NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here
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