EXHIBIT 10.16
INTERNATIONAL JOINT VENTURE OPERATING AGREEMENT
BETWEEN
LIBERTY TECHNICAL SERVICES LTD.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ PETROLEUM COMPANY LIMITED
AGREEMENT COVERING: CONCESSION BLOCK 309
TABLE OF CONTENTS
ARTICLE PAGE
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ARTICLE I
DEFINITIONS -1-
ARTICLE II
EFFECTIVE DATE AND TERM -7-
ARTICLE III
PARTICIPATING INTEREST -7-
3.1 Participating Interest -7-
3.2 Ownership, Obligations and Liabilities -8-
3.3 Government Participation -8-
ARTICLE IV
PROJECT MANAGER -9-
4.1 Designation of Project Manager -9-
4.2 Rights and Duties of Project Manager -9-
4.3 Employees of Operator -11-
4.4 Information Supplied by Operator -11-
4.5 Settlement of Claims and Lawsuits -12-
4.6 Liability of Operator -13-
4.7 Insurance Obtained by Operator -14-
4.8 Commingling of Funds -15-
4.9 Resignation of Operator -16-
4.10 Removal of Operator -16-
4.11 Appointment of Successor -17-
ARTICLE V
OPERATING COMMITTEE -18-
5.1 Establishment of Operating Committee -18-
5.2 Powers and Duties of Operating Committee -18-
5.3 Authority to Vote -19-
5.4 Subcommittees -19-
5.5 Notice of Meeting -19-
5.6 Contents of Meeting Notice -19-
5.7 Location of Meetings -20-
5.8 Operator's Duties for Meetings -20-
5.9 Voting Procedure -20-
5.10 Record of Votes -20-
5.11 Minutes -20-
5.12 Voting by Notice -21-
5.13 Effect of Vote -21-
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ARTICLE VI
WORK PROGRAMS AND BUDGETS -22-
6.1 Exploration and Appraisal -22-
6.2 Development -24-
6.3 Production -25-
6.4 Itemization of Expenditures -25-
6.5 Contract Awards -25-
6.6 Authorization for Expenditure ("AFE") Procedure -27-
6.7 Overexpenditures of Work Programs and Budgets -28-
ARTICLE VII
OPERATIONS BY LESS THAN ALL PARTIES -28-
7.1 Limitation on Applicability -28-
7.2 Procedure to Propose Exclusive Operations -29-
7.3 Responsibility for Exclusive Operations -32-
7.4 Consequences of Exclusive Operations -32-
7.5 Premium to Participate in Exclusive Operations -36-
7.6 Order of Preference of Operations -39-
7.7 Stand By Costs -40-
7.8 Special Considerations Regarding Deepening and Sidetracking -40-
7.9 Miscellaneous -41-
ARTICLE VIII
DEFAULT -42-
8.1 Default and Notice -42-
8.2 Operating Committee Meetings and Data -43-
8.3 Allocation of Defaulted Accounts -43-
8.4 Transfer of Interest -44-
8.5 Continuation of Interest -45-
8.6 Abandonment -45-
8.7 Sale of Hydrocarbons -45-
8.8 No Right of Set Off -46-
ARTICLE IX
DISPOSITION OF PRODUCTION -46-
9.1 Right and Obligation to Take In Kind -46-
9.2 Offtake Agreement for Crude Oil -46-
9.3 Separate Agreement for Natural Gas -47-
ARTICLE X
ABANDONMENT OF ▇▇▇▇▇ -48-
10.1 Abandonment of ▇▇▇▇▇ Drilled as Joint Operations -48-
10.2 Abandonment of Exclusive Operations -49-
ARTICLE XI
SURRENDER, EXTENSIONS AND RENEWALS -49-
11.1 Surrender -49-
11.2 Extension of the Term -49-
ARTICLE XII
TRANSFER OF INTEREST OR RIGHTS -50-
12.1 Obligation -50-
12.2 Rights -53-
ARTICLE XIII
WITHDRAWAL FROM AGREEMENT -53-
13.1 Right of Withdrawal -53-
13.2 Partial or Complete Withdrawal -54-
13.3 Voting -54-
13.4 Obligations and Liabilities -55-
13.5 Emergency -55-
13.6 Assignment -55-
13.7 Approvals -55-
13.8 Abandonment Security -56-
13.9 Withdrawal or Abandonment by all Parties -57-
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ARTICLE XIV
RELATIONSHIP OF PARTIES AND TAX -57-
14.1 Relationship of Parties -57-
14.2 Tax -57-
14.3 United States Tax Election -58-
ARTICLE XV
CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY -59-
15.1 Confidential Information -59-
15.2 Continuing Obligations -60-
15.3 Proprietary Technology -60-
15.4 Trades -60-
ARTICLE XVI
FORCE MAJEURE -60-
16.1 Obligations -60-
16.2 Definition of Force Majeure -61-
ARTICLE XVII
NOTICES -61-
ARTICLE XVIII
APPLICABLE LAW AND DISPUTE RESOLUTION -62-
18.1 Applicable Law -62-
18.2 Dispute Resolution -62-
ARTICLE XIX
ALLOCATION OF COST RECOVERY RIGHTS -65-
19.1 Allocation of Total Production -65-
19.2 Allocation of Cost Oil -65-
19.3 Allocation of Profit Oil -65-
19.4 Allocation of Excess Cost Oil -65-
ARTICLE XX
GENERAL PROVISIONS -66-
20.1 Conflicts of Interest -66-
20.2 Public Announcements -66-
20.3 Successors and Assigns -67-
20.4 Waiver -67-
20.5 Severance of Invalid Provisions -67-
20.6 Modifications -67-
20.7 Headings -67-
20.8 Singular and Plural -67-
20.9 Gender -68-
20.10 Counterpart Execution -68-
20.11 Entirety -68-
Exhibit "A" - Accounting Procedure
Exhibit "B" - Contract Area
iii
PROJECT MANAGEMENT AGREEMENT [SIC]
THIS AGREEMENT is made as of the Effective Date among
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ PETROLEUM COMPANY LIMITED, a
company incorporated in Nigeria
(hereinafter referred to as "Owner");
and
LIBERTY TECHNICAL SERVICES LTD., a company
incorporated in Calgary, Canada
(hereinafter referred to as "Project Manger");
Above may sometimes individually be referred to as "Party" and
collectively as the "Parties".
WITNESSETH
WHEREAS, the Parties have entered into a Project Management Agreement
(hereinafter referred to as "Agreement") covering certain areas located in the
Nigeria Concession 309, referred to as the Concession Area, and more
particularly described in Exhibit "B" to this Agreement; and
WHEREAS, the Parties desire to define their respective rights and obligations
with respect to their operations under the Concession.
NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements and obligations set out below and to be performed, the Parties agree
as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following words and terms shall have the meaning
ascribed to them below:
1.1 ACCOUNTING PROCEDURE means the rules, provisions and conditions set
forth and contained in Exhibit A to this Agreement.
1.2 AFE means an authorization for expenditure pursuant to Article 6.6.
1.3 AFFILIATE means a company, partnership or other legal entity which
controls, or is controlled by, or which is controlled by an entity which
controls a Party. Control means the ownership directly or indirectly of
Check one Alternative
[ ] ALTERNATIVE NO. 1
more than fifty (50) percent
[X] ALTERNATIVE NO. 2
fifty (50) percent or more
of the shares or voting rights, in a company, partnership or legal
entity.
1.4 AGREED INTEREST RATE means interest compounded on a monthly basis, at
the rate per annum equal to the one (1) month term, LIBOR rate for U.S. Dollar
deposits, as published by The Wall Street Journal or if not published, then by
-----------------------
the Financial Times of London, plus TWO percent (2%), applicable on the first
--------------------------
Business Day prior to the due date of payment and thereafter on the first
Business Day of each succeeding one (1) month term. If the aforesaid rate is
contrary to any applicable usury law, the rate of interest to be charged shall
be the maximum rate permitted by such applicable law.
1.5 AGREEMENT means this agreement, together with the Exhibits attached to
this agreement.
1.6 APPRAISAL WELL means any well whose purpose at the time of commencement
of drilling such well is the determination of the extent or the volume of
Hydrocarbon reserves contained in an existing Discovery.
1.7 BARREL means a quantity consisting of forty-two (42) United States
gallons, corrected to a temperature of sixty (60) degrees Fahrenheit under one
(1) atmosphere of pressure.
1.8 BUSINESS DAY means a day on which the banks in NEW YORK/LONDON are
customarily open for business.
1.9 CALENDAR QUARTER means a period of three (3) months commencing with
January 1 and ending on the following March 31, a period of three (3) months
commencing with April 1 and ending on the following June 30, a period of three
(3) months commencing with July 1 and ending on the following September 30, or a
period of three (3) months commencing with October 1 and ending on the following
December 31 according to the Gregorian Calendar.
1.10 CALENDAR YEAR means a period of twelve (12) months commencing with
January 1 and ending on the following December 31 according to the Gregorian
Calendar.
1.11 CASH PREMIUM means the payment made pursuant to Article 7.5(B) by a
Non-Consenting Party to reinstate its rights to participate in an Exclusive
Operation.
1.12 COMMERCIAL DISCOVERY means any discovery of Hydrocarbons which is
sufficient to entitle the Parties to apply for authorization from the Government
to commence exploitation.
1.13 COMPLETION means an operation intended to complete a well through the
Christmas tree as a producer of Hydrocarbons in one or more Zones including, but
not limited to, the setting of production casing, perforating, stimulating the
well and production Testing conducted in such operation. COMPLETE and other
derivatives shall be construed accordingly.
1.14 CONSENTING PARTY means a Party who agrees to participate in and pay its
share of the cost of an Exclusive Operation.
1.15 JOINT VENTURE AGREEMENT means the instrument concluded between ▇▇▇▇▇
▇▇▇▇▇▇▇▇ Petroleum Limited and the Parties identified in the second paragraph of
this Agreement and any extension, renewal or amendment thereof agreed to in
writing by the Parties.
1.16 CONCESSION AREA means as of the Effective Date the surface area which
is described in Exhibit B to this Agreement. The perimeter or perimeters of the
Concession Area shall correspond to that area covered by the Concession, as such
area may vary from time to time during the term of validity of the Concession.
1.17 COST OIL means that portion of the total production of Hydrocarbons
which is allocated to the Parties under the Concession for the recovery of
Petroleum Costs.
1.18 DAY means a calender day unless otherwise specifically provided.
1.19 DEFAULTING PARTY shall have the meaning ascribed in Article 8.1.
1.20 DEEPENING means an operation whereby a well is drilled to an objective
Zone below the deepest Zone in which the well was previously drilled, or below
the deepest Zone proposed in the associated AFE, whichever is the deeper.
DEEPEN and other derivatives shall be construed accordingly.
1.21 DEVELOPMENT PLAN means a plan for the development, of Hydrocarbons from
an Exploitation Area covering all or a portion of the Contract Area.
1.22 DEVELOPMENT WELL means any well drilled for the production of
Hydrocarbons pursuant to a Development Plan.
1.23 DISCOVERY means the discovery of an accumulation of Hydrocarbons whose
existence until that moment was unknown.
Check if desired.
[X] OPTIONAL LANGUAGE
; provided Hydrocarbons are recovered at the surface in a flow measurable by
conventional production test methods.
1.24 EFFECTIVE DATE means the date this Agreement comes into effect as
stated in Article II.
1.25 ENTITLEMENT means a quantity of Hydrocarbons of which a Party has the
right and obligation to take delivery pursuant to the Contract or, if
applicable, an offtake agreement, and shall be derived from that Party's
Participating Interest in the Hydrocarbons produced after adjustment for
overlifts and underlifts.
1.26 EXCESS COST OIL shall have the meaning ascribed in Article 19.4.
1.27 EXCLUSIVE OPERATION means those operations and activities carried out
by Operator, pursuant to this Agreement, the costs of which are chargeable to
the account of less than all the Parties. BUT WILL NOT BE DRILLED WITHIN 25 KM
OF EXISTING WELL CAPABLE OF PROD.
1.28 EXCLUSIVE WELL means a well drilled pursuant to an Exclusive Operation.
1.29 EXPLOITATION AREA means that part of the Concession Area which is
established pursuant to the Concession or if the Concession does not establish
an Exploitation Area, then that part of the Concession Area which is delineated
in a Development Plan approved as a Joint Operation or as an Exclusive
Operation.
1.30 EXPLOITATION PERIOD means any and all periods of Exploitation during
which the production and removal of Hydrocarbons is permitted under the
Concession.
1.31 EXPLORATION PERIOD means any and all periods of exploration set out in
the Concession.
1.32 EXPLORATION WELL means any well drilled during the course of
exploration work other than an Appraisal Well or Development Well.
1.33 G & G DATA means only geological, geophysical and geochemical data and
other information that is not obtained through a well bore.
1.34 GOVERNMENT means the government of Federal Government of Nigeria.
1.35 GOVERNMENT OIL COMPANY means Nigeria National Petroleum Corporation.
1.36 GROSS NEGLIGENCE means any act or failure to act (whether sole, joint
or concurrent) by a Party which was intended to cause, or which was in reckless
disregard of or wanton indifference to, harmful consequences such Party knew, or
should have known, such act or failure would have had on the safety or property
of another person or entity, but shall not include any error of judgment or
mistake made by such Party in the exercise in good faith of any function,
authority or discretion conferred on the Party employing such under this
Agreement.
1.37 HYDROCARBONS means all substances including liquid and gaseous
hydrocarbons which are subject to and covered by the Concession.
1.38 IN KIND PREMIUM means the grant of interest in production made pursuant
to Article 7.5(C) by a Non-Consenting Party to reinstate its rights under an
Exclusive Operation.
1.39 JOINT ACCOUNT means the accounts maintained by Operator in accordance
with the provisions of this Agreement and of the Accounting Procedure for Joint
Operations.
1.40 JOINT OPERATIONS means those operations and activities carried out by
Operator pursuant to this Agreement, the costs of which are chargeable to all
Parties.
1.41 JOINT PROPERTY means, at any point in time, all ▇▇▇▇▇, facilities,
equipment, materials, information, funds and the property held for the Joint
Account.
1.42 MINIMUM WORK OBLIGATIONS means those work and/or expenditure
obligations specified in the Contract which must be performed in order to
satisfy the obligations of the Contract.
1.43 NON-CONSENTING PARTY means a Party who elects not to participate in an
Exclusive Operation.
1.44 NON-OPERATOR(S) means the Party or Parties to this Agreement other than
Operator.
1.45 OPERATING COMMITTEE means the committee constituted in accordance with
Article V.
1.46 OPERATOR means a Party to this Agreement designated as such in
accordance with this Agreement.
1.47 PARTICIPATING INTEREST means the undivided percentage interest of each
Party in the rights and obligations derived from the Contract and this
Agreement.
1.48 PARTY means any of the entities named in the first paragraph to this
Agreement and any respective successors or assigns in accordance with the
provisions of this Agreement.
1.49 PETROLEUM COSTS means costs and expenses incurred by the Parties and
allowed to be recovered pursuant to the Contract.
1.50 PLUGGING BACK means a single operation whereby a deeper Zone is
abandoned in order to attempt a Completion in a shallower Zone. PLUG BACK and
other derivatives shall be construed accordingly.
1.51 PROFIT OIL means that portion of the total production of Hydrocarbons,
in excess of Cost Oil, which is allocated to the Parties under the terms of the
Contract.
1.52 RECOMPLETION means an operation whereby a Completion in one Zone is
abandoned in order to attempt a Completion in a different Zone within the
existing wellbore. RECOMPLETE and other derivatives shall be construed
accordingly.
1.53 REWORKING means an operation conducted in the wellbore of a well after
it is Completed to secure, restore, or improve production in a Zone which is
currently open to production in the wellbore. Such operations include, but are
not limited to, well stimulation operations, but exclude any routine repair or
maintenance work, or drilling, Sidetracking, Deepening, Completing,
Recompleting, or Plugging Back of a well. REWORK and other derivatives shall be
construed accordingly.
1.54 SENIOR SUPERVISORY PERSONNEL means any supervisory employee of a Party
who functions as:
Check one Alternative.
[X] ALTERNATIVE NO. 1 - Field Supervisor Tier
Such Party's designated manager or supervisor who is responsible for, or in
charge of onsite drilling, construction or production and related operations, or
any other field operations; or
[ ] ALTERNATIVE NO. 2 - Facility Manager Tier
Such Party's designated manager or supervisor of an onshore or offshore
installation or facility used for operations and activities of such Party, but
excluding all managers or supervisors who are responsible for or in charge of
onsite drilling, construction or production and related operations or any other
field operations; or
[ ] ALTERNATIVE NO. 3 - Resident Manager Tier
Such Party's senior resident manager, who directs all operations and activities
of such Party in the country or region in which he is resident, but excluding
all managers or supervisors who are responsible for or in charge of
installations or facilities, onsite drilling, construction or production and
related operations, or any other field operations.
And, in any of the above alternatives, any employee of such Party who functions
at a management level equivalent to or superior to the tier selected, or an
officer or a director of such Party.
1.55 SIDETRACKING means the directional control and intentional deviation of
a well from vertical so as to change the bottom hole location unless done to
straighten the hole or to drill around junk in the hole or to overcome other
mechanical difficulties. SIDETRACK and other derivatives shall be construed
accordingly.
1.56 TESTING means an operation intended to evaluate the capacity of a Zone
to produce Hydrocarbons. TEST and other derivatives shall be construed
accordingly.
1.57 WORK PROGRAM AND BUDGET means a work program for Joint Operations and
budget therefor as described and approved in accordance with Article VI.
1.58 ZONE means a stratum of earth containing or thought to contain a common
accumulation of Hydrocarbons separately producible from any other common
accumulation of Hydrocarbons.
[NOTE: Definitions contained in this Agreement must be compared and considered
against definitions under the Contract and under applicable laws and regulations
of the host country.]
ARTICLE II
EFFECTIVE DATE AND TERM
2.1 This Agreement shall have effect from the 1st Day of March, 1992 and
shall, subject always to the Parties' continuing obligations under Article XV,
continue in effect until the Contract terminates or, otherwise until all
materials, equipment and personal property used in connection with the Joint
Operations have been removed and disposed of, and final settlement has been made
among the Parties.
For the avoidance of doubt, portions of this Agreement as described in (A), (B)
and (C) below shall remain in effect until:
(A) all ▇▇▇▇▇ have been properly abandoned in accordance with Article X;
and
(B) all obligations, claims, arbitrations and lawsuits have been settled or
otherwise disposed of in accordance with Article 4.5 and Article XVIII; and
(C) the time relating to the protection of confidential information and
proprietary technology has expired in accordance with Article XVI.
ARTICLE III
PARTICIPATING INTEREST
3.1 Participating Interest
(A) The Participating Interests shall mean working interest as defined in
the Joint Venture Agreement of the Parties as of Effective Date are:
OWNER BPO APO
-----------------------------
_____________________________ 15% 42%
Technical Partners 55% 28%
_____________________________ __%
_____________________________ __%
(B) If a Party transfers all or part of its Participating Interest pursuant
to the provisions of this Schedule and the JVA, the Participating Interests
of the Parties shall be revised accordingly.
3.2 Ownership, Obligations and Liabilities
(A) Unless otherwise provided in this Agreement, all the rights, and
interests in and under the Concession, all Joint Property and any
Hydrocarbons produced from the Concession Area shall, subject to the terms
of the Concession, be owned by the Parties in accordance with their
respective Participating Interests.
(B) Unless otherwise provided in this Schedule, the obligations of the
Parties under the Joint Venture Agreement and all liabilities and expenses
incurred by Technical Partner in connection with Joint Operations shall be
charged to the Joint Account and all credits to the Joint Account shall be
shared by the Parties, as among themselves, in accordance with their
respective Participating Interests.
(C) Unless otherwise provided in this Agreement, all liabilities incurred
by any Party in connection with Joint Operations shall be borne by the
Parties in accordance with their respective Participating Interests.
(D) Each Party shall pay when due, in accordance with the Accounting
Procedure, its Participating Interest share of Joint Account expenses,
including cash advances and interest, accrued pursuant to this Agreement.
Check one Alternative if desired.
OPTIONAL PROVISION
3.3 Government Participation
[X] ALTERNATIVE NO. 1
If Government Oil Company elects to participate in the rights and obligations of
Parties pursuant to Article ____ of the Contract, the Parties shall contribute,
in proportion to their respective Participating Interests, to the interest to be
acquired by Government Oil Company and shall execute such documents as may be
necessary to effect such transfer of interests and the joinder of Government Oil
Company as a party to this Agreement. All payments received for the transfer of
such interests shall be credited to the Parties in proportion to their
Participating Interests. UNDER NO CIRCUMSTANCES WILL THE TECHNICAL PARTNERS BE
LESS THAN 24%.
[ ] ALTERNATIVE NO. 2
If Government Oil Company elects to participate in the rights and obligation of
Parties pursuant to Article ____ of the Contract, the Parties shall contribute,
in proportion to their respective Participating Interests, to the interest to be
acquired by Government Oil Company and shall execute such documents as may be
necessary to effect such transfer of interests. The rights and obligations of
the Parties with respect to each other shall remain unchanged; however, they
shall enter into a separate operating agreement with Government Oil Company
with respect to the rights and obligations of Government Oil Company, on the one
hand, and the Parties on the other. All payments received for the transfer of
such interests shall be credited to the Parties in proportion to their
Participating Interests.
ARTICLE IV
PROJECT MANAGER
4.1 Designation of Project Manager
ABACAN INTERNATIONAL is designed as Project Manager, and agrees to act as an
independent concessionor in accordance with the terms and conditions of the
Concession and this Agreement, which terms and conditions shall apply to any
successor Project Manager.
4.2 Rights and Duties of Project Manager
(A) Subject to the terms and conditions of this agreement, Project Manager
shall have all the rights, functions and duties of Project Manager under
the Concession and shall have exclusive charge of and shall conduct all
Joint. Project Managers may employ independent contractors and/or
operations agents in such Joint Operations.
(B) In the conduct of Joint Operations, Project Manager shall:
(1) Perform Joint Operations in accordance with the provisions of the
concession, this Agreement and the instructions of the Project
Management committee;
(2) Conduct all Joint Operations in a diligent, safe and efficient
manner in accordance with good and prudent oil filed practices and
conservation principles generally followed by the international
petroleum industry under similar circumstances;
(3) Subject to Article 4.6, neither gain a profit nor suffer a loss as
a result of being the Project Manager in its conduct of Joint
Operations;
(4) Perform the duties for the Project Management Committee set out in
Article V, and prepare and submit to the Project Management Committee
the proposed Work Programs, budgets and AFE's as provided in
(5) Acquire all permits, consents, approvals, surface or other rights
that may be required for or in connection with the conduct of Joint
Operations;
(6) Permit the representatives of any of the Parties to have at all
reasonable times and at their own risk and expense reasonable access
to the Joint Operations with the right to observe all such Joint
Operations and to inspect all Joint Property and to conduct financial
audits as provided in the Accounting Procedure;
(7) Maintain the Contract in full force and effect. Operator shall
promptly pay and discharge all liabilities and expenses incurred in
connection with Joint Operations and use its reasonable efforts to
keep and maintain the Joint Property free from all liens, charges and
encumbrances arising out of Joint Operations;
(8) Pay to the Government for the Joint Account, within the periods
and in the manner prescribed by the Contract and all applicable laws
and regulations, all periodic payments, royalties, taxes, fees and
other payments pertaining to Joint Operations, but excluding any taxes
measured by the incomes of the Parties;
(9) Carry out the obligations of Operator pursuant to the Contract,
including, but not limited to, preparing and furnishing such reports,
records and information as may be required pursuant to the Contract;
(10) Have in accordance with the decisions of the Operating Committee,
the exclusive right and obligation to represent the Parties in all
dealings with the Government with respect to matters arising under the
Contract and Joint Operations. Operator shall notify the other Parties
as soon as possible of such meetings. Non-Operators shall have the
right to attend such meetings but only in the capacity of observers.
Nothing contained in this Agreement shall restrict any Party from
holding discussions with the Government with respect to any issue
peculiar to its particular business interests arising under this
Agreement, but in such event such Party shall promptly advise the
Parties, if possible, before and in any event promptly after such
discussions, provided that such Party shall not be required to divulge
to the Parties any matters discussed to the extent the same involve
proprietary information on matters not affecting the Parties; and
(11) Take all necessary and proper measures for the protection of
life, health, the environment and property in the case of an
emergency; provided, however, that Operator shall immediately notify
the Parties of the details of such emergency and measures.
Check if desired
OPTIONAL PROVISION: To be included where English law applies.
[ ]
(12) Include, to the extent practical, in its contracts with
independent contractors and to the extent lawful, provisions which:
(a) ensure such contractors can only enforce their contracts
against Operator;
(b) permit Operator, on behalf of itself and Non-Operators, to
enforce contractual indemnities against, and recover loses and
damages suffered by them (insofar as recovered under their
contracts) from such contractors; and
(c) require such contractors to take insurance required by
Article 4.7(F).
4.3 Employees of Operator
Subject to the Contract and this Agreement, Operator shall determine the number
of employees, the selection of such employees, the hours of work and the
compensation to be paid all such employees in connection with Joint Operations.
Operator shall employ only such employees, agents and contractors as are
reasonably necessary to conduct Joint Operations.
4.4 Information Supplied by Operator
(A) Operator shall provide Non-Operators the following data and reports as
they are currently produced or compiled from the Joint Operations:
(1) Copies of all electrical logs or surveys;
(2) Daily drilling progress reports;
(3) Copies of all drill stem tests and care analysis report;
(4) Copies of the plugging reports;
(5) Copies of the final geological and geophysical maps and reports;
(6) Engineering studies, development schedules and annual progress
reports on development projects;
(7) Field and well performance reports, including reservoir studies
and reserve estimates;
(8) Copies of all reports relating to Joint Operations furnished by
Operator to the Government, except magnetic tapes which shall be
stored by Operator and made available for inspection and/or copying at
the sole expense of the Non-Operator requesting same;
(9) Other reports as frequently as is justified by the activities or
as instructed by the Operating Committee; and
(10) Subject to Article 15.3, such additional information for
Non-Operators as they or any of them may request, provided that the
requesting Party or Parties pay the costs of preparation of such
information and that the preparation of such information will not
unduly burden Operator's administrative and technical personnel. Only
Non-Operators who pay such costs shall receive such additional
information.
(B) Operator shall give Non-Operators access at all reasonable times to all
other data acquired in the conduct of Joint Operations. Any Non-Operator
may make copies of such other data at its sole expense.
4.5 Settlement of Claims and Lawsuits
(A) Operator shall promptly notify the Parties of any and all material
claims or suits and such other claims and suits as the Operating Committee
may direct which arise out of Joint Operations or relate in any way to
Joint Operations. Operator shall represent the Parties and defend or oppose
the claim or suit. Operator may in its sole discretion compromise or settle
any such claim or suit or any related series of claims or suits for an
amount not to exceed the equivalent of U.S. ___________________ Dollars
(U.S.$100,000.00), exclusive of legal fees. Operator shall obtain the
approval and direction of the Operating Committee on amounts in excess of
the above stated amount. Each Non-Operator shall have the right to be
represented by its own counsel at its own expense in the settlement,
compromise or defense of such claims or suits.
(B) Any Non-Operator shall promptly notify the other Parties of any claim
made against such Non-Operator by a third party relating to or which may
affect the Joint Operations and insofar as such claim relates to or affects
the Joint Operations such Non-Operator shall defend or settle the same in
accordance with any directions given by the Operating Committee and such
costs, expenses and damages as are payable pursuant to such defense or
settlement shall be for the Joint Account.
(C) Notwithstanding Article 4.5(A) and Article 4.5(B), each Party shall
have the right to participate in any such pursuit, prosecution, defense or
settlement conducted in accordance with Article 4.5(A) and Article 4.5(B)
at its sole cost and expense; provided always that no Party may settle its
Participating Interest share of any claim without first satisfying the
Operating Committee that it can do so without prejudicing the interests of
the Joint Operations.
4.6 Liability of Operator
(A) Except as set out in this Article 4.6, the Party designated as Operator
shall bear no cost, expense or liability resulting from performing the
duties and functions of the Operator. Nothing in this Article shall,
however, be deemed to relieve the Party designated as Operator from any
cost, expense or liability for its Participating Interest share of Joint
Operations.
(B) The Parties shall be liable in proportion to their Participating
Interests and shall defend and indemnify Operator and its consultants,
agents, employees, officers and directors (the "Indemnitees") from any and
all costs, expenses (including reasonable attorneys' fees) and liabilities
incident to claims, demands or causes of action of every kind and character
brought by or on behalf of any person or entity for damage to or loss of
property or the environment, or for injury to, illness or death of any
person or entity, which damage, loss, injury, illness or death arises out
of or is incident to any act or failure to act by Indemnitees in the
conduct of or in connection with Joint Operations regardless of the cause
of such damage, loss, injury, illness or death and EVEN THOUGH CAUSED IN
WHOLE OR IN PART BY A PRE-EXISTING DEFECT, THE NEGLIGENCE (WHETHER SOLE,
JOINT OR CONCURRENT), GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL
FAULT OF OPERATOR (OR ANY SUCH AFFILIATE); provided that if any Senior
Supervisory Personnel of Operator, engage in Gross Negligence that
proximately causes the Parties to incur cost, expense or liability for such
damage, loss, injury, illness or death, then:
Check one Alternative.
[ ] ALTERNATIVE NO. 1 - No Limitation
Operator shall bear all such costs, expenses and liabilities.
[X] ALTERNATIVE NO. 2 - Joint Property Limitation
Operator shall bear only the actual cost, expense and liability to repair,
replace and/or remove Joint Property so damaged or lost, if any.
[ ] ALTERNATIVE NO. 3 - Financial Limitation
Operator shall bear only the first ____________________ (U.S. $ _________) of
such costs, expenses and liabilities.
[ ] ALTERNATIVE NO. 4 - Complete Limitation
Operator shall still bear none of such costs, expenses and liabilities.
(C) Notwithstanding the foregoing under no circumstances shall any
Indemnitee (except as a Party to the extent of its Participating Interest)
bear any cost, expense or liability for environmental, consequential,
punitive or any other similar indirect damages or losses, including but not
limited to those arising from business interruption, reservoir or formation
damage, inability to produce petroleum, loss of profits, pollution control
and environmental amelioration or rehabilitation.
4.7 Insurance Obtained by Operator
(A) Operator shall procure and maintain or cause to be procured and
maintained for the Joint Account all insurance in the types and amounts
required by the Contract and applicable laws, rules and regulations.
(B) Operator shall obtain such further insurance, at competitive rates, as
the Operating Committee may from time to time require.
(C) Any Party may elect not to participate in the insurance to be procured
under Article 4.7(B) provided such Party:
(1) gives prompt written notice to that effect to Operator;
(2) does nothing which may interfere with Operator's negotiations for
such insurance for the other Parties; and
(3) obtains and maintains such insurance (in respect of which an
annual certificate of adequate coverage from a reputable insurance
broker shall be sufficient evidence) or other evidence of financial
responsibility which fully covers its Participating Interest share of
the risks that would be covered by the insurance procured under
Article 4.7 (B), and which the Operating Committee may determine to be
acceptable. No such determination of acceptability shall in any way
absolve a non-participating Party from its obligation to meet each
cash call including any cash call in respect of damages and losses
and/or the costs of remedying the same in accordance with the terms of
this Agreement. If such Party obtains other insurance, such insurance
shall contain a waiver of subrogation in favor of all the other
Parties and the Operator, but only in respect of their interests under
this Agreement.
(D) The cost of insurance in which all the Parties are participating shall
be for the Joint Account and the cost of insurance in which less than all
the Parties are participating shall be charged to the Parties participating
in proportion to their respective Participating Interests.
(E) Operator shall, in respect of all insurance obtained pursuant to this
Article:
(1) promptly inform the participating Parties when such insurance is
obtained and supply them with copies of the relevant policies when the
same are issued;
(2) arrange for the participating Parties, according to their
respective Participating Interests, to be named as co-insureds on the
relevant policies with waivers of subrogation in favor of all the
Parties; and
(3) duly file all claims and take all necessary and proper steps to
collect any proceeds and credit any proceeds to the participating
Parties in proportion to their respective Participating Interests.
(F) Operator shall use its reasonable efforts to require all contractors
performing work in respect of Joint Operations to obtain and maintain any
and all insurance in the types and amounts required by any applicable laws,
rules and regulations or any decision of the Operating Committee and shall
use its reasonable efforts to require all such contractors to name the
Parties as additional insureds on contractor's insurance policies or to
obtain from their insurers waivers of all rights or recourse against
Operator and Non-Operators.
4.8 Commingling of Funds
Check one Alternative.
[X] ALTERNATIVE NO. 1
Operator may commingle with its own funds the monies which it receives from or
for the Joint Account pursuant to this Agreement. Notwithstanding that monies
of a Non-Operator have been commingled with Operator's funds, the Operator shall
account to the Non-Operators for the monies of a Non-Operator advanced or paid
to Operator, whether for the conduct of Joint Operations or as proceeds from the
sale of production under this Agreement. Such monies shall be applied only to
their intended use and shall in no way be deemed to be funds belonging to
Operator.
Check if desired, in relation to Alternative No. 1.
OPTIONAL PROVISION
[ ] Notwithstanding Article 4.8, the Operating Committee shall have the
right to require Operator to segregate from its own funds the monies which it
receives from or for the Joint Account pursuant to this Agreement.
Check if desired, in relation to Alternative No. 1.
OPTIONAL PROVISION
[ ] Notwithstanding Article 4.8, the Operating Committee shall have the
right to require Operator to segregate from its own funds the monies which
Operator receives from the Parties in connection with operations on each
Exploitation Area.
[ ] ALTERNATIVE NO.2
Operator may not commingle with its own funds the monies which it receives from
or for the Joint Account pursuant to this Agreement.
4.9 Resignation of Operator
Subject to Article 4.11, Operator may resign as Operator at any time by so
notifying the other Parties at least one hundred and twenty (120) Days prior to
the effective date of such resignation.
4.10 Removal of Operator
(A) Subject to Article 4.11, Operator shall be removed upon receipt of
notice from any Non-Operator if:
(1) An order is made by a court or an effective resolution is passed
for the dissolution, liquidation, winding up, or reorganization of
Operator;
(2) Operator dissolves, liquidates or terminates its corporate
existence;
(3) Operator becomes insolvent, bankrupt or makes an assignment for
the benefit of creditors; or
(4) A receiver is appointed for a substantial part of Operator's
assets.
(B) Subject to Article 4.11, Operator may be removed by the decision of the
Non-Operators if Operator has committed a material breach of this Agreement
which Operator has failed to commence to rectify within thirty (30) Days of
receipt of a notice from Non-Operators detailing the alleged breach. Any
decision of Non-Operators to give notice of breach to Operator or to remove
Operator under this Article 4.10(B) shall be made by an affirmative vote of
_______ (2) or more of the total number of Non-Operators holding a combined
Participating Interest of at least _____________ percent (65%).
Check if desired.
OPTIONAL PROVISION
[ ] (C) If Operator together with any Affiliate of Operator is or becomes the
holder of a Participating Interest of less than ___________________ percent
(____%), then Operator shall be required to promptly notify the other
Parties. The Operating Committee shall then vote within __________ (___)
Days of such notification on whether or not a successor Operator should be
named pursuant to Article 4.11.
Check if desired.
OPTIONAL PROVISION
[X] (D) If there is a direct or indirect change in control of Operator (other
than a transfer of control to an Affiliate of Operator), Operator shall be
required to promptly notify the other Parties. The Operating Committee
shall vote within THIRTY ( 30) Days of such notification on whether or not
a successor Operator should be named pursuant to Article 4.11. For purposes
of this Article, control means the ownership directly or indirectly of: 65%
Check the applicable Alternative.
[ ] ALTERNATIVE NO. 1
more than fifty percent (50%)
[ ] ALTERNATIVE NO. 2
fifty percent (50%) or more
of the shares or voting rights of Operator.
Check if desired.
OPTIONAL PROVISION
[ ] (E) Subject to Article 4.11, Operator may be removed at any time without
cause by the affirmative vote of _______________ (____) or more of the
total number of Non-Operators holding a combined Participating Interest of
at least _____________ percent (___%).
4.11 Appointment of Successor
When a change of Operator occurs pursuant to Article 4.9 or Article 4.10:
(A) The Operating Committee shall meet as soon as possible to appoint a
successor Operator pursuant to the voting procedure of Article 5.9.
However, no Party may be appointed successor Operator against its will.
(B) If the Operator disputes commission of or failure to rectify a material
breach alleged pursuant to Article 4.10(B) and proceedings are initiated
pursuant to Article XVIII, no successor Operator may be appointed pending
the conclusion or abandonment of such proceedings.
(C) If an Operator is removed, other than in the case of Article 4.10(C) or
Article 4.10(D), neither Operator nor any Affiliate of Operator shall have
the right to vote for itself on the appointment of a successor Operator,
nor be considered as a candidate for the successor Operator.
(D) A resigning or removed Operator shall be compensated out of the Joint
Account for its reasonable expenses directly related to its resignation or
removal, except in the case of Article 4.10(B).
(E) The Operating Committee shall arrange for the taking of an independent
inventory of all Joint Property and Hydrocarbons, and an audit of the books
and records of the removed Operator. Such inventory and audit shall be
completed, if possible, no later than the effective date of the change of
Operator. The liabilities and expenses of such inventory and audit shall be
charged to the Joint Account.
(F) The resignation or removal of Operator and its replacement by the
successor Operator shall not become effective prior to receipt of any
necessary governmental approvals.
(G) Upon the effective date of the resignation or removal, the successor
Operator shall succeed to all duties, rights and authority prescribed for
Operator. The former Operator shall transfer to the successor Operator
custody of all Joint Property, books of account, records and other
documents maintained by Operator pertaining to the Contract Area and to
Joint Operations. Upon delivery of the above described property and data,
the former Operator shall be released and discharged from all obligations
and liabilities as Operator accruing after such date.
ARTICLE V
OPERATING COMMITTEE
5.1 Establishment of Operating Committee
To provide for the overall supervision and direction of Joint Operations, there
is established an Operating Committee composed of representatives of each Party
holding a Participating Interest. Each Party shall appoint one (1)
representative and one (1) alternate representative to serve on the Operating
Committee. Each Party shall as soon as possible after the date of this
Agreement give notice in writing to the other Parties of the name and address of
its representative and alternate representative to serve an the Operating
Committee. Each Party shall have the right to change its representative and
alternate at any time by giving proper notice to such effect to the other
Parties.
5.2 Powers and Duties of Operating Committee
The Operating Committee shall have power and duty to authorize and supervise
Joint Operations that are necessary or desirable to fulfill the Contract and
properly explore and exploit the Contract Area in accordance with this Agreement
and in a manner appropriate in the circumstances.
5.3 Authority to Vote
The representative of a Party, or in his absence his alternate representative,
shall be authorized to represent and bind such Party with respect to any matter
which is within the powers of the Operating Committee and is properly brought
before the Operating Committee. Each such representative shall have a vote
equal to the Participating Interest of the Party such person represents. Each
alternate representative shall be entitled to attend all Operating Committee
meetings but shall have no vote at such meetings except in the absence of the
representative for whom he is the alternate. In addition to the representative
and alternate representative, each Party may also bring to any Operating
Committee meetings such technical and other advisors as it may deem appropriate.
5.4 Subcommittees
The Operating Committee may establish such subcommittees, including technical
subcommittees, as the Operating Committee may deem appropriate. The functions
of such subcommittees shall be in an advisory capacity or as otherwise
determined unanimously by the Parties.
5.5 Notice of Meeting
(A) Operator may call a meeting of the Operating Committee by giving notice
to the Parties at least fifteen (15) Days in advance of such meeting.
(B) Any Non-Operator may request a meeting of the Operating Committee by
giving proper notice to all the other Parties. Upon receiving such request,
Operator shall call such meeting for a date not less than fifteen (15) Days
nor more than twenty (20) Days after receipt of the request.
(C) The notice periods above may only be waived with the unanimous consent
of all the Parties.
5.6 Contents of Meeting Notice
(A) Each notice of a meeting of the Operating Committee as provided by
Operator shall contain:
(1) The date, time and location of the meeting; and
(2) An agenda of the matters and proposals to be considered and/or
voted upon.
(B) A Party, by notice to the other Parties given not less than seven (7)
Days prior to a meeting, may add additional matters to the agenda for a
meeting.
(C) On the request of a Party, and with the unanimous consent of all
Parties, the Operating Committee may consider at a meeting a proposal not
contained in such meeting agenda.
5.7 Location of Meetings
All meetings of the Operating Committee shall be held in LONDON , ______________
or elsewhere as may be decided by the Operating Committee.
5.8 Operator's Duties for Meetings
(A) With respect to meetings of the Operating Committee and any
Subcommittee, Operator's duties shall include, but not be limited to:
(1) Timely preparation and distribution of the agenda;
(2) Organization and conduct of the meeting; and
(3) Preparation of a written record or minutes of each meeting.
(B) Operator shall have the right to appoint the chairman of the Operating
Committee and chairman of all subcommittees.
5.9 Voting Procedure
Except as otherwise expressly provided in this Agreement, all decisions,
approvals and other actions of the Operating Committee on all proposals coming
before it under this Agreement shall be decided by the affirmative vote of
__________ (2) or more Parties, which are not Affiliates, then having
collectively at least ___________ percent (65%) of the Participating Interests.
5.10 Record of Votes
The chairman of the Operating Committee shall appoint a secretary who shall make
a record of each proposal voted on and the results of such voting at each
Operating Committee meeting. Each representative shall sign and be provided a
copy of such record at the end of such meeting and it shall be considered the
final record of the decisions of the Operating Committee.
5.11 Minutes
The secretary shall provide each Party with a copy of the minutes of the
Operating Committee meeting within fifteen (15) Days after the end of the
meeting. Each Party shall have fifteen (15) Days after receipt of such minutes
to give notice of its objections to the minutes to the secretary. A failure to
give notice specifying objection to such minutes within said fifteen (15) Day
period shall be deemed to be approval of such minutes. In any event, the votes
recorded under Article 5.10 shall take precedence over the minutes described
above.
5.12 Voting by Notice
(A) In lieu of a meeting, Operator may submit any proposal for a decision
of the Operating Committee by giving each representative proper notice
describing the proposal so submitted. Each Party shall communicate its vote
by proper notice to Operator and the other Parties within one of the
following appropriate time periods after receipt of Operator's notice:
(1) ____________ (24) hours in the case of operations which involve
the use of a drilling or completion rig that is standing by in the
Contract Area.
(2) ____________ (7) Days in the case of all other proposals.
Check if AFEs require approval.
OPTIONAL PROVISION
[ ] (3) ____________ (20) Days in the case of an AFE or supplemental AFE
if submitted for approval pursuant to Article 6.6(A).
(B) Except in the case of Article 5.12(A)(1), any Non-Operator may by
notice delivered to all Parties within _____________ ( 7 ) Days of receipt
of Operator's notice request that the proposal be decided at a meeting
rather than by notice. In such an event, that proposal shall be decided at
a meeting duly called for that purpose.
(C) Except as provided in Article X, any Party failing to communicate its
vote in a timely manner shall be deemed to have voted FOR such proposal.
(D) If a meeting is not requested, then at the expiration of the
appropriate time period, Operator shall give each Party a confirmation
notice stating the tabulation and results of the vote.
5.13 Effect of Vote
All decisions taken by the Operating Committee pursuant to this Article, shall
be conclusive and binding on all the Parties, except that:
(A) If pursuant to this Article, a Joint Operation, other than an operation
to fulfill the Minimum Work Obligations, has been properly proposed to the
Operating Committee and the Operating Committee has not approved such
proposal in a timely manner, then any Party shall have the right for the
appropriate period specified below to propose in accordance with Article
VII, an Exclusive Operation involving operations essentially the same as
those proposed for such Joint Operation.
(1) For proposals involving the use of a drilling rig that is standing
by in the Contract Area, such right shall be exercisable for
twenty-four (24) hours after the time specified in Article 5.12(A)(1)
has expired.
(2) For proposals to develop a Discovery, such right shall be
exercisable for ten (10) Days after the date the Operating Committee
was required to consider such proposal pursuant to Article 5.6 or
Article 5.12.
(3) For all other proposals, such right shall be exercisable for five
(5) Days after the date the Operating Committee was required to
consider such proposal pursuant to Article 5.6 or Article 5.12.
(B) If a Party voted against any proposal which was approved by the
Operating Committee and which could be conducted as an Exclusive Operation
pursuant to Article VII other than any proposal relating to Minimum Work
Obligations, then such Party shall have the right not to participate in the
operation contemplated by such approval. Any such Party wishing to exercise
its right of non-consent must give notice of non-consent to all other
Parties within five (5) Days (or within twenty-four (24) hours if the
drilling rig to be used in such operation is standing by in the Contract
Area) following Operating Committee approval of such proposal. The Parties
that were not entitled to give or did not give notice of non-consent shall
be Consenting Parties as to the operation contemplated by the Operating
Committee approval, and shall conduct such operation as an Exclusive
Operation under Article VII. Any Party that gave notice of non-consent
shall be a Non-Consenting Party as to such Exclusive Operation.
(C) If the Consenting Parties to an Exclusive Operation under Article
5.13(A) or Article 5.13(B) concur, then the Operating Committee may, at any
time, pursuant to this Article, reconsider and approve, decide or take
action on any proposal that the Operating Committee declined to approve
earlier, or modify or revoke an earlier approval, decision or action.
ARTICLE VI
WORK PROGRAMS AND BUDGETS
6.1 Exploration and Appraisal
(A) Within ____________ (90) Days after the date of execution of this
Agreement, Operator shall deliver to the Parties a proposed Work Program
and Budget detailing the Joint Operations to be performed in the Contract
Area for the remainder of the current Calendar Year and, if appropriate,
for the following Calendar Year. Within _____________ (45) Days of such
delivery, the Operating Committee shall meet to consider and to endeavor to
agree on a Work Program and Budget.
(B) On or before the 1st of OCTOBER of each Calendar Year, Operator shall
deliver to the Parties a proposed Work Program and Budget detailing the
Joint Operations to be performed in the Contract Area for the following
Calendar Year. Within forty-five (45) Days of such delivery, the Operating
Committee shall meet to consider and to endeavor to agree on a Work Program
and Budget.
(C) If a Discovery is made, Operator shall deliver any notice of Discovery
required under the Contract and shall as soon as possible submit to the
Parties a report containing available details concerning the Discovery and
Operator's recommendation as to whether the Discovery merits appraisal. If
the Operating Committee determines that the Discovery merits appraisal,
Operator within __________ (20) Days, shall deliver to the Parties a
proposed Work Program and Budget for the appraisal of the Discovery. Within
__________ (10) Days of such delivery, or earlier if necessary to meet any
applicable deadline under the Contract, the Operating Committee shall meet
to consider, modify and then either approve or reject the appraisal Work
Program and Budget. If the appraisal Work Program and Budget is approved by
the Operating Committee, Operator shall take such steps as may be required
under the Contract to secure approval of the appraisal Work Program and
Budget by the Government and Government Oil Company. In the event the
Government or the Government Oil Company requires changes in the appraisa1
Work Program and Budget, the matter shall be resubmitted to the Operating
Committee for further consideration.
(D) The Work Program and Budget agreed pursuant to this Article shall
include the Minimum Work Obligations, or at least that part of such Minimum
Work Obligations required to be carried out during the Calendar Year in
question under the terms of the Contract. If within the time periods
prescribed in this Article the Operating Committee is unable to agree on
such Work Program and Budget, Operator shall take such actions, but only
such actions for the Joint Account as are necessary to maintain the
Contract in full force and effect, including the commencement of a Work
Program and Budget to fulfill the Minimum Work Obligations required for the
given Calendar Year.
(E) Subject to Article 6.7, approval of any such Work Program and Budget,
which includes:
(1) an Exploration Well, whether by drilling, Deepening or
Sidetracking, shall include approval for:
Check one Alternative.
[ ] ALTERNATIVE NO. 1 - No Casing Point Election
All expenditures necessary for drilling, Testing and Completing such Exploration
Well.
[X] ▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇ - ▇▇▇▇▇▇ ▇▇▇▇▇ Election - (This alternative shall not
apply where Minimum Work Obligations require Testing and Completing of a well.)
Only expenditures necessary for drilling and open-hole Testing of such well.
When an Exploration Well has reached its authorized depth, all logs, cores and
other approved tests have been conducted and the results furnished to the
Parties, Operator shall submit to the Parties in accordance with Article
5.12(A)(1) an election to participate in an attempt to Complete such well.
Operator shall include in such submission Operator's recommendation on such
Completion attempt and on AFE for such Completion Costs.
(2) an Appraisal Well, whether by drilling, Deepening or Sidetracking,
shall include approval for:
Check one Alternative.
[ ] ALTERNATIVE NO. 1 - No Casing Point Election
All expenditures necessary for drilling, Testing and Completing such Appraisal
Well.
[X] ▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇ - ▇▇▇▇▇▇ ▇▇▇▇▇ Election - (This alternative shall not
apply where Minimum Work Obligations require Testing and Completing of a well.)
Only expenditures necessary for drilling, Sidetracking and open-hole Testing of
such well. When an Appraisal Well has reached its authorized depth, all logs,
cores and other approved tests have been conducted and the results furnished to
the Parties, Operator shall submit to the Parties in accordance with Article
5.12(A)(1) an election to participate in an attempt to Complete such well.
Operator shall include in such submission Operator's recommendation an such
Completion attempt and on AFE for such Completion Costs.
(F) Any Party desiring to propose a Completion attempt, or an alternative
Completion attempt, must do so within the time period provided in Article
5.12(A)(1) by notifying all other Parties. Any such proposal shall include
an AFE for such Completion Costs.
6.2 Development
(A) If the Operating Committee determines that a Discovery may be
commercial, the Operator shall, as soon as practicable, deliver to the
Parties a Development Plan together with the first annual Work Program and
Budget and provisional Work Programs and Budgets for the remainder of the
development of the Discovery, which shall contain, inter alia:
(1) Details of the proposed work to be undertaken, personnel required
and expenditures to be incurred, including the timing of same, on a
Calendar Year basis;
(2) An estimated date for the commencement of production;
(3) A delineation of the proposed Exploitation Area; and
(4) Any other information requested by the Operating Committee.
(B) After receipt of the Development Plan, or earlier if necessary to meet
any applicable deadline under the Contract, the Operating Committee shall
meet to consider, modify and then either approve or reject the Development
Plan and the first annual Work Program and Budget for the development
submitted by Operator. If the Development Plan is approved by the Operating
Committee, Operator shall, as soon as possible, deliver any notice of
Commercial Discovery required under the Contract and take such other steps
as may be required under the Contract to secure approval of the Development
Plan by the Government and Government Oil Company. In the event the
Government or Government Oil Company requires changes in the Development
Plan, the matter shall be resubmitted to the Operating Committee for
further consideration.
(C) If the Development Plan is approved, such work shall be incorporated
into and form part of annual Work Programs and Budgets, and Operator shall
on or before DEC. 1st of each Calendar Year submit a Work Program and
Budget for the Exploitation Area, for the following Calendar Year. Within
forty-five (45) Days after such submittal, the Operating Committee shall
endeavor to agree to such Work Program and Budget, including any necessary
or appropriate revisions to the Work Program and Budget for the approved
Development Plan.
6.3 Production
On or before the 1st day of DECEMBER each Calendar Year, Operator shall deliver
to the Parties a proposed production Work Program and Budget detailing the Joint
Operations to be performed in the Exploitation Area and the projected production
schedule for the following Calendar Year. Within forty-five (45) Days of such
delivery, the Operating Committee shall agree upon a production Work Program and
Budget.
6.4 Itemization of Expenditures
(A) During the preparation of the proposed Work Programs and Budgets and
Development Plans contemplated in this Article, Operator shall consult with
the Operating Committee regarding the contents of such Work Programs and
Budgets and Development Plans.
(B) Each Work Program and Budget and Development Plan submitted by Operator
shall contain an itemized estimate of the costs of Joint Operations and all
other expenditures to be made for the Joint Account during the Calendar
Year in question.
(C) The Work Program and Budget shall designate the portion or portions of
the Contract Area in which Joint Operations itemized in such Work Program
and Budget are to be conducted and shall specify the kind and extent of
such operations in such detail as the Operating Committee may deem
suitable.
6.5 Contract Awards
Operator shall award each contract for approved Joint Operations on the
following basis (the amounts stated are in thousands of U.S. Dollars):
PROCEDURE A PROCEDURE B PROCEDURE C
------------ ------------ -----------
Exploration and Appraisal Operations $ 0 to $ $ _____ to $ >$
------------------------------------ ------------ ------------ -----------
Development Operations $ 0 to $ $ _____ to $ >$
------------ ------------ -----------
Production Operations $ 0 to $ $ _____ to $ >$
------------------------------------ ------------ ------------ -----------
Procedure
(A) Intentionally deleted.
Procedure
(B) Operator shall:
(1) Provide the Parties with a list of the entities whom Operator
proposes to invite to tender for the said contract;
(2) Add to such list any entity whom a Party requests to be added
within fourteen (14) Days of receipt of such list;
(3) Complete the tendering process within a reasonable period of time;
(4) Inform the Parties of the entities to whom the contract has been
awarded, provided that before awarding contracts to Affiliates of the
Operator which exceed U.S. Dollars ________________ (U.S. $
100,000.00), Operator shall obtain the approval of the Operating
Committee;
(5) Circulate to the Parties a competitive bid analysis stating the
reasons for the choice made; and
(6) Upon the request of a Party, provide such Party with a copy of the
final version of the contract awarded.
Procedure
(C) Operator shall:
(1) Provide the Parties with a list of the entities whom Operator
proposes to invite to tender for the said contract;
(2) Add to such list any entity whom a Party requests to be added
within fourteen (14) Days of receipt of such list;
(3) Prepare and dispatch the tender documents to the entities on the
list as aforesaid and to Non-Operators;
(4) After the expiration of the period allowed for tendering, consider
and analyze the details of all bids received;
(5) Prepare and circulate to the Parties a competitive bid analysis,
stating Operator's recommendation as to the entity to whom the
contract should be awarded, the reasons therefore, and the technical,
commercial and contractual terms to be agreed upon;
(6) Obtain the approval of the Operating Committee to the recommended
bid; and
(7) Upon the request of a Party, provide such Party with a copy of the
final version of the contract.
6.6 Authorization for Expenditure ("AFE") Procedure
(A) Prior to incurring any commitment or expenditure, which is estimated to
be:
(1) In excess of U.S. Dollars ______________ (U.S. $100,000.00) in an
exploration or appraisal Work Program and Budget;
(2) In excess of U.S. Dollars _______________ (U.S. $100,000.00) in a
development Work Program and Budget.; and
(3) In excess of U.S. Dollars _______________ (U.S. $100,000.00) in a
production Work Program and Budget.
Operator shall send to each Non-Operator an AFE containing Operator's best
estimate of the total funds required to carry out such work; the estimated
timing of expenditures, and any other necessary supportive information.
Notwithstanding the above, the Operator shall not be obliged to furnish an AFE
to the Parties before incurring any commitment or expenditures in connection
with the workover of the well or ▇▇▇▇▇ where such workover is pursuant to an
approved production Work Program and Budget.
Check one Alternative.
[ ] ALTERNATIVE NO. 1
(B) All AFE's shall be for informational purposes only and, provided
the work and the funds to be expended therefor are authorized in the
current Work Program and Budget, Operator shall not be required to
obtain approval for such AFE prior to commencement of work.
[X] ALTERNATIVE NO. 2
b. Prior to expending any monies or incurring any commitments for
work, Operator shall obtain the approval of the Operating
Committee to such AFE.
Check if desired.
OPTIONAL PROVISION
[ ] Any Party voting to disapprove an AFE issued in furtherance of an
approved Work Program and Budget shall demonstrate that such disapproval is duly
justified and shall state the reasons for such disapproval.
(C) The restrictions contained in this Article shall be without prejudice
to Operator's rights to make expenditures as set out in Article 4.2(B)(11)
and Article 13.5.
6.7 Overexpenditures of Work Programs and Budgets
(A) For expenditures on any line item of an approved Work Program and
Budget, Operator shall be entitled to incur without furnishing a
supplemental AFE an overexpenditure for such line item up to ten percent
(10%) of the authorized amount for such line item; provided that cumulative
total of all overexpenditures for a Calendar Year shall not exceed five
percent (5%) of the total Work Program and Budget in question.
(B) At such time that Operator is certain that the limits of Article 6.7(A)
will be exceeded, Operator shall furnish a supplemental AFE for the
estimated overexpenditures to the Operating Committee for its approval and
shall provide the Parties with full details of such overexpenditures.
Operator shall promptly give notice of the amounts of overexpenditures when
actually incurred.
ARTICLE VII
OPERATIONS BY LESS THAN ALL PARTIES
7.1 Limitation on Applicability
(A) No operations may be conducted in furtherance of the Contract except as
Joint Operations under Article V, or as Exclusive Operations under this
Article. No Exclusive Operation shall be conducted which conflicts with a
Joint Operation.
(B) Operations which are required to fulfill the Minimum Work Obligations
must be proposed and conducted as Joint Operations under Article V, and may
not be proposed or conducted as Exclusive Operations under this Article.
Check if desired.
OPTIONAL PROVISION
[X] Except for Exclusive Operations relating to Deepening, Testing,
Completing, Sidetracking, Plugging Back, Recompletions or Reworking of a well
drilled to fulfill the Minimum Work Obligations, no Exclusive Operations may be
proposed or conducted until the Minimum Work Obligations for the then current
Contract period are fulfilled.
(C) No Party may propose or conduct an Exclusive Operation under this
Article, unless and until such Party has properly exercised its right to
propose an Exclusive Operation pursuant to Article 5.13, or is entitled to
conduct an Exclusive Operation pursuant to Article X.
(D) Subject to this Article, any operation that may be proposed and
conducted as a Joint Operation, other than operations pursuant to an
approved Development Plan, may be proposed and conducted as an Exclusive
Operation.
7.2 Procedure to Propose Exclusive Operations
(A) Subject to Article 7.1, if any Party proposes to conduct an Exclusive
Operation, such Party shall give notice of the proposed operation to all
Parties, other than Parties who have relinquished their Participating
Interest in the Exploitation Area in which the proposed operation is to be
conducted. Such notice shall specify that such operation is proposed as an
Exclusive Operation, the work to be performed, the location, the
objectives, and estimated cost of such operation.
(B) Any Party entitled to receive such notice shall have the right to
participate in the proposed operation.
(1) For proposals to Deepen, Test, Complete, Sidetrack, Plug Back,
Recomplete or Rework involving the use of a drilling rig that is
standing by in the Contract Area, any such Party wishing to exercise
such right must so notify Operator within twenty-four (24) hours after
receipt of the notice proposing the Exclusive Operation.
(2) For proposals to develop a Discovery, any Party wishing to
exercise such right must so notify the Party proposing to develop
within twenty (20) Days after receipt of the notice proposing the
Exclusive Operation.
(3) For all other proposals, any such Party wishing to exercise such
right must so notify Operator within ten (10) Days after receipt of
the notice proposing the Exclusive Operation;
(C) Failure of a Party to whom a proposal notice is delivered to properly
reply within the period specified above shall constitute an election by
that Party not to participate in the proposed operation.
(D) If all Parties properly exercise their rights to participate, then the
proposed operation shall be conducted as a Joint Operation. The Operator
shall commence such Joint Operation as promptly as practicable and conduct
it with due diligence.
(E) If less than all Parties entitled to receive such proposal notice
properly exercise their rights to participate, then:
Check one Alternative.
[X] ALTERNATIVE NO. 1
(1) The Party proposing the Exclusive Operation, together with any
other Consenting Parties, shall have the right exercisable for the
applicable notice period set out in Article 7.2(B), to instruct
Operator (subject to Article 7.9(G)) to conduct the Exclusive
Operation.
(2) If the Exclusive Operation is conducted, the Consenting Parties
shall bear the sole liability and expense of such Exclusive Operation
in a fraction, the numerator of which is such Consenting Party's
Participating Interest as stated in Article 3.1(A) and the denominator
of which is the aggregate of the Participating Interests of the
Consenting Parties as stated in Article 3.1(A), or in such other
proportion totaling one hundred percent (100%) of such liability and
expense as the Consenting Parties may agree.
(3) If such Exclusive Operation has not been commenced within
______________ (180) Days (excluding any extension specifically agreed
by all Parties or allowed by the force majeure provisions of Article
XVI), the right to conduct such Exclusive Operation shall terminate.
If any Party still desires to conduct such Exclusive Operation,
written notice proposing such operation must be resubmitted to the
Parties in accordance with Article V, as if no proposal to conduct an
Exclusive Operation had been previously made.
[ ] ALTERNATIVE NO. 2
(1) Immediately after the expiration of the applicable notice period
set out in Article 7.2(B), the Operator shall notify all Parties of
the names of the Consenting Parties and the recommendation of the
proposing Party as to whether the Consenting Parties should proceed
with the Exclusive Operation.
(2) Concurrently, Operator shall request the Consenting Parties to
specify the Participating Interest each Consenting Party is willing to
bear in the Exclusive Operation.
(3) Within twenty-four (24) hours after receipt of such notice, each
Consenting Party shall respond to the Operator stating that it is
willing to bear a Participating Interest in such Exclusive Operation
equal to:
(a) Only its Participating Interest as stated in Article 3.1(A);
(b) A fraction, the numerator of which is such Consenting Party's
Participating Interest as stated in Article 3.1(A) and the
denominator of which is the aggregate of the Participating
Interests of the Consenting Parties as stated in Article 3.1(A);
or
(c) The total of its Participating Interest as contemplated by
Article 7.2(E)(3)(b) plus all or any part of the difference
between one hundred percent (100%) and the total of the
Participating Interests subscribed by the other Consenting
Parties.
(4) Any Consenting Party failing to advise Operator within the
response period set out above shall be deemed to have elected to bear
the Participating Interest set out in Article 7.2(E)(3)(b) as to the
Exclusive Operation.
(5) If, within the response period set out above, the Consenting
Parties subscribe less than one hundred percent (100%) of the
Participating Interest in the Exclusive Operation, the Party proposing
such Exclusive Operation shall be deemed to have withdrawn its
proposal for the Exclusive Operation, unless within twenty-four (24)
hours of the expiry of the response period set out in Article
7.2(E)(3), the proposing Party notifies the other Consenting Parties
that the proposing Party shall bear the unsubscribed Participating
Interest.
(6) If one hundred percent (100%) subscription to the proposed
Exclusive Operation is obtained, Operator shall promptly notify the
Consenting Parties of their Participating Interests in the Exclusive
Operation.
(7) As soon as any Exclusive Operation is fully subscribed pursuant to
Article 7.2(E)(6) Operator (subject to Article 7.9(G)), shall commence
such Exclusive Operation as promptly as practicable and conduct it
with due diligence in accordance with this Agreement.
(8) If such Exclusive Operation has not been commenced within
____________ (180) Days (excluding any extension specifically agreed
by all Parties or allowed by the force majeure provisions of Article
XVI), the right to conduct such Exclusive Operation shall terminate.
If any Party still desires to conduct such Exclusive Operation,
written notice proposing such operation must be resubmitted to the
Parties in accordance with Article V, as if no proposal to conduct an
Exclusive Operation had been previously made.
7.3 Responsibility for Exclusive Operations
(A) The Consenting Parties shall bear in accordance with the Participating
Interests agreed under Article 7.2(E) the entire cost and liability of
conducting an Exclusive Operation and shall indemnify the Non-Consenting
Parties from any and all costs and liabilities incurred incident to such
Exclusive Operation (included but not limited to all costs, expenses or
liabilities for environmental, consequential, punitive or any other similar
indirect damages or losses arising from business interruption, reservoir or
formation damage, inability to produce petroleum, loss of profits,
pollution control and environmental amelioration or rehabilitation) and
shall keep the Contract Area free and clear of all liens and encumbrances
of every kind created by or arising from such Exclusive Operation.
(B) Notwithstanding Article 7.3(A), each Party shall continue to bear its
Participating Interest share of the cost and liability incident to the
operations in which it participated, including but not limited to plugging
and abandoning and restoring the surface location, but only to the extent
those costs were not increased by the Exclusive Operation.
7.4 Consequences of Exclusive Operations
(A) With regard to any Exclusive Operation, for so long as a Non-Consenting
Party has the option to re-instate the rights it relinquished under Article
7.4(B) below, such Non-Consenting Party shall be entitled to have access
concurrently with the Consenting Parties, to all data and other information
relating to such Exclusive Operation, other than G & G Data obtained in an
Exclusive Operation. If a Non-Consenting Party desires to receive and
acquire the right to use such G & G Data, then such Non-Consenting Party
shall have the right to do so by paying to the Consenting Parties its
Participating Interest share as set out in Article 3.1(A) of the cost
incurred in obtaining such G & G Data.
(B) With regard to any Exclusive Operation and subject to Article 7.4(C)
(and Article 7.8, if selected) below, each Non-Consenting Party shall be
deemed to have relinquished to the Consenting Parties, and the Consenting
Parties shall be deemed to own, in proportion to their respective
Participating Interests in the Exclusive Operation:
(1) All of each such Non-Consenting Party's right to participate in
further operations on any Discovery made in the course of such
Exclusive Operation; and
(2) All of each such Non-Consenting Party's right pursuant to the
Contract to take and dispose of Hydrocarbons produced and saved:
(a) From the well in which such Exclusive Operation was
conducted, and
(b) From any ▇▇▇▇▇ drilled to appraise or develop a Discovery.
(C) A Non-Consenting Party shall have the following and only the following
options to reinstate the rights it relinquished pursuant to Article 7.4(B):
(1) If the Consenting Parties decide to appraise a Discovery made in
the course of an Exclusive Operation, the Consenting Parties shall
submit to each Non-Consenting Party the approved appraisal program.
For thirty (30) Days (or forty-eight (48) hours if the drilling rig
which is to be used in such appraisal program is standing by in the
Contract Area) from receipt of such appraisal program, each
Non-Consenting Party shall have the option to reinstate the rights it
relinquished pursuant to Article 7.4(B) and to participate in such
appraisal program. The Non-Consenting Party may exercise such option
by notifying Operator within the period specified above that such
Non-Consenting Party agrees to bear its Participating Interest share
of the expense and liability of such appraisal program, to pay the
lump sum amount as set out in Article 7.5(A) and to pay:
Check one Alternative.
[ ] ALTERNATIVE NO. 1
The Cash Premium as set out in Article 7.5(B);
[ ] ALTERNATIVE NO. 2
The In Kind Premium as set out in Article 7.5(C);
[ ] ALTERNATIVE NO. 3
At the choice of the Non-Consenting Party exercising such option, either the
Cash Premium as set out in Article 7.5(B) or the In Kind Premium as set out in
Article 7.5(C).
(2) If the Consenting Parties decide to develop a Discovery made or
appraised in the course of an Exclusive Operation, the Consenting
Parties shall submit to the Non-Consenting Parties a Development Plan
substantially in the form intended to be submitted to the Government
under the Contract. For sixty (60) Days from receipt of such
Development Plan or such lesser period of time prescribed by the
Contract, each Non-Consenting Party shall have the option to reinstate
the rights it relinquished pursuant to Article 7.4(B) and to
participate in such Development Plan. The Non-Consenting Party may
exercise such option by notifying the Party proposing to act as
Operator for such Development Plan within the period specified above
that such Non-Consenting Party agrees to bear its Participating
Interest share of the liability and expense of such Development Plan
and such future operating and producing costs, to pay the lump sum
amount as set out in Article 7.5(A) and to pay:
Check one Alternative.
[ ] ALTERNATIVE NO. 1
The Cash Premium as set out in Article 7.5(B);
[ ] ALTERNATIVE NO. 2
The In Kind Premium as set out in Article 7.5(C);
[ ] ALTERNATIVE NO. 3
At the choice of the Non-Consenting Party exercising such option, either the
Cash Premium as set out in Article 7.5(B) or the In Kind Premium as set out in
Article 7.5(C).
(3) If the Consenting Parties decide to Deepen, Test, Complete,
Sidetrack, Plug Back, Recomplete or Rework an Exclusive Well and such
further operation was not included in the original proposal for such
Exclusive Well, the Consenting Parties shall submit to the
Non-Consenting Parties the approved AFE for such further operation.
For thirty (30) Days (or forty-eight (48) hours if the drilling rig
which is to be used in such operation is standing by in the Contract
Area) from receipt of such AFE, each Non-Consenting Party shall have
the option to reinstate the rights it relinquished pursuant to Article
7.4(B) and to participate in such operation. The Non-Consenting Party
may exercise such option by notifying the Operator within the period
specified above that such Non-Consenting Party agrees to bear its
Participating Interest share of the liability and expense of such
further operation, to pay the lump sum amount as set out in Article
7.5(A) and to pay:
Check one Alternative.
[X] ALTERNATIVE NO. 1
The Cash Premium as set out in Article 7.5(B);
[ ] ALTERNATIVE NO. 2
The In Kind Premium as set out in Article 7.5(C);
[ ] ALTERNATIVE NO. 3
At the choice of the Non-Consenting Party exercising such option, either the
Cash Premium as set out in Article 7.5(B) or the In Kind Premium as set out in
Article 7.5(C).
(D) If a Non-Consenting Party does not properly and in a timely manner
exercise such option, including paying in a timely manner in accordance
with Article 7.5, all lump sum amounts and Cash Premiums, if any, due to
the Consenting Parties, such Non-Consenting Party shall have forfeited the
options as set out in Article 7.4(C) and the right to participate in the
proposed program, unless such program, plan or operation is materially
modified or expanded.
(E) A Non-Consenting Party shall become a Consenting Party with regard to
an Exclusive Operation at such time as the Non-Consenting Party gives
proper notice pursuant to Article 7.4(C); provided that such Non-Consenting
Party shall in no way be deemed to be entitled to any lump sum amount Cash
Premium or In Kind Premium paid incident to such Exclusive Operation. The
Participating Interest of such Non-Consenting Party in such Exclusive
Operation shall be its Participating Interest set out in Article 3.1(A).
The Consenting Party shall contribute in proportion to their respective
Participating Interests in such Exclusive Operation, the Participating
Interest of the Non-Consenting Party. If all Parties participate in the
proposed operation, then such operation shall be conducted as a Joint
Operation pursuant to Article V.
(F) If after the expiry of the period in which a Non-Consenting Party may
exercise its option to participate in a Development Plan the Consenting
Parties desire to proceed, the Party chosen by the Consenting Parties
proposing to act as Operator for such development, shall give notice to the
Government under the appropriate provision of the Contract requesting a
meeting to advise the Government that the Consenting Parties consider the
Discovery to be a Commercial Discovery. Following such meeting such
Operator for such development shall apply for an Exploitation Area (if
applicable in the Contract). Unless the Development Plan is materially
modified or expanded prior to the commencement of operations under such
plan, each Non-Consenting Party to such Development Plan shall:
(1) If the Contract so allows, elect not to apply for an Exploitation
Area covering such development and forfeit all interest in such
Exploitation Area, or
(2) If the Contract does not so allow, be deemed to have:
(a) Elected not to apply for an Exploitation Area covering such
development;
(b) Forfeited all economic interest in such Exploitation Area;
(c) Assumed a fiduciary duty to exercise its legal interest in
such Exploitation Area for the benefit of the Consenting Parties.
In either case such Non-Consenting Party shall be deemed to have withdrawn from
this Agreement to the extent it relates to such Exploitation Area, even if the
Development Plan is modified or expanded subsequent to the commencement of
operations under such Development Plan.
7.5 Premium to Participate in Exclusive Operations
(A) Within thirty (30) Days of the exercise of its option under Article
7.4(C), each such Non-Consenting Party shall pay in immediately available
funds to the Consenting Parties who took the risk of such Exclusive
Operations in proportion to their respective Participating Interests in
such Exclusive Operations a lump sum amount payable in the currency
designated by such Consenting Parties. Such lump sum amount shall be equal
to such Non-Consenting Party's Participating Interest share of all
liabilities and expenses, including overhead, that were incurred in every
Exclusive Operations relating to the Discovery, or well, as the case may
be, in which the Non-Consenting Party desires to reinstate the rights it
relinquished pursuant to Article 7.4(B), and that were not previously paid
by such Non-Consenting Party.
(B) In addition to Article 7.5(A), if a Cash Premium is due, then within
thirty (30) Days of the exercise of its option under Article 7.4(C) each
such Non-Consenting Party shall pay in immediately available funds, in the
currency designated by the Consenting Parties who took the risk of such
Exclusive Operations, to such Consenting Parties in proportion to their
respective Participating Interests a Cash Premium equal to the total of:
(1) _______________ percent (500%) of such Non-Consenting Party's
Participating Interest share of all liabilities and expenses,
including overhead, that were incurred in any Exclusive Operations
relating to the obtaining of the portion of the G & G Data which
pertains to the Discovery, and that were not previously paid by such
Non-Consenting Party; plus
(2) ____________ percent ( 500%) of such Non-Consenting Party's
Participating Interest share of all liabilities and expenses,
including overhead, that were incurred in any Exclusive Operations
relating to the drilling, Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting and Reworking of the
Exploration Well which made the Discovery in which the Non-Consenting
Party desires to reinstate the rights it relinquished pursuant to
Article 7.4(B), and that were not previously paid by such
Non-Consenting Party; plus
(3) _____________ percent ( 500 %) of the Non-Consenting Party's
Participating Interest share of all liabilities and expenses,
including overhead, that were incurred in any Exclusive Operations
relating to the drilling, Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting and Reworking of the
Appraisal Well(s) which delineated the Discovery in which the
Non-Consenting Party desires to reinstate the rights it relinquished
pursuant to Article 7.4(B), and that were not previously paid by such
Non-Consenting Party.
(C) In addition to Article 7.5(A), if an In-Kind Premium is due, each
Non-Consenting Party exercising its option under Article 7.4(C), shall be
deemed to grant to the Consenting Parties, and the Consenting Parties, in
proportion to their Participating Interests, shall be deemed to accept an
In Kind Premium, until such time as the In Kind Premium has been fully
satisfied. The In Kind Premium shall be the right to own, take in kind and
separately dispose of Hydrocarbons produced out of one hundred percent
(100%) of the Non-Consenting Party's Entitlement to future production
(including Cost Oil, Profit Oil and, where applicable under the Contract,
gas) from the Exploitation Area for the Discovery in which the
Non-Consenting Party desires to reinstate the rights it relinquished
pursuant to Article 7.4(B)(2)(a) and (b) (or if applicable, from only the
well in which the Non-Consenting Party desires to reinstate the rights it
relinquished pursuant to Article 7.4(B)(2)(a)). The value in U.S. Dollars
of the In Kind Premium shall equal a total of:
(1) ___________ percent (500%) of such Non-Consenting Party's
Participating Interest share of all liabilities and expenses,
including overhead, that were incurred in any Exclusive Operations
relating to the obtaining of the portion of the G & G Data which
pertains to the Discovery, and that were not previously paid by such
Non-Consenting Party; plus
(2) ___________ percent (500%) of such Non-Consenting Party's
Participating Interest share of all liabilities and expenses,
including overhead, that were incurred in any Exclusive Operations
relating to the drilling, Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting and Reworking of the
Exploration Well which made the Discovery in which the Non-Consenting
Party desires to reinstate the rights it relinquished pursuant to
Article 7.4(B), and that were not previously paid by such
Non-Consenting Party; plus
(3) ____________ percent (500%) of the Non-Consenting Party's
Participating Interest share of all liabilities and expenses,
including overhead, that were incurred in any Exclusive Operations
relating to the drilling, Deepening, Testing, Completing,
Sidetracking, Plugging Back, Recompleting and Reworking of the
Appraisal Well(s) which delineated the Discovery in which the
Non-Consenting Party desires to reinstate the rights it relinquished
pursuant to Article 7.4(B), and that were not previously paid by such
Non-Consenting Party; plus
(D) The In Kind Premium shall be deemed fully satisfied when the aggregate
value (determined in U.S. Dollars in accordance with Article 7.5(F)) of the
Hydrocarbons received by the Consenting Parties as In Kind Premium equals
the sum of the amounts calculated in U.S. Dollars pursuant to Article
7.5(C)). After such satisfaction the Consenting Parties' right to such In
Kind Premium shall terminate, and such Non-Consenting Party shall own, take
and dispose of its Entitlement from such Exploitation Area. Production from
other fields in the Contract Area, outside such Exploitation Area (whether
Cost Oil or Profit Oil) shall not be used to satisfy the In Kind Premium.
Any obligation of the Non-Consenting Party to satisfy the In Kind Premium
shall terminate with the cessation of production from the Exploitation Area
(or well, as the case may be) which the In Kind Premium encumbers, and in
such event, no cash payment, in lieu of production, shall be due from the
Non-Consenting Party for the unsatisfied balance of the In Kind Premium.
(E) Within ninety (90) Days after the Completion of any Exclusive
Operation, the Operator shall furnish to each Non-Consenting Party that has
granted an In Kind Premium in respect of such Exclusive Operation an
inventory of the equipment in and connected to the well, and an itemized
statement of the cost of such Exclusive Operation, including equipping the
well for production. Each Calendar Quarter during the period of satisfying
an In Kind Premium, Operator shall furnish to the Non-Consenting Parties
that have granted such In Kind Premium an itemized statement of all costs
and liabilities incurred in the Exclusive Operation(s), establishing the
value of such In Kind Premium together with a statement of the quantity of
Hydrocarbons produced to satisfy such In Kind Premium and the amount of
proceeds realized from the sale of such production during the preceding
Calendar Quarter.
(F) For the purpose of determining satisfaction of the In Kind Premium, the
value of the Hydrocarbons received by a Consenting Party as In Kind Premium
shall be the weighted average price per Barrel (f.o.b. the point of
delivery of the Cost Oil and Profit Oil to the Consenting Parties) which
such Consenting Party receives from the sale of such Hydrocarbons to
non-affiliated purchasers, in arms length transactions. For sales to
Affiliates, the price so used shall be the price at which Hydrocarbons of a
similar grade, gravity and quality (adjusted for differentials in
accordance with regularly established practice) were sold generally on
world markets, during the particular period of sale, in free and fair arms
length transactions, with due adjustments being made for differing
geographical locations. Notwithstanding the fact that royalty or any other
payment obligation to the Government is based on an "official" or
"Government" stated price, the price used for calculation of the
satisfaction of the In Kind Premium shall be the price determined in
accordance with this Article.
(G) In determining the quantity of Hydrocarbons produced for purposes of
the In Kind Premium, the Consenting Parties shall use industry accepted
methods such as but not limited to metering or periodic well tests.
(H) During the period of time Consenting Parties are entitled to an In Kind
Premium, such Consenting Parties shall be responsible for the payment of
all royalties, charges, taxes, and all other burdens established by the
Contract directly related to such In Kind Premium.
(I) Any amount realized from the sale or other disposition of equipment,
which was acquired in connection with an Exclusive Operation, shall be
credited against the satisfaction of the In Kind Premium.
(J) On satisfaction of the In Kind Premium, the right of such
Non-Consenting Party to own, take in kind and separately dispose of its
Entitlement granted under Article 7.5(C), shall be reinstated automatically
as of 7:00 a.m. on the Day following the Day on which such satisfaction
occurs.
7.6 Order of Preference of Operations
(A) Except as otherwise specifically provided in this Agreement, if any
Party desires to propose the conduct of an operation that will conflict
with an existing proposal for an Exclusive Operation, such Party shall have
the right exercisable for five (5) Days, or twenty-four (24) hours if the
drilling rig to be used is standing by in the Contract Area, from receipt
of the proposal for the Exclusive Operation, to deliver to all Parties
entitled to participate in the proposed operation such Party's alternative
proposal. Such alternative proposal shall contain the information required
under Article 7.2(A).
(B) Each Party receiving such proposals shall elect by delivery of notice
to Operator within the appropriate response period set out in Article
7.2(B) to participate in one of the competing proposals. Any Party not
notifying Operator within the response period shall be deemed not to have
voted.
(C) The proposal receiving the largest aggregate Participating Interest
vote shall have priority over all other competing proposals. In the case of
a tie vote, the Operator shall choose among the proposals receiving the
largest aggregate Participating Interest vote. Operator shall deliver
notice of such result to all Parties entitled to participate in the
operation within five (5) Days of the end of the response period, or
twenty-four (24) hours if the drilling rig to be used is standing by in the
Contract Area.
(D) Each Party shall then have two (2) Days (or twenty-four (24) hours if
the drilling rig to be used is standing by in the Contract Area) from
receipt of such notice to elect by delivery of notice to Operator whether
such Party will participate in such Exclusive Operation, or will relinquish
its interest pursuant to Article 7.4(B). Failure by a Party to deliver such
notice within such period shall be deemed an election not to participate in
the prevailing proposal.
Check if desired.
OPTIONAL PROVISION
[ ] (E) Notwithstanding the provisions of Article 7.4(B), if for reasons other
than the encountering of granite or other practically impenetrable
substance or any other condition in the hole rendering further operations
impracticable, a well drilled as an Exclusive Operation fails to reach the
deepest objective Zone described in the notice proposing such well,
Operator shall give notice of such failure to each Non-Consenting Party who
submitted or voted for an alternative proposal under this Article to drill
such well to a shallower Zone than the deepest objective Zone proposed in
the notice under which such well was drilled. Each such Non-Consenting
Party shall have the option exercisable for forty-eight (48) hours from
receipt of such notice to participate in the initial proposed Completion of
such well. Each such Non-Consenting Party may exercise such option by
notifying the Operator that it wishes to participate in such Completion and
by paying its share of the cost of drilling such well to its actual depth,
calculated in the manner provided in Article 7.8(B)(1). If any such
Non-Consenting Party does not properly elect to participate in the first
Completion proposed for such well, the relinquishment provisions of Article
7.4(B) shall continue to apply to such Non-Consenting Party's interest.
7.7 Stand By Costs
(A) When an operation has been performed, all tests have been conducted and
the results of such tests furnished to the Parties, stand by costs incurred
pending response to any Party's notice proposing an Exclusive Operation for
Deepening, Testing, Sidetracking, Completing, Plugging Back, Recompleting,
Reworking or other further operation in such well (including the period
required under Article 7.6 to resolve competing proposals) shall be charged
and borne as part of the operation just completed. Stand by costs incurred
subsequent to all Parties responding, or expiration of the response time
permitted, whichever first occurs, shall be charged to and borne by the
Parties proposing the Exclusive Operation in proportion to their
Participating Interests, regardless of whether such Exclusive Operation is
actually conducted.
(B) If a further operation is proposed while the drilling rig to be
utilized is on location, any Party may request and receive up to five (5)
additional Days after expiration of the applicable response period
specified in Article 7.2(B) within which to respond by notifying Operator
that such Party agrees to bear all stand by costs and other costs incurred
during such extended response period. Operator may require such Party to
pay the estimated stand by time in advance as a condition to extending the
response period. If more than one Party requests such additional time to
respond to the notice, stand by costs shall be allocated between such
Parties an a Day-to-Day basis in proportion to their Participating
Interests.
Check if desired.
[ ] OPTIONAL PROVISION
7.8 Special Considerations Regarding Deepening and Sidetracking
1.1
(A) An Exclusive Well shall not be Deepened or Sidetracked without first
affording the Non-Consenting Parties in accordance with this Article the
opportunity to participate in such operation.
(B) In the event any Consenting Party desires to Deepen or Sidetrack an
Exclusive Well, such Party shall initiate the procedure contemplated by
Article 7.2. If a Deepening or Sidetracking operation is approved pursuant
to such provisions, and if any Non-Consenting Party to the Exclusive Well
elects to participate in such Deepening or Sidetracking operation, the
payment, if any, pursuant to Article 7.5 of such Non-Consenting Party shall
be calculated based on the following liabilities and expenses:
(1) If the proposal is to Deepen or Sidetrack and is made prior to the
Completion of such well as a Commercial Discovery, then payment shall
be based on such Non-Consenting Party's Participating Interest share
of the liabilities and expenses incurred in connection with drilling
the Exclusive Well from the surface to the depth previously drilled
which such Non-Consenting Party would have paid had such
Non-Consenting Party agreed to participate in such Exclusive Well,
plus the Non-Consenting Party's Participating Interest share of the
liabilities and expenses of Deepening or Sidetracking and of
participating in any further operations on such Exclusive Well in
accordance with the other provisions of this Agreement; provided,
however, all liabilities and expenses for Testing and Completing or
attempting Completion of the well incurred by Consenting Parties prior
to the commencement of actual operations to Deepen or Sidetrack beyond
the depth previously drilled shall be for the sole account of
Consenting Parties in the proportion their Participating Interest
bears to the aggregate of their Participating Interests.
(2) If the proposal is to Deepen or Sidetrack and is made for an
Exclusive Well that has been previously Completed as a Commercial
Discovery, but is no longer producing, then payment shall be based on
the Non-Consenting Party's Participating Interest share of all costs
of drilling and Completing said well from the surface to the depth
previously drilled, calculated in the manner provided in Article
7.8(B)(1), less those costs recouped by the Consenting Parties from
the sale of production from such Exclusive Well, plus the
Non-Consenting Party's Participating Interest share of all costs of
re-entering said well, plus the Non-Consenting Party's proportionate
part (based on the percentage of the Exclusive Well such
Non-Consenting Party would have owned had it previously participated
in such Exclusive Well) of the costs of salvable materials and
equipment remaining in the hole and salvable surface equipment used in
connection with such well shall be determined in accordance with the
Accounting Procedure. If at the time such Deepening or Sidetracking
operation is conducted the Consenting Parties have recouped from the
Exclusive Well the amount calculated pursuant to Article 7.5, then a
Non-Consenting Party may participate in the Deepening or Sidetracking
of the Exclusive Well with no payment for liabilities and expenses
incurred prior to re-entering the well for Deepening or Sidetracking.
7.9 Miscellaneous
(A) Each Exclusive Operation shall be carried out by the Consenting Parties
acting as the Operating Committee, subject to the provisions of this
Agreement applied mutatis mutandis to such Exclusive Operation and subject
----------------
to the terms and conditions of the Contract.
(B) The computation of liabilities and expenses incurred in Exclusive
Operations, including the liabilities and expenses of Operator for
conducting such operations, shall be made in accordance with the principles
set out in the Accounting Procedure.
(C) Operator shall maintain separate books, financial records and accounts
for Exclusive Operations which shall be subject to the same rights of audit
and examination as the Joint Account and related records, all as provided
in the Accounting Procedure. Said rights of audit and examination shall
extend to each of the Consenting Parties and each of the Non-Consenting
Parties so long as the latter are, or may be, entitled to elect to
participate in such operations.
(D) Operator, if it is not a Consenting Party and it is conducting an
Exclusive Operation for the Consenting Parties, shall be entitled to
request cash advances and shall not be required to use its own funds to pay
any cost and expense and shall not be obliged to commence or continue
Exclusive Operations until cash advances requested have been made, and the
Accounting Procedure shall apply to Operator in respect of any Exclusive
Operations conducted by it.
(E) Should the submission of a Development Plan be approved in accordance
with Article 5.9, or should any Party propose a development in accordance
with Article VII, with either proposal not calling for the conduct of
additional appraisal drilling, and should any Party wish to drill an
additional Appraisal Well prior to development, then the Party proposing
the Appraisal Well as an Exclusive Operation shall be entitled to proceed
first, but without the right to future reimbursement of costs or to any
Premium, pursuant to Article 7.5. If, as the result of drilling such
Appraisal Well as an Exclusive Operation, the Party proposing to apply for
an Exploitation Area decides to not develop the reservoir, then each
Non-Consenting Party who voted in favor of such Development Plan prior to
the drilling of such Appraisal Well shall pay to the Consenting Party the
amount such Non-Consenting Party would have paid had such Appraisal Well
been drilled as a Joint Operation.
(F) In the case of any Exclusive Operation for Deepening, Testing,
Completing, Sidetracking, Plugging Back, Recompleting or Rework, the
Consenting Parties shall be permitted to use, free of cost, all casing,
tubing and other equipment in the well, that is not needed for Joint
Operations, but the ownership of all such equipment shall remain unchanged.
On abandonment of a well after such Exclusive Operation, the Consenting
Parties shall account for all such equipment to the Parties who shall
receive their respective Participating Interest shares, in value, less cost
of salvage.
(G) If the Operator is a Non-Consenting Party to an Exclusive Operation to
develop a Discovery, then subject to obtaining any necessary Government
approval the Operator may resign, but in any event shall resign on the
request of the Consenting Parties, as Operator for the Exploitation Area
for such Discovery and the Consenting Parties shall select a Party to serve
as Operator.
ARTICLE 8
DEFAULT
8.1 Default and Notice
Any Party that fails to pay when due its Participating Interest share of Joint
Account expenses including cash advances and interest, accrued pursuant to this
Agreement (a "Defaulting Party") shall be in default under this Agreement.
Operator, or any other Party in the case of the default of Operator, shall
promptly give written notice of such default to such Party and each of the
non-defaulting Parties. The amount not paid by the Defaulting Party shall bear
interest from the date due until paid in full. Interest will be calculated
using the Agreed Interest Rate.
8.2 Operating Committee Meetings and Data
After any default has continued for five (5) Business Days from the date of
written notice of default under Article 8.1, and for as long thereafter as the
Defaulting Party remains in default on any payment due under this Agreement, the
Defaulting Party shall not be entitled to attend Operating Committee meetings or
to vote on any matter coming before the Operating Committee during the period
such default continues. Unless agreed otherwise by the non-defaulting Parties,
the voting interest of each non-defaulting Party shall be in the proportion
which its Participating Interest bears to the total of the Participating
Interests of all the non-defaulting Parties. Any matters requiring unanimous
vote of the Parties shall be deemed to exclude the Defaulting Party. After the
said five (5) Business Days and while the Defaulting Party remains in default as
aforesaid, the Defaulting Party shall not have access to any data or information
relating to Joint Operations, and non-defaulting Parties shall be entitled to
trade data without such Defaulting Party's consent and the Defaulting Party
shall have no right to any data received on such trade unless and until its
default is remedied in full. Notwithstanding the foregoing, the Defaulting
Party shall be deemed to have approved, and shall join with the non-defaulting
Parties in taking any action to maintain and preserve the Contract.
8.3 Allocation of Defaulted Accounts
(A) Operator shall, either at the time of giving notice of default as
provided in Article 8.1, or by separate notice, notify each non-defaulting
Party the sum of money it is to pay as its portion (such portion being in
the ratio that each non-defaulting Party's Participating Interest bears to
the Participating Interests of all non-defaulting Parties) of such amount
in default. Each non-defaulting Party shall, if such default continues, pay
Operator, within five (5) Business Days after receipt of such notice, its
share of the amount which the Defaulting Party failed to pay. If any
non-defaulting Party fails to pay its share of the amount in default as
aforesaid, such non-defaulting Party shall thereupon be in default and
shall be a Defaulting Party subject to the provisions of this Article. The
non-defaulting Parties which pay the amount owed by any Defaulting Party
shall be entitled to receive their respective share of the principal and
interest payable by such Defaulting Party pursuant to Article 8.1.
(B) The total of all amounts paid by the non-defaulting Parties for the
Defaulting Party, together with interest accrued on such amounts shall
constitute a debt due and owing by the Defaulting Party to the
non-defaulting Parties in proportion to such amounts paid. In addition the
non-defaulting Parties may in the manner contemplated by this Article,
satisfy such debt (together with interest) and may accrue an amount equal
to the Defaulting Party's Participating Interest share of the estimated
cost to abandon any Joint Property.
(C) A Defaulting Party may remedy its default by paying to Operator the
total amount due, together with interest calculated as provided in Article
8.1, at any time prior to transfer of its interest pursuant to Article 8.4,
and upon receipt of such payment Operator shall remit to each
non-defaulting Party its proportionate share of such amount.
(D) The rights granted to each non-defaulting Party pursuant to this
Article, shall be in addition to, and not in substitution for any other
rights or remedies which each non-defaulting Party may have at law or
equity or pursuant to the other provisions of this Agreement.
8.4 Transfer of Interest
(A) For thirty (30) Days after each failure by the Defaulting Party to
remedy its default by the thirtieth (30th) Day following notice of default
without prejudice to any other rights of the non-defaulting Parties to
recover the amounts paid for the Defaulting Party, together with interest
accrued on such amount, each non-defaulting Party shall have the option to
give notice to the Defaulting Party requiring the Defaulting Party to
transfer its interest to the non-defaulting Parties. To that end if any of
the non-defaulting Parties so elect, the Defaulting Party shall be deemed
to have transferred and to have empowered the electing non-defaulting
Parties to execute on said Defaulting Party's behalf any documents required
to effect a transfer, of all of its right, title and beneficial interest in
and under this Agreement and the Contract, and in all ▇▇▇▇▇ and Joint
Property to the electing non-defaulting Parties. If requested, each Party
shall execute a Power of Attorney in the form prescribed by the Operating
Committee. The Defaulting Party shall, without delay following any request
from the non-defaulting Parties, do any and all acts required to be done by
applicable law or regulation in order to render such transfer legally
valid, including, without limitation, the obtaining of all governmental
consents and approvals, and shall execute any and all documents and take
such other actions as may be necessary in order to effect prompt and valid
transfer of the interests described above, free of all liens and
encumbrances. In the event all Government approvals are not timely
obtained, the Defaulting Party shall hold its Participating Interests in
trust for such non-defaulting Parties who elected to assume such Defaulting
Party's Participating Interest.
(B) In the absence of an agreement among the non-defaulting Parties to the
contrary, any such transfer to the non-defaulting Parties shall be in the
proportion that the non-defaulting Parties have paid the amounts due from
the Defaulting Party.
(C) Subject to Article 12.1(C), on the effective date of such transfer the
Defaulting Party shall forthwith cease to be a Party to this Agreement to
the extent of the Participating Interest so transferred. The acceptance or
non-acceptance by a non-defaulting Party of any portion of a Defaulting
Party's Participating Interest shall be without prejudice to any rights or
remedies such non-defaulting Parties have to recover the outstanding debts
(including interest) owed by the Defaulting Party.
8.5 Continuation of Interest
If within thirty (30) Days after each failure by the Defaulting Party to remedy
its default by the thirtieth (30th) Day following notice of default the
non-defaulting Parties elect to not acquire the Defaulting Party's Participating
Interest as provided in Article 8.4 and to continue to bear the Defaulting
Party's Participating Interest share of liabilities and expenses, then the
non-defaulting Parties shall accumulate all such liabilities and expenses as a
debt pursuant to Article VIII, but the Defaulting Party shall continue to be a
Party subject to Article 8.2 and Article 8.7. If Operator disposes of any Joint
Property or any other credit or adjustment is made to the Joint Account, or if
Operator sells any of the Defaulting Party's Participating Interest share of
Hydrocarbons, then, in respect of the Defaulting Party's Participating Interest
share of the proceeds of such disposal, credit or adjustment or sale, Operator
shall be entitled to retain and to set off the same against all amounts,
together with interest accrued on such amount, due and owing from the Defaulting
Party plus an accrued amount equal to the Defaulting Party's Participating
Interest share of the estimated cost to abandon any Joint Property. Any surplus
remaining after setting off the same as aforesaid shall be paid promptly to the
Defaulting Party.
8.6 Abandonment
If, within thirty (30) Days after the failure by the Defaulting Party to remedy
its default by the thirtieth (30th) Day as aforesaid, no non-defaulting Party
elects to acquire the Defaulting Party's Participating Interest as provided in
Article 8.4, or to bear the Defaulting Party's Participating Interest share of
liabilities and expenses as provided in Article 8.5, then no transfer shall be
made and Joint Operations shall be abandoned subject to any necessary consents
and notices being given, and each Party, including the Defaulting Party shall
pay its Participating Interest share of all costs of abandoning and
relinquishing the Contract. If abandonment occurs as aforesaid, all monies paid
by the non-defaulting Parties for the Defaulting Party pursuant to Article 8.3,
together with interest accrued on such amount, shall remain a debt due and owing
by the Defaulting Party.
8.7 Sale of Hydrocarbons
If a Party defaults after the commencement of commercial production and has not
remedied the default by the thirtieth (30th) Day as aforesaid, then, during the
continuance of such default, the Defaulting Party shall not be entitled to its
Participating Interest share of Hydrocarbons which shall vest in and be the
property of the non-defaulting Parties, and Operator shall be authorized to sell
such Hydrocarbons at the best price obtainable under the circumstances and,
after deducting all costs, charges and expenses incurred by Operator in
connection with such sale, pay the proceeds proportionately to the
non-defaulting Parties which proceeds shall be credited against all monies
advanced pursuant to Article 8.3, together with interest accrued thereon. Any
surplus remaining shall be paid to the Defaulting Party, and any deficiency
shall remain a debt due from the Defaulting Party to the non-defaulting Parties.
Notwithstanding any such sales by Operator the provisions of Article 8.4 shall
continue to apply.
8.8 No Right of Set Off
Each Party acknowledges and accepts that a fundamental principle of this
Agreement is that each Party pays its Participating Interest share of all
amounts due under this Agreement as and when required. Accordingly, any Party
which becomes a Defaulting Party undertakes that, in respect of either any
exercise by the non-defaulting Parties of any rights under or the application of
any of the provisions of this Article, such Party shall not raise by way of set
off or invoke as a defense, whether in law or equity, any failure to pay amounts
due and owing under this Agreement or any alleged or unliquidated claim that
such Party may have against Operator or any Non-Operator, whether such claim
arises under this Agreement or otherwise. Such Party further undertakes not to
raise by way of defense, whether in law or in equity, that the nature or the
amount of the remedies granted to the non-defaulting Parties is unreasonable or
excessive.
ARTICLE IX
DISPOSITION OF PRODUCTION
9.1 Right and Obligation to Take In Kind
Except as otherwise provided in this Article, each Party shall have the right
and obligation to own, take in kind and separately dispose of its Participating
Interest share of total production available to the Parties pursuant to the
Contract from any Exploitation Area in such quantities and in accordance with
such procedures as may be set forth in the offtake agreement referred to in
Article 9.2 or in the special arrangements for natural gas referred to in
Article 9.3. If Government Oil Company is party to the offtake agreement, then
the Parties shall endeavour to obtain its agreement to the principles set forth
in this Article.
9.2 Offtake Agreement for Crude Oil
If crude oil is to be produced from an Exploitation Area, the Parties shall in
good faith, and not less than three (3) months prior to first delivery of crude
oil, negotiate and conclude the terms of an agreement to cover the offtake of
crude oil produced under the Contract. The Government Oil Company may, if
necessary ▇▇▇ practicable, also be party to the offtake agreement. This offtake
agreement shall, to the extent consistent with the Contract, make provision for:
(A) The delivery point, at which title and risk of loss of Participating
Interest shares of crude oil shall pass to the Parties interested (or as
the Parties may otherwise agree);
(B) Operator's regular periodic advice to the Parties of estimates of total
available production for succeeding periods, Participating Interest shares
and grades of crude oil, for as far ahead as is necessary for Operator and
the Parties to plan offtake arrangements. Such advice shall also cover for
each grade of crude oil total available production and deliveries for the
preceding period, inventory and overlifts and underlifts;
(C) Nomination by the Parties to Operator of acceptance of their
Participating Interest share of total available production for the
succeeding period. Such nominations shall in any one period be for each
Party's entire Participating Interest share arising during that period
subject to operational tolerances and agreed minimum economic cargo sizes
or as the Parties may otherwise agree;
(D) Elimination of overlifts and underlifts;
(E) If offshore loading or a shore terminal for vessel loading is involved,
risks regarding acceptability of tankers, demurrage and (if applicable)
availability of berths;
(F) Distribution to the Parties of Entitlements to ensure, to the extent
Parties take delivery of their Entitlements in proportion to the accrual of
such Entitlements, that each Party shall receive currently Entitlements of
grades, gravities and qualities of Hydrocarbons similar to Hydrocarbons
received by each other Party;
(G) To the extent that distribution of Entitlements on such basis is
impracticable due to availability of facilities and minimum cargo sizes, a
method of making periodic adjustments; and
(H) The option and the right of the other Parties to sell an Entitlement
which a Party fails to nominate for acceptance pursuant to (C) above or of
which a Party fails to take delivery, in accordance with applicable agreed
procedures, provided that such failure either constitutes a breach of
Operator's or Parties' obligations under the terms of the Contract, or is
likely to result in the curtailment or shut-in of production. Such sales
shall be made only to the limited extent necessary to avoid disruption in
Joint Operations. Operator shall give all Parties as much notice as is
practicable of such situation and that a sale option has arisen. Any sale
shall be of the unnominated or undelivered Entitlement as the case may be
and for reasonable periods of time as are consistent with the minimum needs
of the industry and in no event to exceed twelve (12) months. The right of
sale shall be revocable at will subject to any prior contractual
commitments. Sales to non-affiliated third parties shall be for the
realized price f.o.b. the delivery point. Sales to any of the Parties or
their Affiliates shall be at current market value f.o.b. the delivery
point. The Party arranging the sale shall pay to the Party whose
Entitlement is involved the above price after deduction of all costs,
including storage costs, incurred in respect of such sale and a marketing
fee of an agreed percentage of the applicable price less deductions,
reflecting actual costs of disposal at immediate notice. Current market
value shall be the value of the Entitlement in international markets
(unless the Entitlement was required to be delivered into the Government's
domestic market, in which case it shall be the value therein) between a
willing buyer and a willing seller and shall be agreed between the two
Parties concerned, or failing agreement, determined by an expert to be
appointed in accordance with procedures set forth in the offtake agreement.
9.3 Separate Agreement for Natural Gas
The Parties recognize that if natural gas is discovered it may be necessary for
the Parties to enter into special arrangements for the disposal of the natural
gas, which are consistent with the Development Plan and subject to the terms of
the Contract.
ARTICLE X
ABANDONMENT OF ▇▇▇▇▇
10.1 Abandonment of ▇▇▇▇▇ Drilled as Joint Operations
(A) Any well which has been drilled as a Joint Operation and which is
proposed to be plugged and abandoned shall not be plugged and abandoned
without the consent of all Parties.
(B) Should any such Party fail to reply within the period prescribed in
Article 5.12(A)(1) or Article 5.12(A)(2), whichever is applicable, after
delivery of notice of the Operator's proposal to plug and abandon such
well, such Party shall be deemed to have consented to the proposed
abandonment. If all the Parties consent to abandonment, such well shall be
plugged and abandoned in accordance with applicable regulations and at the
cost, risk and expense of the Parties who participated in the cost of
drilling such well.
(C) If all Parties do not agree to the abandonment of such well, those
wishing to continue operations shall assume financial responsibility over
the well and shall be deemed to be Consenting Parties conducting an
Exclusive Operation pursuant to Article VII. In the case of a producing
well, the Consenting Parties shall be entitled to continue producing only
from the Zone open to production at the time they assumed responsibility
for the well.
(D) Consenting Parties taking over a well as provided above shall tender to
each of the Non-Consenting Parties such Non-Consenting Parties'
Participating Interest share of the value of the well's salvable material
and equipment, determined in accordance with the Accounting Procedure, less
the estimated cost of salvaging and the estimated cost of plugging and
abandoning as of the date the Consenting Party assumed responsibility for
the well; provided, however, that in the event the estimated plugging and
abandoning and the estimated cost of salvaging are higher than the value of
the well's salvable material and equipment, each of the abandoning Parties
shall continue to be liable pursuant to Article 7.3(B) for their respective
Participating Interest shares of the estimated excess cost.
(E) Each Non-Consenting Party shall be deemed to have relinquished to the
Consenting Parties in proportion to their Participating Interests all of
its interest in the wellbore of a produced well and related equipment in
accordance with Article 7.4(B), insofar and only insofar as such interest
covers the right to obtain production from that wellbore in the Zone then
open to production.
(F) Subject to Article 7.9(G), Operator shall continue to operate a
produced well for the account of the Consenting Parties at the rates and
charges contemplated by this Agreement, plus any additional cost and
charges which may arise as the result of the separate allocation of
interest in such well.
10.2 Abandonment of Exclusive Operations
This Article shall apply mutatis mutandis to the abandonment of an Exclusive
----------------
Well or any well in which an Exclusive Operation has been conducted; provided
that no well shall be permanently plugged and abandoned unless and until all
Parties having the right to conduct further operations in such well have been
notified of the proposed abandonment and afforded the opportunity to elect to
take over the well in accordance with the provisions of this Article X.
ARTICLE XI
SURRENDER, EXTENSIONS AND RENEWALS
11.1 Surrender
(A) If the Contract requires the Parties to surrender any portion of the
Contract Area, Operator shall advise the Operating Committee of such
requirement at least one hundred and twenty (120) Days in advance of the
earlier of the date for filing irrevocable notice of such surrender or the
date of such surrender. Prior to the end of such period, the Operating
Committee shall determine pursuant to Article V, the size and shape of the
surrendered area, consistent with the requirements of the Contract. If a
sufficient vote of the Operating Committee cannot be attained, then the
proposal supported by a simple majority of the Participating Interests
shall be adopted. If no proposal attains the support of a simple majority
of the Participating Interests, then the proposal receiving the largest
aggregate Participating Interest vote shall be adopted. In the event of a
tie, the Operator shall choose among the proposals receiving the largest
aggregate Participating Interest vote. The Parties shall execute any and
all documents and take such other actions as may be necessary to effect the
surrender. Each Party renounces all claims and causes of action against
Operator and any other Parties on account of any area surrendered in
accordance with the foregoing but against its recommendation if
Hydrocarbons are subsequently discovered under the surrendered area.
(B) A surrender of all or any part of the Contract Area which is not
required by the Contract shall require the unanimous consent of the
Parties.
11.2 Extension of the Term
(A) A proposal by any Party to extend the term of the Exploration or
Exploitation Period or any phase of the Contract, a proposal to enter into
a new phase of the Exploration Period, and a proposal to extend the term of
the Contract shall be brought before the Operating Committee pursuant to
Article V.
(B) Any Party shall have the right to extend the term of the Exploration or
Exploitation Period or any phase of the Contract to enter into a new phase
of the Exploration Period or extend the term of the Contract. Any Party not
wishing to extend, shall have a right to withdraw, subject to the
requirements of Article XIII.
ARTICLE XII
TRANSFER OF INTEREST OR RIGHTS
12.1 Obligation
(A) Subject always to the requirements of the Contract, the transfer of all
or part of a Party's Participating Interest shall be effective only if it
satisfies the terms and conditions of this Article.
(B) Except in the case of a Party transferring all of its Participating
Interest, no transfer shall be made by any Party which results in the
transferor or the transferee holding a Participating Interest of less than
______________ percent (5%) or holding any interest other than a
Participating Interest in the Contract, the Contract Area and this
Agreement.
(C) The transferring Party shall, notwithstanding the transfer, be liable
to the other Parties for any obligations, financial or otherwise, which
have vested, matured or accrued under the provision of the Contract or this
Agreement prior to such transfer. Such obligations shall include, without
limitation, any proposed expenditure approved by the Operating Committee,
prior to the transferring Party notifying the other Parties of its proposed
transfer.
(D) The transferee shall have no rights in and under the Contract, the
Contract Area or this Agreement unless and until it obtains the necessary
Government's approval and expressly undertakes in writing to perform the
obligations of the transferor under the Contract and this Agreement in
respect of the Participating Interest being transferred, to the
satisfaction of the Parties and furnishes any guarantees required by the
Government or the Contract.
(E) The transferee shall have no rights in and under the Contract, the
Contract Area or this Agreement unless each Party has consented in writing
to such transfer, which consent shall be denied only if such transferee
fails to establish to the reasonable satisfaction of each Party its
financial or technical capability to perform its obligations under the
Contract and this Agreement.
(F) Nothing contained in this Article shall prevent a Party from
mortgaging, pledging, charging or otherwise encumbering all or part of its
interest in the Contract Area and in and under this Agreement for the
purpose of security relating to finance provided that:
(1) such Party shall remain liable for all obligations relating to
such interest;
(2) the encumbrance shall be subject to any necessary approval of the
Government and be expressly subordinated to the rights of the other
Parties under this Agreement; and
(3) such Party shall ensure that any such mortgage, pledge, charge or
encumbrance shall be expressed to be without prejudice to the
provisions of this Agreement.
Check one Optional Alternative if desired.
[X] OPTIONAL ALTERNATIVE NO. 1 - Preferential Rights
(G) Any transfer of all or a portion of Participating Interest whether
directly or indirectly by assignment, merger, consolidation, or sale of
stock, or other conveyance, other than with or to an Affiliate, shall be
subject to the following procedure:
(1) Once the transferor Party and a proposed transferee (a third party
or a Party) have fully negotiated the final terms and conditions of a
transfer, such final terms and conditions shall be disclosed in detail
to all Parties in a written notification from the transferor. Each
Party shall have the right to acquire the Participating Interest from
the transferor on the same terms and conditions agreed to by the
proposed transferee if, within thirty (30) Days of transferor's
written notification, such Party delivers to all other Parties a
counter-notification that it accepts the agreed upon terms and
conditions of the transfer without reservations or conditions. If no
Party delivers such counter-notification, the transfer to the proposed
transferee may be made, subject to the other provisions of this
Article 12, under terms and conditions no more favorable to the
transferee than those set forth in the notice to the Parties, provided
that the transfer shall be concluded within one hundred eighty (180)
Days from the date of the notice plus such reasonable additional
period as may be required to secure governmental approvals.
(2) If more than one Party counter-notifies that it intends to acquire
the Participating Interest which is the subject of the proposed
transfer, then each such Party shall acquire a proportion of the
Participating Interest to be transferred equal to the ratio of its own
Participating Interest to the total Participating Interests of all the
counter-notifying Parties, unless they otherwise agree; and
(3) In the event that a Party's proposed transfer of part or all of
its Participating Interest involves consideration other than cash or
involves other properties included in a wider transaction (package
deal) then the consideration payable for the Participating Interest
exclusively shall be allocated a reasonable and justifiable cash value
by the transferor in any notification to the other Parties. Such other
Parties may satisfy the requirements of this Article by agreeing to
pay such cash value in lieu of the consideration payable in the
third-party offer.
[ ] OPTIONAL ALTERNATIVE NO. 2 - Right of First Negotiation
(G) Any transfer of all or a portion of a Party's Participating interest
whether directly or indirectly by assignment, merger, consolidation, sale
of stock, or other conveyance, other than with or to an Affiliate shall be
subject to the following procedure:
(1) In the event that a Party wishes to transfer any part or all of
its Participating Interest, it shall send all other Parties written
notification of its intention and invite them to submit offers
therefor. The other Parties shall have thirty (30) Days from the date
of such notification to deliver a counter-notification with a binding
offer in accordance with Article 12.1(G)(3). If the prospective
transferor Party accepts the offer, the prospective transferor and the
offering Party shall have the next sixty (60) Days in which to
negotiate in good faith and execute the terms and conditions of a
mutually acceptable transfer agreement. If the prospective transferor
does not find any Party's offer acceptable, or if sixty (60) Days
elapse and it is evident to the prospective transferor that a fully
negotiated agreement with an offering Party is not imminent, the
prospective transferor shall be entitled for a period of one hundred
eighty (180) Days, plus such reasonable additional period as may be
necessary to secure governmental approvals, to transfer its
Participating Interest to a third party subject to the obligations set
forth in this Article, so long as terms and conditions of the transfer
to a third party are more favorable to the prospective transferor than
the best terms and conditions offered by any Party;
(2) If more than one Party counter-notifies the prospective transferor
that it intends to acquire the Participating Interest which is the
subject of the proposed transfer, then each such Party shall acquire a
proportion of the Participating Interest to be transferred equal to
the ratio of its own Participating Interest to the total Participating
Interests of all the counter-notifying Parties, unless they otherwise
agree;
(3) All Parties giving such counter-notice shall meet to formulate a
joint offer. Each such Party shall make known to the other Parties the
highest price or value in which it is willing to offer to the
prospective transferor. The proposal with the highest price or value
shall be offered to the prospective transferor as the joint proposal
of the Parties still willing to participate in such offer under the
provisions of (1) and (2) above;
(4) In the event that a Party's proposed transfer of part or all of
its Participating Interest involves consideration other than cash or
involves other properties included in a wider transaction (package
deal), then the consideration payable for the Participating Interest
exclusively shall be allocated a reasonable and justifiable cash value
by the prospective transferor in any notification to the other
Parties. Such other Parties may satisfy the requirements of this
Article by agreeing to pay such cash value in lieu of the
consideration payable in the third-party offer.
12.2 Rights
(A) Each Party shall have the right, subject to the provisions of Article
12.1, to freely transfer its Participating Interest.
Check if desired.
OPTIONAL PROVISION
[X] (B) If the transfer of all or a portion of a Party's Participating Interest
whether directly or indirectly by, assignment, merger, consolidation, sale
of stock, or other conveyance is part of a wider transaction (package deal)
involving such assets, such transfer shall be subject to Article 12.1(G),
only if such prospective transferor's Participating Interest represents
_____________ percent (35%) or more of the value of such wider transaction.
ARTICLE XIII
WITHDRAWAL FROM AGREEMENT
13.1 Right of Withdrawal
(A) Subject to the provisions of this Article, any Party may withdraw from
this Agreement and the Contract by giving notice to all other Parties
stating its decision to withdraw and specifying a proposed effective date
of withdrawal which shall be at least sixty (60) Days, but not more than
one hundred eighty (180) Days after the date of such notice. Such notice
shall be unconditional and irrevocable when given.
(B) Notwithstanding Article 13.1(A) a Party shall not have the right to
withdraw from this Agreement and the Contract until the Minimum Work
Obligation set forth in the Contract has been fulfilled. However, if the
Operating Committee or any Party decides to accept new Minimum Work
Obligations by voluntarily extending the current or entering into a new
exploration period under the Contract, a Party that voted against such
decision shall not be prevented from withdrawing; provided that such Party
delivers notice of its withdrawal to all Parties within thirty (30) Days of
such vote pursuant to Article 11.2 and fully satisfies its outstanding
Minimum Work Obligation, if any.
(C) Subject to Articles 13.1(A) and (B) and Article 13.5, the effective
date of withdrawal for a withdrawing Party shall be the later of:
(1) The date proposed in the notice of withdrawal; or
(2) The date that the withdrawing Party has fulfilled its obligations
under this Article.
13.2 Partial or Complete Withdrawal
(A) Within thirty (30) Days of receipt each withdrawing Party's
notification, each of the other Parties may also give notice that it
desires to withdraw from this Agreement and the Contract. Should all
Parties give notice of withdrawal, the Parties shall proceed to abandon the
Contract Area and terminate the Contract and this Agreement. If less than
all of the Parties give such notice of withdrawal, then the withdrawing
Parties shall take all steps to withdraw from the Contract and this
Agreement on the earliest possible date and execute and deliver all
necessary instruments, and documents to assign their Participating Interest
to the Parties which are not withdrawing, without any compensation
whatsoever, in accordance with the provisions of Article 13.6.
(B) If any part of the withdrawing Party's Participating Interest remains
unclaimed after sixty (60) Days from the date of the first notice of
withdrawal, the Parties shall be deemed to have decided to withdraw from
the Contract and this Agreement, unless at least one Party agrees to accept
the unclaimed Participating Interest.
(C) Any Party withdrawing under Article 11.2 or under this Article shall:
(1)
Check one Alternative.
[ ] ALTERNATIVE NO. 1
Withdraw from the entirety of the Contract Area, including all Exploitation
Areas and all Discoveries made prior to such withdrawal, and thus abandon to the
other Parties not joining in its withdrawal all its rights to Cost Oil and
Profit Oil generated by Operations after such withdrawal and all rights in such
associated Joint Property.
[ ] ALTERNATIVE NO. 2
Withdraw from all exploration activities under the Contract, but not from any
Exploitation Area, Commercial Discovery, or Discovery whether appraised or not,
made prior to such withdrawal. Such withdrawing Party shall retain its rights
in the Joint Property but only insofar as they relate to any Exploitation Area,
Commercial Discovery or Discovery whether appraised or not, and shall abandon
all other rights in the Joint Property.
13.3 Voting
After giving its notification of withdrawal, a Party shall not be entitled to
vote on any matters coming before the Operating Committee, other than matters
for which such Party has financial responsibility.
13.4 Obligations and Liabilities
(A) A withdrawing Party, prior to its withdrawal, shall satisfy all
obligations and liabilities it has incurred or attributable to it prior to
its withdrawal, including, without limitation, any expenditures budgeted
and/or approved by the Operating Committee prior to its written
notification of withdrawal (development projects included), and any
liability for acts, occurrences or circumstances taking place or existing
prior to its withdrawal. Furthermore, any liens, charges and other
encumbrances which the withdrawing Party placed on such Party's
Participating Interest prior to its withdrawal shall be fully satisfied or
released, at the withdrawing Party's expense, prior to its withdrawal. A
Party's withdrawal shall not relieve it from liability to the
non-withdrawing Parties with respect to any obligations or liabilities
attributable to the withdrawing Party which are not identified or
identifiable at the time of withdrawal.
(B) Notwithstanding the foregoing, a Party shall not be liable for any
operations or expenditures it voted against if it sends notification of its
withdrawal within five (5) Days (or within twenty-four (24) hours if the
drilling rig to be used in such operation is standing by on the Contract
Area) of the Operating Committee vote approving such operation or
expenditure, nor shall such Party be liable for any operations or
expenditures approved by the Operating Committee, excluding those approved
pursuant to Article 13.5, after notice has been given pursuant to Article
13.1.
13.5 Emergency
A Party's notification of withdrawal shall not become effective if prior to the
proposed date of withdrawal a well goes out of control or a fire, blowout,
sabotage or other emergency occurs. The notification of withdrawal shall become
effective only after the emergency has been contained and the withdrawing Party
has paid, or has provided, security satisfactory to the Parties for its
Participating Interest share of the costs of such emergency.
13.6 Assignment
A withdrawing Party shall assign its Participating Interest to each of the
non-withdrawing Parties which shall be allocated to them in the proportion which
each of their Participating Interests (prior to the withdrawal) bears to the
total Participating Interests of all the non-withdrawing Parties (prior to the
withdrawal), unless the non-withdrawing Parties agree otherwise. The expenses
associated with the withdrawal and assignments shall be borne by the withdrawing
Party.
13.7 Approvals
A withdrawing Party shall promptly join in such actions as may be necessary or
desirable to obtain any Government approvals required in connection with the
withdrawal and assignments, and any penalties or expenses incurred by the
Parties in connection with such withdrawal shall be borne by the withdrawing
Party.
Check one Alternative.
13.8 Abandonment Security
[X] ALTERNATIVE NO. 1 - Short Form Abandonment Security
(A) A withdrawing Party shall provide Security satisfactory to the other
Parties to satisfy any such obligations or liabilities which were approved
or accrued prior to notice of withdrawal, but which become due after its
withdrawal, including, without limitation, Security to cover the costs of
an abandonment, if applicable.
[ ] ALTERNATIVE NO. 2 - Long Form Abandonment Security
If under the terms of the Contract or applicable law, the Parties are or become
obliged to pay or contribute to the cost of abandonment, then the following
provisions shall apply:
(A) During preparation of a Development Plan, the Parties shall negotiate
and agree a security agreement, which shall be completed and executed by
all Parties participating in such Development Plan prior to application for
an Exploitation Area. The security agreement shall incorporate the
following principles:
(1) Security shall be provided by each such Party for each Calendar
Year commencing with the Calendar Year in which the Discounted Net
Value equals one hundred twenty-five percent (125%) of the Discounted
Net Cost.
(2) The amount of Security required to be provided by each such Party
in any Calendar Year (including security previously provided which
will still be current throughout such Calendar Year) shall be equal to
the amount by which one hundred twenty-five percent (125%) of the
Discounted Net Cost exceeds the Discounted Net Value.
"Discounted Net Cost" means that portion of each Party's anticipated before tax
cost of abandoning a development in accordance with applicable law which remains
after deduction of salvage value. Such portion should be calculated at the
anticipated time of abandonment and discounted at the Discount Rate to December
31, of the Calendar Year in question.
ADiscounted Net Value" means the value of each Party's estimated Entitlement
which remains after payment of estimated liabilities and expenses required to
win, save and transport such production to the delivery point and after
deduction of estimated applicable taxes, royalties, imposts and levies on such
production. Such Entitlement shall be calculated using estimated market prices
and including taxes on income, discounted at the Discount Rate to December 31,
of the Calendar Year in question. No account shall be taken of tax allowances
expected to be available in respect of the costs of abandonment.
"Discount Rate" means the rate per annum equal to the one (1) month term, LIBOR
rate for U.S. Dollar deposits as published by The Wall Street Journal or if not
-----------------------
published then by the Financial Times of Londoneffective as of thirty (30)
---------------------------
Business Days prior to the start of a Calendar Year.
(B) Failure to provide Security shall constitute default under this
Agreement.
(C) "Security" means a standby letter of credit issued by a bank or an on
demand bond issued by a corporation, such bank or corporation having a
credit rating indicating it has sufficient worth to pay its obligations in
all reasonably foreseeable circumstances, or, failing the provision of
either of those, cash contributed to a secure fund administered by
independent trustees and invested in ____________________________.
13.9 Withdrawal or Abandonment by all Parties
In the event all Parties decide to withdraw or are required to do so pursuant to
this Article, the Parties agree that they shall be bound by the terms and
conditions of this Agreement for so long as may be necessary to wind up the
affairs of the Parties with the Government, to satisfy any requirements of
applicable law or to facilitate the sale, disposition or abandonment of property
or interests held by the Joint Account.
ARTICLE XIV
RELATIONSHIP OF PARTIES AND TAX
14.1 Relationship of Parties
The rights, duties, obligations and liabilities of the Parties under this
Agreement shall be individual, not joint or collective. It is not the intention
of the Parties to create, nor shall this Agreement be deemed or construed to
create mining or other partnership, joint venture, association or trust, or as
authorizing any Party to act as an agent, servant or employee for any other
Party for any purpose whatsoever except as explicitly set forth in this
Agreement. In their relations with each other under this Agreement, the Parties
shall not be considered fiduciaries except as expressly provided in this
Agreement.
14.2 Tax
Each Party shall be responsible for reporting and discharging its own tax
measured by the income of the Party and the satisfaction of such Party's share
of all contract obligations under the Contract and under this Agreement. Each
Party shall protect, defend and indemnify each other Party from any and all
loss, cost or liability arising from a failure or refusal to report and
discharge such taxes or satisfy such obligations.
Check if desired.
[ ] OPTIONAL PROVISION
14.3 United States Tax Election
(A) If, for United States federal income tax purposes, this Agreement and
the operations under this Agreement are regarded as a partnership (and if
the Parties have not agreed to form a tax partnership) each "U.S. Party"
(as defined below) elects to be excluded from the application of all of the
provisions of Subchapter "K", Chapter 1, Subtitle "A" of the United States
Internal Revenue Code of 1986 (the "Code") as permitted and authorized by
Section 761 of the Code and the regulations promulgated under the Code.
________________, to the extent required by Section 6231(a)(7) of the Code,
is designated as the tax matters party, and is authorized and directed to
execute for each U.S. Party such evidence of this election as may be
required by the Internal Revenue Service, including specifically, but not
by way of limitation, all of the returns, statements, and the data required
by United States Treasury Regulations Section 1.761 and 1.6031-1) d) (2).
Should there be any requirement that any U.S. Party give further evidence
of this election, each U.S. Party shall execute such documents and furnish
such other evidence as may be required by the Internal Revenue Service or
as may be necessary to evidence this election.
(B) No such U.S. Party shall give any notice or take any other action
inconsistent with the election made above. If any future income tax laws of
the United States contain provisions similar to those in Subchapter "K",
Chapter 1, Subtitle "A" of the United States Internal Revenue Code of 1986,
under which an election similar to that provided by Section 761 of the Code
is permitted, each U.S. Party shall make such election as may be permitted
or required by such laws. In making the foregoing election, each U.S. Party
states that the income derived by it from operations under this Agreement
can be adequately determined without the computation of partnership taxable
income.
(C) For the purposes of this Article, "U.S. Party" shall mean any Party
which is subject to the income tax law of the United States of America in
respect of operations under this Agreement.
(D) No activity shall be conducted under this Agreement that would cause
any non U.S. Party to be deemed to be engaged in a trade or business within
the United States of America under applicable tax laws and regulations.
(E) A Party which is not a U.S. Party shall not be required to do any act
or execute any instrument which might subject them to the taxation
jurisdiction of the United States of America.
ARTICLE XV
CONFIDENTIAL INFORMATION - PROPRIETARY TECHNOLOGY
15.1 Confidential Information
(A) Subject to the provisions of the Contract, the Parties agree that all
information and data acquired or obtained by any Party in respect of Joint
Operations shall be considered confidential and shall be kept confidential
and not be disclosed during the term of the Contract and for a period of
_______________ (2) years after expiration of the Contract to any person or
entity not a Party to this Agreement, except:
(1) To an Affiliate, provided such Affiliate maintains confidentiality
as provided in this Article;
(2) To a governmental agency or other entity when required by the
Contract;
(3) To the extent such data and information is required to be
furnished in compliance with any applicable laws or regulations, or
pursuant to any legal proceedings or because of any order of any court
binding upon a Party;
(4) Subject to Article 15.1(B), to potential contractors, contractors,
consultants and attorneys employed by any Party where disclosure of
such data or information is essential to such contractor's,
consultant's or attorney's work;
(5) Subject to Article 15.1(B), to a bona fide prospective transferee
of a Party's Participating Interest (including an entity with whom a
Party is conducting bona fide negotiations directed toward a merger,
consolidation or the sale of a majority of its or an Affiliate's
shares);
(6) Subject to Article 15.1(B), to a bank or other financial
institution to the extent appropriate to a Party arranging for funding
for its obligations under this Agreement;
(7) To the extent such data and information must be disclosed pursuant
to any rules or requirements of any government or stock exchange
having jurisdiction over such Party, or its Affiliates; provided that
if any Party desires to disclose information in an annual or periodic
report to its or its Affiliates' shareholders and to the public and
such disclosure is not required pursuant to any rules or requirements
of any government or stock exchange, then such Party shall comply with
Article 20.2;
(8) To its respective employees for the purposes of Joint Operations,
subject to each Party taking customary precautions to ensure such data
and information is kept confidential;
(9) Where any data or information which, through no fault of a Party,
becomes a part of the public domain.
(B) Disclosure as pursuant to Article 15.1(A)(4), (5), and (6) shall not be
made unless prior to such disclosure the disclosing Party has obtained a
written undertaking from the recipient party to keep the data and
information strictly confidential and not to use or disclose the data and
information except for the express purpose for which disclosure is to be
made.
15.2 Continuing Obligations
Any Party ceasing to own a Participating Interest during the term of this
Agreement shall nonetheless remain bound by the obligations of confidentiality
and any disputes shall be resolved in accordance with Article XVIII.
15.3 Proprietary Technology
Nothing in this Agreement shall require a Party to divulge proprietary
technology to the other Parties; provided that where the cost of development of
proprietary technology has been charged to the Joint Account, such proprietary
technology shall be disclosed to all Parties bearing a portion of such cost and
may be used by such Party, or its Affiliates, in other operations.
15.4 Trades
Notwithstanding the foregoing provisions of this Article, Operator may, with
approval of the Operating Committee, make well trades and data trades for the
benefit of the Parties, with any data, the cost of which has been charged to the
Joint Account, so obtained to be furnished to all Parties. In such event,
Operator must enter into an undertaking with any third party to such trade to
keep such information confidential.
ARTICLE XVI
FORCE MAJEURE
16.1 Obligations
If as a result of Force Majeure any Party is rendered unable, wholly or in part,
to carry out its obligations under this Agreement, other than the obligation to
pay any amounts due or to furnish security, then the obligations of the Party
giving such notice, so far as and to the extent that the obligations are
affected by such Force Majeure, shall be suspended during the continuance of any
inability so caused, but for no longer period. The Party claiming Force Majeure
shall notify the other Parties of the Force Majeure situation within a
reasonable time after the occurrence of the facts relied on and shall keep all
Parties informed of all significant developments. Such notice shall give
reasonably full particulars of said Force Majeure, and also estimate the period
of time which said Party will probably require to remedy the Force Majeure. The
affected Party shall use all reasonable diligence to remove or overcome the
Force Majeure situation as quickly as possible in an economic manner, but shall
not be obligated to settle any labor dispute except on terms acceptable to it
and all such disputes shall be handled within the sole discretion of the
affected Party.
16.2 Definition of Force Majeure
Check one Alternative.
[X] ALTERNATIVE NO. 1
For the purposes of this Agreement, "Force Majeure" shall mean circumstances
which were irresistible or beyond the reasonable control of the Party concerned.
[ ] ALTERNATIVE NO. 2
For the purposes of this Agreement, "Force Majeure" shall have the same meaning
as is set out in the Contract.
ARTICLE XVII
NOTICES
Except as otherwise specifically provided, all notices authorized or required
between the Parties by any of the provisions of this Agreement, shall be in
writing, in English and delivered in person or by registered mail or by courier
service or by any electronic means of transmitting written communications which
provides confirmation of complete transmission, and addressed to such Parties as
designated below. The originating notice given under any provision of this
Agreement shall be deemed delivered only when received by the Party to whom such
notice is directed, and the time for such Party to deliver any notice in
response to such originating notice shall run from the date the originating
notice is received. The second or any responsive notice shall be deemed
delivered when received. "Received" for purposes of this Article with respect
to written notice delivered pursuant to this Agreement shall be actual delivery
of the notice to the address of the Party to be notified specified in accordance
with this Article. Each Party shall have the right to change its address at any
time and/or designate that copies of all such notices be directed to another
person at another address, by giving written notice thereof to all other
Parties.
Attention:
Telecopy:
Telex:
Answerback Code:
Attention:
Telecopy:
Telex:
Answerback Code:
Attention:
Telecopy:
Telex:
Answerback Code:
Attention:
Telecopy:
Telex:
Answerback Code:
ARTICLE XVIII
APPLICABLE LAW AND DISPUTE RESOLUTION
18.1 Applicable Law
This Agreement shall be governed by, construed, interpreted and applied in
accordance with the laws of England, excluding any choice of law rules which
would refer the matter to the laws of another jurisdiction.
18.2 Dispute Resolution
Check one Alternative.
[ ] ALTERNATIVE NO. 1 - Courts
Each Party submit to the exclusive jurisdiction of the courts of England
(or if jurisdiction is not granted by such court by another court having
jurisdiction) for the purpose of finally resolving any dispute, controversy
or claim arising out of or in relation to or in connection with this
Agreement or the operations carried out under this Agreement, including
without limitation any dispute as to the validity, interpretation,
enforceability or breach of this Agreement. Each Party irrevocably
designates, appoints and empowers the agent specified below to receive on
its behalf service of any and all process in any legal action or proceeding
which may be instituted in the courts of ___________, _____________ in
connection with any such dispute, controversy or claim:
A Party's submission to the jurisdiction of the courts of ___________,
_____________ in accordance with the foregoing shall not limit the right of
such Party to institute any legal action or proceeding for the enforcement
of any order or judgment of such courts in any other court having
jurisdiction.
[X] ALTERNATIVE NO. 2 - Arbitration
(A) Any dispute, controversy or claim arising out of or in relation to or
in connection with this Agreement or the operations carried out under this
Agreement, including without limitation any dispute as to the validity,
interpretation, enforceability or breach of this Agreement, shall be
exclusively and finally settled by arbitration, and any Party may submit
such a dispute, controversy or claim to arbitration.
Check one Alternative.
[ ] ALTERNATIVE NO. 1
(B) A single arbitrator shall be appointed by unanimous consent of the
Parties. If the Parties, however, cannot reach agreement on an arbitrator
within ________ (___) Days of the submission of a notice of arbitration,
the appointing authority for the implementation of such procedure shall be
the ______________, who shall appoint an independent arbitrator who does
not have any financial interest in the dispute, controversy or claim. If
___________ refuses or fails to act as the appointing authority within
ninety (90) Days after being requested to do so, then the appointing
authority shall be ____________, who shall appoint an independent
arbitrator who does not have any financial interest in the dispute,
controversy or claim.
[ ] ALTERNATIVE NO. 2
(B) The arbitration shall be head and determined by three (3) arbitrators.
Each side shall appoint an arbitrator of its choice within ____ (___) Days
of the submission of a notice of arbitration. The Party-appointed
arbitrators shall in turn appoint a presiding arbitrator of the tribunal
within _______ (___) Days following the appointment of both Party-appointed
arbitrators. If the Party-appointed arbitrators cannot reach agreement on a
presiding arbitrator of the tribunal and/or one Party refuses to appoint
its Party-appointed arbitrator within said _______ (___) Day period, the
appointing authority for the implementation of such procedure shall be the
INT. ARBIT. BOARD, Paris who shall appoint an independent arbitrator who
does not have any financial interest in the dispute, controversy or claim.
If ___________ refuses or fails to act as the appointing authority within
ninety (90) Days after being requested to do so, then the appointing
authority shall be _______________, who shall appoint an independent
arbitrator who does not have any financial interest in the dispute,
controversy or claim. All decisions and awards by the arbitration tribunal
shall be made by majority vote.
(C) Unless otherwise expressly agreed in writing by the Parties to the
arbitration proceedings:
(1) The arbitration proceedings shall be held in London, England;
(2) The arbitration proceedings shall be conducted in the English
language and the arbitrator(s) shall be fluent in the English
language;
(3) The arbitrator(s) shall be and remain at all times wholly
independent and impartial;
(4) The arbitration proceedings shall be conducted in accordance with
the Arbitration Rules of Paris,
Check one Alternative.
[ ] ALTERNATIVE NO. 1
in effect on the Effective Date.
[X] ALTERNATIVE NO. 2
as amended from time to time.
(5) Any procedural issues not determined under the arbitral rules
selected pursuant to Article 18.2(C)(4) shall be determined by the law
of the place of arbitration, other than those laws which would refer
the matter to another jurisdiction;
(6) The costs of the arbitration proceedings (including attorneys'
fees and costs) shall be borne in the manner determined by the
arbitrator(s);
(7) The decision of the sole arbitrator or a majority of the
arbitrators, as the case may be, shall be reduced to writing; final
and binding without the right of appeal; the sole and exclusive remedy
regarding any claims, counterclaims, issues or accountings presented
to the arbitrator; made and promptly paid in U.S. Dollars free of any
deduction or offset; and any costs or fees incident to enforcing the
award, shall to the maximum extent permitted by law, be charged
against the Party resisting such enforcement;
(8) Consequential, punitive or other similar damages shall not be
allowed; provided, however, the award may include appropriate punitive
damages where a Party has engaged in delaying and dilatory actions;
(9) The award shall include interest from the date of any breach or
violation of this Agreement, as determined by the arbitral award, and
from the date of the award until paid in full, at the Agreed Interest
Rate;
(10) Judgment upon the award may be entered in any court having
jurisdiction over the person or the assets of the Party owing the
judgment or application may be made to such court for a judicial
acceptance of the award and an order of enforcement, as the case may
be; and
(11) Whenever the Parties are of more than one nationality, the single
arbitrator or the presiding arbitrator, as the case may be, shall not
be of the same nationality as any of the Parties or their ultimate
parent entities.
ARTICLE XIX
ALLOCATION OF COST RECOVERY RIGHTS
19.1 Allocation of Total Production
For the purposes of recovery of Petroleum Costs, the total quantity of
Hydrocarbons which are produced and saved from all Exploitation Areas in a
Calendar Quarter and to which the Parties are entitled under the Contract shall
be designated as either Cost Oil or Profit Oil. Such Cost Oil and Profit Oil
shall be allocated among the Exploitation Areas in proportion to each
Exploitation Area's total quantity of Hydrocarbons produced and saved in such
Calendar Quarter with adjustments in quantities to reflect the differences in
value if different qualities of Hydrocarbons are produced, segregated and sold
separately.
19.2 Allocation of Cost Oil
Cost Oil allocated to each Exploitation Area pursuant to Article 19.1 shall be
allocated to the Parties in proportion to their respective Participating
Interests in each such Exploitation Area to the extent required to recover in
the sequence incurred all Petroleum Costs which are specifically attributable to
each such Exploitation Area and which are recoverable in such Calendar Quarter.
19.3 Allocation of Profit Oil
Profit Oil allocated to each Exploitation Area pursuant to Article 19.1, if any,
shall be allocated among the Parties in proportion to their respective
Participating Interests in each such Exploitation Area.
19.4 Allocation of Excess Cost Oil
Subject to the Contract, to the extent that the value, determined in accordance
with Article 9.2(H), of the Cost Oil allocated to each Exploitation Area
pursuant to Article 19.1 exceeds the Petroleum Costs which were specifically
attributable to each such Exploitation Area and which were recovered pursuant to
Article 19.2, the excess ("Excess Cost Oil") shall be allocated as follows:
(A) First, a percentage (equal to the percentage of Profit Oil, if any, to
which the Parties would have been entitled during such Calendar Quarter if
the Contract applied separately to each such Exploitation Area) of the
Excess Cost Oil shall be allocated among the Parties in proportion to their
respective Participating Interests in each such Exploitation Area;
(B) Second, the Excess Cost Oil that is not allocated pursuant to Article
19.4(A) shall be allocated among the Parties in proportion to their
respective Participating Interests as set out in Article 3.1(A) in order to
recover in the sequence incurred any Petroleum Costs which were incurred in
the conduct of Joint Operations and which are recoverable in such Calendar
Quarter; and
(C) Third, the Excess Cost Oil that is not allocated pursuant to Article
19.4(A) or Article 19.4(B) shall be allocated among the Parties in
proportion to their respective Participating Interests in each Exclusive
Operation in order to recover in the sequence incurred any Petroleum Costs
which were incurred in the conduct of Exclusive Operations and which are
recoverable in such Calendar Quarter.
ARTICLE XX
GENERAL PROVISIONS
20.1 Conflicts of Interest
(A) Each Party undertakes that it shall avoid any conflict of interest
between its own interests (including the interests of Affiliates) and the
interests of the other Parties in dealing with suppliers, customers and all
other organizations or individuals doing or seeking to do business with the
Parties in connection with activities contemplated under this Agreement.
(B) The provisions of the preceding paragraph shall not apply to:
(1) A Party's performance which is in accordance with the local
preference laws or policies of the host government; or
(2) A Party's acquisition of products or services from an Affiliate,
or the sale thereof to an Affiliate, made in accordance with rules and
procedures established by the Operating Committee.
20.2 Public Announcements
(A) Operator shall be responsible for the preparation and release of all
public announcements and statements regarding this Agreement or the Joint
Operations; provided that, no public announcement or statement shall be
issued or made unless prior to its release all the Parties have been
furnished with a copy of such statement or announcement and the approval of
at least two (2) non-affiliated Parties holding fifty percent (50%), or
more, of the Participating Interests has been obtained. Where a public
announcement or statement becomes necessary or desirable because of danger
to or loss of life, damage to property or pollution as a result of
activities arising under this Agreement, Operator is authorized to issue
and make such announcement or statement without prior approval of the
Parties, but shall promptly furnish all the Parties with a copy of such
announcement or statement.
(B) If a Party wishes to issue or make any public announcement or statement
regarding this Agreement or the Joint Operations, it shall not do so unless
prior to its release, such Party furnishes all the Parties with a copy of
such announcement or statement, and obtains the approval of at least two
(2) non-affiliated Parties holding fifty percent (50%) or more of the
Participating Interests; provided that, notwithstanding any failure to
obtain such approval, no Party shall be prohibited from issuing or making
any such public announcement or statement if it is necessary to do so in
order to comply with the applicable laws, rules or regulations of any
government, legal proceedings or stock exchange having jurisdiction over
such Party as set forth in Articles 15.1(A)(3) and (7).
20.3 Successors and Assigns
Subject to the limitations on transfer contained in Article XII, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
the Parties.
20.4 Waiver
No waiver by any Party of any one or more defaults by another Party in the
performance of this Agreement shall operate or be construed as a waiver of any
future default or defaults by the same Party, whether of a like or of a
different character. Except as expressly provided in this Agreement no Party
shall be deemed to have waived, released or modified any of its rights under
this Agreement unless such Party has expressly stated, in writing, that it does
waive, release or modify such right.
20.5 Severance of Invalid Provisions
If and for so long as any provision of this Agreement shall be deemed to be
judged invalid for any reason whatsoever, such invalidity shall not affect the
validity or operation of any other provision of this Agreement except only so
far as shall be necessary to give effect to the construction of such invalidity,
and any such invalid provision shall be deemed severed from this Agreement
without affecting the validity of the balance of this Agreement.
20.6 Modifications
Except as is provided in Article 20.5, there shall be no modification of this
Agreement except by written consent of all Parties.
20.7 Headings
The topical headings used in this Agreement are for convenience only and shall
not be construed as having any substantive significance or as indicating that
all of the provisions of this Agreement relating to any topic are to be bound in
any particular Article.
20.8 Singular and Plural
Reference to the singular includes a reference to the plural and vice versa.
20.9 Gender
Reference to any gender includes a reference to all other genders.
20.10 Counterpart Execution
1.1
This Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed an original Agreement for all purposes; provided no
Party shall be bound to this Agreement unless and until all Parties have
executed a counterpart. For purposes of assembling all counterparts into one
document, Operator is authorized to detach the signature page from one or more
counterparts and, after signature thereof by the respective Party, attach each
signed signature page to a counterpart.
20.11 Entirety
This Agreement is the entire agreement of the Parties and supersedes all prior
understandings and negotiations of the Parties. WITH THE EXCEPTION OF AGREEMENT
# MARCH 8, 1992 AND AMENDED ON FEBRUARY 25/93.
------------------ ---------------
IN WITNESS of their agreement each Party has caused its duly authorized
representative to sign this instrument on the date indicated below such
representative's signature.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ PETROLEUM COMPANY LIMITED
--------------------------------------------
(Company Name)
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------
T.B. Folawiyo
--------------
(Print or Type name)
Title: Executive Director
-------------------
Date: March 13, 1992
----------------
LIBERTY TECHNICAL SERVICES LIMITED
-------------------------------------
(Company Name)
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------
▇.▇. ▇▇▇▇▇▇▇▇▇
---------------
(Print or Type name)
Title: President
---------
Date: March 13, 1992
----------------
(Company Name)
By:
(Print or Type name)
Title:
Date:
(Company Name)
By:
(Print or Type name)
Title:
Date: