NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here
PETROLEUM AGREEMENT
Among
GOVERNMENT OF THE REPUBLIC OF GHANA
Ghana National Petroleum Corporation
And
Tullow Ghana Limited
Saore Oil and Gas Limited
Kosmos Energy Ghana HC
In reispeict or
THE DEEPWATER TANO
CONTRACT AREA
Dated March 10, 2006
Table Of Contents
ARTICLE 1................................................................................................................................ ..5
DEFINITIONS.......................................................................................................................... ..5
ARTICLE 2................................................................................................................................ 12
SCOPE OF THE AGREEMENT. INTERESTS OF THE PARTIES AND CONTRACT AREA 12
ARTICLE 3................................................................................................................................ 15
' EXPLORATION PERIOD........................................................................................................ 15
ARTICLE 4................................................................................................................................ 18
MINIMUM EXPLORATION PROGRAMME........................................................................ 18
ARTICLE 5................................................................................................................................ 22
RELINQUISHMENT................................................................................................................ 22
ARTICLE 6................................................................................................................................ 24
JOINT MANAGEMENT COMMITTEE................................................................................. 24
ARTICLE 7................................................................................................................................ 28
RIGHTS AND OBLIGATIONS OF CONTRACTOR AND GNPC....................................... 28
ARTICLE 8................................................................................................................................ 31
COMMERCIALLY.................................................................................................................. 31
ARTICLE 9................................................................................................................................ 36
SOLE RISK ACCOUNT............................................................................................................ 36
ARTICLE 10............................................................................................................................. 39
SHARING OF CRUDE OIL..................................................................................................... 39
ARTICLE 11............................................................................................................................. 47
MEASUREMENT AND PRICING OF CRUDE OIL............................................................... 47
ARTICLE 12............................................................................................................................. 50
TAXATION AND OTHER IMPOSTS..................................................................................... 50
ARTICLE 13............................................................................................................................. 53
FOREIGN EXCHANGE TRANSACTIONS............................................................................. 53
ARTICLE 14............................................................................................................................. 55
SPECIAL PROVISIONS FOR NATURAL GAS........................................................................ 55
PARTI-GENERAL.........................................................-.................................................... 55
PARTII-ASSOCIATED GAS............................................................................................... 55
PART III - NON-ASSOCIA TED GAS.................................................................................. 56
PART IV NATURAL GAS PROJECTS................................................................................ 58
Petroleum Agreement Deepwater-Tullow/Sabre/Kosmos• March, 2006
ARTICLE 15......................................................... 62
DOMESTIC SUPPLY REQUIREMENT (CRUDE OIL)........................................................................................62
ARTICLE 16..................................................................................................................... 63
INFORMATION AND REPORTS : CONFIDENTIALITY..................................................................................63
ARTICLE 17.......................................................................................................................... 66
INSPECTION, SAFETY AND ENVIRONMENTAL PROTECTION...................................................................66
ARTICLE 18.................................................................... 68
ACCOUNTING AND AUDITING................................................................................................ 68
ARTICLE 19........................ 70
TITLE TO AND CONTROL OF GOODS AND EQUIPMENT............................................ 70
ARTICLE 20............. 72
PURCHASING AND PROCUREMENT......................... 72
ARTICLE 21..........................................................................................................................................................73
EMPLOYMENT ANDTRAINING................................................................................ 73
ARTICLE 22..........................................................................................................................................................75
FORCE MAJEURE.................. 75
ARTICLE 23................................. 76
TERM AND TERMINATION........................................... 76
ARTICLE 25.......................................................................................................... 82
ASSIGNMENT....................................................................... 82
ARTICLE 26........................................................................ 83
MISCELLANEOUS................................................................................................................................................83
ARTICLE 27.................. 86
NOTICE....................................................................................................'.............................................................86
ANNEX 1 - CONTRACT AREA.......................................................................................................................2
ANNEX 2- ACCOUNTING GUIDE..............................................................................................................4
SECTION!....................................................................... 5
1.1 GENERAL PROVISIONS......................................................................................................................5
1.2 STATEMENTS REQUIRED TO BE SUBMITTED BY CONTRACTOR................................................5
1.3 LANGUAGE, MEASUREMENT, AND UNITS OF ACCOUNTS..........................................................6
SECTION 2..............................................................................................................................................................8
2.0 CLASSIFICATION AND ALLOTMENT OF COSTS AND EXPENDITURE........................................8
2.1 ALL EXPENDITURE RELATING TO PETROLEUM OPERA TIONS SHALL BE CLASSIFIED, AS
FOLLOWS:............................................................................................................................................8
SECTION 3............................................................................................................................................................12
3.0 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF CONTRACTOR...................................12
3.1 CONTRACTOR FOR THE PURPOSE OF THIS AGREEMENT SHALL CHARGE THE
FOLLOWING ALLOWABLE COSTS TO THE ACCOUNTS:.............................................................12
3.2 COST OF ACQUIRING SURFACE RIGHTS AND RELINQUISHMENT..........................................12
3.3 LABOUR AND ASSOCIATED LABOUR COSTS...............................................................................12
Petroleum Agreement for Deepwater Tano (TJlloy//$abre/Kosmos) -March 2006 2
I
3.4 TRANSPORTATION COSTS...............................................................................................................13
3.5 CHARGES FOR SERVICES...............................................................................................................13
3.6 RENTALS, DUTIES AND OTHER ASSESSMENTS...........................................................................14
3.7 INSURANCE AND LOSSES................................................................................................................14
3.8 LEGAL EXPENSES............................................................................................................................14
3.9 TRAINING COSTS..............................................................................................................................15
3.10 GENERAL AND ADMINISTRATIVE EXPENSES..............................................................................15
3.11 UTILITY COSTS.................................................................................................................................15
3.12 OFFICE FACILITY CHARGES..........................................................................................................15
3.13 COMMUNICATION CHARGES.........................................................................................................15
3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES........................................................................15
3.15 ABANDONMENT COST.....................................................................................................................16
I J 3.16 OTHER COSTS...................................................................................................................................16
3.17 COSTS NOT ALLOWABLE UNDER THE AGREEMENT..................................................................16
n 3.18 ALLOWABLE AND DEDUCTIBILITY...............................................................................................17
3.19 CREDITS UNDER THE A GREEMENT..............................................................................................17
3.20 DUPLICATION OF CHARGES AND CREDITS................................................................................18
SECTION 4............................................................................................................................................................19
4.0 MATERIAL..........................................................................................................................................19
4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS UNDER THE AGREEMENT................19
4.2 VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE........................................................19
4.3 CLASSIFICATION OF MATERIALS..................................................................................................20
4.4 DISPOSAL OF MATERIALS..............................................................................................................20
4.5 WARRANTY OF MATERIALS............................................................................................................20
4.6 CONTROLLABLE MATERIALS.........................................................................................................20
SECTION 5............................................................................................................................................................22
5.0 CASH CALL STATEMENT.................................................................................................................22
SECTION 6............................................................................................................................................................23
6.0 PRODUCTION STATEMENT............................................................................................................23
SECTION 7............................................................................................................................................................24
7.0 VALUE OF PRODUCTION STATEMENT.....................................................................'...................24
r~i SECTION 8............................................................................................................................................................25
] 8.0 COST STATEMENT............................................................................................................................25
I SECTION 9............................................................................................................................................................26
9.0 STATEMENT OF EXPENDITURES AND RECEIPTS.......................................................................26
u SECTION 10..........................................................................................................................................................27
10.0 FINAL END-OF-YEAR STATEMENT................................................................................................27
SECTION 11...........................................................................................................................................................28
11.0 BUDGET STATEMENT......................................................................................................................28
SECTION 12..........................................................................................................................................................29
12.0 LONG RANGE PLAN AND FORECAST............................................................................................29
I ANNEX 3 ■ SAMPLE AOE CALCULATION............................................................................................31
I
Petroleum Agreement for Deepv/ater Tano (Tullow/Sabre/Kosmos) -March 2006 3
l
THIS PETROLEUM AGREEMENT, made this .............. day of
............................................2006 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 Provisional National Defence Council Law 64 of 1983
(hereinafter referred to as "GNPC”), and Tullow Ghana Limited, a Jersey company
(hereinafter referred to as “Tullow”), Sabre Oil and Gas Limited, a United Kingdom
company (hereinafter referred to as “Sabre”) and Kosmos Energy Ghana HC, a Cayman
Islands company (hereinafter referred to as Cosmos”), (the three companies hereinafter
collectively referred to as "Contractor")
WITNESSETH:
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.
2. 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.
3. 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.
4. The Contract Area that is the subject matter of this Petroleum Agreement has been
declared open for Petroleum Operations by the Minister and the Government of
Ghana desires to encourage and promote Exploration, Development and Production
within the said area. GNPC and the State have assured Contractor that all of said
area is within the jurisdiction of the Republic of Ghana.
5. 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 said area.
6. The Parties recognise that Ghanaian nationals should as soon as reasonably possible
be engaged in employment at all levels in the Petroleum industry, including
technical, administrative and managerial positions, and that to achieve this objective
an adequate programme of training must be established as an integral part of this
Agreement.
Petroleum Agreement for Deepwater Tano (Tullovz/Sabre/Kosmos} -March 2006 4
NOW THEREFORE, in consideration of the mutual covenants herein contained, it is
hereby agreed and declared as follows:
ARTICLE 1
DEFINITIONS
1. In this Agreement:
1.1 “Accounting Guide” means the accounting guide which is attached hereto as
Annex 2 and made a pait hereof;
1.2 “Additional Interest” means the Additional Interest of GNPC provided for in
Article 2.5 and Article 2.6;
1.3 “Affiliate” means any person, whether a natural person, corporation, partnership,
unincorporated association or other entity:
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 or indirectly more than fifty percent (50%) of the share
capital or voting rights in a Party hereto or of the companies comprising
Contractor;
c) in which the share capital or voting rights are directly or indirectly and to an
extent more than fifty percent (50%) held by a company or companies holding
directly or indirectly more than fifty percent (50%) of the share capital or voting
rights in a Party hereto or in one of the companies comprising Contractor; or
d) which holds directly five percent (5%) or more of the share capital or voting
rights in Contractor.
1.4 “Agreement” means this Agreement between the State, GNPC and Contractor, and
includes the Annexes attached hereto;
1.5 “Appraisal Programme” means a programme carried out following a Discovery of
Petroleum for the purpose of delineating the accumulation of Petroleum to which
that Discovery relates in terms of thickness and lateral extent and estimating the
quantity of recoverable Petroleum therein;
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 5
1.6 “Appraisal Well” means a well drilled for the purposes of an Appraisal
Programme;
1.7 “Associated Gas” means Natural Gas produced from a well in association with
Crude Oil;
1.8 “Barrel” 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 14.65 psia pressure.
1.9 “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;
1.10 “Calendar Year” means the period of twelve (12) months of the Gregorian
calendar, commencing on January 1 and ending on the succeeding December 31;
1.11 “Carried Interest” means an interest held by GNPC in respect of which Contractor
pays for the conduct of Petroleum Operations without any entitlement to
reimbursement from GNPC as expressly provided for in this Agreement;
1.12 “Commercial Discovery” means a Discovery which is determined to be
commercial in accordance with the provisions of this Agreement;
1.13 “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;
1.14 “Contract Area” means the area of 1,108 sq km covered by this Agreement in
which Contractor is authorised to explore for, develop and produce Petroleum,
which is described in Annex 1 attached hereto and 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;
1.15 “Contractor” means Tullow Ghana Limited, Sabre Oil and Gas Limited and
Kosmos Energy Ghana HC and their respective successors and assignees;
1.16 “Contract Year” means a period of twelve (12) Months, commencing on the
Effective Date or any anniversary thereof;
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos) -March 2008 6
1.17 “Crude Oil” means hydrocarbons which are liquid at 14.65 psia pressure and sixty
(60) degrees Fahrenheit and includes condensates and distillates obtained from
Natural Gas;
1.18 “Date of Commencement of Commercial Production” means, in respect of each
Development and Production Area, the date on which production of Petroleum
under a programme of regular production, lifting and sale commences;
1.19 “Date of Commercial Discovery” means the date referred to in Article 8.12;
1.20 “Delivery Point” shall have the meaning ascribed it in Article 10.5;
1.21 “Development” or “Development Operations” means the preparation of a
Development Plan, the design, engineering, 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 and testing activities
carried out prior to the Date of Commencement of Commercial Production, and
includes all related planning and administrative work, and also includes drilling and
installation of wells and equipment for pressure maintenance and/or for increasing
production rates and may also include the construction and installation of secondary
and tertiary recovery systems, where these are included as part of the Development
Plan;
1.22 “Development Costs” means Petroleum Costs incurred in Development Operations;
1.23 “Development and Production Area” means that portion of the Contract Area
reasonably determined by Contractor (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 of Petroleum constituting a Commercial Discovery,
enlarged in area by ten percent (10%), such enlargement to extend uniformly around
the perimeter of such accumulation; and further enlarged by the area covering any
extension of the accumulation which is revealed by further development work
provided such extension is within the Contract Area;
1.24 “Development Period” means in respect of each Development and Production
Area, the period from the Date of Commercial Discovery until the Date of
Commencement of Commercial Production;
1.25 “Development Plan” means 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;
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
1.26 “Development Well” means a well drilled in accordance with a Development Plan
for producing Petroleum, for pressure maintenance or for increasing the Production
rate;
1.27 “Discovery” means finding during Exploration Operations an accumulation of
Petroleum not previously known or proven to have existed, which is recovered or
recoverable at the surface in a flow measurable by conventional petroleum industry
testing methods;
1.28 “Discovery Area” means that portion of the Contract Area, reasonably determined
by Contractor (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 may be
modified at any time by Contractor (or by GNPC if applicable), if justified on the
basis of new information, but may not be modified after the date of completion of
the Appraisal Programme;
1.29 “Effective Date” shall have the meaning ascribed to it in Article 26.9;
1.30 “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 Discoveiy of Petroleum
constitutes a Commercial Discovery;
1.31 “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 an Annex 2;
1.32 “Exploration Period” means the period commencing on the Effective Date and
continuing during the time provided for in Article 3.1 within which Contractor is
authorised to cany 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 Discoveiy in respect of such
Discoveiy Area;
1.33 “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;
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos) -March 2006 8
r
1.34 “Extension Period” means any of the First Extension Period or Second Extension
Period;
1.35 “First Extension Period” shall have the meaning ascribed to it in Article 3.1(a)(ii);
1.36 “First SubPeriod shall have the meaning ascribed to it in Article 3.1(a)(i);
1.37 “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 at its
instance, including, but not limited to, earthquake, storm, flood, lightning or other
adverse weather conditions, war, embargo, blockade, riot or civil disorder;
1.38 “Foreign National Employee” means an expatriate employee of Contractor, its ■
Affiliates, or its Sub-contractors who is not a citizen of Ghana;
1.39 “Ghana” means the territory of the Republic of Ghana and includes the sea, seabed
and subsoil, the continental shelf and all other areas within the jurisdiction of the
Republic of Ghana;
1.40 “Gross Production” means the total amount of Petroleum produced and saved from
a Development and Production Area during Production Operations which is not used
r by Contractor in Petroleum Operations and is available for distribution to the Parties
i in accordance with Article 10;
L..
1.41 “Gross Negligence” means any act or failure to act (whether sole, joint or
i... concurrent) which was in reckless disregard of or wanton indifference to harmful
consequences such person or entity knew or should have known such act or failure
L would have on another person or entity;
1.42 “Initial Exploration Period” shall have the meaning ascribed to it in Article
3.1(a)©;
1.43 “Initial Interest” means the interest of GNPC in all Petroleum Operations provided
i for in Article 2.4;
a 1.44 “Joint Management Committee (JMC)” means the committee established
pursuant to Article 6.1 hereof;
1.45 “Market Price” shall have the meaning ascribed to it in Article 11.7;
n 1.46 “Minister” means Minister for Energy;
i
u 1.47 “Month” means a month of the Calendar Year;
I
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
/s*-*
I'l
I I
1.48 “Natural Gas” means all hydrocarbons which are gaseous at 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;
1.49 “Non-Associated Gas” means Natural Gas produced from a well other than in
association with Crude Oil;
1.50 “Operator” means Tullow or such other Party as may be appointed by Contractor
with the approval of GNPC and the State, which approval shall not be unreasonably
withheld or delayed;
1.51 “Participating Interest” means for GNPC, the interest held by GNPC in
accordance with the provisions of Article 2.4 and Article 2.5 and for Contractor, the
interest held by Contractor in accordance with the provisions of Article 2.9;
1.52 “Party” means the State, GNPC or Contractor, as the case may be;
1.53 “Paying Interest” means an interest held by GNPC in respect of which GNPC pays
for the conduct of Petroleum Operations;
1.54 “Petroleum” means Crude Oil or Natural Gas or a combination of both;
1.55 “Petroleum Costs” means all expenditures made and costs incurred, both within
and outside Ghana, in conducting Petroleum Operations hereunder determined in
accordance with the Accounting Guide attached hereto as Annex 2;
1.56 “Petroleum Income Tax Law” means the Petroleum Income Tax Law, 1987
(PNDCL 188);
1.57 “Petroleum Law” means the Petroleum (Exploration and Production) Law, 1984
(PNDCL 84);
1.58 “Petroleum Operations” means all activities, both in and outside Ghana, relating to
the Exploration for, Appraisal, Development, Production, handling and
transportation of Petroleum contemplated under this Agreement and includes
Exploration Operations, Development Operations and Production Operations and all
activities in connection therewith;
1.59 “Petroleum Product” means any product derived from Petroleum by any refining
or other process;
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 10
n
r
u
u
I
1.60 "Production” or "Production Operations” means activities not being
Development Operations, undertaken in order to extract, save, treat, measure,
handle, store, load and transport Petroleum to storage and/or loading points and to
carry out any type of primary and secondary operations, including recycling,
recompression, maintenance of pressure and water flooding and all related activities
1 n such as planning and administrative work and shall also include maintenance, repair
and replacement of facilities, and well workovers, conducted after the Date of
Commencement of Commercial Production of the respective Development and
Production Area;
L 1.61 "Production Costs” means Petroleum Costs incurred in Production Operations;
r |
l 1 1.62 "Quarter” means a period of three (3) Months, commencing January 1, April 1,
1! July 1 or October 1;
1.63 “Rate of Return” shall have the meaning ascribed to it in Article 10;
r "Second Extension Period” shall have the meaning ascribed to it in Article
t
(.. 1.64
r 3.1(a)®);
j “Second Sub Period” shall have the meaning ascribed to it in Article 3.1(a)(i);
i 1.65
i.
1.66 “Sole Risk Operation” means an operation conducted at the sole cost, risk and
n expense of GNPC referred to in Article 9;
u 1.67 “Specified Rate” means the rate which the National Westminster Bank, Pic,
London, certifies to be the London Interbank offered rate (LIBOR) in the London
Interbank Eurodollar market on thirty (30) day deposits, in effect on the last business
day of the last respective preceding month, plus one point five percent (1.5%);
1.68 “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;
1.69 “State” means the Government of the Republic of Ghana;
1.70 “Subcontractor” has the meaning assigned to that term in the Petroleum Income
Tax Law;
1.71 “Termination” means termination of this Agreement pursuant to Article 23 hereof;
1.72 “Work Programme” means the annual plan for the conduct of Petroleum
Operations prepared pursuant to Articles 4.3, 6.4 and 6.5;
t
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 11 |
< ') i
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 horn 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 GNPC shall have a 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 GNPC shall have the option to acquire an Additional Interest of five percent (5%) in
every Commercial Discovery. In order to acquire the Additional Interest, GNPC
must notify Contractor within ninety (90) days after Contractor’s notice to the
Minister that a Discovery is a Commercial Discovery, of its intention to acquire the
Additional Interest. If within such ninety (90) day period GNPC does not give such
notice, GNPC’s interest will remain as described in Article 2.4. If GNPC acquires
the Additional Interest, GNPC shall be responsible for paying five percent (5%) of
all future Petroleum Costs including Development and Production Costs as approved
by the JMC. GNPC and Contractor shall agree on the mode of financing such
Additional Interest.
In the event that Contractor decides to seek project finance from a bank or group of
banks for the financing of Development Operations, Contractor shall offer GNPC
Petroleum Agreement hr Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 12
the opportunity (but not an obligation) to join in the said project financing with
respect to its Additional Interest. GNPC shall not, by its action or inaction, impede
or delay Contractor in its efforts to obtain such project financing.
If GNPC fails to pay for the costs associated with its Additional Interest and those
associated with Production Operations as described in Article 2.4 and Article 2.6,
then Contractor shall be entitled to recover the said costs, together with interest at the
Specified Rate, from Production revenues.
In the event that GNPC, having acquired the Additional Interest, subsequently
wishes to dispose of it (or part of it) to a third party, GNPC shall notify Contractor of
such intent and shall inform Contractor of the price which is to be paid by such third
party for the same, and Contractor shall have the right for a period of forty five days
from receipt of such notice to inform GNPC that it wishes to acquire such interest at
the price notified to it by GNPC, being the price at which it was to have been sold to
the third party.
2.6 If GNPC opts to take an Additional Interest as provided for in Article 2.5 then within
six (6) Months 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.
2.7 For the 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 Aticle 2.5; 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
2.8 GNPC may during the Exploration Period assist Contractor in carrying out
Contractor’s obligations expeditiously and efficiently as stipulated in Article 7.3.
Upon completion of the work associated with said assistance, GNPC shall invoice
the Contractor for the costs incurred and shall provide reasonable supporting
documentation in respect of such costs. Contractor shall pay GNPC the invoiced
amount within thirty (30) days of receipt of the invoice. The actual amount of the
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 13
invoice submitted by GNPC shall be at rates agreed by GNPC and the Contractor for
such services.
2.9 Contractor's Participating Interest in all Petroleum Operations and in all rights under
this Agreement shall be ninety per cent (90%), reduced proportionately at any given
time and in any given part of the Contract Area by the Additional Interest of GNPC
pursuant to Article 2.5 or the Sole Risk Interest of GNPC pursuant to Article 9.
2.10 As of the Effective Date, the Contract Area shall cover a total of approximately one
thousand one hundred and eight square kilometres (1,108km2) as depicted by Annex
1 and 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 rentals to the State for that area included within the Contract Area at the
beginning of each Contract Year according to the provisions of Article 12.2(e) below
provided that a pro-rata payment shall be made to cover a period of less than one (1)
full Contract Year.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 14
ARTICLE 3
EXPLORATION PERIOD
3.1 The Exploration Period shall begin on the Effective Date and shall not cover a
period of more than six and one half (6V6) years except as provided for in accordance
with this Agreement and the Petroleum Law.
a) The Exploration Period shall be divided as follows:
(i) an Initial Exploration Period of two and one half (254) years ("Initial
Exploration Period") further divided into Subperiods:
1. One (1) year (“First Subperiod”);
2. One and one half (114) years (“Second Subperiod”) plus
(ii) Two (2) extension periods totalling four (4) years:
1. Two (2) years for the first such period (“First Extension Period”); and
2. Two (2) years for the second of such periods (“Second Extension
Period”).
b) At the end of the First Subperiod, Contractor shall elect to drill a well during the
Second Subperiod or relinquish the entire Contract Area. Contractor shall have
the right to relinquish the entire Contract Area and withdraw from this
Agreement upon the expiration of any of the First Subperiod, the Second
Subperiod, the First Extension Period or the Second Extension period; subject
only to notifying GNPC not less than thirty (30) days before expiration of the
relevant period and provided Contractor has completed the applicable work
obligation of the First Subperiod or Second Subperiod, or any of the Extension
Periods (as applicable) during which such relinquishment and withdrawal is
made.
c) Where Contractor has fulfilled its work and expenditure obligations set out in
Article 4.3 before the end of a specific Subperiod or any of the Extension
Periods and has exercised its option by applying to the Minister in writing for an
extension into the next phase, the Minister will be deemed to have granted an
extension into the Second Subperiod, First Extension Period or, Second
Extension Period, as applicable.
d) 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.
Petroleum Agreement for Deepv/ater Tano (Tullow/Sabre/Kosmos) -March 2006 15
3.2 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 is in the process of
completing an aspect of the Approved Work Programme not falling under
paragraphs (a) or (b) in this Article 3.2 above, or under Article 4.3(c),
Contractor will be entitled to such extension of time as the Minister considers
reasonable for the purpose of completing such work;
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 which to prepare the
Development Plan in respect of the Discovery Area to which that Development
Plan relates 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 (1)
Month after the date on which the final decision thereunder has been given.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 200$ 16
3.3 Where Contractor has during the Initial Exploration Period or, as the case may be,
during the First Extension Period failed to fulfill its work and expenditure
obligations under Article 4 in respect of that period but has made reasonable
arrangements to remedy its default during the First Extension Period 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) In the circumstances 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)
nothing in Article 3.2 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 Article 3.2 (a), (b) and (c) so far as they relate to the duration of
the 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 that Article.
3.6 In the event that the Contractor is in the course of drilling or testing any well at the
end of the Second Subperiod or the First Extension Period then it shall be permitted
to complete the said drilling or testing without breaching this Agreement.
If Contractor elects thereafter to enter into the First Extension Period or the Second
Extension Period, as the case may be, the commencement of the First Extension
Period or the Second Extension Period shall not be affected by the duration of the
period required for the completion of drilling or testing as referred to above, but shall
remain as stated in Article 4.3 (b) or Article 4.3(c) as applicable.
Petroleum Agreement for Deepwater Tano (Tullow/Sebre/Kosmos) -March 2006 17
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 GNPC shall, at the request of Contractor, make available to it 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 the 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 work specified
hereinafter:
a) Initial Exploration Period: Commencing on the Effective Date and
terminating at the end of the two and one half (214) Contract Years which is
made up of the following;
First Subneriod (I year):
Description of Work: By the end of the First Subperiod of the Initial
Exploration Period Contractor shall have undertaken a work programme
including the reprocessing of 3D seismic data and seabed logging.
Minimum Expenditure: Contractor’s minimum expenditure for the work in
the First Subperiod of the Initial Exploration Period shall be two million
United States dollars (U.S.$2,000,000).
Second Subperiod (114 years!:
Description of Work: By the end of the Second Subperiod of the Initial
Exploration Period, Contractor shall have drilled at least one (1) Exploration
Well in the Contract Area.
Minimum Expenditure: Contractor’s minimum expenditure for the work in
the Second Subperiod of the Initial Exploration Period shall be twenty million
United States dollars (U.S.$20,000,000).
Petroleum Agreement for Deepwater Tano (Tutlow/Sabre/Kosmos) -March 2006 18
b) First Extension Period: Commencing at the end of the Initial Exploration
Period and terminating at the end of a further two (2) Contract Years.
Minimum Expenditure: Contractor’s minimum expenditure for the work in
the First Extension Period shall be twenty million United States dollars
U.S.$20,000,000).
Description of Work: Bv the end of the First Extension Period, Contractor
shall have drilled at least one (1) Exploration Well in the Contract Area.
c) Second Extension Period: Commencing at the end of the First Extension
and terminating at the end of a further two (2) Contract Years.
Description of Work: Bv the end of the Second Extension Period, Contractor
shall have drilled one (1) Exploration Well in the Contract Area.
Minimum Expenditure: minimum expenditure for work in the Second
Extension Period shall be twenty million United States dollars
(U.S.$20,000,000).
d) Work and expenditures accomplished in any Subperiod or Extension Period in
excess of the above obligations may be applied as credit in satisfaction of
obligations called for in any other Subperiod or Extension Period. The
fulfillment of any 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 work
obligation.
(e) The principle of Article 4 is that, the fulfillment of any minimum Work
Programme supersedes its corresponding minimum expenditure. However, for
any Extension Period or Subperiod, for which the entire minimum work
obligation is not met by Contractor, the corresponding part of the minimum
expenditure obligation relating to the unfulfilled work obligation shall be paid to
GNPC whereupon Contractor shall be deemed to have fulfilled such minimum
work obligation. However, Contractor’s entitlement to proceed to the next
Extension Period or Subperiod shall be at the discretion of the Minister.
4.4 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.
4.5 The seismic reprocessing and seabed logging programme in Article 4.3(a), when
combined with existing data, shall be such as will enable a study of the regional
Petroleum Agreement for Deepwater Tano (Tjtlovs/Sabre/Kosmos) -March 2006 19
n
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
n portions of the Contract Area.
4.6 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 Article 4.7 and 4.8 below, the minimum depth of each obligatory Exploration
r Well shall be whichever of the following is first encountered:
L a) the depth of 3,600 metres measured from the Rotary Table Kelly Bushing
(RTKB);
! v ' b) the depth sufficient to penetrate 500 metres into the primary target;
i c) the depth at which Contractor encounters geologic basement.
u 4.7 The minimum depth of the first obligatory Exploration Well in Article 4.3 shall be
whichever of the following is first encountered:
n a) the depth of 4,400 meters measured horn the Rotary Table Kelly Bushing
(RTKB);
b) the depth sufficient to penetrate 300 metres into the Santonian; or
c) the depth at which Contractor encounters geological basement,
4.8 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 relevant
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 20
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 relevant 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 to the minimum depth to which such well had
been planned.
The above option shall be exercised by GNPC within thirty (30) days from 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
Articles 4.6 and 4.7 as the case may be.
4.9 During the Exploration Period, Contractor shall have the right to perform additional
Exploration Operations, including without limitation performing gravity and
magnetic surveys, drilling stratigraphic wells and performing additional geological
and geophysical studies, provided the minimum work obligations are performed
within the applicable period.
4.10 During the Exploration Period, Contractor shall deliver to GNPC and the Minister
reports on Exploration Operations conducted during each Calendar 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 If, upon completion of the minimum exploration programme set forth in Article 4.3,
Contractor desires to conduct a further programme of Exploration on those retained
areas that will be relinquished upon expiry of the Exploration Period, Contractor
shall have a right of first refusal to the granting of a new petroleum agreement
covering such retained areas. If Contractor elects to exercise this right, it must do so
in writing to GNPC not less than one (1) year before the expiry of the Exploration
Period. If GNPC receives such written election from Contractor, the Parties shall
use best efforts to negotiate in good faith a new petroleum agreement to cover such
retained areas, with the intention that if possible there shall be no lapse between the
expiration of this Petroleum Agreement and the effective date of the new petroleum
agreement.
Petroleum Agreement for Deepv/ater Tano (Tultovr/Sabre/Kosmos) -March 2006 21
ARTICLE 5
RELINQUISHMENT
5.1 Except as provided in Article 8,3, 8.9, 14.9 and 14.14, 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 3.1(c) then subject to
Article 5.2 at the commencement of the First Extension Period the area retained
shall be one hundred per cent (100%) of the original 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 3.1(c) then subject to
Article 5.2 at the commencement of the Second Extension Period the area
retained shall not exceed fifty (50%) of the original Contract Area as at the
Effective Date. Provided always that the area retained shall be permitted to
exceed fifty percent (50%) of the original Contract Area but not to exceed
seventy-five percent (75%) of the original Contract Area in the event that at that
time, the Contractor commits to the drilling of a total of two (2) or more wells in
the Second Extension Period in which case the provisions of Article 4.3 ( c)
shall be deemed amended accordingly;
c) On the expiration of the Second Extension Period, Contactor shall subject to
Article 5.2 relinquish the remainder of the retained Contact Area.
5.2 The Provisions of Article 5.1 shall not be read or construed as requiring Contractor
to relinquish any portion of the Contact Area which constitutes or forms part of
either a Discoveiy Area or a Development and Production Area.
PROVIDED HOWEVER THAT if at the end of the First Subperiod, Second
Subperiod, First Extension Period or Second Extension Period as the case may be,
Contactor elects not to enter into the Second Subperiod, the First Extension Period
or the Second Extension Period, Contactor shall relinquish the entire Contact Area,
other than any Discovery or Development and Production Area.
5.3 Each area to be relinquished pursuant to this Article shall be selected by Contactor
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.
Petroleum Agreement for Deepv/ater Teno (Tullow/Sebre/Kosmos) -March 2006 22
5.4 Without prejudice to the foregoing provisions of this Article 5, in the event that,
following the relinquishment of the Contract Area, the Contractor has retained one
or more Development and Production Areas, and Contractor and GNPC have, after
reviewing all the relevant technical data and information, determined that the field or
reservoirs for which a Development and Production Area was granted covers
Petroleum lying outside such Development and Production Area, and provided such
outside areas are not under any contract, the Contractor and GNPC shall endeavour
to reach an agreement on unitization between the Contractor (with respect to the
Contract Area) and GNPC (as holder of the area outside of the Contract Area) to
cover the full development of the reservoir or field.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 23
ARTICLE 6
JOINT MANAGEMENT COMMITTEE
6.1 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.
6.2 The composition of and distribution of functions within the JMC shall be as follows:
i) The JMC shall constitute of four (4) representatives of GNPC and four (4)
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, his alternate shall automatically assume the rights
and obligations of the absent or incapacitated member;
ii) The Chairperson of the JMC shall be designated by GNPC from amongst the
members of the JMC;
iii) 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);
iv) At any meeting of the JMC six (6) representatives shall form a quorum,
provided that at least two (2) of such representatives shall be representatives
of GNPC and at least two (2) of such representatives shall be representatives
of the Contractor.
6.3 Meetings of the JMC shall be held and decisions taken as follows:
i) All meetings of the JMC shall be held in Accra, Dublin or London or such
other place as may be agreed upon by members of the JMC;
Petroleum Agreement for Deepv/eter Tano (Tullovz/Sabre/Kosmos) -March 2006 24
ii) The JMC shall meet at least twice yearly and at such times as the members
may agree;
iii) A meeting of the JMC may be convened by either GNPC or the Contractor
giving not less than twenty (20) days notice to the other or, in a case requiring
urgent action, notice of such lesser duration as the members may agree upon;
iv) Decisions of the JMC shall require unanimity provided, however, that
decisions and approvals required for budgets and day-to-day operational
matters associated with Appraisal, Development and Production Operations
the expenditures, outlays or advances for which Contractor will be required to
make on a one hundred percent (100%) basis shall require approval of the
Contractor’s representatives only;
v) Any member of the JMC may vote by written and signed proxy held by
another member;
vi) 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;
vii) 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;
viii) The JMC may also establish subcommittees it deems appropriate for carrying
out its functions, such as:
a) a technical subcommittee;
b) an audit subcommittee; and
c) an accounting subcommittee,
ix) costs and expenses related to attendance by GNPC outside Ghana (e.g.
business class travel, transportation, lodging, per diem and insurance), shall
be borne by Contractor and heated as Petroleum Costs. Subject to GNPC
providing to Contractor reasonable supporting documentation in respect of
such costs and expenses, those costs and expenses shall be reimbursed by
Contractor to GNPC.
6.4 The JMC shall oversee Exploration Operations as follows:
i) Not later than sixty (60) days after the Effective Date and thereafter at least
ninety (90) days before the commencement of each subsequent Contract Year,
25
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
n
r* Contractor shall prepare and submit to the JMC for its review a reasonably
\ detailed Work Programme and budget setting forth all Exploration Operations
l
“| which Contractor proposes to carry out in that Contract year and the estimated
cost thereof, and shall also give an indication of Contractor’s tentative
. i preliminary exploration plans for the succeeding Contract year;
ii) 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;
n iii) Every Work Programme submitted to the JMC pursuant to this Article 6.4 and
u every revision or amendment thereof shall be consistent with the requirements
set out in Article 4.3 relating to minimum work and expenditure for the period
of the Exploration Period in which such Work Programme or budget falls;
iv) Contractor shall report any Discovery to GNPC immediately following such
n
Li Discovery and shall place before the JMC for review its Appraisal Programme
prior to submission thereof to the Minister. 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
n . the detailed Appraisal Programme report provided for in Article 8.7;
i v) The JMC will review Work Programmes and budgets and any amendments or
L
f” revisions thereto, and Appraisal Programmes, submitted to it by Contractor
L pursuant to this Article 6, and timely give such advice as it deems appropriate
[J which Contractor shall consider before submitting the Programme to GNPC and
the Minister for their information;
vi) 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 the costs of such Well or Wells shall be considered Petroleum Costs
for AOE purposes and deductible cost for Ghana income tax purposes only in
the event there is a subsequent Commercial Discovery associated with the Well
or Wells.
6.5 From the first occurring Date of Commercial Discovery the JMC shall have
supervision of Petroleum Operations as follows:
n
u Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 26
U
f !
i. 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 necessaiy for the remainder of that Contract
Year and for the rest of the Exploration Period;
ii. At least ninety (90) days before the Commencement of each subsequent
Calendar Year Contractor shall submit to the JMC for review and approval a
reasonably 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;
iii. 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 review and approval an annual production schedule which shall be
in accordance with good international oilfield practice, and shall be designed to
provide the most efficient, beneficial and timely production of the Petroleum
resources.
6.6 The JMC shall approve lifting schedules for Development and Production Areas as
well as review all of Contractor’s reports on the conduct of Petroleum Operations.
6.7 The JMC shall approve Contractor’s insurance programme and the programmes for
training and technology transfer submitted by Contractor and the accompanying
budgets for such schemes and programmes.
6.8 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 and 6.6, 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.
Petroleum Agreement for Deepwater Tano (Tutlow/Sabre/Kosmos,) -March 2006 27
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:
a) conduct Petroleum Operations with utmost diligence, efficiency and economy,
in accordance with accepted International Petroleum Industry practices, under
the same or similar circumstances observing sound technical and engineering
practices using appropriate advanced technology and effective equipment,
machinery, materials and methods;
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 accepted International Petroleum Industry
practices under the same or similar circumstances;
c) prepare and maintain in Ghana full and accurate records of all Petroleum
Operations performed under this Agreement;
d) prepare and maintain accounts of all Petroleum Operations under this
Agreement in such a manner as to present a full and accurate record of the costs
of such Petroleum Operations, in accordance with the Accounting Guide;
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 applicable law:
a) to establish offices in Ghana and to assign to those offices such representatives
as it shall consider necessary for the puiposes of this Agreement;
b) to use public lands for installation and operation of shore bases, and terminals,
harbours and related facilities, pipelines from fields to terminals and delivery
facilities, camps and other housing;
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 2 8
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 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 (rota) 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 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 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 cany 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 use its
best efforts to assist Contractor and its Subcontractors 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 for such
number of Foreign National Employees of Contractor and its Subcontractors
engaged in Petroleum Operations and members of their families who will be
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 29
l
V )
resident in Ghana, and make arrangements for their travel, arrival, medical
services and other necessary amenities;
d) comply with Ghana customs procedures and 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 necessaiy for the purposes of Petroleum Operations;
f) contact Government agencies dealing with fishing, meteorology, navigation and
communications as required;
g) identify qualified Ghanaian personnel as candidates for employment by
Contractor in Petroleum Operations; and
h) procure access on competitive commercial teims, to infrastructure owned by the
State or GNPC or any Affiliate of or entity controlled by the State or GNPC or
owned by any third party, required for the transportation and/or processing of
Petroleum produced under this Agreement.
n 7.4 All reasonable expenses incurred by GNPC in connection with any of the matters set
out in Article 7.3 above shall be borne by Contractor.
■■'i 7.5 GNPC shall use its best efforts to render assistance to Contractor in emergencies and
J 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.
r
r
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 30
f
ARTICLE 8
COMMERCIAL1TY
8.1 Contractor shall notify the Minister and GNPC in writing as soon as possible after
any Discoveiy is made, but in any event not later than thirty (30) days after any
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
indicate whether in the opinion of Contractor the Discovery merits appraisal.
8.3 Where the Contractor indicates that the Discovery does not merit appraisal,
Contractor shall, subject to Article 8.17 below, relinquish the Discovery Area
associated with the Discoveiy.
8.4 Where Contractor indicates that the Discovery merits appraisal, Contractor shall
submit to the Minister within one hundred and eighty (180) days from the date of
Discovery, an Appraisal Programme to be carried out by Contractor in respect of
such Discoveiy. After thirty (30) days following its submission the Appraisal
Programme shall be deemed approved as submitted, unless the Minister has before
the end of the said thirty (30) period given the Contractor a notice in writing stating:
i. that the Appraisal Programme as submitted has not been approved; and
ii. the revisions proposed by the Minister to the Appraisal Programme
submitted, and the reasons therefor.
8.5 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.
8.6 Contractor shall commence to conduct the Appraisal Programme within one hundred
and fifty (150) days from the date of approval or deemed approval of the Appraisal
Programme by the Minister. Where the Contractor is unable to commence the
conduct of the Appraisal Programme within one hundred and fifty (150) days from
the date of approval or deemed approval of the Appraisal Programme by the
Minister, 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.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 31
8.7 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 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 Natural Gas reserves;
recoveiy drive characteristics; anticipated production performance per reservoir and
per well; fluid characteristics, including gravity, sulphur percentage, sediment and
water percentage and refinery assay pattern.
8.8 Not later than ninety (90) days from the date on which said Appraisal Programme is
completed Contractor will, by a further notice in writing, inform the Minister
whether the Discoveiy in the opinion of Contractor is or is not a Commercial
Discoveiy.
8.9 If Contractor informs the Minister that the Discovery is not a Commercial
Discovery, then subject to Articles 8.17, Contractor shall relinquish such Discovery
Area; provided, however, that in appropriate cases, before declaring that a Discovery
is not a Commercial Discovery, 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 Parties may, where feasible, and in
the best interests of the Parties agree to make such changes or modifications in the
existing arrangements.
8.10 If Contractor pursuant to Article 8.8 informs the Minister that the Discoveiy is a
Commercial Discoveiy, Contractor shall not later than one hundred and eighty (180)
days thereafter, prepare and submit to the Minister a Development Plan.
8.11 The Development Plan referred to in Article 8.10 shall be based on detailed
engineering studies and shall include:
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 Associated Gas in accordance with the provisions of
Article 14.4;
b) the way in which the Development and Production of the reservoir is planned to
be financed;
Petroleum Agreement for Deepwater Teno (Tullovr/Sabre/Kosmos) -March 2006 32
c) Contractor’s proposals relating to the spacing, drilling and completion of wells,
the production, storage, 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;
d) the estimated production profiles for Crude Oil and Natural Gas from the
Petroleum reservoirs;
e) estimates of capital and Production Operation expenditures;
f) 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 Production Operation expenditures; and
v) any other relevant data and evaluation thereof;
g) the safety measures to be adopted in the course of the Development and
Production Operations, including measures to deal with emergencies;
h) the necessary measures to be taken for the protection of the environment;
i) Contractor’s proposals with respect to the procurement of goods and services
obtainable in Ghana;
j) Contractor’s plan for training and employment of Ghanaian nationals; and
k) the timetable for effecting Development Operations.
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos) -March 2006 33
8.12 The date of the Minister’s approval of the Development Plan shall be the Date of
Commercial Discovery.
8.13 After thirty (30) days following its submission, the Development Plan shall be
deemed approved as submitted, unless the Minister has before the end of the said
thirty (30) day period given Contractor a notice in writing stating:
i) that the Development Plan as submitted has not been approved; and
ii) the revisions, proposed by the Minister, to the Development Plan as submitted,
and the reasons thereof.
8.14 Where the Development Plan is not approved by the Minister as provided under
Article 8.13 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 8.13 above meet to agree on
the revisions proposed by the Minister to the Development Plan. In the event of
failure to agree to the proposed revisions, 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.
8.15 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.
8.16 Where the issue in question referred for resolution pursuant to Article 24 is finally
decided in favour of the Minister in whole or in part, Contractor shall forthwith:
i) 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
ii) subject to Article 8.19 below relinquish the Discovery Area.
8.17 Notwithstanding the relinquishment provisions of Articles 8.3 and 8.9 above, if
Contractor indicates that a Discovery does not at the time merit appraisal, or after
appraisal does not appear to be commercial but may merit appraisal or potentially
become commercial 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 Exploration Period provided that the Contractor shall
explain what additional evaluations, including Exploration work or studies (within or
outside the Discovery Area), are or may be planned in order to determine whether
subsequent appraisal is warranted or that the Discovery is commercial. Such
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 34
evaluations shall be performed by Contractor according to a specific time table,
subject to its right of earlier relinquishment of the Discovery Area. After completion
of the evaluations, Contractor shall make the indications called for under Article 8.2
or 8.8 and either proceed with appraisal, confirm commerciality or relinquish the
Discovery Area. In any case, if at the end of the Exploration Period Contractor has
not indicated its intent to proceed with an Appraisal Programme or that the
Discovery is a Commercial Discovery, then the Discovery Area shall be
relinquished.
8.18 Before Contractor indicates that the Discoveiy will not merit appraisal, or after an
Appraisal Programme, indicates it will not be a Commercial Discoveiy, 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 commerciality. 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 Article 8.17 and Article 8.19 Contractor shall
relinquish the Discovery Area.
8.19 Nothing in Article 8.3, 8.9, 8.16 or 8.17 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:
i) Contractor has given the Minister a separate notice indicating that such
Discovery merits appraisal or confirmation; or
ii) Contractor has given the Minister a separate notice indicating that such
Discovery is a Commercial Discovery; or
b) any area which constitutes or forms part of a Development and Production
Area.
8.20 In the event a field extends beyond the boundaries of the Contract Area, the Minister
may require Contractor if it so wishes, to exploit said Field in association with the
third party holding the adjacent area, pursuant to unitization and engineering
principles and practices in accordance with accepted international Petroleum
industry practices.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos)-March 2006 3 5
ARTICLE 9
SOLE RISK ACCOUNT
9.1 Subject to Article 8.6, unless and until Contractor has notified GNPC that it wishes
to appraise a Discovery, GNPC may notify Contractor that it will at its sole cost, risk
and expense commence to appraise that Discovery, provided that within thirty (30)
days of such notification from GNPC, Contractor may elect to commence to appraise
that Discoveiy within its Work Programme.
9.2 Where an appraisal undertaken under Article 9.1 at the sole expense of GNPC
results in a determination that a Discovery is commercial, Contractor may develop
the Commercial Discoveiy upon reimbursement to GNPC of all expenses incurred in
undertaking the appraisal and arranging with GNPC satisfactoiy 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 and expense, 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 test, complete or abandon the
well. The exercise by GNPC of this right shall be in an agreed 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 or testing under Article 9.3,
Contractor may elect to embody the required drilling or testing in its own
Exploration Operations, in which case any resulting Discovery shall not be affected
by the provisions of this Article 9.
9.5 Where any sole risk deeper drilling or testing results in a Discovery, GNPC shall
have the right, at its sole cost, risk and expense, to appraise, develop, produce and
dispose of all Petroleum from that deeper horizon, provided however that if at the
time such Petroleum is tested from the well, Contractor's Work Programme includes
a well or wells to be drilled to the same producing horizon, and provided that that the
well or wells result (s) in a Petroleum producing well producing from the same
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 3 6
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 Agr eement.
9.6 Alternatively, if at the time such Petroleum is tested from the well, 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 cost, risk
and expense, 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 hinder Contractor
from satisfying its work obligations or delay it in so doing. 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 for the account and 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 Discoveiy 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. Such premium shall
not be reckoned as Petroleum Costs for the purposes of Accounting Guide.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 37
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,
Contractor shall relinquish the Development and Production Area associated with
such Commercial Discovery.
9.11 Sole Risk Operations under this Article 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 GNPC’s sole risk, and subject to such
n 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 Gross
Negligence provided that under no circumstances shall Contractor be liable for
consequential loss (including but not limited to loss of profit or loss of production).
9.13 The exercise by GNPC of its sole risk rights under this Article 9 shall be performed
in an agreed manner with Contractor, which does not prevent Contractor from
complying with its work obligations under Article 4.3, an Appraisal Programme or a
Development Plan and shall include a financing plan satisfactory to Contractor
where GNPC has nominated Contractor to perform the Sole Risk Operations on its
behalf.
9.14 GNPC shall not elect to conduct any Sole Risk Operations during the First Subperiod or within the boundaries of a Development and Production Area.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 38
ARTICLE 10
SHARING OF CRUDE OIL
10.1 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) Five per cent (5%) of the Gross Production of Crude Oil shall be delivered to the
State as ROYALTY, pursuant to the provisions of the Petroleum Law. Royalty
for any Crude Oil having an API gravity of less than eighteen degrees (18°) shall
be four per cent (4%). The rate of royalty on the Gross Production of Natural
Gas shall be three per cent (3%). Upon notice to Contractor, the State shall have
the right to elect to receive cash in lieu of its royalty share of such Petroleum.
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. 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) The State’s AOE (as hereinafter defined) Share of Crude Oil 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.
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). 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
Market Price for the relevant period as determined in accordance with Article
11.7 for Crude Oil;
c) After distribution of such amounts of Crude Oil as are required pursuant to
Article 10.1(a), the amount of Crude Oil, if any, shall be delivered to GNPC to
the extent it is entitled for Sole Risk operations under Article 9;
d) After distribution of such amounts of Crude Oil as are required pursuant to
Article 10(a) and (c) above, the remaining Crude Oil produced from each
Development and Production Ar ea shall be distributed to Contractor and, subject
to (e) below, to GNPC on the basis of their respective Participating Interests
pursuant to Article 2.4,2.5 and 2.9;
Petroleum Agreement for Deepv/ater Tano (Tullow/Sabre/Kosmos) -March 2006 39
n
t '
r
e) In the event that GNPC has failed to pay any amounts due to Contractor
pursuant to Article 15.2 of this Agreement (such amounts together with interest
thereon in accordance with Article 26.7 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 it for its share of Production Costs paid by it to
that date, 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 puiposes of this Article 10 shall be the Market Price determined pursuant
to Article 11.7.
10.2 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 separately
for each Development and Production Area at the end of each Quarter in accordance
with the following computation:
(a) Definitions:
“ NCF” means Contractor’s net cash flow for the Quarter 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 Quarter by Contractor from the
Development and Production Area, including an amount computed by multiplying
the amount of Crude Oil taken by Contractor during such Quarter in accordance
with Article 10.1 (d) and (e); excluding such Crude Oil taken by Contractor for
payment of advances and interest in respect of Petroleum Costs incurred by
Contractor on GNPC’s behalf, and Default Amounts as defined in Article 10.1 (e)
by the Market Price applicable to Crude Oil during the Quarter 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
L.J include revenues from Royalty or AOE Crude Oil delivered to Contractor because'
the State has elected to receive cash in lieu or which is Crude Oil lifted by
L.. Petroleum Agreement for Deepwater Tano (Tullow/S8bre/Kosmos) -March 2006 4 0
LJ
Contractor which is part of another Party’s entitlement (e.g. 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 quarter (%) 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 Ar ea 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 directly
allocable to that Area as well as those expenses deductible under the said Section 3
which are not attributable to any Development and Production Area where the
Development and Production in question had the earliest Date of Commencement
of Commercial Production. 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 Quarter 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 Quarter, 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.
For the avoidance of doubt, where Petroleum Costs are expended before the first
Date of Commencement of Commercial Production, the NCF computation shall
nonetheless be made for each such Quarter and once a Development and
Production Area is delineated, costs directly attributable to such Area as well as
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 41
Exploration Costs not attributable to any other Area shall be retrospectively
deemed allocated to the Development and Production Area having the first Date of
Commencement of Commercial Production; provided that where, after the
delineation of such Development and Production Area but before its Date of
Commencement of Commercial Production, another Development and Production
Area is delineated, Contractor may elect either to maintain the original
retrospective allocation or reallocate those Exploration Costs attributable to the
new Development and Production Area to such new area.
“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.i”, <£SAn_i”. “TAn.i”, “YAn_i and “ZAn_i”, respectively, mean the lesser of (i)
the FAn, SAn, TAn, YAn_i or ZAn, as the case may be, as of the last day of the
Quarter immediately preceding the Quarter in question, or (ii) zero. Stated
otherwise, FAn.i shall equal FAn as of the last day of the Quarter immediately
preceding the Quarter 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 Quarter immediately preceding the Quarter in question if
such SAn was a negative number, but shall equal zero if such SA„ was a positive
number. Likewise TAn.j shall equal TAn as of the last day of the Quarter
immediately preceding the Quarter in question if such TAnwas 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 Quarter immediately preceding the Quarter in
question if such YAn was a negative number, but shall equal zero if such YAn was
a positive number. Likewise, ZAn.j shall equal ZAn as of the last day of the
Quarter immediately preceding the Quarter 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 Quarter of Petroleum Operations, FAn_i, SAn_i, TA^ YAn_i
and ZAn.i shall be zero.
“i” for the Quarter in question equals one (1) subtracted from the quotient of the
United States Industrial Goods Wholesale Price Index (“USIGWPI) for the
Quarter second preceding the Quarter in question as first reported in the
International Financial statistics of the International Monetary Fund, divided by
the USIGWPI for the same second preceding Quarter 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 Quarter in question.
Petroleum Agreement for Deepwater Tano (Tullovz/Sabre/Kosmos) -March 2006 42
“n-1 ” refers to the Quarter immediately preceding the nth Quarter
b) Formulae:
m,= (M,i(; + JM7±iL))+AO?
(0-204+^ )) + NCP
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.
7A„ = (l + ■ + MCP
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.
(Q.3Q +i)
rAn 4
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.
ZA»= + (°'44+J)-)) + AfCT
hi 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 the FAm SAniTA„ and YAn.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 43
c) Prospective Application:
State’s AOE measured in barrels of Crude Oil will be as follows:
i) If FA,,, SAn> TAni YA„ and ZAn are all negative, the State’s AOE for the
Quarter 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 Quarter in question shall be equal to the absolute amount
resulting from the following monetary calculation:
Five percent (5%) of the FAn for that Quarter divided by the weighted
iii) average Market Price of Crude Oil as determined in accordance with
Article 11.7.
If both FA„ and SAn are positive, but TAn YAn and ZA„ are negative, the
State’s AOE for the Quarter in question shall be equal to an absolute
amount resulting from the following monetary calculation:
the aggregate of five percent (5%) of FAn for that Quarter plus ten
iv) percent (10%) of the SAn for that Month all divided by the weighted
average Market Price of Crude Oil as determined in accordance with
Article 11.7.
If FAn, SAn and TAn are all positive but both YAn and ZAn are negative,
the State’s AOE for the Quarter in question shall be equal to the absolute
amount resulting from the following monetary calculation:
the aggregate of five percent (5%) of the FAn for that Quarter plus ten
percent (10%) of the SAn for that Quarter plus fifteen percent (15%) of
the TAn for that Quarter all divided by the weighted average Market
Price of Crude Oil as determined in accordance with Article 11.7.
If FAm SAn TAn and YAn are all positive but ZAn is negative, the State’s
AOE for the Quarter in question shall be equal to the absolute amount
resulting from the following monetary calculation:
the aggregate of five percent (5%) of the FAn for that Quarter plus ten
percent (10%) of the SAn for that Quarter plus fifteen percent (15%) of
the TAn for that Quarter plus twenty percent (20%) of the YAn for that
Quarter all divided by the weighted average Market Price of Crude Oil as
determined in accordance with Article 11.7.
Petroleum Agreement for Deepwater Tano (Tullovr/Sabre/Kosmos) -March 2006 44
. I
vi) If FAn, SAn, TA„ YAn and ZAn are all positive, the State’s AOE for the
Quarter in question shall be equal to the absolute amount resulting from
the following monetary calculation:
the aggregate of five percent (5%) of the FAn for that Quarter plus ten
percent (10%) of the SAn for that Quaiter plus fifteen percent (15%) of
the TAn for that Quarter plus twenty percent (20%) of the YA„ for that
Quarter plus twenty five percent (25%) of the ZAn for that Quarter all
divided by the weighted average Market Price as determined in
accordance with Article 11.7.
<---1
I d) The AOE calculations shall be made in U.S. Dollars with all non-dollar
u
expenditures converted to U.S. Dollars in accordance with Section 1.3.5 of
Annex 2. When the AOE calculation cannot be definitively made because of
disagreement on the 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 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 Quarterly basis, with the AOE to be paid
commencing with the first Quarter following the Quarter in which the FA„,
n SAn, TAn, YAn or ZAn, (as applicable) becomes positive. Because the precise
amount of the AOE for a Quarter cannot be determined with certainty until
r after the end of that Quarter, deliveries (or payments in lieu) of the AOE with
[. respect to a Quarter shall be made during such Quarter based upon the
Contractor’s good faith estimates of the amounts owing, with any adjustments
r following the end of the Quarter to be settled pursuant to the procedures agreed
i to pursuant to Article 10.7. 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.
i
’ i 10.3 GNPC shall act as agent for the State in the collection of all Petroleum or money
accruing to the State under this Article and delivery or payment 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
n 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.
n
..J Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 45
Market Price for purposes of this Article 10.4 shall be determined in the manner
specified in Article 11.7,
10.5 Except as otherwise provided in this Agreement, GNPC’s and Contractor’s respective
. right and entitlement to the volume of gross production of Petroleum at the first
metering of fiscalization point shall be shared according to Articles 2.4, 2.5,2.7 and 2.9.
Ownership and risk of loss of all Petroleum lifted or sold by Contractor or GNPC shall
pass to Contractor or GNPC, as the case may be, after the custody transfer at the fiscal
metering skid at the outlet flange (“Delivery Point”) of the marine terminal or other
storage or holding facility or pipeline 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 Petroleum allocated and/or delivered to it pursuant to this
Article.
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 Quarter. 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.
Petroleum Agreement for Deepwater Tano (Tultow/Sabre/Kosmos) -March 2006 4 6
ARTICLE 11
MEASUREMENT AND PRICING OF CRUDE OIL
11.1 Crude Oil shall be delivered by Contractor to storage tanks constructed, maintained
and operated in accordance with applicable laws and good international petroleum
industry oilfield practice under the same or similar circumstances. 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
(2) a test requested on metering (or measurement) devices, where the test
demonstrates that such devices are accurate within acceptable tolerances, the Party
requesting the test shall reimburse Contractor for the costs associated with the test or
tests.
11.2 GNPC or its authorised agent shall have the right:
a) to be present at and to observe such measurement of Crude Oil; and
b) to examine and test whatever appliances are used by Contractor.
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. If 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 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.
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos) -March 2006 47
W
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 as follows:
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) on other sales by Contractor, on exports by Contractor without sale and 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 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;
c) sales in “aim’s length commercial transactions” shall mean sales to purchasers
independent of the seller, which do not involve Crude Oil exchange or baiter
transactions, government to government transaction, sales directly or indirectly
to Affiliates, or sales involving consideration other than payment in U.S. Dollar
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 the quality of various Crude Oils produced from the Contract Area is different,
segregated and sold separately, 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 to an equitable methodology for assessing
relative value for each grade of Crude Oil comprising the blend and shall
Petroleum Agreement for Deepwater Tano (Tullovr/Sabre/Kosmos) ~March 2006 48
implement the agreed methodology for having the producers) of higher quality
Crude Oil(s) reimbursed by the producers) of lower quality Crude Oil(s) as
appropriate.
11.8 Contractor shall notify GNPC of the market Price determined by it for its respective
lifting during each Quarter not later than thirty (30) days after the end of that
Quarter.
11.9 If GNPC considers that the price notified by Contractor was not correctly determined
in accordance with the provisions of Article 11.7, 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 that purpose, or if, having met, cannot agree on the applicable Market
Price, 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 Article 11.8. Should the determined price be different from
that used in accordance with the foregoing then the difference plus interest at the
Specified Rate shall be paid in cash or in Crude Oil by or to Contractor, as the case
may be, within thirty (30) days of such determination.
Petroleum Agreement for Deepwater Tano (Tullovz/Sabre/Kosmos) -March 2006 49
ARTICLE 12
TAXATION AND OTHER IMPOSTS
12.1 No tax, duty, fee or other impost shall be imposed by the State or any political
subdivision on Contractor, its Subcontractors or its Affiliates in respect of activities
related to Petroleum Operations and to die sale and export of Petroleum other than as
provided in this Article.
12.2 Contractor shall be subject to the following:
i) Royalty as provided for in Article 10;
ii) Income Tax in accordance with the Petroleum Income Tax Law 1987 (PNDC
L188) levied at the rate of thirty-five percent (35%) as stipulated in the
Petroleum Income Tax Law 1987, PNDC Law 188. Where a new income tax
rate comes into force as a result of the promulgation of the new Petroleum
Income Tax Law currently before Cabinet, Contractor shall have the option of
either applying the new income tax rate to this Agreement or remaining under
the Petroleum Income Tax Law, 1987, PNDC Law 188;
iii) Additional Oil Entitlement as provided for in Article 10.2;
iv) Payments for rental of Government property, public lands or for the provision
of specific services requested by Cont actor from public enterprises; provided,
however, that the rates charged Cont actor for such rentals or services shall not
exceed die rates charged to other members of the public who receive similar
services or rentals;
v) Surface rentals payable to the State pursuant to Section 18 of the Petroleum
Law per square kilometre of the area remaining at the beginning of each
Contact 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 $30 per sq. km.
1st Extension Period US $ 50 per sq. km.
2nd Extension Period US $75 per sq. km.
Development & Production Area US $100 per sq. km.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 50
H
vi) Taxes, duties, fees or other imposts of a minor nature and amount insofar as
they do not relate to the stamping and registration of this (1) Agreement, (2)
any assignment of interest in this Agreement, or (3) any contract in respect of
Petroleum Operations between Contractor and any Subcontractor.
12.3 Save for withholding tax at a rate of five percent (5%) from the aggregate amount
l
due to any Subcontractor (other than the State or any entity wholly-owned or
controlled by the State, where such entity is in possession of a certificate of
exemption from withholding tax from the Commissioner of Internal Revenue
Service, in which case withholding tax shall not be payable) if and when required by
Section 27 (1) of the Petroleum Income Tax Law, Contractor shall not be obliged to
withhold any amount in respect of tax from any sum due from Contractor to any
Subcontractor. Notwithstanding the foregoing, the withholding tax in respect of
services provided to Contractor by an Affiliate of any company comprising
Contractor shall be waived provided such services are charged at cost.
12.4 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
r~i of transport used in the export of Contractor’s Petroleum from Ghana shall not be
i liable for any tax, duty or other charge by reason of their use for that purpose.
12.5 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, taxes, fees and charges on imports save minor administrative charges. !
PROVIDED THAT:
a) GNPC shall have the right of first refusal for any item imported duty free under
this Article which is later sold in Ghana; and
b) where GNPC does not exercise its right of purchase Contractor may sell to any
; i other person only subject to all import duty and taxes as if such items were being
U
imported at the time of such sale; provided, however, that no duty or tax shall be
levied if the purchaser could have imported the item sold free of duty or tax
under an exemption similar to Contractor’s hereunder.
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 12.5.
U Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 51
12.7 Subject to GNPC’s rights under Articlel9, Contractor, Subcontractors and Foreign
National Employees shall have the right to export from Ghana all previously
imported items as defined. Such exports shall be exempt from all customs and other
duties, taxes, fees and charges on exports save minor administrative charges.
12.8 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 exempt 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.
12.9 Pursuant to part 1 section 3 (2) of the Petroleum Income Tax Law, the parties hereby
confirm that in respect of Capital allowance deductions for the purposes of
calculating chargeable income of the Contractor, the Contractor shall fully depreciate
in five (5) years. The mode of calculation shall be in accordance with the Capital
Allowances schedule annexed to the Petroleum Income Tax Law 1987 (PNDC
L.188).
12.10 With regard to each Development and Production Area, Contractor shall accrue
estimated costs of decommissioning and abandonment of operations and facilities,
site restoration and other associated operations and have such costs allowed prior to
abandonment as a deduction against chargeable income over the estimated life of the
estimated reserves on a straight line basis, commencing on the date when fifty
percent (50%) of the estimated reserves have been produced from such area.
Estimates with regard to costs will be reviewed on an annual basis for adjustment
and will be adjusted to reflect actual expenses as incurred. The implementation of
this Article 12.10 shall be subject to detailed guidelines to be issued by the Minister,
but to the extent that such guidelines suggest potential changes to what is agreed in
this Article 12.10, any such changes shall be subject to prior agreement between the
Parties hereto.
12.11 It is the intent of the Parties that payments by Contractor of tax levied by the
Petroleum Income Tax Law qualify as creditable against the income tax liability of
each company comprising Contractor in its jurisdiction. Should the fiscal authority
involved determine that the Petroleum Income Tax Law does not impose a creditable
tax, the Parties agree to negotiate in good faith with a view to establishing a
creditable tax on the precondition that no adverse effect should occur to the
economic rights of GNPC or the State.
Petroleum Agreement for Deepwater Tano (Tullovz/Sebre/Kosmos) -March 2006 52
ARTICLE 13
FOREIGN EXCHANGE TRANSACTIONS
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, 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 Part
IV, Division 1, 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
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 5 3
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 U.S. Dollars, except as requested
otherwise pursuant to Article 13.4 above. All payments shall be made by electronic
transfer in immediately available funds to a bank to be designated by GNPC or the
State, and reasonably accessible to Contr actor 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 U.S. Dollars. All payments shall be made by electronic
transfer in immediately available funds to a commercial bank to be designated by
Contr actor, and reasonably accessible to GNPC or die State by way of its being able
to receive payments made by GNPC or die State and give confirmation of receipt
thereof, or in such other manner as may be mutually agreed.
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos) -March 2006 54
ARTICLE 14
SPECIAL PROVISIONS FOR NATURAL GAS
PART I ■ GENERAL
14.1 Contractor shall have the right to use Natural Gas produced from any Development
and Production Area for Petroleum Operation within the Contract Area such as
reinjection for pressure maintenance and/or power generation.
14.2 Contractor shall have the right to flare Natural Gas:
a) to the extent provided in an approved Development Plan;
b) during production testing operations;
c) when required for the safety of persons engaged in Petroleum Operations in
accordance with Petroleum Industry practice;
d) where reinjection is inadvisable from the point of view of good reservoir or
petroleum engineering practice; or
e) as otherwise authorised by the Minister.
14.3 Contractor shall have the right to extract condensate and Natural Gas liquids for
disposition under the provisions relating to Crude Oil. Residual Natural Gas
remaining after the extinction of condensate and Natural Gas liquids is subject to the
provisions of this Article.
PART II -ASSOCIATED GAS
14.4 Based on the principle of full utilisation of Associated Gas and without substantial
impediment to Crude Oil production, the Development Plan of each Development
and Production Area shall include a plan of utilisation for Associated Gas.
14.5 If Contractor considers that production processing and utilisation of Associated Gas
from any Development and Production Area to be non-economic, GNPC shall have
the option to offtake such Associated Gas at the outlet flange of the gas-oil separator
at its Sole Risk for its own use and to that end the Development Plan proposed by
Contractor shall include:
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
a) a statement of the facilities necessary for the delivery to GNPC of such
Associated Gas; and
b) a plan for the reinjection of such Associated Gas into the reservoir.
14.6 A. If GNPC elects to offtake Associated Gas under Article 14.5 above, GNPC shall
pay for the cost of any additional facilities and any related production cost required
for tire delivery of the 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%); or
b) if Contractor subsequently develops a gas utilisation programme and requires
the use of such facilities, Contractor shall pay GNPC an agreed fee for such use.
B. The decision of GNPC as to whether or not to exercise the option provided for in
Article 14.5 shall be made in a timely manner. In making any such decision and
in its subsequent conduct GNPC shall avoid the prevention of, or delay to, the
orderly start-up or continuation of the production of Crude Oil as envisaged in
Contractor’s Development Plan.
PART 111 ■ NON-ASSOCIATED GAS
14.7 Contractor shall notify the Minister in writing as soon as any Discovery of Non-
Associated Gas is made in the Contract Area.
14.8 As soon as possible after the technical evaluation of the test results of such
Discovery is complete and in any event not later than one hundred eighty (180) days
from the date of Discovery, Contractor shall by a further notice in writing to the
Minister (the “Notice”) indicate whether in Contractor’s opinion the Discovery
merits Appraisal.
14.9 Where Contractor’s Notice 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 petroleum agreement
made pursuant to Article 14.18 below, then Contractor need not submit a proposed
Appraisal Programme at that time but instead shall indicate what other studies or
evaluations 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 petroleum
agreement made pursuant to Article 14.18, then GNPC may by Notice to Contractor
Petroleum Agreement for Deepwater Teno (Tu!lo\y/$abre/Kosmos) -March 2006 5 6
Af*-1
require Contractor to relinquish the rights to the Non-Associated Gas within that
Discovery Area.
14.10 Where Contractor’s Notice indicates that the Discovery merits the drilling of one or
more Appraisal Wells at that time, Contractor shall prepare and submit to the JMC
the appropriate Appraisal Programme which Appraisal Programme shall be
scheduled to be completed within two (2) years of the submission of the Notice to
the Minister.
14.11 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. If the report concludes that the
Discovery merits commercial assessment, Contractor shall notify the Minister within
one hundred eighty (180) days from the date on which the Appraisal Programme
relating to the Discovery was completed of a programme of such assessment and
shall conduct such programme during the rest of the Exploration Period and, if
applicable, during the initial period under a new petroleum agreement made pursuant
to Article 14.18. Notwithstanding the above, Contractor may also notify the
Minister that commercial assessment of the Discovery is not warranted at that time
but the Discoveiy may merit such assessment at a later date during the Exploration
Period or during the initial period aforesaid. If Contractor so notifies the Minister,
Contractor shall also indicate what other studies or evaluation may be warranted
before a commercial assessment is undertaken.
14.12 The purpose of the commercial assessment shall be to study the uses to which
production from the Discovery Area, separately or together with any Natural Gas
referred to in Part II of this Article 14, can be devoted and whether involving exports
or domestic utilisation. As part of the assessment, the Parties shall also pursue
discussions on the required contractual arrangements for disposition of the Natural
Gas to potential purchasers and/or consumers of the Natural Gas.
14.13 Contractor may consult with the other Parties and may make appropriate
representations proposing changes in the fiscal and other provisions of this
Agreement which may, in the opinion of Contactor, affect the above determinations
made pursuant to Articles 14.10 and 14.11. The other Parties may, where feasible
and in the best interests of the Parties, agree to make such changes or modifications
in the existing arrangements.
14.14 Nothing in this Part III of Article 14 shall he read or construed as requiring
Contractor to relinquish any area:
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
i) which constitutes or forms part of another Discovery Area in respect of which
Contractor has given to the Minister a separate notice indicating that such
Discovery merits confirmation or commercial assessments; or
ii) which Contractor has given the Minister a separate notice in respect of
indicating that such Discovery is a Commercial Discovery; or
iii) which constitutes or forms part of a Development and Production Area.
PART IV NATURAL GAS PROJECTS
14.15 If at any time during the commercial assessment Contractor informs the Minister in
writing that the Discovery can be produced commercially, it shall as soon as
reasonably possible thereafter submit to the Minister and to GNPC its proposals for
an agreement in accordance with Article 8 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
favourable to Contractor than those provided for in Articles 10 and 11 and which
take full account of the legitimate interest of the State as the resource owner.
14.16 If at any time during the commercial assessment Contractor has identified a market
in Ghana for the reserves of Associated and/or Non-Associated Gas or any part
thereof that can be saved without prejudice to an 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 a domestic market for such Natural
Gas, Contractor and GNPC shall receive for delivery onshore of its share of the
Natural Gas at a price to be agreed between GNPC and Contractor taking into
account among other things the cost of developing the Natural Gas and the uses
which will be made of the Natural Gas.
14.17 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
S8
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
that the Royalty to be delivered to the State on Natural Gas shall be at the rate of
three percent (3%) of the annual Gross Production of Natural Gas as an
incentive to enhance the viability of a Gas project on the basis herein provided
for.
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 recognised that, unless otherwise agreed by the Parties hereto,
Contractor will have no right or interest in the project or the Natural Gas
produced and delivered after the term of this Agreement has expired unless a
petroleum agreement pursuant to Article 14.18(A) has been entered into.
c) In the event that Contractor or an Affiliate decides to construct 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 Natural Gas
into one or more commercially marketable products, the Contractor shall be
entitled to pay for such Natural Gas the price paid by the State or GNPC under
Article 14.16.
d) The Parties will consider collaboration in obtaining any common external
financing available for Natural Gas processing or Natural Gas utilisation
facilities, including project financing; however, each Party shall remain free to
finance externally its share of such facilities to the extent it prefers to do so.
14.18 A) Where Contractor has during the continuance of the Exploration Period made a
Discovery of Non-Associated Gas but has not before the end of the Exploration
Period declared that Discovery to be a Commercial Discovery, the State and
GNPC will, if Contractor so requests, enter into a new petroleum agreement with
Contractor in respect of the Discoveiy 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 14.18(A) unless before the end of the Exploration
Period Contractor has carried out an Appraisal Programme in respect of that
Discovery pursuant to Article 14.10 and submitted to the Minister a report
thereon pursuant to Article 14.11, or has notified the Minister of reasonable
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 5 9
n
i
; j
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 14.18 (A):
i) shall unless the Discoveiy 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 five (5) years; .
:J 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 thirty (30)
years;
b) include, or be deemed to include, all the provisions which, mutatis
mutandis, would have applied to a Commercial Discoveiy of
Non-Associated Gas if Contractor had declared such Discovery to
be a Commercial Discovery under this Agreement;
n iii) shall contain in respect of the initial period or of any renewal period
LJ
details of the evaluations or studies which Contractor proposes to
undertake in order to determine or keep under review the commerciality
of the Discovery;
iv) shall confer on GNPC preemptive rights in respect of the Gas contained
in the reservoir to'which the Discoveiy relates substantially in the form
n of the provisions hereinafter set out in Article 14.18 (D).
i
D In the event that the Parties are unable to agree to the detailed terms of
n the Petroleum Agreement contemplated in Article 14.18(a) and the
. i
Exploration Period expires, GNPC itself, or a third party may, at its sole
risk and expense, complete the Appraisal Programme relating to the
Discovery and/or develop the Discovery, provided that Contractor shall
have the right of first refusal in respect of any transaction proposed by
11 GNPC or such third party for the development of the Discovery.
u
E i) Where Contractor has not, before the end of the initial period,
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 five (5) years. The
60
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
TH
7^
right of Contractor to retain the Discovery Area aforesaid shall be
secured by the renewal of the Agreement referred to in Article
14,18 (a) or where necessary by a new Agreement entered into by
the Parties for that purpose.
ii) Where Contractor has not declared the Discovery to be a
Commercial Discovery, if GNPC has identified a market for the
Gas contained in the reservoir to which the Discoveiy relates, or
any part thereof, it may at any time during the initial period or the
aggregate period referred to in 14,18 D above serve on Contractor
a notice giving particulars of the quantities of Natural 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
Article 14.18 C (iv) above.
4.19 For the purposes of calculating the State’s 3% Royalty share on Natural Gas, 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.
4.20 Within four (4) months from the receipt of a notice as aforesaid Contractor may
declare the Discoveiy to be a Commercial Discovery and in accordance with the
Agreement and the Petroleum Law prepare and submit to the Minister a
Development Plan for the production of the Gas in association with GNPC to serve
the market identified at the price offered.
4.21 If Contractor has not, within the period of four (4) months aforesaid, declared the
Discoveiy to be a Commercial Discovery, GNPC may at its sole risk and expense
develop the Discoveiy to the extent necessary to meet the requirements of the
market identified as aforesaid, and in that event the Contractor shall cease to have
any rights in respect of the Natural Gas in the reservoir required for that purpose.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 61
ARTICLE 15
DOMESTIC SUPPLY REQUIREMENT (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.
5.2 In the event that Crude Oil available to the State pursuant to Article 15.1 is
insufficient to fulfill the Domestic Supply Requirement, Contractor shall upon three
(3) Month’s notice from the State, be obliged together with any third parties which
produce Crude Oil in Ghana, to supply a volume of Crude Oil to be used for such
Domestic Supply Requirement, calculated on the basis of the ratio of Contractor’s
entitlement to Crude Oil under Article 10.1 (d) to the entitlements of all such third
parties producing Crude Oil in Ghana and provided that Contractor’s obligation to
supply Crude Oil for puxposes of meeting the Domestic Supply Requirement shall
not exceed the total of Contractor’s entitlement of Gross Production of Crude Oil
after deduction of the State’s Royalty under this Agreement.
15.3 The Contractor shall ensure that any contract for the supply of the Contractor’s share
of Crude Oil under this Agreement shall be made subject to the requirement in this
Article 15 to meet the Domestic Supply Requirement,
15.4 The State shall purchase any Crude Oil supplied by Contractor pursuant to this
Article at a price which matches the Market Price determined under Article 11.7 for
the Month of delivery. The State shall pay such prices in accordance with Article
13.7 within thirty (30) days after receipt of Contractor’s 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. Contractor shall
recover any amount due and unpaid by State, plus interest at the interest rate defined
in Article 26.7, from GNPC’s share of Crude Oil as provided in Article 10.1 (e).
Petroleum Agreement for Deepwater Tano (Tullow/Sebre/Kosmos) -March 2006 62
ARTICLE 16
INFORMATION AND REPORTS : CONFIDENTIALITY
16.1 Contractor shall keep GNPC regularly and fully informed of operations being carried
out by Contractor and provide GNPC with all information, data, (film, paper and
digital forms), samples, inteipretations 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, 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, Subcontractors and contracts for the provision of services to
Contractor.
Where appropriate, data shall be provided on film, paper and in digital format. 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,
Petroleum Agreement for Deepwater Tano (Tutlow/Sabre/Kosmos) -March 200$ 6 3
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;
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, including without limitation, that described
in Articles 16.1, 16.2 and 16.3 shall be treated as confidential and shall not be
disclosed by any Party to any other person without the express written consent of the
other Parties.
16.5 The provisions of Article 16.4 shall not prevent disclosure:
a) by GNPC or the State:
i) to any agency of the State or to any adviser or consultant to GNPC or the
State; or
Petroleum Agreement for Deepv/ater Tano (Tullow/Sabre/Kosmos) -March 200$ 64
r1
ii) for the purpose of obtaining a Petroleum Agreement in respect of any
1 acreage adjacent to the Contract Area.
H
! b) by Contractor:
j
n i) to its Affiliates, advisers or consultants;
i ii) to a bona fide potential assignee of all or part of Contractor’s Interest
0 hereunder provided GNPC is given prior notice of such potential
assignee;
n to banks or other lending institutions for the purpose of seeking external
i 1 iii) financing of costs of the Petroleum Operations;
iv) 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;
n v) 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 notified about such disclosure; or
vi) to such persons and for such purposes as the Joint Management
Committee may permit from time to time.
c) by any Party:
i) to the extent necessary in any arbitration proceedings or proceedings
before a Sole Expert or in proceedings before any court;
ii) with respect to data, etc., which already through, no fault of the disclosing
Party is in the public domain.
16.6 Any Party disclosing information or providing data to any third party under this
Article shall require such persons to observe the confidentiality of such data.
Promptly after the Effective Date, the Parties shall agree upon a mutually acceptable
international petroleum industry standard form of confidentiality agreement.
Contractor shall require the execution of an agreement substantially on the terms
contained in such agreed form of agreement by a potential assignee prior to
disclosure of such data; and shall provide copies of all such signed agreements to
GNPC.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 65
IK
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 accepted Petroleum
industry practice, to perform activities pursuant to the Agreement in a safe manner
and shall comply with all requirements of the Law of Ghana, including labour, health
safety and environmental laws and regulations issued by the Environmental
Protection Agency.
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 accepted 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
Contract in accordance with accepted 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 If Contractor’s failure to comply with the requirements of Article 17.4 results in the
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
Petroleum Agreement for Deepwater Tano (Tultovr/Sabre/Kosmos) -March 2006 6 6
cause harm to fresh water, marine, plant or animal life, Contractor shall, in
accordance with accepted Petroleum industry practice, promptly take all necessary
measures 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 directly from the Gross
Negligence of Contractor, the cost of subcontract clean-up and repair activities shall
be borne by Contractor and shall not be included as a Petroleum Cost under this
Agreement.
17.6 Contractor shall notify GNPC immediately in the event of any emergency or major
accident and shall take such action as may be prescribed by GNPC’s emergency
procedures and by accepted international petroleum industry practices in the same or
similar circumstances.
17.7 If 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 which are necessary, in accordance with accepted
international petroleum industry practice in the same or similar circumstances 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.
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos) -March 2008 67
n ARTICLE 18
i ,
. i
i ) ACCOUNTING AND AUDITING
n 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
i---» 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.
n 18.2 In addition to the books and reports required by Article 18.1 Contractor shall
; i
n 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
i ,i the requirements of the applicable law and accepted accounting principles generally
n used in the international petroleum industry.
■ i 18.3 The accounts required by Articles 18.1 and 18.2 shall be kept in United States
.)
Dollars.
18.4 Contractor will provide GNPC with quarterly summaries of the Petroleum Costs
r incurred under this Agreement.
18.5 GNPC shall review all financial statements submitted by the Contractor as required
n by this Agreement, and shall signify its provisional approval or disapproval of such
t
L, statements in writing within ninety (90) days of receipt failing which the financial
n statements as submitted by Contractor shall be deemed approved by GNPC; in the
{j event that GNPC indicates its 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.
i
18.6 Notwithstanding any provisional approval pursuant to Article 18.5 GNPC shall have
the right at its sole expense and upon giving reasonable notice in writing to
Contractor to audit the books and accounts of Contractor 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 he
undertaken by an independent international auditing firm and shall be completed
within nine (9) months after commencement. An extension of time to complete an
0 audit shall be allowed upon receipt by Contractor from GNPC’s auditing firm of a
written statement representing that the auditors have used reasonable efforts to
complete the subject audit and they require additional time not to exceed three (3)
months to complete such audit. If after a period of one (1) year the subject audit has
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 6 8
n
u
n
not been completed by GNPC the books and accounts covering such period shall be
■---i
: I deemed approved. Contractor shall provide all necessary facilities for auditors
appointed hereunder by GNPC including working space and access to all relevant
personnel, records, files and other materials.
If GNPC desires verification of charges from an Affiliate, Contractor shall at
r GNPC’s sole expense obtain for GNPC or its representatives an audit certificate to
this purpose from the statutory auditors of the Affiliate concerned. Copies of audit
p 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
r~i 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
I
i i unresolved audit claim shall be submitted for resolution in accordance with Article
fl 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)
l.) years from the date of their submission unless before the expiry of such two year
n period GNPC has notified Contractor of any exceptions to such accounts and
statements.
n 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).
r
i
CJ
n
i
u
r 1
U
n
L
11
l j Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 69
(i
t
L j
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 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 Ml cost thereof has been recovered by Contractor in accordance with
the provisions of the Accounting Guide from its proportionate share of
Petroleum revenues and any other revenues it receives in respect of
Petroleum Operations; or
ii) this Agreement is terminated pursuant to Articles 23.3 and 23.4 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 in accordance with international petroleum industry practices in the same or
similar circumstances. 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.
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 he deemed to be
transferred to GNPC.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 200$ 70
Ufa
19.4 All assets owned by Contractor which are not affected by the provisions of Article
19.1 (b) above may, where requited 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 19.3
above, and all subcontractor equipment, may be freely exported by Contractor or its
Subcontractor, respectively, at its discretion.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2008
ARTICLE 20
PURCHASING AND PROCUREMENT
20.1 In the acquisition of plant} equipment, services and supplies for Petroleum
Operations, Contractor shall give preference to materials, services and products
produced in Ghana including shipping services provided by vessels owned or
controlled by Ghanaian shipping companies if such materials, services and products
meet standards generally acceptable to international oil and gas companies and
supplied at prices, grades, quantities, delivery dates and on other commercial terms
equivalent to or more favourable than those at which such materials, services and
products can be supplied from outside Ghana.
20.2 For the purposes of Article 20.1, price comparisons shall be made on a Accra
delivered basis.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
mGf
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 pay to GNPC the sum of
two hundred and fifty thousand US dollars (US$250,000) per year from the Effective
Date to maintain and implement such programmes. Such expenditure shall qualify
for deduction against income tax under the Income Tax law and shall be considered
as Petroleum Costs.
The above amounts shall be payable within thirty (30) days after the beginning of
each Calendar Year, provided that the sum payable shall be pro rata for any period of
less than a full Calendar Year (e.g. from the Effective Date to the end of the
Calendar Year). GNPC shall prepare and present to JMC its intentions for such
programmes on an annual basis and shall consider any suggestions made by
Contractor’s JMC representatives.
21.2 In addition to the annual sums payable pursuant to Article 21.1 above, Contractor
shall pay to GNPC on a once-off basis a single further sum of four hundred thousand
US dollars (U.S.$400,000) in respect of technical support for GNPC. Such
expenditure shall also qualify for deduction against income tax under the Income
Tax law and shall be considered as a Petroleum Cost.
21.3 Where qualified Ghanaian personnel are available for employment in the conduct of
Petroleum Operations, Contractor shall ensure that in the engagement of personnel it
shall as far as reasonably possible provide opportunities for the employment of such
personnel. For this purpose, Contractor shall submit to GNPC an employment plan
with number of persons and the required professions and technical capabilities prior
to the performance of Petroleum Operations. GNPC shall provide the qualified
personnel according to the said plan.
21.4 Contractor shall, if so requested by GNPC, provide opportunities for a mutually
agreed number of GNPC personnel nominated by GNPC to be seconded for
on-the-job training or attachment in all phases of its Petroleum Operations under a
mutually agreed secondment contract. Expenses of secondment shall not be credited
against the training obligation under Article 21.1. Such secondment contract shall
include continuing education and short industry courses mutually identified as
beneficial to the secondee. Costs and other expenses connected with such
assignment of GNPC personnel on secondment shall be borne by the Contractor and
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 73
w
shall qualify for deduction against income under the Petroleum Income Tax Law and
shall be 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.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 14
ARTICLE 22
FORCE MAJEURE
22.1 The failure of a Party to fulfil 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 fulfil 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 hereunder, 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.
22.4 Except in the case of:
a) a law of general application;
b) an action taken in consequence of an emergency arising from a condition of
Force Majeure;
GNPC may not claim Force Majeure in respect of any action or provision of the
State or any agency of the State.
Petroleum Agreement for Deepwater Tano (Tullow/Sebre/Kosmos) -March 2006
T)
ARTICLE 23
TERM AND TERMINATION
23.1 Subject to this Article 23 and to the Petroleum (Exploration and Production) Law
PNDCL 84 (Section 12) the term of this Agreement shall be thirty (30) years
commencing from the Effective Date.
23.2 At the end of the term provided for in Article 23.1, provided that this Agreement has
not earlier been terminated, the Parties may negotiate concerning the terms and
conditions of a further agreement with respect to the Contract Area or any part
thereof, but no failure to enter any such further agreement shall give rise to
arbitration pursuant to Article 24 hereof.
23.3 Subject to Article 22, 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 Articles 8 or 14, or once a Development Plan has been approved, nor
when the provisions of Articles 8.13 through 8.19 are applicable;
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 preparations with respect to Development Operations pursuant to
Article 8.11.
23.4 Subject to Article 22 and 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) below:
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; provided that
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 7 6
1
:i
n in 1he 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;
n b) the assignment or purported assignment by Contractor of this Agreement
contrary to the provisions of Article 25 hereof;
n 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, and there is thereby justifiable anticipation
that the obligations of Contractor hereunder will not be performed; provided,
r- however, if the Contractor is comprised of more than one non-Affiliated entity,
then the insolvency or bankruptcy of one Contractor Party shall not lead to a
termination of the Agreement if the other Contractor Parties will assume the
rights and obligations of the defaulting Contractor Party under the Petroleum
< Agreement;
d) the intentional extraction by Contractor of any material of potential economic
value other than as authorised under this Agreement, or any applicable law
H except for such extraction as may be unavoidable as a result of Petroleum
Operations conducted in accordance with accepted international petroleum
industry practice, in the same or similar circumstances;
e) failure by Contractor
r- i) to fulfil its minimum work obligations pursuant to Article 4.3, save where
u
n the Minister has waived the default; or
ii) to cany out an approved Appraisal Programme undertaken by Contractor
pursuant to Article 8, unless Contractor notifies GNPC and the Minister
that the Appraisal Programme should be amended and submits said
amendment to the JMC for its review;
f) substantial and material failure by Contractor to comply with any of its
obligations pursuant to Article 7.1 hereof;
i g) failure by Contractor to make any payment of any sum due to GNPC or the
State pursuant to this Agreement within thirty (30) days after receiving notice
that such payment is due, except where liability for payment of such sum is
disputed in good faith by Contractor in which case the matter shall, if agreement
r in relation to it cannot be reached after thirty (30) days, be referred to arbitration
under Article 24;
f i
•J Petroleum Agreement for Deepv/ater Tano (Tullow/Sebre/Kosmos) -March 2008
<_<
t
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.
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 accepted international petroleum industry practice.
[J
■J
. ' 1
: ; I
u Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 7 8
("%
\
Lj
ARTICLE 24
CONSULTATION. ARBITRATION AND INDEPENDENT EXPERT
24.1 Except in the cases specified in Article 26.4 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 Parly. 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 24.7 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”), which ICC Rules are deemed
incoiporated by reference into this Article 24, save as otherwise provided herein.
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 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 or Sole Expert shall be a citizen of the home country of any Party
hereto, and no arbitrator or Sole Expert shall have any economic interest or
relationship with any such Party.
24.4 The arbitration proceedings shall be conducted in London, England or at such other
location as selected by the arbitrators unanimously, but which must be located in a
State which is a party to the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards and located within any one of the States
specified in the Schedule to the Arbitration (Foreign Awards) Instrument, 1963 (LI
261), as may be amended from time to time. The proceedings shall be conducted in
the English language.
24.5 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
Petroleum Agreement for Deepv/ater Teno (Tullow/Sabre/Kosmos) -March 2006 79
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.
24.6 The right to arbitrate disputes arising out of this Agreement shall survive the
termination of this Agreement.
24.7 Unless where a matter is specifically required to be referred to a Sole Expert under
this Agreement, the Parties to a dispute arising under this Agr eement may, in lieu of
resorting to arbitration, mutually agree to refer such matter for determination by a
Sole Expert to be appointed by agreement of the Parties. The Sole Expert
proceedings shall be administered in accordance with the Rules for Expertise of the
International Chamber of Commerce and any hearings or meetings shall take place
in Accra, Ghana. Where, however, the Parties fail to agree upon the appointment of a
Sole Expert within forty-five (45) days of the notice by one Party to the other Parties
of a dispute pursuant to this Agreement, the Sole Expert shall be appointed by die
International Centre for Expertise established by the International Chamber of
Commerce (ICC), The decision of the Sole Expert shall be given in writing with full
reasoning and shall be final and binding upon the Parties and shall be treated as if it
was an award by a sole arbitrator. The Sole Expert shall have ninety (90) days after
his appointment to decide the case, subject to any extensions mutually agreed to by
the Parties to the dispute. Upon failure of the Sole Expert to decide the matter in a
prompt and timely manner, any Party may call for arbitration under Article 24.1
above.
24.8 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 to such matter shall (unless otherwise provided
by this Agreement) be suspended, without liability to any Party, until said matter
has been resolved pursuant to this Article 24.
Petroleum Agreement for Deepwater Tano (Tullovz/Sabre/Kosmos) -March 2006 8 0
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.
Petroleum Agreement for Deepwater Tano (Tullovr/Sabre/Kosmos) -March 2006 81
ARTICLE 25
ASSIGNMENT
25.1 This Agreement shall not be assigned by any or all of the companies comprising
Contractor directly or indirectly in whole or in part, without the prior written consent
of GNPC, and the Minister, which consent shall not be unreasonably withheld or
delayed.
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 between the persons who constitute
contractor 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) no change in the scope of the Petroleum Operations may take place without the
prior approval in writing of GNPC, which approval shall not be unreasonably
delayed or withheld; and
c) 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 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.
Petroleum Agreement for Deepweter Teno (Tullov//S8bre/Kosmo$) -March 2006 82
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 consistent with such rules of international law as may
be applicable, including rules and principles as have been applied by international
tribunals.
26.2 The State, its departments and agencies, shall support this Agreement and shall take
no action which prevents or impedes the due exercise and performance of rights and
obligations of the Parties hereunder. As of the Effective Date of this Agreement and
throughout its Term, the State guarantees Contractor the stability of the terms and
conditions of this Agreement as well as the fiscal and contractual framework hereof
specifically including those terms and conditions and that framework that are based
upon or subject to the provisions of the laws and regulations of Ghana (and any
interpretations thereof) including, without limitation, the Petroleum Income Tax
Law, the Petroleum Law, the GNPC Law and those other laws, regulations and
decrees that are applicable hereto.
26.3 This Agreement and the rights and obligations specified herein may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the Parties. Any legislative or administrative act of
the State or any of its agencies or subdivisions which purports to vary any such right
or obligation shall, to the extent sought to be applied to this Agreement, constitute a
breach of this Agreement by the State provided, however, where a new income tax
rate comes into force as a result of the promulgation of the new Petroleum Income
Tax Law currently before Cabinet, Contractor shall have the option of either
applying the new income tax rate to this Agreement or remaining under the
Petroleum Income Tax Law, 1987, PNDC Law 188.
26.4 "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.
26.5 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 negotiations and shall effect such changes in, or rectification of, these
Petroleum Agreement for Deepwater Tano (Tullov//$abre/Kosmo$) -March 2006 83
provisions as they may agree are necessary to restore the relative economic position
of the Parties at the date of this Agreement.
26.6 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.
26.7 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 with respect
to each day of delay during the period of such nonpayment shall be the Specified
Rate. 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, and without prejudice to Article
10.1 (e) seek remedies available pursuant to Article 24.
26.8 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 whatsoever except as provided
in Article 10.4.
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 he 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 10.1
(a); and
iii) AOE share under the provisions of Article 10.1 (b).
26.9 Each Party warrants that it and its Affiliates have not made, offered, or authorized
and will not make, offer, or authorize with respect to the matters which are the
subject of this Agreement, any payment, gift, promise or other advantage, whether
Petroleum Agreement for Deepv/ater Tano (Tultow/Sabre/Kosmos) -March 200$ 8 4
directly or through any other person or entity, to or for the use or benefit of any
public official (i.e., any person holding a legislative, administrative or judicial
office, including any person employed by or acting on behalf of a public agency, a
public enterprise or a public international organization) or any political party or
political party official or candidate for office, where such payment, gift, promise
or advantage would violate (i) the applicable laws of Ghana; (ii) the laws of the
country of incorporation of such Party or such Party's ultimate parent company
and of the principal place of business of such ultimate parent company; or (iii) the
principles described in the Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions, signed in Paris on December 17,
1997, which entered into force on February 15, 1999, and the Convention’s
Commentaries. Each Party shall defend, indemnify and hold the other Parties
harmless from and against any and all claims, damages, losses, penalties, costs
and expenses arising from or related to, any breach by such first Party of such
warranty. Such indemnity obligation shall survive termination or expiration of
this Agreement. Each Party shall in good time (i) respond in reasonable detail to
any notice from any other Party reasonably connected with the above-stated
warranty; and (ii) furnish applicable documentary support for such response upon
request from such other Party.
26.10 This Agreement shall not take effect unless and until it is ratified by the Parliament
of Ghana and this Agreement has been executed by the parties which ever occurs
later (the “Effective Date”).
Petroleum Agreement for Deepwater Tano (Tuttow/Sabre/Komoa) -March 2006 8 5
ARTICLE 27
NOTICE
27 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, facsimile
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 21 667151 - 3
Telefax: 233 21 668262
FOR GHANA NATIONAL PETROLEUM CORPORATION:
THE MANAGING DIRECTOR
GHANA NATIONAL PETROLEUM CORPORATION
PETROLEUM HOUSE
HARBOUR ROAD
PRIVATE MAIL BAG
TEMA, GHANA
Telephone: 233-22-204726
Telefax: 233-22-205449
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006 86
FOR CONTRACTOR:
EXPLORATION MANAGER
TULLOW GHANA LIMITED
P. 0. BOX 532
CHANNEL HOUSE
7 ESPLANADE
ST. HELIER, JERSEY
CHANNEL ISLANDS
JE4 5UW
Telephone: +3531 737 700
Telefax: + 3531239 0400
MANAGING DIRECTOR
SABRE OIL AND GAS LIMITED
4 RUBISLAWPLACE
ABERDEEN
AB101XN
Telephone: + 44 1244 649 400
Telefax: +44 1244 649 700
KOSMOS ENERGY GHANA HC
C/OKOSMOS ENERGY, LLC
8401N. CENTRAL EXPRESSWAY
SUITE 280
DALLAS; TEXAS 75225
U.S.A
ATTN: MR CRAIG CLICK
Telephone: + 1 214 363 0700
Telefax: + 1 214 363 9024
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) -March 2006
ft
[ 'Moo
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 STATE
Its. Its.
FOR GHANA NATIONAL PETROLEUM
CORPORATION Witnessed:
By
Its
FOR TULLOW GHANA LIMITED Witnessed:
By
Its
Petroleum Agreement for Deepv/ater Tano (Tullovr/Sabre/Kosmos) -March 2006 88
I
n
i i
"T
I FOR KOSMOS ENERGY GHANA HC Witnessed:
Annexes
Petroleum Agreement for Deepv/ater Tano (Tullow/Sabre/Kosmos) - March 2006
ANNEX 1 - CONTRACT AREA
The Contract Area is bounded to the North, starting at point ‘A’ along the Ghana
Ivory Coast boarder at Latitude 4° 47’ 34.874” N and Longitude 3° 10’ 35.296”
W; thence proceed Southeast to point ‘B’ at Latitude 4° 40’ 00.000” N and
Longitude 2° 55’ 00.00” W; thence proceed South to point ‘C’ at Latitude 4° 25s
54.00” N and Longitude 2° 55’ 00.00” W; thence proceed West to point ‘D’ at
Latitude 4° 25’ 54.00” N and Longitude 3° 14’ 53.00” W; thence proceed North
along the Ghana-Ivory Coast border to the beginning of point ‘A’ resulting in an
area comprising of approximately one thousand and one hundred and eight
(1,108) square kilometers.
Tire Contract Area is designated by the coordinates of the following points as
shown in Table 1 and the area covered by the points A, B, C and D as indicated
on the map on the following page.
Table 1
Point Latitude Longitude
A 4° 47’ 34.874” N 3° 10’ 35.296” W
B 4° 40’ 00.000” N 2° 55’ 00.000” W
C 4° 25’54.000” N 2° 55” 00.000” W
D 4° 25’54.000” N 3° 14’53.000” W
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) - March 2006
1
Contract Area Plat
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.
Petroleum Agreement for Deepv/aler Tano (Tullow/Sabre/Kosmos - March 2006) 4
SECTION 1
X.l GENERAL PROVISIONS
1.1.1 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. A reference to an
Article in this Annex shall, unless otherwise indicated, refer to an
Article in the Agreement.
1.1.2 This Annex may be amended by written agreement upon 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 normal practice of the international petroleum industry and
Article 18.2.
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.
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.
1.2.4 Following agreement over the outline Contractor shall prepare
and submit to GNPC formal copies of the chart of accounts
Petroleum Agreement for Deepwater Tano (Tuttovz/Sabre/Kosmos - March 2006) 5
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 die 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) 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 die 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, capital item or liability are in Ghana Cedis
or currency other than the U.S. Dollar, amounts in such other
currency shall be immediately converted to U.S. Dollars at the rate
actually incurred and accounts required for the purposes of this
Agreement shall be maintained only in U.S. Dollars.
1.3.2 Measurement required under this Annex shall be in the medic
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 loss at the expense of or to the benefit of the other as a result of
exchange of currency. Where any such currency exchange gam or
loss arises it shall be charged or credited to the accounts under the
Agreement.
Petroleum Agreement (or Deepwater Tano (Tullow/Sabre/Kosmos - March 2006)
1.3.6 The rate of exchange for the conversion of currency shall be the
rate actually incurred in the purchase or sale of currencies required
in Petroleum Operations as allowed under the laws of Ghana.
1.3.7 To translate revenue received and expenditures made in Ghana
Cedis or in U.S. Dollars, the average of the preceding month’s rate
between the currencies shall be used.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006)
■ 1
i \
n
SECTION 2
H
2.0 CLASSIFICATION AND ALLOTMENT OF COSTS AND
t i EXPENDITURE
r 1 2.1 ALL EXPENDITURE RELATING TO PETROLEUM
OPERATIONS SHALL BE CLASSIFIED, AS FOLLOWS:
a) Exploration Expenditure;
b) Development Expenditure;
r c) Production Expenditure;
i. d) Service Costs; and
e) General and Administrative expenses
i. and shall be defined and allotted as herein below provided.
2.2 EXPLORATION EXPENDITURE
Exploration Expenditure shall consist of all direct, indirect and allotted
costs incurred in Exploration Operations, in the search for Petroleum in
the Contract Area, including but not limited to expenditure on:
a) aerial, geographical, geochemical, paleontological, geological,
bathymetrical, topographical and seismic surveys, and all relevant
r~ studies and their interpretation;
l. b) borehole drilling and water well drilling;
o) labour, consumables, 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 save
such wells temporarily abandoned for future use as producing
wells;
d) facilities used solely for Exploration Operations, including access
roads, where applicable, and purchased geological and geophysical
information;
Petroleum Agreement for Deepwater Teno (Tullow/Sebre/Kosmos - March 2006) «
< -i
<_ J
t
e) all service costs allotted to the Exploration Operations on an
equitable basis;
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,
g) all of the above costs in connection with or related to an Appraisal
Programme.
2.3 DEVELOPMENT EXPENDITURE
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 puiposes of producing a Petroleum reservoir already
discovered, whether these wells are dry or producing;
b) tangible drilling costs for completing wells such as installation of
casing or equipment or otherwise equipping a well after it 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 and production
facilities, Petroleum storage facilities (whether offshore or
onshore) and access roads for Production Operations;
e) engineering and design studies for field facilities;
f) all service costs allotted to Development Operations on an
equitable basis;
g) all General and Administrative Expenses (incurred within or
outside Ghana) allocated to Development Operations based on the
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006) 9
0
j
1 I
n
percentage share of projected budget expenditure which will be
H adjusted to actual expenditure as the end of the year.
2.4 PRODUCTION EXPENDITURE
n
li Production Expenditure shall consist of but not be limited to all
r> expenditure incurred in Petroleum Operations, including appropriate
abandonment charges, after the Date of Commencement of Commercial
Production, such expenditure being other than Exploration Expenditure,
n Development Expenditure, General and Administrative Expenses and
i ! Service Costs. The balance of General and Administrative Expenses and
. i
Service Costs not allocated to Exploration Operations or to Development
Operations under Section 2.2 and 2.3 shall be allocated to Production
Expenditure.
n
; i
i i 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
r~i (within and/or outside the Republic of Ghana), including (but
not limited to) the construction, installation, purchase, hire or
charter (as applicable) of the following: of warehouses, piers,
marine vessels, vehicles, motorised rolling equipment, aircraft,
L. fire security stations, workshops, water and sewerage plants,
power plants, offices, housing, community and recreational
facilities and furniture, fixtures, tools, land and equipment used
in such construction or installation.
r Service Costs in any Calendar Year shall include the total costs
L 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.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006)
< 1
: I
...J
r
t
n
2.6 GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative Expenses shall consist of:
2.6.1 All main office, field and general administrative costs,
benefiting Petroleum Operations the Republic of Ghana),
including but not limited to supervisory, technical, accounting,
n financial, legal and employee relations services;
2.6.2 An overhead charge for the actual unallocated cost of services
rn rendered outside the Republic of Ghana by Contractor or its
Affiliates for managing Petroleum Operations and for staff
advice and assistance, including but not limited to financial,
legal, accounting and employee relations services. Such
overhead charges shall be allocated at a rate equivalent to the
following percentages of the total costs attributable to Petroleum
[ Operations as follows:
rl For the Exploration Phase:
j
U.S. Dollars 0-20 million -One point two five percent (1.25%)
i
U.S. Dollars 20 -25 million -One percent (1%) j
U.S. Dollars 25 million and above-Zero point five percent (0.5%) |
n i
j For the Development Phase:
n U.S. Dollars 0-50 million -One point two five percent (1.25%)
U.S. Dollars 50-100 million -One percent (1.0%)
U.S. Dollars 100 --- 500 million--Zero point five percent (0.5%)
U.S. Dollars 500 million and above-A lump sum of not less than U.S.
r i Dollars two point five million (U.S.
Dollars 2.5 million)
2.6.3 All General and Administrative Expenses will be regularly
allocated as specified in subsections 2.2(f), 2.3(g) and 2.4 to
Exploration Expenditure, Development Expenditure and
lj Production Expenditure.
n
u
Petroleum Agreement for Deepv/ater Tano (Tullovz/Sabre/Kosmos - March 2006)
rn
i i
• U
SECTION 3
3.0 COSTS, EXPENSES, EXPENDITURES AND CREDITS OF
CONTRACTOR
3.1 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;
g) insurance and losses;
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
Labour and associated labour costs shall include but not be limited to;
Petroleum Agreement for Deepv/ater Tano (Tullow/Sabre/Kosmos - March 2006) 12
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, all
of which shall be in accordance with usual practice of the
Contractor.
3.4 TRANSPORTATION COSTS
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) actual costs under third party contracts for technical and all
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 (Gulf of Guinea) market;
b) cost of technical and other services of personnel assigned by
the Contractor and its Affiliates when performing
management, engineering, geological, geophysical,
operations, technical, administrative, legal, accounting,
Petroleum Agreement for Deepv/ater Tano (Tuttovs/Sabre/Kosmos - March 2006) 13
treasury, tax, employee relations, computer services,
purchasing, and all other functions for the direct benefit of
Petroleum Operations;
c) cost of general services, including, but not without
limitation, professional consultants and others who perform
services for the direct benefit of Petroleum Operations.
3.5.2 Services furnished by Contractor and its Affiliates shall be charged
at rates commensurate with those currently prevailing for such
services in the regional (Gulf of Guinea) market.
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 die Article 12.2 (ii).
3.7 INSURANCE AND LOSSES
a) Insurance premia and costs incurred for insurance, provided that if
such insurance is wholly or partly placed with an Affiliate of
Contractor, such premia and costs shall be recoverable only to the
extent not in excess of those generally charged by competitive
insurance companies other than Affiliate;
b) costs and losses incurred as a consequence of events, which are,
insofar as not made good by insurance, allowable under 17 of the
Agreement; and
c) Costs or expenses necessary for the repair or replacement of property
resulting fiom damage or losses incurred.
3.8 LEGAL EXPENSES
All costs and expenses of litigation, arbitration, mediation 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.
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos - March 2008)
Tty
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 tire Agreement, including, without limitation,
the amounts referred to in Article 21.1.
3.10 GENERAL AND ADMINISTRATIVE EXPENSES
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 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 Development and Production Area
shall be charged initially to the Development and Production Area for
which the facility is first used. Costs incurred thereafter shall be
allocated in a reasonable manner, consistent with generally accepted
international petroleum industry accounting practice, to the
Development and Production Area 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.
3.14 ECOLOGICAL AND ENVIRONMENTAL CHARGES
All charges for environmental protection and safety measures conducted
in the Contract Area including, without limitation, those incurred in
accordance with Article 17 of the Agreement.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2008) 15
3.15 ABANDONMENT COST
Cost relating to the decommissioning and abandonment of Petroleum
Operations and facilities, site restoration and other associated operations
pursuant to Article 12.10.
3.16 OTHER COSTS
Any other costs not covered or dealt with in the foregoing provisions
which are incurred and not mentioned in Section 3.17 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, provided that it
shall be deductible for income tax purposes pursuant to the
Petroleum Income Tax Law;
d) petroleum marketing costs or costs of transporting 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 nonfulfilment of
contractual obligations;
f) premium paid as a result of GNPC exercising a Sole Risk option
under Article 9 of this Agreement;
g) cost of arbitration under Article 24 of the Agreement or dispute
settlement by any independent expert under the terms of the
Agreement;
h) final and unappealable fines and penalties imposed by a competent
Court of Law;
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006)
/“I
; t
'1
i |
< i
i) cost incurred as a result of Contractor’s Gross Negligence
: chargeable to Contractor or the Operator under the terms of the
Agreement.
3.18 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 no bearing on Contractor’s eligibility or otherwise for
i---i deductions in computing Contractor’s net income from Petroleum
i Operations for income tax purposes under Article 10 of the Agreement.
3.19 CREDITS UNDER THE AGREEMENT
The net proceeds of the following transactions will be credited to the
n accounts under the Agreement:
a) the net proceeds of any insurance or claim in connection with
Petroleum Operations or any assets charged to the accounts under
i j the Agreements when such operations or assets were insured and
the premia charged to the accounts under the Agreement;
b) revenue received from third parties for the use of property or assets
rn charged to the accounts under this Agreement;
c) any adjustment from the suppliers or manufacturers or their agents
r in connection with a defective equipment or material the cost of
u which was previously charged to the account under the Agreement;
f 1
d) the proceeds received for inventory materials previously charged to
j !
the account under the Agreement and subsequently exported from
t -> the Republic of Ghana or transferred or sold to third parties
without being used in the Petroleum Operations;
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
J proceedings;
f) the proceeds from the sale or exchange of plant or facilities from
die Development and Production Area or plant or facilities the
acquisition costs of which have been deducted in the AOE
computation under Article lOfor the relevant Development and
Production Area;
0
Petroleum Agreement for Deepwater Tano CTullow/Sebre/Kosmoe - March 2006)
G
' 1
I
I I
g) the proceeds derived from the sale or issue of any intellectual
property the development costs of which were incurred pursuant to
this Agreement; and
h) the proceeds from the sale of any petroleum information derived
from Petroleum Operations under this Agreement.
3.20 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.
r
n
n
i
i
f
r ~l
r )
f )
J
f
Petroleum Agreement for Deepwater Tano fTullovz/Sabre/Kosmos - March 2006) 18
TR
u
SECTION 4
4.0 MATERIAL
4.1 VALUE OF MATERIAL CHARGED TO THE ACCOUNTS
UNDER THE AGREEMENT
Material purchased, leased 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 and to point of usage or installation, including but not limited
to, insurance, taxes, customs duties, consular fees, other costs incurred
on such material, and any other related costs actually paid.
VALUE OF MATERIAL PURCHASED FROM AN AFFILIATE
Contractor shall notify GNPC of any goods supplied by an Affiliate of
Contractor. 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.
4.2.1 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.
4.2.2 Used Material (Condition
Used material shall be classified as Condition “B” provided that
it is in sound and serviceable condition and is suitable for reuse
without reconditioning. Such material shall be valued at not
more than seventy five percent (75%) of the current price of
new material valued according to Section 4.2.1 above.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006) 19
4.2.3 Used Material ^Condition “C»l
Used material which is serviceable for original function as good
second hand material after reconditioning and cannot be
classified as Condition “B” shall 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
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.
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. Contractor
does not warrant any material.
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 overages
and shortages (hereinafter referred to as Controllable Material).
Petroleum Agreement (or Deepwater Tano (Tullow/Sabre/Kosmos - March 2006)
f *“k
n 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 each such 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 inventoiy 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.
i j
o
0
u
Petroleum Agreement tor Deepwater Tano (TuUow/Sabre/Kosmos - March 2006)
0
SECTION 5
5.0 CASH CALL STATEMENT
5.1 In respect of any Petroleum Costs to which GNPC is contributing as
provided in Article 2 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 for its share of Petroleum Costs. Such Cash Call Statement shall
include the following information:
a) Due Date;
b) Payment Instructions;
c) The balance prior to the Cash Call being issued;
d) Amount of US Dollars due; and
e) An estimation of the amounts of US Dollars required from GNPC for
the following Month.
5.2 Not later than the twenty-fifth (25th ) day of each Month, Contractor will
furnish GNPC a statement reflecting for the previous Month:
a) Payments;
b) The nature of such payments by appropriate classifications; and
c) The balance due to or from GNPC.
5.3 Contractor may in the case where a large 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.
Petroleum Agreement for Deepv/ater Tsno (Tullow/Sabre/Kosmos - March 2006)
SECTION 6
6.0 PRODUCTION STATEMENT
6.1 Subsequent to the Date of Commencement of Commercial Production
from the Contract Area, Contractor shall submit a monthly Production
Statement to GNPC showing the following information for each
Development and Production Area as appropriate:
a) the quantity of Crude Oil produced and saved;
b) the quantity of Natural Gas produced and saved;
c) the quantities of Petroleum used for the purpose of conducting
drilling and Production Operations, pumping to field storage and
reinjections;
i. > d) the quantities of Natural Gas flared;
ri
i e) the size of Petroleum stocks held at the beginning of the Month;
f) the size of Petroleum stocks held at the end of the Month.
6.2 The Production Statement of each Calendar Month shall be submitted to
GNPC not later than ten (10) days after the end of such Month.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006)
n
• i
i i
SECTION 7
7.0 VALUE OF PRODUCTION STATEMENT
7. Contractor shall prepare a statement providing calculations of the value of
Crude Oil produced and saved during each Quarter based on the Market
Price established under Article 11 of the Agreement as well as the
amounts of Crude Oil allocated to each of the Parties during that Quarter.
Such Statement shall be submitted to the Minister and to GNPC not later
than thirty (30) days following the determination, notification and
acceptance of the Market Price to GNPC according to Article 11 of the
Agreement.
Petroleum Agreement for Deepv/ater Tano (Tultovz/Sabre/Kosmos - March 2006)
SECTION 8
8.0 COST STATEMENT
8.1 Contractor shall prepare with respect to each Quarter, a Cost Statement
containing the following information:
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 Quarter in question
(subsection 8.1(a) plus subsection 8.1(b));
d) Petroleum Costs for Development Operations advanced in the
Quarter in respect of GNPC’s Participating Interest pursuant to
Article 2 of the Agreement;
e) Costs as specified in (d) above which have been recovered during
the Quarter pursuant to Article 10.1(e) of the Agreement and the
balance, if any, of such costs unrecovered and carried forward for
recovery in a later period.
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.
8.2 The Cost Statement of each Quarter shall be submitted to GNPC no later
than thirty (30) days after the end of such Quarter.
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2008) 25
i I
i )
! I
SECTION 9
o
■ i
9.0 STATEMENT OF EXPENDITURES AND RECEIPTS
9.1 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
n 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
n following:
a) actual expenditures and receipts for the Quarter in question;
b) cumulative expenditure and receipts for the budget year in question;
■ j c) latest forecast of cumulative expenditures at the year end; and
d) variations between budget forecast and latest forecast and
explanations therefor.
9.2 The Statement of Expenditures and Receipts of each Quarter shall be
submitted to GNPC not later than thirty (30) days after the end of such
Quarter for provisional approval by GNPC.
! \ Petroleum Agreement for Deepv/ater Tano (Tullow/Sabre/Kosmos - March 2008)
: I
L;
SECTION 10
10.0 FINAL END-OF-YEAR STATEMENT
10.1 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, 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.
Petroleum Agreement for Deepwater Teno (Tullow/Sabre/Kosmos - March 2006)
SECTION n
11.0 BUDGET STATEMENT
11.1 The Contractor shall prepare an annual budget Statement. This will
distinguish between Exploration Expenditure, Development Expenditure
and Production Expenditure 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.
Die 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.
Petroleum Agreement for Deepwater Tano (Tullow/Sebre/Kosmos - March 2006) 28
SECTION 12
12.0 LONG RANGE PLAN AND FORECAST
12.1 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;
iii) Details of drilling activities planned for each such year-;
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 First Subperiod of twelve months of
the Initial Exploration Period within sixty (60) days after 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:
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 personnel employed in the
Petroleum Operations in the Republic of Ghana;
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006) 29
J !
f
' i
v) description of proposed Petroleum marketing arrangements;
n vi) description of main technologies employed; and
vii) description of die working relationship of Contractor to
GNPC.
« i
; ) c) The Development forecast shall be revised at the beginning of each
n 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
r-) twenty (120) days of the date when the first Development Plan is
i ;
i ; approved by the Minister and Contractor commences the
n implementation of such plan and thereafter shall prepare and
submit a revised Development Forecast to GNPC no later than
i i thirty (30) days before each Calendar Year commencing as of the
r* second year of the first Development forecast.
• I 12.2 CHANGES OF PLAN AND FORECAST
’ r~i It is recognised by Contractor and GNPC that the details of the
! i
i Exploration Plan and Development forecast may require changes in the
light of existing circumstances and nothing herein contained shall limit the
i J flexibility to make such changes. Consistent with the foregoing the said
Plan and Forecast may be revised when appropriate. The Exploration Plan
and Development Forecast are for planning pmposes only.
Lj
r
r •
r
Petroleum Agreement for Deepwater Tano {Tullow/Sabre/Kosmos --March 2006)
i 1
L.
I ‘1
L
ANNEX 3 - SAMPLE AOE CALCULATION
SAMPLE ADDITIONAL OIL ENTITLEMENT CALCULATION
This sample calculation has been prepared to illustrate the Additional Oil Entitlement
(AOE) provisions of Article 10 of die Petroleum Agreement to which this Annex 3 is
attached and made a part thereof. The assumptions used, year-by-year cash flows,
inflation rate, and resulting AOE payments are hypothetical only and are neither based
upon nor do they represent an actual situation. They are designed to illustrate the
mechanics of each of the hypothetical AOE calculations only.
Sample AOE Calculation:
Contractor’s Revenues minus Income Taxes minus “Petroleum Costs”
Income Tax Rate: 35%
Petroleum Costs: Contractor’s Petroleum Costs including costs
advanced on GNPC’s behalf
Additional Oil Entitlement (AOE):
Discounted Cash Flow
Real Rate of Return (%*) AOE Rate (%\
19% or less 0%
Over 19% 5%
Over 20% 10%
Over 25% 15%
Over 30% 20%
Over 40% 25%
*Rate of Return exclusive of Inflation
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos - March 2006) 31
SAMPLE APE CALCULATION (MILLION US DOLLARS)
YEAR NCF FAn@l9 AOE 1 (3J SAmgio AOE 2@ TAfr@2i AOE3® YAn @ AOE 4 @ ZAn@ AOE5@ TolslAOE
%p.O. 5% %p.o. 10% p.o. % p.a. 15% $0% p.o. 20% p.o. 40% p.o. 25% FaymonU
l -$2.0 •$2.0 .$2-0 •$2.0 •$2.0 -$2,0
2 .$15.0 •$17.5 •$17.5 .$174 •$17.7 -$17.9
3 -$150.0 •$171.7 •$171.9 -$172.9 •$173.9 •$176.0
4 •$20.0 •$232..9 •$234.0 -$244.7 -$254.8 •$275.1
S $10.0 .$270.8 ■$293.6 •$308.3 -$333.9 .$388.9
6 $350.0 •$S7 •$14.4 -$50-6 •$110.8 •$224.0
7 $220.0 $213.0 $10.6 $191.3 $19.1 $111.4 $16.7 $23.9 $4.8 •$156.0 $51.3
e $200.0 $2000 $10.0 $190.0 $19.0 $171.0 $25.7 $1454 $29.1 -$110.0 $83.7
9 $150.0 $150.0 $7.5 $1424 $14.3 $128.3 $19.2 $109.0 $21.8 .$72.2 $62.8
10 $100.0 $100.0 $5.0 $95.0 $94 $854 $12.2 $727 $14.5 ■ $46.6 $41.9
11 $55.0 $55.0 $3.3 $61.8 $6.2 $55.6 $8.3 $47.2 $94 •$29.8 $27.2
12 $55.0 $45 $2.3 $42.8 $4.3 $38.5 $5.8 $327 $64 •$17.1 $18.8
13 $35 i35.0 $1.8 $33.3 $3.3 $29.9 $4.5 $25.4 $5,1 -$4.4 $14.7
\4 $25.0 $25.0 $1.3 $238 $2.4 $21.4 $3.2 $18.2 $3.6 $8.2 $2X1 $124
15 $10.0 $10.0 $0.5 $04 $1.0 $8.6 $1.3 $7.3 $1.5 $5.8 $1.5 $5.6
Tofoli $1013.0 $42.1 $79.0 $97,5 $96.4 $3.5 $318.5
1. Rates of return used above include annual inflation of 5%.
2. Year 7: AOE 1 = 0.05 * $213.0 MM (i.e. 0.05 times Cumulative Cash Flows
compounded annually at 19% p.a. + 5% inflation) = $10.6 MM.
3. Years 8 through 15: AOE 1 in nth year = nth Year FA * 0.05
4. Year 7: SA = -$14.4 MM * 1.25 + $220.0 MM - $10.6 MM = $191.3 MM
5. Year 7: AOE 2 = 0.10 * $191.3 MM (i.e. AOE Rate times Cumulative Cash Flow LESS
AOE 1 compounded at 20% p.a. + 5% inflation) = $19.1 MM
6. Year 7: TA «-$60.6 MM * 1.30 + $220.0 MM - $10.6 MM - $19.1 MM = $111.4 MM
7. Year 7: AOE 3 = 0.15 * $111.4 MM (i.e. AOE Rate times Cumulative Cash Flow - AOE
1 - AOE 2 compounded at 25% p.a. + 5% inflation) = $16.7 MM
8. Year 7: YA =-$110.8 MM* 1.35+ $220.0 MM - $10.6 MM-$19.1 MM - $16.7 =
$23.9 MM
9. Year 7: AOE 4 = 0.20 * $23.9 MM (i.e. AOE Rate times Cumulative Cash Flow - AOE 1
- AOE 2 - AOE 3 compounded at 30% p.a. + 5% inflation) = $4.8 MM
10. Year 14: ZA = -$4.4 MM * 1.45 + $25.0 MM - $1.3 MM - $2.4 MM - $3.2 - $3.6 MM =
$8.2 MM
11. Year 14: AOE 5 = 0.25 * $8.2 MM (i.e. AOE Rate times Cumulative Cash Flow - AOE 1
- AOE 2 - AOE 3 - AOE 4 compounded at 40% p.a. + 5% inflation) = $2.0 MM
Petroleum Agreement for Deepwater Tano (Tullow/Sabre/Kosmos) - March 200$