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EX-10.9 2 exlO 9.htm PRODUCTION SHARING CONTRACT


EXHIBIT 10.9





























PRODUCTION SHARING CONTRACT





For


EXPLORATION, DEVELOPMENT AND PRODUCTION OF


PETROLEUM IN ONSHORE ALBANIA





BLOCKS “4, 5 and DUMRE”


between





MINISTRY OF ECONOMY, TRADE AND


ENERGY OF ALBANIA


(Acting by and through the National Agency of Natural Resources /AKBN)





and


SKY PETROLEUM, Inc.








Tirana, on . , 2010


 PRODUCTION SHARING CONTRACT













FOR






EXPLORATION, DEVELOPMENT AND PRODUCTION OF













PETROLEUM IN ALBANIA ONSHORE






BLOCKS "4, 5 AND DUMRE"


































between




















MINISTRY OF ECONOMY, TRADE AND ENERGY OF ALBANIA






(Acting by and through the National Agency of Natural Resources)




















and













SKY PETROLEUM, Inc.









































This Contract signed as of the 2 fr** day of /> . 2010, by the MINISTRY






OF ECONOMY, TRADE AND ENERGY of the Government of the Republic of






Albania (acting by and through the National Agency of Natural Resources,






hereinafter referred to as “AKBN”), pursuant to the Petroleum law No. 7746






dated 2d.07.1993, "Petroleum Law (Exploration and Production)", represented by






tC. ■ . Afrryfr/ f_, as one Party, and Sky Petroleum, Inc., a






company incorporated and existing under the laws of the State of Nevada, United






States of America, represented by Karim Jobanputra, President and Chief






Executive Officer, as the other Party, (hereinafter referred to as






“CONTRACTOR”).




















WITNESSETH:




















WHEREAS, all natural resource, ir^uding minerals and hydrocarbons in the






Republic of Albania are the property Albania;






4.1.2 Second Exploration Period (3 Years)


Provided it hail completed the Minimum Work Program for the


First Exploration Period or it has paid to AKBN the amount of


U.S. Dollars pursuant to Paragraph 4.1.4 of this Contract,


CONTRACTOR shall have the option of extending the Exploration


Period for an additional period of three (3) Years (‘Second


Exploration Period’'). Such option may be exercised by


CONTRACTOR giving to AKBN, not less than thirty (30) Days


prior to the end of the Fir3t Exploration Period, written notice of


(i) its election to enter the Second Exploration Period and (ii) its


commitment to perform the following Minimum Work Program


during the Second Exploration Period:





r Minimum Expenditure in USD


Minimum Work Program


150.000


1 G&G Evaluation I


_ 2 Exploration Weiis or i Exploration t


Well and 100km Seismic Acquisjtipn 2000m 2.500,000


Total Commitment “ --- .-<• at ••• • •» - ------


_______ 2,650,000





G&G: including but not limited to interpretation of geological,


geophysical and well data, regional geological and structural


studies (mapping, balanced cross sections).


Exploration Wells' either (a) drill one well in blocks 4 & 5 and





another well in Durare block or (b) drill one well in blocks 4 & 5


and acquire 100km seismic in Dumre block. The well(s) shall be


drilled to a minimum vertical depth of 2,000 meters or until it


reaches the Carbonates of the Eocene or Cretaceous, whichever


first occurs.





During the Second Exploration Period in addition to fulfilling the


Minimum Work Program set forth in this article, CONTRACTOR


may elect to undertake additional Exploration work including


without limitation the drilling of additional well(s), seismic


acquisition and processing, geological field work, and rock


mechanical studies.


Any additional Exploration work in excess of the minimum


amounts described above (whether G&G or Exploration wells) may


be credited against the CONTRACTOR'S minimum work


obligations in the third Exploration Period.


4.1.3 Third Exploration Period (2 Years)





Provided it has completed the Minimum Work Program for the


Second Exploration Period or it has paid to AKBN tho amount of


U.S. Dollars pursuant to Paragraph 4.1.4 of this Contract,


CONTRACTOR shall have the option of extending the Exploration


Period for an additional period of two (2) Years (“Third Exploration


Period") if, as approved by the AKBN, there are special


circumstances which require more time for the CONTRACTOR to


perform adequate Exploration activity. Such option may be


exercised by CONTRACTOR giving to AKBN, not less than thirty


(30) Days prior to the end of the Second Exploration Period, a


written notice o£ (i) its election to enter the Third Exploration


Period and (ii) its commitment to perform the following Minimum


Work Program during the Third Exploration Period:








Minimum Work Program . Minimum Expenditure in USD


\


1 G&G Evaluation 150.000


2 2 Exploration Weils 2000m 3.000,000





Total Commitment 3,150,000





G&G- including but not limited to interpretation of geological,


geophysical and well data, regional geological and structural


studies (mapping, balanced cross sections).


Exploration Wells^ drill one well in blocks 4 & 5 and another well


in Dumre block. The welKs) shall be drilled to a minimum vertical


depth of 2,000 meters or until it reaches the Carbonates of the


Eocene or Cretaceous, whichever first occurs.


During the Third Exploration Period in addition to fulfilling the


minimum work program set forth in this article, CONTRACTOR


may elect to undertake additional exploration work including


without limitation the drilling of additional well (s), seismic


acquisition and processing, geological field work, and rock


mechanical studies.


4.1.4 If CONTRACTOR fails to timely complete a firm.obligation for


acquisition and processing of the requisite amount of 2-D seismic


and/or for re processing the existing seismic data, CONTRACTOR


shall pay to AKBN the balance of the Minimum Expenditure


related to such unccuip-eted seismic obligation, and shall thereby


be relieved of Ion to acquire and re-process the said


seismic data; provided however, CONTRACTOR may, with AKBN


approval, be relieved of the said monetary obligations for not


acquiring and processing said data, and the corresponding seismic


obligation, if such relief is considered by AKBN as justified on the


technical grounds. Such approval shall not be unreasonably


withheld or delayed.


4.1.5 At the end of the First Exploration Period or the Second


Exploration Period, CONTRACTOR shall have the right, subject to


AKBN approval, to extend such period by one (l) year. In such a


case, the duration of the Second Exploration Period or the Third


Exploration Period shall be reduced to one (1) year. The request


extension shall be presented to AKBN in writing, at least ninety


(90) days prior to the end of respective exploration period.


Except as otherwise provided herein, if CONTRACTOR fails to timely


commence drilling of an obligatory Exploration Well, or after commencing


the drilling of an obligatory Exploration Well abandons the well without


having completed the well or without having met the Minimum


Expenditure for that well, CONTRACTOR shall pay to AKBN the


Minimum Expenditure in the case where the commencement of drilling did


not occur, or the balance of the Minimum Expenditure in the case where


the well was abandoned. Provided, however, an obligatory Exploration


Well shall be deemed to have been completed if (a) in the


CONTRACTOR'S sole opinion continuing drilling of the relevant well


presents a hazard due to the presence of unforeseen conditions; (b)


insurmountable technical problems are encountered rendering it


impractical to continue drilling with standard equipment; or (c) petroleum


formations are encountered whose penetration requires laying protective


casing that does not enable the obligatory depth to be reached.


CONTRACTOR shall be entitled to recover any expenditure made in


conducting Exploration during any Exploration Period as Exploration


Expenditures in the manner provided in Article VII.


Notwithstanding any other provision of this Contract, the First


Exploration Period, the Second Exploration Period or the Third


Exploration Period shall be automatically extended for the period of time


necessary to allow for 1) completion of drilling or testing of a well and/or 2)


evaluation of results from the drilling or testing of a well, provided,


however, that such evaluation period may not exceed six (6) Months from


and after the date the drilling or any testing ceases (by which date


CONTRACTOR may continue to hold the relevant area by- submitting a


notice under Paragraph 6.4.1, Paragraph 6.4.2, or Paragraph 6.4.3) except


for reasons of Force Majeure.


If CONTRACTOR, in compJar.ee with Paragraphs 4.1.2 or 4.1.3, does not


decide to enter into any cf Exploration Period or Third Exploration


Period, CONTRACTOR shall be relieved of any work and expenditure


obligations with respect to any such period not entered into, but


CONTRACTOR shall have the right to proceed with the Appraisal of any


potential Commercial Discovery resulting from any well drilled during the


Exploration Periods in which it entered into.


4.4 All wells committed by CONTRACTOR under this Article IV. or drilled


pursuant to Article VT, will be programmed to a bona hde objective and


drilled in a workmanlike manner in accordance with Good International


Petroleum Industry Practices; and CONTRACTOR in so drilling such wells


shall be permitted to intersect and pass through all zones, formations and


reservoirs as may be necessary for the purposes of acliieving such


objectives, regardless, of whether such zones, formations and reservoirs


are part of the Contract Area.


4.5 At least three (3) Months prior to the beginning of each Calendar Year, or


at such times as otherwise mutually agreed to by AKBN and


CONTRACTOR, CONTRACTOR shall prepare an Exploration Work


Program and Budget for the Contract Area setting forth the Exploration


operations which CONTRACTOR plans to carry out during the ensuing


Calendar Year.


During the Exploration Period, each such Work Program and Budget shall


be at least sufficient to satisfy CONTRACTOR'S minimum work


obligations for the period it covers.


4.6 The Exploration Work Program and Budget, any Appraisal Plan and any


Development Plan shall be reviewed by a joint committee to be established


by AKBN and CONTRACTOR after the Effective Date of this Contract.


This committee, hereinafter referred, as the "Exploration Advisory


Committee” shall consist of six (6) members, three (3) of whom shall be


appointed by AKBN and three (3) by CONTRACTOR. The Chairman of


the Exploration Advisory Committee shall be designated by AKBN from


among the members appointed by it. The Exploration Advisory Committee


will be installed within thirty (30) Days from the Effective Date. The


Exploration Advisory Committee shall meet at least twice in each


Calendar Year unless agreed upon by Operator and AKBN, and shall have


the following functions and responsibilities under this Contract: (a) to


provide opportunity for and to encourage the exchange of information,


views, ideas, and suggestions regarding the proposed Exploration Work


Program and BudgetCs) and results of Exploration Operations; (b) in case


of a Discovery, to review CONTRACTOR’S proposals for the Appraisal and


possible Development of such Discovery; and (c) to foster cooperation


between AKBN and CONTRACTOR towards implementation of this


Contract in accordance with its terms.


CONTRACTOR shall be responsible for making necessary arrangements


for the conduct of the Exploration Advisory Committee meetings. The





13


 ARTICLE VI


OPERATIONS AFTER DISCOVERY








6.1 Within fifteen (15) Days after a Date of Discovery is determined by


CONTRACTOR, CONTRACTOR shall notify AKBN, in writing, of the


Discovery and will provide AKBN with the results of the testing.


Following a Discovery, CONTRACTOR may produce, transport and sell


Petroleum on test, as may be reasonably permitted by AKBN. Such


production shall be subject to Article VII.


6.2 Within sixty (60) days after the notice of Discovery under Paragraph 6.1,


CONTRACTOR will notify AKBN in writing whether CONTRACTOR


considers the Discovery to be worthy of Appraisal as a potential


Commercial Discovery.


6.3 In case CONTRACTOR notifies AKBN under Paragraph 6.2 that it


considers a Discovery to be worthy of Appraisal as a potential Commercial


Discovery, CONTRACTOR shall promptly thereafter inform AKBN of its


Appraisal plans for the concerned Discovery and will undertake the


Appraisal of the Discovery by performing such works that, in the


CONTRACTOR'S opinion, may be necessary to determine whether such


Discovery is worthy of being Developed commercially, taking into


consideration all relevant technical and economic factors.


6.4 Within six (6) months after completion of the Appraisal, CONTRACTOR


shall either-


6.4.1 Submit to AKBN a Development Plan for the purpose of declaring


a Commercial Discovery! or


6.4.2 Notify AKBN that the Discovery could be commercial if other


Discoveries are made and jointly Developed and exploited w ith it,


or that CONTRACTOR proposes to do additional work in the


Contract Area for that purpose! or


6.4.3 Notify AKBN that CONTRACTOR does not consider the Discovery


to be potentially commercial.


6.5 A Development Plan submitted pursuant to Paragraph 6.4.1 above and as


presented to the Exploration Advisory Committee, will be subject to the


approval of AKBN, which approval shall not be unreasonably withheld and


will be given within ninety* (90) Days from receipt of the Development Plan


or else shall be deemed to have been approved. CONTRACTOR shall then


proceed to Develop the Discovery* in accordance with the approved


Development Plan.


To the extent that the Development Plan contains estimates of quantities


of Petroleum which CONTRACTOR expects to recover from the relevant


Discovery in each year of the Production period relating thereto, or the


rate of recovery expected, or yearly forecast expenditure and cash flow of


both capital and Operating Expenses, or estimates of the time necessary to


undertake the Development Plan, these shall be treated as estimates only,


and if such estimates do not prove accurate, CONTRACTOR may


nevertheless continue to develop and operate the Development and


Production Area in accordance with the Development Plan unless (a) in the


CONTRACTOR’S sole opinion continuing Development and Production


presents a hazard due to the presence of unforeseen conditions.' (b)


insurmountable technical problems are encounttered rendering it


impractical to continue Development or Production; or (c) continued


Development and Production would not be commercially profitable.


6.6 In case of a notice by CONTRACTOR under Paragraph 6.4.2 above,


CONTRACTOR shall present to Exploration Advisory Committee and


submit in writing for AKBN approval, which approval shall not be


unreasonably delayed or withheld, a plan containing a description of the


additional works that CONTRACTOR considers necessary and the


estimated schedule for said works, in accordance with Good International


Petroleum Industry Practices. CONTRACTOR shall undertake, as part of


its Exploration program, the performance of said additional works in


accordance with the plan and schedule submitted to AKBN.


6.7 In case of a notice by CONTRACTOR under Paragraph 6.4.3 above, AKBN


shall have the right to Develop and exploit the Discovery for its sole benefit


and at its sole cost and risk, and CONTRACTOR will have no rights in


such Discovery and will relinquish, in accordance with Good International


Petroleum Industry Practices, the Discovery .Area; however,


CONTRACTOR’S rights in the remainder of the Contract Area shall not be


affected thereby.


6.8 Any Commercial Discovery may consist of one (l) Reservoir or a group of


Reservoirs which, after Appraisal, is considered by CONTRACTOR worthy


of being Developed commercially.


6.9 Within three (3) Months following a submission under Paragraph 6.4.1 of


this Contract, CONTRACTOR shall provide AKBN with a report on the


technical and economic factors considered in determining that the


Discovery is worth being Developed commercially.


6.10 The Production period shall be twenty (five (25) Years for each field from


the Date of Initial Commercial Production and based on the Petroleum


Law may be extended, at CONTRACTOR’S option for successive periods of


five (5) Years on the same c-nd-iions as provided for herein, subject to


approval by AKBN. whitL shall not be unreasonably withheld or


IN WITNESS HEREOF, this Contract has been duly signed by the respective


Parties hereto as of the date first set out above.

















MINISTRY OF ECONOMY, TRADE AND ENERGY OF ALBANIA






































SKY PETROLEUM Inc.




















Title:
















































































66


 ANNEX “A"


DESCRIPTION OF CONTRACT AREA








The Contract Area covered and affected by this Contract comprises, on the


Effective Date, the area enclosed by the following lines, also shown on the map


comprising ANNEX UK>?»





A. GEODETIC COORDINATES OF BLOCK 4 ONSHORE


ALBANIA








1. 40° Off 10.0" N 20® 41' 25.0" E


2. 40° 20’ 00.0" N 20® 30' 00.0" E


3. 40° 30’ 00.0" N 20® 30' 00.0" E


4. 40° 30’ 00.0" N 20® 15' 00.0" E


5. 40® 20' 00.0" N 20® 15’ 00.0" E


6. 40® 20’ 00.0" N 20® 00' 00.0" E


7. 40® 05' 00.0" N 20® 00' 00.0" E


8. 39® 55' 00.0" N 20® 15' 00.0* E


9. 39® 55* 00.0" N 20® 20* 50.0" E








Explanations


Point 1. Is the intersection of the line 1*2 (Annex B) with the international


boundary line between Albania and Greece.


Point 9. Is the intersection of the parallel 39 ® 551 N with the international


boundary line between Albania and Greece.









































1


B. GEODETIC COORDINATES OF BLOCK 5 ONSHORE


ALBANIA








1. 40 ° 27' 00.01' N 19° 29' 10.0” E


2. 40° 27' 00.0" N 19 0 37 00.0" E


3. 40° 14'00.0" N 19° 37' 00.0" E


4. 40° 14' 00.0" N 19° 58' 00.0” E


5. 40° 20' 00.0" N 19 0 45' 00.0” E


6. 40 • 20‘ 00.0" N 20® 00’ 00.0" E


7. 39° 57' 30.0" N 20® 00* 00.0" E


8. 39° 52' 00.0" N 20° 09* 40.0" E


9. 39* 55' 00.0" N 20° 15' 00.0" E


10. 39° 55’ 00.0" N 20 ° 20’ 50.0" E


11. 39° 38’ 49.8" N 20° 00’ 31.5" E








Explanations





Point 1. Is the intersection of the parallel 40 0 27' N with the Adriatic Sea


shore line in Vlora Bay.





Point 10. Is the intersection of the parallel 39 0 55' N with the international


boundary line between Albania and Greece.


Point 11. Is the intersection of Ionian Sea shore line with the international


boundary line between Albania and Greece.






























































2


c. GEODETIC COORDINATES OF DUMRE BLOCK ONSHORE


ALBANIA











1 41° 00' 00.0” N 19° 45' 00.0" E


cm co rr ir: t£> 41 ® 00' 00.0" N 19° 48' 00.0" E


41° 05’ 00.0” N 19° 48’ 00.0" E


11° 05’ 00.0" N 20° 02’ 00.0" E


40° 50* 00.0" N 20° 02' 00.0" E


40 *>50* 00.0" N 19° 4.5' 00.0" E


























































































































3


 ANNEX “B"


MAP OF TIIE CONTRACT AREA





BLOCK 4













































































5


MAP OF THE CONTRACT AREA





BLOCKS


 MAP OF THE CONTRACT AREA








DUMRE BLOCK
































t *


£


O*


41*04* 41*06'








E 13 AS AN I











41*04' 43*00

















4i*or 4I*C*

















4 TOO' 4TOO*

















urw WOO'




















40*00' 40*00


















































7