Common use of Cost Recovery and Production Sharing Clause in Contracts

Cost Recovery and Production Sharing. Subject to the terms and conditions of this Agreement, the Contractor shall bear and pay all contract costs incurred in carrying out petroleum operations and shall recover contract costs only from cost oil as herein provided. All recoverable contract costs incurred by the Contractor shall, subject to the terms and conditions of any agreement relating to Non-Associated gas made pursuant to Article 12, be recovered from the value, determined in accordance with Article 13, of a volume of crude oil (hereinafter referred to as "cost oil") produced and sold from the contract area and limited in any month to an amount which equals seventy-five percent (75%) of the total production from the contract area for such month excluding any crude oil used in petroleum operations or which is lost. "Recoverable contract costs" means such costs as the Contractor is permitted to recover, as from the date they have been incurred, pursuant to the provisions of Annex C. To the extent that in any month, recoverable contract costs exceed the value of cost oil determined in accordance with Article 13, the unrecovered amount shall be carried forward and, subject to the limitation stipulated in Article 11.2, shall be recoverable in the immediately succeeding month, and to the extent not then recovered, in the subsequent month or months. The balance of crude oil available in any month after recoverable contract costs have been satisfied to the extent aforesaid (hereinafter referred to as "profit oil") shall be shared between the Government and the Contractor for each field in the following proportions: Contractor fifty percent (50%) and Minister fifty percent (50%). The quantity of cost oil actually utilized in satisfying the recoverable contract costs may be allocated by the Contractor to production from any field or fields. Subject to the provision of Article 14, the profit oil shall be shared between the Government and Contractor on a monthly basis according to their respective entitlements as specified in Article 11.4. To the extent that the actual quantities and costs required to determine cost oil and profit oil for the month in question are not known, crude oil sharing shall be calculated on an interim basis each month taking the following factors into account - unrecovered recoverable contract cost; estimated current recoverable contract cost by reference to the agreed work programme and budget supplemented by any other relevant documents or information which are accepted by Contractor and Minister as being reliable indicators of the actual position for the month in question; estimated production for the month in question; and crude oil price from the previous month calculated. Retroactive adjustments shall be made to the crude oil entitlements and shall be agreed with the Minister based on recalculations utilizing actual quantities of crude oil produced and saved and recoverable contract costs. Any revised entitlements shall be made, subject to any applicable lifting agreements, as soon as practicable after such elements have definitely been determined. The Contractor shall have the right to use in any petroleum operations as much of the production as may reasonably be required by it therefor and the quantities so used or lost shall be excluded from any calculations of cost oil and profit oil entitlement.