of and shall be


made by each Party which constitutes the Contractor:


(i) Payments under the Petroleum Income Tax Law;





(ii) Payments of royalty taken in cash under the provisions of Article 10.2(a); and


(iii) AOE share under the provisions of Article 10.2(b).





26.6 This Agreement shall not take effect unless and until the date on which (a) it has been ratified by


the Parliament of Ghana and (b) the Escrow Account has been established and funded in


accordance with Article 4.3(a) and notice of such establishment and funding has been delivered


to GNPC by the Escrow Agent (the "Effective Date"). The Escrow Agreement shall be executed


by the Parties, and the Escrow Account established and funded not later than thirty (30) days


following the ratification of this Agreement by the Parliament of Ghana.


26.7 In construing this Agreement:


(a) no consideration shall be given to the captions of the Articles, Sections, or Subsections


which are inserted for convenience in locating the provisions of this Agreement and not


as an aid in its construction;


(b) the word "includes" and its derivatives means “includes, but is not limited to" and


corresponding derivative expressions; ' *


. (c) a defined term has its defined meaning throughout this Agreement and each annex, and a


attachment to this Agreement, regardless of whether it appears before or after the place ri'


where it is defined;


(d) the plural shall be deemed to include the singular, and vice versa;


(e) each gender shall be deemed to include the other genders; .


-- - (f) Each annex and attachment to this Agreement is a part of this Agreernent, but if there is


any conflict or inconsistency between the main body of this Agreement and any annex or


attachment, the provisions of the main body of this Agreement shall prevail; and


(g) each reference to an Article, Section or Subsection refers to an Article, Section or


Subsection of this Agreement unless expressly otherwise provided.


26.8 This Agreement comprises the full and complete agreement of the Parties hereto with respect to


the subject matter hereof and supersedes and cancels all prior communications, understandings


and agreements between the Parties hereto, whether written or oral, expressed.





26.9 Contractor shall at all times comply, and shall ensure that its agents, subcontractors and Affiliates


while in Ghana carrying out activities contemplated by this Agreement and related documents


comply, with the laws of the Republic of Ghana in effect from time to time during the term of this


Agreement to the extent that the Contractor has notice of or, with the exercise of reasonable





69


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inquiry, would have knowledge of, such laws. Nothing in this Agreement or any related document


shall require the Contractor or any of its agents, subcontractors or Affiliates to violate the laws of


the Republic of Ghana in effect from time to time. To the extent any conflict exists between the


terms of this Agreement and the laws of the Republic of Ghana, the Contractor shall not be found


to be in breach of this Agreement to the extent the Contractor complies with the terms of this


Agreement; provided, however, that where this Agreement specifically refers to the law of the


Republic of Ghana, a breach of such law shall constitute a breach of this Agreement.



























































































































































70


 ARTICLE 27


NOTICE





27,1 Any Notice, Application, Requests, Agreements, Consent, Approval, Instruction, Delegation,


Waiver or other communication required or permitted to be given hereunder shall be in writing


and shall be deemed to have been properly given when delivered in person to an authorised


representative of the Party to whom such notice is directed or when actually received by such


Party through registered mail, telex or telegram at the following address or at such other address


as the Party shall specify in writing fifteen (15) days in advance:


FOR THE STATE:


MINISTER FOR ENERGY


MINISTRY OF ENERGY


PRIVATE MAIL BAG


MINISTRY POST OFFICE


ACCRA, GHANA ' "


Telephone: 233 (0)302 667151 - 3


Telex: 2436 ENERGY GH


Telefax: 233 (0)302 668262


FOR GHANA NATIONAL PETROLEUM CORPORATION:


THE CHIEF EXECUTIVE


GHANA NATIONAL PETROLEUM CORPORATION


PETROLEUM HOUSE


HARBOUR ROAD


PRIVATE MAIL BAG


TEMA


GHANA


Telephone: 233-(0)303-204726


Telefax: 233-(0)303-202854


FOR CONTRACTOR:


COLA NATURAL RESOURCES GHANA LTD. AND MEDEA DEVELOPMENT LTD.


ANTRAK HOUSE


PO BOX 155








71


 Mallam, Accra


Ghana





Telephone: +233 302 787 024





Telefax: +233 302 787 024








IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their dulv a


representatives as of the date first written above y auth°rized





FOR THE GOVERNMENT OF THE REPUBLIC OF


GHANA Witnessed:


By: Aumti- kofi AurtH By:





Signatures


Signature:


Its: Its: CAktff l^rjZ^Trrv^





Witnessed:


FOR GHANA NATIONAL PETROLEUM CORPORATION


-WWt s\x$)











|ts:











FOR CONTRACTOR


COLA NATURAL RESOURCES GHANA LTD


r. pj&kA 3am j).ft By:





Signature:





Its: -C-EuSl





MEDEA DEVELOPMENT LTD. Witnessed:





L. AuL/g-rrft


* CiccAiLSU.1 By: jiLi/v


Signature:





Dt Its:














72


 ANNEX 1





CONTRACT AREA











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EAST CAPE THREE POINTS BLOCK


SIZE: APPROX. 1,.565'SQ. KM


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 ANNEX 2





ACCOUNTING GUIDE





The- purpose of this Accounting Guide is to establish equitable methods as between the Parties for


determining charges and credits applicable to operations under the Agreement. Principles established by


this Accounting Guide shall truly reflect the Contractor's actual cost.


SECTION 1


1.1 GENERAL PROVISIONS





11.1 Words and terms appearing in this Annex shall have the same meaning as in the


Agreement and to that end shall be defined in accordance with Article 1 of the Agreement.


1.1.2 This Annex may be amended by a unanimous decision of the JMC.


1.1.3 In the event of a conflict between the provisions of the Accounting Guide and the


provisions of the Agreement, the provisions of the Agreement shall prevail.


1.2 STATEMENTS REQUIRED TO BE SUBMITTED BY CONTRACTOR


1.2.1 Within sixty (60) days from the Effective Date,. Contractor shall propose to GNPC an


outline of the chart of accounts, operating records and reports to be prepared and maintained,


which shall describe the basis of the accounting principles and procedures to be used during the


term of the Agreement, and-shall be consistent with applicable law as in effect from time to time


and with accepted accounting principles generally used in the international petroleum industry


from time to time.


1.2.2 Within ninety (90) days of the receipt of such proposal GNPC shall either accept it or,:


request such revisions as GNPC deems necessary. Failure to notify Contractor of any requested/


revisions within a ninety (90) day period shall be deemed acceptance of such proposal. .


Ai t


1.2.3 Within one hundred and eighty (180) days from the Effective Date, the Parties shall either


agree on such outline or submit any outstanding issue for determination by a Sole Expert pursuant to the


provisions of Article 24 of the Agreement.


. 1.2.4 Following agreement over the outline Contractor shall prepare and submit to GNPC


formal copies of the chart of accounts relating to the accounting, recording and reporting functions listed


in such outline. Contractor shall also permit GNPC to inspect its manuals and to review all procedures


" Which- are to be-followed under the Agreement. Contractor’s Allowable Cost Statement and Final Year


Statement shall be issued by an independent internationally-recognized auditing company. GNPC shall


be permitted to audit on site of all of the Contractor's records that evidence any of the reports issued by


the Contractor under the Agreement in accordance with the procedures set forth in Article 18 of the


Agreement.





1.2.5 Without prejudice to the generality of the foregoing, Contractor shall make separate


statements relating to Petroleum Operations for each Development and Production Area as follows:


a) Cash Call Statement (see Section 5)





b) Production Statement (see Section 6)


c) Value of Production Statement (see Section 7)


d) Allowable Cost Statement (see Section 8)


e) Statement of Expenditures and Receipts (see Section 9)


f) Final End-of-Year Statement (see Section 10)


g) Budget Statement (see Section 11)


h) Long‘Range Plan and Forecast (see Section 12)


1.3 LANGUAGE, MEASUREMENT, AND UNITS OF ACCOUNTS


•1.3.1 The U.S. Dollar being the currency unit for investments and compensation hereunder


shall therefore be the unit of currency for all bookkeeping and reporting under the Agreement. When


transactions for an asset or liability are in Ghana Cedis or currency other than the U.S. Dollar, the


respective accounts shall be kept in such other currency as well as the U.S. Dollar.


1.3.2 Measurement required under this Annex shall be in the metric system and Barrels.


1.3.3 The English language shall be employed.


■ 1.3.4 Where necessary for purposes of clarification, Contractor may also prepare financial


reports in other languages, units of measurement and currencies.


1.3.5 It is the intent of the Parties that no Party shall experience any gain or Joss at the


expense of or to the benefit of the other as a result of exchange of currency. Where any such


gain or loss arises it shall be charged or credited to the accounts under the Agreement.


1.3.6 The rate of exchange for the conversion of currency shall be the rate actually incurred


(which shall be at the prevailing rate at the date of acquisition). Where actual rates are not known,


the arithmetic average of buying and selling rate quoted by the Bank of Ghana, at a close of


business on the date of such currency conversion shall be used.


1.3.7 Current Assets and Liabilities shall be converted at the rate prevailing on the date of


settlement of the account.


1.3.8 To translate transactions in Ghana Cedis into dollars or vice versa at the year end for


revenue and expenditure the rates of the transactions or average monthly rates where


reasonable will be used.


1.3.9 To translate transactions in Ghana Cedis into dollars or vice versa at the year end for


assets, liabilities and capital items the year end rate will be used


SECTION 2


2.1 CLASSIFICATION AND ALLOTMENT OF COSTS AND EXPENDITURE


2.1.2 All expenditure relating to Petroleum Operations shall be classified, as follows:


a) Exploration Expenditure;


b) Development Expenditure;





c) Production Expenditure;





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d) Service Costs; and


e) General and Administrative expenses


and shall be defined and allotted as herein below provided.


2.2 EXPLORATION EXPENDITURE


2.2.1 Exploration Expenditure shall consist of all direct, indirect and allotted costs incurred in


the search for Petroleum in the Contract Area, including but not limited to expenditure on:


a) aerial, geographical, geochemical, paleontological, geological, topographical and seismic


surveys, and studies and their interpretation;


b) borehole drilling and water drilling;


c) labour, materials and services used in drilling wells with the objective of finding new Petroleum


reservoirs or for the purpose of appraising of Petroleum reservoirs already discovered, provided


such wells are not completed as producing wells;


d) facilities used solely for Exploration Operations, including access roads, where applicable, and


■ ' purchased geological and geophysical information;


e) all service costs allotted to Exploration Operations on the basis of procedures proposed by the


Contractor on an equitable basis ; and


f) all General and Administrative Expenses allotted to Exploration Operations based on the


percentage share of projected budget expenditure which will be adjusted to actual expenditure at


the end of each year.


2.2.1 Exploration cost shall be tied to resultant commercial discoveries; Where exploration


activity is undertaken after a commercial discovery that exploration cost shall be regarded


as capital work-in-progress. If the exploratory activity results in commercial discovery it


shall be regarded as cost of the discovery and subsequent field. Where there is no


commercial discovery it shall be charged to the previous field.


2.3 DEVELOPMENT EXPENDITURE


2.3.1 Development Expenditure shall consist of all expenditure incurred in Development


Operations, including but not limited to expenditure on:





a) drilling wells which are completed as producing wells and drilling wells for purposes of producing


a Petroleum reservoir already discovered, whether these wells are dry or producing;


b) tangible drilling costs for completing wells by way of installation of casing or equipment or


otherwise after a well has been drilled for the purpose of bringing such well into use as a


producing well;


c) intangible drilling costs such as labour, consumable material and services having no salvage


value which are incurred in drilling and deepening of wells for producing purposes;


d) field facilities such as pipelines, flow lines, production and treatment units, wellhead equipment,


subsurface equipment, enhanced recovery systems, offshore platforms, Petroleum storage


facilities and access roads for production activities;








76


e) engineering and design studies for field facilities;


f) all service costs allotted to Development Operations on equitable basis;


g) all General and Administrative Expenses allotted to Development Operations based on the


percentage projected budget expenditure which will be adjusted to actual expenditure as the end


of the year.


h) Capital allowance for development expenses shall be granted under the following conditions:


i. Development activity has been approved by the Minister;


il Development activity has been completed; and


iii. Production activity has started after the completion of the development activity.


2.4 PRODUCTION EXPENDITURE


Production Expenditure shall consist of but not limited to all expenditure incurred in Petroleum Operations


including . appropriate abandonment charges, after the Date of Commencement of Commercial


Production, such expenditure being others than, Exploration Expenditure, Development Expenditure,


General and Administrative Expenses and Service Costs. The balance of General and Administrative


Expenses and Service Costs not allotted to Exploration Operations or to Development Operations under.


Section 2.2 and 2.3 shall be allotted to Production Expenditure.


2.5 SERVICE COSTS


2.5.1 Service Costs shall consist of but not be limited to all direct and indirect expenditure


incurred in support of Petroleum Operations, including the construction or installation of


Warehouses, piers, marine vessels, vehicles, motorised rolling equipment, aircraft, fire security


stations, workshops, water and sewerage plants, power plants, housing community and


recreational facilities and furniture, tools land, equipment used in such construction or installation.


Service Costs in any Calendar Year shall include the total costs incurred in such year to purchase


and construct or install such facilities as well as the annual costs of maintaining and operating


such facilities.


2.5.2 All Service Costs will be regularly allotted on an equitable basis to Exploration


Expenditure, Development Expenditure and Production Expenditure.


2.6 GENERAL AND ADMINISTRATIVE EXPENSES


General and Administrative Expenses shall consist of:


2.6.1 All main office, field and general administrative costs, in the Republic of Ghana, including


but not limited to supervisory, accounting and employee relations services;


2.6.2 An overhead charge for the actual cost of services rendered outside the Republic of


Ghana by Contractor and its Affiliates for managing Petroleum Operations and for staff advice


and assistance, including but not limited to financial, legal, accounting and employee relations


services in the following amounts:


a) For the Exploration Phase: U.S. Dollars 0-20 million - One point two five percent (1.25%) to a


cap of US$200,000.00 per annum.








77


 b) For Development Phase; U.S. Dollars 0-50 million - One point two five percent (1.25%) to a cap


of US$500,000.00 per annum.


c) For Production Phase; US Dollars 0-10 million - 1 percent (1%) to a cap of US$200,000.00 per


annum.


2.6.3 All General and . administrative Expenses will be regularly allotted as specified in


subsections 2.2(f), 2.3(g) and 2.4 to Exploration Expenditure, Development Expenditure and


Production Expenditure.


SECTION 3


3.1 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF CONTRACTOR





3.1.1 Contractor for the purpose of this Agreement shall charge the following allowable costs to the


accounts:


a) costs of acquiring surface rights;


b) labour and associated costs;





c) transportation costs;


d) charges for services; *


e) material costs;- •


f) rentals, duties and other assessments; t


g) insurance and losses; :,i


h) legal expenses; '


i) training expenses;


j) general and administrative expenses;





k) utility costs;


l) office facility charges;


m) communication charges;


n) ecological and environmental charges;


o) abandonment cost; and


p) such other costs necessary for the Petroleum Operations.


3.2 COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT


Cost of acquiring surface rights shall consist of all direct costs attributable to the acquisition, renewal or


relinquishment of surface rights acquired and maintained in force over the Contract Area. '




















{


 3.3 LABOUR AND ASSOCIATED LABOUR COSTS


3.3.1 Labour and associated labour costs shall include but not be limited to:





a) gross salaries and wages including bonuses of those employees of Contractor and of its Affiliates


engaged in Petroleum Operations who are permanently or temporarily assigned to Ghana;


b) Costs regarding holidays, vacation, sickness and disability payments applicable to the salaries


and wages chargeable under (a);


c) expenses or contributions made pursuant to assessments or obligations imposed under the laws


of the Republic of Ghana which are applicable to cost of salaries and wages chargeable under


(a):


d) cost of established plans for employees' life insurance, hospitalisation, pensions and other


benefits of a like nature customarily granted to employees; and


e) reasonable travel and personal expenses of employees and families, including those made for


travel and relocation of the personnel.








Transportation costs and other related costs of transportation of employees, equipment, materials and


supplies necessary for the conduct of Petroleum Operations.


3.5 CHARGES FOR SERVICES


3.5.1 Charges for services shall include:


a) the costs of third party contracts which are the actual costs of contracts for technical and other


services entered into by Contractor for Petroleum Operations made with third parties other than


Affiliates of Contractor, provided that the prices paid by Contractor are no higher than the


prevailing rates for such services in the regional market;


b) cost of technical and other services of personnel assigned by the Contractor and its Affiliates


when performing management, engineering, geological, geophysical, administrative, legal,


accounting, treasury, tax, employee relations, computer services, purchasing, and all other


functions for the direct benefit of Petroleum Operations; provided that charges for such services


shall be at actual cost;


c) cost of general services, including, but not without limitation, professional consultants and others


who perform services for the direct benefits of Petroleum Operations.


3.5.2 All Services furnished by Contractor and its Affiliates (other than the Operator) shall be


performed based on a form Services Agreement to be approved by the JMC and at actual cost, on a


no gain no loss basis, without element of profit and with no allocation of fixed costs in the


determination of the service fees.


3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS


All rentals, taxes, duties, levies, charges, fees, contributions and any other assessments and charges


levied by the Government in connection with Petroleum Operations or paid for the benefit of Petroleum


Operations, with.the exception of the income tax specified in the Article 12 of the Agreement








79


 3.7 INSURANCE AND LOSSES





a) Insurance premium and costs incurred for insurance, provided that if such insurance is wholly or


partly placed with an Affiliate of Contractor, such premium and costs shall be recoverable only to


the extent not in excess of those generally charged by competitive insurance companies other


than Affiliate; and;


b) costs and losses incurred as a consequence of events, which are, insofar as not made good by


insurance, allowable under Article 17 of the Agreement.


c) Costs or expenses necessary for the repair or replacement of property resulting from damage or


losses incurred.


3.8 LEGAL EXPENSES


All costs and expenses of litigation and legal or related services necessary or expedient for the procuring,


perfecting, retaining and protecting the rights hereunder and in defending or prosecuting lawsuits


involving the Contract Area or any third party claim arising out of activities under the Agreement, or sums


paid in respect of legal services necessary or expedient for the protection of the joint interest of GNPC


and Contractor, provided that where legal services are rendered in such matters by salaried or regularly


retained lawyers of Contractor or an Affiliate of Contractor, such compensation will be included instead


under either Section 3.3 or 3.5, as applicable. The preceding costs and expenses shall not include costs


of any nature (including attorneys’ fees and the fees of the ICC, arbitrators, the Sole Expert, other


experts, . professionals and translators) incurred in connection with any consultation, arbitration or Sole


Expert process under Article 24 of the Agreement.


3.9 TRAINING COSTS


All costs and expenses incurred by Contractor in training of its employees and nominees of GNPC to the


extent that such training is attributable to Petroleum Operations under the Agreement. ,f


V


3.10 GENERAL AND ADMINISTRATIVE EXPENSES y# r


General and Administrative Expenses shall consist of the costs described in Subsection 2.6.1 and the


charge described in Subsection 2.6.2.


3.11 UTILITY COSTS


Any water, electricity, heating, fuel or other energy and utility costs used and consumed for the Petroleum


Operations.





3.12 OFFICE FACILITY CHARGES


The cost and expenses of constructing, establishing, maintaining and operating offices, camps, housing


and any other facilities in Ghana necessary to the conduct of Petroleum Operations. The cost of


constructing or otherwise establishing any operating facility which may be used at any time in operations


of more than one field shall be charged initially to the field or fields for which the facility is first used.


Costs incurred, thereafter shall be allocated in a reasonable manner, consistent with international


accounting practice, to the fields for which the facility is used.


3.13 COMMUNICATION CHARGES





The costs of acquiring, leading, installing, operating, repairing and maintaining communication systems,


including radio and microwave facilities





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3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES


All charges for environmental protection and safety, measures conducted in. the Contract Area in


accordance with Article 17 of the Agreement.


3.15 ABANDONMENT COST


Cost relating to the decommissioning and abandonment of operations and facilities; site restoration and


other associated operations accrued from a reasonable date in advance based on estimate of such cost


(with subsequent adjustments to actuals) as provided in Article 12.10 of the Agreement


3.15 OTHER COSTS


Any other costs not covered or dealt with in the foregoing provisions which are incurred and not





mentioned in this Section 3.16 for the necessary and proper conduct of Petroleum Operations.


3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT


The following costs shall not be allowable under the Agreement:


a) commission paid to intermediaries by Contractor; •





b) charitable donations and contributions, except where prior approval has been oBtained from


GNPC;


c) interest incurred on loans raised by the Contractor as well as any other borrowing costs or costs


to secure finance (including professional and advisory fees and expenses);


d) costs (including duties) arising from the marketing or processing Petroleum or transportation of


Petroleum beyond the Delivery Point;


e) the costs of any Bank Guarantee under the Agreement and any other amounts spent on


indemnities with regard to non-fulfilment of contractual obligations;


f) premium paid as a result of GNPC exercising a Sole Risk option under Article 9 of this


Agreement;


g) costs of any nature (including attorneys' fees and the fees of the ICC, arbitrators, the Sole Expert,


other experts, professionals and translators) incurred in connection with any "consultation,


arbitration or Sole Expert process under Article 24 of the Agreement;


h) fines, penalties and interest due pursuant to any applicable law or regulation and/or Imposed by a


competent administrative or judicial body;


i) costs, damages and other liabilities incurred as a result of (1) a breach of any provision of the


Agreement other than a contractual standard of care, (2) Gross Negligence with respect to any


contractual standard of care set forth in this Agreement, and/or (3) Willful Misconduct, in each


case by the Contractor, the Operator, their respective Affiliates and/or subcontractors, and/or any


other entities or persons for whom the Contractor is responsible under the Agreement;


j) income taxes (including any taxes on the net income of permanent establishments in Ghana and


any capital gains taxes or taxes on assignment of interest), withholding taxes and/or royalty


shares or other Petroleum entitlements, In each case paid to authorities .in Ghana in connection


with or related to the Agreement, (2) any taxes paid to authorities outside Ghana, except any


foreign value added taxes or other foreign taxes paid with respect to products or services





81


.imported into Ghana, (3) any taxes subject to reimbursement or refund, and (4) any other taxes


that should be deemed non-allowable costs;


k) costs incurred by the Contractor under contracts or amendments thereto that were subject to (1)


approval by the JMC or GNPC and were not so approved, or (2) award or approval in accordance


with tender procedures and were not awarded or approved in accordance with the applicable


tender procedures; •


l) costs that .(1) are not incurred in accordance with a Budget in force at the time the cost was


incurred, or (2) exceed by more than 10% any budget line item set forth in the Budget in force at


the time the cost was incurred, except for costs that are incurred in accordance with the


Agreement in response to an emergency;


■ m) costs that are not documented in accordance with applicable law or this Agreement; and


n) any bonus payments payable by the Contractor to the State, any other governmental body in


.Ghana, GNPC or any Affiliates of GNPC under the Agreement.


3.17 ALLOWABLE AND DEDUCTIBILITY


The costs and expenses set forth herein shall be for the purpose of determining allowable or non¬


allowable costs and expenses only and shall have no1 bearing on Contractor's eligibility or otherwise for


deductions in computing Contractor's net income from Petroleum Operations for Income tax purposes


under the Agreement.


3.18 CREDITS UNDER THE AGREEMENT


- 3.18.1 The net proceeds of the following transactions will be credited to the accounts under the


Agreement: -m


a) the net proceeds of any insurance or claim in connection with Petroleum Operations or any


assets charged to the accounts under the Agreements when such operations or assets were-


insured and the premium charged to the accounts under the Agreement; -t


b) revenue received from third parties for the use of property or assets charged to the accounts


under this Agreement;


c) any adjustment from the suppliers or manufacturers or their agents in connection with a defective,


equipment or material the cost of which was previously charged to the account under the


Agreement;





d) the proceeds received for inventory materials previously charged to the account under the


Agreement and subsequently exported from the Republic of Ghana or transferred or sold to third


parties;





e) rentals, refunds or other credits received which apply to any charge which has been made to the


account under the Agreement but excluding any award granted under arbitration or Sole Expert


proceedings;





f) the proceeds from the sale or exchange of plant or facilities from the Development and


Production Area or plant or facilities the acquisition costs and the cost of sale;





g) the proceeds derived from the sale or issue of any intellectual property the development costs of


which were incurred pursuant to this Agreement;








82


 n


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I


h) the proceeds from the sale of any petroleum information 'derived from Petroleum Operations


under this Agreement; and


. . 4


£


i) any Service Expenses that benefit any operation or activity other than Petroleum Operations.


3.19 DUPLICATION OF CHARGES AND CREDITS | "





Notwithstanding any provision to the contrary in this Annex, it is the intention that there shall be no


duplication of charges or credits in the accounts under the Agreement.


SECTION 4





4.1 VALUEOF MATERIAL CHARGED TO THE ACCOUNTS UNDER THE AGREEMENT





Material purchased, (eased or rented by Contractor for use in Petroleum Operations shall be valued at the


actual net cost incurred by Contractor. The net cost shall include invoice price less trade and cash


discounts, if any, purchase and procurement fees plus- freight and forwarding charges between point of


supply and point of shipment, freight to port of destination, insurance, taxes, customs duties, consular


fees, other items chargeable against imported material, and any other related costs actually paid.


Vi'.;.


4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE '





4.2.1' Contractor shall notify GNPC of any goods supplied by an Affiliate of Contractor. .; fi


Materials purchased from Affiliate of Contractor shall be charged at the prices specified in


Sections 4.2.1, 4.2.2 and 4.2.3 below. . f;


4.2.2 New Material (Condition "A") New material shall be classified as Condition "A". Such


material shall be valued at the prevailing market price, plus expenses incurred in procuring such


new materials, and in moving such materials to the locations where the material shall be used. j [


j


4.2.3 Used Material (Condition "B") Used material shall be classified as Condition "B" S


provided that it is in sound and serviceable condition and is suitable for reuse without


reconditioning. Such materia! shall be valued at not more than seventy five percent (75%) of the


current price of new material valued according to Soction 4.2.1 above. , /■





4.2.4 Used Material {Condition "C") Used material which is serviceable for original function 33


as good second hand material after reconditioning and cannot be classified as Condition "B" shall u


be classified as Condition "C". Such material shall be valued at not more than fifty percent (50%)


of the current price of new material valued according to Section 4.2.1. above. The cost of


reconditioning shall be charged to the reconditioned material provided that that the value of such


Condition "C" material plus the cost of reconditioning does not exceed the value of Condition "B"


material.





4.3 CLASSIFICATION OF MATERIALS '■i


J





Material costs shall be charged to the respective Exploration Expenditure, Development Expenditure,


Operating Expenditure accounts at the time the material is acquired and on the basis of the intended use


of the material. Should such material subsequently be used other than as intended, the relevant charge


will be transferred to the appropriate account.





4.4 DISPOSAL OF MATERIALS





Sales of property shall be recorded at the net amount collected by the Contractor from the purchaser.














S3


(


 4.5 WARRANTY OF MATERIALS





In the case of defective material or equipment, any adjustment received by Contractor from the suppliers


or manufacturers of such materials or their agents will be credited to the accounts under the Agreement.


4.6 CONTROLLABLE MATERIALS


4.6.1 The Contractor shall control the acquisition, location, storage and disposition of materials


which are subject to accounting record control, physical inventory and adjustment for averages and


shortages (hereinafter referred to as Controllable Material).


4.6.2 Unless additional inventories are scheduled by the JMC, Contractor shall conduct one


physical inventory of the Controllable Material each Calendar Year which shall be completed prior to the


end of the year. The Contractor shall conduct said inventory on a date to be approved by the JMC.


Failure on the part of GNPC to participate in a JMC schedule or approved physical inventory shall be


regarded as approval of the results of the physical inventory as conducted by the Contractor.


4.6.3 The gain or loss resulting from the physical inventory shall be reflected in the stock


records of Controllable Materials. The Contractor shall compile a reconciliation of the inventory with a


reasonable explanation for such gains or losses. Failure on the part of GNPC to object to Contractor's


reconciliation within thirty (30) days of compilation of said reconciliation shall be regarded as approval by


GNPC.


SECTION 5


5.1 CASH CALL STATEMENT


In respect of any Exploration Costs to which GNPC is contributing or any Development and Production


Area in which GNPC elects to take a participating interest, and in any case where Contractor conducts


Sole Risk Operations for GNPC's account, Contractor shall at least fifteen (15) days prior to the


commencement of any Month submit a Cash Call Statement to GNPC. Such Cash Call Statemenf^hall


include the following information:


a) Due Date;


• b) Payment Instructions;


c) The balance prior to the Cash Call being issued;


d) The cash call being issued


e) Amount of US Dollars due; and


f) An estimation of the amounts of US Dollars required from GNPC for the following month.


5.2 Not later than the twenty fifth day of each Month, Contractor will furnish GNPC a


statement reflecting for the previous month:


a) Payments;





b) The nature of such payments by ap


c) The balance due to or from GNPC.











84


5.3 Contractor may in the case where a. targe unforeseen expenditure becomes necessary


issue a special Cash Call Statement requiring GNPC to meet such Cash Call within ten (10) days of


receipt of such Statement.











6.1 PRODUCTION STATEMENT


6.1.1 Subsequent to the Date of Commencement of Commercial Production from the Contract PJ!


Y9


Area, Contractor shall submit a monthly Production Statement to GNPC showing the 8


following information for each Development and Production Area as appropriate:


a) the quantity of Crude Oil produced and saved;


I


b) the quantity of Natural Gas produced and saved; I


c) the quantities of Petroleum used for the purpose of conducting drilling and Production Operations,


pumping to field storage and re-injections; I





d) the quantities of Natural Gas flared; 1





e) the size of Petroleum stocks, held at the beginning of the Month; ir I


fl


>0


:V'


f) the size of Petroleum stocks held at the end of the Month. a


6.1.2 The Production Statement of each Calendar Month shall be submitted to GNPC not later I


■ than ten (10) days after the end of such month. ifl


SECTION 7 i1


•il


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k


7.1 VALUE OF PRODUCTION STATEMENT





During each Quarter Contractor shall prepare a statement providing calculations of the value of Crude Oil 1|


produced and saved based on the Market Price established under Article 11 of this Agreement, the j:!


amounts of Crude Oil allocated to each of the Parties during that Quarter, the buyer of the cargo, sales 1


basis with respect to Benchmark crude oil, the pricing basis, the differential, and any deductions. Each /


Production Statement shall be submitted to the Minister and GNPC not later than thirty (30) days


following the determination, notification and acceptance of the World Market Price to GNPC,according to j


Article 11 of this Agreement.


SECTION 8 Is


8.1 ALLOWABLE COST STATEMENT J


8.1.1 Contractor shall prepare with respect to each Quarter, an Allowable Cost Statement containing j


the following information with respect to costs that are allowable under Section 3.17 of this Accounting


Guide:


P


a) Total Petroleum Costs in previous Quarters, if any;


b) Petroleum Costs for the Quarter in question;





c) Total Petroleum Costs as of the end of the


subsection 8.1.1 (b) above;








85


d) Petroleum Costs for Development Operations advanced in the Quarter in respect of GNPC's


participating Interest pursuant to Article 2.8 of the Agreement;


e) Costs as specified in (d) above which have been recovered during the Quarter pursuant to Article


. 10.2 of the Agreement and the balance, if any, of such costs unrecovered and carried forward for


recovery in a later period.


8.1.2 Petroleum Costs for Exploration, Development and Production Operations as detailed above


shall be separately identified for each Development and Production Area. Petroleum Costs for


Exploration Operations not directly attributable to a specific Development Area shall be shown


separately.


8.1.3 The Allowable Cost Statement of each Quarter shall be submitted to GNPC no later than thirty


(30) days after the end of such Quarter.


SECTION 9


9.1 STATEMENT OF EXPENDITURES AND RECEIPTS


9.1.1 Subsequent to the Date of Commencement of Commercial Production from the Contract


Area, Contractor shall prepare with respect to each Quarter a Statement of Expenditures and Receipts.


The Statement will distinguish between Exploration Expenditure and Development Expenditure and


Production Expenditure and will identify major items of expenditure within these categories. The


statement will show the following:


a) actual expenditures and receipts for the Quarter in question;


b) cumulative expenditure and receipts for the budget year in question; ■


c) latest forecast of cumulative expenditures at the year end;


d) variations between budget forecast and latest forecast and explanations therefor; .


e) Price per barrel of crude oil sold; and ;#'-


f) Price per barrel of oil equivalent of Gas sold.


9.1.2 The Statement of Expenditures and Receipts of each Calendar Quarter shall be


submitted to GNPC not later than thirty (30) days after the end of such Quarter for provisional approval by


GNPC.





SECTION 10


10.1 FINAL END-OF-YEAR STATEMENT





The Contractor will prepare a Final End-of-Year Statement. The Statement will contain information as


provided in the Production Statement, Value of Production Statements, Allowable Cost Statement and


Statements of Expenditures and Receipts, as appropriate. The Final End-of-year Statement of each


Calendar Year shall be submitted to GNPC within ninety (90) days of the end of such Calendar Year.


Any necessary subsequent adjustments shall be reported promptly to GNPC.


86














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 SECTION 11





11.1 BUDGET STATEMENT


11.1.1 The Contractor shall prepare an annual budget statement. This will distinguish between


Exploration Expenditures, Development Expenditures and Production Expenditures and will show the


following;


a) forecast Expenditures and Receipts for the budget year under the Agreement;


b) cumulative Expenditures and Receipts to the end of said budget year; and


c) the most important individual items of Exploration, Development and Production Expenditures for


said budget year.


11.1.2 The budget may include a budget line or lines for unforeseen expenditures which,


however, shall not exceed ten percent (10%) of the total budgetary expenditure.


11.2 The Budget Statement shall be submitted to GNPC and JMC with respect to each budget year no


less than ninety (90) days before the start of such year except in the case of the first year of the


Agreement when the Budget Statement shall be submitted within sixty (60) days of the Effective Date.


11.3 Where Contractor foresees that during the budget period expenditures have to be made in


excess of the ten percent (10%) pursuant to section 11.1.1 hereof, contractor shall submit a revision of


the budget to GNPC.


SECTION 12


12.1 LONG RANGE PLAN AND FORECAST


12.1.1 Contractor shall prepare and submit to GNPC the following:


a) During Exploration Period, an Exploration Plan for each year commencing as of the Effective


Date which shall contain the following information:


i. Estimated Exploration Costs showing outlays for each of the years or the number of years agreed


and covered by the Plan;


ii. Details of seismic operations for each such year;


ill. " Details of drtiIing"actlvlties planned for each such year; 7


iv. Details of infrastructure utilisation and requirements.


The Exploration Plan shall be revised on each anniversary of the Effective Date. Contractor shall


prepare and submit to GNPC the first Exploration Plan for the Initial Exploration Period of two (2)


years within sixty (60) days of the Effective Date and thereafter shall prepare and submit to GNPC no


later than forty five (45) days before each anniversary of the Effective Date a revised Exploration


Plan.


b) In the event of a Development Plan being approved, the Contractor shall prepare a Development


Forecast for each calendar year of the Development Period, which shall contain the following


information:








87


i. forecast of capital expenditure portions of Development and Production expenditures for each


Calendar Year of the Development Period;


ii. forecast of operating costs for each Calendar Year;


iii. forecast of Petroleum production for each Calendar year;


iv. forecast of number and types of personriel employed in the Petroleum Operations in the Republic


of Ghana;


v. description of proposed Petroleum marketing arrangements;


vi. description of main technologies employed; and


vii. description of the working relationship of Contractor to GNPC.


c) The Development forecast shall be revised at the beginning of each Calendar Year commencing


as of the second year of the first Development forecast Contractor shall prepare and submit to


GNPC the first Development forecast within one hundred and twenty (120) days of the date when


the first Development Plan is approved by the Minister and Contractor -commences the


implementation of such plan and thereafter shall prepare and submit a revised Development


Forecast to GNPC no later than forty five (45) days before each Calendar Year commencing as of


the second year of the first Development forecast.


12.2 CHANGES OF PLAN AND FORECAST


It is recognised by Contractor and GNPC that the details of the Exploration Plan and Development


forecast may require changes in the light of existing circumstances and nothing herein contained shall


limit the flexibility to make such changes. Consistent with the foregoing the said Plan and Forecast may


be revised annually.
























































88


 ANNEX 3 SAMPLE APE CALCULATIONS











hple AOE calculation using Cola and Medea AOE thresholds





'■flWtP'LE. AO'E. 'CfiLCU a_Ajr»»Q'l!S3;1*1





::OQ iL9 tf' Ffc'Q'Fg. iAOE


\ 12.5% 12.5%


\ 3L y". 5*H& 3L13 _ 05*&





;■ 2 2 _ S^-rg. =1


22.5%


J 2.2'.





{ 3 2 _ 5%








timer: AOEs are calculated on a monthly basis but for ease of analysis the


Jple calculations were based on annual figures.








I Jjfion Rate j3% !............


h mounts in million of U$$)


NCF FAn®12.5 AOE 1 @12.5% SAn©17.5% AOE 2 TAn® 22.5% AO E 3 YAn®27.5 AOE 4 @22.5% ZAn©32.5% AOE 5 Tot


%p.0 p.-a @15% 0-3 . i- ■ @17.5% % n.a B-3 @27.5% Pay





12.5% 12.5% 17.5% 15.0% 22.5% 17.5% 27.5% 22.5% 32,5% 27.5%





(150.00) (150.00) 0.00 (150.00) 0.00 (150.00) 0.00 (150.00) 0.00 (150.00) 0.00 0


(240.00) (413.25) 0.00 (420.75) 0.00 (428.25) 0.00 (435.75) 0.00 (443.25) O.OQ 0


(310.00) (787.30) 0.00 (817.00) 0.00 (847.45) 0.00 (878.65) 0.00 (910.60) 0.00 0


(550.00), (1,459.34) 0.00 (1,534.49) 0.00 (1,613.55) 0.00 (1,696.64) 0.00 (1,783.87) o.ori o


(280.00)- (1,965.53) 0.00 (2,229.06) OjOO (2,305.01) 0.00 (2,494.12) 0.00 (2,697.14) O.OQ o


(80.00) (2,350.19) 0.00 (2,645.52) 0.00 (2,972.79) 0.00 (3,334.83) 0.00 (3,734.63) 0.00 0


(65.00) (2.779.47) 0.00 (3,252.85) 0.00 (3,795.85) 0.00 (4,41695) 0.00 (5,125.42) 0.00 0


990.00 (2,220.29) 0.00 (2,929.68) 0.00 (3,773.79) 0.00 (4,774.12). 0.00 (5,95494) 0.00 o


1,4-70.00 (1,094.43) 0.00 (2,060.27) 0.00 (3,266.11) 0.00 (4,760.22) 0.00 (6,59895) 0.00 0


1,630.00 36553 45.74 (898.36) 0.00 (2,514.71) 0.00 (4,627.83) 0.00 (7,357.31) 0.00 4!


970.00 970.00 121.25 (233.78) 0.00 (2,307.21) 0.00 (5,190.57) 0.00 (9,120.41) 0.00 12


Mp 750.00 750.00 93.75 374.55 56.18 (2,295.48) 0.00 (6,173.63) 0.00 (11,758.09) 0.00 14:


680.00 680.00 85.00 595.00 89.25 (2,375.07) 0.00 (7,550.83) 0.00 (15,426.46) 0.00 17


410.00 .....410.00 ---------51.25---------- ......355.75 .....53.81 ---(2,675:78) --- ---0.00--------- (9,518.90) -----------0.00 --- • (20,59792) 0.00 10


220.00 220.00 27.50 192.50 28.88 (3,194.48) 0.00 (12,297.69) 0.00 (27,746.55) 0.00 5£





Bt 5,445.00 42449 228.12 0.00 0.00 0.00 65;


 I A


l


i!


i ;|f'i


i l&F


ANNEX 4





CONFIDENTIALITY AGREEMENT j I


i


Offshore Ghana: IT


: lli


THIS AGREEMENT is entered into this [__ ] day of [ _], 20_(the ''Effective Date") by and


between {Contractor Party], a company organized and existing under the laws of [ J 1.


(hereinafter referred to as the "Disclosing Party’’); and [_ _], a company organized and ||


existing under the taws of [_ ■ J (hereinafter referred to as the “Receiving Party"). p





The companies named above may colleotively be referred to as the “Parties" or individually as "Party".





WHEREAS in connection with the Possible Transaction (as defined below) by the Receiving Party, the H


Disclosing Party is willing, in accordance With the terms and conditions of this Agreement, to disclose I


certain Confidential Information (as defined below) relating to the East Cape Three Points Offshore Block


( the “Area") shown in Exhibits A to D attached hereto; and jti


WHEREAS the Petroleum Agreement covering the said Contract Area requires that the Disclosing Party


require the execution of a confidentiality agreement by Reoeiving Party prior to the disclosure of Ih


Confidential Information in order to.govern such-disclosure and that a copy ot-all ,such signed r


confidentiality agreements be provided to GNPC. "" \ 3. .• t.


, -&■ . if:


NOW THEREFORE, in consideration. for the mutual undertakings of the Disclosing Party and the


•Receiving Party under this Agreement, the Parties agree as follows: ]





' ■ ,1


1. Definitions SI





As used in this Agreement the following words and terms shall have the meaning ascribed to them below: ^


• ^


1.1 “Affiliated Company” means any Person which: jf





a. Controls directly or indirectly a Party, or


b. Is Controlled directly or indirectly by such Party, or j





c. Is directly or indirectly controlled by a Person which directly or indirectly Controls such a Party. ; j











1.2 “Confidential Information” means individually or collectively:


a. any and all corporate information concerning the Disclosing Party and any Affiliated Companies


of the Disclosing Party, and





b. any and all data and information obtained as a result of petroleum operations in the Area,


including without limitation well data and seismic information together with all other data and information


obtained by or on behalf of the Disclosing Party in connection with the Disclosing Party’s petroleum


operations in the Area, as well as geological and economic reports, studies, interpretations and analyses


prepared by or on behalf of the Disclosing Party in connection with its petroleum operations in the Area.


Confidential Information includes certain proprietary data and information that is the property of GNPC


(hereinafter "GNPC Information") as described in Exhibit B attached hereto.


 c. information that can be reasonably demonstrated by the Receiving Party as being already lawfully


known to Receiving Party as of the Effective Date;


d. information that is or becomes available to the public other than through the act or omission of


Receiving Party or of any other Person to whom Confidential Information is disclosed by the Receiving


Party pursuant to Article 4.2 unless public disclosure was made pursuant to Article 4.1;


e. information that is acquired independently from a third party that has a right to disseminate such


information at the time it is acquired by the Receiving Party; or


f. information that can be reasonably demonstrated by the Receiving Party to have been developed


by Receiving Party independently of the Confidential Information received from Disclosing Party.





1.3 “Control” means the ownership directly or indirectly of 50% or more of the voting rights in a


Person or the ability to direct, directly or indirectly, the management or policies of a Person, whether


through the appointment of the directors, the ownership of voting shares or other voting rights, pursuant


to written contract or otherwise. "Controls”, "Controlled by" and other derivatives shall be construed


accordingly.


1.4 “Evaluation Material" means information derived in whole or in part from Confidential


Information, and generated by or. on behalf of the Receiving Party. For purposes of this Agreement,


Evaluation Material may include without limitation models, technical, financial andfeconomic reports,


studies, interpretations, analyses-, estimates of reserves, and evaluations and notes' of documents or


meetings.


1.5 “GNPC” means Ghana National Petroleum Corporation, a Statutory Corporation established by


Provisional National Defence Council Law 64 of 1984 with its Head Office at Petroleum House, Harbour


Road, Tema.


1.6 “Person” means an individual, joint venture, corporation, company, firm, partnership, limited


partnership, Limited Liability Company; trust, estate, government agency or any other entity, including


unincorporated business associations.


1.7 “Petroleum Agreement” means the Petroleum Agreement dated _], 2013 between the


Government of the Republic of Ghana, Ghana National Petroleum Corporation, Cola Natural Resources


Ghana Limited and Medea Development Limited in respect of the East Cape Three Points Offshore Block


(and all amendments and supplements thereto).





1.8 “Possible Transaction” means any possible business arrangement with the Disclosing Party


under which Receiving Party would acquire directly or indirectly all or part of the rights and interests


owned by Disclosing Party and/or Disclosing Party Affiliates in one or more offshore hydrocarbon


ex^lDra^tiO'n. developrnent'or production assets located Within the Arear “ ; .....---.....................


2. Disclosure





In connection with the Possible Transaction, Disclosing Party is willing to disclose to Receiving Party


certain Confidential Information. The Parties agree that the disclosure by the Disclosing Party and the


receipt by the Receiving Party of the Confidential Information is subject to the terms of this Agreement.


J








3. Undertaking of Confidentiality, Restriction on Use and Damages


3.1 In consideration of the disclosure referred to in Article 2 above, the Receiving Party agrees that


the Confidential Information and the Evaluation Material shall be held and treated strictly in confidence


and may not be disclosed, licensed, traded, published or otherwise revealed in any manner whatsoever,


without the prior written consent of the Disclosing Party except as provided in Article 4 below.





91


3.2 The Receiving Party shall (and shall procure that any Affiliated Company shall) not use or permit


the use of the Confidential Information and/or the Evaluation Material other than for the purpose of


evaluating the Area and determining whether to enter into negotiations in connection with the Possible


Transaction with the Receiving Party.


3.3 The Receiving Party shall (and shall procure that any Person that receives Confidential


Information and/or Evaluation Material pursuant to and in accordance with Article 4.2 hereof shall) keep


any Confidential Information it receives and any copies thereof and any Evaluation Material secure and


confidential (in a manner no less secure and confidential than Receiving Party and such Persons keep


their respective confidential information) and to prevent the Confidential Information and any Evaluation


Material from being disclosed in breach of this Agreement.


3.4 The Receiving Party agrees not to disclose to anyone, except as provided for by Article 4 below,


the fact that the Confidential Information has been made available or that discussions or negotiations are


taking place or have taken place between Disclosing Party and Receiving Party or any Party's Affiliated


Companies.


3.5 The obligations of the Receiving Party for confidentiality and non-use as set forth in this


Agreement shall commence from receipt of the Confidential Information by the Receiving Party. Further,


the obligation not to disclose shall not be affected by bankruptcy, receivership, assignment, attachment or


seizure procedures, whether initiated by or against the Receiving Party, nor by the rejection of any


agreement between GNPC and Disclosing Party and/or Receiving Party, by a trustee of Receiving Party


in bankruptcy, or by the Receiving Party as a debtor-in-possession or the equivalent of any of the


foregoing.


3.6 The Receiving Party agrees to indemnify Disclosing Party against.direct damages (including,


losses, damages,- claims, expenses and reasonable attorney’s fees) incurred or suffered as a result of a


breach of this Agreement by Receiving Party or its Affiliated Companies. Such direct damages shall be


the sole exclusive remedy, and all other remedies, or damages at law or in equity are waived except such


equitable relief as may be granted under Article 11. In no event shall the Parties be liable to each other


for any other damages, including incidental,, consequential, special, or punitive damages, regardless of


negligence or fault. '


4. Permitted Disclosure and Obligation of Receiving Party for Permitted Disclosures


The Receiving Party may disclose Confidential Information and/or Evaluation Material without the prior


written consent of the Disclosing Party:


4.1 To the extent the Confidential Information and/or Evaluation Material is required to be disclosed


under applicable law, order, decree, regulation or rule of any governmental entity having jurisdiction over


the Receiving Party, or any regulatory entity, securities commission or stock exchange on which the


securities of the Receiving Party or any of its Affiliated Companies are listed or are to be listed, provided


that the Receiving Party shall make all reasonable efforts to give written notice to the Disclosing Party


prior to such disclosure (including full details of the circumstances of such disclosure); or


4.2 To the following persons on a need to know basis and only for the purpose described in Article


3.2:


4.2.1 employees, officers and directors of the Receiving Party;


4.2.2 employees, officers and directors of an Affiliated Company of the Receiving Party;


4.2.3 any professional consultant or agent retained by the Receiving Party or its Affiliated Company; or


4.2.4 any bank, financial institution or entity financing or proposing to finance the Possible Transaction,


including any professional consultant retained by such bank, financial institution or entity for the purpose


of evaluating the Confidential Information and/or Evaluation Material.


Prior to making any such disclosure to Persons under Articles 4.2.3 and 4.2.4 above, however, the


---Reeeivmg Party shall obtain an undertaking of confidentiality, on terms no less stringent than contained in


this Agreement, from each such Person; provided, however, that in the case of outside legal counsel, the


Receiving Party shall only be required to procure that such legal counsel is bound by an obligation of


confidentiality.


4.3 The Receiving Party shall be responsible to the Disclosing Party for any act or omission of the


entities and .Persons described in Article 4.2 that would constitute breach of this Agreement as if the


action or omission had been perpetrated by the Receiving Party and shall immediately notify the


Disclosing Party upon becoming aware that Confidential Information has been disclosed in breach of this


Agreement.


5. Ownership of Confidential Information


5.1 Receiving Party acknowledges the Confidential Information, excluding the GNPC Information,


remains the property of the Disclosing Party and the Disclosing Party may use such Confidential


Information for any purpose without obligation to the Receiving Party.


5.2 Receiving Party acknowledges that the GNPC Information's and-remains the property of GNPC


and GNPC may use such GNPC Information for any purpose without obligation to the Disclosing Party or


Receiving Party. In addition, Receiving Party acknowledges that in the event that it acquires, directly or


indirectly an interest in the Area, that it may be required to enter into a data licensing agreement with


GNPC with respect To the GNPC Information on terms to be agreed between GNPC and the Receiving


Party.


5.3 The Receiving Party shall acquire no proprietary interest in or title or right to the Confidential


Information.


6. Return of Confidentiallnformation


U:..


6.1 Disclosing Party may demand the return of the Confidential Information at any time upon giving


written notice to Receiving Party.


6.2 Within thirty (30) days of receipt of the notice referred to in Article 6.1 or upon completion of the


Receiving Party's review and/or evaluation of the Confidential Information, the Receiving Party shall


retain no copies of the Confidential Information, but shall:


6.2.1 Return all of the original Confidential Information to the Disclosing Party;


6.2.2 Destroy or delete or cause to be destroyed or deleted all copies and reproductions (both written


and electronic) of Confidential Information and any Evaluation Material in its possession and/or in the


possession of persons to whom it was disclosed by the Receiving, Party. Confidential Information or


Evaluation Material that is in electronic format (including all electronic back-up files - subject to Art 6.3.1)


shall also be deleted; and


6.2.3 Provide a written certification, signed by an authorized officer of the Receiving Party, that


Receiving Party has fully complied with its obligations under this Clause 6.2.


6.3 The provisions of Article 6.1 and 6.2 do not apply to the following:


6.3.1 Confidential Information or Evaluation Material that is retained in the computer backup system of


Receiving Party or a Person to whom it was disclosed under Article 4.2 if the Confidential Information or


Evaluation Material will be destroyed in accordance with the regular ongoing records retention process of


Receiving Party or such Person and if the Confidential Information is not used prior to its destruction;


6.3.2 Confidential Information or Evaluation material that must be retained under applicable Jaw or


regulation, including by stock exchange regulations or by governmental order, decree, regulation or rule;


and .■ ■ ■" '.


6.3.3 any corporate documents or reports of the Receiving Party which contain data-derived from the n


-ConfidentiaUnformation or Evaluation Material which-were presented -to its executive board (or the


^equivalent thereof) and are required in accordance with applicable law or its document retention policy to


be retained;


provided that any Confidential information and/or Evaluation Material that is -so retained shall remain





subject to the terms of this Agreement.


7. Remedies


The Receiving Party understands and acknowledges that any breach of the terms of this Agreement may k'





cause the -Disclosing .Party irreparable harm, and damages may not be an adequate remedy, and


therefore agrees that the Disclosing Party, an Affiliated: Company of Disclosing Party shall have the right


to apply 4o a court of competent jurisdiction for specific performance and/or an order restraining and


enjoining any such breach or further disclosure and for such other relief as may be deemed appropriate.


Such right is.to be in addition to the remedies otherwise available to the Disclosing Party, an Affiliated


Company of Disclosing Party at law or in equity. -


8. Term








. This Agreement shall terminate on the later of five (5) years from the Effective Date or the date on which


- disclosure is no longer restricted by the terms of the Petroleum Agreements currently covering the Area.





9. Representations and Warranties


The Disclosing Party , represents and warrants that it has the right and authority to disclose the


Confidential Information to the Receiving Party. However the Disclosing Party, its Affiliated Companies


and their respective principals, officers, directors and employees make no representation or warranties,


express or implied as to the quality, accuracy and completeness of the Confidential Information disclosed


hereunder, and the Receiving Party expressly acknowledges the inherent risk of error in the acquisition,


processing, and interpretation of geological, and geophysical data. The Disclosing Party, its Affiliated


Companies and their respective principals, officers, directors and employees shall have no liability


whatsoever with respect to the use of or reliance upon the Confidential Information by the Receiving Party


or its Affiliated Companies or Persons to whom the Receiving Party discloses Confidential Information


under Article 4.2.


10. Assignment





The rights and obligations of the Receiving Party under this Agreement may not be assigned in whole or


in part by the Receiving Party without the prior written consent of the Disclosing Party. Any attempted


assignment-by Receiving Party without the prior written approval of Disclosing Party shall be void. Without


limiting the prior provisions of this Article 10, this Agreement shall bind and inure to the benefit of the


Parties and their respective successors and permitted assigns.


11. Governing Law and Dispute Resolution





11.1 This Agreement shall be governed by and interpreted in accordance with the laws of England and


Wales.





11.2 Any dispute arising out of, relating to, or in connection with this Agreement, including any


question regarding its existence, validity or termination, shall be settled under the Rules of Arbitration of


the International Chamber of Commerce by three arbitrators appointed in accordance with said rules.


The place of arbitration shall be Geneva, Switzerland. The proceedings shall be in the English language.





94


11.3 The resulting arbitral award shall be final and binding without right of appeal, and judgment upon


such award may be entered by any court having jurisdiction thereof. A dispute shall be deemed to have


arisen when either Party notifies the other Party in writing to that effect. Receiving Party understands and


acknowledges that any breach of the terms of this Agreement may cause the Disclosing Party irreparable


harm for which damages may not be an adequate remedy. Accordingly, the arbitrator may award both


monetary and equitable relief, including injunctive relief and specific performance or other such relief as


may be deemed appropriate. The Disclosing Party may apply to any competent judicial authority for


interim or conservatory relief; an application for such measures or an application for the enforcement of


such measures ordered by the arbitrator shall not be deemed an infringement or waiver of the Agreement


to arbitrate and shall not affect the powers of the arbitrator,. Any monetary, award issued by the arbitrator


shall be payable in U.S. dollars. Each Party waives any right to damages other than those provided in


Article 3.6.





11.4 Unless the parties expressly agree in writing to the contrary, the parties undertake as a general


principle to keep confidential all awards in their arbitration, together with all materials in the proceedings


created for the purpose of the arbitration and all other documents produced by another party in the


proceedings not otherwise in the public domain - save and to the extent that disclosure may be required


of a party by legal duty, to protect or pursue a legal right or to enforce or challenge an award in bona fide


legal proceedings before a state court or other judicial authority.


11.4 Any Party that now or hereafter has a right to claim immunity for itself or any of its assets hereby


waives such immunity and agrees not to claim such immunity, in connection with this Agreement,


including any dispute hereunder. This waiver includes immunity from (A) legal process of any sort


whatsoever, (B) jurisdiction or judgment, award, determination, order or decision of any court, arbitrator,


tribunal or Expert, (C) inconvenient forum, and (D) any effort to confirm, enforce, or execute any decision,


settlement, award, judgment, service of process, execution order, attachment (including pre-judgment


attachment) or other remedy that results from an expert determination, arbitration or any judicial or


administrative proceedings commenced pursuant to this Agreement.





12. Non-exclusivity








The disclosure of Confidential Information to Receiving Party is non-exclusive, and Disclosing Party may


disclose the Confidential Information to others at any time pursuant to the terms and conditions of#ie


Petroleum Agreement. 4$i


if?


13. No Rights in the Area





Unless otherwise expressly stated in writing, any prior or future proposals or offers made in the course of


the discussions of the Parties are subject to all necessary management and government approvals and


may be withdrawn by either Party for any reason or for no reason at any time. Nothing contained herein is


intended to confer upon Receiving Party any right whatsoever to the interest of Disclosing Party in the


Area. ......____________________________________________





14. No Waiver


No waiver by either Party of any one or more breaches of this Agreement by the other Party shall operate


or be construed as a waiver of any future breach or breaches by the same or other Party, whether of like


or of different character. Except as may be expressly provided in this Agreement no Party shall be


deemed to have waived, released or modified any of its rights under this Agreement unless such Party


has expressly stated in writing, that it does waive, release or modify such right.


15. Modifications


No amendments, changes or modifications to this Agreement shall be valid except if the same are in


writing and signed by a duly authorized representative of each of the Parties hereto.











95


 16. Severability


if any term of this Agreement is held by a court .of competent jurisdiction to be invalid or unenforceable,





then this Agreement, including all of the remaining terms, will remain in full force and effect as if such


invalid or unenforceable term had never been included. m





17. interpretation





17.1 Headings. The topical headings used in this Agreement are for convenience only and shall not


•1


, be construed as having any substantive significance or as indicating that all of the provisions of this


Agreement ■relating to any topic are to be found in any particular Article.





. 17.2 Singular and'Piur>a). Reference to the singular includes a reference to the plural and vice versa.


i


17.3 .Include. The words "Include" and "including" have an inclusive meaning, are used in an illustrative '*


sense and not a limiting sense,'and are not intended to limit the generality of the description preceding Or


following such term. ^


: j


18. Counterpart Execution





This Agreement may be executed in counterparts and-each counterpart shall be deemed an original |a


Agreement for all purposes; provided that neither Party shall be bound to this Agreement until both 4


parties have executed a counterpart. For purposes of assembling the counterparts into one document,


Disclosing Party is authorized to detach the signature, page from one counterpart and, after signature j


thereof by Receiving Party* attach each signed signature-page to a counterpart. j





19. Entirety


if


This Agreement comprises the full and complete agreement of the Parties hereto with respect to the


■disclosure of the Confidential Information and supersedes and cancels all prior communications, ij


understandings and agreements among the. Parties with respect to disclosure of the Confidential ||


Information to the Receiving Party by the Disclosing Party, whether written or oral, expressed or implied. f,


20. No Third Party Beneficiaries





20.1 This Agreement is made for the benefit of the Parties, any Affiliated Company of the Disclosing i


Party and their respective successors and permitted assigns. f


: irt


20.2 It is the intention of the Parties that: |


(a) any person who is an Affiliated Company of the Disclosing Party; and '


P




has a right under the U.K. Contract (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of |j|





any term of this Agreement. Except as aforesaid, a person who is not a party to this Agreement has no I j


right under such Act to enforce or enjoy the benefit of any term of this Agreement.





20.3 Notwithstanding any provisions of this Agreement, the Parties to this Agreement do not require


the consent of any third party to vary this Agreement at any time provided that the consent of GNPC will


be required for any variation which relates to any provision as it applies to GNPC Information.


21. Notices i


j


All notices authorized or required between the Parties by any of the provisions of this Agreement shall be


in writing, in English and delivered in person or by courier service or by facsimile which provides written





96


 16. Severability


If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable,


then this Agreement, including all of the remaining terms, will remain in full force and effect as if such


invalid or unenforceable term had never been included.


17. Interpretation





17.1 Headings. The topical headings used in this Agreement are for convenience only and shall not


be construed as having any substantive significance or as indicating that all of the provisions of this


Agreement relating to any topic are to be found in any particular Article.


17.2 Singular and Plural. Reference to the singular includes a reference to the plural and vice versa.





17.3 Include. The words "include" and "including" have an inclusive meaning, are used in an illustrative


sense and not a limiting sense, and are not intended to limit the generality of the description preceding or


following such term.


18. Counterpart Execution





This Agreement may be executed in counterparts and each counterpart shall be deemed an original


Agreement for all purposes; provided'that neither Party shall be bound to this'Agreement until both


parties have executed a counterpart. For purposes of assembling the counterparts into one document,


Disclosing Party is authorized to detach the signature page from one counterpart and, after signature


thereof by Receiving Party, attach each signed signature page to a counterpart. '


19. Entirety





This Agreement comprises the full and complete agreement of the Parties hereto with respect to the


disclosure of the Confidential Information and supersedes and cancels all prior communications,


understandings and agreements among the Parties with respect to disclosure of the Confidential


Information to the Receiving Party by the Disclosing Party, whether written or oral, expressed or implied?**


20. No Third Party Beneficiaries


20.1 This Agreement is made for the benefit of the Parties, any Affiliated Company of the Disclosing





Party and their respective successors and permitted assigns.


20.2 It is the intention of the Parties that:


(a) any person who is an Affiliated Company of the Disclosing Party; and





(b) GNPC in respect of any GNPC Information,


has a right under the U.K. Contract (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of


any term of this Agreement. Except as aforesaid, a person who is not a party to this Agreement has no


right under such Act to enforce or enjoy the benefit of any term of this Agreement.


20.3 Notwithstanding any provisions of this Agreement, the Parties to this Agreement do not require


the consent of any third party to vary this Agreement at any time provided that the consent of GNPC will


be required for any variation which relates to any provision as it applies to GNPC Information.


21. Notices


All notices authorized or required between the Parties by any of the orovisions of this Aareement shall be


in writing, in English and delivered in person or by courier servic





96


confirmation of complete transmission, and properly addressed to such Parties as shown below. Oral


communication and email do not constitute notice for purposes of this Agreement and email addresses


and telephone numbers for'the Parties are listed below as a matter of convenience only. A notice given


under any provision of this Agreement shall be deemed delivered only when received by the Party to


whom such notice is directed, and the time for such Party to deliver any notice in response to such


originating notice shall run from the date the originating notice is received. “Received" for purposes of


this Article 21 shall mean actual delivery of the notice to the address or facsimile address of the Party


specified hereunder. Each Party shall have the right to change its address at any time and/or designate


that copies of all such notices be directed to another person, by giving written notice thereof to all other


Parties.


Disclosing Party Name





Address:














Attention:





Facsimile:





Email: Telephone











Receiving Party Name


Address:


Attention:


Facsimile:


E-mail:


Telephone:


iN WITNESS WHEREOF the duly authorized representatives of the Parties have caused this Agreement


to be executed on the date first written above.


DISCLOSING PARTY














Signature:





97


Name: _


Title: _





Date: _





RECEIVING PARTY





{_1


Signature: __


Name: _


Title: ______


Date: _

















Signature page to CONFIDENTIALITY AGREEMENT:


Offshore Ghana East Cape Three Points Offshore Block












































98


 Annex 5





ESCROW AGREEMENT





THIS ESCROW AGREEMENT (this "Agreement"), made this.{.] 2013 by and among the Government of


the Republic of Ghana (hereinafter referred to as the "State"), represented by the Minister for Energy


(hereinafter referred to as the "Minister"), the Ghana National Petroleum Corporation, a public


corporation established by the Ghana National Petroleum Corporation Act, 1983 PNDCL64 (hereinafter


referred to as "GNPC"), and Cola Natural Resources Ghana Limited, a company existing under the Law


of the -British Virgin Islands (BVI) and having its registered office in Ghana with branch registration


number ETG0Q422Q12 (hereinafter referred to as "CNR"), and Medea Development Ghana Limited, a


company existing under the Law of the British Virgin-Islands and having its registered office in Ghana with


branch registration number ET 000442012 (hereinafter referred to as "Medea")(CNR and Medea are


sometimes referred to herein as the "Contractor"),-and Barclays Private Bank & Trust Limited, having an


office at 39 - 41 Broad Street, St-Helier,- Jersey, Channel Islands (hereinafter referred to as "Escrow


Agent").


WHEREAS the State (represented by the Minister),'GNPC, CNR and Medea have entered into the


Petroleum Agreement (East Cape Three Points Offshore Block) on the [.] September, 2013 (the


"Petroleum Agreement") pursuant to which Contractor is to conduct Petroleum Operations on the Block;


and


- WHEREAS the Petroleum Agreement requires that the Contractor fund the Escrow Account with an


amount equal to at least the Minimum Expenditure Obligation, and to contract the Escrow Agent to handle


the funds in the Escrow Account.


NOW THEREFORE in consideration of the mutual covenants and agreements set out in this


Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby


acknowledged, the parties hereto agree as follows:


11. Definitions .Capitalized terms used and not defined herein shall have the meanings ascribed to


them in the Petroleum Agreement, unless the contrary intention appears. "Business Day" means


any day on which banks in the Bailiwick of Jersey are open for business.


12. Appointment of Escrow Agent. The State, GNPC and Contractor appoint the Escrow Agent to


act as escrow agent in respect of the Escrow Amount in accordance with the terms and


conditions of this Agreement, and the Escrow Agent accepts such appointment.


13. Escrow Amount. The escrow amount shall be as determined by the provisions set out in Article


4.3(a) of the Petroleum Agreement (the "Escrow Amount").


14. Escrow Amount Delivery, Not later than thirty (30) days following the ratification of the


Petroleum Agreement by the Parliament of Ghana, Contractor shall deposit the Escrow Amount


with the Escrow Agent contemplated in Article 4.3(a) of the Petroleum Agreement. Upon receipt


of the Escrow Amount, the Escrow Agent shall hold the Escrow Amount in trust for and on behalf


of the State, GNPC and Contractor in accordance with the terms of this Agreement. The Escrow


Agent shall deposit the Escrow Amount in an interest bearing deposit account under the control of


the Escrow Agent at Barclays Bank in the Principality of Monaco which is the Escrow Account for


the purposes of the Petroleum Agreement. Upon completion of the deposit of the Escrow Amount


in the Escrow Account, Escrow Agent shall provide a written notice to the State and GNPC that


the deposit has been made.


15. Holding of Escrow Amount. Contractor shall direct which interest bearing deposit account is to


be utilized for the Escrow Amount so as to permit withdrawal of the Escrow Amount as required in


accordance with this Agreement and the Petroleum Agreement and the Escrow Agent will be


obliged to act in accordance with the directions of the Contractor and have no responsibility for


ensuring that funds will be available for withdrawal from the Escrow Account at any time or from


time to time. The Escrow Agent shall provide to each Party a copy of each statement received


from Barclays Bank in the Principality of Monaco pertaining to the Escrow Amount. Escrow Agent


shall allow the State and GNPG to audit its records in relation to the management of the Escrow


Amount, upon reasonable advance written notice and during regular office hours of the Escrow


Agent.


16. Escrow Interest. Interest earned on the Escrow Amount from time to time shall be paid by the


Escrow Agent to Contractor, The Escrow Agent makes no representations as to the interest to be


yielded from the Escrow Amount, shall bear no liability for any failure to achieve the maximum


possible yield from the Escrow Amount, which shall be the responsibility of the Contractor, and


shall not be responsible for any failure of the bank in which the Escrow Amount is deposited.


17. Work Programme and Budget. Promptly following the approval and any amendment of the


Work Programme and Budget under the Petroleum Agreement, Contractor will provide to the


Escrow Agent (with a copy to GNPC) a copy of the approved or amended Work Programme and


Budget together with a note that identifies the maximum budgeted expenditure (including the 10%


contingency under Accounting Guidelines, Annex 2, 11.1.2 of the Petroleum Agreement) (the


"Maximum Expenditure") for the relevant Calendar Year or such extended period as


contemplated by Section 6.4(a) of the Petroleum Agreement (the "Relevant Period").


18. : Disbursement of Escrow Amount. Subject to the terms and conditions of this Agreement, the


Escrow Amount shall be held by the Escrow Agent and distributed either to Contractor or to the


State based on the following directions:


(a) Contractor has delivered to the Escrow Agent a notice precisely in the form of Schedule


"A" (a "Draw Notice"), or


(b) Following termination of the Initial Exploration Period, the State and; GNPC have


delivered to the Escrow Agent a notice precisely in the form of Schedule "B" (a "Default


Notice"), or • .....


(c) Following termination of the Initial Exploration Period and approval of the Joint


Management Committee, Contractor has delivered to the Escrow Agent a notice


precisely in the form of Schedule "C" (a "Final Draw Notice"), or


(d) The State, GNPG and Contractor have delivered a joint written notice substantially in the


form of Schedule "D" (the "Adjustment Notice") to the Escrow Agent, instructing the


release and payment of all or a portion of the Escrow Amount.


19--- Release of Escrow Amount. The Escrow Agent shall promptly release and pay all or part of the


Escrow Amount in accordance with the following directions:


(a) the Escrow Agent shall promptly release and pay all or part of the Escrow Amount in


accordance any Draw Notice, provided that the Escrow Agent shall not release and pay


any amount which would exceed the Maximum Expenditure during the Relevant Period;


(b) the Escrow Agent shall promptly release and pay all or part of the Escrow Amount in


accordance any Adjustment Notice;


(c) the Escrow Agent shall release and pay the entire remaining amount of the Escrow


Amount in accordance with any Default Notice on the Business Day which next follows


fifteen days after the receipt of the Default Notice (the "Final Default Release Date"),


unless Escrow Agent receives from Contractor a notice precisely in the form of Schedule








2


"E" (a "Default Dispute Notice") at least one Business Day prior to the Final Default


Release Date;


■(d) the Escrow Agent shall release and pay the entire remaining amount of the Escrow


• Amount in accordance with any Final Draw Notice on the Business Day which next


follows fifteen days after the receipt of the Final Draw Notice (the "Final Draw Release


■ ‘ Date"), unless Escrow Agent receives from the State and GNPC a notice precisely in the


1 form of Schedule "F" (a "Final Draw Dispute Notice") at least one Business Day prior to


the Final Draw Release Date; and


(e) ■ the Escrow Agent may also release and pay the Escrow Amount, or any portion thereof,


in accordance with any direction or decision of an arbitration panel established pursuant


to Article 24 of the Petroleum Agreement.


Retention of Escrow Amount. Where the Escrow Agent receives a Default Dispute Notice or a


Final Draw Dispute Notice within the time contemplated by Section 9(c) or (d), it shall hold the


remaining Escrow Amount until it receives either an Adjustment Notice or a direction or decision


of an arbitration panel established pursuant to Article 24 of the Petroleum Agreement. If the


Contractor -fails or refuses to provide instructions which are required under section 5 regarding


the Escrow Account, the Escrow Amount will be placed .in an (accounts Note to Draft: Barclays


Trust to complete] until instructions are received or the Escrow Account is released under section


9, hereof, or the Escrow Amount (or power-to deal with it) is assigned or transferred or the


Escrow Amount is deposited with a court under section 12 hereof.


Method of payment. The obligation of the Escrow Agent under Section 9 hereof to pay and


deliver the Escrow Amount to the State and GNPC in accordance with a notice properly delivered


under this Escrow Agreement shall be satisfied by wire transfer from the account of the Escrow


Agent to the account to be provided at the time of the notice


If the Escrow Amount is to be returned to Contractor in accordance with Section 9, the payment


shall; be made to the account designated below:


; Bank:


- Branch: ■


Account No.:


IBAN:


Account Name


Swift:


Reference:








The State and GNPC will confirm that the account provided pursuant to this section 21 is a bank


account of the State or GNPC and no other person has a beneficial interest therein. Contractor


confirms that the account second designated above is a bank account of the Contractor and no


other person has a beneficial interest therein. Payment instructions of a party to this Agreement


may be amended by written notice by such party to all other parties.


Dispute. Notwithstanding anything to the contrary contained herein, the Escrow Agent shall have


the right at any time, without notice and in its sole and absolute discretion, to deposit the Escrow


Amount with the High Court of Justice of England and Wales in London, England and interplead


such funds. The Escrow Agent shall give written notice of any such deposit to the State and


GNPC and Contractor promptly after such deposit is made. Upon so depositing such funds and


filing its interpleader, the Escrow Agent shall be relieved of all obligations and liability under the


terms hereof.








3


23. Legal Counsel. If the Escrow Agent is joined into any litigation involving this Agreement, CNR


and Medea jointly and severally agree to pay to the Escrow Agent on demand, its reasonable


charges, counsel and attorney fees, disbursements, and expenses in connection with such


litigation. Provided, however, that this obligation shall not extend to litigation resulting from


actions or omissions taken or suffered by the Escrow Agent in bad faith or involving gross


negligence on the part of the Escrow Agent.


24. No agency. The Escrow Agent shall not under any circumstances be deemed to be the agent of


the State and GNPC or Contractor in respect of the escrow arrangements herein referred to.


25. Indemnity, The Escrow Agent will not be liable for any loss suffered by the Escrow Amount or the


interest paid thereon arising from any cause whatsoever unless such loss was caused by the bad


. faith or gross negligence of the Escrow Agent and CNR and Medea hereby jointly and severally


agree to indemnify and hold the Escrow Agent harmless from and against all costs, claims


(including those from third parties) and expenses, including solicitor's fees and disbursements


incurred in connection with or arising from the performance of the Escrow Agent's duties or rights


hereunder; provided that this indemnity shall not extend to actions or omissions taken or suffered


by the Escrow Agent in bad faith or involving gross negligence on the part of the Escrow Agent.


The costs of any indemnity payment made pursuant to this Agreement shall be borne by CNR


and Medea, jointly and severally.


26. Fees. CNR and Medea shall jointly and severally be responsible for and pay the fees of the


Escrow Agent as established in the Fee Agreement between the Escrow Agent and the


Contractor plus the disbursements of the Escrow Agent for its services under this Agreement,


including without limitation the reasonable accounts of any independent counsel to the Escrow


Agent. Escrow Agent may at its option deduct its fees from any interest earned on the Escrow


Amount prior to disbursement thereof to Contractor and will not be obliged to account for any


profit received as a result of acting as Escrow Agent hereunder.


27. Limitation on Duties. It is understood and agreed that the Escrow Agent's only duties1 and


obligations in respect of the Escrow Amount are expressly set out in this Agreement. The Escrow


Agent shall have the right to consult with separate counsel of its own choosing (if it deems such


consultation is advisable) and shall not be liable for any action taken, suffered or omitted to be


taken by it if the Escrow Agent acts in accordance with the advice of such counsel. The Escrow


Agent may act, and shall be protected if it acts, upon any written or oral communication, notice,


certificate or other instrument or document believed by the Escrow Agent to be genuine and to be


properly given or executed without the necessity of verifying the truth or accuracy of the same or


the authority of the person giving or executing the same. The Escrow Agent shall have no duty to


determine the performance or non-performance of any term or condition of any contract or


agreement between the parties.


28. Resignation of Escrow Agent. The Escrow Agent may, at any time, resign its obligations under


this Agreement and be discharged from all further duties and liabilities hereunder by giving the


State and GNPC and Contractor at least 10 days’ notice in writing of its intention to resign. The


State and GNPC and Contractor agree that they shall forthwith upon receipt of such notice


appoint a new escrow agent to act in place and stead of the Escrow Agent, which shall be a bank,


trust company, law firm or other person reasonably suitable to serve the function of the Escrow


Agent and approved by the State, GNPC and Contractor. Upon any new appointment, the new


escrow agent will be vested with the same powers, rights, duties and obligations as if it had been


originally named herein as the Escrow Agent and such new escrow agent shall enter into an


agreement on the same terms as this Agreement. In event of Escrow Agent's resignation, upon


receipt of written notice executed by the State and GNPC and Contractor, the Escrow Agent shall


deliver to the new escrow agent the Escrow Amount (or assign and transfer the power to deal


with the Escrow Amount at Barclays Bank in the Principality of Monaco) and the Escrow Agent


shall thereafter be released and discharged from all obligations and liability hereunder and will be








4


 entitled to all fees and disbursements for the period before the Escrow Amount (or the power to


deal with the Escrow Amount) is transferred .





29. Discharge of the Escrow Agent. The State and GNPC and Contractor may, by unanimous


agreement at any time, remove the Escrow Agent as the escrow agent hereunder, and substitute


therefor a new bank, trust company, law firm or other -person reasonably suitable to serve the


function of the Escrow Agent approved by the State, GNPC and Contractor, in which event, upon


receipt of written notice thereof executed by the State and -GNPC and Contractor, the Escrow


, Agent shall deliver to the new escrow agent the Escrow Amount (or assign and transfer the power


to deal with the Escrow Amount at Barclays Bank in the Principality of Monaco) and the Escrow


Agent shall thereafter be -released and discharged from all obligations and liability hereunder and


will, be entitled to allfees and disbursements for the period before the Escrow Amount (or the


power to-deal with the Escrow Amount) is transferred.


30. Further Assurances. Each party shall cooperate fully with the other parties and shall take all


further actions and execute such further instruments, documents, and agreements and give


further written assurances as may be reasonably requested by any other party to evidence and


reflect the transactions described herein and contemplated hereby and carry into, effect the


intents and purposes of this Agreement. -





31. Anti-Bribery Provisions,


(a) Definitions: mi








(i) Applicable Anti-Bribery Law: means any bribery, fraud, kickback, or other similar


anti-corruption law or regulation of any relevant country, including the Bribery Act


and the US Foreign Corrupt Practices Act 1977;





(ii) Associated Person:, means' in relation to any entity, a person who (by reference


to all the relevant circumstances.) performs services for or on behalf of that entity


in any capacity and including, without limitation, employees, agents, subsidiaries,


representatives and subcontractors;





(iii) Bribery Act: means the UK Bribery Act 2010 (as amended from time to time);





(b) Contractor must not violate any Applicable Anti-Bribery Law.





(c) Contractor has and must at all times implement adequate procedures designed to


prevent it or any Associated Person from engaging in any activity which would constitute


an offence under the Bribery Act if it were carried out in the UK, or violate any Applicable


Anti-Bribery Law. Contractor represents that, in connection with this Agreement, no


improper financial or other advantage has been, will be or is agreed to be given to any


person (whether working for or engaged by the Barclays Group or any third party) by or


on behalf of Contractor or its Associated Persons. Breach of any of the provisions in this


clause 21 or of any Applicable Anti-Bribery Law is a material breach of this Agreement


and, without prejudice to any other right, relief or remedy, entitles Barclays to terminate


this Agreement immediately. Contractor must promptly report to Barclays in writing upon


becoming aware that it or any of its Associated Persons relevant to this Agreement (or to.


any agreement with the Barclays Group):





(i) have committed an actual or suspected breach of this clause 21 or of any


Applicable Anti-Bribery Law;





(ii) are proposed for debarment or suspension from, or are ineligible for participation


in, any government procurement programmes or contracts;








5


(iii) are the subject of any actual or threatened police, judicial or regulatory


investigation or proceedings in relation to any suspected breach of any


Applicable Anti-Bribery Law; or


(iv) have received any request or demand for any undue financial or other advantage


in connection with the performance of this Agreement.


(d) Contractor must keep detailed up to date books, accounts, and records that accurately


reflect its transactions relating to this Agreement, and the steps taken by it to comply with


Applicable Anti-Bribery Law from the date of this Agreement, and such books, accounts


and records shall be retained for a period of not less than six years after their creation;


(e) Contractor must from time to time, at the reasonable request of Barclays


(i) confirm in writing that it has complied with its obligations under this clause 21 and


must provide any information reasonably requested by Barclays in support of


such compliance;


(ii) permit Barclays to have such access to its books, accounts, and records (and to


--take~sadrcopies 1heieof) as reasonablyneces.saiy in xirder to verify compliance


with this clause 21, and to meet with those of its Associated Persons as are


relevant to this Agreement to audit such compliance, for up to six years after


termination or expiry of this Agreement; and


■ (iii) permit Barclays to appoint, and Contractor must cooperate with, an independent


accounting or auditing firm to carry out such audit as Barclays reasonably


requires in order to verify compliance with this clause 21 (including meeting with


those of its Associated Persons as are relevant to this Agreement), for up to


three years after termination or expiry of this Agreement.


(f) Contractor must give reasonable assistance and cooperation to Barclays in relation to


any police, judicial or regulatory investigation or enquiry in relation to any suspected


bribery or corruption, whether during the term of this Agreement or up to six years after


its termination; ■ ■ ,!,f


(g) Contractor represents that the responses it provided to Barclays due diligence enquiries


remain true, accurate and complete.


32. Notice. All notice or other communications given pursuant to this Agreement shall be in writing


and shall be either delivered by hand or by facsimile transmission or electronic mail addressed as


follows:





To State and GNPC: The Chief Executive


Ghana National Petroleum Corporation


Petroleum House


Harbour Road


Private Mail Bag


Tema


Ghana





Telephone: 233-(0)303-204726


Telefax: 233-(0)303-202854











6


 To Contractor: {Contractor to complete]








To Escrow Agent: Barclays Private Sank & Trust Limited


39 - 41 Broad Street


St Helier


Jersey, Channel Islands





Fax:


Email:





Any notice or other communication shall conclusively be deemed to have been given and


received on the date on which it was delivered or sent if delivered or sent during normal business


hours on a Business Day, and if delivered after normal business hours Or on other than a


■ Business Day, shall be deemed to have been given or sent on the next following Business Day.


Any party may change its address for notices Or other-communications by giving notice thereof to


the other parties to this Agreement in accordance with this Section.


33. Termination of Agreement. This Agreement shall terminate when the entire Escrow Amount


shall have been released by the Escrow Agent or paid into -Court, in accordance with this


Agreement, or following release or resignation of the Escrow Agent and the -completion of the


procedures described in Section 18 and 19, or when all parties otherwise agree to its termination.


34. Expenses. Except as otherwise provided in this Agreement or any other agreement between the


parties, the State and GNPC and Contractor shall each be responsible for their own costs and


expenses with respect to matters involving this Agreement.


35. Headings. The section headings contained in this Agreement are for reference purposes only


and shall not affect in any way the meaning or interpretation of this Agreement. All pronouns shall


be deemed -to refer to the masculine, feminine, neuter, singular, or-plural, as the identity of the


persons, firm , or corporation may require in the context thereof.


36. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of


England and Wales and the parties hereto irrevocably submit to the jurisdiction of the courts of


England and Wales.


37. Modification. This Agreement may only be modified or amended by an agreement in writing


signed by all of the parties hereto.


38. Severability. If any provision of this Agreement, or any covenant, obligation or agreement


contained in this Agreement is determined by a Court to be invalid or unenforceable, such


determination shall not affect any other provision, covenant, obligation or agreement, each of


which shall be construed and enforced as if such invalid or unenforceable portion were not


contained in this Agreement. Such invalidity or unenforceability shall not affect any valid or


enforceable application thereof, and each such provision, covenant, obligation or agreement,


shall be deemed to be effective, operative, made, entered into or taken in the manner to the full


extent permitted by the law.


39. Counterpart. This Agreement may be executed in counterparts, each of which together shall


constitute one and the same instrument, and each of the Parties may execute this Agreement by


signing any such counterpart. An electronic (.pdf) or facsimile signature of a Party shall be


deemed to be an original.


40. Time. Time shall be of the essence of this Agreement.





7


41. Successors and Assigns, This Agreement shall enure to the benefit of and be binding upon the





parties hereto and their respective successors and assigns.

























































































































































































8


IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized


representatives as of the date first written above.





FOR THE GOVERNMENT OF THE REPUBLIC OF Witnessed:


GHANA


By: By:


Signature: • . • . Signature:


Its: Its:





FOR GHANA NATIONAL PETROLEUM CORPORATION Witnessed








By: By:


Signature: Signature:


Its: Its: ;


FOR CONTRACTOR Witnessed:


COLA NATURAL RESOURCES GHANA LTD


By: By:


Signature: Signature:


Its: Its:


MEDEA DEVELOPMENT LTD. Witnessed:


By: By: .. _


Signature: Signature:


Its: Its:


FOR ESCROW AGENT Witnessed:


BARCLAYS PRIVATE BANK & TRUST LIMITED


By: By:


Signature: Signature:


Its: Its:


9


 SCHEDULE"A"


Draw Notice


TO: [_(the "Escrow Agent")]


-CC: Government of the Republic of Ghana and Ghana National Petroleum Corporation





FROM: Cola Natural Resources Ghana Limited and Medea Development Limited


RE: Escrow Agreement dated_, 2013(the "Escrow Agreement")





Capitalized terms used in this Draw Notice and not otherwise defined have the meanings given to them in


the Escrow Agreement.


The undersigned hereby authorize and direct the Escrow Agent to release and pay $__ (or such


lesser amount as remains in the Escrow Account) to Contractor, representing funds required for


Petroleum Operations under the Petroleum Agreement, in respect of activities approved under the


Petroleum Agreement for the current Work Program and Budget.





The amount previously released and paid by Escrow Agent during the current Relevant Period is


$ . and accordingly the requested sum in this Draw Notice does not exceed the Maximum


Expenditure of $__.


. The accounts) to which the above funds shall be wired are as provided in the Escrow Agreement.





DATED the [•] day of [•], 201_





Cola Natural Resources Ghana Limited Medea Development Limited








Per: Per:











i











)

















I














105


 SCHEDULE "B1


Default Notice





TO: [_(the "Escrow Agent")]


GC: Cola Natural Resources Ghana Limited and Medea Development Limited


FROM: Government of the Republic of Ghana and Ghana national Petroleum Corporation





RE: Escrow Agreement dated_, 2013 (the "Escrow Agreement")





Capitalized terms used in this Default Notice and not otherwise defined have the meanings given to them


in the Escrow Agreement.


The undersigned -hereby authorize and direct the Escrow Agent to release and pay the entire remaining


amount of the Escrow Amount to the State and GNPC.


The accounts) to which the above funds shall be wired are as provided in the Escrow Agreement.


DATED the [•] day of [•], 201_.


Government of the Republic of Ghana Ghana National Petroleum Corporation


represented by the Minister for Energy


Per:____ Per:_


 SCHEDULE"C"


Final Draw Notice





TO: [_(the "Escrow Agent")]


CC: Government of the Republic of Ghana and Ghana National Petroleum Corporation


FROM: Cola Natural Resources Ghana Limited and Medea Development Limited


RE: Escrow Agreement dated_, 2013 (the "Escrow Agreement")


Capitalized terms used in this Final Draw Notice and not otherwise defined have the meanings given to


them in the Escrow Agreement.


The undersigned hereby authorize and direct the Escrow Agent to release and pay the entire remaining


amount of the Escrow Amount to Contractor.


The account(s) to which the above funds shall be wired are as provided in the Escrow Agreement.


DATED the [•] day of .[•], 201_.





Cola Natural Resources Ghana Limited Medea Development Limited


 SCHEDULE"D"


Adjustment Notice


TO: [_(the "Escrow Agent")]


FROM: Cola Natural Resources Ghana Limited, Medea Development Limited, Government of the


Republic of Ghana and Ghana National Petroleum Corporation


RE: Escrow Agreement dated__, 2013 (the "Escrow Agreement")





Capitalized terms used in this Final Draw Notice and not otherwise defined have the meanings given to


them in the Escrow Agreement.'


The. undersigned hereby authorize and direct the Escrow Agent to release and pay ($_] (or


: such lesser amount as remains in the Escrow Account) to [the State and GNPC][Contractor].


The account(s) to which the above funds shall be wired are as provided in the Escrow Agreement.


DATED the [•] day of [•], 201_.


Cola Natural Resources Ghana Limited Medea Development Limited


Per: __:_ Per: __;_-


Government of the Republic of Ghana Ghana National Petroleum Corporation


represented by the Minister for Energy


Per:__ Per:___






































108


 SCHEDULE"E"


Default Dispute Notice





TO: (the "Escrow Agent")]





! CC: Government of the Republic of Ghana and Ghana National Petroleum Corporation


FROM: ' Cola Natural Resources Ghana Limited and Medea Development Limited





RE: Escrow Agreement dated_, 2013 (the "Escrow Agreement")








Capitalized terms used in this Default Dispute Notice and not otherwise defined have the meanings given


to them in the Escrow Agreement.


The undersigned hereby direct the Escrow Agent not to release and pay the entire remaining amount of


the Escrow Amount to the State and GNPC in accordance with the Default Notice delivered to Escrow


Agent by the State and GNPC on or about_, 201_ on the grounds that Contractor is in a dispute


with the State and GNPC respecting performance by Contractor under the Petroleum Agreement, and


this dispute has been referred to arbitration in accordance with Article 24 of the Petroleum Agreement.


DATED the [•] day of [•], 201_. [NOTE: This Default Dispute Notice may not be served prior to the


delivery of a Default Notice]








Cola Natural Resources Ghana Limited Medea Development Limited








Per:_ Per:







































































109


 SCHEDULE"F"


Final Draw Dispute Notice





TO: (the "Escrow Agent")]





CC: Cola Natural Resources Ghana Limited and Medea Development Limited





FROM: Government of th.e Republic of Ghana and Ghana National Petroleum Corporation





RE: Escrow Agreement dated_, 2013 {the "Escrow Agreement")








Capitalized terms used in this Final Draw Dispute Notice and not otherwise defined have the meanings


given to them in the Escrow Agreement.


The undersigned hereby direct the Escrow Agent not-to release and pay the entire remaining amount of


the Escrow Amount to Contractor in accordance with the Final Draw Notice delivered to Escrow Agent by


the State and GNPC on or about ■ 2013_ on the grounds that the State and GNPC are is in a


dispute with Contractor respecting performance by Contractor under the Petroleum Agreement, and this


dispute has been referred to arbitration in accordance with Article 24 of the Petroleum Agreement.


DATED the [•] day of ■[•],. 201_. [NOTE: This;Default Dispute Notice may riot be served prior to the


delivery of a Final Draw Notice]


Government of the Republic of Ghana Ghana National Petroleum Corporation


represented by the Minister for Energy








Per:__ Per:

































































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